History And Future Of Money: Why Private Digital Cash Has To Lead The Way
If you are into cryptocurrencies or not, one thing is for sure: Money plays an important role in anyone's life. Even if you are not a materialistic person and do not care about ‘money’; you still need it to transact for goods and services. That said, for many people that is about it. They go to work, get a paycheck every month, save some money and use the rest to pay for goods and services they need in their lives.
But what is money and when, by whom, was it invented? Money has a vast history going back thousands of years. From bartering to metal coins to paper money, and nowadays, what we call ‘cryptocurrency’ - or, to be even more specific, ‘privacy coins’.
One thing is for sure: Governments and central banks worldwide are increasing the pressure when it comes to the implementation of CBDC (central bank issued digital cash) while potentially limiting the freedom to transact for ‘unwelcome’ citizens.
In this article, we will go through the history of money, how humanity profited from each stage and what the next years could look like, thanks to technological progress and new inventions.
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What is ‘Money’?
Money can be anything and it does not need intrinsic value. It is an object that gets its value from the trust of the people using it. Yet, it can have intrinsic value, obviously, as we all know from coins made of precious metals. In the modern world, cash is king. Paper money has revolutionised money but has no real value.
But let’s keep it slow for the moment. When there was no money, people had to barter for goods and services. You are a farmer who needs lumber? Easy, exchange some meat or another good you produce for it. From the Mesopotamians to the Phoenicians and later American Colonialists, bartering was essential for the progress of mankind in those times.
This came to an end when the Mesopotamians created the first ‘modern’ currency, called the Shekel. Gold and silver coins, i.e., from Roman times came later, around the early 3rd century BCE; in some regions, i.e., China, supposedly a few hundred years earlier.
From Coins to Modern Cash
Coins made of silver or gold were a great solution back in the days. With those currencies, it was possible to pay by count rather than weight. As stated before, different coins were used in different regions of the world. The Roman Empire belonged to the first of such regions, creating the first round coins as we know them today a few hundred years B.C. Different stamps of known figures, gods and emperors, authenticated them.
Later, in 800 A.D., silver pennies were issued by Charlemagne and became the standard currency in Western Europe until 1200 A.D. Later on, larger amounts of silver pennies were calculated in Shilling and Pound.
But today, we are more used to banknotes, less and less to coins. This is also a development that goes back several hundred years. The first banknotes existed in China (700 - 800 AD), but they were only used until about 1455. The light weight of paper money made international trade easier; on the other hand, it led to the first currency wars. After its use was suspended, coins were mainly used again.
So what about the banks? When did they start to appear? Again, eyes on the Romans. Here, the first banks were created around 300 B.C. - they issued loans and took money from their clients as deposits. They vanished together with the downfall of the empire and it took some time until banks in Europe were respectable organisations in the 19th century, having been in development since the 15th/16th century (Italy, Spain, Germany, Court Jews).
One important experience that banks made in those days was that they could lend more money to people than they had; a step to the modern fractional reserve banking system.
Gold continued to play an important role in the monetary world and became the standard of value in England in 1816, and by 1900 in the USA through the Gold Standard Act. Yet due to the depression and the decreasing value of gold, it came to an end in the 1930s.
As of today, ‘cash’ is king; just with the difference that we tend to go from physical to digital cash. Either in the form of digital FIAT money created by (central) banks or of cryptocurrencies; while in the last few years, governments and central bankers are proposing a CBDC, a central bank issued digital currency.
What is a CBDC?
A Central Bank Digital Currency (CBDC) represents the digital form of a FIAT currency of a particular nation (or region) and is issued and regulated by the country's competent authority. Over the years, traditional banking regulators around the world have struggled to control the growing influence of popular cryptocurrencies, such as Bitcoin and Ethereum.
Such virtual currencies have gained immense popularity due to their decentralised and regulation-free nature. They have become a threat to today's traditional banking system, which operates under the supervision and control of a country's regulator (such as a central bank).
Unable to control the growth and influence of such cryptocurrencies, many leading central banks around the world are working on, or at least thinking about, launching their own versions of cryptocurrencies.
These regulated cryptocurrencies are called central bank digital currencies and are operated by the respective central bank of a given country. The CBDC, also referred to as digital FIAT or digital base money, will act like a digital representation of a country's FIAT currency and will be backed by an appropriate amount of foreign reserves, such as gold or foreign exchange.
While CBDCs offer advantages, such as low-cost transactions, there are also a number of disadvantages. For example, in a CBDC system, every transaction without exception would be tracked and stored forever. This is also already the case today, but we are drifting further and further towards a cashless system. Today, cash is the only way in the FIAT system to achieve a certain degree of privacy.
From CBDC to Complete Surveillance: And Why Bitcoin Isn’t A Big Help
One thing first: when we talk about the future of money and CBDCs and their drawbacks, we can immediately state that Bitcoin is not the answer to related problems. Bitcoin is a great innovation and gives people around the world the opportunity to participate in a new decentralised monetary system.
However, one point that is often forgotten is the lack of privacy. Bitcoin is not anonymous; at best, it is pseudonymous. Transactions can be traced back on the blockchain and there are already some large agencies like Chainalysis that are investigating the blockchain on behalf of government agencies.
But privacy is precisely what will matter in the future. People are not served by using a CBDC any more than they are served by using Bitcoin for their transactions. But why is privacy so important?
Surveillance vs. Privacy
Just ask yourself the following question: What do I need in order to pursue my freedom rights? Freedom rights such as the right to free speech, religion, assembly and so on. For all of those activities you will need money. In order to be able to participate in free speech, you might want to create a website; and have to pay for the hosting. You want to go to a demonstration; you have to pay for fuel in your car or pay for a train ticket. Without being able to pay for goods and services, your freedom is taken away.
In the eyes of governments and central banks, it is, of course, not about that but more about getting rid of money laundering, terorrism financing or tax evasion.
All these things are indeed wrong and worth an investigation, for sure. However, this is what cash is used for every day. Big banks have to pay hefty fines related to money laundering for criminal organisations all the time.
At the end of the day, the freedom of any citizen is threatened in a world where banks and governments work hand in hand to get rid of cash and replace it with CBDC, while retaining the possibility to freeze anyone’s bank account and making sure that cryptocurrencies are getting regulated heavily.
This opens the door to dark, dystopian scenarios in which you may not be able to participate in society, maybe because you posted the ‘wrong’ opinion on Facebook, because your bank accounts are locked and there is no way to use your freedom rights due to lack of ability to transact.
If we are not careful, we are facing a grim future - but, let’s stay optimistic, because there are solutions!
Private Cash: Privacy Coins To The Rescue
So when CBDCs as official FIAT money could cause a lack of privacy, and thus a lack of freedom, while alternatives like Bitcoin are not really a functioning alternative - what is left? This is where privacy-oriented cryptocurrency projects like ours, Navcoin, come into place.
Navcoin is a private finance (PriFi) ecosystem running on a self-developed protocol, called blsCT, soon to be operating on a fully private blockchain. While flagships in this sector such as XMR (Monero) are focusing solely on the ‘private cash’ aspect, we are pushing things a bit further. We want to create meaningful cryptographic solutions in order to protect not just simple transactions of ‘money’, but also enable our users to create, for example, private tokens and private NFTs that can be used for a multitude of different use cases.
We believe that everyone has the right to personal freedom, security, financial data protection and business privacy.
Privacy coins are not the devil’s work, as governments and regulators would like to make you believe. They are what cryptocurrencies were typically all about back in the day: a private, anonymous means of payment.
Over the next few years, we are expecting a higher influx of new PriFi users and are looking forward to welcoming lots of them to the Navcoin ecosystem!
If you are interested in what we are doing, feel free to check the following resources: