Trust, PNBFraud and Cryptocurrency

It was a monthly routine of some of my friends of our engineering days that can explain one Professor Mankad’s statement – “Money is what is accepted as money”. Some of my friends, used to be penniless for last one week to ten days every month. Possibly it is a common phenomenon of current generation students. So for about last ten days these friends of ours used to borrow from us. A couple of times I gave, returns used to be few and far between. I and few other “venture capitalists” stopped lending these friends. In these trying times, the borrower friends came up with an idea – whenever the received a cheque (rarely demand draft) – from home it used to take three or more days to realize those – they used to borrow against it.

Let me try to explain it with example, say Neerav got a cheque of INR 2500 from home, he will show that and borrow money (say INR 1000) from Yogesh and possibly INR 1500 from Pravin and another INR 1000 from Prateek. Now Neerav has borrowed INR 3500 against a cheque of 2500. All of the lenders used to be under an impression that within next five days or so we will get our money back as Neerav has got INR 2500. We used to accept that cheque as guarantee of timely return. “We” accepted cheque in “Neerav’s name” as a money. Thankfully none of the Neerav’s defaulted on our outstanding.

We have been living in a very nicely woven cobweb of currency and economy for at least last two centuries. Currency and thus “money” is the biggest fraud happening around us. Be the gold standard (relatively better method of “value”) to fiat currency. What is money? The question Professor Mankad asked us in our MBA class about 8 years back is still very relevant and I have been revisiting it time and again. When he asked such question, we started answering coin, currency notes etc etc. His one line response was – “Money is what is accepted as money”. Yes that is true, money is what is accepted as money, as we used to accept cheque without known Neerav has kind of pleaded same cheque to 5 different lenders!

Earlier, I wrote on trust as a foundation – Currency for the future. QUOTE from there Let us flip the coin and say “Trust” is the currency. What would happen? Those who have hoards of currency may be the most bankrupt people on the earth. Perhaps, a business of trading of trust would start (Bomday Trust Exchange or National Trust Exchange). Would the world be a different place then when currency would be mutual trust (well not necessarily Mutual such as DLF and Robert Vadra. UNQUOTE. This I wrote in 2012, at that time Cryptocurrency (example bitcoin) was not commonplace – well even I did not know about it. I had a different measure and calculation for the currency – money what is it?

However, lesser than the intangible concept of Trust that I thought, we have a better believable system evolving these days – cryptocurrency. If we keep on seeing the meltdown of 2008, NPA frauds of India and many other such scams from the politicians and their accomplice etc. we will soon accept the bitcoin or other such more reliable systems for transactions. Crypto is putting pressure because administrations and regulatory authorities will lose control on the economy. With the control also they are not making any good; at least if we see India – a former FM and his son facing trial but our system is unable to conclude the trial or many scammers settling out of India.

I am bit hopeful on blockchain, it is more reliable (difficult to fudge) and open as against the lenders like Punjab National Bank who can decide on their fancy on the money of other depositors. Blockchain is the way for not only currencies but for many other things including contracts and agreements. Hopefully then we will have a more balanced society and “trust” as digital money. Only fear is these “connected” bureaucrats, politicians and their page 3 friends, clique will first get their ill gotten money put in these digital currencies and probably try to make it murky too.

Disclaimer – story of engineering days is authentic, names of my friends are changed, I didn’t have any batchmate in Engineering named Nirav.