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 Design, sign up for our blogs or, for accredited investors, inquire about our fund. For more information contact Shane Hadden at email@example.com.