Let me ask you a question… What is fiat currency, and why does it suck so much?
Welcome to Cryptonomics, principles of cryptocurrency and investing. I’d like to talk about how Dash is helping people handle the problems of hyperinflation in Venezuela, and give you some historical context about the failure of fiat currency, and why you shouldn’t trust governments with the money supply.
Thanks so much to everyone sharing, resteeming, liking and commenting on this content. I can feel that we’re already building a community of people that’s willing to ask the deeper questions about finance.
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Fiat currencies
Getting into crypto, you’ve probably heard the term “fiat currency”. Some people say that “fiat currency” means a currency not backed by anything, but the literal meaning is “currency by decree”. Governments declare that something must be accepted as a payment for debts – that’s what’s known as “legal tender”, and they’ll demand that currency as taxes. In a very real sense, it’s violent money, blood money. The government makes a threat, saying pay us using our money, or we will put you in a cage.
Before 1971, national currencies were backed by gold or silver in some form. At certain times in history, you could even go into a national bank, hand in your notes and receive gold in return. Not any more though. The US dollar, the British pound, the euro, and of course the Venezuelan bolívar are fiat currencies, used largely because of that threat of state force. Cryptocurrencies like Dash and Bitcoin aren’t fiat currencies. No formal office has declared them to be money, and generally, people aren’t forced into using them. So to the extent that people do use them, is generally the extent that they are useful. They use them because they want to, not because they have to. Let’s talk about hyperinflation. Let’s go back to beautiful Venezuela.
Hyperinflation in Venezuela
February 18, 1983, Black Friday. The bolívar was unpegged from the US dollar. 25 years later, in January 2008, the bolívar was worth so little that the government decided to chop three zeros off the currency, phasing out the bolívar, replacing it with the bolívar fuerte or strong bolívar. Now ten years later, they’ve again revalued the currency, replacing the strong bolívar with the sovereign bolívar. They planned to cut off three zeros in June 2018, but it was August before the plan went through, so they cut 5 zeros instead, dividing bank accounts by 100,000. Now there are many causes for this, including the sanctions by the US and other countries, and the fall in the oil price. One thing is undeniable though… The government ruined the money by printing too much.
Hyperinflation through history
I wish I could tell you this was a new story, but it’s not. This isn’t the first time it’s happened. The Argentine peso has been revalued 4 times since 1970, and might even be due for another crash. The continental dollar issued during the US revolutionary war was such a spectacular failure that people started saying the phrase “not worth a continental”. In the German Weimar republic, hyperinflation was so marked that there were reports of a mental disorder known as zero stroke, where bookkeepers would get obsessed with large numbers, writing long strings of zeros without stopping, and when asked their age, they would say they were 40 billion years old. The more power you give a small group of people over a society’s money, the more likely and rampant the corruption. Power corrupts, power is irresistible to the corruptible. Historically, every fiat currency has failed, sooner or later. The average lifespan of a fiat currency is 27 years. When Nixon cut the final tie to gold, he removed the backing of almost every international currency. That was 47 years ago.
Dash vs Hyperinflation
Compared to fiat, it’s very difficult to hyperinflate cryptocurrencies like Bitcoin and Dash because the issuance of the currency is set by the software, which is in the hands of the people. If Fed chairman Jerome Powell wanted to come in and say “Let’s print a million bitcoin today, let’s print a billion Dash tomorrow,” the network would have to come to a consensus for that to pass. The reason I mention Dash over other crypto is because it’s one currency that people in Venezuela are choosing to use to do business. People have been mentioning some others to me, for example Nano, which looks like a cool project – zero fees and instant transactions. The Bitcoin Cash community is also doing charity projects there which shows us the hearts of people in crypto and humanity in general. However, Dash is already getting traction as a medium of exchange in Venezuela, people are choosing it to conduct commerce. A big problem when people come into a community and try to help them using a new technology… They come from outside, and try to tell people how to use it, when they don’t know the problems that are unique to that area. What happens with Dash is, people submit proposals to the treasury and get funding for projects. That means local people who already know the culture and the problems can come up with ways to address them. So the conferences and contact centres set up for Dash in Venezuela are coming from inside the community they’re trying to help.
Not only does Dash have the money to support these projects, they also have a system which can benefit from all the brains of the people who need it. That’s the beauty of crowdsourcing, these decentralised systems that have access to a crazy amount of human capital. I asked one Venezuelan in the Dash Discord about its adoption. He goes by the moniker LeoGrizz, and he had this to say:
“We Venezuelans are learning the advantages of a currency which is more stable than the bolivar, and we’re enjoying the advantages of the payment system for that reason. Of course it’s understood that a currency isn’t enough to solve all our problems, but if the adoption of Dash continues such a rapid path, I doubt very much that Dash would disappear after Venezuela gets back on its feet. On the contrary, it would affirm its position and have an even greater value.”
The dream of cryptocurrency is alive, the dream of a world where money, the lifeblood of an economy, is not controlled and abused by warmongers and sociopaths, but instead is in the hands of the people. Viva Venezuela.
Thank you
@jorge21commented on my last video on Steemit; I’ll paraphrase his comment:
“I am Venezuelan. We are held captive by the military and rotten politicians. They are sucking all resources just like a leech sucks blood. Everything is hitting bottom: health, education, food, infrastructure, among other things. Cryptocurrency is a way to salvation for Venezuela and the world.”
Thanks Jorge, it’s good to hear that crypto is starting to have the positive effect many of us hoped it would when we got involved, that it does offer people opportunities, that there is hope for a better future. Also a quick shout out to the Dash community who have been so supportive, especially Mark Mason and Tao of Satoshi. Thanks for listening to Cryptonomics. As Mark says, stay Dashy, and as always, stay grateful!
Important links
The Cryptolifer Mentality by Bob Stanley
You can listen and subscribe on Anchor and other podcasting services here: Cryptonomics – Dash vs Hyperinflation