Money and Bitcoin

blockchain as the basis
of the new monetary system

by Jurg Conzett

Is Bitcoin Money?

More and more visitors come to the MoneyMuseum with this question: is Bitcoin our coming money?

There are two thinking errors that prevent us from answering this question realistically. I call them the Scrooge-Duck thinking error, and the exchange thinking error.

The Scrooge McDuck thinking error:

Scrooge McDuck symbolizes wealth. He is happiest when he is alone with his money. He is also considered a symbol of capitalism. Scrooge has a safe in which he can go swimming in money. But today, central and commercial banks generate huge sums of money out of thin air that exist only electronically. No one will ever be able to touch this money. And yet, like Scrooge McDuck, we believe that this money is worth something in itself. That is a mistake in thinking.

The second thinking error concerns the moment of origin of money: There is an often-told story: Two people want to exchange their goods. A farmer needs copper for new tools and wants to exchange it for his potatoes. His neighbor, however, cannot help him because he has enough potatoes himself. The idea to add a rare object, like gold or silver, to the exchange. So local markets for barter developed, and thus our money was born. This story is deeply ingrained in our minds. It sounds so logical that it must be true. But this story is completely false.

If money should have an intrinsic value, then Bitcoin cannot be money. If one believes that money originated from exchange, then one fails to realize that our money originated historically and could thus be replaced by a new system.

We believe with Scrooge McDuck that money has an intrinsic value. Scrooge has had a safe built for himself in which he can bathe in money. We also think that our money is somehow "backed". This is a false assumption. Our money consists of nothing except that our state forces us to use this money exclusively in transactions. Picture Jason Muhr.

Money does not come from exchange. In the past, buying and selling, the exchange of equivalents, did not dominate life. Money did not come into being in our present form until the 16th century. That is, money has come into being historically and can also be changed again historically.

Bitcoin as money?

Today, the big countries want to introduce digital money, either without blockchain or if with, then with a centralized blockchain with state control. China has already introduced the digital Renminbi in local places, the EU wants to launch the digital euro in 2025, and Switzerland and Sweden, for their part, have completed all preparations for the launch. Digital currencies, however, are hardly different from today's money and would not change many of the drawbacks of today's money. I am thinking of the division of society, growth pressures, the unequal distribution of resources, and environmental destruction.

In contrast, money based on a decentralized blockchain has four advantages:

1. no banks are needed for a transaction, the transaction is direct and instant, similar to digital money.

A payment in the banking system requires both people to have an account with a bank; the bank requires trust and takes time to post. A payment in the blockchain system does not require a bank, but is administered by many nodes in the system and is processed without delay.

A payment in the banking system requires both people to have an account with a bank; the bank requires trust and takes time to post. A payment in the blockchain system does not require a bank, but is administered by many nodes in the system and is processed without delay.

2. Bitcoin transactions are indelibly recorded in the blockchain registry, and thus every transaction can be tracked at all times.

Privacy is maintained, but blockchain is not anonymous.

Privacy is maintained, but blockchain is not anonymous.

3. Bitcoin can be made by anyone, much like the means of payment in archaic societies.

In Papua Newinea, the locals use the taboo shell money - mainly for cultural purposes, but also to pay taxes. These chains are made by themselves. However, the competition is fierce and the yield correspondingly small.

In Papua Newinea, the locals use the taboo shell money - mainly for cultural purposes, but also to pay taxes. These chains are made by themselves. However, the competition is fierce and the yield correspondingly small.

4. Bitcoin cannot be multiplied without limits - this in contrast to today's national currencies.

Conclusion

The world's governments feel unsettled and threatened by the new blockchain technology. They want to "tokenize" their national currencies, i.e. offer them in electronic form and thus retain control over their money.

In a second step, one could work out a global blockchain with many commercial applications that can handle large trading volumes and whose register is decentralized. This would then be an ideal infrastructure for global money.

The idea of a global money is so tempting that it must be tried.

What's so special about blockchain?

Bitcoin is one of many products made possible by blockchain technology.

A new block is produced every 10 minutes. Miners who are the first to calculate the block receive a reward in Bitcoin. The individual blocks contain only numbers 0 and 1. The basis is the binary number system, which can be used to store any content. The number of 0 and 1 is precisely noted and stored in the last and subsequent block. This is called a hash. If a block is detached from the chain, the hash changes and the blocks no longer form a chain.

Even if only the slightest number or word in a block were changed, the so-called hash changes and the blocks no longer fit together. The chain disintegrates. This ensures the integrity of the blockchain.

The individual blocks are like register entries. An endless register where new register entries are added every 10 minutes. This register is not kept centrally, but on many individual computers. It is estimated that after confirmation of more than six such computers, the chain continues with this block. Thus, the new block is virtually sanctioned.

Blockchain is a global infrastructure

The Internet has been built over a long period of time, but since 1996 there is the browser, i.e. a program with which even the layman can call up pages. For 25 years we have been benefiting from the Internet of Information: without mobile devices we would have to organize everyday life differently, Big Data has become a huge industry, the big companies are working on machine learning and artificial intelligence, we store data in the cloud and share information on the social web.

What is important is how many Internet users there are and where they are located. Here is a short video:

While the USA was far ahead in Internet use in the 1990s, China has been catching up rapidly since 2000. Today, it is the Chinese who use the Internet by far the most. This gives China great advantages as they can combine their market dominance with Artificial Intelligence. This gives the market leader almost 100% control.

With blockchain, the Internet of Values is now being introduced. With blockchain technology, you can also transfer valuables - as easily as exchanging e-mails, without middlemen, without a bank as an intermediary. And bitcoin is just the beginning.

Growth types

Natural growth: growth ends, the tree no longer grows larger. This is the type of growth we experience next.

Natural growth: growth ends, the tree no longer grows larger. This is the type of growth we experience next.

Linear growth: Value increase of equities (red) vs. real estate (green) and bonds (blue).

Linear growth: Value increase of equities (red) vs. real estate (green) and bonds (blue).

20 Iterations with digital growth: Zurich - Berlin

20 Iterations with digital growth: Zurich - Berlin

30 Iterations with digital growth: passed the moon!

30 Iterations with digital growth: passed the moon!

Digitization underestimated

The growth in computer capacity is underestimated. If we take a step of 1 meter, we will have covered 20 meters after 20 steps or iterations.

In the financial market, there is a different kind of growth: we want to know after how many years our investment will double. To do this, we use the 72 formula: divide 72 by the growth rate per year; in our example 72/8.1 = 8.9. If the value of our stock portfolio increases by 8% per year, the value doubles every 9 years.

The computer capacity, on the other hand, knows a completely different way of growth: it doubles at each iteration. If we start at 1 (example 1 meter) and go through 20 iterations, we get 524 km - the distance Zurich-Berlin. At the 30th iteration, it would already be 536,000 kilometers, more than the distance to the moon. This is a growth dynamic that we can only imagine with difficulty.

China has set itself the goal of becoming the global leader in digitization. The battle for dominance in the digital world is in full swing. However, China's vision for the use of future technology is diametrically different from democratic-liberal ideas. It is the vision of an authoritarian state.

For this reason, it would be of great importance to post all entries in a blockchain so that there is full transparency. Tempting for the population, while certain government officials don't want to look at their cards. The race is completely open at the moment.

What are we using blockchain for?

Real Estate Register:

Not everything works as reliably as the Swiss land registry offices. New governments that disregard the agreements of the old government or simply unreliable administrations are not uncommon. This is where blockchain can offer great advantage.

Small payments:

There are areas where small payments, i.e. payments under one franc, are desirable. Example: buying newspaper articles or small tips. The Zurich startup Centi AG offers exactly this; payments for a few cents with the lowest transaction fees.

Certificates like university diplomas:

Fake diplomas are a serious problem in academia. A Google search for "buy fake university degree" produces thousands of results, and with an English search term, as many as a million. With SWITCHverify.ch, university diplomas can be certified, protected against forgery and efficiently checked for authenticity.

EHR Data: electronic health care data

Electronically available patient data, the access to which can be managed by the patient himself.

Unisot.com

SeafoodChain as an example of seamless recording "from sea to plate". Global supply chains allow the end consumer to track the origin and processing of food and products.

Tokenization:

Not just stocks, but almost any item or contract can be run on the blockchain and traded in the token economy. In this example: the app Aktionariat.