*Lyn Alden* # Progressive Summary # Definitions # Chapter Notes ## 1 - Ledgers as the Foundation of Money > At its core, money is a ledger. Commodity money serves as a ledger governed by nature. Bank money serves as a ledger governed by nation states. Open-source money serves as a ledger governed by users. > Politics can affect things locally and temporarily, but technology can affect things globally and permanently, which is why I analyze money primarily through the lens of technology. The oldest beads (snail shells with perforated holes) were found at the Bomblos Cave in South Africa. They were 75,000 years old. Christopher Henshilwood called it "perhaps the earliest storage of information outside the human brain." The shells do not decay (like food) nor are they bulky (like spears or furs), so they make ideal trading tokens. They can be worn on the body, and used as decorative items. ## 2- The Evolution of Commodities as Money Oral ledgers (a form of social credit) can serve small groups, but once trading groups get bigger, then there is a need for money. The Austrian School of economics, founded by Carl Menger in the 1800s, and further advanced by Ludwig, von Mises and Friedrich Hayek, promoted the commodity theory of money. According to this, money had the following characteristics: Divisible – it can be subdivided for different sizes of purchases Portable – it packs a lot of value into a small weight and is easy to move across distances Durable – it is easy to save across time Fungible – individual units are similar to each other; one is as good as any other Verifiable – the seller of goods or services can easily check if the money is what it appears to be Scarce – the money supply does not increase quickly Utility – it is intrinsically desirable in some way All these qualities combined make money the "most salable good" - the most capable of being sold. It is a universal good, one that everyone desires. Different forms of money will compete with each other based on these qualities. When an asset has a monetary premium on top of its utility, there will be an incentive to produce more of it. The purchasing power of a commodity money is the total of its utility value and monetary premium. > Only assets that are highly resistant to increases in supply relative to the total existing supply can withstand this challenge, and thus can become and remain widely accepted money on a global scale. Gold ranks highly on almost all of them. It does not rot, rust, or corrode, because it is chemically inert. Gold miners add only about 1.5% of existing stock each year, giving gold the highest stock-to-flow ratio (100/1.5 = 67) of any commodity. The biggest problem with gold is that it's not very divisible. Silver has the second-best score after gold for the various attributes, and the second highest stock-to-flow ratio, but it beats gold in terms of divisibility, since small silver coins are good for daily transactions. Where gold is the king of money, silver is the queen. Salt, on the other hand, scores poorly on portability and scarcity. The word "salary" comes from the Latin word *salarium*. Roman soldiers were given a monthly stipend to buy salt. Gold and silver kept their value into modern times because they could maintain high stock-to-flow ratios despite the rise of human technology, even when there was a substantial monetary premium placed on them. > Shell money lasted thousands of years in various regions, but eventually became unworkable against the industrial revolution. Furs, livestock, salt, tobacco, and other monies also served their useful roles at various times, but the ever-growing technical prowess of civilization eventually made those unworkable as money as well. ## 29 - Asymmetric Defense ## 30 - A World of Openness or a World of Control Who controls the ledger? - in early history, the answer was local communities and nature (for commodity money) - when some civilisations gained a large technological advantage over others, the advanced civilisations were able to control the ledgers of the less advanced civilisations - with the advances in communications technology, gold was too slow to serve as money anymore, and the ledger became increasingly centralised and controlled by nation states, who had a monopoly on fast, long-distance money transmission - the future will be a contest between bottom-up digital monies such as bitcoin which attempt to give the ledger back to the people, and top-down digital monies such as central bank digital currencies that give nation states even more control over the ledger that people use There are two parts to the question of who controls the ledger: - Who can surveil and censor the transactions of others, or freeze their funds? - Who can create money nearly for free and devalue the savings and wages of others? > Encryption initially allowed for the private sharing of information, and now encryption also allows for the private sharing of value. Information and value are the two components needed for individuals to conduct trade. # Quotes # References