Universal Trust

 

So there is a huge craziness around Bitcoin after 3 years. Few believe this time it could be different and could sustain the mammoth valuation it is breaking everyday. Because this time Institutional Investors have bought the Bitcoin story and hence the belief.

But there is huge skepticism among the public as to whether Bitcoin or crypto in general could become the defacto standard of exchange. To understand this we have to understand the concept of money. 

In human history, the necessity for money was caused by Specialization. Because specialization created a problem, how do you manage the exchange of goods between specialists? For instance, when someone was specialized in curing human diseases, the entire village went to that person and if everyone were to give apples or sheep - think about the specialist situation.

What if the specialist's need was wine at any given point and nobody was offering that. And what if the specialist wanted to move to another village for better prospects. There was an immense need for a medium of exchange that enables people to convert almost everything into almost anything else. 

Thus came the existence of "money" - which after so many iterations and variations we are accepting in the form of coin or printed paper which has some imprints or signature of some trusted authority. The coin or paper itself is not what constitutes as money because they obviously do not equate to the value they represent anyways. So it is the imprints or signature of the trusted authority which is carrying the value. 

In other words, money isn’t a material reality – it is a psychological construct and is basically a system of mutual trust. As long as my neighbor believes in the trusted authority which issues them, I believe in them and vice versa. Now the question boils down to does the trusted authority always have to be the federal government where we geographically live? 

Could an universal order of trust be created where a decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen happens? Basically the universal order of trust is entrusted upon peer to peer. i.e. if you are an artist and if you create a creation and make it available for common public consumption then the corresponding revenues should come directly to you without any intermediaries. 

Whether this concept will pick up or not and what the practical challenges with this approach is going to be is a larger discussion in the coming years.