"I don't believe we shall ever have a good money again before we take the thing out of the hands of government. That is, we can't take them violently out of the hands of government. All we can do is by some sly roundabout way introduce something that they can't stop." - Friedrich Hayek.
In 1976, the Nobel Laureate Friedrich Hayek authored an important and prescient paper titled: "The Denationalization of Money." Bitcoin proponents love and often quote this work as the rationale for why Bitcoin needs to exist, but Hayek's original vision looks less like today's Bitcoin, and more like today's stablecoins.
Still, Hayek wrote with the hope that some perfect storm of circumstances might someday change the game, even going so far as to suggest that the change may need to happen without government support.
Today, more than 40 years after the idea's inception, we see the denationalization of money unfolding organically in the form of digital assets.
The Bitcoin protocol can certainly be described as a "Sly roundabout way" of introducing an independent money that no central authority can stop.
Like scarce metals, fixed supply assets cannot respond to changes in demand, and will never achieve the sustainable level of near-term price stability needed to compete with central bank money.
Bitcoin instilled in a new generation of innovators the idea that money is something we can change.
Hayek also believed that the introduction of independent money would raise the ceiling of monetary quality by placing pressure on the best sovereign currencies to be more responsible with their issuance and regulation of supply.
Algorithmic stablecoins have the potential to profoundly transform money as we know it, but they are much harder to pull off and introduce risks that can only diminish with time and scale.
Ultimately, only algorithmic stablecoins can further the underlying mission of digital currencies and emerge as true alternatives to government money.
The True Crypto Alternative to Government Money
Published on Dec 28, 2018
by Coindesk | Published on Coinage
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