Bretton Woods and Bitcoin

a lot has changed in 75 years

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We’re all here because of the creation of a decentralized, non-sovereign asset called Bitcoin. Bitcoin has caused millions of people to reimagine the very essence of money. It has spawned thousands of offshoots, many with cult followings, created novel forms of fundraising, and enabled new business models facilitating permissionless economic activity.

And now, this whole ecosystem which we call crypto has grown large enough to gain the attention of the President, the Secretary of Treasury and the Chairman of the Federal Reserve.

Let’s step back for a second and recognize the profundity of that. 

Three of the most powerful people in the world are giving the time of day to an internet money that has meme’d its way into existence.

Damn. 

A large part of this is thanks to Libra, and the fact that over two billion people could soon be using a purely digital form of money. In the process of figuring out what this Libra is, and how it compares to true cryptocurrencies, many people have been forced to reimagine what they consider money.

This is likely only the start and as regulators, bankers, and lawmakers start to ask these questions you can expect many more conversations that could alter the future of money.

We’ve been living in a fiat world for the better part of the last half-century. But, it wasn’t always this way and the monumental shifts in monetary policy during the 20th century shaped where we are today.

Perhaps none of them as important as the agreements made at Bretton Woods 75 years ago today.

- - -

The post WWI depression era was marked by competitive currency devaluations, discriminatory trade blocs, and high tariffs which many believe exacerbated the tensions leading up to WWII.

In an attempt to resolve these issues leaders from 44 allied nations met in Bretton Woods, New Hampshire for the United Nations Monetary and Financial Conference, known better as the Bretton Woods conference. At the end of three weeks the attendees emerged with a new monetary system that established the U.S. dollar as the world reserve currency. 

At the time, most countries were on the gold standard. However, the U.S. held ¾ of the world’s gold meaning it was difficult for other countries to sustain their monetary base. The solution? Fix their exchange rates to the greenback. The result? The U.S. was left as the only country that could effectively print money, albeit still backed by their gold reserve redeemable at a rate of $35/oz where it remained for the next few decades. 

Source: Macrotrends

By fixing exchange rates to the USD, it alleviated competitive devaluations to gain an edge in foreign trade. The International Monetary Fund (IMF) was also established at the conference and funded by member nations for the purpose of lending money to countries in a currency crisis.

Bretton Woods was effective at stabilizing currencies after bouts of hyperinflation experienced post WWI.

However, keeping the USD fixed to gold supply left a limited amount of the world reserve currency. After a few decades the U.S. felt it wasn’t adequate to service the worlds demand so they began to break the peg, eventually suspending convertibility altogether bringing us to the fiat system we know today. Even though the dollar was no longer redeemable for gold and exchange rates were free floating based on market forces, the USD remained the world reserve currency. 

This brings us to the world we live in today - a paradigm of modern monetary theory employing quantitative easing and low or negative interest across the board. General distrust of our financial system has led to people looking for alternatives which can explain how a new idea like cryptocurrencies have been able to grow in such a short amount of time.

If the current trends continue, and we see cryptocurrencies reach escape velocity where world leaders seriously consider it a direct threat to their control, its not unlikely that we see another gathering of the world elite making decisions that will shape the course of the next century. 

The only question is do they accept crypto or try to fight it?

-Jack

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Best of the Boards

This week we are highlighting some of the best user generated boards from the past week. Build your own, tweet it, and tag us us for a chance to be featured next week!

LRS56 - Week of July 15-21 - @nlw

From Trump tweeting about Bitcoin to two days of Libra hearings in Congress DC was all about crypto last week. Catch up on all the details with Long Read Sundays from Nathaniel Whittemore.

EIP-2025 Discussions - @jpurd17

EIP-2025 is a controversial new proposal that would see a portion of Ethereum block rewards used to fund development of ETH 1.x. Learn more about the proposal and how the community feels about it.

Fundamental Crypto Valuation - @Ryan_A_Watkins

Curious about how to value cryptoassets? This collection of long-form pieces features some of the most important thoughts on crypto valuation from a variety of industry leaders.

Did I miss something?

Send me the link, your twitter handle and your best imitation compression algorithm write up. If I like it, I’ll include your bit next issue (with attribution).

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Messari's Weekend Reads 😎

reading, sleep, self-care, and new a new product!

Your daily snapshot from our OnChainFX markets dashboard.

This week we rolled out beta access to the new Pro Screener for our subscribers. Pro is a powerful way to create and save custom views and apply filters to 600+ assets across 100+ metrics. In the coming months we’ll add advanced multi-series charting and new tools (sector comps tables, alerts, private dashboards for teams) to make the Pro experience even more powerful.

[video-to-gif output image]

Everyone will be able to sign up for Pro soon, but if you want early access along with our daily research, exclusive Telegram community, and bi-weekly conference calls you can subscribe to Unqualified Opinions today.

Community updates:

Over the last few weeks our community analysts have been hard at work building out the “Investopedia” of crypto. More than 70 pages have been completed with many with additional boards to take your learning to the next level.

Congrats to Max Hinchman for being our top contributor!

You can check out some of the great information, like Block Reward from Ryan Watkins and Decentralized Exchanges by Steve Miller, by searching for a topic on messari.io.

The contributions are only picking up, so expect to seem more in the future. We have big things in store for our analysts, and are excited for what’s to come! If you’re interested in joining email jack@messari.io with some examples of work you’ve written.

Registry updates:

Across projects on the Messari Registry there were a few significant updates this week. Check them out on our weekly updates board and remember to create and share your own boards for a chance to be featured in Monday’s newsletter.

Now, onto our weekend reads.

Messari’s weekend reads:

  • Placeholder considerations: Resources, governance, and legitimacy in NU4 - Chris Burniske

  • Polkadot: Promise and problems - Tom Shaughnessy

  • The dollar, not crypto, is a national security issue - Peter C. Earle

  • Why Bitcoin? - wiz

  • Notes from Peter Thiel’s speech at the National Conservatism conference on July 14, 2019 - Bonnie Kavoussi

  • There is no such thing as a 'small' nuclear war (but trump wants mini nukes) - David Axe

Have a good weekend y’all.

- The Messari Team

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Messari Compression Algorithm

Content and thoughts from around the web as summarized by the Messari team.

👎 [Analysis] Democrats more negative than Republicans at House hearing on Facebook’s Libra (July 2019)

Republican representatives were less negative than their Democratic peers during the Financial Services Hearing on Facebook's Libra, per analysis from The Block. Democratic representatives were more likely to ask negative questions based on The Block's "relatively subjective" question association. Overall, 75% of the questions were either neutral or constructive. (share or read more)

🏛 [Analysis] Congressional testimony reveals some faults in Facebook’s digital currency plans (July 2019)

David Marcus' recent hearing before the Senate Banking Committee and House Financial Services Committee raised several holes in Libra, according to TechCrunch. While Marcus tried to sit in the ambiguity of Libra vs. Calibra, lawmakers took issue with Facebook's history. Rep. Alexandria Ocasio-Cortez (NY-D) argued Facebook leveraged the Libra Associations governance model, setting up a dangerous precedent. Unintended but real consequences of Libra include sovereign currency destabilization, said Rep. Maxine Waters (CA-D). Defining the digital currency as an exchange-traded fund and the implications of KYC or platforming were also raised too little response. (share or read more)

Quick Bits (Don't read that, I read it for you)

Choke Points (Exchange News)

  • 🧺 Coinbase's Bundle product has been discontinued per an FAQ on the exchange's website. The product was launched in Sept. 2018 with five cryptos including Bitcoin ($BTC), Bitcoin Cash ($BCH), Ethereum ($ETH), Ethereum Classic ($ETC), and Litecoin ($LTC). (share or read more)

  • 🇸🇨 Bloomberg reports that the U.S. Commodity Futures Trading Commission (CFTC) is investigating crypto exchange BitMEX, according to people familiar with the matter. The months-long CFTC probe is focused on whether BitMEX broke rules by allowing Americans to trade on the platform. (share or read more)

Startup Signals (ICOs, Cryptos, and Startups)

  • 🍴 Friendly Zcash ($ZEC) fork Ycash (YEC) is set to go live tomorrow at 3:00 UTC. Ycash is led by longtime Zcash proponent Howard Loo as a preemptive fix to the founder's rewards fee change. Ycash will cap the founder's reward at a perpetual five percent funneled to the Ycash Foundation. (share or read more)

  • 💧Binance 'discovered' it has been staking customers Stellar Lumens ($XLM) for the past year following wallet recommendations from the Stellar Lumens team. Binance will airdrop 9,500,000 XLM worth $775,000 to XLM holders on Sept. 1st. (share or read more)

The Powers That Be (Legal/Reg/Policy)

  • 🚔 Now defunct crypto exchange WEX's ex-CEO Dmitri Vasilev was arrested in Italy according to the BBC's Russian services. WEX shut down in 2018 following a dispute with a new owner, frozen Ether ($ETH) on Binance, and consumer deposits being locked on WEX. Russia and numerous neighboring countries set up police investigations into the exchange and Vasilev. WEX was once BTC-e, an exchange linked to the Mt.Gox collapse. (share or read more)

  • 🇨🇳 Chinese Securities Network reports that the Hangzhou Internet Court has ruled Bitcoin ($BTC) having the features of property. The court held that Bitcoin has value, scarcity, and disposableness of property, classifying it as 'virtual property.' (share or read more)

Did I miss something?

Send me the link, your twitter handle and your best imitation compression algorithm write up. If I like it, I’ll include your bit next issue (with attribution).

Should your colleagues read daily? We now offer discounts for corporate access. Email us, and we’ll onboard your whole team.

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