1636, the Netherlands. The highest per capita income. The better people live, the more of the economy is focused on luxury goods. And as we know, in terms of luxury there is no limit to human imagination.
And then someone, having acquired the most expensive mansion, handmade furniture, and incredibly beautiful dishes, decided to turn his attention to tulip bulbs. The fact is that some varieties of tulips are subject to mutation: they have an unusual color and shape. To possess such a flower was considered a sign of the finest taste, and, of course, wealth.
And then the prices for mutated tulip bulbs skyrocketed. Some copies could be easily exchanged for a mansion. According to the data now available, it was common to buy a tulip for 1,000 guilders, which was equivalent to 10 kg of silver or almost a kilogram of gold. For example, a skilled artisan earned about 300 guilders a year. People entered into contracts and receipts and also used bulbs (and contracts for them!) as a means of payment.
Why did gardeners across the country decide to grow tulips, and the rich decided to buy them? History tells us that in addition to the effect of luxury, there was some symbolism for the Dutch. This whimsical and changeable flower brought to the Netherlands from the East was considered a sign of beauty, and its owner had a refined taste.
However, in February 1637, everything changed dramatically. Gardeners and farmers in search of easy money switched from the production of vital goods to the cultivation of flowers, which led to a shortage of economically important goods, an instant loss of interest in insanely expensive tulips, and the financial bubble burst in just a few days. Historians do not have financial documents from those years, but given current knowledge, it can be assumed that manufacturers, investors, and even flower buyers themselves had a hard time when assets that yesterday cost ten kilograms of gold depreciated today.
During the period (already a very recent!) of growing interest in Bitcoin and the emergence of other cryptocurrencies, many began to compare the new industry with the very tulips from the Netherlands, thereby equating cryptocurrency with a financial bubble. Undoubtedly, this was due to fear and unbelief. Let’s explain to inquisitive gardeners and luxury collectors from the 17th century what was the problem with tulips and why modern cryptocurrency does not have such problems.
- Tulips, unlike cryptocurrencies, could not be a store of value. Obviously, flowers are short-lived, and unblown bulbs do not guarantee that a tulip of the desired shape and color will grow from them. It also follows that when growing bulbs, the farmer cannot be sure that his crop will cost a penny. With cryptocurrency, everything is exactly the opposite: by acquiring assets, you can be sure that these assets will remain so even after a long time.
- Tulips, like any product in the physical world, require transportation and special storage conditions. Tokens however are sent, bought, and exchanged in minutes.
- Tulips are also untenable as a means of payment: one flower cannot be divided into parts, because this will kill him. Cryptocurrency is easily divided into many parts, which makes it a convenient means of payment.
- Cryptocurrency is protected by cryptographic methods and works on the blockchain, which makes it almost impossible for any financial fraud. Stealing flowers is a million times easier than stealing a digital wallet!
- Cryptocurrency is not an end in itself, as it was with tulips. No one buys tokens because it is prestigious – cryptocurrency is a non-fiat currency, so its value is determined by the market, not the desire of the rich.