2025-08-23
Money is a system that tracks debt between individuals. When someone buys goods from another unfamiliar person, there has to be some way to establish a dept relationship between the persons. If they would know each other they could simply agree that the buyer will sell something back to the sheller at later point in time. But when the persons are strangers to each other, the seller must have some way to trust that the buyer will pay his dept back later on.
Requirements for a monetary system are:
How to make it easy to create currencies without stamping coins or printing notes?
A coin or a note is an evidence that a person has acquired a certain amount of money from others, being it a bank, an employer or another individual.
When someone signs a receipt that says that you paid him a certain amount of money, it is a similar piece of evidence as the coins you gave to him. Only in the reverse direction.
Paper money came to be when banks gave receipts to people who stored gold in banks. These receipts started to circulate as money because they were easier to handle than the actual gold.
The problem with paper receipts is that they are easy to fake. And if you want notes that are not easy to fake, they are not really lightweight because you need some expensive machinery.
A digital signature can be nearly impossible to fake and they are easy to make with computers. A light weight currency system could thus be based on digital signatures created with phones, computers or purpose build "electronic calculator" -like machines.
We can hire an accountant and trust him keep a ledger about everybodys IOUs. This is what banks are now.
We keep a public ledger of everybodys transactions by boradcasting it to a network of computers that obey an algoritm by which they agree on the state of the ledger.
A crucial aspect of any monetary system is how the money is created and by whom. There are two basic patterns: everyone using the money can create it or it is created centrally
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