by Enrique de Nalda
The reader will be used to hearing incessantly news about new crypto assets, DeFi protocols, the famous NFTs and various applications of the Blockchain. All of them are very interesting and undoubtedly represent a great disruption. However, this article focuses on the monetary revolution that Bitcoin supposes, without going into the technological disruption that the Blockchain supposes, which has endless new applications.
In finance, a distinction is usually made between real assets and financial assets. Financial assets are the right to claim a collection from a third party, be it a friend, a company or a state. Its value depends on the obligation that has been contracted and the confidence that is had in the fulfillment of the counterparty. Real assets, by contrast, have value for themselves; their properties get society to recognize a value in them without the need for trust in a third party.
Real assets can be tangible (real estate, raw materials, etc.) or intangible (patents, trademarks, etc.). On the contrary, financial assets are fundamentally intangible since the right of collection with a third party is incorporeal; however, it can be tangibly represented in the form of tickets, contracts, etc.
Both types of assets can be used as money; money being understood as any asset that is used for the exchange and storage of value. However, real assets, due to their properties, find some difficulties to be used as such. For example, a house, although it allows me to store value, I find too many inconveniences in its exchange because I cannot transport it or divide it. On the other hand, I believe that it is not necessary to explain why a patent or a trademark is not suitable for monetary use.
In history there are various real assets that have functioned as money; from salt (hence the word salary) to precious materials. The technological advances of the time, specifically metallurgy, allowed the best adaptation to the monetary field. Gold and silver have played a leading role in our economic history thanks to their conversion into currency.
On the contrary, financial assets, thanks to their intangibility, find great ease in their monetary use. If an agent owes me a debt, it is enough for me to put it on paper so that I can trade the debt of that agent. Without going any further, fiat notes are an obligation of the government to its holder.
Even so, financial assets have also suffered from technological revolutions that have managed to completely outnumber real assets in the monetary sphere. The digitization of money has achieved that its divisibility, its transmission and its accounting are infinite times higher than that obtained by real assets (we must not forget that, if I digitally buy gold, what I am acquiring is a right to gold, but not gold itself and therefore, depending on the trust in a third party, it is a financial asset). The world we live in needs digitization and therefore it is not surprising that real assets have lagged behind in the monetary sphere; until Bitcoin arrived.
Bitcoin has become the first real monetary asset that is not tangible and therefore suitable for digital use. Bitcoin, even without being corporeal, does not require the trust of a third party. This is a true revolution because to date the possibility that something intangible could have value and monetary use by itself, without the need for a third party to act as arbitrator and guarantee the value of said asset, was not conceived. So the big question here is: How does Bitcoin, something disembodied, get not relying on trust in any third party?
The answer is decentralized social consensus. Bitcoin finds its value in the trust of the users that make up its network. It is one thing to trust Bitcoin, and another for its value to depend on our trust in someone. Thanks to cryptography (this is where the Blockchain comes in), money transfers are validated by users without the need for trust in a third party or an arbitrator. You can trust the integrity of your ledger as long as you trust that there is no malicious majority of computing power. And the question is, how can one be sure of this fact?
The answer lies in the incentive system. The design of the Bitcoin network is made so that users get more benefits by acting honestly than by attacking the network. In addition, thanks to the proof of work, it would take more than half of the total computing power of the entire network to be able to adulterate its content. Considering the immense computing power that currently exists in the Bitcoin network, getting 50% seems like an almost impossible task. Still, let's see what would happen in the event that some users ally and get the majority of the network.
What would surely happen is that these users would be incurring a titanic resource expenditure (hence the importance of proof of work). They could use that spending to do "good", act as transaction validators, thus obtaining as rewards amounts of Bitcoin proportional to their effort. On the contrary, they could use that majority to do "evil" and go against the rules. Without going into technicalities that explain the different attacks and responses of the network, it is enough for the reader to understand that the attackers would find serious problems to obtain benefits above the expense they incur, and that, in the best of cases, the only effective thing they would do would be to damage the network. Trusting in Bitcoin means trusting that, if this scenario occurred, these users would choose to profit rather than destruction.
It is much easier to trust that agents will act for their own benefit than to trust the goodwill of an arbitrator; and more, when those referees could have hidden interests (and sometimes not so hidden). It is no secret that inflation is the debtors' best friend and that the states are ultimately the biggest holders of debt. Would the reader trust the integrity of a sports match where the referee is suspected of being a close friend of one of the competitors? On the contrary, no one is surprised when a large company grants shares to its directors; Shareholders will sleep better at night if they know that managers have their personal interests aligned with those of the company.
Bitcoin has burst into the economic system and has come to stay. It has passed the market test and is no longer that "nothing" that could cease to exist overnight. Today there is a decentralized social consensus large enough to guarantee the value of Bitcoin despite its intangibility. Bitcoin has succeeded in offering a store of value alternative to many agents who prefer to trust that people will act in their best interests rather than the benevolence of an arbitrator.
In conclusion, the Blockchain has meant a technological revolution whose magnitude will be revealed to us over time. However, Bitcoin is much more than a technological advance; it is a monetary revolution. Bitcoin is already a reality and has made real monetary assets stand up to financial assets in the digital age.
Criptan is a cryptocurrency trading platform with a service of integrated custody that seeks to bring the world of cryptocurrencies to people’s everyday life, focusing on delivering returns and profits on top cryptocurrencies. It is a Spanish company founded in 2018 by Jorge Soriano, an architect who has worked for years in strategic and creative consulting, with extensive experience of more than six years in the crypto world, and Jaume Sola, linked for more than 30 years to the innovation and technological ecosystem, which has collaborated since its inception on platforms such as Flywire and other of the most important technological ones.
Both understand cryptocurrencies as a new form of money that has to be accessible to all people. Therefore, they decide to create a platform focused on simple and reliable access that is the gateway for this type of user. Partnering, to complete the project, with Enrique and Pablo Penichet, founders of Bbooster Ventures, Manuel Palencia and John Nahm, Managing Director of Strong Ventures.
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