MIT 15.S12 Blockchain and Money Note (Lec 2)

Study Questions:

1. Roles and characteristics of money mean historically and in today’s digital economy
2. What is fiat currency, what are its ledge and how it its within the history of money?
3. How dose bitcoin fit within the history of money, the emergence of the Internet and failed attempts of cryptographic payment systems?

History of Money

1. Non-metal money: Salt bar in Ethiopia, Cowrie Shell in Nigeria, Tally Sticks in England, Rai Stone in Yap
2. Metal money: Bronze Aes Rude in Rome, Bronze Spade in China, Copper Plate in Sweden
3. Minted money: Bronze Yuan (青铜币) in China, Gold Aureus in Rome …
4. Paper money: Jiaozi(交子) in China,

The reason why these non-metal or metal materials could be used as money is because it is scarcity and some of these need to be mined, same as gold and nowadays, BITCOIN!!

Ledger

a way to record economic activity, a book or collection of accounts in which account transactions are recorded. There are transaction ledgers, balance ledgers. General ledgers and sub ledgers

1. Bitcoin: have the mechanism to store transaction

2. Ethereum: have the mechanism to store balance

3. General Ledger: a general ledger, also known as a nominal ledger, is a bookkeeping ledger in which accounting data is posted from journals and from subledgers, such as accounts payable, accounts receivable, cash management, fixed assets, purchasing and projects.
4. Sub Ledger: A subledger is a ledger containing all of a detailed sub-set of transactions.
5. The bookkeeping system in which only one aspect of a transaction is recorded, i.e. either debit or credit, is known as Single Entry System. Double Entry System, is a system of keeping records, whereby both the aspects of a transaction are captured.

What characteristics good ledgers should at least Immutable, consistent…

A negotiable order of withdrawal, also known as a NOW account, is a type of deposit account that provides interest and allows the depositor to write drafts against the money that is held on deposit.

Fiat Money

Fiat Money: With social consensus, represented by central bank liabilities

Legal Tender: is a form of money that courts of law are required to recognise as satisfactory payment for any monetary debt.

Difference between Legal Tender and Fiat currenccy:

Fiat money does not have any intrinsic (inherent) value. What value it has depends on public confidence in the currency’s issuer. Legal tender is any currency declared legal by a government. Many governments issue a fiat currency and then make it legal tender by setting it as the standard for repaying debt.

Credit Cards: First appeared in a science fiction ‘Looking Forward’ in 1887. First Credit card in 1946

Past Digital Currency and its failure

Why early digital currencies failed?

1. Not enough of Merchant adoption
2. Centralisation
3. Can not solve Double-Spending problem: is the risk that a digital currency can be spent twice.
4. Lack of consensus