This article takes a look at how more freedom could have a beneficial impact on blockchain and cryptocurrencies, especially if government and corporations were reduced in size.
Blockchain and cryptocurrencies seem to be part of the next stage of the Internet. But they need to be implemented in a free and open manner to be most effective. If they are not implemented this way, they’ll be increasingly ineffective. Cyryptocurrencies may fail and the blockchain technology won’t be much different than a single general ledger.
Earlier this year, Carl-Ludwig Thiele, a Bundesbank board member, told bitcoin investors not to buy the currency. A German news outlet quoted him as follows:
Bitcoin is a means of exchange which is not issued by a central bank, but by unidentified actors. I do not see it as a currency. If you think bitcoin would be as safe as the euro or the dollar, you have to take responsibility for it. We can only warn people not to use the bitcoin to preserve purchasing power.
Of course, it is an open question whether or not the dollar or the euro is “safe” in the early 21st century. And central banks seem to have a lot to lose from the cyrptocurrency implementation. But there are others who believe that cryptocurrencies will fail no matter what. Dr. Gary North is a well-known free market economist who says cryptocurrencies are a “spectacular private Ponzi scheme” that will outdo anything from Bernard Madoff.
First, someone who no one has ever heard of before announces that he has discovered a way to make money. … Second, the individual claims that a particular market provides unexploited arbitrage opportunities. Something is selling too low. If you buy into the program now, the person running the scheme will be able to sell it high on your behalf. So, you will take advantage of the arbitrage opportunity.
... This strategy was described a generation ago by George Goodman, who wrote under the pseudonym of Adam Smith. You can find it in his book, Supermoney. This is done with financial corporations when individuals create a new business, retain a large share of the shares, and then sell the stock to the public. In this sense, bitcoins is not a Ponzi scheme. It is … a supermoney scheme.
Dr. North states such coins will never be the money of the future. In fact, a definition of money was made by Austrian economist Carl Menger in 1892. He called money “the most marketable commodity.” It was a definition later adopted by another Austrian, Ludwig von Mises, who noted it in “The Theory of Money and Credit” published in 1912.
Differences In Money
Mises made the point, just as Menger had before, that money comes out of transactions. Initially gold and silver were valuable as is. But now it becomes valuable as a “facilitation of exchange” as well. As it does, people employ gold and silver for new purposes.