The Evolution of Money

Since its advent, money—being a medium of exchange and a store of value—has become an integral item in every part of human endeavors. It is so important that very few things can be accomplished without its exchange in one form or the other.
However, prior to that advent, and at the dawn of civilization, humans had something in lieu. The concept of trade by barter was rife and was an acceptable form of transaction in trading of goods.

In East Africa, salt was used as the acceptable medium of exchange around the period of the middle age, while the Aztecs who hold cocoa beans in high esteem, regarded it as a much more acceptable medium of exchange. In fact, the Aztecs valued cocoa beans much more than gold. Today, as whimsical as it may sound, a bank in Italy, the “Credito Emiliano” since 1953 continued to accept an Italian hard, granular cheese made into wheels, known as Parmigiano-Reggiano, as a form of collateral for loans giving to customers.

Monetary evolution also went beyond the predominant bartering to introducing commodity money, and subsequently, commodity-based money. The most popular commodity-based money is the “gold standard”, with which the value of a legal tender is tied to gold.

This is subsequently followed by the fiat money system, which was made even more significant by the Bretton Woods Conference of 1944—countries agreed to tie their currencies’ value to the USD, rather than gold and silver—and the subsequent abolishment of the US adherence to the gold standard in 1971. As a result, all the currencies basically became order money and the only value attached to it was the trust the people put in the government.

Governments hold on the control of money is met with a lot of skepticism and opposition from people who argued that: a government, through its central bank, could swing the supply of money whichever way it pleases due to its autonomy, thereby weakening the currency and may end up posing as a threat to the economy.
Successive changes have also taken place in the world of finance, and these range from the various technological advancement in banking which has transformed the way consumers engage with money, the paradigm shift from the conventional traditional banking methods to the new school banking which offers a lot of technological convenience for the millennials who form the core of today’s market, to the introduction of cryptocurrency.

The collapse in trust, which ensued as a result of the lingering financial crunch, seems to have spurred the thriving of an alternative financial service that represents a view of the future and a break from the norm. It has led to the creation of over 12,000 FinTech companies who offer services in various financial aspects. Today, banks, who once regarded the FinTech companies as a peril to their conventional model, are now forging alliances with these FinTech groups in order to stay ahead of the game. This is necessitated by all the technological innovation happening in our present climes, known as the cashless society, where holding money for financial transactions among others is becoming outdated as most transactions can take place with the use of various technology applications.

How does Dollar actually work?

The general view of the workings of currencies of nations is largely inaccurate. Perhaps, you may understand the underlying workings, but the same can’t be said for the majority of people. The dollar held by your bank on your behalf doesn’t work quite the same as those physically in your pocket. This is because those in your account are capable of being transacted by other instruments such as check and through electronic means. In the appropriate type of account, the money will yield interest, and equally impact on your credit ratings. For cash, this is not the case. Expect for the conscious effort to keep the record of transactions, the money in cash leaves no trace. Hence it is important to know that the rules guiding them differs.

The possibility of walking into the bank and depositing money, as well as going to the bank to withdraw money gives us the impression of it being the same. Because of such viability, ease of access and seamlessness of such exchange, we become oblivious of differences that exist between these currencies.

The oddity goes beyond this surficial explanation. Individual banks tend to have their own rules guiding their operation and different from the others, which historically include printing their own currency. However, the banks have schemed a way to allow their currencies to be exchanged with cash dollars, arming them with what appears like a solitary legal tender

It is believed that the government is responsible for the issuance of currency to the public and this is very well a wrong assumption of the role of the government. Banks are the authorized entities basically responsible for issuing the currency, while government on the other hand prints it into circulation. Equally, it is imperative to understand that most of the money that is being used to transact these days are electronic cash instead of the conventional money that we all are familiar with.

Democratization Of Finance

Looking at the structure of money, while banks are empowered with the requisite means to facilitating transactions, it is the government that possesses issuing power, thereby affirming the assertion that money structure cannot be dissociated from the concept of centralized power. Despite the workability of this model, it has also caused ramblings in some quarters as this has created an uneven structure in which some have been left behind while others seemed to have benefitted immensely from it.

The stronghold established by the banking community has made it almost impossible for competitors to stake a claim in the money market, hence, forcing the competitors to make giant stride which culminated in the introduction of profound and innovative transparent processes on financial services to the general populace in order to stand alongside the banking community as competitors.

Building the right regulatory template will offer a good chance to harness this generation’s greatest driver of growth and productivity. Creating trust in digital money as a safe store of value, while encouraging disruptive innovation, will require governments and regulators to work more closely with a wider range of stakeholders — including technology start-ups — than would previously have been thinkable: "The future of money" , EY - Global

The wheel of change has been set in motion in the financial sector by this new knowledge on financial services. Consumers are now conscious of what is happening, they are more intimated on the varying options that exists and could be chosen from, coupled with the awareness of the benefits and risks involved.

Five years from now, the financial sector will witness enormous rivalry and better alternatives if the necessary regulatory platform that will provide a good avenue to combine this generation’s greatest zeal of growth and productivity is established.

Putting faith in digital currency as a safe house of value, while at the same taking cognizance of and ensuring innovations, will need the combined efforts of the government, regulators and a wider range of stakeholders in the market than what was attainable earlier. Invariably, we will experience a shift in the existing relationship between major finance players and the end users.

Facilitating Transactions

It is a truism that change is constant. however, the idea of eliminating the traditional modes of payment is highly unfeasible at the moment. The reasons for this are not farfetched. First, the idea of creating and putting a new model into operation—digital currency—and also getting consumers who are already accustomed to the old norms to adapt to this new model are risks the banking community and regulators are wary of.

Whereas, it would be a herculean task for cryptocurrencies to have any significant impact on the position of national currencies as a store house of value, in the nearest future, there will be huge benefit for the use of channels such as XRP as an instrument of payment for value.

XRP is positioned to be the new order in finance and its services are cost effective, especially when we put into consideration the fact that Visa and Mastercard makes more $30 billion yearly from interchange fees alone. Approvingly, Ripple is poised to surpass them by fostering faster payment solutions which reduces risk, as well as provide features and process that will abate factors militating against fraud control.

On average, Ripple costs 81 percent less than the correspondent banking network used for decades to send global payments. And with Ripple, companies can track their payments and see precisely how much it will cost to complete the transfer: Financial Technology News |

The Evolution of the Ledger

Ledgers are everywhere

Ledger is the book for recording and totaling economic transactions measured in terms of a monetary unit of account with separate columns for debits and credits, and also for beginning monetary balance and ending monetary balance. All in all, it is quite accurate to say that ledger is the principal book of account. the aforementioned functions of ledger, its development has been rather stagnant for long until the surfacing of cryptocurrency.

A distributed ledger in its basic form is a digital record distributed among many participants connected by a network who have agreed on the rules for updating the ledger. This ledger is commonly maintained as a blockchain where records are collected into blocks of data and put into a chronological order with each block building on the previous one: C.D. HOWE Institute, "Blockchain Technology – What’s in Store for Canada’s Economy and Financial Markets?"

In trying to historicize the evolution of Ledger, it would appear that ledger developed at the same time with writing. The origin of ledger can be traced to Ancient Near East. It was used to document output, sales and debt. The first international ‘’organization’’ was set up through a connection that served like a ledger. The first major invention to the advancement of book ledger can be said to be the invention of double entry bookkeeping which allows for recording of debits and credits to information and accounts balancing.

Distributed ledger technology might be an impressive catalyst for a whole range of applications that will promote ethics or address unethical activities both in the financial sector and beyond: Witold Gromala, Compliance & Ethics Advisor

Moving forward onto the 19th century, centralized ledgers were used by corporate firms and government bureaucracies but this was set up solely on trust. By the 20th century, the world had begun to embrace digital ledgers and Australia as at 1970 had embraced digitalization by using its passport ledger in a digitized and centralized way which ensures that the database is easily computable and searchable.

Understanding XRP Ledger

XRP ledger is a unique ledger that has been in operation as a viable, futuristic and alternative platform to the Bitcoin proof-of-work concept. This ledger is a shared transaction method which allow users to transfer value effortlessly to different parts of the world. Given the peer-to-peer method it operates, the XRP ledger encounter similar challenges that other crypto currencies are facing as regards to the prevention of double-spending of funds and ensuring network-wide agreement on the status of consumer accounts and balances. Nevertheless, it compensates with the distinguished assurance of consistency and sole agreement on participants which allows for a decentralized open connection unlike others, and since its launch, has provided lower transaction dormancy and higher output.

Demystifying Blockchain

Blockchain cannot be described just as a revolution. It is a tsunami-like phenomenon, slowly advancing and gradually enveloping everything along its way by the force of its progression… Blockchains are enormous catalysts for change that affect governance, ways of life, traditional corporate models, society and global institutions: William Mougayar, "The business blockchain: promise, practice, and application of the next internet technology"

Blockchains are slow. In order for a block of transactions to commit to the chain, it takes about 10 minutes and looking at the slow pace of transaction on bitcoin it can take longer for it to harmonize all the transactions on the same ledger which makes it even more cumbersome. The amount of transaction that a bitcoin can hold is quite tiny compared to that of VISA and which operates at 10,000 times faster pace. This slow pace is also grossly affected by the fact that the higher the number of people transacting, the longer it takes to complete the transactions.

Communication can be more cumbersome and slower in a distributed system since nodes need to be connected, possibly in a hierarchical way compared to a centralized system that needs to have connections only between the centre and its nodes: C.D. HOWE Institute, "Blockchain Technology"

Quick Facts about Bitcoin:

Bitcoin’s early history is shrouded in controversies (Bitstamp – $5 million loss, Silk Route – $200 million of anonymous online drug sales using bitcoins, Hong Kong’s Mycoin and a fraud of at least $21.8 million after the bitcoin trading platform suddenly collapsed (Cryptocity, 2015)). Exchange heists, stolen wallets, mysterious bankruptcies and missing CEOs eroded the image of the technology and quickly many ethical concerns arose. The question emerged – is a technology that is surrounded by scandals regarding its illegal and unethical use in its early stages able to address the ethical issues it was aimed to eliminate? Is the medicine more dangerous than the disease itself? - "Ethics & Trust in Finance", Global edition 2016-2017

In other to overcome the challenges of the challenges of blockchain, feelers have supported the introduction of sidechains that create separate ledgers that connects with the parent blockchain. And this raises the question of differences in currency and ledgers in which creates a similarity to that of banks.

Thus, Bitcoin’s attempt to dislodge the use of currencies is turning to be a situation of creating a similar product to banking system but in a different package, not minding the humongous consumption of electricity that is required for it.

Ever since its inception Bitcoin’s trust-minimizing consensus has been enabled by its proof-of-work algorithm. The machines performing the “work” are consuming huge amounts of energy while doing so: Digiconomist


And don't forget that the Danger of Centralization still exists in the Blockchain:

Bitcoin Mining giant Bitmain has mined 42% of all Bitcoin blocks this past week, steadily moving closer to controlling a majority 51% of th network hash rate: Bitcoinist

Why XRP is not mined?

One medium through which cryptocurrencies that make use of proof of work secure their blockchains is through mining. However, XRP, instead of using proof of work, favors and deploys a shared agreement protocol to safeguard the blockchain, thereby rendering mining unnecessary.

There are several reasons to be adduced for not mining XRP.

  • Firstly, XRP shared agreement protocols can reach conclusiveness in less than ten seconds as compared to proof of work which typically requires at least ten minutes to provide a high level of confidence that a transaction cannot be reversed.
  • In addition, using the proof of work by other systems to ensure a protected platform requires inducement that runs into millions.
  • This inducement, paid to miners, are used to purchase ASIC producers, as well as offset the humongous electricity bills accrued. This cost, ultimately falls on the holder and users in the bitcoin ecosystem, causing a deficient situation, which will necessitate production of millions of dollars in value so as the preserve the price. Such a situation is not obtainable in with the XRP model.
  • Lastly, which can also be the focal point, centralized authority is attainable mining, irrespective of the value of the power or tools used.

Anyone can be the top miner, thereby dictating the direction of chains. In such instance, the chain is capable of being impaired if the needs and desires of the top miner are not met.

You want your own blockchain that follows your rules because you don’t want to be forced to take what other people give you? Well, if you use proof of work you need to generate millions of dollars a day worth of value — to be given to electric companies — just to keep your chain secure. Does that make sense when there are algorithms that don’t have those costs? I don’t think it does: David Schwartz, Chief Cryptographer at Ripple

XRP as a strategic weapon and as a part of a bigger vision

The only digital asset with a clearly organized system and pattern designed to tackle and eliminate the big problem which includes; the global payment problem and short supply of cash that banks, payment providers and corporate organization experience in the money market is XRP. To surmount the aforementioned challenges, XRP has put in place a system that possesses all the required factors such as speed, cost and scalability to surmount these challenges poised. Thus, when XRP is juxtaposed with other top digital assets around the world, it is crystal clear that XRP is comes out top.

The information might be collected for a number of purposes (both political and commercial) and we might not have any idea that it is happening. This Internet is the Internet of Information, information that is spread across the Web, uncontrolled by data subjects. It definitely has some value but is not value itself. The technology that is sometimes referred to as the Second Era of the Internet: distributed ledger technology (DLT) or its subcategory, blockchain (terms often used interchangeably), is supposed to address the aforementioned issues – it is said to transform the Internet of Information into the Internet of Value: "Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World " , Alex Tapscott & Don Tapscott

Just like money is a measure of value, XRP is a good measure of “internet of value” which portrays the vision of Ripple—to make money at the snap of the finger. XRP’s vision of speed, transparency seeks to help ease the burden off finance houses just like the way technology moves in present day society and transactions can be completed in seconds. it is also imperative to highlight the cost-efficient methods that has consistently fostered XRP performance to be of optimal best, coupled with Ripple’s possession of the financial wherewithal to ensure that the XRP performs well.

XRP is fast gaining ground, and this is attributable to the advantages it offers over other systems.

People won’t use XRP unless it’s the best tool for the job. You can’t trick them or force them into using it. And by building an open platform with a level playing field, you can have the largest possible market with the broadest support: David Schwartz, Chief Cryptographer at Ripple

By setting up equal opportunity for everyone involved, there is a heightened possibility for an enlarged market with support from far and near. Invariably, the broad acceptance and use of XRP translates to the fact that a considerable number of transnational payments are done using XRP as a mode of transaction.

Everyone who adopts the Ripple protocol removes all technical obstacles to bridging with XRP. And the protocol is so good that it’s worth using even if there isn’t enough liquidity to bridge with XRP today: David Schwartz

Financial houses are aware of the revolutionary changes sweeping across every strata of the society due to technological innovations. As politicians around the world are well aware of the fact that they can win and lose their credibility through the social media, so also are banks aware of the great power of digitalization.

In the Canadian context, some banks including National Bank, CIBC and ATB Financial, are already taking advantage of Ripple’s flexibility in getting money across borders, essentially in real time: The Globe and Mail

When the wave of digitalization swept across the music industry, there was little choice other than the music companies adapting to digital streaming or lose their business to computer companies. Now, the wave of digitalization is at the doorstep of the financial sector, and the choice is simple: it is either the banks and other related systems adapt and conform to this trend, regardless of if it results in receding their control of the flow of money or stay aloof and subsequently fade away.

This article was originally published by David Olliver

Read Disclaimer