Our society has always been one for development, evolution, and transcendence — mostly breaking the economic limits and setting new standards for higher living. This resulted in wealth distribution at certain times and extreme localization at other times when the core values surrounding the concept of money and its acquisition changed drastically.
More recently, money has played an essential role in the economic evolutionary trend. Moreover, one central theme which remained over the course of this trend is the drive to create an efficient system that makes global transactions easier, faster and far more profitable.
As told by many accounts, the earliest value-exchange system, or conveniently the barter system which primarily involved the exchange of goods and services for goods and services were truly the most primitive institutions for commerce and yet formed the primer for future commerce.
Some sources have it that man’s craving for complex societies gave rise to accountability and hence made it harder for the barter system to hold form. More so, as the economic processes got complex from increased difficulty in matching needs during barter trades due to spontaneous trade diversification to even more elaborate occupations setting in, it became rather hard to sustain such a system. This perhaps led to the reasonable school of thought about money being catalytic to social accounting.
The Money Strides
Noteworthy, the value-exchange system is thought to have transcended several generations — at least 5 generations to include barter, gold, metal coins, paper money, and electronic money; and with each passing generation a shedding of bulkiness, redundancy, and an increased ease of accessibility, as well as inclusion of non-systemic entities were recurring themes. Non-systemic entities in our present-day economy would apply to the unbanked and the underbanked citizens within a society.
As with every changing system, a new model always replaces the old; and without probing too dip into the evolutionary of money, highlights during each transition provide an intriguing insight into the future of money — or the value-exchange system as a whole.
Barter to Coins and Paper Money
First, with the barter system, take a scenario where a farmer in New Zealand intends to change goods with another commodity seller in China, the vast expanse of literal space between them made it difficult or next to impossible for international trade, especially on a small scale. In this sense only well-established entrepreneurs would ship across borders from one continent to another and conduct such trades — And yet successes in trades were contingent on the needs of the merchants at the destined location as well as their prosperity.
The flaws in the barter system may have led to the adoption of simpler commodity money such as coins in the form of precious metals such as gold and silver. Other forms of commodity trades involved jewels such as diamonds and rubies.
As for Gold, it’s the highlight of cross-generational commodity money outliving many value-exchange systems. It remains one of the most sought out precious metal commodity, yet the weight of gold, especially in huge transactions, makes them the most cumbersome among all the types of the medium of exchange.
Coins and paper money as thought to have existed in over 9,000 years replaced a large chunk of the barter system — and yes not all the barter system may have yet been completely replaced even today. This category of value-exchange was a huge leap in money evolution as well as in commerce. However, they are not without risks and so the search continues for the ultimate system which will scale with the growing demands of the human society.
From Paper money to electronic money
The advent of the internet has made a great impact on global communication, which in turn gave rise to several digitized innovations across the globe. One of such digital innovations helped the human society gravitate towards a cashless society — one where paper money would be extinct.
Transactions between parties were conducted based on the reliance on digital signatures — the affirmation that a specific unit of value moved from one entity to the other. This became the core infrastructure of payment processors who helped establish the communications between banks and users virtually.
A Higher Breed of Electronic Money
In the era of electronic money, a burgeoning space of digital currencies has giving rise to a whole new concept about money. Now appears to be a sign of a new economic era, conveniently dubbed the industrial revolution 4.0, and yet another system MUST rise up to the challenge of meeting the ever scaling global need for business interactions (emphatically because man will always be driven towards the direction of change whether he wills it or not).
Cryptocurrency debuted as Bitcoin along with its revolutionary technology of distributed ledger system — blockchain, seem like a plausible alternative to the paper money system to become the new heights of the electronic money system. So far, three essential themes of the quality of money have been explored, these include; the speculative narrative, value proposition as a medium of exchange, and the economic durability in terms of a store of value. Many cryptocurrency variations have emerged from the underlying distributed ledger technology; and all seek but one purpose, to be the ultimate transcendence of money systems.
A Case for Stablecoins
Despite the promise in these emerging assets, one major concern seems to stall worldwide adoption — volatility. This has hindered the considerable shift from fiat ideologies to the new model of cryptocurrency transactions. And hence most of these digital assets proposing to be an excellent medium of exchange as well as a store of value, have for the most part fallen short of adoption by the masses.
The only alternative for digital assets built on the blockchain is Stablecoins which are virtual currencies pegged to a form of real-world assets or fiat currencies. Stablecoins are the new money, and they would replace the legacy medium of exchange to become the standard due to their intrinsic hedge value.
The rate at which different stablecoins are emerging is quite intriguing, which further emphasize the importance of this asset class. There are about 24 currently active stablecoins accessible on the crypto open market and combined, they pull a staggering a $4.75 billion sector capitalization of the industry.
Other mainstream institutions are also looking into developing their stablecoin asset. JPMorgan Chase’s stablecoin (JPM Coin) — though a coin to be developed for internal transactions; in its own way gives credence to the stablecoin institution. And now, Facebook with its recently instituted multi-billion dollar consortium comprising of corporate behemoths such as PayPal, Visa, Master Card, and Uber are pulling in their weight to develop the next iconic stablecoin dubbed Libra Coin.
Stablecoins are certain to be the next important thing in the crypto industry because their uniqueness presents the world an opportunity to tap into a whole new world of secure financial inclusion through blockchain technology. They will play a unique role in stabilizing the next-generation exchange value system.
If you are interested about stablecoins in general, feel free to follow the Global Stablecoin Popularization and Education Movement and learn more about stablecoins.
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