The Color of Money
If you’re american you’ve probably heard the expression “Cold hard cash.” You’ve held, or at least longed to hold, a fat stack of benjamins (US $100 bills). Perhaps you’ve wanted to “make it rain.” Or perhaps you’ve caught yourself sniffing a crisp, fresh pressed bill from the bank.
Well…forget about all that. Because the future of money is like a deadly gas — colorless, odorless, invisible to the senses, but powerful nonetheless. It sounds ominous, but don’t fret, because we believe there’s cause to celebrate.
This series will attempt to examine the properties and attributes of old money versus new, and to determine how the new digital cryptocurrencies stack up. To get there though, it’s useful to question some of our basic assumptions about what money is and how it functions.
Money is awesome.
Not in the “cool” sense of the word, but more like the biblical one. Something of such immense power and magnitude that it inspires both reverence and fear. It’s nature is almost elemental. Like a magnetic force it goes unseen, yet constantly exerts its influence.
Money is, perhaps, the most dominant organizing principle of our modern world. It weaves people together into tribes, nations, and insanely complex social networks. But it’s even more than that. Because money does not simply attract and repel, or direct resources. It’s a transformative technology. It’s a tool that when harnessed by the virtuous can grease the wheels of human progress. In more sinister hands, however, it can become a weapon, fueling war and destruction.
With so prevalent a role in the shaping of our world and our everyday lives you’d think we’d have an intimate, almost exhaustive knowledge of money. But do we really understand what it is and how it works? The surface answer is yes. Practically speaking, we all know what money is. It’s the dollars, euros, & yens that we use everyday to exchange for goods and services. It’s the stuff we get paid, that we then use to pay for other stuff. That’s at least how we generally understand it.
But when we talk about money in this way, what we’re really talking about is currency. What we’re actually discussing is not money, but rather the medium of exchange that is used to represent money.
Money is not a physical thing. It’s not a commodity like barley or cattle or gold. Money is the underlying system of credits and debts, a system of accounting that facilitates transactions — the buying and selling of goods & services, assets & liabilities, even gifts & favors. The “money” that we’re familiar with, our coins and bills and bullion, those are merely tokens, records of the underlying system that are used to represent and settle our accounts.
Money, it turns out, is a social technology, brought forth from a concept of universal economic value, a shared belief amongst people that things, across domains, have a value that can be measured, negotiated, and exchanged between parties. Currency, the thing we usually think of as money, the thing we use in transactions, is just an abstract unit in which that value is denominated. It’s the meter or the mile to distance. The kilo or pound to weight.
Why does this distinction between money and currency matter? And what’s the harm in confusing them?
The danger is akin to confusing the map for the territory itself. The map is a useful guide. It provides a helpful picture that assists with navigating and orienting in a space. But the map contains only a fraction of the information and depth that exists within the actual territory. Additionally, maps can (and should) be altered as more information comes to be known. They can be constantly refined and improved to better reflect the territory. Maps are also reflective of our intentions within that territory. A single territory might have many different maps — a hiker may wish to know the topography, while a politician may want to know the population density.
Likewise, currency is a tool in service of money. It’s used, among other things, to speak about value, but it is only the unit of measurement, not the thing being measured! If we confuse currency for money we fail to identify the underlying system; and our understanding of the economic landscape remains superficial. We cannot evaluate the effectiveness of our tools if we do not grasp their larger context, or the functions which they are meant to serve. The advent of cryptocurrencies can be understood as an evolution, an adaptation of older technology to fit our digital landscape. Therefore to understand what cryptocurrencies are, how they work, and whether they are any good, it’s essential to grasp the history and circumstances from which they came. To do that we’ll take a hard look at the different currencies of our past, present, and potential future in an attempt to parse out the good from the bad from the ugly.
For more in this series check out Part 2: A (very) Basic Overview of Currency
