Background
I was listening to a @taskmaster4450 video blog today and he said;
thinking of cryptocurrency as money was wrong. We don’t need cryptocurrency to replace what money can do, we need cryptocurrency to do what money can’t do.
He closed his video log stating that we should think about how cryptocurrency not in terms of what we know: money, but as cryptocurrency, which has greater potential then money. post
I thought about it and I was struck by this idea that cryptocurrency wasn’t just money, it is Super Money.
Super Money
Cryptocurrency is like a Superman, part Clark Kent, mild mannered reporter, and part Kalil from the planet Krypton. Cryptocurrency is part fungible and part non-fungible. When cryptocurrency is fungible it’s just money, but when it’s non-fungible it’s like Superman but I call it Super Money.
Fungible and Non-fungible tokens represent value
When cryptocurrency can represent the value stored in something else. And it is this ability to represent the value of something else that allows to act like a super hero and solve problems which regular money can’t because it can be Super Money. For example the problem of Cross-chain trading is solved by fungible cryptocurrency tokens which represent the value of something else on a blockchain.
Going places the original can’t go
The way cryptocurrency blockchains work is that each blockchain has a specific token, which is the only token which can be used on that blockchain. And this restriction includes includes all applications running on that blockchain. So for example we would like to trade Bitcoin on the Ethereum blockchain but this is not possible currently with the original Bitcoin token. That trade would be called a Cross-chain or cross blockchain trade
Non-fungible tokens
But the Ethereum blockchain has fungible tokens (Ether) and other tokens called ERC tokens. The Bitcoin token can’t be traded on the Ethereum blockchain, but an ERC Token, which represents the value of a Bitcoin token can be traded there. Money can’t due this, but a cryptocurrency can, it’s like a Super hero, it is Super Money.
Wrapped Bitcoin
(WBTC) is an ERC token, so it’s a token, which represents the value of one Bitcoin token on the Ethereum blockchain. So by using this representation of Bitcoin, Bitcoin can be traded on the Ethereum blockchain. So by using these ERC tokens we solved this problem. Money can’t do this but a currency super hero can, a cryptocurrency can and it is Super Money.
Problem number two: Locked equity
Real estate is the largest asset class in the world, but it’s value or equity. Now you can change that equity to currency by selling the house or obtaining a new loan, but sometimes neither of those options is possible and so the equity is said to be locked. Now if we think of cryptocurrency only as money, it doesn’t solve our problem of locked equity. But if we remember cryptocurrency can be non-fungible and represent the value of something else. Now let’s see how this Super Power helps us unlock the locked equity problem.
Nonfungible Super Power Unlocks Equity
We have a house worth 1000 dollars. We have a loan on the house for 600 dollars. We have equity, in this case 1000 dollars minus 600 dollars equals 400 dollars in equity. We want to change the equity to dollars without selling the house or getting another loan from the bank. We can use cryptocurrency tokens, specifically non-fungible tokens to represent the value of the house and turn the house equity into cash.
Oracle, Tokenizer and Non-fungible Tokens turn equity into cash
We go to a business called an Oracle, whose job is to keep track of value. The Oracle confirms market value of $1000.00. Then we go to another business called a Tokenizer, who reviews the valure set by the Oracle and the loan of $600.00, agrees with $400 equity and creates Non-fungible ERC Tokens, 400 ERC tokens, worth one dollar each. We then sell those ERC tokens for cash. This is how our equity in the house is converted to currency.
Superhero of Money: Cryptocurrency
We can’t do this with regular money, but we can do it with cryptocurrency, because of it’s special powers. Cryptocurrency is Super Money.
I hope you had fun with this article, and I hope you learned some important things too.
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