The Death of Cash and the Battle for the Future of Money

In the future, we There will be a private, anonymous alternative to cash. But in the future of the TV series "Black Mirror," the money in your pocket knows everything about you.

Cash is dying.

But with cash dead, the future of privacy is highly uncertain. In a previous article, I said that the government will make cash disappear within twenty years. But now, I don't thinkit will last that long.

The only question now is what to replace it with? Is a decentralized cryptocurrency or a state-driven digital currency more advantageous?

This means that there may be two very different visions of the future. One is that cash is eliminated, and national digital currencies become the main form of money. Currency will be related to your identity verification and location data. Everything you do is recorded by powerful government computers. Even, what these computers know about you Knowing more about yourself than you do, decentralized currencies will become illegal.

The second is that the country’s currency system has eliminated cash, but we can see that it is parallel, open, and based on privacy The openness of the digital currency system makes it have the same anonymous properties as cash.

Please note that in both cases physical cash will no longer exist. But this will create two very different futures. One situation, you can better control your money; the other situation, you will be controlled by your money.

01 Future Battle

There is no question that the fight for the future of money is a fight for control. Who has control now? Who will lose control? Who gets more control?

Whenever the structure of society changes, power changes with it. When control changes hands, someone gains more power and someone loses it. We've seen this power swing back and forth time and time again throughout the arc of history.

Roman coins are engraved with the faces of long-time rulers

In the ancient Greek era, the decentralized state was the center of the Roman Empire Centralization was replaced, but then empires disintegrated, replaced by ever-changing agglomerations of nation-states loosely fused with Christianity and the artistic, architectural, and mathematical ideals left over from ancient Greece. The cycle of power from centralization to decentralization runs through the entire human history.

The evolution of money mirrors the course of human history. Currency evolved over time into credit as people figured out a way to barter this substitute, and it could be traded for anything from horses to cheese.  

When the national regime is unstable, the currency is more local. The development of a common currency allows people making international transactions to exchange back into their local currency afterwards.  

The rise of the nation-state mirrors the rise of money. As small clans gradually reduced to feudal fiefdoms, raids and wars pushed borders to a more stable state, and money evolved into a more generally accepted standard. We are increasingly seeing precious metals such as gold and silver dominating what people think of as money. The precious medals were then pressed into coins of fixed value.

After coins, we moved to small pieces of paper backed by precious metals. Eventually, as countries moved off the gold standard, we severed our ties with the precious metal. At this point, the evolution of physical money has reached its peak.

02 Cash Wars

Just as we have seen chemical film develop over a hundred years and suddenly be replaced by digital cameras, paper currency will suffer the same fate. It will be replaced by liquid, easily transferable digital currencies.  

The transition to a cashless society began several years ago. Now China is basically a cashless society, which is a huge change, and when I visited China in 2014, cash was still the mainstream. In just 7 years, 86% of people in China use mobile payment instead of cash, skipping the ancient Visa and MasterCard POS systems.

These examples clearly show that governments view cash as a threat.  

Because cash has little control over the state, the government cannot easily monitor where it goes, including who owns it and what was bought with it What.  

As nation-states become the ultimate power on earth, they seize the right to print money and outlaw anyone else The power to create money by law and force. The state is used to this kind of control.  

Initially, the physical currency printed with the symbol of the nation-state was the ultimate source of prestige, and having currency meant having an independent strength.

But that all started to change as money became more and more virtual. As virtualization increases, currencies lose their anonymity and become easier to track. With the rise of credit cards in the 1950s and 1960s, money and its movement became increasingly transparent, with physical distributed ledgers held by private companies such as Diner's Club and Visa detailing the movement. As computers and networks swept the world in the 1980s and 1990s, and all these distributed ledgers became digital and more transparent, controlling the flow of that money became more important than printing the money itself.

Now that the government is used to seeing every transaction and where it goes, they don't want to lose control. Eliminating cash would eliminate anonymity forever.

There's just one problem these days: They're still having trouble getting rid of cash.

As we have seen in India, people refuse to hand over cash and spend it. A year later, India had to put the notes back into circulation because their digital system was not ready to handle them. In Australia, the pandemic has shattered any illusion that Australia already had a digital payments system strong enough to replace cash.  

To finally outlaw cash, countries need more than laws. When a new technology has almost all the characteristics of the old technology and a bunch of new irreplaceable functions, the original dominant old technology will disappear. This is where digital currency comes in. True digital currency does not come from one country, the innovation started with Bitcoin.

03 Nation-State Strikes Back

Most nation-states are horrified by the international, decentralized nature of Bitcoin, and governments have enjoyed control of the money supply for so long that they can no longer imagine an international currency like silk or salt. currency.  

Nation-states are fearful and angry about cryptocurrencies. As Facebook tries to launch Libra, Congress and other world governments Following them; when Telegram tried to build a fully scalable When it came to digital currencies, the U.S. government crushed them despite raising all the money from accredited investors.  

But as the U.S. and other governments react in fear, China is watching blockchain closely, They know their strengths better than any other country in the world. When other superpowers are not optimistic about the blockchain and Bitcoin, or are in blind fear, China has begun to vigorously build the blockchain.  

China's digital yuan ignited the fuse of "killing cash" and accelerated the demise of global cash. China's digital payment system has shocked countries around the world. They are years ahead of the Western powers.     

China has begun to test the digital renminbi, airdrop it, and let citizens use it Free money to buy things. Based on the videos and comments I've seen, it's a great platform. It lets users exchange cash with a touch of their phone, whether offline or not, and sync transactions afterwards.  

China is smart. Instead of goofy Western economists like Dr. Doom slamming Bitcoin’s huge price swings, they see a way to twist Bitcoin’s original libertarian design — to create a centrally controlled digital governance hub.

They see it as a way of creating a state support system that can easily cross borders and break through international sanctions , and eventually even smashed the international monetary system dominated by the United States. They take the underlying technology of the blockchain and then leave it behind, replacing those idealistic traits with centrally controlled tools. A permission-based, dictation-based model of "consensus" puts those primitive utopian ideals under fire.  

The Chinese also see a decentralized currency governed by hard-to-change algorithmic rules, which means Governments can no longer devalue or inflate currency by removing parts of it from circulation or printing more, and they will lose the ability to enforce currency controls, telling people how much they can take out or send to others at one time. Privacy-focused cryptocurrencies are even worse because it means everyone has ironclad encryption protocols behind them, but investigators want to take shortcuts instead of doing real surveillance.  

China sees it all and wants to be one step ahead before cryptocurrencies take over the world. So China moved quickly, banning bitcoin transactions within the country. They then built a centralized digital cash system to quickly crush decentralized currencies.

They will pass the "Belt and Road" initiative, let the Chinese invest heavily in developing economies, building roads, bridges and infrastructure facilities, or provide loans, thereby sowing the seeds for the renminbi. Soon, they will expect developing countries to repay these loans in digital yuan.

Want to send money through Western systems? Write a note, sign it, scan it, and fax it to someone else. Maybe someone got it a day later. Unless a person from a third world country can get a bank account in the first place if one wants to do business with Americans, or a business in a small country can comply with all FACTA requirements.  

So while they are battling the stodgy international banking system, they might choose to activate their Wallet, or use a beautiful digital dashboard on your desktop, and use China's system to gain benefits worldwide in seconds.  

Guess which one they chose?

When America abandons leadership and investment in other countries in favor of a ridiculous "I'm first" approach While the national populist worldview looks inward, the Chinese are investing in the future. While the Americans are fighting a senseless and destructive culture war, the Chinese invest in more than 70 countries around the world with unstable governments and poor infrastructure, and China buys the future by building roads and bridges, America is building a wall.

Of course, the western world does not want to see a Chinese currency dominate the third world, and the rest of the world's central banks are racing to Create your own digital currency to counter this threat, but the West is already far behind. Italy wants to go completely cashless, as does Europe, which has stepped up research into a digital euro. But Western powers are facing the dilemma of being too far behind China.  

However, Western powers will eventually catch up, and soon we will start a full-scale arms race of national digital currencies for hegemony. Some of them will be hindered by horrible IT and programmers, some will have dark designs, some will break security protocols and get hacked, but they Some of them will have good outcomes, and the failed countries will simply copy the successful ones.

With a new central bank digital currency, the state has the power to have total surveillance of your wallet Every transaction, every place you go...all have access to your identity, history and geolocation data.

Ten years from now, you're not filing taxes anymore, every time you buy a used toaster at a junk sale They will all be deducted automatically when the time comes. If something goes wrong, you can call to fight it, or ask an accountant to get you a refund. Whereas the government will loan you a year for free, the money will not even be transferred from the central bank to a private banking institution, it will go straight into your pocket and your money will know everything you have done.

The arrival of central bank digital currencies will accelerate. Despite the original regulations to the contrary in the crypto community, people absolutely will use these central bank digital currencies. Even, they will be proud of it.

04 The characteristics of trust and the deficiency of decentralized currency

Of course, people are only proud and happy when the government is functioning well.

When things are going well, the evils in the system will not affect enough people and come into the public eye, only The "bad guys" will pay the price, but probably not anyone the average citizen comes into contact with. So this system will mostly work for most people who don't care about privacy because they're just buying diapers for their kids, books on Amazon, or coffee at their local store.

But when the government goes wrong, as we saw with the U.S. Capitol uprising, their minds will will change rapidly. A currency endorsed by a country is the same as the government that controls it, you have to trust it, and in order to trust it, you have to trust the people behind it.

You cannot think of institutions as fixed concepts.

The United States is not fixed. There is a group of people behind every government agency, and they are always running. IBM is a company, but companies are always changing because the people behind it are changing. Trust is based on who is in power and how they use that power.  

Trust is in flux. Trust is broken so often that it only takes one breach of trust to shatter it forever. A man may be loyal to his wife for ten years, but the moment he betrays him, the trust is gone.  

“The crux of traditional money is all the trust it takes to make it work, the central bank has to be trusted not to debase the currency , but the history of fiat currencies is fraught with breaches of trust."Satoshi Nakamoto wrote in 2009.

When governments go mad, they now have the right to infect you with that madness. Want to move your hard earned money to another country that doesn't have such crazy people in power? But you can't, because of currency control, your money will be frozen, spend it at home or elsewhere.

Maybe you think this is a good thing, shouldn't a nation-state have the power to control the flow of money into and out of the country? They're just trying to protect their citizens and their economy from the fallout.

If you live in Iceland, your experience may be different. Iceland imposed strict currency controls after the financial crisis of 2008 until 2017. This means that everyone who lives there is only in the fantasy of owning their money, which they never actually have.

You can’t buy a house overseas, you can’t invest in Tesla stocks, you can only invest your money in local businesses, but these businesses Suffering with minimal or even negative returns.

Of course, many in the crypto space believe that no one in their right mind would choose a state-backed, surveillance currency , rather than a decentralized privacy protection system.

The average person doesn’t care about privacy, they don’t know what it means. It didn't occur to them that they might live in a world completely exposed to the government.

They never lived in East Berlin, password The police will show up at your house at any time and take you away for any reason; they have never lived in Venezuela and suddenly the economy collapses and it takes a year's salary to buy bread.  

This is why they will quickly adopt any centralized digital currency imposed by their country, if the government simplifies it or Mandatory use of it, or both, will speed up the digitization process.  

In "Five Keys to Encryption Technology Development", I wrote that to make decentralized cryptocurrency To take off, you need not only funds, but also a complete ecosystem that distributes currency, automatically exchanges currency, and provides goods and services in that currency without reconverting to fiat currency. No one can create a super transaction system that prevents all currency transactions like a centralized transaction system.

But instead, what the crypto community is doing today is doing small iterations on Satoshi’s vision, with newer, A fast blockchain makes cryptocurrencies go faster. They created privacy-grade currencies Zcash and Monero. They propose new ways to upgrade the blockchain without forking .

But other than that, they are the same.

There isn’t a single killer app that can only be purchased with cryptocurrency. There is still no better way to distribute tokens other than airdrops, miners, and centralized exchanges. These are just transplants of centralized distribution mechanisms from the old world to the new world. While there are already decentralized exchanges, you need to have cryptocurrencies to use them, and you cannot exchange them for fiat currency there. The distribution mechanism of cryptocurrencies mirrors the top-down currency distribution mechanism of the central bank, with miners and exchanges replacing the central bank and commercial banks.

We need a revolution in distribution, economics and commerce for decentralized money to really take off. Right now, cryptocurrencies are a speculative asset at best, making a few people very rich and nothing more. The experience remains scary and confusing, with little to no use and a test of the currency's future.  

Centralized digital currency has become a reality, if we want to see a decentralized currency that protects privacy, then we must Accelerate the pace, increase creativity, CBDCs are coming faster and faster, and we are running out of time.

05 This is the end of everything

< /p>

A dear friend of mine passed away this year and it got me thinking about crypto UX and what it means to all of us.

We entered the cryptocurrency space together many years ago and it is one of the foundations of our long-standing friendship. We made a deal that if one of us dies, the other will help his family find and sell all his cryptocurrencies.  

When I sat down to authenticate with the two keys associated with his dying smartphone "Who will do this for me? My money will go with me." 

My friend and I trust each other completely. I will make sure his family gets every coin and he will do the same for me. But it's not hard to imagine someone who isn't careful about owning cryptocurrencies. Fortunately, my friend made a wise choice, others may not be so lucky. That's where the terrible user experience comes in, and cryptocurrencies aren't moving fast enough to catch on with the average person.

For cryptocurrencies to really catch on, they have to be easy to use and easy to get started. I’m talking about “three clicks,” just three clicks to set up a wallet for a three-week transfer, then KYC on an exchange, and make sure you’ve got your passwords firmly in mind. That way you don't lose all your money and never have customer support, like someone who lost 7,002 bitcoins worth a total of 220 million forever just because he couldn't remember where he put the passphrase.

While decentralized currencies are struggling to get out of their infancy, China is conducting a shocking test of a central bank digital currency platform. As western countries fall behind, they start attacking decentralized currencies, which makes it harder for privacy-oriented currencies to gain traction.

Even if the western countries lag behind China, they will catch up, they have to catch up, because money is power, and this Just the power of the holders of power, a millionaire or billionaire wields a lot of power, but their economic power dwarfs that of a large economy.

They have that power now and don't want to lose it. To keep it that way, they have to kill cash and remove the threat of a decentralized currency.

Unfortunately, Satoshi may have given them the weapons they need to do so. Satoshi Nakamoto dreamed of creating an uncontrolled, decentralized, and trustless system, but in creating the blockchain, he/she may have inadvertently given chains to centralized power, tying us all forever in Together.

Original link