What does a financial revolution look like? History tells.

Author: Michael R.
Date: 
January 01, 2019
Read time: 
7 minutes

Many argue that cryptocurrencies are acting as the catalyst for a modern-day financial revolution. Generally, it is easier to identify a financial revolution after the fact because the implications for any breakthrough are not immediately realized or understood by the general population.

Many argue that cryptocurrencies are acting as the catalyst for a modern-day financial revolution. Generally, it is easier to identify a financial revolution after the fact because the implications for any breakthrough are not immediately realized or understood by the general population.

Looking historically, we have seen the evolution of currency progress from bartering with goods, to trading precious metals, to creating coins and dollars, to today - where we largely transact digitally. In this article, we will broadly explore the evolution of money and how changes in money served as major financial revolutions. We will then draw parallels to decide if we are witnessing a modern-day blockchain revolution.

 

Financial Revolutions and the Evolution of Currency

As briefly mentioned, there are several financial revolutions that have taken place in history. While there are many bubbles that have existed such as Tulipmania, the dot-com boom, or the roaring ‘20s in the US and western Europe, we are instead going to focus on global, long-term financial revolutions from more of a historical perspective. Each of the topics we will discuss will be focused primarily on the evolution of currency. Arguably, the automotive industry, aerospace industry, and many others spurred financial revolutions, but as it is a vague term, we will define it by referring to financial revolutions that affected the evolution of currency from a big picture perspective.

The three currency phenomenon we will focus on are:

  1. Bartering
  2. Gold Standard
  3. Government-backed currency

financial revolution

As we go through these, keep in mind the current blockchain revolution as I will do my best to explain the social sentiment at the times of these revolutions. This blockchain revolution is very controversial, mixed with lovers and haters, but don’t think that historical revolutions didn’t face similar criticisms.
 

Bartering

Arguably, this is not a financial revolution as much as it is the first step to visualizing the evolution of currency. It is commonly understood that there was a time where humans bartered for goods in lieu of money. For example, I may trade you salt for sugar, or wood for chicken. It is up to individuals, and to some extent communities, to value goods and gain a sense for what is a good deal. Keep in mind a world of bartering has not existed since early B.C.

Clearly, this is not the best method as people can rip each other off or some may just have poor judgment. Eventually, people wisened up and began to use precious metals, namely gold, as a standard for value.

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Gold Standard

Early on, still in B.C. times, humans began to turn to a more consistent method for valuing goods. Gold became the metal of choice. The first use of gold as money occurred around 700 B.C., when Lydian merchants produced the first coins. These were simply stamped lumps of a 63% gold and 27% silver mixture known as "electrum". Gold made things fungible, reliable, and standardized.

Much like with the current blockchain revolution, or the internet revolution back in the 80s and 90s, the general population did not pick up on this immediately.

Source: Cameralla Youtube Channel
 

The reluctance is understood though. Imagine having a system like bartering that works for you, and now someone wants to pay you in a new currency type, that you don’t have an immediate use for unless other merchants accept it. The same reluctance can be seen with the internet boom, most did not see the value in the internet or purpose of it, because life was “fine” without it.
 

Government-Backed Currency

Now, while gold is great, there are downsides to it. It is quite heavy and cumbersome. Additionally, a global currency is not best for the world as different countries are on different business cycles - we’ll explain.

As early as the 10th century AD, countries began issuing their own currencies. Government-backed currencies are commonly referred to as “fiat.” There are upsides and downsides to fiat currency, specifically paper dollars we are familiar with.

Paper money is much lighter, less expensive to manufacture, and easy to exchange for other currencies. As for the business cycles we mentioned, different countries prosper at different times. While one country is prospering, another may be going through a depression. Fiat currencies give countries the power to control the money supply and ultimately stimulate their economy. If there was one global currency, this would not be as easy. As we know, living in a world of government-back currencies, some countries are very responsible about managing their economies, while some are not and lead to serious recessions or dictatorships. To this day, there is lots of criticism towards fiat-backed currencies especially since the US broke away from the gold standard.

Then came the advent of the internet, after thousands of years of physical cash. Without much explanation, it is safe to say that the internet has spurred a financial revolution, once again changing the way we view how we transact.

Many believe that the cryptocurrency revolution is currently in a bubble, but if you look at the market caps of past bubbles such as the dot-com boom, you will notice that we still have plenty of room to grow.

Evolution of Currency and the Internet

While we have only briefly touched upon this, let me summarize once more how money has evolved over time. First, we bartered, then we used gold, then governments began issuing their own currencies (in the form of paper money or coins).

Next, we have recent technology revolutions. Credit cards and debit cards were introduced as well as e-commerce. Technology and the internet have not only changed the way we socialize and share information but also how we transact.

financial revolution

Source: statista.com

 

Markets are now global and we can purchase virtually anything from any country thanks to digital finance. Still, the internet has its shortcomings related to privacy. After using cash for thousands of years, we may have forgotten about the importance of privacy that comes with it. The internet forces us to purchase with credit or debit cards that are linked with our name, address, date of birth and social security numbers. Many argue that we have an inherent right to transact privately, much as we do with cash, online. So, the internet may not have directly changed the currency we use, but it did change the way we transact - which is the catalyst for where we are today.

This brings us to our next question. Has the way in which we transact been updated given the change in medium (from the physical world to the digital world)? We’ll break this down next.

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So, Are We In a Cryptocurrency Revolution?

In my opinion, yes, we are. Let’s break down the question I asked just before this, “has the way in which we transact been updated with the change in medium (the internet)?” What this means is that the medium in which we transact changes how we transact. For example, before sharing information over the internet we had books and diaries. The information in these books may be very important to us, so we can keep them locked in a safe or hidden under our beds. Additionally, if we wanted to purchase those books, we would pay in cash.

financial revolution

Now, as we put information on the internet, we care more about our privacy. Using safes and locks will not protect our information in this new medium, the internet. These methods of security are quite literally outdated. Instead of safes and locks, we need different methods for keeping our text documents safe and private, which we can do thanks to encryption. The same goes for cash. When we purchase on Amazon, we must use our credit card, which means that we cannot purchase anonymously as we do with cash, which is an inherent human right. Much like we need proper security to protect our personal identities online, we also need a new way to transact anonymously, much like physical cash.

Thanks to cryptocurrencies such as Bitcoin, Ethereum, and Monero - we have the option of purchasing goods with a system similar to cash. Cryptocurrencies allow consumers to spend money that is not connected to their name as a credit card is. Instead, money can be spent with Bitcoin in an anonymous, secure, and private fashion. This is the true appeal and reason behind the hype of cryptocurrencies. If we are transacting in a new medium, the way in which we transacted must be updated.

To summarize the differences between physical and digital transacting:

  • Digital makes for a global economy.
  • Digital introduces new privacy concerns - we had no digital-cash alternative. At least not until cryptocurrencies were invented.
  • Digital introduced new security concerns. Since personal identities are tied to our credit cards, we should always strive for new and highly secure methods for identity protection.

financial revolution

Cryptocurrencies solve the pain points listed above - offering a global, secure, and private digital cash. Many believe that the cryptocurrency revolution is currently in a bubble, but if you look at the market caps of past bubbles such as the dot-com boom, you will notice that we still have plenty of room to grow.
 

How can I get started?

Great question. Getting involved in a financial revolution early is usually a good move. Those involved in the gold rush did quite well for many generations. Much like with any financial revolution, there is a higher barrier of entry for the education required to understand cryptocurrencies. The blockchain revolution often referred to as the cryptocurrency revolution, is highly technical with lots of incorrect information online. I highly recommend checking out our start investing guides, created by our team of handpicked cryptocurrency experts, so you can get started today. We also offer a 100% money back guarantee because we are confident that our course is exactly what you are looking for - our information is always up to date and our community is here to help.

Posted by Michael R.

Michael is an entrepreneur who has been deeply involved in the cryptocurrency industry since early 2014. He joined Cryptomaniaks as a cryptoanalyst, helping to create accurate and digestible content.

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