Recently, one of the major news items specific to Shiba Inu (CCC:SHIB-USD) is that the underlying team issued a beta version of its decentralized autonomous organization (DAO) for the purpose of facilitating SHIB users more control over cryptocurrency projects and pairs on the ShibaSwap platform.
My point in mentioning this is not to get into a discussion about DAOs, which Cooper Turley, an expert on the subject, describes as “an internet community with a shared bank account.”
Rather, I’d like to address a much more fundamental point: Shiba Inu, as its creative team mentioned, is not just a meme coin.
The community is legitimately attempting to build an ecosystem around SHIB tokens. For many, this harkens back to the day when the U.S. had its own proliferation of private currencies, with the worst-offending variety labeled as wildcat banknotes.
Although the sources I used to draw comparisons between cryptos like Shiba Inu with the private notes of that time appeared to suggest that decentralized currencies led to failures, I recently found other sources that object vehemently to that characterization.
Some go even further, providing a rather diametrically contrasting viewpoint.
Perhaps the most credible of this rethinking of private or wildcat notes arrives courtesy of Lawrence H. White, a senior fellow at the Cato Institute, and professor of economics at George Mason University since 2009. White provided evidence that both in the U.S. and across the world, private currencies have had a rather successful tenure.
Notably, White mentioned that Canada had a lightly regulated banking system up until 1935, when the country established a central bank. Up to that point, Canadian banks remained robust through various economic troubles, including the paradigm-shattering Great Depression.
Can SHIB and other cryptos provide a modern-day equivalent?
Shiba Inu Isn’t 100% Speculative But Perhaps Close Enough
Citing the work of economic historian Kevin Dowd, White mentioned that the allegedly true record of most historical free banking systems were “considered as reasonably successful, sometimes quite remarkably so.”
Further, White wrote the following:
In particular, [Dowd] notes that they “were not prone to inflation,” did not show signs of natural monopoly, and boosted economic growth by delivering efficiency in payment practices and in intermediation between savers and borrowers. Those systems of plural note issue that were panic prone, like those of pre-1913 United States and pre-1832 England, were not so because of competition but because of legal restrictions that significantly weakened banks.
Under this framework, which White asserts is the accurate picture of so-called wildcat banking, it seems that Shiba Inu may enjoy historical precedent, for lack of a better phrase. It appears back then in the analog age as it does today in the digital age that people prefer delivered “efficiency in payment practices and in intermediation between savers and borrowers.”
If that’s honestly the case, then maybe — just maybe — Shiba Inu could survive and thrive as a digital asset and ecosystem. And if not SHIB, certainly some other cryptos of repute.
However, I still believe that people should exercise extreme caution with Shiba Inu and every other virtual currency. While I may be forced to concede certain points of my prior arguments — given these revelations of which I was not privy to earlier — I remain troubled at the notion of investing too heavily in decentralized protocols.
It’s almost certain that successful wildcat notes featured stable valuations and mutual acceptable at par value. But when valuations can fluctuate at a magnitude of 50X, such volatility inherent in many speculative cryptos doesn’t seem encouraging for long-term viability.
The Debate’s Not Quite Over
Of the critics of comparing the likes of Shiba Inu to wildcat banknotes, George Selgin, a senior fellow and director emeritus of the Center for Monetary and Financial Alternatives at the Cato Institute and professor emeritus of economics at the University of Georgia, appears to be the most upset.
Among other assertions, Selgin claims that the scandalous tales of wildcat banking are overexaggerated. If that’s genuinely the case, he has every right to be upset.
The problem for me is that if wildcat banking wasn’t as damaging for the U.S. monetary system — or if it was a positive experience to go the other end — these “contrarian” researchers have a serious uphill battle to climb.
For instance, the official Nebraska government’s website notes how wildcat notes “issued by some Nebraska territorial banks caused considerable financial instability.” It’s possible that the pro-wildcat (my term, not theirs) researchers are absolutely in the right. However, I’m going to have a hard time contradicting a state government’s declarations.
At this point, I think the only thing we can agree upon universally is that when it comes to studying history to ascertain the future trajectory of risky investments like Shiba Inu, careful due diligence is non-negotiable.
I’ve presented both sides of the argument. The rest is up to you.
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On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.