Minting currency is hard. All of that smelting, printing, special ink, security thread, optical illusions and micro print. Yet, after all of that work, hundreds of millions of fake bills find their way into international commerce, diminishing the value of the dollar and defrauding merchants worldwide. The temptation and reward is simply too great, and in many cases nation-state actors are engaging in a form of economic warfare. This is a technological arms race on a vast scale, between criminal syndicates, rogue countries, and nations protecting their capital controls.
You can’t counterfeit Bitcoin. A fact that people speak of rarely, but a foundational component of the system, and absolutely essential to its continuing success. The same strong cryptography that allows for effortless transfer of value gives Bitcoin an enviable level of digital protection. A virtual asset that cannot be duplicated, altered, copied or printed.
Even better, the same properties can be extended to protect all sorts of digital assets printed into the blockchain. A verifiable fort knox of digital goods, and tokens that represent everything from cars to property, derivatives and stocks. The ability to publish these items onto the distributed ledger and the software and systems to manage it is critically important to the next wave of contract and digital currency innovation.
The idea of private currency has been advocated for years, most prominently by economist Friedrich Hayek, who won the Nobel prize in 1974 for his work on the theory of money. His work on the subject implies that local communities can drive spending and reach shared goals by minting locally used currency and using it exclusively for trade as an adjusted unit of barter. That competing Fiat instruments would of their own accord reach an equilibrium in the free market and would be a natural alternative to state control.
These same concepts map nicely onto decentralized communities. The forums and private groups that characterize such large portions of the net are perfect places to adopt this new variation of the movement. With the underlying technology freely accessible and decentralized. Within Bitcoin we are already starting to see this type of fragmentation with well over a thousand alternative currencies blossoming out of nothing. Of course, the vast majority of those currencies have little utility. They neither provide a secure network, nor are backed by any company or means of production. They exist for the most part as purely speculative instruments, designed to take the money of the unsuspecting and greedy who would invest. Penny stocks on steroids.
Now the game has changed. With little work a group can generate incorruptible, and impossible to counterfeit tokens on top of the Bitcoin network and use them for trade, in exchange for perks, or simply as a matter of reputation. These can be instantly disseminated to participants, and provides a powerful and additional mechanism for user engagement, as well as unlocking easy trust-less barter in distributed communities.
We are just scratching the surface of the types of applications possible. Real smart contracts and distributed verifiable tokens are the operational and technical bedrock of a myriad of new financial services and products. If Bitcoin is to financial inter-operation what TCP/IP was to the Internet we can expect a truly stunning wave of innovation ahead.