A Utrust original on how true ownership of your money is only possible through technological means, and why
True ownership of your money has been a complicated question that has driven the economic history of civilization from its beginnings. Entire systems have been built with the sole purpose of ensuring that whatever it was people were using as money reflected actual value and could be verified as such.
When we collectively decided that it was impossible to use valuable materials (such as gold coins) without paralyzing the economy, politicians and economists of the era still weren’t convinced: if we were going to be using paper money for economic transactions, for the sake of expediency, then that paper money had to be exchangeable for something valuable.
Some countries chose silver. Others chose more complicated formulae. The vast majority, however, looked to the most standardized precious substance we knew: gold.
The reasons why the gold standard was abolished are complex. The arguments for it and against it are complex as well. We look over that historic period in a little more detail in this article, and the relitigation of the 19th century falls beyond the scope of this article.
What matters for the sake of this article is the system that we inherited, one where fiat money is backed by nothing and where controls over its introduction to the economy are barely existent.
When the gold standard was abolished, this was not the intended outcome. Both the British and the US governments had every intention of returning to it (the British actually did for a while), but realized that once unleashed, the free flow of money was very hard to stop without crippling the economy.
So if fiat money has no intrinsic or use value (by definition), and there are no reserves or valuable materials or anything else to back it… how do you define ownership?
Physical money is on its way out
Money is now mostly digital. Let’s take the USD as an example. A little over 2 trillion USD are in circulation right now as bills and coins. The estimated US M2 money supply, however, is over ten times that amount.
The M2 matters because that’s the calculation that includes short-term bank deposits, meaning everyone’s checking account, or the money that we consider to be our own, available at any time for any reason. That means that over 90% of American people’s money is already fully digital.
This begs the question: if less than one in every ten dollars exists as physical money, and the rest exists only in digital form, in bank databases, what rights do you have to it? Do you actually own it? How can you prove it?
Whenever you deposit money into a bank, whatever bank it is, you surrender your legal title to the cash. The bank has no obligation to safekeep it. They can do whatever they want with it. They can invest it, lend it out, put it into a fund, use it to pay salaries, or use it in any way they see fit. No one’s checking.
This is called fractional reserve banking and it’s how the vast majority of banks operate. It’s also 100% legal. As long as the bank has a minimum amount in reserves, enough to ensure that they can respond to normal withdrawal patterns, then whatever’s in your checking account counts as money. This is what’s called a deposit liability.
Since the bank is responsible for paying it back, and has a legal responsibility to do so, then that debt counts for money, regardless of the fact that no bank has the reserves to effectively make good on all those promises.
Here’s our question, then: do you effectively own that money?
Your keys, your money
Crypto (Bitcoin, in this case) came to existence in the sequence of one of the largest crises in modern history, what came to be known as the Great Recession. Satoshi Nakamoto, whether a person or a collective, rebelled against world governments’ decisions to tackle a banking crisis with an uncontrolled supply of debt-backed money.
He made it so Bitcoin could operate outside of a banking system, independent from the whims of governments or any other institutions. The crypto industry would follow suit, building an alternative to this way of looking at money that operates on simple principles:
- Whoever owns BTC, ETH, EGLD, or any other crypto coin or token is written on the blockchain, a ledger that is both transparent and immutable;
- It is impossible to transfer money from anyone’s wallet without private keys that are only available to the owner of said wallet.
The issues we have discussed over this article aren’t circumstantial or easily fixable. Governments over the world have tried and failed dozens of different monetary policies with varied degrees of modest success. While this may be fascinating to academic economists, the fact remains that anyone over the age of 30 will likely see the second recession of their adult life within the next 12 months.
What we are building at Utrust seeks to replace this flawed system, built over trial and error and riddled with legacy problems that run deep to its core, with a solid system, built from scratch with the Internet in mind.
To own your own money isn’t just a metaphor. It’s a technologically guaranteed fact.
If you own a business and you are ready to experience the speed, reliability, and security of crypto payments, here is where you can find all the information you need.
If you don’t but you are ready to embrace true ownership of your financial future, we recommend the Maiar wallet as a starting point.
We hope you enjoyed the article, and it gave you plenty of things to consider. Stay tuned for part 2, where we will be looking at one of the greatest concerns of our time: inflation.