Farzam Ehsani (@farzamehsani) is the blockchain lead at RMB and the Chairperson of the South African Financial Blockchain Consortium (SAFBC).

The following article is an exclusive contribution to CoinDesk’s 2017 in Review.

Nothing lasts forever – we live in a world that is subject to the immutable law of change.

However, it’s also true that human minds have a preference for the current state of affairs (status quo bias) and have difficulty conceptualizing dramatic changes from what they know and are familiar with.

Money is a case in point. The form, nature and name of money have changed over time. We have used cows, animal hides, beads, shells, salt, gold, paper and more as our stores of value, means of exchange and units of account. Much has been written about the key characteristics of money (divisibility, durability, fungibility, portability and scarcity) that determine its acceptability in society and how, over time, communities adopt the most frictionless forms of money that best embody these attributes.

Yet, despite this rich monetary history, we have a tendency to believe that our current form of money, fiat currency, is somehow immortal, even though it has only existed in its current state (unbacked by gold) for just over 46 years – half a human lifetime.

This past year, despite the promise that cryptocurrency will become the most technologically advanced form of money humanity has ever known, many have criticized the volatility of cryptocurrencies as a sign of their demise. The truth is that this asset class wouldn’t be what it claims to be without this volatility.

It is a necessary ingredient for monetary transition.

Defending the new

Money is most volatile at two stages of its lifecycle: its birth and its death.

We are well familiar with the volatility that takes place at the death of a particular type of money. The Venezuelan bolivar and the Zimbabwean dollar are two of the most recent examples.

The birth of a completely independent type of money is just as turbulent. Our traditional valuation methodologies of discounted cash flows, comparable analysis or precedent transactions fail us as cryptocurrencies have no cash flows to discount, no comparable ratios to multiply and no precedents in history.

We’re left with the brute forces of market dynamics to discover the relative value that humans place on this new asset: people express the value they place on cryptocurrencies by the amount of another asset (e.g., U.S. dollars) they’re willing to sacrifice. But opinions on cryptocurrencies vary drastically and these divergences lead to expressions of sacrifice that are just as divergent, leading to tremendous volatility.

Money always needs to prove itself as a store of value before it becomes a medium of exchange, let alone a unit of account (why would someone ever accept money in exchange for energy-consuming goods and services if the money didn’t possess and hold value?). Volatility is an inescapable path toward this proof of a new form of money.

Toward unification

But while the future remains unknown, the path towards acceptance and adoption of a new form of money won’t be simple.

The plethora of cryptocurrencies in existence today may only be a stepping stone to a universally accepted form of money. Yet, the volatility inherent in establishing a new international currency heralds the volatility that society will need to undergo in order to establish a new global system that better serves the needs of humanity.

The unity of the family, tribe, city-state and nation have been attempted and established. World unity is the next goal towards which a harassed humanity is striving. True monetary union cannot be accomplished without political and fiscal union.

The following words from “Who’s Writing the Future?,” written by the Baha’i International Community in 1999, well before the advent of cryptocurrencies, resonate as I ponder our future:

“It would be difficult to exaggerate the psychological and social impact of the anticipated replacement of the jumble of existing monetary systems – for many, the ultimate fortress of nationalist pride – by a single world currency operating largely through electronic impulses.”

Still think volatility is a problem? CoinDesk is accepting submissions to our 2017 in Review. Email news@coindesk.com to share your thoughts and make your argument heard.

Bubbles in a glass via Shutterstock