Cryptocurrency is money, not a rare artifact of speculative value. Decentralized issuance beyond the control of government or central banks is the essential tenet and attraction of cryptocurrency. The immutable, public ledger blockchain provides the foundation for peer-to-peer commerce in the infinitely divisible digital realm–disrupting the control of centralized entities and their gateway keeper required remuneration. A great leap in global wealth and productivity will occur if exchange is made its most efficient and unnecessary fees are eliminated. Since cryptocurrency is borderless, it portends a corresponding leap in the efficient global exchange of goods and services, the end of chaotic, foreign exchange currency churning and manipulation, and a halt to disruptive, harmful trade wars. This requires a currency whose value is defined by an unchanging, monetary standard of reference.
Cryptocurrency offers a democratic solution to the perpetually declining value of government mandated, central authority issued fiat currencies. Honest money—money that retains its value without inflation or deflation—is a foundational bond of societies. When governments honor their commitment to protecting the earnings, savings, and financial contracts of citizens, citizens in turn honor their financial and societal commitment to government. When governments break this bond, society frays—economically and socially.
It is easy to view the world today through this prism. The global experiment with 46 years of fiat money of no defined value underpins global unrest that visibly undulates throughout society and manifests itself in current financial and political upheaval. Cryptocurrency can be seen as the natural evolution of human ingenuity that leaps roadblocks, propels progress forward, and advances mankind.
But to achieve its potential, cryptocurrency must be understood as money. The current design of cryptocurrency creates a short-term speculative investment vehicle that is not sustainable, nor does it fulfill its promise of transactional and central monetary authority disruption.
Money has three roles; a medium of exchange, store of value, and unit of account. A unit of account is the most important role of money and the least understood. A unit of account is a monetary standard of reference. It is a measuring stick in the monetary realm for the efficient, frictionless exchange of the galaxy of goods and services that require an unchanging, defined standard of reference. This is no different in theory than the scientific world’s Systeme International (SI) seven base units of measure, defined by the speed of light. No one would conceive of the absence of a standard of reference for measurement in the scientific and mathematical world, nor should they in the economic world.
The initial experiment with cryptocurrency has neglected the role of money as a unit of account. The creators of cryptocurrency are brilliant on the tech side but have shown no awareness of understanding this essential, elementary component of money. When this is understood, it is possible to create a cryptocurrency that defines money and fulfills its disruptive and beneficial potential.