In such an economy, based on trust, then once trust fails the substitute of money is required to oil the wheels of commerce. This is exactly what happened in France where after the revolution a lack of trust in the state quickly became a shortage of credit in the marketplace and therefore an immediate demand for a circulating medium of exchange. It is easy to see echoes of this in the post-crash demand for “trustless money”, initially manifest in Bitcoin.
This idea is not completely novel — its roots can be traced to arguments made by F.A. Hayek in the 70s. A privately issued, non-collateralized, price-stable currency could pose a radical challenge to the dominance of fiat currencies. But how would you ensure it remains stable?
Enter Seignorage Shares, a scheme invented by Robert Sams in 2014. Seignorage Shares is based on a simple idea. What if you model a smart contract as a central bank? The smart contract’s monetary policy would have only one mandate: issue a currency that will trade at $1.