Prior to the existance of Layered Money there was simply money.Money is a tool which allows peers the exchange of goods within a consensus value.

Money

Let's see different forms of money used historicaly:<ul><li>Seashells</li><li>Animal Teeth</li><li>Jewelry</li><li>Livestock</li><li>Iron tools</li></ul>And then...GOLD & SILVER appeared.

Forms of Money

Initialy, gold and silver coins were issued as a first-layer form of money. Which means that coins where backed by its own value depending of the purity of gold/silver contained.First records of coins usage trace back to around 700 BC in Lydia, modern-day Turkey.Over the years, each region minted their own coins, which varied in gold/silver purity.

Gold & Silver Coins

Gold & Silver Coins were a huge implementation for humanity growth & evolution. Unfortunately they had some cons:<ul><li>Coin Multiplicy: There were too many different currencies, which was an issue to money velocity (how quickly money changes hands).</li><li>Risks of Physical Transfer: sending coins across land and sea was dangerous and a logistical nightmare during the medieval era.</li></ul>

Cons of Gold & Silver Coins Usage

"Always and everywhere, monetary systems are hierarchical."

First of all we need to see the difference between first layer & second layer money:<ul><li>A gold coin - First Layer Money.</li><li>A piece of paper (bills of exchange) that says: "The Medici banking family will pay one gold coin to the bearer on demand". - Second Layer Money.</li></ul>The gold coin is a first layer money because it is the basis of the monetary system. If the gold coin wouldn't exist the piece of paper wouldn't neither.

Medici Banking Dynasty

With the emerging layered money the arise of centralized entities was a matter of time.The first to appear and take control of the monetary system were the Bank of Amsterdam and the Bank of England.Both entities gave unpredecented power over the peoples' monetary affairs to their governments.

Centralizd Banking

It was created back in 1609 and thanks to the world's first joint-stock company, the Dutch East India Company (Vereenigde Oostindische Compagnie, or VOC).The VOC was the first example of equity investors providing capital in exchange for a share of ownership in the form of a paper certificate.As the shares increased in value, original investors wanted to realize gains by selling them for cash to new investors, and that is how the first stock market was born.All cashiers were forced to surrender precious metal to the Bank of Amsterdam and were issued BoA deposits in return.

Bank of Amsterdam (BoA)

The Bank of England was created in 1694 with the purpose to purchase new government bonds in an effort to rebuild the country after a crushing defeat of the English navy.It was tasked with taking custody of precious metal, issuing deposits, effecting transfers between depositors, and circulating notes as cash.The Bank of England and the Private Sector (private banks/non-government entities) created the third-layer of money.This third-layer money was issued by Private Sector and its value relied on both BoE Deposits and BoE Notes. Private Sector issued:<ul><li>Deposits</li><li>Bills of Exchange</li></ul>

Bank of England (BoE)

"Gold is money. Everything else is credit."

Shortly after an earthquake in 1906 rocked San Francisco, the US immersed into a financial crisis.Congress passed into law the Federal Reserve System on Decemeber 23, 1913.The Fed was founded to combat financial crises, and it would do this with a second-layer money called reserves.Wholesale money (Fed reserves) is money that banks use, and retail money (Fed notes) is money that people use.

Federal Reserve System

The Federal Reserve Act's stated the following purposes:<ul><li>To provide for the establishment of Federal reserve banks.</li><li>To furnish an elastic currency.</li><li>Means of rediscounting commercial paper.</li><li>To establish a more effective supervision of banking in the US.</li></ul>The Act also decreed that at least 35% of the Fed's assets must be held in gold.

Federal Reserve Act

Franklin Roosevelt issued Executive Order 6102 on April 5, 1933 which instructed all "gold coin, gold bullion, and certificates to be delivered to the government."The order was effectively a forced sale of gold in exchange for Fed notes (cash) by all US citizens and eliminate the people's access to first-layer money.In 1934 the US devaluated the dollar against gold by increasing the gold price from $20.67 to $35 per ounce.The goal was to attract foreign demand by having the cheapest prices.

No Gold for the People

In 1944, world leaders gathered at a hotel in Bretton Woods, New Hampshire and formalized that all currencies besides the dollar were forms of third-layer money within the dollar pyramid.Federal Reserve notes still promised the bearer gold coins on demand at $35 per ounce.Currencies would have fixed exchange rates with the dollar and wouldn't themselves be redeemeble for gold.

Bretton Woods

In 1971, the United States suspended gold convertability for the dollar; the suspension was supposed to be temporary, but the dollar never returned to any linkage with the commodity.Two years later, the modern era of free-floating currencies began, officially ending the Bretton Woods agreement.Gold transitioned to the informal role of neutral money, still held today by governments and central banks around the world as first-layer, counterparty-free money.

Eliminating Gold Convertibility

"Today, our financial system is broken. It works, but the fractures within make it prone to ruptures. It almost collapsed in 2008 and again in 2020. The Federal Reserve has done its job as lender of last resort in each circumstance and kept the financial system alive, but everybody now understands the Fed is the world's only true source of liquidity, and without its support the system couldn't stand on its own."

Bitcoin originated back in 2008, forty-six days after the fall of Lehman Brothers. Its whitepaper was sent to a very small online community called the Cryptography Maling List.The paper was written by Satoshi Nakamoto. The creator remains unknown even now, something that strengthens Bitcoin's neutrality, as no leader exists who wields too much influence, can be coerced or blackmailed, or will try to change Bitcoin's rules.Satoshi would send his last knwon correspondance in April 2011 and disappeared from the Internet forever.

A Renaissance of Money

"A puely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial instituton."

It is a completely revolutionary form of money which is characterized by being:<ul><li>Immutable and Antifragile.</li><li>Secure and Trustless.</li><li>Transparent and Neutral.</li></ul>Bitcoin officially refers to two things:<ol><li>The Bitcoin software protocol.</li><li>The monetary unit within that software.</li></ol>Bitcoin uses the Secure Hash Algorithm 256 (SHA256) as security mechanism.

Defining Bitcoin

BTC is digital gold. It's a form of money. People trust BTC because they believe it to be rare and valuable. It has a price in hundreds of different currencies. It doesn't originate from the balance sheet of a financial institution, just like gold doesn't.BTC is digital land. There are only 57 million square miles of land on Earth. Similarly, there will only be 21 million BTC. This digital land is divisible into the tiniest of parcels.Bitcoin works similarly to email. Email addresses can be shared with anybody, but only the password holder can access received messages.

Bitcoin Analogies

"The steady addition of a constant amount of new coins is analogous to gold miners expending resources to add goldto circulation."

The Bitcoin blockchain most fundamentally describes a record of transactions simultaneously kept by all peers in the network. Blockchain can be understood as a Distributed & Public Ledger.Bitcoin mining is the process of verifying new transactions to the Bitcoin digital currency system, as well as the process by which new bitcoin enter into circulation. For each block successfully mined the winner of the Proof of Work problem of that block gets awarded with 6.25 BTC as an incentive to maintain the blockchain running. This BTC issuance is reduced every 210,000 blocks mined to the half.

Blockchain and Bitcoin Mining

"The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronicaly, but they lend it out in waves of credit bubbles with barely a fraction in reserve."

"Actually there is a very good reason for Bitcoin-backed banks to exist, issuing their own digital cash currency, reedemable for bitcoins. Bitcoin itself cannot scale to have every single financial transaction in the world be broadcast to everyone and inlcuded in the block chain. There needs to be a secondary level of payment systems which is lighter weight and more efficient. Likewise, the time needed for Bitcoin transactions to finalize will be impractical for medium to large value purchases."

"Bitcoin-backed banks will solve these problems. They can work like banks did before nationalization of currency. Different banks can have different policies, some more aggressive, some more conservative. Some would be fractional reserve while others may be 100% Bitcoin backed. Interest rates may vary. Cash from some banks may trade at a discount to that from others.I believe this will be the ultimate fate of Bitcoin, to be the "high-powered money" that serves as a reserve currency for banks that issue their own digital cash."

The invention of Bitcoin has changed money forever and forced central banks to respond with their own iteration of cryptocurrency.Worldwide, central banks are preparing to launch central bank digital currencies (CBDCs) as another second-layer monetary instrument originating from their balance sheets on par with reserves and paper currency.It's uncertain how CBDCs will be constructed, how similar or different their technology will be to Bitcoin's, or the impact they'll have.

Central Bank Digital Currencies

Understand money history and the layers that conform our monetary system, as well as the revolutionary form of money Bitcoin.

In this fascinating deep dive into the evolution of monetary systems around the globe, Nik Bhatia takes us into the origins of how money has evolved to function in a "layered" manner. Using gold as an example of this term, he traces the layers of this ancient currency from raw mined material, to gold coins, and finally to bank-issued gold certificates. In a groundbreaking manner, Bhatia offers a similar paradigm for the evolution of digital currencies. Bhatia's analysis begins in Renaissance Florence with the gold Florin coin and a burgeoning banking culture, continues with the evolution of central banking, and concludes with a vision for the future of our international monetary system. As central banks around the world prepare to launch their own crypto-competitors, Bhatia illustrates how the invention of Bitcoin created a seismic shift in money and merged the monetary and cryptography sciences. His unique analysis of "layered money" illuminates money markets for the general reader and shows how Bitcoin is becoming a trusted global currency. Readers will come away with an understanding of the mechanics of our financial system, why the dollar is deeply entrenched despite its state of disrepair, and how Central Bank Digital Currencies (CBDCs) and cryptocurrencies will interact in our new monetary future.

Layered Money

The goal of Satoshi Nakamoto's invention of Bitcoin was to enable two willing parties to transact directly without needing a trusted third party.   The reason is that modern banks have flaws and disadvantages to the consumer. Due to their centralized nature, they can be unreliable, vulnerable to security threats, charging fees and even biased. This is why cryptocurrencies will pave the way for a better banking and payments experience in the future.

Why cryptocurrencies exist

You entrust your money to banks, and in turn, they become gatekeepers of your finances. If you use mobile banking and their servers are down, you can't access your finances unless you go to the local ATM and withdraw cash. Cryptocurrencies never go out of service as they use automated systems and are always accessible.  Cryptocurrencies are bought through crypto exchange platforms and stored in safe and secure crypto-wallets. They are decentralized and operate very securely.

Unreliability of traditional centralized banks

Banks make over $15 billion a year in overdraft fees. But fees can take many other forms, including late penalties, returns, using an out-of-network ATM, money transfers, inactivity, international remittances fees, and customer support. Cryptocurrencies don't charge you so many fees for transactions. The most common fees for crypto transactions are called gas fees, a reward given to miners for entering transactions on the blockchain or executing the transactions.

Crazy banking fees

With centralized banks, large amounts of cash or international payments can take a week or more. Cryptocurrency transactions are quick and can handle more daily transactions than traditional banking systems. The financial service issuing officer can deliberately delay transactions or even freeze your assets. Thousands of people have their life savings frozen by banks and exchanges every month.

Transactions can take a long time

Bank transactions depend on account numbers and personal information, making them open to biases.  Cryptocurrencies don’t judge or profile you. The decentralized nature minimizes human interactions, which makes them free from biases.

Bank transactions and financial services are open to biases

Many platforms today share your data with third parties.  Centralized banks can share your personal and sensitive data, such as passport or ID information, residence address, SSN, and employment information with their affiliates or partners or third-party buyers,

Data collection

According to a survey by Accenture, banks suffer an average of 85 attempted serious cyber attacks a year, and one-third are successful. As a result, some people lose large sums of cash from their accounts or get scammed. The systems are also prone to fraud and especially money embezzlement. Crypto relies on a distributed network of computers all over the world. Crypto is more secure and reliable because it uses anonymous ID numbers in transactions and is tamper-resistant.

Security Issues

Banks make over $15 billion a year in overdraft fees according to the federal Consumer Financial Protection Bureau.

Stashed ideas

The Real Problem With Centralized Banks And Why Crypto Is Inevitable

One of the leading arguments against crypto is its extreme volatility. Between April and June 2022, Bitcoin's value more than halved. Established companies like Coinbase, a popular crypto exchange, have announced layoffs. Crypto sceptics argue that the crash has revealed crypto as a Ponzi scheme. While some of the criticism is well deserved, the focus on price volatility isn't as strong an argument. Instead, it reveals a misunderstanding of what different crypto assets represent.

The Main Argument Against Crypto

Most projects are barely five years old. Eventually, different coins are meant to serve different functions. Today, they all more or less act as startup equity with the distinctive properties of having liquidity and price discovery from the start.

Crypto is a Young Industry

<ul><li>Startup equity is a core concept in business. Every type of startup falls into this category. However, traditional startup equity has no liquidity - you don't invest and expect to flip your shares a month later.</li><li>Crypto is different because a token can start trading right away. But early liquidity has benefits and drawbacks.</li><li>Everyone from central banks to Wall Street is exploring blockchain technology because the features of cryptocurrency enable cheaper to operate and more dynamic markets. Yet, the downside to enhanced efficiency is extreme volatility.</li></ul>

Equity, Liquidity, and Volatility

With Cryptocurrency, everything is borderless and the total addressable market is huge. Success could mean significant value accrual to its token, but the project could also fail. The dilemma is increased because most digital assets can’t be pigeonholed into traditional categories, making valuation much harder. Crypto investors can't rely on established metrics such as a stock's price-to-earnings (PE) ratio. Most digital assets are a hybrid and change from one category to another throughout their lifecycle.

Everything Is Bigger on Blockchain

Price swings give important information to founders and investors, especially during the crucial adolescent stage of any startup.
Universal access, immediate price discovery, and greater transparency contribute to scams and shady behaviour in crypto. But with crypto, even the scams are transparent.
The crypto industry has a lot of growing to do and the current downturn clearly offers some hard lessons. Investors and entrepreneurs are learning not only what is possible in this new ecosystem, but also what isn’t.

Volatility Isn’t Always Bad

One of the leading arguments against crypto is its volatility. In the wake of the most recent downturn, critics have doubled down on this point. But the argument misses an important insight about how crypto assets differ from those in traditional finance. While different coins are meant to serve different functions, today they all more or less act as startup equity — and often serve as hybrid assets, treated as commodities, currency, store of value, and incentive for the validators that make a project function. Unlike traditional equity, crypto assets have liquidity and price discovery from the start. This does mean that crypto markets are more sensitive to signals and changes. The overlooked feature of this, however, is that price swings communicate important information to founders and investors, and builds previously unseen levels of transparency into the system.

What Skeptics Get Wrong About Crypto’s Volatility

In 2021, NFTs (or “non-fungible tokens”) surged in popularity.the graphic artist “Beeple” sold one NFT for a whopping $69 million USD.Since then, artists and investors have wondered if non-fungible tokens represent a new potential market.

NFTs

If a good is “fungible,” it means it can be exchanged for another identical item.Example: if I trade $1 dollar bill for another $1 dollar bill, I’m left with the same thing.Examples of fungible goods include dollar bills, stocks and Bitcoin.In contrast, non-fungible goods cannot be exchanged for the same thing—they’re unique.Examples of non-fungible products include land and sports memorabilia.Non-fungible tokens, exist on the blockchain—a shared digital ledger.

non-fungible

Blockchain technology is what gave rise to cryptocurrencies like Bitcoin, but it also supports NFTs.Any piece of digital content —digital art, music, gifs— can be transformed into an NFT and assigned a unit of code that can act as verified proof of ownership.

Blockchain

Think of NFTs as a digital signature or autograph.This “signature” is what gives digital assets one-of-a-kind value on the internet.Anyone can copy and paste an NFT, but only one person can own the original, verified signature.This scarcity and authenticity is what gives NFTs value, just as they do for physical art.NFTs allow creators to establish direct relationships with customers and create a loyal community online.

NFT Is A Signature

NFTs are typically sold on several main marketplaces including OpenSea, Nifty Gateway, and Mintable.To purchase an NFT in a marketplace, you’ll need to have cryptocurrency to spend.You’ll also need to set up a digital wallet to complete the transaction.BEWARE: Some experts warn the NFT market is a bubble that will pop: when there’s a ton of hype around an emerging market, risk can be high.Other experts note NFTs may be warming the planet because it takes an immense amount of energy to run the computers that support blockchain technology.

NFT Purchases

NFT Masterclass

It isn’t easy to separate genuine cryptocurrency recommendations from the scams; there are lots of sharks out there waiting to take your money.Reports of crypto investment scams surged to 7,118 in the first nine months of 2021. This was up 30% on the whole of 2020, according to Action Fraud, with the average loss per victim at £20,500.So when you’re confronted with a lot of information about a cryptocurrency, take a step back from the hype.Try to look critically at the project or platform. How many users does it have? What problem does it solve?

1. Have a strategy for crypto trading

Some people offering crypto trading tips might not have your best interests at heart. So don’t get stung making the same mistakes as others.Set limits on how much you invest in a particular digital currency and don’t be tempted to trade with more money than you can afford to lose. Cryptocurrency trading is a high-risk business and more traders lose money than don’t.

2. Manage risk

It doesn’t pay to have too much invested in one single cryptocurrency. Or as they say: don’t put all your eggs in one basket.As with stocks and shares, spread your money out among different digital currencies.This means you don’t risk being over-exposed should one of them plummet in value – especially as the market prices of these investments are highly volatile.

3. Diversify your crypto portfolio

Prices can rise and fall quite dramatically day to day, and novice traders are often duped into panic selling when prices are low.Cryptocurrencies are not going to go away. Leaving your money in the crypto market for months or years at a time could offer you the best rewards.

4. Be in it for the long term

Just as with regular stocks and shares, it can help to automate your crypto purchases to take advantage of pound-cost averaging.Most cryptocurrency exchanges, including Coinbase and Gemini, allow you to set up recurring buys.This is where crypto investors tell the platform to purchase a fixed amount of their preferred cryptocurrency every month – for example, £100 worth of bitcoin. It means they get a bit less of the currency when prices are high, and a little more when prices are low.

5. Automate purchases

Trading bots can be useful in some circumstances, but they aren’t recommended for beginners looking for crypto investment tips. Often, they are just scams in disguise.If real algorithm existed that timed your buy and sell trades to perfection, everyone would be using them!

6. Use trading bots

The latest research from UK regulator the Financial Conduct Authority showed that about 2.3m Brits own cryptocurrency in one form or another. It’s very easy to get caught up in the hype of news headlines. Crypto mistakes are startlingly common, and below we list some of them.

common crypto mistakes

Low prices do not always represent bargains. Sometimes prices are low for a reason! Watch out for cryptocurrencies with falling user rates.Often, too, developers leave a project and it stops getting properly updated, making the cryptocurrency insecure.

1. Buying just because the price is low

Some of the more suspect trading platforms suggest you should maximise your money by betting as much as possible. This is a quick way to the poor house.Better crypto investment tips would be to only use a certain proportion of your investing capital — say 5% — and always keep an emergency cash fund in an easy access savings account that never gets invested in the market.

2. Going ‘all-in’

There’s nothing easy about making money through trading any kind of financial asset, whether stocks and shares or commodities like silver and gold. The same can be said for cryptocurrency.Anyone who says different is probably trying to trick you into making crypto mistakes.

3. Thinking crypto is ‘easy money’

If you have a hardware wallet for storing your crypto offline, forgetting your keyphrase is like losing the keys to a bank vault.Without your keyphrase, all your cryptos will be irretrievable.

4. Forgetting your crypto keyphrase

The best crypto tips will tell you to stick with big name crypto wallets, such as Ledger, Trezor, Exodus or MetaMask.Dodgy or unknown wallets that you find on Google Play or the App Store can steal your crypto funds with dodgy code.

5. Malicious wallet software

With so many cryptocurrencies on the market, it can be difficult to tell what’s real and what’s not.When you invest in fake coins, criminals can steal your identity and often your hard-earned money. Don’t take anyone else’s word for it and use as many sources as possible to do your own research on coins before you buy them.

6. Fake coins

With this handy guide any beginner can learn how to come up with the best trading strategies and avoid common cryptocurrency mistakes. 

Layered Money

The Real Problem With Centralized Banks And Why Crypto Is Inevitable

What Skeptics Get Wrong About Crypto’s Volatility

NFT Masterclass

Cryptocurrency Mistakes & Tips

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