The rise of cryptocurrencies like Bitcoin, Ethereum, and Litecoin has been greeted with mixed reactions around the world. On one hand, cryptocurrency enthusiasts love using these digital tokens to barter and make private transactions, whereas others in the world of mainstream finance largely view them as useless gimmicks or volatile assets unworthy of serious consideration. What too few people are discussing is the way that cryptocurrencies could come to reinvent capitalism, however, especially as it pertains to the ownership of private property.
Will cryptocurrencies reinvent capitalism as we know it? Here’s why these fledgling digital currencies could reshape our understanding of the political economy.
A New Era Of Private Property
Perhaps the signature aspect of any capitalist system is the championing of private property. In his famous book The Wealth of Nations, Scottish economist Adam Smith famously put forward the notion that private property rights were essential to developing the wealth of any population, asserting that free enterprise alone can encourage people to labor productively day in, day out. Since the early days of capitalist societies, this emphasis on private property has only grown more important, with modern day economies having developed through private property regimes that allow everyday individuals to effectively accumulate as much as they can get their hands on.
Now, cryptocurrencies are reinventing our notion of private property as people learn how to trade Bitcoin. This is because all money to date has been in the hands of a central bank or economic authority, an unfortunate necessity. With blockchain-based cryptocurrencies, however, we’re truly discovering for the first time a way to have digital currencies that are entirely democratized and out of the hands of any one central authority. Furthermore, the encrypted nature of cryptocurrencies like Bitcoin means the transactions you conduct with these digital tokens are entirely anonymous. This is a boon for the free market and could change the way we conduct business with one another forever.
Famous venture capitalists are evening beginning to muse that cryptocurrencies could outright replace fiat currency in the near-future. While it’s unlikely such tokens as Bitcoin and Ethereum will come to entirely replace cash, it’s indisputable that cryptocurrencies are growing in popularity and will continue to become more ingrained in our economic system as time goes on. Already, a number of private businesses around the country accept cryptocurrencies as a method of payment.
Long-Term Investments Will Change
Besides replacing and supplementing additional currencies and upending state-methods of control over the economy, cryptocurrencies will also reinvent capitalism by changing the nature of long-term investments. For most people, the largest investment decision they ever make is the buying of a home. Such investments will be rendered more interesting thanks to the introduction of cryptocurrencies, which can be exchanged in lieu of money for a home. Already, a single-family home has been sold in Texas via the service BitPay, which translates cryptocurrencies like Bitcoin into American dollars.
Elsewhere, long-term investments will also be put to the test by enduring cryptocurrency exchanges. Rather than just investing in stocks and bonds, your future retirement or investment portfolio may also include some coin wallets. Cryptocurrencies themselves will only play a minor role in the reinvention of capitalism, however, whereas most of the real work will be done by the underlying blockchain technology that powers such digital tokens.
Blockchain Is Changing Cryptography
The way that blockchain technology is reshaping cryptography is set to disrupt our globalized economy. Blockchain is a decentralizing technology by its very nature, meaning it takes closed proprietary information systems and opens them to everyone. This democratizing technology will thus change how companies operate in an information-heavy environment, which is important as the future of capitalism could be determined by powerful transnational corporations and how they choose to invest in the future.
Next-generation cryptography will help us create “governance markets,” which will allow everyday people and smaller businesses to scale much in the same way that stock markets and investor support allow corporations to scale. The rise of the crypto-commons is going to fundamentally challenge modern understandings of capitalism, especially as democratizing technology like blockchain make scalable governance possible for everyone. Gone are the days when private property owners could horde control entirely for themselves – in the era of cryptography, decentralized technology will make everyone more accountable to one another, crumbling the power of monopolies.
Cryptocurrencies can only reinvent capitalism if they continue to enjoy the support of avid investors, however. That should be of little concern, especially since investors across the market are pouring tons of money into blockchain services in anticipation of cashing in on this technology in the near-future. Thus, while popular cryptocurrencies like Bitcoin continue to face an uphill battle to become accepted members of the mainstream economy, the underlying technology powering these tokens is becoming more ingrained to our system by the day. Capitalism demands continuous innovation and change, and if any burgeoning technology meets these demands it’s cryptocurrencies.
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