If you know the folk story about Stone Soup, you’ve likely already grasped the idea of this post. If not, you will find the story being a perfect allegory to what is going on in the crypto world:

The soldier comes to the village carrying nothing more than an empty cooking pot. Villagers are not willing to share any of their food stores with him (and with each other alike). Then the soldier goes to a stream and fills the pot with water, drops a large stone in it, and places it over a fire. The villagers become curious and ask what he is doing. The soldier answers that he is making “stone soup”, which tastes wonderful and which they would be delighted to share with the villager, although it still needs a little bit of garnish, which he is missing, to improve the flavor.

The villagers, who anticipate enjoying a share of the soup, do not mind parting with a few carrots, so these are added to the soup. The village butcher managed to find some salt beef . . . and so it went, through potatoes, onions, mushrooms, and so on, until there was indeed a delicious meal for all. The villagers offered the soldier a great deal of money for the magic stone, but he refused to sell and travelled on the next day.

You’ve got the point. Bitcoin’s value does not magically come from blockchain, but is generated by a new way of human cooperation and exchange that creates wealth. If Bitcoin is not used as a means of payments, it has nothing to prop its value up.

Therefore, hodling does not make any sense. Holding bitcoin is like keeping the stone in a box and expecting that it will feed you in years to come, because it fed you once, by making people to cooperate out of their curiosity. This won’t work this way. The new framework of human exchange and cooperation, enabled by bitcoin, should become a norm. Once it happens, cryptocurrency users will be benefitting from free economy where natural resources, real capital and labor put together for the long term productive use.

From a practical point of view, it means that there has to be a cryptocurrency(ies) serving as an effective medium of exchange, changing hands as many times as possible to create as much wealth as possible. The function of the store of value should be performed by security and utility tokens, which represent your share in the real wealth.

The biggest problem with fiat currencies is their speculative, rentseeking nature. The root cause of all modern economic problems is that conventional currencies do not work as an effective medium of exchange. Money is hoarded while the real capital and labor are idle. Putting bitcoin in the same league as a new speculative, hoarded asset is not only giving the whole idea of crypto up, but is also pointless and unworkable.

If a 2008 like financial crisis happens again, all investors will flee to safety and it is US dollar that will be perceived as the safe haven, because unlike Bitcoin it is globally accepted. Crypto ecosystem, in its current form, will almost certainly collapse in the face of a global financial crisis, as without universal acceptance it offers virtually no utility for holders.

Adoption and acceptance of cryptocurrencies should be priority No 1. This is recognised by a significant number of people, however there is still a lot of work to be done, including fostering a different crypto culture, focused on adoption, and building the right infrastructure.

 

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