Locks, Money and Large Societies
Locks made large human communities possible and money made trade scale. Bitcoin is an improvement on both technologies, and will therefore significantly contribute to advance human civilisation.
In our modern society, we use locks to protect wealth in all of its forms, whether it is our house, our car, family jewellery or precious digital data, we use physical or electronic (encryption) locks to make sure that what we consider valuable stays safe. Locks are necessary for a very simple reason: we want to preserve private property, but we are surrounded by countless strangers we cannot trust.
However, this was not always the case. In early human civilisations, people lived mostly in small tribes or villages, interacting regularly with a quantity of fellow humans well below the Dunbar’s number. This meant that, at the time, there was no need for such a thing as a lock. In a community, it was just widely known what was owned by each member, and most valuable proprieties such as animals and tools were easily recognizable and not fungible. Therefore, it was simply unfeasible to get away with theft. If Alice went on stealing Bob’s knife, as soon as she tried to employ it in some daily task she would soon be confronted with awkward questions such as “hey, what are you doing there with Bob’s knife?”.
Locks were just not needed in small scale societies, it was easy to trust the people around you and hard to benefit from stealing. However, things got more complicated when urbanisation began. As you move from a small village to a large town full of strangers, the safety of your private propriety becomes a serious concern. It is indeed unrealistic to establish trust with all the people around you, and a thief could easily enjoy the stolen good in another part of the city or in a nearby town. Therefore, some sort of protection to make sure your stuff doesn’t get stolen is suddenly needed, thus creating market demand for the first kinds of primordial locks.
Initially locks were just simple knots made of rope or other materials, used mostly to detect if someone tried to open them and as a deterrent. Later, as technology evolved, some mechanisms made of wood or metals were developed, making finally possible the restriction of access to certain areas without having to rely on vigilant human guards. The oldest archaeological finds come from Egypt and Babylon, dated to about 4000 years ago, and later spread to other urbanised civilisations, with evidences found in Hellenistic cities, the Roman Republic and eastern cultures including China. Wherever large cities emerged, locks were needed.
So, what is the significance of the invention of the lock? First of all, it represented a remarkable human achievement, as it managed to transform information into a physical barrier, making it possible to protect propriety without having to rely on the threat of violence. But more importantly, it made human communities scalable. Without locks, it would have been much harder to protect wealth in large societies where trust is scarce and strangers are everywhere, and the large cities, that made trade develop and human civilization flourish all around the world, would have been less liveable. To put it in other terms, locks significantly reduced the trust requirement of social and business interaction, improving significantly the scale to which human cooperation was sustainable.
Scaling human trade
However, locks are just one of the inventions that reduced the need of trust when interacting with other people. Another older one and surely even more important is money. While locks made it easier to store value around strangers, money made it easier to exchange value with them.
Money was a tremendous improvement over barter for trading due to several reasons, such as the reduced number of trading pairs that improved scalability and liquidity, but more importantly it simplified the verification of the value of received goods. If I am trading with a foreigner, I have little trust that he will not try to scam me, so I will have to make sure that what I am receiving has indeed the claimed value. In a barter based economy, I either have to trust to some degree the counterparty, or have to be able to verify the quality and value of a large set of goods, while with money I can specialise in verifying very well one intermediate commodity, facilitating commerce with outsider traders.
While the trust-minimisation properties made money widespread all round the world in various forms, over time multiple innovations reintroduced the need for trust to improve the efficiency (e.g. coinage, credit notes, fiat currencies, etc). Unfortunately, if money is trust-based, it is hard to make it scale socially beyond the area of influence of the trusted entity (i.e. a central bank and the government backing it), creating frictions for global commerce. It is indeed much more difficult to trade with someone that belongs to another trust-zone with a different form of money, than with someone using the same currency.
The global unconfiscatable money
One of the reasons why Bitcoin gained popularity in the last decade, is because it managed to improve both the ability of individuals to store wealth in adversarial environments, like locks did few millennia ago, and the ability to exchange wealth with people not belonging to the same trust zone, like the first forms of money did much earlier (tens of thousands of years ago).
Bitcoin makes wealth become pure information, knowledge of a secret is indeed what determines ownership of a bitcoin, and nothing else. Storing large amounts of bitcoins is possible by simply memorising few words in the correct order or by writing down a short alphanumeric string on a piece of paper, far more convenient than what we are used to experience with cash and precious metals. In a highly adversarial situation, like running away from an authoritarian dictatorship or dealing with government-led confiscations, Bitcoin easily becomes the only way to store significant amounts of wealth, making it a tremendously effective digital lock for our savings.
The other defining feature of Bitcoin is the absence of trust requirements towards third parties, and the ability of users to transact digitally without intermediaries. This has massive consequences in terms of social scalability and interoperability. Legacy fiat money has indeed significant limitations in this regard. If you transact in cash, you can basically only use the local national currency (with few exceptions in touristic areas and countries with very weak local currencies), which is a huge limitation. It won’t indeed be easy to convince a French farmer from the Bordeaux countryside to accept British Pounds for a case of wine, as it won’t be easy to convince a gunsmith in Montgomery to accept Euro payments.
Similarly, also in its digital form fiat money suffers from trust related limitations, mostly because it can only be transmitted through intermediaries, and such intermediaries only deal with people in their network of trust. So, it may happen that you cannot pay your counterparty through PayPal because she/he works in the wrong industry (e.g. porn and sex-related jobs), or you cannot send a bank transfer because she/he lives in the wrong country (e.g. Iran or Venezuela). Moreover, fiat money not only is based on trust, but is also deeply political, making the political objectives of governments interfere with your ability to freely trade with others.
On the other hand, Bitcoin has the potential to become, one day, true global money. No trust is required, thus it is not subject to the limitations of trust zones and political goals, and intermediaries are not needed, as it is possible to pay directly any other Bitcoin user without asking permission to anyone.
Conclusions
Locks made private property defensible when among strangers, enabling the creation of large communities. Money made commerce more convenient and secure even when dealing with foreign traders, making markets develop across continents. These two inventions contributed significantly to make human society scale, and Bitcoin happens to be a substantial improvement on both of them. Therefore, if the Bitcoin experiment manages to succeed, it will significantly contribute to advance human civilisation.
