Cryptocurrencies

With Pierre Poilievre hocking cryptocurrencies as part of his campaign for the leadership of the Conservative Party of Canada people have increasingly been trashing them. They have largely described them as some kind of scam and they are mistaken.

Cryptocurrencies are a logical extension of the the current technical revolution that we are going through. Remember before the Industrial Revolution and the resulting need for more and more energy to make it work petroleum was a useless substance. Hell, even coal, which has been used since antiquity, was not that big of a deal. For centuries, the only coal that was mined was the stuff that was near the surface. If you had to put in any more effort than that to get to it the cost was too prohibitive. It was only after the invention of the steam engine that coal and petroleum products became the important commodities that they have become.

Since the current technical revolution is essentially a virtual revolution, as its main commodity is data, it stands to reason that some of the commodities that would feed that revolution would also be virtual and cryptocurrencies are exactly that, a virtual commodity.

A market for commodities always develop when they become important and one forming for cryptocurrencies should surprise no one. As with all commodity markets the prices fluctuate according to market forces, leading to volatility. 

Incidentally, it should be noted that most national currencies have become virtual as well. There was a time when we used to exchange actual specie, bills and coins, for goods and services. Now we use bank cards. With a few key strokes some electrons move between computers and servers and money magically moves from one account to another but no real money is actually exchanged. It is a virtual transaction. So the difference between say Bitcoin and the Canadian Dollar is much less than people think and those differences are being reduced quickly.

So the problem with Mr. Poilievre's proposal is not cryptocurrencies it is his gross misunderstanding of them.

Although there are a few exceptions most commodities are not suitable to be used for facilitating the exchange of goods and services, which is the function of money. No one would suggest that I buy my next car using wheat, coal, or pork bellies. There was a time when gold or silver might have been appropriate but those times ended when we invented paper money.

The same is true of cryptocurrencies. Since they are a currency they can be likened to gold and silver but like those two commodities they are not practical for the everyday use of buying and selling goods and services and it will remain that way as long as there are national currencies. If countries ever get out of the business of "printing" their own currency, cryptocurrencies could fill the gap. But since that is not going to happen cryptocurrencies will just remain another commodity, to be bought and sold in a commodities market.

Mr. Poilievre is an idiot for suggesting otherwise but the problem lies with him not the cryptocurrencies.