The Austrian Way: The epic battle between the internet and fiat

As Austro-libertarian nut-jobs we at Bogpaper salivate like dogs in a butcher’s shop when we see new forms of money emerging in the market for our savings and capital.

Obviously we’re untrusting of state imposed monetary systems and think legal tenders laws are ridiculous. We don’t think monetary affairs can be run well when they’re top down.

As a result we find digital currencies a bit like money porn and dream of a Misean-inspired future where dozens of currencies, exist independently of central banks and the state, circulate competing for our usage. (Obviously in this dreamland Bernanke is the devil, has three nipples and wears a hairy gimp suit whilst walking his little dog, Kruggie.)

It was whilst talking about crypto-currencies with two developers at Feathercoin and nearly having to gorilla-walk (blokes know what I’m talking about here) out of the room to use the gents that I wondered where all this great digital challenge to fiat money first started.

It turns out it turns out it’s been going on a fair bit longer than I thought, first kicking off in the early 1990s.

Old yella’ gets digital 

First we see the marriage of the oldest forms of money – gold and silver bars – with the 1s and 0s of the information technology age, when in 1996 eGold is founded by a good couple of libertarians, Douglas Jackson and Barry Downey.

eGold was a micropayments system backed by precious metals, launched two years before PayPal, and in just over five years attracted a million users. Hopefully Bogpapger will soon too show that hockey-stick type growth.

After eGold comes eBullion founded in December 2000 by Jim Fayed, before GoldMoney launches in 2001, the idea of precious metals guru, James Turk and his band of cheerleaders including Bogpaper favourites Eric Sprott and Doug Casey.

By the mid-2000s we gold-silver-anti-fiat-bugs have a handful of new toys to play with, even if eGold and eBullion are suffering some pretty bad PR mostly thanks to the Feds and also due to the aforementioned Fayed’s untimely murder of his wife. (Unless she was a Keynesian, Jim, that’s really not on).

By 2008 eGold is processing over $2bn of transaction a year, with impressive velocity in its currency system – the underlying bullion now changes hands over 100 times a year. Then in 2009 eGold hits 5 million users – that’s quite a lot of ‘money launderers’, ‘cyber-criminals’ and ‘questionable folk’ as the regulators might see them.

Crypo-currencies explode onto the scene

After the bullion based offerings, cryptography technologies that most of us had never heard of and that had been growing and maturing with the internet generally were now ready to enter the monetary fray.

Lead by their hero, Satoshi Nakamoto, a network of caffeinated, libertarian developers starts to grow around the world seeking to leverage their crypto-technologies and disintermediate state-provided money systems in a whole new way.

In 2008 Satoshi  posted an online paper called ‘Bitcoin: A Peer-to-Peer Electronic Cash System’, describing his envisioned community electronic cash system based on open-source cryptographic protocols independent of central banks or governments. Shortly after, in January 2009 this vision becomes a reality with the Bitcoin Genesis Block.

Things are really happening now in the creative destructions giving birth to new digital wonga, with the first Bitcoin transactions occurring in 2010 when some dude paid 10k BTC for a pizza sale. Well, it was a developer making that first transaction so we should expect him to buy coffee, pizza, fizzy drinks or porn.

After pioneering away for a few years Bitcoin is joined by some weirdly named new digital money treats by the names of Litecoin, Namecoin, PPCoin, Feathercoin and Hayekoin. Ok, so I made the last one up.

The thing is though that this crypto-currency world is still occupied by virgin code writers with acne, led by their pied-piper Max Keiser and a few other big names like Jon Matonis. That is until early 2013, when after making huge strides in security and technology digital currencies properly enter the mainstream consciousness.

I’m not sure whether Cyprus really got people thinking enough about fiat money in the bank, or whether this timed fatefully with a massive run up in Bitcoin prices, but either way we then suddenly see the major global news outlets run their angle on these new monies. (Respect to Forbes here for having been on this story for years.)

Where next for our money porn?

We might need to calm our salivating though as despite huge advancements made in monetary evolution and massive new challenges to the toxic fiat leviathan under which we all struggle, the great money disruption has not happened yet.

The US dollar is still the world’s reserve currency, not Bitcoin, and other national monies still hold far larger pools of capital than their new competitors.

However, things are looking good fellow asylum dwellers, as we see large, welcome inflows of venture capital, development skills and computing power into this new monetary crusade.

It is still extremely early days in this great story.

We cannot yet know if being ‘of nature’ is gold’s greatest strength here, when digitised. We also cannot yet know if crypto-currencies’ superior mobility over gold is a trump card, or whether being ‘of man’ poses a problematic vulnerability. The authorities and regulators also present a great unknown. For example – Thailand banned Bitcoin in the summer of 2013.

It’s been one hell of a ride so far (this infographic visualises it) and it’s going to get much more interesting. As a money nerd I first heard of Thiers’ Law through Professor Peter Bernholz’s seminal work on money and inflation.

The internet can enable Thiers’ Law to exert itself on a level never seen before. All power to those liberto-crypto-developer geeks – hurry up with it will you!

  • https://plus.google.com/103066251162055029153 Simon Drake

    BitCoin and friends are fine and dandy until the lights go out. You can have your ‘wealth’ on a USB stick, but that would imply everyone else is on that level too.
    BitCoin and crypto currencies are good but not perfect, they are a medium of exchange, not a trusting holder of value like a gold nugget.

    • http://gldcoin.com/ Johny

      I just recently discovered crypto currency & the idea behind crypto currency is good, but as Simon Drake said it isnt perfect, but its 3 times beter than what we have now. I recently discovered crypto currency Goldcoin (GLD) http://gldcoin.com and really think this could even replace eGold and become a big player in crypto currencies

  • hans

    the problem of crypto currency is that you will NEVER be able to get back from it again. any thought of democratic or arbitrary money is gone. simply the infinite race for the perfect match between money sum and underlying asset and work sum will prevail, fired by the development of intel and amd provessors and self-evolving computer algorithms. money will not be in the hands of MEN any more but in the hands of the machine and nature, men WILL have stable money but not much influence on it for some democrativ or so purposes.

    • Rocco

      Oh. My. God !!!!!!!!!!!!

  • http://gravatar.com/tomknott Demetrius

    The way things are I am stocking up on cowrie shells.

  • http://jdseanjd.wordpress.com jdseanjd

    Max Keiser for King of the Asylum.
    Stacey Herbert for Head Nurse.
    Beyonce for ward sister.
    & me for Beyonce.

    Well, if you’re gonna dream, you way as well dream ambitious. :-)

  • silverminer

    The problem with crypto currency is that I don’t understand it. It’s totally beyond my comprehension. A silver coin I can hold in my hand. An account backed by grams of gold or silver, that’s an easy concept to grasp. I don’t trust what I don’t understand.

    • http://gldcoin.com/ Johny

      Crypto currency is easy. You download a wallet of crypto currency like Bitcoin or Goldcoin. With this wallet you have an account with a send button and receive button. When somebody wants to send you some crypto currency you give him your receiving adress & when you want to send a crypto currency you put the receivers adres in and press send.

  • http://twitter.com/KickoutLeads Kickout Leads (@KickoutLeads)

    A better crypto-currency than Bitcoin is MYU http://myubank.com/ since it does not require Internet, block chain download and high CPU usage and provides marketplace and messages

  • Mr Davies

    cyberDosh will not prevail unless you can either escape taxes or be able to pay your taxes with it.