CRYPTOCURRENCY FOCUS
The history of money, a collective fiction Matthew Amlôt, Editor, CPI Financial, writes about how currency has evolved from the earliest days to modern cryptocurrency
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here is a collective fiction we all participate in. That collective fiction is money. Money has no intrinsic value. Even gold, which until 20th Century had virtually no industrial uses, was only valuable because we decided it was, and was in relatively short supply. there is no intrinsic value in banknotes but they are widely accepted and difficult to make your own copies, though not impossible. Indeed, UK bank notes still ‘promise to pay the bearer on demand…’ a relic of the days when you could walk into the Bank of England and exchange your note for the equivalent value in gold. And now, since mid-90s, we have gone digital, just exchanging 1s and 0s— nothing physical at all remains in the largest transactions.
This works because, broadly, until the advent of cryptocurrencies, the overwhelming majority of currencies were state controlled, and these large institutions have governed how monetary interactions work. When it doesn’t work, it’s the large institution that is generally at fault. These large institutions create friction in the system. When I want to send money back to the UK, I have to pay extra fees and wait days. Moving money across borders and time zones is expensive. The act of setting up these governing bodies slow down small business, taking payments and access to credit. Across the board, the way these bodies are acting as gatekeepers to our access to finance. Coupled with this, the traditional banking and finance space has always been slower to innovate.