Conversations From Discord

Imagining Decentralisation In a Stage & Cycle Orientation

One of the most satisfying things about leading a cryptocurrency project is the occasional new idea one finds embedded in one’s community discussions. Early this morning, one of our community members from Germany (who now lives in the US) kicked off a more cerebral conversation by positing a possible currency equation in our Discord:

u — volume of utility

i — volume of investment

s — volume of speculation

For Bitcoin: u — is BTC used to pay for stuff, needs to be determined by chain forensics i — is on chain volume passing between different users (filtering out, using forensics, multiple wallet hops by a single user) s — is global on exchange volume minus (i) and (u)

For fiat: u — is world GDP, a direct metric for the goods and services paid for in fiat (lets ignore swap contracts to keep it simple) i — is the money flowing between medium/long term cash accounts for storage s — is FOREX volume minus foreign trade components of (i) and (u)

Shortly thereafter, a Scandinavian member of our community chimed in:

I believe that USD still is the king of fiat/political money and that it will continue to rise to 2020/2021 and then commodities, the Dow and hopefully crypto will go really crazy… That’s my two cents at least..

These comments got me to thinking of a potentially valid paradigm shift that may be evolving right under our nose without us realising, each stage of which is much faster (but consequently equal in length of rapidity thereof) the other. I will get stuck into it. I don’t portend to have thought this through much, so refinements will be necessitated, but this post goes to show how such conversations elicit a process of knowledge amplification all round.

Stages & Cycles of Currency Utility

Currency has three types of transactional evolution in today’s economy:

Stage 1 — 1750–1972 (222 years): Commodity — this is the use of the currency in a physical context Example: gold, oil

In economies where physical constraints and a limitation upon communication / media is in place are applied to the same environment in which the transaction of goods and services takes place, commodity currencies are the only resource which make any sense to use. With global media and technology facilitating a much greater share of transaction environments today, the value of commodity currencies is being gradually reduced to pure utility. Whereas before it served as a line of creditworthiness, there are now much easier (more efficient) ways to achieve the outcome of high credit, such as building networks within financial services environments to obtain credit or even adopting high profile public relations strategies to boost your own appearance of creditworthiness. Variants: 1 (commodity / utility)

Stage 2 — 1972–2008 (36 years). Policy — this is the use of the currency in any political (everyday) context Example: USD, GBP

Political currencies are by far the most dominant today in an environment which is not constrained with respect to the physical limitations of transactions and wherein political messages are easily broadcast in real time. This has, not coincidentally, been the case increasingly since the gold standard was first semi-unpegged in the 1940s and finally, permanently removed in the 1970s from underpinning the USD. In that scenario, real economic growth began to outpace the physical constraints that gold put on the currency’s necessary utility as a transaction instrument and Presidents Carter and Nixon were forced to unpeg gold from the dollar. Political currencies are manifest by declarations and demonstrations of fiscal and political strength and are not in any way constrained to physical resources limitations. For this reason, the principle challenge to their evolutionary counterparts, technological currencies, has been predominantly politically inclined. Variants: 2 (bilateralism; eg USD vs GBP, USD vs CNY etc.)

Stage 3 — 2008–2013 (5.6 years) / 2013–2019.2 (5.6 years) etc. Technology — this is the use of the currency in any technological context Example: BTC, ETH

Technological currencies emerged as the core architecture, based principally on fiber optic innovation, began to take hold. What were the core drivers of political currency soon became the core drivers of its nemesis, decentralised organisation. As a result, the reaction to technological mediums of exchange has predictably been political, as opposed to socio-economic, which was the reaction to the transition of commodified currency to political currency. The trend is one of continuity based on constantly upgradeable architecture, whereby there are no transitions to alternate forms of currency merely a shifting emphasis of one form of interpretation of that currency to the next. For example, one can elicit already the 5.6-year cycles out of the past two event cycles:

Cycle 1 (2008–2013.6) — 5.6 years:

Value Exchange Cycle — adoption in the form of education and outreach pertaining to the use of a tech medium as a medium of value exchange

Cycle 2 (2013.6–2019.2) — 5.6 years:

Value Representation Cycle — adoption of the technological medium of exchange as a form of variable value representation (e.g. as transaction utility, as ROI etc.)

Cycle 3 (2019.2–2024.8) — 5.6 years:

Value Invention Cycle — adoption of the alternately represented form of digital value as a means around which concepts of value can be altered producing near-impossible feats in the present day (e.g. poverty eradication) creating constant value invention

In each phase of the Value Reorientation cycle, the architecture for IoT is in the process of being installed so that by around 2025, global society is facilitating the process by which value adoption is decreasingly commodified and/or politically represented. If this all seems rather new, then think of this whole process as being something perhaps rather more familiar to you — decentralisation. And hence Variants: Multiple, Decentralised