Money, money, money- its presence is a problem… and its absence? How did this concept become the most important part of our life cycle? Considering today’s conditions and comparing them with the past, the question of why money is so important comes to mind. The use of money, which has become a part of life for centuries, effectively continues all over the world and it has succeeded in being among the most basic needs of people.
Although the importance of money varies from person to person, there is a fact that is known by everyone. In today’s conditions, it has become almost impossible to live an ordinary life without money. People cannot meet their basic needs without money and therefore they need money.
When the existence and development process of money is examined, it can be said that it is an invention that is not based on any physical, biological, religious, or legal structure and is shaped by human beings according to their needs in time. Money had many functions such as setting the prices of goods and services, facilitating economic activities, saving, and investing. With the increase in functionality, the rapid development of technology and the entry into the age of digitalization, the need to create a universal and freer economic system has arisen. As a result, digital currencies such as crypto money, which have a decentralized structure, have emerged. Unlike traditional currencies, these currencies, which are managed in a virtual environment and called cryptocurrencies, have been a frequent destination for investors -especially recently- and their transaction volumes have entered a process that increases day by day.
The concept of money is explained with a simple example in an article titled “The Island of Stone Money” written by economist Milton Friedman in 1991.
Yap is a nation of four islands located in the South Pacific ocean. There is no gold, silver or other metal to replace the money we are used to on the islands. For this reason, residents of Yap use stones instead of precious metals, which we see as a value exchange tool. A few centuries ago, the inhabitants of Yap discovered a special limestone in another island group about 400 kilometers from them. Since this limestone is not found in the Yap Islands, the resource is very limited. Over time, the island chiefs organized expeditions to these distant islands, extracting limestone from the mines and bringing new stones in the form of discs with them. These discs, some 5–10 cm wide and some up to 3.5 meters wide, come in different sizes and weights. At the end of a successful campaign, the chief himself seizes the large stones and 40 percent of the small stones. The remainder is divided among the participants in the expedition. Thus, many large stones accumulate outside the home of a long-lived chief.
When a chef on the island wants to go shopping or give a gift to a neighbor, he realizes that these stones are too big to move, but no one makes it a problem. The chief announces the new owner of the stone and now everyone knows who the new owner of the stone is. This is the way it is in all business transactions.
Between the works and the chiefs, the information of who the stones belong to is constantly circulating without changing the location of the stones. Everyone is happy. In the Yap Islands, money became a value that was expressed with stones but kept in people’s memories at the end of the day. The system works perfectly as long as the islanders do not forget who the stones belong to.
The system works so well that it continues to work even if no one knows where the stones are (even if the stones are lost). In fact, from time to time, after the stones are removed from the mines, on the way back to the island, the ships are caught in a storm and sink, and the stones naturally end up at the bottom of the sea. However, when they return to the island, the chief tells everyone where the stone is. The stone rests at the bottom of the sea 5–10 kilometers from the shore. Since everyone trusts the chief, this is accepted and when the chief uses this stone in a trade, the tribe accepts this situation and there is no problem. The stone at the bottom of the sea now has a new owner. Since the stones do not go anywhere, there is no problem. Everyone agreed on a common value.
The point Friedman emphasizes in his story is this: It doesn’t really matter whether a stone is where it is said to be or not.
If everyone agrees on a common value judgment, that value judgment is called money. The definition of money as a consensus tool for a common value judgment is the simplest definition, and what it will look like next is just a detail.
These could be pieces of stone as used on Yap Island, coins from the board game Monopoly, hard-to-copy paper notes, a credit card with a silicon processor, or unique data records on the Bitcoin Blockchain network.
So what is this Blockchain technology?
Blockchain is a digital ledger. All transactions made in this ledger are recorded in units called blocks, and these blocks are linked together in a chain fashion. In this way, transactions cannot be changed and deleted retrospectively.Blockchain technology is based on storing and managing data in a distributed network. Therefore, data is not managed by a single central authority. Instead, data is distributed in a network of many nodes. Transactions between these nodes are verified using mathematical algorithms. This verification process ensures that data is stored securely and transparently.
It is possible to come across different aspects of blockchain technology. The two most important distinctions are made in terms of whether participation is free or not and whether it is open to the public or not. We can give crypto money technology as an example of the state where participation is free and open to the public.
Crypto is a word formed by the combination of the words cyripto and currency, which means encrypted money. The reason why it is used as a password is that it is taken from virtual wallets with a password and removed with a password. The fact that it is only available in the virtual market is a distinguishing feature from the current coins. Internet is a phenomenon that causes the elimination of limitations in commercial activities today. Cryptocurrency is the most effective technological development that can be shown as an example of the elimination of this limitation. These technological developments bring about changes on the financial system with cryptocurrencies. In conclusion, cryptocurrencies are digital currencies that have different characteristics compared to traditional currencies. With their increasing popularity, many individuals and organizations are taking steps towards transitioning to digital currencies.
Preventing any trouble in the central authority from affecting the entire system, minimizing high commissions by eliminating intermediaries, and creating accurate, consistent, unchangeable record information retrospectively are some of the benefits offered to us by Blockchain technology.
Although Blockchain is a new technology, as we can see from Bitcoin and cryptocurrencies, it has a high potential and excites us in every field it is used in. What are we waiting for to bring this technology into our lives?
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