Money Without Boundaries

How Blockchain Will Facilitate the Denationalization of Money

Thomas J. Anderson

• Publisher: Wiley
• Year: 2019
• ISBN:
  9781119564058
• Edition: 1
• Topic: Negocios y empresa
• Subtopic: Comercio electrónico

Discover how blockchain will facilitate a new currency that will transcend space and time

Largely inspired by The Denationalization of Money by Fredrich Hayek, Money Without Boundaries' ideological foundation is also inspired by economists and thought leaders like Milton Friedman and Irving Fisher, advancements in capital markets over the past 50 years, and the convergence of old and new technologies. Author Thomas J. Anderson explains how blockchain acts as the filter and the glue, making it all possible.

Compared with other currencies, blockchain-managed money markets are more straightforward and transparent. It is easier to monitor, understand, and assess the quality of their "full-faith and credit." Money Without Boundaries shows how not only money, but also the process of borrowing and lending, will evolve to be conducted in a 100% trusted, secure, transparent, open architecture environment. Anderson begins with a history of money and discusses the rise of cryptocurrency, concluding with a comparison of decentralized money markets to all other alternatives.

Money without Boundaries:

•Demonstrates how blockchain technology allows full transparency

•Explains how blockchain makes it possible for money to be fully commoditized

•Explains how this fully market-based, decentralized, self-regulating system has vast implications throughout the global financial system

•Shows how everyone will benefit when they have the opportunity to compete on "full faith in credit"

If you are interested in cryptocurrency, money, monetary theory, or understanding how the applied uses of blockchain technology will change your everyday life, this is essential reading.

Part One
THE FOUNDATION

Chapter 1
Money Through Time – A Different Perspective

“The term money has two very different meanings in popular discourse. We often speak of someone ‘making money,’ when we really mean that he or she is receiving an income. We do not mean that he or she has a printing press in the basement churning out greenbacked pieces of paper. In this use, money is a synonym for income or receipts; it refers to a flow, to income or receipts per week or per year. We also speak of someone's having money in his or her pocket or in a safe-deposit box or on deposit at a bank. In that use, money refers to an asset, a component of one's total wealth. Put differently, the first use refers to an item on a profit-and-loss statement, the second to an item on a balance sheet.”

– Milton Friedman

Before humans had, or even considered having, a universal medium of exchange, they traded one commodity directly for another – two goats for an ox or wheat for labor – but they had no real means of measuring the relative value of what they were trading. So began the search for a universal medium of exchange – money –and throughout history, humans tried everything from cowrie shells to cigarettes. But cowrie shells, used in ancient times on the African coast,¹ broke and wore down, and more and more of them kept washing ashore. How valuable could they be if there was a seemingly limitless supply? Cigarettes, used as currency in Germany just after World War II ended,² were certainly scarce enough, but inevitably they got smoked (for after all, their value lay in the relief they provided people during terrible times).

People in the ancient Mediterranean were the first to use metals, including gold, electrum, silver, iron, and copper, as money. Some of these metals were so abundant and easy to procure that they never became valued. Of them all, gold, silver, and copper stood out as precious and worth pursuing as currency, but gold rose to the top for its rarity, durability, malleability, near indestructibility (it doesn't tarnish or burn), and sheer beauty. Throughout the ages, gold has carried with it an almost mystic quality, which is why it became the precious metal most favored by kings.³ In The Power of Gold: The History of an Obsession, Peter L. Bernstein writes that gold rose to the top for practical reasons as well. It is so dense that small amounts can serve as large denominations, and every piece – in the earring, applied to the halo in a fresco, on the dome of the Massachusetts State House, in the flecks on Notre Dame's football helmets, in the gold bars hidden away at Fort Knox – reflects the same qualities.⁴

But it is gold's scarcity – only 125,000 tons exist, as far as we know⁵ – that has given it enduring value. Empires have been built and destroyed throughout the ages, and countless lives have been lost in the pursuit of gold. “The history of humankind – sometimes not so human – would have been different without the wars and invasions that had, as a basic aim, the pursuit of power by the possession of gold,” Thomas Hoving and Carmen Gómez-Moreno wrote in a Metropolitan Museum of Art Bulletin in 1972,⁶ just a year after the United States went off the gold standard. The museum curators went on to point out, poetically, that “with incredible effort it is extracted from the depths of the earth, and much of it is buried again in bank vaults as bullion.”⁷

Neolithic humans first discovered gold nuggets carried by rivers during the sixth millennium BC, but they were too soft to be of much use to make the tools and weapons that primitive people needed in their fight for survival. Eventually, as life got easier and cultures grew more sophisticated, gold's allure began to grow. In the fifth century BC, the Greek poet Pindar said gold was “a child of Zeus, neither moth or rust devoureth it, but the mind of man is devoured by this supreme possession.”⁸ Ancient Egyptians considered it solidified fire, like the sun, and made it a symbol of their sun god Ra,⁹ and during the Bronze Age (2200–1100 BC), they began using gold as money, in the form of rings or pellets of fixed weight for small transactions and by weight for larger ones. As the Egyptians' trade routes took them south to Crete and Cyprus, where people still traded in oxen, they adjusted their gold money system to work with oxen as the standard – but instead of trading the animals themselves, they represented them with an oxhide-shaped copper ingot or a small gold ring or pellet called a talanton.¹⁰ Gold was the preferred metal as coinage became established everywhere, mining engineer and metallurgist Zay Jeffries wrote, because it was “the most beautiful metal, the heaviest substance known until the platinum metals became available, easy to fabricate, difficult to counterfeit, scarce but not too scarce, durable, dividable into small units without impairment of its value, easy to evaluate by weight and assay, valuable per unit of weight, transportable and storable.”¹¹

Silver and copper were used along with gold in early coinage, but from the beginning it was clear to everyone that silver, which blackens and changes over time, and copper, which can be ruined by moisture in a matter of days, were inferior metals.¹² Croesus, the last king of Lydia from 560 until 546 BC, was the first to acknowledge the lesser value of silver in relation to gold when he decreed that one gold coin was equivalent in value to twenty silver coins – an equation that would influence gold and silver value ratios for millennia. After Persia defeated Croesus as it built the Achaemenid Empire, Darius the Great began issuing gold darics and silver sigloi that were minted in the millions by Achaemenid kings for the next two centuries. Those coins influenced a huge swath of history, from the downfall of Athens to the corruption of Sparta to the Sicilian wars.¹³

Rulers, as they will, learned early on how to manipulate the money system to their best advantage. In the fourth century, for example, Dionysius of Syracuse was heavily indebted to his citizens, so he forced everyone to bring him every one of their one-drachma coins, which he promptly had re-stamped as two-drachma coins.¹⁴ That was just one of the tricks early world leaders employed when they needed money. They also debased coins by alloying, short weighting, and even clipping off the edges to melt into new ones. In a cycle that would repeat itself again and again down through the ages, their debasements inevitably triggered inflation, sometimes so massive that nations had to start again with new currencies.¹⁵ Many would even argue that continuous currency debasement and runaway inflation is what took down the Roman Empire.

Romans used rough, broken lumps of bronze or copper as currency until the first silver coins were minted in 187 BC.¹⁶ In 49 BC, when Julius Caesar arrived in Rome to beg...