Predicting the future of the internet is never an easy thing to do. Back in the early 90’s when the internet was essentially email and a digital yellow pages there were a savvy few that had any idea that there would be Amazon.com or even Napster, which was founded in 1999. In 1999, I was 15 years old, and didn’t think much about the future of the internet. I was too excited that I could download “Bittersweet Symphony” in a mere 4 hours. But I would bet all the digital-currency in the world that even the most forward thinking innovator in the world in 1999 could not have predicted “Coinye” to come along. Coinye is a digital currency based on the Bitcoin model, with the odd distinction of being named after the rapper Kanye West, and bearing his likeness on the face of it.
Try to imagine something more difficult to explain to someone in 1999. Young people today with their… new forms of currency? It’s incredible.
I am not an economist (who trusts them anymore anyway) but I am a relentlessly curious person, and a constant student of whatever that curiosity leads me to. Few things have been as curious to me lately as digital currency. I do not care to be an expert in any one thing, but I am driven to understand things well enough to find some meaning in them. I want to know the implications. I think, when it comes to highly technical subjects like this, that it is how most people want to learn. “I don’t care how it works, just explain to me what the heck this means.”
The first question people have about something like Coinye is why? The short answer, as it often is, is why not. The long answer requires an explanation of it’s parent currency, Bitcoin. Here is my very rough and incomplete explanation:
Bitcoin arrived on the scene in 2009 and has been doing very well. At least the people who bought into it early are doing very well, since the value of a Bitcoin has risen from essentially nothing to around $1000 per digital coin. While having the property of increasing in value is only one way in which we might measure how “well” a currency is doing, it is arguably the sole measure of how a stock is doing. Bitcoin is doing fantastic as an investment, despite the fact that it is subject to drop in value dramatically and unpredictably.
Some other ways to measure how well a currency is doing are the amount of users of the currency, the stability, and the ease with which it can be used. Bitcoin has a relatively small user base, but it is growing. It has terrible stability, but can only appreciate in the long run by design, due to the finite amount of Bitcoins that can be created. Ease of use is debatable: While it is almost impossible to use at a store (so far), it can be used incredibly easily on the internet, transferring wealth almost anonymously, nearly instantly, with no middle man and no fees. The point is, it is great at some things and not great at other things. There are also a few other “serious” digital currencies that have emerged along side of Bitcoin, such as Litecoin, which take a similar approach.
Bitcoin is open source, which means that you can look at the code that makes it work, copy it, and tweak it, much like how the internet, Linux, and a tremendous amount of other things we use were built. While you cannot go and alter Bitcoin’s code and change how Bitcoin works like you can with some open source projects, the greater concept of digital currency is an ongoing collaborative project where people can create new currencies using previous innovations and adding their own. This was done with lighthearted internet geek flair with Coinye, and prior to that Dodgecoin, Coinye’s predecessor, which was an homage to a internet dog meme. This is all fun and good, despite how many of Bitcoin’s detracters attempt to use Dodgecoin and now Coinye to mock the whole idea.
At face value, it is kind of stupid, but the implications are vast. These represent some of the first, careful, tentative and delicate manipulations to Bitcoin. Software engineers took a perceived disadvantage of Bitcoin (lack of pizazz, I suppose) and improved upon it by altering the code. Though this arguable has been done in order to enrich the creators of these whimsical currencies, and as trivial as the addition of pizzaz to currency may seem, there is a greater lesson here: less trivial improvements are surely on the way.
Coinye and Dodgcoin show how easy it is to alter code and create new currencies. This has never been possible before. Imagine a competitive environment in which there are dozens, hundreds or even thousands of virtual currencies! Like any competitive environment, only the strong will survive. Only the strong currencies, and more importantly, only the strong code.
Bitcoin introduced a number of innovations in its code that will likely survive into the next few generations of digital currency. Bitcoin allows for peer to peer sharing, which makes it possible to transfer wealth without a middle man. It also allows anonymity, which is beneficial for some things like avoiding taxes, and bad for other things, like collecting taxes. Most impressive, Bitcoin has created a system in which a currency can be regulated by an algorithm. Groups of humans like the people who run the federal reserve have tremendous power, which as we know inevitably leads to corruption. Algorithms cannot be corrupted, at least not until A.I. is sufficiently powerful that it can have some sort of self serving agenda, and the possibility of that is debatable to this day. What would an A.I. even want with power over humans? We can’t be sure.
The next few generations of digital currencies will keep the innovations provided by the creator of Bitcoin that it sees as beneficial, and add on some new innovations. Some of these new innovations will last into the next generation of digital currencies, which will add more, and so on. Perhaps, a way to address the problem of stability, or a way to easily use them at your local corner store. What we are seeing with Bitcoin is the birth of a new species of currency, into a system that is favorable for rapid evolution. Not biological evolution, but not figurative evolution either. Real digital/cultural evolution that was powerful enough to create the entire internet and continues to change our lives more and more.
The conversation about Bitcoin is largely between those who are convinced that Bitcoin is the way of the future, and those who think it is nothing more than a pyramid scheme. As I understand it, Bitcoin is neither of these things. However, it is only a matter of time until the progeny of Bitcoin make the Federal Reserve, Bank of America, Visa, and Western Union obsolete in the same way that online video streaming services made Blockbuster obsolete. It will simply be a better product, provide a better service.
Bitcoin raises a tremendous amount of better questions than “Is this the future or a pyramid scheme.” For example, what is money? What do we want it to do? One interesting thing Bitcoin is doing is challenging our assumptions about the answers to these questions. For example China has recently decided to attempt to tax Bitcoin, treating it as a commodity rather than as a currency. Arguably Bitcoin is acting more like a commodity than a currency because more people are using it that way, investing in it like they would a stock in Ford or wool futures, and less people are using it to buy goods. This raises an important question: in a world where finance has become so speculative and abstract that it is difficult to tell the difference between a currency and a commodity, is there even a fundamental difference anymore? Is it possible that currency is simply a good that has properties that make it useful for exchanging value?
We have never had a choice between currencies that would allow us to think that way. We can choose the better coffee maker based on our needs, but we have never been able to choose a currency based on our needs. That is changing, and with it the way that we look at currency. With products, there is competition for who can provide the best one, thus fueling innovation. What happens when the most basic element of Capitalism becomes a product subject to the same pressures toward innovation as everything else within the system? What will happen?
This change in how we perceive currency allows us to ask new questions about currency that have rarely been considered. Instead of seeing currency as a stagnant object we must innovate around in order to try to solve the problems of our global financial system, we can now think about how we can evolve currency itself.
The possibilities are infinite and not limited to things like creating a virtual currency that has a picture of Bobcat Goldthwait on it called Goldbob Cointhwait. For example, what if we created an algorithm that tracked people’s un-monetized contributions to essential elements of the web (tweets, yelp reviews, etc.) and sent them all micro-payments in a new currency that is tied to the average value of all currencies in circulation in the world, with a note that says, “This is 1/100th of a Goldbob Cointhwait and it is always worth the average of one unit of every currency in circulation, so long as enough people agree that that is what it is worth?” After all, all currencies are valuable because of this kind of consensus. What are the limits of our capacity to agree on something?
What if we created a virtual currency that as soon as you get it it doubles in value for one day, and then halves in value every day after until it is worthless. This would strongly incentivizing people to exchange for it, and then spend right away, keeping money in circulation and preventing hoarding, but certainly would create other problems. What would those problems be? How would we solve those problems?
We can’t know the answers to these questions anymore than a velociraptor knew that millions of years later it would end up standing three apples high and bobbing around the road like a drunken auntie in the form of a quail. Or any more than Kanye West knew when he was an aspiring young rapper that he would be honored on the face of a digital currency. But we do know that the finance empires of the last hundred years are failing us. We know my generation, the millennials, are simultaneously the most screwed by the current system and the most equipped to change it. We can’t know the answers to all of these what ifs until we try them out. The concept of digital currency on the internet has introduced an environment in which these ideas can be tested with real people in real time.
Coinye is an early example of people having fun experimenting in this new environment. It is only a matter of time that these experiments will create new digital currency products that will be such an improvement upon the current national currencies that they will overtake them. Will the currencies of the future have pop culture references embedded in them? Maybe and maybe not. Will Coinye and Dodgecoin be viewed as major innovations to currency? Probably not. But while we acknowledge that the invention of fireworks was groundbreaking, its easy to forget that whoever first made a green firework was doing more than adding flair: they were adding to the volumes of human knowledge on the manipulation of gunpowder to suit our needs. Like Coinye, making a firework green was a fun use of a new technology. Like gunpowder, digital currency is changing the world as we know it.
While the NSA’s and Facebooks of the world continue to use technology as a means to political and financial power, people use those same technologies for the empowerment of themselves and their communities. If the technology can be controlled by a central authority (a government controlling gunpowder manufacturing, or a company controlling the servers that store all of our information) it can be used to gain power. When it is difficult to control a technology (peer to peer file sharing and digital currency with no central authority) it can be used to empower individuals and communities. The world we find ourselves in today is a place where innovation is happening at a remarkable pace on both sides of the proverbial coin. There is a new paradigm of good an evil emerging in which the struggle is not between this group of people and that, but between those who would empower themselves at the expense of all others, and those who would empower everyone for the benefit of all. Coinye is but a sparkler in the history of the explosive technology that is digital currency. And thanks to peer to peer technology, when the big guns come, they will belong to all of us.