One of the biggest challenges for the cryptocurrency industry is to transform from money to wealth. This is a concept that few think about simply because we are not really taught the difference.
Money is not wealth. It is a tool for generating it.
Wealth is business. It is the production of goods and delivery of services people need. Money is what helps to create this. Confusing the two has led to major issues for individuals, companies, and countries.
Why do you think "money printing" never works? When countries that are in full control of the money supply decide to expand it, why aren't they wealthy? The simply answer is because, again, money is not wealth.
Unless there is an increase in commerce as a result of the extra money, we end up seeing inflation.
So how does cryptocurrency navigate this? We know that anyone has the ability to create money. How does this apply to what is being created in this realm?
We will use Hive as an example since there is actual activity.
One of the reasons why the Podping project holds so much appeal is because it is a commercial application. There is utility to the protocol that is being designed. Ultimately, this create value which is another term for wealth.
It was a project that was financed through money "created out of thin air". Nevertheless, it was transformed into something that has practical use to those applications in the podcasting industry.
This is an example of moving from money to wealth.
We continually stress development. In the digital world, this is what generates wealth, at least the foundation for it. Ultimately, it is the network effect that kicks it off. Facebook has extreme value since there are a couple billion users. The coding itself isn't worth a whole lot.
Splinterlands is another area we can point to that exemplifies this concept. It is a game that allocates tokens and in-game assets. However, the value comes from the game being enjoyed by thousands of people, most who show up daily. An ecosystem (another word for network effect) formed around it, further enhancing the value in total.
Cryptocurrency is filled with people trying to monkey around with tokenomics. This does not generate wealth. It is focusing upon the money. While it is important to get that right, a project with poor tokenomics can succeed if it has users and appeal. The reverse is not true. A dead project with the greatest tokenomics is still dead.
Wealth is the production of goods and delivery of services. This is essential for any economy.
Of course, money is also a primary component too. Without that, we see the lack of ability to expand.
At a time when everyone is focused upon the CPI readings and "inflation", we have to maintain a clear head about what really is taking place. Many assume that inflation is bad, hence deflation is good.
This is not true. Deflation is horrible for a society. It is easy to presume that prices going down is a good thing. The challenge with this is that is only thinking from a consumer's perspective. What about your house? How would you like to sell it and have to bring a check to closing because it declined in price 2% for the 10 years you owned it?
Few would opt for this.
How about investments? Do you like putting money into a project and getting less out? This is deflationary.
The same holds true for employment. During deflationary periods, people end up being let go. Companies who are seeing a reduction in sales and profitability are not going to keep excess people on. They will adjust the workforce to match the new economic reality.
We saw the most horrific deflationary period in US history during the early 1930s. It was called the Great Depression for a reason. We can presume it was not a great time for many.
One of the reasons we discuss the idea of needing a lot more HBD is because this is what is going to drive the wealth generation on Hive. Ultimately, we need more of the tool to finance the production of those services that will bring value to Hive.
As we know, developers want to be paid. The same holds true for server companies. Marketing costs money. In short, the entire business process requires funding. We even need money to buy the goods and services being offered.
This is what makes up an economy.
Simply creating more money is not the answer. Neither is starving the economy. We need to have both sides to equate for wealth creation.
Businesses are the foundation of any economy. With Hive, this is evident by the fact that everyone has an opportunity to be a business. All of our activity is monetized. People are brands if they so choose to operate in that manner.
Those who approach Hive with the idea of growing value are in the process of building wealth. We often point out what people think about reputation on Hive and what it means to them. This is another way of describing one's brand.
Games, applications, and other commercial endeavors are all a part of the wealth generation process. To achieve this end, money is required. This can come in the form of USD, cryptocurrency, or Cabbage Patch dolls. It all comes down to what someone will take in return for their services.
Since we do not have the ability to expand the Cabbage Patch doll supply as needed, plus the lack of value tied to them, we will presume that people want to operate using something else. Within the digital world, cryptocurrency is a sensible option since it was designed in this realm.
Nevertheless, we cannot confuse the creation of money for wealth. The former allows for the latter but it is not. Ultimately, the coins tied to Hive will represent the value the ecosystem has.
As the wealth expands in totality, the money is supported. This is the best backing agent there is.
Society often talks about wealth meaning money. Unfortunately, within a larger backdrop, money without commerce has no value. Hence, we have to distinguish wealth from the tool that creates it.
Cryptocurrency has generated a lot of money. Where it falls short, thus far, is in producing wealth.
This is the challenge before Hive.
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