Bitcoin's three financial disruptions; the pull of decentralization


No financial invention has triggered as much potential disruption as Bitcoin. The implications of this technology affect every corner of the industry. In fact, the transformations that are resulting from Bitcoin are so broad that they are sometimes hard to keep track of in an organized way. This post offers a simple approach to thinking about these changes and a prediction that, in the long run, decentralization will be the most fundamental change.   

There are three major disruptions of finance resulting from Bitcoin:  decentralization, tokenization and blockchain.   

Decentralization:  Value is transferred without intermediaries. This prevents the formation of transactional monopolies.      

Tokenization: Value is represented by digital tokens. This increases liquidity for all forms of ownership.  

Blockchain: Value is tracked on an immutable ledger. This increases trust in the transactional record.  

  Centralization versus Decentralization

Note that the only one of these disruptions that is a direct result of Bitcoin is decentralization.  Tokens and blockchain existed before Bitcoin. As a practical matter, however, Bitcoin launched tokenization and blockchain as disruptions because decentralization brought a new level of interest to these areas.

Of these three major disruptions, blockchain gets the most positive attention from the financial press, tokenization has the most revenue impact for investment banks, and decentralization has the most potential for positive impact for society. 

The adoption of blockchain technology in finance will greatly improve the transparency of who owns what when. This has tremendous benefits in the form of cost savings, risk reduction and the promotion of property rights.  

Tokenization will be a bonanza for investment banks who get in early.  Traditionally illiquid assets will be traded in token form and a new asset class, the utility token, will grow as a funding option to rival debt and equity.

Note that decentralization is not required for the blockchain and tokenization disruptions.  This may explain why they are achieving mainstream adoption first. These innovations can occur in a centralized manner with big benefits. Private blockchains can deliver cost savings and risk reduction and exchange traded utility tokens can be powerful marketing tools and result in lower funding costs. 

However, decentralization is the full promise of Bitcoin. Decentralization results in the continual improvement of the financial system through the power of consumer choice.  

The Pull of Decentralization

The ultimate power of Bitcoin's innovation may be that it is self preserving - it creates an environment that favors decentralization. 

As mentioned above, Bitcoin unleashed blockchain and tokenization onto the markets. Blockchain seems to have already gained mainstream adoption. Tokenization should also gain mainstream adoption as soon as the regulatory environment catches up with the innovation.   

Decentralization is not catching on as quickly among mainstream financial markets, likely because the institutions in these markets feel threatened by the competition. (Institutions that are relying on monopoly protection should feel threatened, whereas high quality institutions should see this as an opportunity to take market share).   

It is usually unwise to say something is inevitable, but the power of democracy and the markets is so strong that it may be reasonable to say that decentralization is inevitable once blockchain and tokenization become mainstream.  This is because over time these innovations will prove that society does not need centralized monopolies for a healthy financial system.  

In order for centralized financial institutions to resist market demand for decentralization, they will need to convince voters that central monopolies are necessary. This will become harder and harder to do as tokenization increases liquidity in global markets and blockchain reduces the potential for secrecy. 

As money and information flow more easily, people will demand a competitive decentralized financial system based on credit worthiness and value rather than a centralized system based on monopoly protection. 

This will not just be a populous movement. As markets improve there will be centralized institutions in certain countries that come to the conclusion that they could do better competing in a decentralized global financial marketplace than maintaining their smaller centralized position.  

Additionally, over time strong central banks will realize that they can manage their economies as well or better in a decentralized system, because in such as system, credit worthiness is king. Strong central banks will be better able to manage the supply of money in their regions. Weaker countries will need to become more fiscally responsible.  .  

This pull of decentralization is strong and will only get stronger. Central bankers today seem to not appreciate this. They talk about a world with blockchain, but without Bitcoin, as if this is possible or even likely. This dismissive approach to decentralization is not healthy for the growth of a stronger global economy. 

In sum, Bitcoin has triggered three major financial disruptions - decentralization, tokenization and blockchain. Tokenization and blockchain will dramatically transform finance, but their largest contribution to the world will be to promote the adoption of decentralization.    

Author: Shane Hadden

About the Global Currency Group:  The Global Currency Group promotes the adoption of a decentralized global currency through investments, advisory services, new currency creation and advocacy.  

The Currency Report.  This is a regular newsletter of news and insights related to Global Currencies and the tokenization of finance.  Subscribe. 

The Global Currency Fund.  This is an actively managed private fund focused exclusively on the Global Currency segment of the cryptocurrency market.  Accredited Investors only.  Inquire. 

For more information contact Shane Hadden at    



Investment banking in a tokenized world


Investment bankers make money by creating liquidity.  Bitcoin and Ethereum have triggered a tidal wave of liquidity through the process of tokenization, in which assets of all types, from currency to equity to art, are recorded on a public blockchain and traded on new exchanges. 

Is this good or bad for investment bankers?  It is very good. Below are a few thoughts on the many ways in which investment banks can benefit from tokenization. 

Note that this is not a discussion of blockchain's benefits to the back office.  This is about new sources of revenue.   

New Asset Classes: Tokens (or cryptocurrencies) as a whole are not a new asset class. Tokens are simply a new form for representing ownership. However, there are at least two completely new asset classes that have been created as a result of the process of tokenization - decentralized currencies (e.g., bitcoin) and utility tokens (e.g., ether).  Both asset classes will create new opportunities in trading and asset management as well as new advisory and placement activity.  Utility tokens will become a third option to traditional debt and equity for fundraising for any company raising money.  This will not be limited to start-ups seeking crowdfunding. Large companies will issue utility tokens to benefit from network effects and to diversify funding types and sources.  Banks will offer "token capital markets" services, possibly as an extension of an equity capital markets desk.  

New Risks: New asset classes means new risks to be managed for clients and traded on a proprietary basis. The banks that first develop appropriate expertise and a book of trading partners will earn high returns as these risks become more liquid over time. New types of cash and derivative instruments will likely evolve to facilitate risk distribution in these new asset classes.    

New Liquidity: Liquidity is the ultimate objective of Bitcoin's focus on decentralized transfer of value and Ethereum's extension of this concept to other apps. It is all about transparency of information and exchange with minimal or no intermediation.  All types of assets are being tokenized into "security tokens" or "asset tokens."  This is being done both in whole and in various forms of divided ownership. As mentioned above, this opens new opportunities for trading for investment banks. This also increases the ability of prime services to lend to hedge funds.    

New Clients:  Investment banks now have a new type of client - the decentralized organization. Bankers who understand this new form will have an advantage in earning various types of advisory and placement engagements.    

New Funding:  Investment banks that are also depository institutions can lower their funding cost by issuing deposits denominated in cryptocurrencies, such as bitcoin.  Even if deposits are not available, investment banks should be able to earn a very attractive spread by borrowing and lending in these currencies. Bitcoin denominated debt instruments will be very attractive to the market, even at low rates. If the bank is the issuer, this bitcoin can then be lent to short sellers. So long as bitcoin remains highly volatile the bank can run a matched book or hedge in the futures market if practical.  Over time, traditional lending markets will develop in bitcoin, creating additional opportunities for spread revenue.  This will also create debt capital market opportunities to place bitcoin denominated debt for clients.   

New Deals: Investment banks that develop expertise in decentralized currencies will be in a very good position to advise the various currency projects on how to grow within the global currency markets. Even though these projects are decentralized they still can have large budgets to hire advisory firms.  In time, advisory engagements could include trillion dollar M&A assignments in the global currency markets.  M&A among decentralized utility token projects may also become very active as these markets consolidate after a period of over issuance.    

New Arbitrage:  The coming years of mass tokenization will present enormous opportunities for arbitrage by investment banks and their hedge fund clients. Arbitrage opportunities will exist between assets trading in both traditional and token form as well as between token markets.      

New Size: All of the above opportunities will be available on a very large scale. At the limit, all instruments of ownership could be tokenized. Many new trillion dollar markets could be created.  Utility tokens could displace a large portion of the traditional equity markets.  Tokenization of traditional illiquid assets could allow for liquid trading of such things as residential real estate. Global currencies could grow to replace traditional fiat currencies.  This is all in addition to the tokenization of traditional liquid markets such as the equity and debt markets.       

The opportunities presented to investment banks by tokenization are enormous. The question is, which banks will jump in and take advantage of them and which will stay on the sidelines. The lion's share of these new markets will go to the first movers.

Investment banks who want to participate in these markets should be trading cryptocurrencies as soon as possible. They should be developing expertise in the risk as well as sales relationships throughout the marketplace.  They should be thinking about new token-related revenue sources for each of their lines of business and how they might be able to create new lines of business to meet the needs of the new markets. 

The keys to success will be creativity and openness to decentralization.    

Author:  Shane Hadden

About the Global Currency Group:  The Global Currency Group promotes the adoption of a decentralized global currency through investments, advisory services, new currency creation and advocacy.  

The Currency Report.  This is a regular newsletter of news and insights related to Global Currencies and the tokenization of finance.  Subscribe. 

The Global Currency Fund.  This is an actively managed private fund focused exclusively on the Global Currency segment of the cryptocurrency market.  Accredited Investors only.  Inquire. 

For more information contact Shane Hadden at    

Bitcoin banking - a better monetary system

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The promise of Bitcoin is not to get rid of banks, it is to offer people an alternative so that banks and the monetary system can be improved.

The current monetary system has two major flaws - people must use banks for payments and governments can print money. Both of these flaws erode trust in the system. A Bitcoin-based banking system would solve these problems with competitive decentralization.  

It is not difficult to imagine what a Bitcoin-based banking system would look like. All that is required is for banks to issue Bitcoin-denominated deposits. Banks would issue deposit accounts just as they do with fiat currencies and they would settle among themselves on the Bitcoin blockchain.  

(Note:  Bitcoin is used here to stand for a decentralized digital currency. It could be Bitcoin. It could be DASH, Litecoin, Stellar Lumens or another Global Currency competitor. It could be a coin that does not yet exist. It could be multiple coins.)

Below are a few thoughts on such a system:

User friendly payments:  Payments in Bitcoin-denominated accounts would be made over the same bank-based networks that currently carry dollars, such as the Visa network. Transaction speeds and consumer friendly features, such as charge backs, would be the same as they are with dollar-based payments. When people refer to Bitcoin as an inferior currency because of slow transaction speeds or high costs, they are confusing Bitcoin as a currency and Bitcoin as a payment method.  Bitcoin the currency can be transferred in exactly the same way as the dollar once it issued in the form of a bank deposit.  

Lower fees and better service:  People would have the choice to pay with Bitcoin directly on the Bitcoin network or with a Bitcoin-denominated account on a bank-based network. This competition would reduce fees and increase the quality of all services, including that of the banks, the bank-based payment networks and Bitcoin itself.    

Prudential money supply:  Supply of Bitcoin would be managed by creditworthy governments through traditional banking levers, such as the required level of Bitcoin reserves backing Bitcoin deposit accounts. Non-creditworthy governments would not have this option and would not be able to print money, which would force fiscal restraint. It is likely that the amount of base money as a percentage of M2 would be higher for Bitcoin than with the fiat currencies because more people would choose to hold their money outside of banks.  

Global growth and integration:  Since banks throughout the world would offer accounts in Bitcoin, Bitcoin would become a truly global currency.  Foreign exchange risks and transaction costs would be eliminated.  

Privacy regulation: Absent government regulation, transactions made outside of banks and directly on the Bitcoin blockchain would be private, similar to transactions made in cash. As mentioned above, the proportion of non-bank transactions would likely be much higher in a Bitcoin-banking world because of the relative ease of using Bitcoin versus cash. The people in each country would need to decide to what degree they want to give up the privacy of their payments to protect against bad actors. It is likely that some form of compromise would be reached to balance these competing interests while allowing for non-bank payments.      

Opportunity:  The first banks and countries to adopt Bitcoin-based banking could take significant market share from banks and countries that are slower to move to Bitcoin.  

The invention of Bitcoin cannot be undone. This amazing technology has created a finite commodity that is weightless, infinitely divisible and can be transferred in a trustless manner.  If gold had these characteristics, we might have never ended up with the flawed banking system that we have today. Now that this precious commodity exists, banking will certainly change.  The questions are how, where and when.  

It is common today for bankers to focus on blockchain as the technology that will change their industry, while dismissing Bitcoin.  This is a major oversight. 

Blockchain technology will undoubtedly improve record keeping and most financial instruments will eventually be tokenized. However, it is the decentralized currency that blockchain enables that will most fundamentally transform the global monetary system for the better.  

The world now needs brave bankers to stick their necks out and embrace Bitcoin. We'd be happy to help.  

Author:  Shane Hadden

About the Global Currency Group:  The Global Currency Group promotes the adoption of a decentralized global currency through investments, advisory services, new currency creation and advocacy.  

The Currency Report.  This is a regular newsletter of news and insights related to Global Currencies and the tokenization of finance.  Subscribe. 

The Global Currency Fund.  This is an actively managed private fund focused exclusively on the Global Currency segment of the cryptocurrency market.  Accredited Investors only.  Inquire. 

For more information contact Shane Hadden at    


Introducing the Global Currency Fund

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The Global Currency Fund is the first hedge fund focused exclusively on the growth of decentralized global currencies. 

Global Currencies:  Of the over 1,500 cryptocurrencies listed on, only ten or so are actively seeking to become a currency accepted by merchants worldwide. We call this segment of the market "Global Currencies."  

Investment Thesis:  The value of Global Currencies is currently less than $200 billion. The potential market of Global Currencies as measured by the value of gold and fiat currencies is approximately $93 trillion. We believe this gap will close over the next ten years with potential returns for Global Currencies in excess of 10x. 

Strategy:  We only invest in currencies that are well positioned to grow as a Global Currency. We assess many factors in selecting and weighting these currencies, including: governance structure, focus on merchant adoption, payments infrastructure development, existence of treasury funding for development and marketing, currency and platform features and the general attractiveness of the currency for adoption on a global scale. 

We believe it is possible that the most successful Global Currency has not yet been created. For this reason we are focused on identifying promising new currency projects.    

We actively promote the adoption of Global Currencies and will be active in the governance of the currencies in which we invest.  These efforts will give us an advantage in spotting promising new currencies early.    

Management:  The fund is managed by Shane Hadden.  Shane is a Certified Bitcoin Professional and Chartered Financial Analyst. He has over 20 years of experience in global structured finance.  He teaches Financial Innovation at the University of Kentucky and manages the Currency Report.

Current Holdings:  Bitcoin, Litecoin, DASH, Monero, Lumens, Decred

Terms:  Accredited Investors only. Traditional hedge fund terms.  Favorable terms for early investors. 

Contact:  Shane Hadden,, (917) 940-5322. 


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Can Bitcoin break the fiat currency "monopoly"?

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In a recent research report on cryptocurrencies, JPMorgan frames the question as whether one of the new decentralized currencies, such as Bitcoin, will be able to break the government's "natural monopoly" on currency:  

"It will be extremely hard for cryptocurrencies to displace and compete with government-issued currencies, as dollars to euros and yuan are virtual natural monopolies in their regions and will not easily give up their seigniorage profits" (emphasis added)

This is exactly the question that everyone should be asking. If you think that Bitcoin could break this "natural monopoly", then you may want to buy Bitcoin. If you don't think this is possible, then don't buy Bitcoin. It's that simple.  

So what is the "monopoly" that JPMorgan is referring to?  The observation is that within any country the great majority of merchants use the currency that is promoted by the government.  The U.S. promotes dollars through the banking system. If you want to use a bank in the U.S., you are required to use dollars. If you are a merchant in the U.S., you accept dollars because that is what the customers use.  The monopoly exists because it is created by law ("fiat").    

What does this sound like?  Yellow cabs in New York City?  Imagine JPMorgan writing a report ten years ago for a taxi medallion finance company.  They may have said: "Medallion owners have a natural monopoly on cabs in New York.  It would be extremely difficult for a competitor to displace the yellow cab." Right?   

As Uber proved, a monopoly propped up by laws is an easy monopoly to break.  Throughout the world, when Uber comes to town, the people decide whether they like the new option better, and if they do, the law changes. That's how it works in democratic countries and that's how it could play out with Bitcoin.  

The analogy to Uber is not perfect.  Uber had the advantage of being very easy to use from the beginning, whereas the Level 2 payments infrastructure for Bitcoin still needs to be built and the currency may not be ready for large scale adoption until its price settles at a mature level. But at some point, the value comparison of Bitcoin to fiat around the world may be as stark as Uber versus taxis.  At this point the "natural monopolies" could fall quickly.    

JPMorgan and other banks are now in the position of the medallion holders - they benefit from the "natural monopoly."  The banks are much more powerful than cab owners, so it could be a bigger fight, but it will eventually come down to whether the majority of people want to use Bitcoin.  

Do you remember when you first took an Uber ride? Maybe in San Francisco. Were you jealous?  Were you angry at your city for not allowing Uber? 

Imagine in the near future, somewhere in the world, a country promotes Bitcoin. Americans will travel to that country and use Bitcoin with a payment card like they use dollars in the U.S.  Maybe the first time this happens they will think it is a local curiosity, but then they will go to another country somewhere else in the world and people will be using Bitcoin there also.  Eventually, Americans may demand the option to bank in Bitcoin in the U.S., just like they demanded Uber in New York.  If that happens, it will only be a matter of time before the "natural monopoly" of fiat currencies comes to an end.   

It would be wise for American banks to embrace Bitcoin, rather than push against the tide.  One way to do this would be for banks to lobby regulators to allow them to issue Bitcoin denominated deposits.  This would give consumers the ability to choose among currencies from within the banking system, which is not a bad outcome for the banks.  If it is not done this way, consumers may choose to ditch banks also. Don't forget, banks themselves are yellow cabs.  

Author:  Shane Hadden

About The Currency Report:  The Currency Report promotes the adoption of a decentralized global currency. We provide advisory services to new currency designers and investors, including our fund, the Global Currency Fund. Read the Guide to New Currency Valuation and Designsign up for our blogs or, for accredited investors, inquire about our fund.  For more information contact Shane Hadden at    





Gold should embrace bitcoin.

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Last week the World Gold Council released a report on cryptocurrencies that described bitcoin as a competitor to gold. This is a very bad strategy if the Council wants to promote gold usage. Thanks to bitcoin, gold now has the opportunity to regain its status as currency, rather than simply a store of value. Gold may not be as good of a currency as bitcoin, but it certainly has a very bright future if non-governmental currencies end up replacing fiat.   

Gold was the original decentralized currency.  Just like bitcoin, much of its value comes from the fact that governments can't make more of it at will. Gold has never been able to become a global currency in physical form because it is too heavy and can't be divided easily. For gold to be a currency, it must be issued in the form of a financial instrument backed by gold, for example, a gold-backed depository receipt or national currency. Because of this, prior to the invention of bitcoin, gold's fate as a currency was in the hands of governments. This is no longer the case. The creation of new currencies is now in the hands of the markets, so if the markets want gold-backed currency, they will likely get it. 

Gold receipts have already been put on a blockchain and are being traded on exchanges now - See Digix for example. If the World Gold Council wants to promote gold usage, it should promote one or more of these new gold-backed coins as currency and join with bitcoin and others in developing a global regulatory and payments infrastructure that supports decentralized payments.

Gold and bitcoin should cooperate now to develop the market and save the competition for later. The world is engaged in a two stage process to determine what currency will look like in the future.  

Stage One:  Markets decide whether to use non-fiat currencies. This is the current phase. It is at this stage that we will find out if the $86 trillion market for fiat currencies is actually open to new entrants like bitcoin and gold.  If the markets want non-fiat currencies, we move to Stage Two.  

Stage Two:  The world transitions to non-fiat currencies and individual participants in the market decide which currencies they want to use.   

In Stage One all non-fiat currencies, including gold and bitcoin, should be cooperating to develop the market for new currencies.  Successfully moving to Stage Two will require a great deal of marketing to merchants, consumers and governments. This requires a lot of money and a coordinated effort. It would be wise for the gold community to join this effort.

So, if gold does wake up and promotes itself as currency, will the world go back to a gold-standard?  Probably not. Bitcoin and other digital representations of underlying value are likely to be more appealing to people than gold because ownership can be more easily observed. However, there are a lot of people in the world who want the option of physically touching their money, so gold has a good shot at grabbing a large portion of the $86 trillion global currency market if it plays its cards right. As with everything related to new currencies, it will be fun to watch how this plays out.    

About The Currency Report:  The Currency Report promotes the adoption of a decentralized global currency. We provide advisory services to new currency designers and investors, including our fund, the Global Currency Fund. Read the Guide to New Currency Valuation and Designsign up for our blogs or, for accredited investors, inquire about our fund.  For more information contact Shane Hadden at    


Three new ways for currencies to grow quickly.

 Photo by  Patrick Fore  on  Unsplash

Photo by Patrick Fore on Unsplash

When the cryptocurrency markets are as volatile as they are now, it helps to remember that these coins are just kids. Until they grow up, they are going to be very unpredictable. Their prices won't become stable until they reach their full market potential, which, in the case of the global currencies, is measured in the trillions of dollars. 

So it's a good time to think creatively about how they might grow. Bank partnerships and marketing are the obvious suggestions. Below are three strategies that are more on the fringe, but each is either happening now or is likely to happen over the next couple of years.   

Portable Currencies: One way to grow is to expand your customer base. But not everyone in the world wants the same thing in a currency. So how does a currency designer choose among the many characteristics that matter in the market - anonymity, speed, transaction costs, governance, decentralization, supply, utility, etc?  What if a single currency could be developed that allows the user to select among various form factors, while maintaining the value of the currency.  This is the idea of Portability. 

New currencies are being designed that allow for free transfer among blockchains or centralized record keeping systems with unlimited local features.  For example, if the currency is XYZ, a user could hold her XYZ on a Monero-like blockchain if she wanted a high level of anonymity, or a DASH-like blockchain if she wanted to exercise a vote to create new features, or a centralized record if she wanted free transfers, or a localized merchant sponsored blockchain for special deals, or a government sponsored blockchain for favorable loan terms. This would all be done with guaranteed 1:1 transfer between blockchains and in each case XYZ would be the currency that is used with merchants.

Metronome, which is launching in late February or early March, is introducing one form of portability.  Provide, a company that is affiliated with the Currency Report, is also in the early stages of developing a comprehensive form of a portable currency.  

M&A:  Consolidation is another way to gain economies of scale. This could be especially helpful for the network effects of currencies. Can decentralized currencies merge or can one decentralized currency acquire another? Sure. The currencies are decentralized, but they all have governance structures that could vote for an M&A transaction. Some governance structures are more formal and well-functioning, such as that of the DASH master node system in which large holders actually vote on proposals. Others are a matter of practical reality and are less predictable, such as Bitcoin's reliance on miner adoption. Nevertheless, all coins are potential buyers and sellers in M&A transactions.  

In fact, according to recent tweets by their principals, Litecoin and Monero are thinking about merging. So should the Bitcoin community hire Goldman as an M&A advisor? Could DASH one day go on a buying spree with its treasury funds?  What about one of these new coins that are raising billions of dollars?   

It may be a little early for a roll up among the currencies. The competitive landscape is probably still too fluid for the constituents in each of the coins to come to agreement as to a fair price. But in a couple of years, when the competitive landscape becomes more clear, consolidation could be the theme. Investment banks should be preparing for this.  

Note that M&A transactions may not always result in one currency disappearing.  They could be done as consolidations into a federation of portable coins with a new common currency.      

Government Sponsorship:  

Governments are the elephants in the global currency room. Government sponsorship would mean instant adoption by a large group of people. There is talk of governments putting their national currency on a blockchain, but that's not such a big deal. They would still control the supply. The big deal will be when a government sponsors a decentralized currency. Imagine Canada creates a currency called Maple (MPL). MPL is completely decentralized - Canada has no special control.  They make the currency legal tender in Canada and support their banks in the creation of MPL denominated demand deposits with Visa and MasterCard integration. MPL would have a big competitive advantage in gaining traction as a global currency. 

Why would Canada do this?  Because they could make a lot of money. If they kept 10% of the issuance for themselves (seigniorage), and waited to sell their stake over time as the currency grew into a truly global currency used around the world, Canada would make $100 billion for each $1 trillion of value created.  Considering the global M2 money supply is about $86 trillion, this may be worth considering for any country.  

Maybe Canada won't do this, but there are a lot of smaller countries that might.  Or a number of countries might partner, for example, Canada may partner with South Africa, South Korea, Brazil, India, Mexico and a non-Euro European country. Not a bad group to kick off global network effects.       

First movers have a large advantage with government sponsorship. This creates a big risk for the other countries if they stall or try to prevent this from happening. If the U.S., China and the Euro Area wait, they could be displaced by a currency issued by the other countries. Maybe all of the nations of the world will do the improbable and agree to jointly create a decentralized global currency? Maybe the market will force political integration?  This seems unlikely. We'll see.

The roadmap for the decentralized global currencies is complex. It involves technology, marketing, competitive strategy, financial engineering and politics. The variations of potential outcomes are endless. One thing is for sure - price volatility will not slow down until the market is mature.    


About The Currency Report:  The Currency Report promotes the adoption of a decentralized global currency. We provide advisory services to new currency designers and investors, including our fund, the Global Currency Fund. Read the Guide to New Currency Valuation and Designsign up for our blogs or, for accredited investors, inquire about our fund.  For more information contact Shane Hadden at  








The market will create a decentralized global currency.

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Can you name a public good that can only be created by the market?  Answer: A decentralized global currency. National governments will never create such a currency, but the markets can and will.   

A decentralized global currency would help tie the world together in peace and prosperity. Just like a common language would improve global communication, a common currency would improve global commerce and economic integration. 

So why don't we have a decentralized global currency?  Because until the invention of Bitcoin, the creation of currency was the exclusive domain of governments. Before Bitcoin banks were necessary for the transfer of digital currencies, so if you wanted to create a currency it needed to be sanctioned by the banking system, which is sponsored by governments.  

Governmental control of a currency is not necessarily bad. All of the new currencies have some form of governance structure. If the world had one government with a well functioning democracy, that currency would be just as decentralized as bitcoin or any of the other new currencies. The problem is that we have about 200 national governments that don't necessarily have the interests of the globe in mind. They make decisions based on near-term local interests, which prevents the creation of a global public good. This is why a decentralized global currency has not yet been created.    

The good news is that unlike other public goods, the market can create a currency. Governments don't need to take a leading role. This is because merchants can create currencies. It is the act of accepting a currency as a unit of exchange that gives it value.  

But why would merchants around the world have an economic incentive to accept a new currency?  Network effects. Merchants today accept the currency issued by their country or economic region primarily because that is what their customer's hold. Merchants will only switch to a global currency if they think that this will increase profits by broadening their customer base or reducing transaction costs.    

So how does a decentralized currency gain enough global users to convince global merchants to switch? It shouldn't be that hard considering that there is $10 trillion or more to work with (the estimated value of a global currency). Currencies should focus on three things:  

Global distribution: Put the currency in people's hands globally. The currency issuer Stellar is doing this with their gifts to people and non-profits. What if a new currency simply gave one unit to every person on the planet? Dilution is not an issue at the beginning of the new currency creation process because of the tremendous value creation dynamics.  

Bank integration: Partner with banks. People will not adopt a global currency unless it is as easy to use as a Visa debit card. Bitcoin has stripped banks of their monopoly on payments. If banks are not necessary, but are only used opportunistically, they do not create centralization. It is time to fold banks back into the decentralized currency system in order to benefit from their deposit creation services and user friendly payments networks.

Advertising, advertising, advertising:  Spend as much as possible on global advertising. The new currencies have billions of dollars to spend on development. EOS has already raised over $700 million. Telegram plans to raise $2 billion. DASH has hired Ogilvy and Mather. Now is the time to educate the world that there is a better option.    

So it is certainly possible with today's currency valuations for the markets to create a decentralized global currency. Of course national governments can try to prevent this from happening. But they will be going against the combined power of social good and the market. Market power and social good. That is a combination that we would bet on any day.  

About The Currency Report:  The Currency Report promotes the adoption of a decentralized global currency. We provide advisory services to new currency designers and investors, including our fund, the Global Currency Fund. Read the Guide to New Currency Valuation and Designsign up for our blogs or, for accredited investors, inquire about our fund.  For more information contact Shane Hadden at  

BTC Miami. It is still very early.

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The largest crypto conference to date was held in Miami last week. In Bitcoin time, this conference has a deep and legendary history, going back five or six years.  Among other notable events, this was where Vitalik Buterin first announced Ethereum in 2014.  (After you read this post I recommend watching Vitalik's presentation - especially his explanation of why many currencies are good for society.) 

This year's audience was much larger than in previous years. According to Moe Levin, the conference organizer, the original plan was to have the event in the exhibit hall (maybe seating 500 or so). He had to move up to the Convention Center's large theater space at the last minute to accommodate the sold out capacity of 4,000. 

2017 was the big bang for cryptocurrencies  - rapidly expanding chaos. The chaos is still present, but there is also a great deal of creativity and some order forming here and there. This was my first BTC Miami, so I can't compare it first hand, but I suspect that this one felt more like a transition than the previous events. 

There was the obligatory discussion of riches made and private keys lost, but, for the most part, everything was forward looking. It feels like every area of the tokenization space is still in its infancy and flying under the radar. As evidence of this (possibly superficially), I saw very few Wall Street or even fintech people - the usual ABS and Money 2020 crowds were not there.  This is shocking, considering the potential of tokenization to upend every corner of finance.  

Below are some selected observations from the conference by crypto-category:

Currencies:  Deference was paid to Bitcoin without exception.  There was no contentious talk of SegWit, block sizes or BCH.  Ryan Taylor, CEO of DASH, outlined an impressive execution plan to invest in the DASH ecosystem.  The increase in the price of DASH now allows them to spend most of their Treasury dollars on marketing.  DASH is working on merchant and payments partnerships and have hired Ogilvy and Mather to create an ad campaign. That is very good news for the prospects of a global currency as consumer and merchant adoption is critical. Decred had a similar story to tell as far as starting to focus Treasury dollars on marketing. If Decred adds marketing to their state-of-the-art development and democratic voting regime, they will be highly competitive in the global currency race.  Ricardo Spagni from Monero promoted that team's highly decentralized approach. No one presented from Zcash, Litecoin or BCH.  I was hoping for more on Metronome, but they didn't have a booth.  

Utility Tokens:  ICO pitches made up about 35% of the conference.  Start-ups were tokenizing rights to every service from tax preparation to luxury car rental. Some made sense, others felt forced. Although there were many exciting new projects, utility tokens as a class were the subject of much derision and scorn. One bitcoin pioneer and founder of a well known early-ICO actually said he now hates almost all utility tokens. I think this is unwarranted. There are certainly a lot of scammy utility tokens and ICOs, but the utility token itself is a valuable new tool for businesses to raise money in a way that offers advantages over traditional equity. I hope bad actors and regulatory uncertainty don't scuttle what could be a major new outlet for marketing and start-up funding innovation.  

Security Tokens:  The biggest theme of the conference may have been the rise of "security tokens."  These are tokens that represent ownership of traditional assets, such as common stock.  Polymath seems to be making the biggest splash as a platform for creating security tokens, having already pulled together a network of 50,000 advisors, issuers and investors. Polymath's CEO Trevor Koverko predicted his company will do for security tokens what Ethereum did for utility tokens.  Patrick Byrne's T0 is pioneering this space with a regulated exchange for securities tokens. There are also many boutique service providers like to help companies raise traditional funds in the form of tokens. I believe it is inevitable that most securities (and other large assets) will eventually migrate to token-based ownership. I would prefer the term "ownership token" or "title token," rather than "security token", since neither the token nor the underlying asset are necessarily "securities" from a regulatory perspective, but based on the recent widespread use of the term, it may be too late.   


So there was both creativity and chaos at BTC Miami.  The industry is growing too quickly for there not to be chaos, but the amount of creativity present points to an exciting next period of growth.

All in all, BTC Miami felt much more like beginning than end.  For anyone thinking about jumping in to the tokenization space, I would say it is still very early.  


About The Currency Report:  The Currency Report promotes the adoption of a decentralized global currency. We provide advisory services to new currency designers and investors, including our fund, the Global Currency Fund. Read the Guide to New Currency Valuation and Design, sign up for our blogs or, for accredited investors, inquire about our fund.  For more information contact Shane Hadden at  

It's time for a new definition of currency

Currency is traditionally defined as a medium of exchange.  We believe the term "medium" creates confusion in the age of digital payments. We suggest a focus on currency as a "unit" of exchange.  

The term "medium" implies some form of action, a means or method of payment. Prior to digital payments, when all transactions were executed solely with physical currencies, this definition worked well because the physical currencies where actually moved in the exchange itself. In the age of digital payments and digital currencies, with payments and currencies playing two distinct roles, we need a more precise definition. 

The term "medium of exchange" is no longer useful because most transactions are now accomplished digitally with IOUs, rather than the underlying currency itself.  For example, the "medium of exchange" in most retail, dollar-denominated transactions is the digital transfer of a dollar-denominated bank IOU using a credit or debit card. 

A better definition for currency is a "unit of exchange." It is this unit of value in which a transaction will ultimately be settled. This unit of value is always named (denominated) in a transaction, regardless of the payment method.  For example, a debit card transaction could be denominated in dollars or bitcoin. 

Thinking of currency as a "unit of exchange" helps to avoid several sources of confusion that are prevalent in discussions of digital currencies.  

-  Confusion about IOUs: Because the "medium of exchange" in most transactions is a bank IOU, it is sometimes stated that currencies are IOUs. This is not accurate. An IOU may be used as a currency, but most currencies, including the dollar and bitcoin, are not IOUs. There is no entity that will provide the holder with any value upon demand. They are both simply representations of value accepted in the market for payment.        

- Confusion about payments:  Because "medium of exchange" refers to some sort of action, using this definition can result in payment methods and currencies becoming synonymous. This causes confusion with bitcoin and other decentralized currency platforms because they are both payment method and currency. It is important to understand that bitcoin, the currency, can be used with any payment method, including credit and debit cards.   

- Confusion about the role of government:  When currency is associated with payment methods, governments appear to take on a more important role in currency creation than they actual do. Governments help create trusted payment infrastructures through the banking system. Before the invention of bitcoin, the role of government in creating efficient payments systems was arguably indispensable. Currency, on the other hand, does not rely on governments for its creation or efficiency. Currency, as a unit of exchange, is created by merchants and others who choose to accept the currency in payment.

So what does this matter for bitcoin and the other currencies that are competing to become a global currency?  The ultimate goal for these currencies should be widespread adoption of the currency as a unit of exchange, not as a medium of exchange.  For example, bitcoin needs to promote bitcoin-denominated transactions, not necessarily transactions that occur on the Bitcoin blockchain.  

About The Currency Report:  The Currency Report promotes the adoption of a decentralized global currency. We provide advisory services to new currency designers and investors, including our fund, the Global Currency Fund. Read the Guide to New Currency Valuation and Design, sign up for our blogs or, for accredited investors, inquire about our fund.  For more information contact Shane Hadden at