03 What Happened With Money

Metal Representatives

For many centuries, metal coins were the units by which civilisations transacted. They were scarce, could not easily be counterfeited, and required work to produce it that near enough represented the value on its face. But it being a ‘thing’ and a heavy one at that, there was a requirement to not move it around too much as that was further time and energy. Every time someone lifts up kilograms worth of coins around from point A to point B, that was exerting time, effort and energy just to use it, preserve it and transact with it. It became more and more frequent that people would just leave it with someone trusted who could maintain it. And in China, they invented their ‘latest tech’ which was to use ‘certification’. The idea is as follows:

1. You leave your money with someone trustworthy,
2. You receive a certificate in return that represents what they are holding,
3. You can give this certificate to anyone which could represent the transfer of ownership of that gold coin to them,
4. If the certificate was slightly damaged or torn, thats not a problem, because its only a ‘certificate’. The value is not in the paper, but in the coin held by the trusted party,
5. If you needed smaller denominations, you could issue different certificate with a smaller share of the coin on it,
6. Because its made by paper, its magnitudes lighter than carrying the coin, and because its ‘virtual value’ is just what’s written on it, any amount of coins can be represented by a single piece of paper.

That was the latest tech at the time, and it soon spread. The idea of using certificates and a custodial vault to look after everyones gold. But as you can image, this tech was not safe from human manipulation. Issuing certificates that have matching coins requires trust of another human. And time and time again, this trust was broken by the issuing of more certificates than there are coins. There has never ever been a paper based currency that has survived longer than a century. They have always all gone to zero. In opposition to gold, which has never gone to zero. Not yet.