When it comes to cryptocurrencies, and given the sheer volume of information poured into the media with each tweet from Elon Musk on the subject, it is quite likely that when you ask the woman or man in the street, you discover that they have only one word on their lips: Bitcoin! Yet, my interview with Michel Volle on the occasion of the release of The tectonics of currencies, a collective book published by the Institut de l’Iconomie(*), led me to discover a very different reality. This book, only available in French, depicts a world, which will be ours in just a few years, where cryptocurrencies will top the list, but with one important nuance: the cryptocurrencies that will prevail, according to our economist friend and his writing pals, will not be Bitcoin or Ethereum and even less the laughable Dogecoin, but the national currencies digitised and transformed into cryptocurrencies. A provocative theory, remarkably substantiated, which I invite you to discover through this interview, also available from our podcast channel. As for the outcome, time will tell, but things are moving fast, Michel explains, so we should find out soon enough.
Important notice: on May 13, 2021, Elon Musk’s about-face regarding Tesla’s acceptance of Bitcoins. While this about-face is justified on environmental grounds, it is quite possible that his motives run deeper. Would this prove the Iconomy Institute right? Until we find out, if you want to invest in Bitcoins, and you’re not afraid of the rollercoaster ride of a pure competition economy, it might well be worthwhile to listen to the statements made by the quirky entrepreneur. For instance as of May 13, the value of the flagship crypto had already dropped by 9%.
At the moment, the dominance of the dollar is obvious and excessive,” says Michel.
This allows the Americans to cover their balance of trade deficit by printing paper, as the demand for dollars by citizens all around the world is overwhelming.
According to Michel, our friends from across the pond are “abusing their legal system to bend all those who use the dollar – the whole world – to their geopolitical whims”.
At the moment, no one can trade with Iran, for example, because at some point you will have to use the dollar, which will expose you to very punitive fines.
The dollar is thus, for Michel and his fellow writers, compared to Pangaea in the Carboniferous era, where on the planet there was a gigantic ocean, then a gigantic continent. According to the theory of plate tectonics, as evolution took place, the plates broke apart and this resulted in the continents we know today.
The war is heating up between public currencies. While the commercial and judicial dominance of the dollar has made the world a monetary continent as compact as Pangaea was, that continent could be broken, as if by plate tectonics, into three pieces each dominated by a major currency: the crypto dollar, the crypto euro and the crypto yuan
The tectonics of currencies
What is likely to happen is that the monolithic, monopolistic dominance of the dollar over the international monetary system will be broken up, like Pangea, by the crypto yuan, the crypto euro, which will carve out new continents. This is why the authors speak of a tectonics of currencies.
Obviously, this development will not please the United States at all. They will do everything they can to slow it down and prevent it. But it seems inevitable, according to the Iconomy Institute.
The day the Chinese have a crypto yuan and offer the world the services that this crypto yuan allows, other countries will follow suit, as will companies. Michel is thinking in particular of Africa, he can well imagine the crypto yuan spreading throughout the eastern part of Africa and taking up a considerable area.
Michel considers that bitcoin is not really in the running because it does not have the qualities offered by a commodity.
Bitcoin is not really in the running because it lacks the qualities offered by a commodity
“It’s a bit like gold bullion, which you keep in a drawer, but you don’t go shopping with it,” he says. The day you want to get your money back from the gold bars, you go to a merchant or a bank that will buy the bars. Bitcoin works on the same principle, it is not a currency designed to make transactions every day quickly the economist explains to us.
The three main qualities of a currency are: medium of exchange that facilitates transactions (liquidity, the fact that it is easy to spend, easy to receive, crosses borders); then, Legal tender (one accepts this currency in payment because one trusts it); then the function of a store of value. In Michel’s view, Bitcoin does not have any these three qualities.
In terms of electronic money, there is the Facebook project (formerly Libra, now called Diem), which makes it possible to offer very convenient identification, authentication, notarisation of exchanges, and also encryption and security services.
Electronic money makes it possible to automate the back office, to install smart contracts that allow partners to trigger automatic payments in execution of the contract, and also to develop the token economy.
The ‘token economy’ opens up a new continent for individual and corporate action
The tectonics of currencies
The buyout of the Huffington Post, which was sold in 2012 for $315 million to AOL, had then triggered protests from the contributors. They felt they had been wronged by the sale, from which they received nothing, despite their content contribution.
This has started a reflection on how to give rights to people who contribute to a company on a voluntary basis. These rights can be in the form of tokens. The number of these tokens can be proportional, for example, to the number of thumbs up an item has had, but it has no face value. It has no value in principle, but it is a right that may have a value on the day the company in question sells, and the people who have contributed may receive, as a reward for their tokens, the remuneration for their efforts.
There are also airline miles, loyalty rewards for shoppers in department stores. All these are tokens. And then, as soon as you have tokens from various sources, you can exchange them for other tokens. Exchanges have been created (“token exhanges“) where you can acquire tokens of another kind by exchanging with those you have.
A token economy has thus been created, with non-fungible tokens even being presented as a new way of valuing dematerialised artworks.
A version of Wikipedia also follows this logic, offering tokens when you contribute. It is an economy of voluntary contribution, but at the same time it generates fees.
This is a new economy, the development of which has been impossible up to now because the transactions involve tiny sums, the unit value is low and a traditional banking system would never have been able to make this kind of activity profitable.
It is a new economic continent. The token economy is just one example of the novelties that electronic money can bring.
The virtualization of currency exchanges is already well underway
This computerisation of currencies is a considerable challenge, beyond the geopolitical game and the importance of currencies in relation to each other. It is a virtualisation of monetary exchanges that has already begun in earnest.
Of course, hackers can be counted on to come and harass these systems to look for loopholes. Michel anticipates several conflicts. There’s going to be a conflict between sovereign cryptocurrencies, like the crypto dollar (which is not yet in the pipeline, but is maturing), the crypto yuan (which is well advanced), and the crypto euro (for which decisions are being made), and private cryptocurrencies such as those of Facebook Diem, etc.
They will compete on a very simple argument, which is their convenience. The convenience of a currency is its essential argument. Is this currency easy to use, does it allow for intelligent contracts, a wide variety of applications, great flexibility?
Sovereign cryptocurrencies, being the work of heavyweight institutions, may be a little less nimble than private cryptocurrencies
“There will be a security problem. Computer scientists will have to show their virtuosity, knowing that the flaws still exist. It’s quite an adventurous future,” warns Michel.
The prognosis varies according to whoever has made it. One of the contributors to the book, Pascal Ordonneau, who has a career as a banker behind him, argues that the banks do not have much of a future, that in ten, fifteen or twenty years’ time, we do not really know what will be left of these companies.
On the other hand, for the banks, the current fear of bank run (the fact that people withdraw their money from the banks to put the notes under the mattress) will totally disappear once the currencies are computerised. “Banks will manage accounts in cryptocurrencies and they will continue their business as it is,” Michel assumes.
Between the two hypotheses, the disappearance of the banks because we won’t need them so much anymore, or on the contrary, the electronic money that will allow them to avoid the bank run, what is the truth? A mystery. In any case, the question has been asked, Michel points out.
For sure, banks have taken their time to get interested in the blockchain, beating about the bush but never really trying to implement proper projects. It may well end up playing a trick on them, unless they were right to procrastinate. It’s impossible to decide right now, time will tell.
Now, scepticism is no longer in season, according to the institute. They are all working on it, even if it is difficult for them to shake up their business model to this extent.
Everything is moving very fast at the moment,” says Michel. Facebook’s announcement shook the world a lot. Facebook set up a company in Switzerland with important partners, some of whom have since left, but there are still a good number of them.
The United States was initially quite hostile. When Mark Zukerberg testified before Congress, he didn’t have it easy. But Facebook, it’s nearly 2 billion users, is already like a very big country on a global scale.
Michel thinks that, more than bitcoin, which was obviously seen as an interesting experiment, it was Facebook’s initiative that kicked the bucket.
“Everyone started to gamble,” he explains. The ECB, the Banque de France, the BNP. The Chinese, for their part, are making good progress with their crypto yuan. They are giving it an important role regarding their Silk Road project which will cross all of Eurasia, all the way to Italy. And the Silk Road is not only trains, it is also about ships.
Chinese logistics will be the vehicle for contaminating the world with crypto yuan
And since they are very active, very fast and very competent, a lack of get-up-and-go on the part of other countries is no longer possible. “It’s going to be a very busy year,” warns Michel.
And that’s why the Institute of Economics has brought out this book The Tectonics of Currencies quickly, “because now is the time to explain things,” Michel concludes.
(*) The Institute of Iconomics, created in 2012, brings together experts from various specialties, sociologists, philosophers, computer scientists, economists — including Michel Volle — who study the phenomenon of computerisation. Their thesis is that computerisation is completely transforming the economy and society in depth, and that it presents new opportunities and new dangers, and that we must know how to take advantage of the opportunities and master the dangers.”
The Institute has constructed an economic model called the Iconomy. The Iconomy is a computerised society and economy that would hypothetically have reached full efficiency. They consider that today we are far from having reached this state. This model allowed them to highlight the necessary conditions for efficiency in a computerised economy.
The authors of the Institut de l’Iconomie behind the collective book the Tectonics of Currencies (in French) and published by Kindle Edition are: Michel Volle, Jean-Paul Betbeze, Laurent Bloch, Nathalie Janson, Vincent Lorphelin and Pascal Ordonneau.
Could Generative AI be a game-changer for photography and photographers? Photography has been around for…
‘Breaking down silos’ is certainly digital transformation’s most common phrase and myth. If you haven’t…
Let's look at a major marketing misconception today: the more market data you have, the…