Cryptocurrencies and the True Source of Value

Reading Time: 5 minutes

One of the arguments against Bitcoin and cryptocurrencies in general is that they do not represent true value. Behind the crypto-algorithms, according to this line of argument, is really nothing that could objectively be considered currency; indeed, nothing at all. Hence, cryptocurrencies are a bubble which is bound to burst. This is not just an any-man-on-the-street opinion; it has been espoused by the billionaire investor Howard Marks, who predicted the “dotcom bubble” of the 1990s. “In my view, digital currencies are nothing but an unfounded fad (or perhaps even a pyramid scheme), based on a willingness to ascribe value to something that has little or none beyond what people will pay for it,” Marks said in 2017. Marks used historical precedent to underscore this point, pointing to the notorious “tulip mania” that started in the Netherlands in the 17th century. In 1637, at the height of the mania, a single tulip bulb could be worth up to ten times the annual income of a skilled craftsman.

Lydian coin. Inscription reads “I am the sign of Phanes”. Electrum (alloy of gold and silver), length: 2,3 cm. Late 7th century BCE, found at Ephesus. Israel Museum, Jerusalem.

One might wish to consider other historical precedents, however. Currencies per se are a surprisingly recent invention in human history. According to the archaeological record, the first coins were used in Lydia (present day Turkey) in the 7th century BCE (see image above). This is long after the rise of cities and kingdoms and indeed the successful smelting of metals, including gold, silver and bronze; even 500 years after the commencement of the Iron Age in the Middle East. We also know that this was not due to lack of technical engraving ability, since many small metal seals with intricate designs have been found dating from many centuries prior to the 7th century Lydian coins (see image below).

Seal of Tarkummuwa, King of Mera. Silver (diameter: 4.2 cm). c. 1400 BCE, found at Smyrna. Walters Art Gallery, Baltimore.

The anthropologist David Graeber has provided an interesting explanation of why coinage was eventually developed. Coins were not initially used by most ordinary people, he argues. The available archaeological evidence shows that the first coins were used by soldiers. This makes sense, Graeber argues, when we consider that ancient rulers had to find a reliable way of feeding armies at the frontier of their empires. If the soldiers were stationed inland, he points out, it would be extremely difficult to move large amounts of grain or other foodstuffs with them. If, however, standardised coins could be minted and given to soldiers, the soldiers would be able to buy the necessary food from the ruler’s civilian subjects in these far-flung parts of the empire. By taxing his subjects, these metallic tokens of value would then be returned to the king. They began as a more efficient way of feeding armies, but once they acquired universally recognised value within the state, could be applied to any economic transaction.

In order to be hard to forge, coins had to be minted out of rare metals by skilled craftsmen. But even gold, silver and copper, which were used for the earliest coins, have no intrinsic value, as Israeli historian Yuval Noah Harari points out – “you can’t eat it, or fashion tools or weapons out of it.” The lesson here is that no form of currency has value above and beyond what we ascribe to it, collectively, as human beings. Thus, it will not do to dismiss a cryptocurrency, as Marks does, because it has no value beyond what people will pay for it (this is not to say, of course, that other arguments against cryptocurrencies fail; only that this particular line of argument is unconvincing). One might well imagine an ancient Lydian exclaiming, “These bits of metal with their fancy designs and inscriptions have no real value. The whole fraud will surely collapse after the king dies.” And yet, as we now know, it did not turn out that way. The coins had value because enough people came to believe that they did and that was all that mattered.

We have since, although only relatively recently in 1971, abandoned the gold standard, making way for the the US dollar as the world’s reserve currency. One could even argue, as some have, that the dollar is a less reliable store of value than either gold or Bitcoin, because the US Federal Reserve can simply print as many units as it sees fit – and indeed, in the last round of quantitative easing since the 2008 crash, it has been printing an unprecedented number. The amount of gold in the world runs up against physical limitations, whereas the amount of Bitcoin runs up against mathematical ones. While it is true that other cryptocurrencies can avoid the same limitations that appear to be built into Bitcoin, matters such as the total number of units to be issued and the value of each unit relative to everything else still depend on the vital criterion of consensus by the community of users. Notice that the technological aspects aside, this criterion also applied to the very first currencies used by our species. While it is true that the first coins were issued by rulers in a top-down fashion, these rulers did not realise that they had brought into being a monetary system that would soon escape their control. As Graeber also notes, after appearing in Lydia, coinage soon emerged independently in differently parts of the world. This meant that when different empires came into contact with each other, they had to arrive at a fair exchange rate. If the empires were of roughly equal power, this could not be determined by either of their rulers and was determined instead by market factors beyond any one individual’s control. Exchange rates between different official currencies have thus continued to fluctuate from ancient until modern times.

Bitcoin and other cryptocurrencies could indeed be seen as the next logical step: prior to their emergence, the only “non-physical” medium of exchange resembling a truly global currency was the IMF’s “Special Drawing Rights” or SDRs, although as their name suggests these have only been issued and used in exceptional circumstances. Better yet, unlike SDRs, cryptocurrencies are not controlled centrally in any way. Instead, they are designed to bypass both governments and banks. All they require is a public ledger, the blockchain, to keep track of all transactional information. Governments and banks understandably find this frustrating and will likely do all they can to bring cryptocurrencies under their control. In this respect, however, they may resemble a Lydian king who tries to fix the prices of various commodities, only to find his attempts frustrated by his subjects, who find roundabout ways to buy or sell commodities at market prices.

The fact of the matter is that we are now all living in a global economy, and cryptocurrencies have beaten the IMF to the finish line of establishing imaginary units of value that are created (or “mined”), recognised and used globally. One or even all of them may collapse eventually, but the point is that such an event cannot be brought about by governments or banks. The technology is now out there, as is the will to avoid the fiats of governments or banks. And if they do collapse irreversibly, that is not necessarily good news for fiat currencies. The need for an independent global currency will likely persist even in their absence, perhaps leading to a return to something like the gold standard. In any event, when we go back to the very root of currencies and what makes them valuable, we may well discover a counter-intuitive (at least, to some) truth: that both gold and cryptocurrencies are better placed as stores of value than fiat currencies, such as the pound, dollar or euro.

Sesame Credit and the Future of Social Credit

Reading Time: 2 minutes

When it comes to bashing countries for poor internet freedom practices, China usually appears near the top of the list – and with good reason. Perhaps in part that’s because, in contrast with more crude filtering systems adopted in many authoritarian states, the Great Firewall is an almost elegant panopticon. The sheer level of surveillance – and capacities for intervening – can look like an early draft of a Black Mirror episode. Take, for example, the ability to effectively remove images deemed unsuitable for the interests of the state ‘mid-air’. Where the Soviets had to make do with erasing people after the fact, Chinese internet censors can do so on a real-time basis.

Sesame Credit seems, in a sense, to be the obvious outcome of this level of monitoring and capacity for intervention. The so-called ‘social credit’ is opaque in its operation, but from what we understand, citizens will be able to ‘earn’ credits by such patriotic activities as pro-government posts on message boards. A higher score will mean greater perks, incentivising citizens to behave as suits the Communist Party of China.

There is something thoroughly Chinese about this – and not in a negative way. In e-commerce, the country outstrips its competitors with home-grown giants like Alibaba. Granted, they have been grown in a sort of incubator, with Western competitors artificially kept out, but they have achieved success on a scale which surely makes even Facebook or Google jealous. The ease of access to functions through all-in-one apps like WeChat is another example of an approach to the internet with a great number of affordances. On the more positive side, the use of something like Sesame Credit shows a continuing move away from paper money. This was the goal of China’s almost as populous neighbour to the West, through the process of demonetisation. Yet India has largely failed in its bid to go digital: in spite of the number of new digital bank accounts created, the majority (owned by the urban poor) are empty, and the rural poor (with no access to the internet) never had them to start with.

This cannot detract from the cost in terms of citizens’ rights to privacy, or freedom of expression. It also opens up a number of worrying scenarios in which a users social credit could be lowered. A drunken error or a joke made at the expense of the government on a relative’s account, for example, might have an impact; more concerningly, a malicious actor could effectively fabricate dissent. There is also the question of automation . How well can the system deal with bots set up to pump out pro-government posts? Will it lead to inflation (at least temporarily, before accounts are presumably removed)? The lack of adequate information on this front makes this largely guesswork, sadly.

Will social credit in the style of Sesame Credit spread from China, is the final question. Many have pointed to pre-existing systems, like the credit scores which are prevalent across the West – and they have a point. Much like Sesame Credit, when it’s rolled out, they can have immense impacts on our lives and are by no means transparent. And yet largely speaking, our behaviour on Facebook or Twitter has no major bearing on these (we hope). The age of the all-in-one app is yet to hit us – but when it does, there’s no reason to assume that social credit would not be its outcome.

Not another collaboration.

Reading Time: 2 minutes

Collaboration. “The action of working with someone to produce something”

One of our key values, not only attached to our product but also our culture featuring an international team of 12 nationalities across 4 time zones. How can you make this work effectively with  the help of technology directly impacting the way teams are engaging  today? Without surprise, the hottest job title on trend currently is  “Digital Nomad” – defining people who use telecommunications technologies to earn a living and, more generally, conduct their life in a nomadic manner. Such workers often work remotely from foreign countries, coffee shops, public libraries, co-working spaces, and recreational vehicles. So much for a trend though, it’s been predicted that by 2035, over 1 billion people will be working this way. Without doubt, this life isn’t for everyone, but I’m confident we have all been through office space transformations with hot-desking and remote working all very 2005.

With more tools becoming available to encourage collaborative working, we see the likes of GitHub and Slack improving efficiencies, and at a rapid pace and scale. We, as employers or employees, are working smarter and more on the go than ever before. Is there a skill for Alexa to do it? The only thing that remains the same is that  we all have the same amount of time in a day, and there is no way to get more of it. It doesn’t matter how successful or wealthy one is – we are all capped at 24 hours per day.” as quoted by The Entrepreneur.

In the way technology makes us evolve as humans, it also encourages us to shape and adapt our products. As a result, we’ve rolled-out the largest update on “Boards”. Think of a board as an enriched collaboration space online, that enables you to work on specific projects with your team and to keep track of  notes, files, articles and everything in between. Roll this up with our Chrome extension clipper. This lets you clip the content directly from the web and continue collaborating as such with tagging and commenting straight to the Boards. It has never been easier to consolidate!. As Pokeshot rightly mentioned, “Find and use tools that integrate, so your employees can find everything in one place”.