The cryptocurrency mystery: how the idea of new money developed and implemented

The "revolutionaries" of the crypto revolution we are witnessing, which began with the emergence of Bitcoin in mid-2009, claim to have invented a new form of currency, free from the pressures of bureaucracy regulation, faster, easier, and safer to use, which will finally disrupt the status quo in financial markets. It's worth noting that virtual money had its real-world usage on Silk Road, a dark web black market shut down in 2013 when its founder, "Dread Pirate Roberts" (Ross Ulbricht), was arrested. Only seven years later, the U.S. government announced that Bitcoins worth one billion dollars were connected to the Silk Road.

Taking a realistic view of the whole picture, without leaning toward "modern attitudes" or critical forums, the origins of digital currency can be traced back to E-gold, which operated under Gold&Silver Reserves Inc. It allowed users to open accounts on their website and trade in this currency tied to grams of gold. The E-gold system was launched in 1996 and had reached 5 million users by 2009, when their operations were halted due to "legal difficulties" and the FBI's shutdown of the website. Their business began two years before the emergence of PayPal, and in 1999, the Financial Times reported that it was the only electronic currency that had reached critical mass online. At its peak in 2006, it processed a staggering $2 trillion in transactions annually. For comparison, the largest and most serious cryptocurrency exchange, Mt. Gox in Tokyo, was founded in July 2010, and by the end of 2013, it handled over 70% of all BTC transactions. Money is used to exchange goods and services worldwide, and today, we increasingly see the trend of valuing individuals and societies based on how much money they have, how much they are worth through it, or how much they have created a bubble of untouchability with the help of money. This second trend has prompted millennials to seek more and more money, regardless of its utility. The mere fact that you "own" money anywhere on the internet in any wallet, and even that you will most likely earn it through speculative future actions, buys you a status in the modern world of social media and digital reality.

Yet, money, in traditional terms, is nothing more than a piece of paper that changes hands and drives consumption. Its value lies in its role as a standard unit of account for trading without carrying bags of gold and silver around. To make this possible, money needs to have a stable value derived from a local basket of goods and services controlled by monetary regulators who can expand or contract spending in line with market movements to help maintain stability.

The idea of a new form of currency aligns with a revolutionary battle against BIG Tech companies or, more accurately, against the established financial system. As a paradigm, we also see examples where nearly all companies belonging to Big Tech are attempting to create their coins, such as Diem (formerly Libra) by Facebook. The only logical answer that comes to mind is the assumption that they, too, want to leverage the fundamental characteristic of all cryptocurrencies, which is that they are designed so that inflation cannot be controlled until all coins are mined.

If we look over our shoulders at historical events, revolutions have typically introduced new technologies or defended principles and beliefs expressed through revolutionaries' demands. The idea of "reforming money" is not new. In 1827, Josiah Warner opened a general store called the "Cincinnati Time Store," where he exchanged goods for promissory notes denoting hours of labour, effectively replacing traditional paper money. Two years later, Robert Owen, known for his socialist ideas, attempted to establish a currency exchange in London based on labour-hour-backed vouchers, aiming to avoid money based on precious metals and replace it with something that couldn't be taken from anyone and everyone possessed their time for labour to create new value. Both his and Warner's ideas quickly faced failure. The most significant attempt to eliminate money and its use was within the framework of communist ideology. It aimed to raise individual self-awareness to the point where people would contribute their maximum work capacity while satisfying their basic needs without needing luxury. However, no communist country ever succeeded in eliminating money, and today, we witness economies still grappling with the consequences of yet another unsuccessful experiment. The logical question arises: Is this a revolution against the significant power levers of the capitalist system? Can cryptocurrency lead to the collapse of monetary systems in large countries like the United States? All Big Tech companies operate in significant countries. The United States has the most rigorous control over money tracking, complex banking systems, and transactional business. We hear whispers of considerable inflation and how it will destroy the dollar without considering the actual economic possibility of the U.S. taking on additional debt, which could do up to 250% of its GDP, surpassing the debt levels of more than half the countries in the world. It's more realistic to expect that cryptocurrencies, contrary to the revolutionary message, will disrupt the monetary systems of small, underdeveloped, and impoverished countries. The bursting of the "crypto bubble," which must inevitably occur, will lead to hunger and widespread poverty in these nations. Will we then face the reality of providing "play-to-earn" NFT games to these small, impoverished countries in Africa, the Philippines, and other poor regions as one of the fastest-growing subcategories of NFTs, allowing people to earn a living by playing games?

Cryptocurrencies contain destructive elements of technology that create the most significant threat to organized society by mixing blockchain technology with social media to develop speculative values of new capital, which affects securities. Everyone in the crypto world will tell us about many advantages, especially in the private blockchain sphere. Still, they must also clearly and unequivocally acknowledge the moral risks that we must become aware of.

The logical question arises: Is this, in fact, a revolution against the most significant levers of power in the capitalist system? Can cryptocurrency lead to the collapse of monetary systems in large countries like the United States? All Big Tech companies operate in significant countries. The United States has the most rigorous control over money tracking, complex banking systems, and transactional business. We hear whispers of considerable inflation and how it will destroy the dollar without considering the actual economic possibility of the U.S. taking on additional debt, which could do up to 250% of its GDP, surpassing the debt levels of more than half the countries in the world. It's more realistic to expect that cryptocurrencies, contrary to the revolutionary message, will disrupt the monetary systems of small, underdeveloped, and impoverished countries. The bursting of the "crypto bubble," which must inevitably occur, will lead to hunger and widespread poverty in these nations. Will we then face the reality of providing "play-to-earn" NFT games to these small, impoverished countries in Africa, the Philippines, and other poor regions as one of the fastest-growing subcategories of NFTs, allowing people to earn a living by playing games?

Cryptocurrencies inherently contain destructive aspects of technology that pose the greatest threat to a structured society by mixing blockchain technology with social media to create speculative values of new capital affecting securities. While everyone in the crypto world talks about many advantages, especially in private blockchains, they must also clearly and unequivocally acknowledge the moral risks we must be aware of.

They must acknowledge the emergence of the so-called "Ponzi Scheme," which was brought to global attention by Tyler Moore, Jie Han, and Richard Clayton, professors from Wellesley College and the University of Cambridge, as a modern financial scam that generates enormous profits by using new investors' money. To put it in simpler terms, the first "sophisticated" investors are aware of the fraudulent activity and invest money, hoping to profit from the funds of the following investors, knowing that those who enter the investment last will bear the consequences of loss from which they will benefit. Does this bring us closer to buying various NFTs and their unreal values now?

I must pay attention to another fact to understand how this idea differs from other global trends and protections of individual freedoms and rights for a better life in a better environment. All major blockchains operate on the "proof of work" protocol, which requires massive amounts of computation and uses vast amounts of electrical energy to fulfil its primary purpose - functioning on a large scale. This creates an enormous carbon footprint for cryptocurrencies. The laws of supply and demand dictate that the value of each currency is determined by the amount of energy consumed in its production. Today, we have examples of Kazakhstan's most extensive miners and miners due to the cheapest electricity prices. Over the last six months, with the onset of the global energy crisis, many EU countries and countries worldwide have banned cryptocurrency mining. The Cambridge Centre for Alternative Finance estimated the current energy consumption for bitcoin production at 121.36 TWh. To grasp how massive this consumption is, this number might mean little for most of us. It is equivalent to the energy consumption of all nuclear power plants worldwide for 13 days or the energy consumption of 1.4 million average households in the United States. There are indeed some cryptocurrencies that do not use these protocols ("proof of stake"), but they are the minority, and their implementation still has an impact on energy consumption. Also, revolutionaries often cite the need for ever-increasing speeds and the expected habits of modern society for fast data processing, while the essence is that blockchain technology could be more rapid in terms of transaction speed. Bitcoin, for instance, can process between 3 to 7 transactions per second, whereas, for example, Visa processes around 20,000 transactions per second.

Is it every individual's obligation to protect the future of humanity and raise red flags when observing irrational behaviour in society? I believe it is. We must be aware that even though a veil of mysticism surrounds cryptocurrencies and the entire crypto community for those not involved in the world of crypto, programming, or blockchain, we can see energy consumption that does not bring new utility value, the construction of fraudulent schemes that deceive the gullible and uninformed, putting their entire savings, property, or future earnings at risk. And why? To become part of an imaginary world where they carry a sense of greater freedom because they will operate outside monetary and state institutions and have a significant chance to earn or at least preserve assets from future inflation, which is whispered about from all sides.