Nothing certain in crypto

my image

Farmers held hostage to force them to pay taxes. Ancient Egypt.

“In this world nothing is certain except death and taxes” Benjamin Franklin, 1789.

If the value of a currency is determined by its use cases, shouldn’t all crypto be close to zero?

Or is it a function of the supply and demand of the token? Is it the expectation of its future value? Is it the audited reserves? Or is it the charisma of the project leader(s)?

In the real world and after a few millennia of "using currency" not even monetarists and government policymakers can agree on “what exactly gives money its value”.

Some say it’s the size of their power projection in the world (not true, see Switzerland's case), other say it’s connected to their material output to the world's economy (not true, as many African and Latin American economies can attest), while others say the value is derived from its reserves of precious metals (not true at all,

Nevertheless, everyone can agree that an acceptable currency is one which both the seller and the buyer agree to use. This has been the case since the invention of currency.

But there is no such agreement for cryptocurrency - almost no one uses it for its intended purpose: regardless of the media noises created by photos of smiling backpackers buying their breakfast with Bitcoin in El Salvador, there are few buy-sell transactions with cryptocurrency in direct exchange for a tangible good.

One reason for this is the volatility of crypto. How can anyone take a medium of exchange with an uncertain future and ascribe value to it? Is it worth a cup of coffee? 10 cups of coffee? Nothing at all?

The solution to this is deceptively simple: if a government uses cryptocurrency as a stabilisation fund (financed with your taxes on crypto currency) then the value of exchange between buyer and seller would be maintained. And this would be good as it provides certainty to the future value of the currency.

In other words: you should be able to use cryptocurrency to transact with your government. A government should allow you to pay your dues to society using cryptocurrency if you wish; and should fund your social services with cryptocurrency.

At the same time, a government should be able to maintain a convertibility pool (paid with your taxes) and issue and enforce guidelines for the transactions it will accept, and the conditions for their settlement.

This very complicated thought is surprisingly easy to implement. Libertarians and believers in semi-anarchical societal structures will despise this, but in my opinion, there is no other viable alternative to cryptocurrency than government-imposed stability.

Government intervention will -ironically- be the key to saving the promise of Web 3 into the future, as it might create the conditions for the transaction of goods and services with certainty.

Once this certainty is created, it has to be granted legitimacy. Using it for taxation achieves this. And once it is taxed it can be the key to transforming our societies in ways that traditional money can’t.

{ more on the next episode }

You'd be wise to check what you find in the Internet before you use it. This is an opinion piece, treat it as such. All code examples are provided "as-is".
"Elegant code does not exist: it either solves a problem or it does not."