What if you owned a central bank?

By Edward W. Mandel

The whole point of IOU.iois that you create the capital you need to buy what you want. Via the IOUXtoken and your own demonstrated trustworthiness, the market determine how much your credit is worth. Not the bank, not the credit card company and not your national central bank or monetary authority — the market.

Essentially, you’re minting your own money. And here on the IOU team we’d like to think that this is a new idea. Alas, it isn’t.

Governments have mishandled monetary policy for as long as people lived in cities and had a portable medium of exchange. Lenders have always pursued their own short-term gains over the public’s long-term interests by tightening their credit criteria just when the economy needs a boost from spending — and then they’ve often opened up a firehose of money, lending to anyone with a pulse just when a little discretion would’ve been called for.

And regular folks have been caught in these messes every time. So it’s to be expected that they’ve found workarounds. Maybe cryptocurrency is new, but non-fiat currency is as old as money itself.

“Friends, Romans, countermen …”

Money — in the form of futures contracts and tokens of debts owed — date back to the dawn of civilization. It was around for thousands of years before anyone thought to carve the king’s face on it. But ever since that happened, most transactions have been conducted in sovereign currency.

And that convention has never been adequate.

Let’s take for example the Roman Empire. What was its official currency? If you’re a barroom trivia champ, then you know the answer the quizmaster is looking for is the denarius. But that’s only a partial answer. There were also the aureus, the solidus, the antoninianus, the follis and any number of denominations of those. Back then, coins had intrinsic value — that is, the price of the metal content was literally the value of the coin. So when treasury officials started cutting the precious metals with lead or tin, the debased currency suddenly had less purchasing power.

Over time, the money-spending public came to appreciate the backing of a central government. But Rome is not called the Eternal City for nothing — that empire lasted for centuries. And all that military might and all those public works didn’t come cheap, nor did the appetites of the emperors and their families. So inflation was definitely a factor in Roman life. There were periodic “financial reforms,” often involving a switch between silver, gold, bronze and copper as the intrinsic metal. Each reset was followed by a revaluation and, on occasion, a renaming of the currency.

There is one advantage for coins to have inherent value, though: no counterfeiting. Why go through the trouble of building a mint if the actual design stamped on the coins is incidental compared to the value of the metal? No, it was much easier to take the government-issued coins you had, file them down and shake the dust into a bag.

For all these reasons, Roman citizens often ignored minted money and invented their own.

Oh, and there was one more reason: Roman numerals. To find a less intuitive way of measuring things you’d have to go back to 2019 America and its system of feet, pounds and gallons. Romans still had the same number of fingers as we do and tended to organize things in tens of tens of tens, so people whose jobs involved counting used tools that varied from the Vs, Xs, Ls, Cs, Ds and Ms recognized more widely. As a result, the pebbles used as placeholders in abacus-like calculators came to be used as the units of value that they originally stood for just to make the math easier.

Meantime, the spintria — a unique numismatic artifact — became a thing. Through the first century, these cheap, bronze or brass coins were widely used for purposes lost to history, but one persistent theory is that they were brothel tokens. Spintriae depicted sexual acts on the obverse side and their numeric values on the reverse (adding new meaning to “heads or tails?”). The word comes from the same Latin root as sphincter, and near-contemporary historian Suetonius uses the word to refer to male prostitutes.

Emperor Caracalla once sentenced a man to death for using a coin bearing his likeness to hire a prostitute, so there’s some tangential support that a non-fiat currency was needed for this time-honored purpose. Then again, Caracalla didn’t ascend to the purple until a hundred years after spintriae fell out of use. Caligula was one of the emperors under whom they were traded, and I’m pretty sure he wouldn’t have minded.

Still, leading academics say that spintriae were used for some other purpose, perhaps as locker tokens. (For what it’s worth, the leading expert on the spintria was named Buttrey. He thought they were used as game pieces.)

A Roman spintria. Locker token? Game piece? Brothel token? You decide. Credit: Matthias Kabel

Once upon a time

Rome fell, and all those denarii, antoniniani and, presumably, spintriae were worthless. The medieval world again had to find ways to conduct business in the maze of fiefdoms, bishoprics and suzerainties that succeeded the empire. Non-fiat currency took some time to gain traction, but then it kept rolling into the present day.

The coins that enabled this came to be known as jetons. They date back to the Late Middle Ages and persist to this day in the form of casino tokens. Until recently, they were used for payphones and vending machines.

During the 1800s, Japan was faced with its own set of mercantile challenges. The feudal society had to contend with the collapse of the Tokugawa Shogunate, a national government that had lasted 200 years. Suddenly, the paper issued from Edo were worthless and each domain had to create its own scrip. This local banknotes, known as hansatsu, was initially backed by gold or silver, but could also be a future contract predicated on the rice harvest. You might think that this was a big step, but it really wasn’t. There were enough issues with the military authority’s money that scrip had been part of the Japanese economy throughout that whole period.

Hansatsu from the Shibamura domain, 1745. Credit: British Museum

The rest of the world had its economic rough patches as well, and non-fiat money was always an option to move past them. America’s Panic of 1837 (and 1838, and 1839, and …) was caused by President Andrew Jackson’s declaration that only gold and silver coins could be exchanged as legal tender. Of course, there were never enough of these and the economy faced a deep recessionary period remembered as Hard Times. Privately struck copper pennies of the time are now collector’s items known as Hard Times tokens.

Whenever people are forced together in a closed environment, an economy will break out. That’s why makeshift currencies have appeared everywhere from the Siege of Khartoum to prisoner-of-war camps to the cigarette-based exchange medium of penitentiaries.

Perhaps the most important — and underappreciated — form of non-fiat money came as a result of the famous hyperinflation of Germany’s inter-war Weimar Republic. As the Reichsmark became worth literally less than the paper it was printed on, local governments and chambers of commerce created their own notgeld, or emergency money. These served as a medium of exchange until a new government decided to issue marks backed not by gold, which they didn’t have, but by real estate, which they did. The rentenmark kept the German economy afloat for years until the Great Depression swamped the entire world — and we all know what happened next. My friend William Freedman wrote an interesting blog post on notgeldand the rentenmark.

Your turn.

So what will you do now that you’re empowered to create your own money?

In the days after the internet was widely adopted but before blockchain technology developed, one team createda currency that would help epidemiologiststrack flu outbreaks. It didn’t go anywhere, but maybe now’s the time to try again.

There are examples of cryptocurrency projects that perform a social good beyond serving as a medium of exchange or utility. One of my favorites is ExsulCoin, which is designed to help Rohingya refugees in Bangladesh establish their professional credentials and use the gig economy as a way out of their desperate poverty.

A recent Stanford University study identifies several similarly woke initiatives. AgriDigitaltokenizes agricultural products to insulate farmers around the world from counterparty risk. Votemis an American firm that emerged in reaction to the irregularities in the 2016 election that puts the voting audit trail on a distributed ledger. AID:Techis developing a blockchain-based process for ensuring that money donated to charities gets to the people it’s supposed to help rather than get hijacked by corrupt officials or other bad actors. Read the whole study here. It’s fascinating.

That’s just to give you an idea. If all you want to do with your IOUX tokensis buy products from the vendors on IOU.io, that also benefits the whole world, if a little less directly.

Edward W. Mandel is a strategic advisor for IOU.io , he is an Ernst and Young Entrepreneur of the Year Finalist, Blockchain Enthusiast and visionary behind many successful organizations. An avid entrepreneur, Edward has a knack for designing distinctive business models complemented with superior technology to deliver unparalleled service and profitability. Edward also has been advising and consulting for various successful Blockchain technology and ICO projects and recently launched his own BQT.io P2P Hedge Exchange helping traders connect with each other to leverage their crypto assets.

IOU is a blockchain-based peer-to-peer platform designed to unify ecommerce transaction and customer retention processes, incorporating trade-able IOUs. It is currently raising capital through ICO. The platform can be found online at IOU.io and its community on Telegram at https://t.me/IOUCommunity.