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Crypto is (and is not) money
None of your coins are money and you all have brain damage. “Money” is a sloppy word, but it is generally used to refer to items that constitute a general unit of account (like the U.S. dollar) and/or a generally accepted medium of exchange (like a bank deposit).
Money almost never means something that is simply a solid store of value, or that is expected to generally increase in value over time. Of course, storing value is an important function of money, but it is the only one of the three functions that is more widely shared with other things.
There are many more things that function as a “store of value” than there are things that function as a “generally accepted unit of account” or a “generally accepted medium of exchange.” This makes being a unit of account or medium of exchange much more specific to money.
Of course, many things can still be used as a medium of exchange, giving rise to a notion of “money” based on the general willingness of people to accept a thing in exchange.
So when we talk about money, what actually makes it money is its use for the purpose of exchange and accounting for value. However, when cryptocurrencies talk about money, for some reason they seem to only care about being a store of value – the way bitcoin is “digital gold”. Ultrasonic deflationary assets and all that nonsense.
At least be honest with yourself: you’re not talking about money, you’re talking about fixed assets. In some cases, you invoke a discounted cash flow. In some cases, you cite the scarcity or preciousness of crypto digital assets. In some cases, both.
But we don’t usually talk about money since the money is actually used.
To be honest, I’m not sure any of us really know what money is in the 21st century. In crypto, the definition of money has been polluted by people hyper-obsessed with stores of valuable assets, selling our collective future short. Money is about accounting and exchange, not just about storing value.
You could argue all day about whether ETH (ETH) or GROUND (GROUND) or ATOM (ATOM) is a better store of value without me making fun of money (although I could care less about other things). But if you really want to talk about money, you need to explain how cryptography can be used as a unit of account and medium of exchange – for example, how the original idea for bitcoin was a “peer-to-peer digital currency” .
A unit of account is something in which you denote your debts (this includes what we call “prices”). A medium of exchange is something you use to settle debts when they come due. You can read more about these definitions of the functions of money here.
It should be clear to everyone that our crypto assets are hardly used for these purposes.
Is this really true? Well, not exactly.
The only place where crypto is definitely used, and where we could definitely consider token money, is in the context of their own block space. ETH block space is priced and settled in ETH, so ETH is money in the context of an economy centered around its own block space.
You could also argue that ETH (or SOL or ATOM or any other token) is used as a medium of exchange or unit of account in some other crypto-focused circuits, including base pairs in exchange or for purchasing cryptocurrencies. NFT.
To the extent that some things are valued directly in ETH, SOL or ATOM, or to the extent that debts are denominated in these units, then they act as a unit of account. Since payments are settled using these tokens, they function as a medium of exchange.
One of the challenges is that it does not make sense to use volatile assets as a unit of account. Even gas prices seem to adapt more to inherent accounting in dollars than in native tokens.
However, it appears that some NFTs have been priced more in native token than in dollars. There is also the case of protocol-owned liquidity, where debts are denominated in a native token, like how ATOM was loaned by Cosmos Hub to Osmosis and to Neutron is a debt denominated in ATOM.
The liquid staking revolution is also relevant here, as these native tokens, locked as capital assets storing value, can also be used as a medium of exchange (to the extent that people wish to settle their debts into liquid staked assets).
All of this is to say that there’s no point arguing over which is the best money right now, because almost no one actually uses tokens as money. Unless you set or settle a significant fraction of your payments in crypto, in which case you have my respect.
Rather than debate, I would encourage the entire sector to deepen their knowledge on the subject. And no, I’m not just talking about Graeber’s “debt” and Fergusson’s “rise of money.” The most important book for understanding the monetary context of cryptocurrencies is “Private money and public currencies, the challenge of the 16th century”. The book describes the background to the rise of central banks, and therefore the motivation for crypto.
I also recommend a intensive five-book course on the history of money, some of which cover an important aspect which is too absent from the discourse on money: the payment graph. The key to building a stable, sustainable currency is to balance the payments chart, the ledger that shows who owes money to whom. This is a key element behind Cyclesa new project that reinvents payments and credit.
It should be noted that Cosmos has by far the most advanced understanding of all of this, both implicitly and explicitly. Jae Kwon and I, the two co-founders of Cosmos, have always insisted that ATOM is not money. More recently I started calling it Interchain Capital.
The Cosmos philosophy of sovereign interoperability is fundamentally a monetary philosophy, but it inherently recognizes that we don’t really know what money is in the 21st century and will have to experiment to understand it. The Cosmos remains the privileged place of this experimentation, and the Blockchain Cosmos Hub is itself an anchor for this.
By refusing to fall prey to the memetics of “ultra-sound money” and focusing on fostering a broader culture of innovation through sovereign interoperability, ATOM and the Cosmos Hub become homes for a new type of experiment on what money is.
Of all the “currencies” in the crypto space, ATOM has the most decentralized governance on what that means. While ETH focuses on deflation and SOL on cheap global computation, ATOM focuses on the political issues at the heart of money itself.
This is part of what makes ATOM so much more complicated and hated. But that’s where its uniqueness lies. Not to mention that ATOM secures one of the top liquid staking sites and is poised to become a leading place to launch new chains and access cross-chain capital with the next Atomic wars And Partial set security.