Bitcoin Isn’t It. CloudBanks are our future currency.

We have struggled throughout human history to find a good currency. Salt was it, for most of the people who ever lived. Gold and silver were the medium of choice among merchants for millennia, because they are portable, durable, and have verifiable quality and quantity. Fiat currencies have taken hold, in recent decades, because of a blind faith in states’ interests. Block chain ‘coins’ hoped to provide an alternative, and have succeeded somewhat, if only because fiat currencies are so horrifically deficient and easily devalued.

There is an alternative: materials-backed currencies.

Some have suggested water-backed currency, which fails the portability and verifiable-quality tests; Edison, as I recall, mentioned real estate as a viable currency, though regulations, eminent domain, and entailments make it subject to states’ whims, again. What alternative stands out? And how might this alternative do MORE than traditional currencies?

To escape the traps of application-less block chain coins (oh, our squandered processing power!) and state-subjugated fiat monies, we must adopt a form of capital good as our currency. The value of such a currency is backed, and kept from collapse, by the real utility of the capital, itself. And, that capital, held as currency, produces a yield — unlike dollars, gold, or bitcoins. So, what capital can best substitute as currency?

The CloudBank:

The world runs on compute. And, that real value is generated by processors. If a processor was a valid form of currency, it would not only meet the criteria of portability, durability, and verifiability — it would earn a dividend.

Imagine: you convert dollars to processors, buying a ‘share’ of a corporation’s Cloud servers. You now own that ‘share’ as a form of currency. When those servers are used for business and personal applications, dollars come in. Like a cow or field of corn (the original ‘stocks’), your currency grows and gives back. Your ‘money’ is earning interest from inside its ‘CloudBank’.

No Federal Reserve:

Unlike dollars, processor-currency cannot be artificially devalued. And, unlike dollars, processor-currency does not need to be produced by a monopolistic and un-audited entity! Any chip manufacturer or server-farm operator could offer its CloudBank as an investment platform. Global supply-and-demand fixes the value of the currency relative to other goods and services.

Yes, it is true that improvements in chip technology would lead to a marginal loss in value of older chips. (This is not a problem unique to processor-currency or capital-currencies in general: we keep mining gold, silver and bitcoins, and governments keep printing higher volumes of paper monies…) I expect that, because these server farms are already a valuable investment for businesses, the dividend earned on a CloudBank would more than compensate for the loss due to Moore’s Law.

Additionally, if CloudBanks became a staple for international currency traders and businesses, as a means for mediating the exchange of other goods and services, that additional demand for processors would provide a greater incentive to improve computing power and cloud services. As compute becomes cheaper, we manage to find a greater volume of applications for it, and we are unlikely to saturate any time soon. (Jeff Dean needs half, for his neural networks…) Demand for processor-currency would boost the supply of clouds of servers, lowering the margin on compute costs for end users, to the extent that more applications are worth putting onto the cloud. (That’s a virtuous cycle I could invest in!)

Amazon, would you like to take my dollars, and issue a CloudBank card for B2B purchases? Your currency would be more stable, and less prone to hacks, devaluations, shock corrections and politics, than Bitcoin or rubles. And, this would make your cloud services run on capital that was paid for by international traders, instead of your own cash reserves. Whether you do it or not, Baidu may soon.

Written by

Easily distracted mathematician

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