Human action is purposeful behavior — Ludwig von Mises

Your favorite cryptocurrency will not become money by accident — it must be willed to become such. The dollars, euros, or whatever is used in your area, did not become money by accident — they were willed to become such, for specific purposes.

For cryptocurrencies to even survive, let alone thrive amidst the competition, their developers and promoters need a clear understanding of what purposes monetary instruments serve, and what interests they threaten. You want to reinvent money? Welcome to the most dangerous industry on earth :)

In this series of posts I will discuss the following:

Money, part 1: what it is, why it matters

Money, part 2: how it came to be, how it has evolved

A general framework for cryptocurrencies aiming to be money

Specific recommendations for Dash

This post is mostly an introduction to the series, but we’ll also get a good start on the first item in our list above. Later posts will expound on part 1 and cover the rest of the series.

Defining Terms

The beginning of wisdom is to call things by their proper name — Chinese proverb

I’ll be using this post as a reference for several subsequent posts, so I want to define some relevant terms. Words used in daily life can be subjective and ambiguous, and that’s generally okay. However, it’s crucial in any technical study to have clear definitions as the foundation.

My approach to discussing money borrows extensively from two great minds in economics, Ludwig von Mises and Murray Rothbard. Defining money will involve a recursive drilling down into the definition given by Mises (also supported by Rothbard).

Understanding what money is will help inform cryptocurrency communities whether what they are building is achieving the functions of money. But before we get to money, let’s take a little side trip to discuss (read “rant about”) the term “cryptocurrency”.

Cryptocurrency

Folks, we’ve done ourselves a disservice by settling for the awkward and unpalatable term “cryptocurrency” to describe our product. Sure, “currency” sounds nice enough, it suggests a flow of something — that can be descriptive in certain contexts. A river’s current is the flow of water over time, measured in gallons per minute (gpm) or liters per second (l/s). An electrical circuit’s current is the flow of electrical charge over time, measured in coulombs per second (C/s) a.k.a. amps (A). So, what is cryptocurrency? A flow of cryptography over time on a network? It might as well be; it sounds about as obtuse as that to the average uninitiated (wo)man on the street.

We don’t need to define our product by the technology used to make it. “Cryptocurrency” may not be the best term to promote.

What is Money

What (some) “cryptocurrency” communities are trying to build, is money. Let’s just use that term. Unfortunately, the unqualified term “money” is taken — nation-state money has dominated the money industry to the point of being synonymous with money itself. That’s one of the our biggest challenges, trying to convince others that money is not literally defined as the thing their government (-chartered bank system) issues. We have to push back on this claim; money is a product of peaceful human action and free association, not the state (but more on that in the next post).

So, if the term “money” is taken, what alternative to “cryptocurrency” could we claim? I suggest free-market money. That’s a term that uses the same amount of syllables (at least in English) as cryptocurrency, but is much more descriptive and palatable. Let’s use it.

On to the definition.

Mises went through a lot of trouble to give an accurate description of money, including all the constituent parts comprising his definition.

Money is a commonly used medium of exchange

While we won’t dive all the way into each subsequent term, we do need to go a couple levels deeper. The definition of money can be expanded by defining “medium of exchange”.

A medium of exchange is a good used for indirect exchange

Let’s go one more level by defining a good and indirect exchange in economic terms. For good we will turn to Murray Rothbard since he gives a clearer definition than Mises:

A good is a means to satisfy man’s wants

Finally,

Indirect exchange is an exchange where an individual buys a commodity in exchange, not as a consumers’ good for the direct satisfaction of his wants or for the production of a consumers’ good, but simply to exchange again for another commodity that he does desire for consumption or for production

Putting it together

Our definition of money can thus be expanded as follows:

Money is a commonly used means to satisfy man’s wants indirectly, i.e. through exchanging it for a commodity that he desires for consumption or production.

With those important definitions out of the way, let’s talk briefly about why money matters, and what later posts in this series will discuss.

Why Money Matters

As the phrase goes, time is money. If you believe this to be true then the corollary is also true: money is time. Think about that…😱… If someone is messing with your money, they are messing with your time, with your life. And so it is — as it turns out, someone is messing with your money, and you have no control over that so long as you are economically pigeon holed into using said money.

Looking Ahead

But we’re getting ahead of ourselves. In the next post we’ll back up a bit and see why humans invented money in the first place (further explaining why money matters), how it evolved in the market, and how it became corrupted as governments saw the immense benefits money affords, and how through seizing control over it, they could enrich themselves.