So it is only fair for those sitting on the sidelines or just heard of Bitcoin as some internet currency, to not understand where the value lies — or even if there is any.

At Coin Hunter, we have slowly been putting together a document aimed at those sitting on the fence, the ones who want exposure to this new asset class, but don’t have the time to follow the trends. It is hard for those new to the space to understand some bespoke sharing economy blockchain that uses RFID chips to tag transactions and rewards its customers with loyalty points… Instead, we want to push new investors right back to the start and not even think of the different competing cryptocurrencies, but what the technology could provide as a whole. This is best achieved by examining at the most straightforward use case first. Money.

Any attempt at understanding Bitcoin, one must first understand money. Anyone who disputes Bitcoin’s potential without first properly taking time to understand what money even is — at least on a high level — are not doing their due diligence. If one is to argue why something isn’t something, one would do well to understand what that something is in the first place. It doesn’t mean the someone who understands the complexity of money has to agree, but the establishment of common ground is essential in any debate. So let’s take a look at this common ground, “What is money?”

Money is such a part of everyday part of life, and for those of us lucky enough to not experience an event as punishing event as hyperinflation or systemic corruption, our relationship with money is usually is quite simple. It goes along the lines of “I want more money” rather than ”what is money” or “why do we have money?’

This article is aiming to provide a light understanding of money to see if Bitcoin can be classified as money. If so, we see a potential investment opportunity.

The Google definition of money:

The definition is pretty straightforward but lets it break it down into three main functions.

• A medium of exchange (I get paid in money for my work)
  - A unit of account (I know what and how much I can buy with my money, how much I am worth)
  - A store of value (I will collect more of it, to obtain better things)

Perhaps a more philosophical definition could be, money is a human coordination mechanism. Maybe it’s not that philosophical as it essentially means “money makes the world go around”, a saying we are all familiar with.

Even if money is not at the centre of your world or your ‘Being’, it dictates your life one way or another. It is something us humans have recognised since the beginning of civilisation. This notion is substantiated by the fact that nearly every culture, every society, at every point in known human history, has conceived a form of money or at least designed a basic system to transfer value between parties.

So if we know money has taken many forms throughout human history, we can begin to see that the value that people place on it has nothing to do with the actual physical value (in most cases) of the money but instead money is valuable merely because everyone needs to use its functions throughout society. Money is valuable because everyone else will accept it as a form of payment, a unit of account and a store of value.

I.e. If I found myself shipwrecked on a mysterious island with a backpack full of gold, I might think that I’d have some bargaining chips for whomever I came across. Use my gold to leverage some food, a weapon or a means of transport. What happens when I stumble across a tribe who perceived gold to be a useless, a shiny evil stone. Let’s say I discovered that this tribe uses pearls as a form of wealth and money across the tribe. They tell me that can provide me with a canoe for ten pearls. If I can’t convince them that my backpack full of gold is worth significantly more than ten pearls, well I best get diving…

This example can currently be used as a point against Bitcoin, and it would be fair to do so. This article isn’t trying to push Bitcoin, just merely illustrating understanding the properties of money and how a lot of it comes down to perception. But say I were to convince the tribe that gold, for whatever reason, was a better use of money than pearls, it might take some time before the whole tribe or island population drops the pearls and covets gold.

Let’s take a look at actual history rather than the island. The time it took for the general public to accept ‘paper money’ over coins was 400 years and I am sure there many people saying “No one accepts it, therefore it’s useless”, but we all know how that turned out…

Forms of Money

Money has taken numerous forms throughout history and the notion of a new type of money — Bitcoin — is not actually that unique if you take a millennia-long worldview perspective.

Where things get interesting is that the origins of money actually cannot be precisely traced. Why? Well, because many civilisations used the concept of money before writing was invented. Unfortunately unlike Homer’s ‘Oddessy’, the story and history of money was not told around the campfire — surviving until somebody thought to put pen to paper.

So what’s the consensus around the origin of money then?

Barter.

Before coinage, it is commonly accepted that things were bartered in ancient markets that could be described as a medium of exchange. These included livestock and grain — things directly useful in themselves — but also merely attractive items such as cowrie shells or beads were exchanged for more valuable commodities.

A fascinating and vital idea proposed by anthropologist David Graeber in his book ‘Debt: The First 5000 Years’, is that debt is probably the oldest means of trade, with cash and barter transactions being later developments. Graeber argues that someone having to go to the marketplace with a commodity or item that somebody else actually wants at that precise moment in time and exchange it for the good you precisely want, is not a realistic way society operates. He provides evidence throughout different cultures that debt ledgers (basic accounting system of debit and credit), — even virtual in some case — actually functioned as money is many societies. The importance of the word ‘ledger’ will become more evident the more you understand blockchain technology, as all blockchains are fundamentally just decentralised digital ledgers.

Some of forms of money throughout human history are:

• Debt / Ledgers
• Barter
• Livestock & Grains
• Cowrie Shells (Pacific and Indian Oceans)
• Metal Coins
• Modern Coinage (Gold & Silver)
• Leather Money (China)
• Potlatch (Gift exchange in North America)
• Beads
• Paper Currency
• The Gold Standard
• Fiat currency — today’s currencies. Definition: Fiat money is a currency without intrinsic value that has been established as money, often by government regulation
• Digital Money

Properties of Money

As we can see, mankind has been extremely creative in our invention of money, perhaps simply because of necessity being the mother of innovation.

The why we societies need money can be found in the aforementioned functions of money, the transfer of value, unit of account, and the store of wealth. These ‘functions of money’ could be argued to be more objective elements of money than the ‘properties of money’, or the properties of good money.

As we are fundamentally coordinated by the transfer of money to one another, it would be safe to assume that the instrument that coordinates us, money, is robust in design, trustworthy and generally accepted. Anything can technically be money, a precious shell to a piece of paper, so we must examine the properties to discover what makes ‘good money’.

What makes one money better than the other’? It is when we begin to answer these questions, the fundamental investment opportunity of Bitcoin becomes more apparent.

Let’s have a look at some basic principles that money should contain. Admittedly, this is where the topic begins to get more subjective. Each will have their own headings, subheadings, and weightings between them. We have attempted to extrapolate what we believe are the core principals good money should inhabit.

• General Acceptability

We have covered this. Peers, businesses and governments must accept this as a form of money.

• Durability

It must last the test of time. The more indestructible, the better.

• Portability

You should be able to easily take your value with you wherever you go. From the corner to across international borders.

• Divisibility

The more divisible, the more options there are for products and prices within different denominations.

• Fungible

Fungibility is the ability of a good or asset to be interchanged with other individual goods or assets of the same type. Assets that are fungible are exchangeable for each other and simplify the exchange and trade processes, as fungibility implies equal value between the assets. I.e. we don’t want my $1 coin somehow being worth more than your $1 coin for whatever reason.

• Uniform & Recognisable

Uniformity of money calls for a standardisation of money so that it looks the same. This means it is harder to counterfeit and it will be more commonly accepted.

• Limited Supply or at least Transparent Supply

“Your money is not worth the paper it is printed on”. Hyperinflation. What good is money if supply begins to vastly outweigh demand?

• Stability of Value

One hopes their money or their value is worth roughly the same from day to day.

Comparisons of Money

It starts to become evident that when we break down the properties of money, that blockchain technology provides a natural progression for money in the Digital Age.

Our graphic (still in draft stage) attempts to compare Bitcoin vs Fiat vs Gold on an extremely high level. In our comparison, we are using Bitcoin as a blanket for all cryptocurrencies, and USD as a blanket as a Fiat currency. Though we have taken into account hyperinflation that many other currencies have experienced and put that into my assessment of fiat currency.

As this is a high-level assessment of the properties of each form of money, we understand certain complexities require their own debate. We will address these complexities in a different document. These include gold becoming digitised, Fiat on the blockchain and how Bitcoin falls short on arguably the most quintessential properties of money, Acceptability and Stability. Rome wasn’t built in a day…

For now, though, the “What even is money?” is critical to understand before we break down the comparison. This notion rarely taught outside of those pursuing economic and commerce degrees, but if we are on the brink of discovering ‘the people’s money’, the people best arm themselves with a firmer understanding of this question.

It exciting to peer into the future at what the world might be. Maybe one of fairness, transparency and, innovation. Hopefully free from non-hierarchical structures and where the citizens are giving ‘Big Brother’ a big FU.

Decentralisation for many is, in fact, the next step in the journey to a utopian world, but we have to remember this does not happen overnight. At at the current state of the technology we are far from anything that resembles utopia, in fact, we may be taking a step backwards. You only have to look at the news to see the continual flow of market manipulation, hacks or scams to realise this looks more like a dystopian world than anything else. However, sometimes, it is actually necessary to take a step backwards before moving forward.

EOS has caused and is still causing much polarisation among many crypto enthusiasts, so we thought it would be imperative to drill further into what has been behind the longest and largest ICO to date. What we found and what makes EOS so unique is that it is much more than a technology platform, it is in all seriousness a ‘New World Order’ that is aiming to take us one step closer to a decentralised utopia.

So what is EOS?

EOS, more commonly known as the Ethereum Killer or Ethereum On Steroids, is a smart contract platform explicitly designed for decentralised apps. Although this sound exactly how one would describe Ethereum, EOS has several substantial fundamental differences that makes it “bespoke” for Dapps and a future digital world.

It is essential to think about what we as users need from Dapps and what developers need from a decentralised platform.

• Seamless UI and UX
• Development-friendly (cost effective to build)
• Competitive pricing (free)
• Fast transactions (high throughput)
• Trust
• People actually using them (network effects)

If you were to read the EOS whitepaper, would see how they plan to attack the above needs and much of this comes down to their governance and consensus model. Oh and they also have 4 billion dollars in funding to make the above a reality, and the experience of Dan Larimer who has created two of the most used platforms to date, namely bitshares and Steem.

But this is not just about the technology, this is about how we create the right governance model that moves us to a world that many of us originally believed that bitcoin was taking us to. The idea that code is law fails to understand that humans design code and in all designs, an achilles heel will reveal itself most likely when masses amount of money are on the line.

EOS works via a consensus mechanism known as Delegated Proof of Stake, which simply is a voting mechanism where entities known as ‘Block Producers’ are voted in by the crowd to ‘produce blocks’ (reach consensus). Think is this like voting in a senator in ancient Rome — or any other government for that matter — and if they do not uphold to their campaign promises, yes, we vote them out!

There are significant rewards for being a Block producer; however, they are also under careful watch by the network. There are 121 total nodes (block producers), and the top 21 are actively involved in block production. The other 100 are on standby in case one of the top 21 can no longer perform their block producing duties. Much like our Senators, Block Producers are elected based on whatever criteria you as a token holder find valuable. With ongoing voting, should a Block Producer not perform their duty to the highest standard, they can be voted out by the network. What this leads to is an ultra-competitive system that enforces the Block Producers to not only function at a high standard but also support and grow the network. In essence, this could highly efficient government, which will utilise it’s revenue stream to improve the platform…hopefully!

An argument for Delegated Proof of Stake (DPos) and against bitcoins ‘1CPU =1 vote’ (ability to reach consensus) is that ‘1CPU = 1 vote’ creates power structures emerge such as mining monopolies and people essentially vote who they will donate their CPU power too. This gives them a chance to share in the reward as they cannot compete alone against sophisticated mining equipment.

Is this not a less transparent version of DPoS? Not sure…

Interesting EOS Block Producers have the ability to include a transaction in a block but also to exclude a transaction. They can also forge transactions that affect any wallet on the network. This can be done only if 15/21 of the Block Producers agree on the course of action and publicly indicate their intention on the network. This means that Block Producers have the ability to reverse hacks or exclude transactions on a subjective basis as well as restore accounts to those that have lost their seeds.

What good is a monetary system like Bitcoin if you forget your private key, lose your hardware wallet or more likely hacked and all your wealth is gone forever? Many will argue that ‘you have to look after your funds… you are the bank… blah blah blah’. But is this a reality or is this a justification of a poor design framework? In a world filled with fraud, key theft, and scams, it is exciting to see that this is a blockchain that can provide safety and security to the participants rather than the bitcoin and ethereum philosophy of “too bad”.

The EOS.IO is about creating a governance structure that meets the needs of its users. Not happy with the governance, leave, sell the coins. The incentive mechanism of the EOS tokens, however, ensures that it is in the best interest of the token holders to have a robust governance model that works for all and that Block Producers work together to build a blockchain that functions highly effectively.

To compare to the King of the North, Ethereum is the decentralised computer of the world but lacks efficiency, whereas EOS sacrifices some decentralisation for higher throughput. For many, they see this is as a significant downfall in its design but decentralisation is a continuum, and these bottom layer protocols, in which only a few will ultimately exist will range on that continuum. EOS is not the decentralised network that many first envisioned, but it does offer many of the benefits of blockchains with the added comfort of safety and security, it may not be perfect, but with 4 billion dollars in the bank, it’s going to be around for a long time.

People in this space can become quite tribalistic and unfortunately for some, it is easy to forget that we are all fighting on the same side. Not to despair though as competition leads to progress and innovation. Just remember our quest for decentralisation — our next iteration of utopia — should never be halted because if we give up on the quest, we have lost the battle. As a quote from Oscar Wilde reads

“A map of the world that does not include Utopia is not worth even glancing at, for it leaves out the one country at which Humanity is always landing. And when Humanity lands there, it looks out, and, seeing a better country, sets sail. Progress is the realisation of Utopias.”

Progress is the realisation of Utopia — EOS Summary was originally published in Coin Hunter on Medium, where people are continuing the conversation by highlighting and responding to this story.

When it comes to my ‘worldview’, I am –or was– an ‘imist’ agnostic (neither a pessimist nor an optimist). So when I saw the title ‘Factfullnees: Ten reasons why we’re wrong about the world — And why things are better than you think’ — Hans Rosling, I thought I hadn’t heard a vast wealth of optimist information recently (except all the blockchain developments of course), so why not give it a crack? Give me some of the good stuff.

Before finishing the first chapter, let alone the book, I was surprised, entertained and maybe most importantly, I was potentially resolved to sitting on the optimist side of the fence! But this article isn’t about my change of perception, it is about bitcoin and the blockchain. In my thinking, we must first understand the overall premise of the book to know how it relates to these two topics.

Note: This book has nothing to do with bitcoin — nothing at all — but this is when I get most excited about the future of this movement. I get excited when I come across great works describing global situations, problems and solutions by authors who have no agenda or seemingly zero knowledge of the cryptocurrency sphere, but whose visions and conclusions for a better future are analogous to the decentralisation movement. I get excited enough to write labouriously long sentences for our readers.

The Book

‘Factfulness’ starts with a multiple choice questionnaire where you have three options for an answer, rather than the usual four (so my chances just got better). These questions focus on topics which we should all remember from high school Geography:
- How many people are currently living in poverty?
- How many girls finish school?
- What is the life expectancy of the world today?
- How many people have access to electricity?
So on and so forth.
I thought I had a pretty good memory and idea of how the world operates, or at least how it is currently operating. My score… was 3. 3 out of 20! Yikes.

Before you think that a score this low could be one belonging to an out-of-touch or ignorant person, this is surprisingly the average score among multiple focus groups, including UN representatives, investment bankers, teachers and medical practitioners. How!? Instincts. We, as humans, harbour many, which morph our worldview. No one is at fault for this — in fact, one is ‘The Blame Instinct’ — and Rosling explores our instincts in page turning depth, mixing in real-life experiences, hard data and engaging visuals.

If you haven’t guessed it, my answers were all leaning towards the pessimistic side, and thankfully I was horribly wrong. The book doesn’t aim to relieve us of (or abscond our responsibility to) the magnitude of problems that are still unquestionably a part of the world, in fact, it addresses them head on. What Rosling is adamant about is that the situation can be both ‘bad’ and ‘improving’: these states are not mutually exclusive. I discovered that almost everything we consider as societal or global problems have been drastically improving over the past 50 years, so much so that sometimes we should give us ourselves a *brief* pat on the back whilst still pushing forward.

Have a look for yourself.

Even better, ‘Bad Things’ are on the decline!

What really has stuck with me — and the most relevant point relating to Bitcoin (you’ll see soon) — is that we need to stop grouping our world into the binary framework of ‘developed’ and ‘developing’ nations. It neither helps us understand the world in a practical way or help us find business opportunities. Rosling’s solution is to divide the world into four distinct brackets based on income levels. (Perhaps Rosling is not re-inventing the wheel here, but you will soon see the difference this will make.)

Note: Each figure in this chart represents 1 billion people and as you can see the income gap is not as dramatic as you might think. In fact, the spread actually lies mostly in the middle. But just because the majority of the population is now sitting in level 2 and 3, doesn’t mean we should take our foot off the pedal and guess what? We’re not!

As you can see people on Levels 2 and 3 still lack essential services that many of us take for granted, too many for me to outline in this article let’s concentrate on access to a financial system. Rather than let my rose coloured glasses and confirmation bias take too much of a grip though, I’ll give you an excerpt directly from the book which describes how some of the unbanked citizens of Tunisia store their wealth — it is rather crafty and innovative. If the below story isn’t screaming a use-case for bitcoin, I don’t know what is.

Rosling goes on to explain why there are many half-built homes throughout the Tunisian neighbourhoods.

“On Levels 2 & 3, families often do not have access to a bank to put their savings and cannot get a loan. So, to save up to improve their home, they must pile up money. Money, though, can be stolen or lose its value through inflation. So, instead, whenever they can afford them, the Salahis {Tunisian family} buy actual bricks, which won’t lose their value. But there is no space inside to store bricks, and the bricks might get stolen if they are left in a pile outside. Better to add the bricks to the house as you buy them. Thieves can’t steal them. Inflation won’t change their value. No one needs to check your credit rating. And over 10 to 15 years you are slowly building your family a better home.”

I am not even going to dissect how there is a more effective solution — even though I do quite like the brick one — on the horizon. I will leave it to you to craft the reasons as to why bitcoin may be the new solution, or maybe it’s not? Up to you, or more importantly, it’s up to the Tunisians! However, they, along with everybody else, need further education and development to fully grasp what is going on and what is coming.

For now, when arguing the “banking the unbanked” use case for bitcoin, add this anecdote to your bow amongst the other arguments such as:

• Approximately 2 billion people do not have access to a bank account but hey have access to a basic mobile phone and usually the internet;
• These people need international remittance services to send money home while working; abroad. They get charged an arm and leg by the centralised banks such as Western Union;
• They need a way to participate in the globalised world;
• They need a currency that is not vulnerable to hyperinflation or government intervention.
• Bitcoin = all of the above.

The above are all accurate statements — along with our brick anecdote — and I will not take away from the sheer gravity of how each one of these points can stand alone as a need for a decentralised global currency. 2 billion is a massive number, one worthy of the world’s attention, bitcoin or not. (Though I do firmly believe bitcoin or some other decentralised currency or network is the standout solution.)

What it lacks, however, is a vision for the future: a vision that these nations can catch up. It focuses on the notion that these people will not need to use bricks anymore, because they can now buy Bitcoin. They can purchase Bitcoin and live almost the same life they do now, but have a safer and more reliable way to store value, a way to save on remittance fees and, hell, maybe their wealth will even increase if they get in early…

It suggests the world will stay the same and that Africa may never catch up, but as Rosling puts it:

‘Cultures, nations, religions, and people are not rocks. They are in constant transformation.’

The benefit of separating our population into these four distinct groups is for us to avoid the ‘us’ and ‘them’ — The Generalisation Instinct — as it can lead those on Level 4 to presume the rest of the world is all ‘developing’ and not see the radical change going on. All other buildings look small and roughly the same height from the top of a skyscraper.

A New Middle Class

The graphic above illustrates the tipping point we are spearheading towards, where over the next several years the global middle class will expand dramatically.

This shift is one of the most important features of the global economic landscape today. Let’s think about this for a second. I highly doubt these people — who have found new wealth — will live and transact the same way they have previously done. Perhaps they don’t need a trusted financial service? Maybe they will continue to buy and store bricks and lack purchasing power? No. They are going to have more purchasing power for goods and services, send their children to better schools, save for their futures, and hopefully, further invest and participate in the globalised economy!

Who gives a shit what they do though really, it’s up to them, but I daresay they’ll be welcomed with open arms by most of us Level 4 leeches: “Welcome friend, sorry I don’t know why I haven’t advertised any products to you before, but here you are, do you need any life insurance? Used car? Bank account? Products, products, products?”

Anybody who ignores this imminent shift, will do so to their own detriment. Global businesses, retailers, financial institutions, whatever the industry may be, anyone who doesn’t wake up to this shift will be left behind before it even starts. In fact, it may be already happening with retailers.

Rosling describes that most Western manufacturers of sanitary items — talking tampons here people — have completely missed this. They are dreaming up ways to service the 300 million menstruating women on Level 4. “What if we market an even thinner pad for a bikini? What about pads that are invisible, to wear under lycra, How about one pad for each kind of outfit, each situation, each sport?” Blah blah… you get the point, but like most consumer markets on Level 4, the basic needs of consumers are already met, so the products are fighting to create demand in smaller segments or cultural and social enclaves of affluent society.

Meanwhile, 2 billion women are menstruating on Level 2 and 3 who have very few options to choose from, if any. They want a low-cost product that is simple to use. Once they find a product they like, they are most likely to stick with it and recommend it to friends and daughters.

Again, this middle class is set to explode in the future, any sort of strategic business planners need a fact-based worldview to find their future customers. I thank the heavens, the blockchain space has a few of those worldviews, that’s for sure. So let’s use them. Let’s push our innovation outside the bubble of the affluent. Let’s bring the future financial system to all the people who need it!

This isn’t only the perspective of a libertarian, idealist, anti-establishment type (I wouldn’t identify strongly with any of these, but I’m probably coming off that way for sure!), Financial Managers are attempting to convince their clients that not only Asia is catching (/caught) up, but that Africa might be coming in hot sometime soon too.

Rosling was hired by a Financial Manager to speak and convince his high-net-worth clients precisely that. He tried to break them away from ‘The Destiny Instinct’ (assume things won’t change) and illustrate how the Asian countries that experienced economic progress over the past decades, actually had made social progress during the decades before their economic growth. He tried to show that the same was happening in certain parts of Africa such as Nigeria, Ethiopia and Ghana. These countries are being starved for investment but have still been growing at a rate of 5% while the Western nations have stayed around 2% since the GFC. These percentages are from the IMF, take it up with them if you don’t believe it. Actually, fuck it, I’ll whack it in below.

Where the fuck are the Western Countries!?!?

Hopefully you are starting to see a bigger picture. The notion of ‘banking the unbanked’ is a far greater use case for blockchain technology — primarily its currency function — when coupled with the global projections of a new middle class emerging, a middle class who are not yet loyal to brands or services — especially financial.

Now don’t get me wrong, no one can predict the future, these two movements may never meet. They will have to play out organically and over an extended period of time. We have to remember there are forces larger than the decentralisation movement and they may not be following the same path. Bloody hell though… wouldn’t it be exciting if these forces edged closer toward each other, there would likely be some trepidation at first, but hopefully they would ultimately come together.

We are going to have to be patient though, because for this to flourish a tremendous amount of education is needed, especially since even those living on Level 4 don’t even get taught on how their current financial system works — let alone this crazy new cyberpunk one. Many suggest that we will see the uptake of these decentralised networks when the next GFC hits, when we see our current monetary policies collapse. Funnily enough, this emerging middle class has already seen enough of this compared to the “main characters of the world” Level 4 Westerners.

So while the current ‘herd’ in the wider blockchain arena are talking about coins that may: make you coffee; give you Facetime access to an NBA player; fly you a kite; or some other bullshit problem that previously didn’t exist that blockchain now has a solution for… a new ‘herd’ may be on the horizon. One that will want to use blockchain for its most simple feature, to store and transact wealth.

Bitcoin interest by region

We all learn a hell of a lot more when we converse with people who have differing opinions. So please, comment below and let me know your mind!

Bitcoin & The Emerging Middle-Class was originally published in Coin Hunter on Medium, where people are continuing the conversation by highlighting and responding to this story.