a street-born TL;DR theory on vaporizing money and loss of collective value
Busking in the streets of Europe was an essential part of my music training. At the same time, it turned out to be fundamental for some key understandings of how monetary economy works, years before I’ve got to know Blockchains. Indeed, this first moment marked the start of my growing curiosity towards the monetary system, leading me eventually into Ethereum’s lap (thanks forever Chris Hobcroft).
Here’s a short theory I came up with one day, as I was counting my hard-earned 20 euros in 1 hour of playing… mostly made of copper coins.
COPPER COINS: 1 cent, 2 cents, 5 cents.
Their purposes are diverse, what we can say is that:
- they help pricing policies (you cannot always round up or round down the price in a scaled business model) and
- they help ‘legit customer deception’ by setting $ 1.99 like prices (something dumb in your brain will accept the 1 as more worth-memorizing than the .99).
So, as I was counting my 20 euros in coppers, something crossed my mind: ”I am now counting my daily pay in items that normally I would randomly find in my pockets, in drawers, between my car’s seats…”
I would then calculate an average amount of 1 cent coins I vaporize (they might not be lost) around me every year by 52 cents/year, imagining I would lose track of a 1-cent coin every week.
The economically active population in Europe in 2019 was roughly 240M (source). By multiplying my personal money vaporization rate to that population number, we get the EUR 124.800.000,00. An insane amount of money, if you think that sum could benefit each European country with 2.5M euros every year to assign to social projects.
What is the factor behind this vaporization? the “CopperCoin” token format, a very tiny metal round that would have higher chances of getting lost. Most importantly, a token format that we cannot “insert” into, say, the way bigger and more noticeable 1-euro coin token format.
A reasonable answer to this scenario is that, if everyone vaporized money around at the same rate, the purchase power will still be the same, resulting in a zero-sum game (read the full explanation by @sbowman on satellite.earth) . This would be true in a global scenario, where the currency in question was a global one and everyone had ‘vaporized’ an amount of cents proportional to her/his purchase power. In reality, these vaporized EUR 125M per year are still being emitted and accounted by the ECB, which would have its own impact on, for example, the exchange rate USD/EUR, without having that tiny bit of inflation backened by any economic activity, let alone Welfare.