2020: The Rise of Alternative Cryptocurrencies
From Kings to Investors
Over the years, the issuance of money has transitioned from being the sole privilege of kings and central banks to a more democratic system. The emergence of alternative cryptocurrencies has seen a significant increase, with individuals and organizations alike jumping on the bandwagon. Notably, investors like Andreessen Horowitz, Bain Capital, and Peter Thiel have invested over $300 million into stablecoins, which are projects that aim to create blockchain-based currencies like dollars and euros to compete with traditional central banks.
Redefining the Value of Money
The concept of creating digital representations of traditional currencies comes from the realization that a majority of dollars today exist as digital records rather than physical notes. This realization, combined with the accessibility of blockchain technology to create cryptocurrencies, has opened up new opportunities. The idea is to establish cryptocurrencies with a consistent value equivalent to that of the dollar. This raises the question – can a cryptocurrency with the same value as a dollar issued by the Federal Reserve be just as valuable?
New Approaches
Projects such as Maker and Basis are attempting to do just this by creating cryptocurrencies that can be accepted and exchanged on a one-to-one basis with traditional dollars. These projects are not merely digital representations of dollars issued by central banks; they are entirely new dollars that exist only on the blockchain. Each project is taking a different approach to achieve this goal, from backing the new currency with existing cryptocurrencies to using algorithms to regulate its value and supply.
Digital Competition
What sets these projects apart is the fact that they are governed by decentralized algorithms, circumventing the pressure that traditional central issuers may face. This competition with central banks is also extending to national levels, as additional countries like Venezuela, Iran, and the Marshall Islands plan to launch their own cryptocurrencies, governed by code rather than central bankers.
Expanding Beyond Money
In addition to alternative currencies, 2019 will see the launch of various projects aiming to challenge key government functions, such as citizenship and legal systems. Bitnation, for instance, offers a marketplace for digital citizenship, where competing service providers offer citizens a range of services, from dispute resolution to basic income. A particularly unusual example is FOMO3D, an autonomous pyramid scheme that pays out a dividend, designed to continue indefinitely and provide a “basic income” to participants.
Innovating Legal Systems
Kleros is another project that provides an alternative to traditional government services, targeting the legal system. This platform offers a network of arbitrators who examine and resolve disputes, bypassing the conventional legal system and enforcing their verdict using blockchain technology.
As we move into 2019, the cryptocurrency landscape is set to expand beyond just financial alternatives, with an array of innovative projects challenging traditional government functions and services. Whether these projects will thrive or falter remains to be seen, but they certainly represent a shift towards a more decentralized and competitive approach to the issuance and governance of currency and other key societal functions.
