Whenever someone arrives with a new representation to manage the physical world, people become suspicious. When Marco Polo returned for the first time from the East, his stories of people who used paper-based representations of money in China, not metal, were discredited as witchcraft. How can sheets of paper equate to a chicken?
The European world continued to resist the representative money in the 17th century. Subsequent forms of derivative money, electronically transferred over wires and computer networks, also required time to be understood and accepted.
Perhaps it is not surprising that the emergence of cryptocurrencies has triggered the same waves of fascination and skepticism. These cryptographically protected aggregate data bits are only the newest form of value representation, the 21st century version of that fragile paper currency.
"Some of the most important human creations were the new systems of representation," said cognitive scientist Margaret Boden The creative mind: myths and mechanisms. "These include formal notations, such as Arabic numerals (not forgetting zero), chemical formulas, or staves, minima and semiminime used by musicians.The programming languages are a more recent example."
Cryptocurrency is in many ways a natural evolution of previous representative systems, although it favors the truth with respect to the power sanctioned by the state. Unlike the real estate systems managed by the government (and the financial vehicles that followed it), its protocols minimize the need to trust the other actors in the system. It is a peer-to-peer trust system that is also radically decentralized and open.
Giving access to developing countries to this technology will help to increase the whole system, not just the unbanked.
"Because value representations become less ponderous and more virtual, people are understandably skeptical," wrote Hernando de Soto in The mystery of capital. He was fascinated by the emergence of property systems and how they could go beyond cultures, increase trust and reduce friction for the creation of new capital. As someone who came from the global south, de Soto was sympathetic but ultimately critical of the subject of Marx's capital formed through work. De Soto concluded that those whose assets were not traced by the necessary bureaucracies were "invisible and sterile in the market".
This new cryptocurrency system provides information, reduces costs and adds value to transactions between those who own what. Creating consensus without a central actor is also a profound evolution of the social contract. The consequence of this new system allows economic agents to discover the potential in new types of resources, whether they are digitized land titles, credit systems to consume music, payment flows between Internet of Things devices, data of the & # 39; user on the Internet or even electrons exchanged between solar panels.
Unlike "invisible and sterile" people outside the ownership system to which De Soto refers, anyone can access these new networks with a blockchain-based identity. In the developed world, this means that government agencies and banks can attest to your identity or behavior, for example that you are indeed a citizen of that country or have a good financial position. In the less developed world, people without a persistent portable identification (such as refugees or those who do not have documents) will have a new identity construction that can be attested. If they are forced to leave their country, they can still make purchases or get micro-loans and start their businesses.
Instead of wealth being controlled by a few state actors and 1% higher, it can be distributed more evenly. While only 1,000 people own 40% of the bitcoin that has been extracted, large-scale cryptocurrencies could eventually lead to greater distribution of wealth through the power of decentralized networks. Integrated systems call for the creation of a wider network in which the potential to increase capital increases in orders of magnitude proportional to the number of users connecting to them. Giving access to developing countries to this technology, therefore, will help to increase the whole system, not just the unbanked.
Instead of conflicting relationships between society and client, we will have common-good collective relationships on open platforms on the net. It will take some time, yes, but the absorption has been quick. As shown by the ongoing construction of new networks and business models tokenised on the Ethereum network, perhaps it will not take long to convince people of these new systems as Marco Polo did in Europe.
This story is part of What Happens Next, our complete guide to understanding the future. Read more about the future of money.