In the past we discussed the Eurodollar System is some detail. This is the engine that truly drives the global economy. It is something that few focus upon and is not really understood. That said, it is what the banks and other financial institutions set up over the course of more than half a decade.
It is so big that many people call it the "offshore dollar system". In fact, when we compare the amount of US dollars, the Eurodollar System far outpaces what the Federal Reserve and domestic commercial banks do.
This is responsible for daily funding that gets into the trillions. People talk about trade, oil, and other things that are minor in comparison. Here is where the main action is.
By looking at this, we also see the potential of cryptocurrency and decentralized finance (DeFi). Actually, it is good to know the road map in already in place.
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For those who do not know, we will briefly touch upon what the Eurodollar System is.
This was a "shadow" financial system that emerged, beginning some time after World War II. With the expansion of globalization, the central bank system quickly revealed itself to be obsolete. Hence, the banks and other entities took it upon themselves to create a system that could met the financial needs of those around the world.
It is a system of borrowing, lending, collateralization, and cross border payments that operates outside the scope of any government. In fact, for the first couple decades, few were aware it was being developed.
The starting point was the post WWII packages that sent dollars to Europe and Asia for reconstruction. These ended up in foreign banks. It was the basis for the new system that started by using eurodollars (US dollars that are offshore).
Over time, like most of our systems, the currency left. There are few (to none) eurodollars used. Instead, like we see with all digital money, it is a ledger based system.
The key is how this is something that was established without government oversight or intervention plus ended up taking over the financial world.
With the introduction of FedNow, some were asking how it would affect cryptocurrency. By the asking of this question reveals a lack of clarity regarding the depths of the Eurodollar System.
Many talk about crypto, Bitcoin in particular, in terms of taking over payments, the USD, or banking. All of that is short-sighted. It underestimates the size of the market we are dealing with.
What cryptocurrency, and all the tentacles, is targeting is the Eurodollar System. We are not talking about billions. This is an arena where the numbers are in the trillions on a daily basis.
This is what DeFi, blockchain, and cryptocurrency are after. The US dollar is not the focus but, rather, the eurodollar.
In short, cryptocurrency will become the global funding mechanism. It is going to take a while to build out the infrastructure but the coming decades will reveal this to be the case.
Tell me if this rings a bell:
What are we describing? If you said cryptocurrency, give yourself a cupcake.
However, this is the modern version. These characteristics are actually the Eurodollar System. Long before Satoshi Nakamoto, there was the this system.
Both are private, decentralized financial networks with global reach. The difference is that the banks established a closed system. There are thousands of participants.
Cryptocurrency, on the other hand, is open and will have billions. Each of us will be able to do what the financial institutions do in Eurodollar System.
That means, to say cryptocurrency is not legitimate is to deny the impact of the system that funded global trade for the past 70 years.
Cryptocurrency is not really novel. Ledger based money existed for centuries. This is part of every economic system since the 1500s. Over the last 100 years, it became the norm as technology advanced.
What we are involved in is simply another evolution. The Eurodollar System is identical to cryptocurrency, with one exception.
Currency under fractional reserve banking is essentially private money through the banks with reserves.
When we look at the Eurodollar System, we are dealing with private, reserve-less bank money.
Cryptocurrency is simply private, reserve-less money without the banks.
Under that system, trust comes from relationships between the different players. It is a self regulating system that has to correct without any oversight. This means trusting the other party in an effort to minimize the counterparty risk.
Plus it is a closed system.
With cryptocurrency, trust comes from the blockchain. In this regard, it is trustless. At the same time, being open means we have the ability to grow much larger. Here is where trillions will likely transform into quadrillions.
One overlooked part of the tokenization of everything is that it also will include everyone.
Ledger based money has been the norm for hundreds of years and yet most people are not aware of it. This means that they feel cryptocurrency is something completely different.
It simply is not the case.
What makes cryptocurrency different is the control of the ledger. That is what it all boils down to.
Our present system puts that in the hands of the banks and financial institutions. With cryptocurrency, the node operators along with the code are the ones who maintain the ledger.
Outside of that, cryptocurrency is simply the new Eurodollar System.
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