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!