The value of blockchain: the medium is the message

Rage Comment : Marshall McLuhan proposed the "medium is the message" theory, arguing that the content delivery mechanism is the key to content acceptance and interpretation. In fact, he believes that the content delivery mechanism is much more important than the content itself. Today, blockchain and the existing currency system are tentatively moving towards each other, learning from each other, and looking forward to the emergence of a win-win situation.

Translation: Flora

If you have ever seriously thought about what money is, you will find that the existing system has great drawbacks, which is a huge challenge for Bitcoin applications. Today, the two systems are tentatively moving towards each other, hoping to win-win and avoid the worst situation.

Marshall McLuhan is famous for his theory that the medium is the message. The theory states that the mechanism by which content is delivered is fundamental to how it is received and interpreted. In fact, McLuhan believed that the mechanism by which content is delivered is far more important than the content itself.

Marshall McLuhan

For example, social media shapes the way you communicate with different rules—140 characters; use images for emphasis; videos should be no longer than 6 seconds; etc. McLuhan wrote the following:

"Content on the media is like juicy meat that a burglar tosses to a guard dog..."

The value of the delivery mechanisms themselves is powerful, but they are also quiet. We rarely wonder about the ways in which our smartphones and social media influence us, just as we browse through content on these media without questioning its value or the impact it has on our lives and relationships with one another. Whether the content is positive or not is not important; what matters is the secrecy of the delivery process.

What is true about communication technology is true about money. Money is many things: a measure of value, a medium of exchange, and a store of value. Money has played different roles at different times throughout history, but its purpose has remained the same throughout history. Something we rarely consider is the communication mechanisms that create and manage money. This is important because it means that the way we transfer value has some value in itself, just like a social media post, a TV show, or a newspaper has some value in itself.

Blockchain vs Fiat Currency

Blockchain refers to a set of technologies that can be used (and some organizations are trying to use) to enhance existing fiat currency systems, but there are certain properties and values ​​of blockchain itself that make it fundamentally different from money as we know it today.

The most obvious point to outside observers is the peer-to-peer nature of blockchain. Users send money directly to each other. (Records in this shared ledger are more accurate and can be updated without the involvement of a central authority; blockchain solves the trust issues inherent in typical online financial transactions.) This fundamentally distinguishes blockchain from regular online money transfers.

It is also important to recognize the pros and cons of blockchain. All transactions are processed without a middleman, without a trusted third party. This means that transactions cannot be unilaterally blocked or reversed, but if both parties are satisfied with the transaction, immutability becomes a benefit. If a hacker successfully gains access to an address, they can drain the funds on the entire chain, while users can do nothing about it (except resorting to legal action).

So the point is that in an open blockchain system there is no intervention: individuals truly own and control their own money (including creating and transforming its value). Of course, with greater freedom comes greater responsibility. Once users are careless, hackers and fraud will find them. The biggest challenge for Bitcoin and blockchain companies in the coming year will be to break this cycle: maintain the freedom that blockchain-based cryptocurrencies bring, while providing effective protection and security to customers. To achieve this goal, insurance, appropriate regulation, better user interfaces and key storage are necessary. But the reality is that customers will not choose to use a new system until they are sure that their funds are 100% safe and secure.

Money and Debt

Almost all attention paid to blockchain is focused on its peer-to-peer transaction characteristics, but people who are new to blockchain are most concerned about the immutability of transaction records. There is another issue that fundamentally distinguishes blockchain-based currencies from legal tender and has a great impact on the value of both systems.

Money is based on debt. Physical money, including banknotes and coins, accounts for only a small part of the money supply (about 2-3%), and most of it is held electronically in bank accounts.

Contrary to popular belief, banks do not lend out the money that customers deposit. They no longer even engage in fractional reserve practices where they lend out most of the money and keep a small portion in the bank. Instead, money exists when it is loaned out: loans made by banks, such as mortgages, are money created by the bank. This means that almost all of the money exists in the form of a corresponding amount of debt.

The implications are incredible. Money based on debt has to pay interest, that is, the end user has to pay something to the people who created it. Progress, as politicians and economists call it, is predicated on ever-increasing debt. Inflation becomes part of the system and a public policy issue, because it is better to inflate public debts than to pay them off. Moreover, a highly leveraged system cannot cope with deflation, because rising prices are accompanied by increasing default fees and catastrophic problems in the banking sector.

In contrast, blockchain money can be thought of as a “positive money,” meaning it is not debt-based. The original money—gold, silver, cattle, grain—was positive money, in that it existed and could not be easily eliminated. It was money we actually owned, and its existence could not be cancelled by an equivalent negative balance elsewhere. In addition, we did not have to pay interest on it, and once it was ours, it was ours forever. Likewise, the known and fixed supply could not be devalued by unexpected inflation.

Hybrid System

The message conveyed by fiat currency is that your money is not really yours, you need to spend money to own it, and its value is not guaranteed. You can only use this money created by others under certain conditions.

The message conveyed by blockchain is: you fully own your money and are fully responsible for it. There is no intermediary to protect you, and accordingly, there is no risk of devaluation caused by inflation.

Neither form of money is perfect for the most purist customers. The negative votes in presidential elections and referendums in recent weeks and months have illustrated dissatisfaction and antipathy with the political and economic status quo. Blockchain adoption has also been hampered by concerns about individuals having full control over the security of their funds. In 2017, these two very different value systems will learn from each other for their own benefit.