Decentralization & innovation maximalist. Slogging community manager. Virtual CMO.
You’re forgiven if you think that modern Fiat currency has been around since the dinosaurs. But it’s probably younger than your parents are.
August 15 marks the anniversary of the “Nixon Shock” – a series of economic actions by United States President Richard Nixon in 1971 – when the international convertibility of the US dollar into gold was irrevocably cancelled.
Fiat is derived from the Latin, simply meaning that which is determined by the authority. Fiat currency literally means a government-proclaimed currency that is not backed by anything other than the proclamation.
It is because we say it is. “Might makes right.” Fiat currencies are potentially infinite because they can be issued at will.
What Existed Before the Nixon Shock?
In 1944, the Bretton Woods agreement established the rules for commercial and financial relations among the United States, Canada, Western European countries, Australia, and Japan
The purpose of Bretton Woods was to allow global financial stability to flourish, with the mandate that each country maintain external exchange rates within 1 per cent by tying its currency to gold, and the International Monetary Fund (IMF) to bridge any temporary imbalances of payments.
The United States, which controlled two-thirds of the world’s gold, insisted that the Bretton Woods system rest on both gold and the US dollar. But on 15 August 1971, the United States unilaterally terminated convertibility of the US dollar to gold, bringing the Bretton Woods system to an end.
Other countries soon followed, with the majority of fixed currencies also becoming free-floating fiat currencies.
Why The Invention of Bitcoin Matters
Cryptocurrencies like Bitcoin are often criticized for being volatile. In less than 12 months, the value of BTC rollercoastered from over $3000 USD to $60,000 USD and back to $30,000 USD. In most countries, other than El Salvador and Japan, BTC isn’t legal tender and so it isn’t fiat currency at all, it’s a capital asset.
Although neither BTC nor fiat currency are backed by anything of material value (although there are arguments that BTC is backed by the consumption of energy, so is the machinery of the fiat currency system which maybe even far more energy consumptive given its inefficiencies and intermediaries), there is one key difference between Bitcoin and government currencies. Bitcoin is not infinite.
In total, there are 21 million BTC that will be available once Bitcoin is fully mined – give or take a few million lost to hacks, lost wallets, and the Satoshi slush fund.
That’s 21 million maximum supply regardless of how long into the future that BTC is used as a store of value. If the awareness, and hence the demand, of Bitcoin increases, its value can only go up. It can never be diluted, or debased.
The Revolution of Longterm Bitcoin Adoption
There’s a person leading the Bitcoin adoption revolution in developing countries of the MENA region, for whom BTC is very close to his heart – Tey el-Rjula, author of The Invisible Son.
Tey was an early adopter of Bitcoin, pioneering the use of blockchain to break financial and identity barriers, and earning an MSc in Digital Currencies and Blockchain Technology.
Tey’s story is an unlikely one. Born Syrian, he was nicknamed “The Invisible Man” at age 5 and literally became one as a refugee in the Netherlands 25 years later, using his mined Bitcoins to buy pizzas in the refugee camp.
Tey’s journey ultimately led him to the realization of his life’s mission: turning invisible people into invincible ones. I posed a few questions to him about why August 15 is a date to remember.
Why is Bitcoin so important to your own personal history?
I started my Bitcoin journey in late 2012, early 2013. As a Second Life gamer, Bitcoin was always mentioned in the chat rooms as a way to buy Linden dollars. It was a great way to make money and play games. The premium to Linden Dollars with BTC was 40%! The Hustler in me saw the opportunity to broker payments and deals for the gamers.
Soon I found myself going down the rabbit hole and learning concepts like encryption, game theory, consensus algorithms, public key management, and much more.
My side hustle of a Bitcoin broker turned into a commercial business being one of the early miners in the Netherlands. I still recall Dutch SWAT breaking in my home coz they thought the massive energy consumption and heat signals my apartment is showing relates to indoor marijuana farms and not a crypto farm.
Having seen Bitcoin at 100 USD growing to 1000 USD value was a magical and unbelievable experience. I could not believe my eyes. Yet still did not believe in its potential to change the world.
Not until life had a surprise for me. On September 24 I turned from being a skilled immigrant in the Netherlands to a refugee. I had to close down my mining operation and head to the refugee camp in Northern Holland. My residency in the Netherlands had expired and the only way to stay in Holland was asylum.
In the refugee camp, all I had on me was my phone, 4G internet, and my Bitcoin wallet.
Locked inside the camp waiting for my turn to be interviewed and granted asylum, days went into weeks, and then months.
All these days I was feeling blessed to be a refugee in the Netherlands and not somewhere else. Refugee camps and prisons in the Netherlands are similar to a 5 star hotel, compared to a camp in Greece, or France.
The food service was great, but I was craving for pizza : )
One day I was telling the pizza bitcoin story to my fellow asylum seekers, and the light bulb went on!
I have Bitcoins in my phone, and there is a website where I can order food and pay with BTC! Eureka! I went on thuisbezorgd.nl and I ordered the largest pepperoni pizza I could find! I put the delivery address as the refugee camp! And in 45 min the pizza was delivered to everyone’s surprise!
Why surprise? Well as Asylum seekers, we don’t have the right to open a bank account, or any mode of online payment that does NOT require proof of ID. EXCEPT FOR BITCOIN!
Download an app, and you are included in a multi-billion dollar financial network. Simply by holding a smartphone / a 4G connection/ and a wallet.
This is my personal reason why I am very bullish on Bitcoin and crypto. I have lived in the shoes of 4 billion people who have no access to banking and financial inclusion. Lack of Identity is one of the barriers to financial inclusion, and Bitcoin is a perfect solution to bring a basic human right to everyone.
What does August 15 mean to you and what lasting effects has it had?
August 15 is an important day in History as you have mentioned before because on August 15, 1971, President Richard M. Nixon announced his New Economic Policy, a program “to create a new prosperity without war.” Known colloquially as the “Nixon Shock,” the initiative marked the beginning of the end for the Bretton Woods system of fixed exchange rates established at the end of World War II.
A few months later, war raged in our region, with Israel being attacked by Egypt and Syria in the events of the Yum Kipor day. As an Arab kid, I was taught to embrace this day, as Arabs fought to win territory from Israel back.
Little did they teach us in the school in Lebanon, how this war was instigated by failed economic policies and a war fueled by US dollar money. A story for another time perhaps.
Only when I started my Bitcoin journey, I realised what form of global reserve currency we use today, majorly backed up by war, politics, and military power. Of course, we are talking about the USD.
What are you doing to mark the date of the Nixon Shock this year?
To mark the Nixon shock this year, I am launching fluus.finance. Fluus is an ecosystem of financial services that allows users to leverage the multi-billion dollar universe of cryptocurrencies and blockchain protocols to create a path of financial freedom.
An intuitive app that connects to multiple crypto platforms and decentralised exchanges allowing users to turn their fiat into crypto so they can save & invest in value that they have autonomy over and not the bank.
I started Fluus immediately after the explosion of Beirut Port in August last year.
With a failed banking system, there was little to be done to send money donations to NGOs and families affected by the explosion. Cryptos like BTC, USDT, and LTC were a life raft to keep money flowing into Lebanon from around the globe.
Fluus means money in Arabic, and we are bringing a safe way to invest & save in an app that our users have full control over. Fluus is money for you and the rest of the world.
It is our way of saying there is a new era of money. A Neutral, global & permissionless type of money that includes everyone, even Refugees : )
Watch Tey on Hague Talks:
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