I couldn’t believe my eyes when I saw the steep steps. I looked around. No… definitely no escalators. And no elevators. The only option was to drag the 23-kg-suitcase up those steps looking like a mountain goat. I stood there for about a minute, looking at people using all sorts of methods and ways to get to the street level from a station which, by the way, was solely dedicated to the airport express.
It was fun for a while. Then, the 6-hour-trip from Shanghai started feeling very long. I sat down on the suitcase and took my time to enjoy my cigarette. That’s when my phone went.
It was a WeChat message to add to my day. It turned out my efforts were all for nothing. The event I have travelled all those miles for, was actually cancelled. And it was not only me. Hundreds of people have travelled to Beijing. It was right then, the value of Bitcoin and Ethereum started to plummet. A few days later it was down by 20%.
A few days past and China banned all ICOs all together. After that, Israel issued a statement that it was going to do the same. It seemed like everyone, except Estonia which actually decided to launch their own cryptocurrency ESTCOIN, saw lines of codes created in bedrooms around the world, as a threat.
So what was going on? Why did everyone panic? And why is everyone chasing all these tokens no-one heard of only a few years back. To understand why, I thought of looking at the winners and losers of digital tokens. Let’s walk into this with an open mind.
So, first things first. What are all these ICO’s, Bitcoints, Blockchains smart contracts and Ether?
You may or may not know about it yet, but these are the most fundamental tech developments of our generation. ‘Blockchain’ and ‘smart contracts’ have become signatures for the most famous digital currencies: Bitcoin and Etherium. In essence, it creates a record of all trades between people and, most importantly, makes it impossible to change or alter any records. In other words, all the politicians’ expenses are visible and track-able all the way to the source.
In practice, it is a way to exchange cash and goods. As long as someone is accepting your ‘Bitcoins’ or ‘Ethers’, you can trade them for products and services of your choice using those two digital currencies.
Now, an ICO, is a short for Initial Coin Offering. It’s a way to start a digital currency and get as many supporters as possible. Effectively, it’s a crowdfunding campaign of a mass scale. And the numbers just keep on growing to an astronomic scale, as the new ICO Filecoin clearly showed us by raising 257 million in only two months.
An ICO is a currency that comes about when a group of people decide that it should come about. It is a system of trust, much like any currency. But there’s a fundamental difference between ‘any’ government currency and a crypto coin. The crypto is cancelling out the middleman – the central point of management which, in all countries with the exception of North Korea, is the central bank and by proxy also the government, leaving many countries in the void of currency without meaning. It might not seem surprising then that the government is not ecstatic over this massive ICO boom, for the exception of the Estonians, who have proven to be the most open minded nation in the world in this area when it comes to this.
With crypto currencies, there’s no central bank. There is no centre at all. This means that the value of a digital coin is assigned by the amount of people believing in it and by that only.
It’s true that this technically true for all currencies. Imagine you have a bag full of cash and decide to go out and spend it. You go to the ice cream van, and order a proper Italian gelato. You watch the ice cream man make it for you and pour strawberry sauce all over it. He hands it over to you and you pass him a 5 euro note. He looks at it in disapproval. I’m not accepting that money anymore, he says. There’s this other alternative that makes me a lot more money and makes my life a lot easier. So then what? What happens to all your savings? Not to mention the investments? What happens to the establishment if we stop using the money it prints?
This suddenly changes things. We go back to associate value to the trade. Value of the pot to what’s actually being produced. Whatever we pay for is decided by the market valueof the crypto currency itself, which is associated with the amount of people who invested in it. This is very different from the current market, because the value of goods and services is limited to the amount of real money in the system. There’s no way to assign a virtual value to, say, a place to live, which, in 90% of the cases has to be dealt with through a bank.
ICO on the other hand depend on the collective view of people’s perspective of life and their ideas. This gives us choice about what to support and a transparency of what the currency actually does. The record, which is created in blockchain is impossible to change. That means that anyone can see trade in weapons supporting various wars, and you don’t support that type of trade, you can take the money out of and put it into a different one. In this case, you actually know what your money does.
It goes without saying that this is a concept that affects ICO and the government as a whole. The more people believe in cryptocurrencies and, by proxy, also a decentralised society – one without banks and governments – the less people see the government as a necessary part of the big picture. Loss faith in the government and rise support for cryptocurrencies may not be linked directly, but even if they happen in parallel, the outcome is the same; the idea of us living without a government has gone too far to be stopped now – and the support is higher than ever before.