Demi-mini History of Currency: God currency—Government currency—Democurrency（part 1）

Demi-mini History of Currency: God currency—Government currency—Democurrency（part 2）

 IV. Democurrency

Before talking about democurrency, let's talk about information currency (commonly known as digital currency).

Information currency, for the first time in history, separates the value of currency from the physical carrier . One only needs to remember his/her account name and password to carry out transactions anywhere in the world with internet. Currency is no longer a "thing", it is "information."

"Information currency" has the following advantages compared to "physical currency ":

1. Zero carrying cost. You only need to remember the figures.

2. Barely any storage cost. If a bank builds an electronic clearing system, the total cost is the same no matter how much money is kept inside, so the storage cost per money unit is infinitely close to 0.

3. Superb transaction speed. Transactions can be done with a click of the mouse and within a blink of an eye.

4. No need for anti-fake identification. The system within and between banks is a highly secure system which processes transactions with cryptography, so no fake money here.

5. Clear accounts. A natural advantage of computer systems is that all transactions are clearly recorded. This is extremely beneficial for consumers, if purchased product goes wrong, you can always find the seller for refund.

6. Significantly lower probability of loss and damage. Unless your account name and password are theft, information currency will not be lost, it will not be bitten by rats either.

So here, we need to topple the definition of currency:currency is a kind of information which is acknowledged by enough people, and there is a generally acknowledged way to identify this kind of information, identified information represents a certain amount of value, people are willing to trade their goods or services with this kind of information.

While our economy has been completely globalized and informationalized, currency, as the blood of economy, should also be informationalized. God currency cannot be informationalized, only the government currency can (currently, information currency is about 20 times the amount of physical currency). So, we have a sad outcome: governments kidnapped information currency and robbed the wealth of common people.

However, people finally found a way out!

 November 1, 2008, a more memorable day in the world's monetary history, the first democurrency—Bitcoin was born!

Democurrency, a kind of currency that belongs to the people, what kind of attributes does it have?

 1. It must be information currency (digital currency).

2. Distribution right belongs to the people (all people have equal access to the currency through the issuing mechanism).

3. Its increment is within control.

4. Counterfeiting.

5. Decentralized trading and storage. Credit digital currency is stored in a bank’s central system. Government can easily control the central system, thus control the currency. So democurrency should not have a central storage and trading system.

Let’s see how Bitcoin accomplishes the above-mentioned points.

1. Bitcoin value is a string of information, a bitcoin account is also a string of information. "Official" Bitcoin is not physical. Bitcoin is 100% information currency; it is endowed with all advantages of information currency.

 2. Bitcoin has a "mining" mechanism that enables people to have equal access to mine Bitcoin by paying electricity bills to use a computer to calculate qualified strings of information. This is equal for all people of the world.

 3. Total number of qualified strings of information is limited, so the total amount of Bitcoin is limited, 21 million.

 4. Bitcoin’s source code is open to all, it survived the attacks launched by countless hackers in five years, which is the best proof of its security. The mechanism enables every Bitcoin client to record all Bitcoin information; every transaction needs to go through a lot of "notarization", so it’s actually safer than the banking system.

 5. All Bitcoin transactions are recorded in every client, this is super multi backup storage without a central system. Bitcoin transactions apply P2P networks, they are passed and notarized by multiple intermediaries, it doesn’t need a central trading system.

After Bitcoin, a variety of democurrencies sprang up. This also reflects the "democratic" feature of democurrency. The kind of God currency is limited because of its natural features, a government can only issue one kind of government currency, but democurrency has greater flexibility, any person or organization can initiate democurrencies, no limit of the kind, issuing amount and mining mechanisms.

Democurrency helps people get rid of government control mainly in two aspects:

1. It helps people eliminate currency over-issuing and robbery of people’s wealth.

2. It helps people get rid of government’s control on currency trading, and achieve anonymous, free, large, cross-border transactions without transaction cost.

Of course, democurrency also has disadvantages, the main drawbacks are:

 1. Since there is no central registration system, once you forget the account name or password, your will never get your coins back.

2. It can become a channel for illegal trading activities, and undermine government’s control on illegal activities.

The last topic is very sensitive: the government's attitude towards democracy currency.

 1. For the government, democurrency is much like God currency, since God currency can be killed, democurrency is no big deal, governments doesn’t need to fear.

 2. Government can take advantage of democurrencies’ features to issue "CPPCC currency", that is, the government can adopt the issuing mechanism, pre-mine a lot, then let the coin go public; next, the government can promote the coin with it own credit, and establish a central clearing and settlement system (since most people are not able to use democurrency client). This way, democurrencies will be kidnapped and became a kind of "puppet currency" by the name of "CPPCC".

Politics are backed by economy; to govern economy, a government has to govern the currency; the core of political economy is political currency; so democurrency is an inevitable trend, but it must go through the ups and downs of political struggle to succeed.