Why call things by their right name? Or, Publica brings back Representative Money.
While writing our white paper I kept bristling at the word money. Everyone knows what money is, right? So what’s my problem? I was also haunted by the words of a young taxi driver who said when hearing about Publica, “So my books end up working like money!”
I had to know why he thought so. I took the time to study money and rediscovered representative money, a term I learned at university and never used again. Many forms of society have used it at one time or another in their own way. In history, representative money preceded capitalism and communism. Fiat and commodity money replaced representative money but it worked fine before they were invented.
I reviewed certain passages of our paper time and again looking for what was holding me up from declaring them complete. When I thought of their underlying economic forces in terms of representative money, my problems disappeared and I finished drafting the paper as fast as I could type it. That’s why calling things by their right name matters.
In the body of the paper, I explained representative money this way.
Fiat money (government-enforced) isn’t backed by real things. It works because people believe it will work again tomorrow. Beliefs can change very quickly but people trust fiat money because they believe most other people will too. It’s mostly a matter of scale, i.e, mass belief. But it’s never your money, it’s your government’s money lent to you until they take it back on their terms.
Representative money is always backed by something of value and that’s key to Publica’s idea. In the shortest possible terms, it means money that is “malleable today, not tomorrow.” Its time stamp is as important as its face value so you’re assured of getting exactly what you bought, defined by what it was at the time you bought it. No wiggle-room in the deal.
Modern contracts, paper or digital, static or smart, are detailed versions of representative money. Fiat money is a poor relation to representative money.
Your checking account is a good example of representative money because you can sign your check in exchange for something you want, when you want it, and the deal is done. Or you can write your check in exchange for a foreign country’s money and coins valid today so exchange rates can’t change the deal later on. Representative money makes your money simple for you regardless of the underlying complexities of money-at-large and that’s all you really care about.
Book tokens are representative money in a global economy and they should ease people’s fears about digital tokens and other buzzwords so they can get on with the fun and profit in making and using books. There’s no wiggle-room in a digital book token.
In that page’s footnotes, I expanded a bit.
The oldest books are Sumerian clay tablets. They’re agricultural ledgers, i.e., they’re about exchanging money for things. They were written long before any precious metal backed a commodity money, even longer before fiat money was invented. Technically, they’re about representative money.
An IOU (“I’ll gladly pay you Tuesday for a hamburger today”) and the-ink-has-dried (“You said Tuesday so pay up!”) are the basic elements of representative money. But malleable today, not tomorrow speaks to the core of representative money — its time stamp and when you choose to use it.
Other forms of money attack that core so it must be important. For example, you can back-date or forward-date a check but not a dollar bill or a credit card swipe. The person you give your check to is also free to deposit it into their own account today or hold on to it awhile.
It remains the same check-for-thing exchange record that you both trust, and you’re both free to choose when to engage your respective money changers (banks) on your own terms. Credit cards and electronic transfers record the same electronic time stamp in both of your accounts so neither of you have any choice in the matter. Fiat and commodity money omit the time stamp entirely so the institutions issuing them can change the value of your deal after it’s made.
Malleable today, not tomorrow highlights the core issue, i.e., trust and freedom between the parties exchanging money for whatever they want, whenever they choose to time stamp their deal. In short, representative money is your money and nobody can alter your deals however you choose to define them.
In our Internet era, smart contracts on a blockchain have more in common with representative money than they do with any fiat or commodity money in the history of money so far.
In the paper’s glossary, I expanded even further. The first paragraph is abridged from Wikipedia’s Representative Money.
Representative money is any medium of exchange with something of value backing its face value. Unlike fiat money which has nothing backing its face value.
Publica’s book tokens are representative money. Their face value represents a book with an intrinsic value similar to commodity money with a face value backed by a small amount of precious metal.
Commodity money may be exchanged for precious metal but you almost never have any choice in which metal because no matter how many metals may be precious to someone, very few are precious enough to everyone to make it worth the cost of their vaults. You can exchange Publica’s book tokens and choose which books regardless of what people outside the transaction think of the books, and the vaults cost nearly nothing.
Fiat money is inflated or deflated whenever a nation-state circulates too much or too little of it, directly affecting its own residents and the citizens of all other nation-states who trade with them. Publica’s book tokens are issued by their authors and their number can’t change. A book token’s face value is that book. More tokens mean more books but their numbers are forever aligned and limited.
In general, representative money can be powerful because it leaves the power of choice with the people who exchange it, in the field where the assets lie, according to their individual beliefs.
For example, in an ancient agricultural society representative money could be exchanged in an actual field and recorded on any trustworthy ledger such as a clay tablet or papyrus as tokens.
Some tokens represent cattle and some represent sheep, some of which are visibly pregnant, offering a fair expectation of more cattle and sheep in the future and more or less valuable to the buyer or the seller depending on for what purpose they want the livestock. A neighboring grain farmer isn’t directly affected because the same number of cattle and sheep remain in circulation. They don’t need to identify every individual cow and ewe and they don’t need to measure them by the grain they eat. They need to see the cattle and sheep before they start exchanging the tokens but they don’t need to see the neighbor’s grain. That’s why in the field where the assets lie matters in representative money.
In publishing, representative money can be exchanged in the metaphorical field of books, backed by books about cattle and books about sheep, some of which may be metaphorically pregnant, e.g., sources for promising sequels, prequels, collector’s editions and so on. That’s why according to their individual beliefs matters in representative money.
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