Hello, I am James Bayley, the founder of CRYPTOSTAR.MONEY and an expert on cryptocurrencies and blockchain technologies. I have taken up Tim’s kind offer to write for the Continental Telegraph and I hope that my weekly column will be of interest to you. Please post your questions and comments below.
The Big Questions
The first thing that anyone asks about Bitcoin is “will it go up?”.
The second thing they ask is – is it all a scam?
Having got that out the way we can get onto the interesting stuff.
Free Speech, Free Markets, Free Money
At the Continental Telegraph we value free speech and free markets because it is a human right to express your opinion and use your own property as you wish. We are using “free” not as in “free beer” (no cost) but as in “freedom”.
What might Free Money look like? Before we can answer that question, it is necessary to think a bit about why money exists and what is used for. This is the topic of this week’s column.
Hunter-gatherers have little use for money but it became a necessity when people started settling down in large groups and growing more food by division of labour and specialisation. The blacksmith who makes a plough could be paid in wheat, but wheat is not an ideal medium of exchange because it is tricky to spend in the pub. The farmer who grows a more food than he needs for himself might want to store it safely in the temple so he can sell it later but he will want a receipt. Early civilizations quickly found that tokens could be used as medium of exchange and represent a store of value.
People quickly found new users for token. For example, if Jim got into a fight in the pub and had to pay a fine he could use them to “settle his debt” and I am sure that every Mesopotamian housewife could have told you the number of wheat tokens required to purchase a sheep carcass at the market (“unit of account”).
Technology changes but people don’t and the invention of tokens was rapidly followed by the emergence of token forging as profitable career. This is a huge societal problem because no farmer will put his surplus food in the temple if his tokens become valueless due to forgery.
Fortunately, the solution was close at hand. Cities require kings to keep the peace and defend them and kings proclaimed that they would cut the dangly bits of anyone who forged their currencies. As “Realist not Conformists” we know that any potential forger will carefully weigh up the cost of forging coins versus the gains. The threat of castration was not much of deterrent because life was cheap so a technical arms race began with the goal of creating tokens that could not be counterfeited.
Don’t miss next week’s exciting episode “From Coins to Bitcoin”.