Comment by nostrademons
17 days ago
A currency can arise from any fungible, tradable, generally-durable commodity that the bulk of society decides to accept as being worthwhile. In prisons cigarettes often fill that role; in pre-agrarian hunter gatherer groups it's often little baubles like shells. Government isn't necessary for this, but social contract is. You need to have enough faith that your neighbor will accept the currency to accept it yourself.
Cryptocurrencies have the advantage that they can be spent worldwide, instantaneously, with little friction, while most commodities require that you be physically present to exchange them. They're also significantly easier to store and more resistant to garden-variety theft, as long as they're secured by passphrases. But they exist in the uncanny valley of requiring electricity and Internet. It is fairly unlikely that the government collapses and yet you still retain always-on electricity and Internet. What will you use to pay the electric company, and how do you enforce the contract that they keep providing you power?
There's perhaps an interesting role for a digital cryptocurrency that does not require always-on connectivity, eg. something that can be carried over SneakerNet for local transactions, and then automatically syncs up with the global system when the community regains Internet connectivity. In actual conflict zones today, people seem to get intermittent electrical & Internet connectivity, eg. the electricity will come on for an hour a day with rolling blackouts, and then you try to get everything charged in that one hour. And there are enough solar installations out there that several communities are likely to retain significant power even in the event of a societal collapse. But current crypto's consensus mechanisms aren't built for intermittent connectivity: you'd need to build and design something that is eventually consistent, where a weeks-long fork does not result in two competing cryptocurrencies.
In some prisons, it's fish packets from the commissary.
https://fee.org/articles/how-a-fish-became-prison-currency/
I think the key to making a pocket-switched protocol that did currency-like things is the CALM theorem.
It's pretty restrictive. You couldn't just port bitcoin to a CRDT while keeping CALM. You'd have to rethink the economics around the constraints of what's possible to do in a distributed way. But maybe that would be worth doing anyway.
> A currency can arise from any fungible, tradable, generally-durable commodity that the bulk of society decides to accept as being worthwhile. In prisons cigarettes often fill that role; in pre-agrarian hunter gatherer groups it's often little baubles like shells. Government isn't necessary for this, but social contract is. You need to have enough faith that your neighbor will accept the currency to accept it yourself.
Are cigarettes really currency in this case? Aren't they more like one of many possible barter units? Can't you also price things in ramen packs in prison?
Similarly, I thought the sea shells thing had been sort of debunked. In that scale of society you don't need currency, you know the guy. David Graeber summarizes this rather intuitively. Why would you need to give a guy a sea shell in a "hunter gatherer group"? You're gonna see him every day of your life and everyone is gonna know/remember he owes you one. It would be like giving your sibling a sea shell because you did them a little favor or something. It doesn't actually happen that way because it would be a complete waste of time, just actually return the favor next time. I believe the sea shell thing is more like a gift, rather than a currency. Like you might give someone a flower to tell them you think they're swell. Presumably you think that because they helped you at some point. That doesn't make it currency. People just liked giving each other shells.
I think on most modern theories, currency really comes about from conquest. The idea is as you expand these informal IOUs are not enough. You don't want to have to lug around ramen packs or cigarettes. So at the point of a sword or w/e you say hey take this coin and give us food and then you honor the coin enough and people trust it, not because it's "fungible, tradable, generally-durable commodity that the bulk of society decides to accept as being worthwhile" but because if you don't accept it the government will kill you. And if you do accept it then not only will they not kill you but they'll give things back to you later, which you will end up being a positive incentive for everyone. Now instead of a presiding over a killing field you've created a market. But without the threat of the state, it is not coherent. That's what government is.
That's basically what it says on American money. "This note is legal tender for all debts, public and private". So sure a business can refuse you service, that's a separate issue. But if you have a debt in the United States and you try to give them US dollars and they refuse and say, no thanks actually we demand cigarettes - well now they are breaking the law, aka inviting the wrath of the state. So everyone uses dollars because the last thing anyone wants is to be in debt and think a pack of ramen is gonna work and they just get to say no thanks cigarettes for me please.
And of course, you also don't want to get impaled on a spike by a dude who looks suspiciously like that guy on the coin you probably should have taken.
Currency is used for trade between multiple distrusting groups, credit is used for trade within a social group. There was an article recently on HN about the highland tribes of Papua New Guinea [1] and it described how the natives would trade amongst tribes using shells.
You actually see this on a small scale today in the functioning of many small communities, eg. you don't actually exchange currency to pay the host of a party, but you are expected to reciprocate and host sometimes yourself if you want to keep getting invited. There's a surprisingly large amount of these unpaid micro-transactions that happen, eg. my wife has gotten free childcare, free advice, free (used) furniture, free baby clothes, etc, all in the heart of Silicon Valley, because she reciprocates and also gives away her old furniture, baby toys, baby clothes, advice, introductions, childcare, etc. But when we have to pay the contractor for work on our house, we need dollars. When we buy a computer, we need dollars. When we buy all those goods that we give away new, we need dollars. That again reinforces the "credit is for people you know, currency is for people you don't" distinction.
Barter is used when a previous currency system collapses. The currency is no longer guaranteed to be accepted, so people want hard goods that they know they can use. But barter is an unstable equilibrium: as you mentioned, currency is just barter where one particular good becomes so widely accepted that people will take it not because they want it, but because it can be traded for other things that they want. There are reports of the Bosnian War [2] that described how alcohol and ammo quickly became pseudo-currencies because they were universally accepted and could easily be traded for what you actually needed.
Graeber isn't wrong, but as an anthropologist he over-indexes on the within-group interactions. There are lots of documented examples of currency emerging spontaneously from trade between groups where the groups all mutually decided that one type of object had value.
[1] https://www.scribd.com/document/664716931/How-I-survived-a-y...
Hmm... do you not have a credit card? I often reflect on how paying with dollars seems so disadvantaged in today's economy. If you plan to pay back on time, why would you ever use dollars?
I'm not sure your in group/out group thing really holds up. I think of your credit/wife examples as not "credit" but something like basic reciprocity, closer to barter.
I think it's just a bit of blurring of terms. In my mind, bullets and ammo are just not currency in the same way a coin is. You can call it a "pseudo-currency" but the pseudo is kind of cheating.
I'm also not sure "There are lots of documented examples of currency emerging spontaneously from trade between groups where the groups all mutually decided that one type of object had value" disproves the point about violence/government. Can't I do the "pseudo" move back at you? What is the mechanism of the "mutual decision"? Would it be unlike the ones that lead to states? It sounds like everyone agrees something has value so we can have a dispute resolution mechanism. The implication being if you don't agree the other choice is violence? What if I say this "spontaneous collective of groups" is a "pseudo-government"?
Where would that leave us?
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I've heard many arguments that barter came before currency, if I'm not mistaken that was even one of Adam Smith's tropes in his writings that influenced currencies and economies we have today.
I don't necessarily buy the idea that someone with a chicken and needed bread wandered around looking for a baker in need of chicken, but their argument does fly in the face of the idea that barter follows failed currencies.
If nothing else you have a chicken and egg problem to unwind there, and barter does seem a bit more basic or simple than currency so I'd have guessed it came first.
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While your assumptions about barter societies are pretty much true, I think you're off on the origins of currency being tied to force. This is overly influenced by modern fiat currencies whose values are derived from government requirements rather than valuable assets. There was a long period of time where precious metals and other valuable items were used as stores of value without a central authority requiring their use. People used official coinage because its weight and purity was standardized and it made things easier, and the value changed alongside debasement, often in spite of official attempts to prevent this. People also used different currencies alongside each other based on their weights and purities. The only times in ancient societies where we have something similar to what you're describing where a specific currency must be used is in taxation, and even then, most taxes were settled in equivalent values of other goods and not specific currencies. The only example I can think of for what you're describing is the Jewish temple offering system in the second temple period, in which certain obligations to the Temple were ruled to have to be paid in Tyrian sheckles specificall
But what do you mean? We have multiple currencies today? Each one is still based on force within its jurisdiction. Yes people try to get around the law. That doesn't change the nature of force. People speed all the time. This is not evidence that the government does not have authority over the interstates, rooted in force.
Sure it's evolved, but I don't see anything in your comment that really disputes the tie to force. Of course, taxation is connected to force. Additionally, as I addressed in another comment, a lack of modern "central authority" does not mean a lack of connection to "force" or violence. People can come up with distributed or atomized versions, which nevertheless arise under a similar tradeoff with respect to the fear of violence.
Sea shells were traded across the North American continent. I don’t know if they were currency, but they were found 1000 miles from the shore.
The point is that they weren’t just used within a single group where everyone had access to more for the cost of only labor.
Does pricing things in euros mean dollars aren't a currency? Are dollars just one of many interchangable barter units?
I am sorry to burst your "bubble", as it were, but cryptocurrencies are not, in fact, currencies.
Speaking in terms of U.S. regulation and legislation, crypto is variously regulated as a "commodity" or as a "security" and therefore, cannot be formally considered a currency. The name, "cryptocurrency" is a marketing ploy, which cleverly seeks to dilute the meaning of the term, which is a term of art, and is still reserved, in legal circles, for things which are, in fact, currencies, and function as currencies, and are regulated as currencies, which crypto… is not.
It was rather painful to me in particular, because a few weeks ago, I registered and attended a municipal education session on fraud. And this session was co-hosted by an actual representative of the Arizona Corporation Commission - Securities Division. I can prove that because my prize for the session was an authentic, imprinted, ACC/SD pizza slicer! Anyway, as soon as she mentioned crypto and asserted it is a class of "currency" I tried to call her out, and I asked more than once, and being reluctant to turn the session into a referendum on her legal knowledge, I finally let her win. It was embarrassing.
Anyway, no, cryptocurrency has never been a currency. Not in the USA. Other nations may deem it as such, but I kind of doubt it so far. Please do not conflate real currency with crypto. They are distinct things that are easily distinguished. The consumer should not be deluded into thinking otherwise.
The human race is going to be really bummed to learn that currency didn't exist before the advent of US regulation and legislation! We were doing it wrong this whole time!!