Heat Treat Today publishes eight print magazines a year and included in each is a letter from the publisher, Doug Glenn. This letter first appeared in Heat Treat Today's March 2022 Aerospace Heat Treating print edition.
Publisher and Founder
Heat Treat Today
What does cryptocurrency (crypto) have to do with the heat treating industry? Within the past two weeks, I spoke with two suppliers in our industry who are making equipment to help cool crypto mining equipment, both of whom are diverting a portion of their manufacturing capacity to fulfill crypto demand. To that extent, the crypto craze is affecting the North American heat treat market in some capacity. So, let’s talk about cryptocurrencies because it’s a hot topic — and we deal with heat in this industry!
The question I’d like to mull over publicly is whether crypto has what it takes to be legitimate money.
Money — a widely accepted medium of exchange — has the following characteristics:
- It is relatively scarce.
- It is easily divisible.
- It is easily portable.
- It is durable.
- It is uniform/fungible.
- It is widely recognized/accepted.
I suggest we add one more characteristic to this list: It needs to be understandable.
Crypto’s Success or Failure
Something becomes money when people come to recognize it as a commonly accepted item which maintains its value over time. It is something widely and commonly valued and nearly everyone will accept it in exchange for another item or service. There must be a “perceived value” — both today and in the future.
This is where crypto has a few hurdles to clear before it can become real money. While there is a relatively small (but growing) number of people currently using cryptocurrencies, it is certainly far from being widely accepted, primarily because it is not widely understood — and some would say it is not understandable.
For example: Where does it come from? How is it made? Who makes it? Where is it kept? How do I trade it for other goods and services? What am I trading? Why is it valuable? Where do I keep it? What does it look like? Can I withdraw it and keep some at home? Can I carry it around? Can I see, touch, and feel it? Does it still exist if the electricity goes out? If it fell in the woods when no one was around, would it make a noise?
If cryptocurrencies are going to succeed in becoming money, they are going to have to be understandable to the common man. The common man is going to have to “believe” in it. They’re going to have to understand what it is, where it comes from, why it is valuable, and why it will continue to be valuable into his/her retirement years and beyond.
The Good of Crypto — Limited Supply
Cryptocurrencies do have (purportedly!) one thing going for them that our current currency lacks — limited supply. If the claim is true that there is a limited supply of cryptocurrency, then that is a clear and very important advantage it has over the U.S. dollar, because it can be endlessly printed if those in charge so desire. There is nothing physically stopping the Federal Reserve Banking System — those in charge of the currency — from printing and printing and printing. Cryptocurrencies, on the other hand, if we are to believe those in charge of their creation, have a limited supply (at least some of them). At least that’s what we’ve been told.
The reason the U.S. dollar is in such trouble now is because those in charge of the currency in the past have created way too many dollars. It’s just paper (or credit) and there is essentially NO LIMIT to how many dollars can be created. When too many dollars are created, the value of each dollar shrinks and the money itself becomes less and less valuable because it can buy fewer and fewer items. If crypto is going to succeed, the supply is going to have to be understandably and believably finite. Unfortunately, it’s not obvious to the common man that this is the case.
Beyond Governments
Money will come into existence without the help of government. Cryptocurrencies are a great reminder of that economic fact! Individuals, acting freely, will sooner or later settle on a widely accepted medium of exchange which is relatively scarce, divisible, portable, durable, uniform/fungible, widely recognizable/accepted, and understandable. If governments step in and make any currency, crypto or otherwise, “legal tender” or insist that only they can create money (what has historically been called “monopoly of the mint”), then I suggest we run from that money. Free people acting freely will settle on the best medium of exchange without government help. Whether or not crypto will be that next medium of exchange remains to be seen.
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