Crypto vs Fiat

Crypto naysayers often ask the simple rhetorical question, "If crypto is sound money, why do people still measure their crypto assets in fiat terms?" They point out that people frequently say things like "I have $10,000 worth of BTC" or "The sum of all my crypto holdings is $100,000." Ha! Gotcha!

However, this line of reasoning is flawed. Counterintuitively, counting crypto assets in fiat terms does not lend credence to fiat's persistence as a unit of account in the future. Historically, long after currencies have collapsed, people still use them as a unit of account.

In fact, following the collapse of a dominant hegemonic currency, the more frequent solution has been to adopt some sort of credit system. The old currency is removed from circulation and is no longer minted or issued, but its utility as a unit of account persists. This is what happened when much of Europe "reverted to barter" after the collapse of the Roman Empire, and then again after the Carolingian Empire fell apart. People continued to keep accounts in the old imperial currency, even if they were no longer keeping coins.

David Graeber discusses this phenomenon in his book Debt: The First 5,000 Years. The book is a smooth read and is recommended by Vitalik Buterin. From the fall of the Carolingian Empire in the 10th century A.D. to the mid-1600s, people used what was called old Carolingian denominations, which were really "imaginary money." For 800 years, people continued to call their imaginary money pounds, shillings, and pence (or livres, deniers, and sous), despite the fact that the few coins that were in existence were different coins entirely. In actuality, most people simply didn't have coins, yet they still priced everything as if they did (Einaudi 1953).

In conclusion, while it is true that most people still measure their crypto assets in fiat terms, this does not mean that crypto lacks utility. In fact, thousands of years of history assert the contrary.

The Collapse of Centralized Platforms and the Future of DeFi

The collapse of centralized platforms like FTX serves as a reminder of the inherent risks of centralization, particularly when it comes to the management of capital. In this blog post, we will explore the history of centralization and its consequences, and why decentralized finance (DeFi) is the only answer in the long term.

Centralization of capital has a long and troubled history. In the past, we have seen numerous examples of mismanagement and abuse of power within centralized institutions, leading to disastrous consequences for those who entrusted their assets to these organizations.

One prime example of this is the 2008 financial crisis, which was caused in large part by the reckless and irresponsible behavior of centralized financial institutions. This crisis had far-reaching consequences, leading to widespread economic turmoil and hardship for many people around the world.

The collapse of FTX, a centralized cryptocurrency exchange, serves as another reminder of the risks of centralization. While the exact cause of the collapse is not yet known, it is clear that the centralized nature of the platform played a role in its failure.

This is where decentralized finance (DeFi) comes in. DeFi is a new financial paradigm that is built on blockchain technology and is designed to be decentralized, transparent, and open to all. It allows users to access financial services without the need for intermediaries, thereby removing the risks associated with centralization.

In the long term, DeFi is the only viable solution to the problems of centralization. By building a financial system that is decentralized and open to all, we can ensure that the mismanagement and abuse of power that have plagued centralized institutions in the past will never happen again.

The collapse of FTX and the 2008 financial crisis are just two examples of the risks associated with centralization. DeFi offers a solution to these problems by building a financial system that is decentralized, transparent, and open to all. It is the only answer in the long term to ensure that the mismanagement and abuse of power that have plagued centralized institutions in the past will never happen again.

Sources:

https://newsletter.banklesshq.com/p/ftx-is-why-we-need-more-defi-not-bb3?utm_source=%2Finbox&utm_medium=reader2

https://www.moneyandstate.com/blog/sophistry-and-the-savior

https://twitter.com/mattytay/status/1592202791547961345