Cash Is a State-Backed Utility – Part 3

September 1, 2016     By : Mehul Desai

The only reason cash works, as in everyone accepts it, everyone trades it, everyone saves it, and everyone bets on it – literally and metaphorically – is because the state backs it.

Cash’s killer application is its ubiquity in terms of acceptance and usage.

Cash’s design is highly intuitional. It does not require a user manual. Case in point, our three-year-old was never tutored on the importance or usage of cash but somehow figured it out very early in his existence.

Cash’s design is universal. For some unexplainable reason, if we can deal with cash issued by one state, we can very easily adapt to cash from a different state.

Cash is extremely simple. There is only one purpose assigned to its creation. There are no value-added services, no hidden features, no advertising (yet), no behavioral analytics running in its background (yet) and no social media (yet) trending it to obscurity.

Cash is, largely speaking, anonymous. Although we can infer that anything with a unique serial number, hypothetically speaking, should be traceable. But given its scale and the inability to figure out which cash is worthy of tracking versus which isn’t, it is safe to assume that it is impossible to trace cash, practically speaking.

All of the above withstanding, the most endearing quality of cash is that everyone in the physical world accepts it. I do not know anyone, who in turn does not know anyone, who in turn does not know anyone, who will not accept cash.

There are some significant downsides to cash, specifically the impracticality of carrying around a lot of cash and the related security implications. But after taking everything into consideration, it has been proven beyond doubt that people all over the world have priced this risk into their acceptance of cash. We have a focus group of seven billion and counting to back up this study.

Cash Is a State-Backed Utility – Part 3

While the argument holds that cash does not hold up for virtual transactions, we will come back to those relatively small albeit growing volume of use-cases shortly.

Along with its simplistic and intuitional design, its universal acceptability (nay, desirability) makes the usage of cash impossible to beat.

With all of the above withstanding, most of which just about everyone is in agreement with, the aspect of cash we should really focus on is its ability to transfer value from the debtor to the creditor – consistently and unconditionally. Simply put, if a banknote from a debtor promises to transfer to the creditor a value of $100, the creditor will receive $100 – not $91 or $99.99 – but always $100.

Needless to say, there is a huge cost to ensure this pervasive system works consistently, and can be constantly scaled and sustained. The business model behind cash, which fundamentally has a value chain of two, is simple. The massive cost of printing, circulating, and retiring cash is borne by the people, for the people.

Once again, cash is what it is because it is a state-backed utility.


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Mehul Desai

Mehul Desai has spent over 20 years in the areas of intellectual property, product development, business development, strategy and international operations, focusing on ICT and related applications worldwide. Mehul has done pioneering work in the field of secure transactions for mobile phone users, evolving the Digital Wallet, to a Mobile Wallet, to a Lifestyle Container. Mehul co-founded C-SAM, Inc. in 1998, which was acquired by MasterCard Worldwide in 2014.
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