Better Money?

I have been thinking about the meaning of money for some time now.

One of the most compelling ways of describing it is to say that Money is “an instrument to facilitate trade”.

If I produce tomatoes, and I need bread, I can go to the baker and exchange my tomatoes for bread. But that only works if the bread maker needs tomatoes at the same time that I need bread. Money solves that problem, and other more complex ones, by providing a common instrument that can be exchanged with both bread and tomatoes whenever we need these or other goods.

I will not go into too much detail, but I will mention that the form that money takes, which I will call a “token”, has evolved with time, going from skulls and teeth of dead animals to gold and silver, to bills printed by governments, to now their digital version in the form of a record in a balance sheet. In the current form, governments of different countries or groups of countries issue (create) these tokens. The value that these tokens have depends to a great extent on how much people trust the governments that issue them.

For international trade, a reference needs to be used and, in the last few decades, the US Dollar has been the reference token.

There is no question that the current system has provided great benefit to the global exchange of goods. However, there is plenty of room for improvement in the following areas:

1. The reference currency is controlled by a single countryits supply is limitless, and it can be manipulated.

2. Transferring money across borders requires intermediary institutions, it can take days, and it can be expensive.

3. Transactions are hard to trace.

In 2008, a new technology (blockchain) was developed in order to create a new type of money, a programmable form of money, known as a cryptocurrency. The original and dominant one is called Bitcoin, but many others with different useful features were created later. Bitcoin is secure by design and all transactions are traceable and public. It is not issued by any single country, but it is generated by a perfectly defined algorithm. There is a limited supply (approximately 21,000,000) that will be ever be issued. It cannot be corrupted and manipulated. Transactions are peer-to-peer, they do not need an intermediary, and are not affected by international borders. The bookkeeping of the transactions is run by a decentralized global network of computers, and anyone can contribute and get rewarded for maintaining the network.

I am certain that Cryptocurrencies in general, not just Bitcoin, will transform global trade, and they will enable an improved financial system, more transparent and traceable, in which no single country is in full control. Cryptocurrencies already facilitate fast, relatively inexpensive, person-to-person transactions without the need of financial institutions, and regardless of international borders. This is already happening, I have benefited from using them (especially Bitcoin) a few times already, and it is obvious to me that we have passed the turning point. There are already enough people and institutions using them. I am conscious of the need for regulations and interfacing with traditional financial systems, and for governments to be able to collect taxes related to transactions. Regardless of the regulatory framework that develops, there is no going back.  Bitcoin, and some other cryptocurrencies, are here to stay.

Beyond Bitcoin: Stacks, a Decentralized Democratic Internet

Many people are becoming familiar with Bitcoin and the concept of blockchain technology. However, not many are aware of the magnitude of the technological and societal revolution we are witnessing. It is not just the better money (see post on this here) that was created in 2008. The technology behind it will change the way we interact with the world around us in the coming years. There are hundreds of projects using blockchains to develop new decentralized ways of doing everything. One of the most important ones, in my view, is Stacks.

Stacks (previously known as Blockstack) is a decentralized computing platform and the concept is explained in detail in the Ph.D. thesis of Muneeb Ali at Princeton University, entitled “Trust-to-trust design of a new internet”. Muneeb also has a brief description in the form of a TED talk here.

In the same way Bitcoin is better money, Stacks can be pictured as a better internet, but with additional features not currently present on the internet we are used to. One of the most important features is security, as the Stacks blockchain leverages the Bitcoin blockchain by anchoring to it. Just to emphasize, Stacks is a separate blockchain but uses the Bitcoin blockchain for security through a mechanism called Proof of Transfer (PoX). If you want to look under the hood and get more information on how this works, see the Stacks 2.0 white paper here.

Some of the most important features of the Stacks platform are:

• You can run secure, decentralized, and censorship-resistant applications on it

• You own your own data, rather than the companies that you interact with. There is no middleman

• It enables new ways of doing business and receiving payments

• No major player has control

I find the concept truly fascinating, and something that we cannot afford not to have for the following reason. Stacks is a democratic version of the internet, as opposed to the current one in which the power is in the hands of a few players like Google, Facebook, and Amazon. I am not trying to paint any of them as evil. In fact, I think they have done great contributions to society. But they are run by humans, and it is a fact that humans that hold power for too long, get corrupted. It is in human nature. This is the reason why in most democratic governments, there are limits in the number of years the leader of a country serves in office. The internet is now bigger than any country, and it is too important not to bring important elements of democracy to it.

This is the future. Hundreds of decentralized apps have been already built for Stacks, and the list is growing by the day. To learn more, I encourage you to go here.

Freehold: A Concept with a Transformational Potential

Freehold

The Crypto space and blockchain technology, in general, are growing fast. Most newcomers get attracted to it when they see the growth in price in many Cryptocurrencies, Bitcoin being the most well-known and dominant. In other words, most people come for the money, as they see that many of these assets outperform any other type of investment. However, many of us soon recognize that there is a lot more value in this technology than just their use as an investment, or as a better form of Money (see my other post on this).

One of the most promising applications is the use of this technology as a tool to help build communities (networks) of trustworthy people centered around common interests, in a way that their interest can be verified. The verification relies on something called “proof of HODL”. Yep, not a typo, there’s a fun story behind the term “HODL”, but for practical purposes, it means to “hold something indefinitely”. In our case, the person would hodl a crypto token (such as Bitcoin) in a designated wallet to show that they believe in the project associated with that token by keeping it there. Note that this can be a very small nominal amount and they wouldn’t necessarily need to buy it, but they could earn it by performing a specific task (other mechanisms exist too). What I am doing right now is an example of the latter. I am writing a description of the concept that Freehold advocates for, in order to get rewarded in a token which I hodl. One can imagine doing the same for new or existing communities, such as people that work in Nanoscience (my field of work) for which we create a $Nano token. People could get rewarded in $Nano for a variety of reasons, such as contributing opinions, publishing articles, building tools, etc. In that way, the $Nano accrued and the length of time they are hodled could be a verifiable measure of the reputation of that person in the community. The same person can be part of various communities and their collective hodled tokens can be a representation of their interests and personality.

At a time when misinformation threatens to tear apart our society, we cannot afford not to consider the benefits of a technology like this one, which will allow growing communities with valuable content, generated by verifiably trustworthy individuals. This movement is still in its infancy, and the tools are just being built, but I believe it can transform the way our communities organize and the way we build trust. You can learn more and contribute at Freehold.