Bitcoin has been cited as the ‘all-conquering economic juggernaut’. As it’s the hardest money ever…
What exactly is money? It’s a slippery concept. We like to think of money as something tangible that has a guaranteed value. But as a recent Google ad revealed, it’s not as simple as we would like to believe.
The Google ad was for a product called Call Screen. The Call Screen service is designed to provide users of Android devices with information about who is calling and why. But that’s not what makes the advert interesting. What is interesting are some of the brief comments that the actors make about cryptocurrency.
About halfway through the advert, the male actor receives a text through Google Call Screen informing him that his electricity bill has gone up. When asked why by the female actor in the ad, he makes a joke that it is because of his cryptocurrency mining habit. She then responds, tongue-in-cheek, that cryptocurrency is not “real” money, to which the male actor quips that money, in general, is not real.
So is money real or not? It all depends on the definition of “real.” If money is defined as a store of value, then both fiat and crypto are real: they can both be traded for tangible goods and services in the economy. But if real means something that is physically tangible, then no, crypto is not a real form of money: it only exists as electrical signals in digital circuits.
What a lot of people do not realize is that very little money in circulation is physical. 90 percent, according to Siam Kidd of The Realistic Trader, is in digital form. Cryptocurrencies, therefore, are a kind of extension of the monetary system that already exists which lower transaction costs and improve audit trails.
The New Google Ad Highlights Crypto’s Bad Image
The short exchange between the two actors in the Google ad reveals a lot about the current attitude towards cryptocurrency. People want to know if they can rely on cryptocurrencies to be a stable form of exchange in the long term.
It’s not surprising that they aren’t sure. The world’s foremost investor, Warren Buffet, says that he believes that the crypto market “will end badly” and that he will never invest in crypto assets. His opinions carry a lot of weight, so people listen.
There is a myth that cryptocurrencies hold no value. But in a sense, the Google ad is behind the times. While it is true that negative attitudes towards cryptocurrencies dominated the headlines in 2017, especially when JP Morgan CEO Jamie Dimon called them a fraud, things have started to change. For instance, JP Morgan’s head of corporate investment, Daniel Pinto, says that the bank is now seriously considering making investments in the crypto space. Morgan Stanley has got plans to engage with these new currencies too, even though CEO, James Gorman, called them a fad last year.
Besides questioning whether cryptocurrencies are real, the ad also hints that they require enormous power consumption. Again, this could be misleading. While it is true that cryptocurrencies need energy to power mining GPUs, regular, government-created fiat money is also energy-intensive.
Fiat money production requires that thousands of people transport themselves to central banks, mints, and other financial institutions to keep the monetary system running. And although the creation of new bitcoins is more intensive than the production of a new dollar bill, system-level energy requirements of the fiat system are higher.