In a previous writing I introduced the concept of “Cryptoexchangea” (I changed the spelling now to reflect a reference to pangea) in order to show the misconception about the purpose and existence of Tether. From a traditional point of view of central banking, from the customer/citizen perspective, Tether is project that creates a central bank which will inevitably over inflate its supply (like all central banks do).
But, from a Cryptoexchangean realm perspective Tether EFFECTIVELY supplies Ideal Money for the ecosystem. The digital USD which is pegged to a phenomenon that exists outside any INTERNAL cryptoexchangean political intervention (but with an externally agree upon value) allows for trustworthy inter-exchange accounting.
The concept or paradigm of Cryptoeachangea, which is the perspective exchange operators function from, is helpful to elucidate this distinction of what Tether is for and why the external incentive is to keep the USDT perfectly backed by USD (in a real bank account with real USD’’s etc.).
The introduction of Cryptoexchangea allows us to observe the emerging fintech phenomenon in such a way that historical economic philosophy might be more applicable. For instance we can think of alt-coins as commodities themselves rather than simply as currencies whereas this transmutation might not be as applicable to alt-coins in regard to their real world use cases (and reasons for existence).
This article takes a broader view of Cryptoexchangea and its relationship to the real world.
The subjective theory of value points out the difficulty of objectively defining the value of something since value is determined by each individual's needs in relation to their own space-time. Money is a phenomenon that arises to help us deal with this problem as it is by definition transferable to, or exchangeable for, that which the individual wants.
In this sense money is simply the most accepted good for exchange (although this could be argued differently and more accurately it serves the purpose of this writing well enough). It is easy to understand how a market consisting of a set of commodities might end up levating a single commodity as its “money” (ie most exchangeable good).
Mises and Menger laid the foundation for the existence of money through a regressive argument that lands on the reasoning that a commodity that arises to become money MUST have had an initial use case that gave it value that was not of the money type.
This declaration creates a problem for bitcoiners that want to argue that bitcoin is or can be money. Thus, there is a school of thought that is waiting for the answer as to what bitcoin’s use case as pre-money commodity is. Some argue that bitcoin’s pre money use cause is as a payment or settlement system/network.
Nick Szabo gives his own thoughts.
From a different perspective bitcoin may have a value in the eyes of many people and different groups, however, it needs a proper price in relation to our existing pricing system otherwise there will be great friction created by the barter energy and transaction costs needed to facilitate trade involving bitcoin.
The first bitcoin purchase for bitcoin was 10,000 bitcoins in exchange for 2 pizzas. But this couldn’t be considered a representation of the true value of the world's most secure financial infrastructure. Those bitcoin’s on todays markets would be worth 10’s of millions of USD.
There is also Mt. Gox which saw the price of bitcoin skyrocket from pennies and dollars to over $1000 basically over night. While many traders probably thought they were instant millionaires the objective truth was that Mt. Gox was the only major exchange price available, therefore, it effectively served as a security hole for the distortion of an honest market price of bitcoin (ie regardless of the actual underlying value the world's population would ascribe to it).
What is needed is a decentralized “realm” of exchanges that are locked in self interested equilibrium such that no one exchange can spoof the bitcoin price without the other exchange’s prices perfectly exposing the distortion. In this sense we can see bitcoin as a sort of raw ray of signal that requires a very apolitical lens with which to translate the information with.
This lens is what Cryptoexchangea will become PROVIDED the construction of it remains true to the intention of keeping the price signal honest.
Those that believe in bitcoin’s ability to ultimately serve our financial system by fostering a competitive free market for banking in the real world (thereby putting pressure on legacy banks to print higher quality money ie non-inflationary) would seek to foster a competitive decentralized Cryptoexchangea.
Those that are seeking to stop bitcoin from becoming the great basis for value would mean to distort the lens that translates the market valuation of it. Such nefarious actors would act against the decentralization of Cryptoexchange rather than trying to contribute to it.
Such actors might have their own plans for what the new world basis for value should be:
