The Strange History of Paper Money
Paper money and cryptocurrency have far more in common than most people realize. Both mediums of exchange are financial technologies invented to increase the supply of money available to average people.
Specifically, both paper money and cryptocurrency were created to form the basis of new economic systems. Paper money was devised as a means of exchange for the old paper economy. Cryptocurrency was invented as money for the new digital economy.
The history of paper money reveals that cryptocurrency or digital currency will be a far more disruptive innovation than is commonly believed. Paper money was one of the key technologies on which the modern world was built. Cryptocurrency has the potential to be just as disruptive and innovative.
How Paper Money Made the Modern World
Modern paper money was invented in the 18th century because of the shortage of precious metals like gold and silver. When the economy started expanded during the industrial revolution there simply were not enough gold and silver coins in circulation to pay all the new factory workers.
Paper money was introduced by private banks and companies to pay large workforces. Governments eventually took over the printing and distribution of paper money to control the money supply.
The US government started printing paper money during the Civil War to pay the Union Army. Uncle Sam started printing greenbacks or paper dollars because there was not enough gold pay to the troops.
How Paper Money Made the Modern Economy Possible
It was paper money that made the industrial economy with its centralized corporations and huge payrolls possible. Without paper money, it would not have been possible to pay all the employees giant enterprises like factories, mines, and railroads required.
Paper money made the consumer economy and modern retail possible, because it gave average people the money to buy stuff for the first time. The first department and discount stores; which sold goods to the middle and working classes, appeared shortly after paper money went into circulation.
Paper bills enabled employers to pay workers a regular salary, usually weekly. That enabled merchants to extend credit to workers because they received money each week.
It also allowed people to buy insurance for the first time. At the turn of the 20th Century, life insurance was sold directly to the poor for cash in the United States and the United Kingdom. Early insurance agents came around each week and collected cash premiums from housewives in working-class neighborhoods.
How Paper Money Created Popular Culture
A related innovation was news and entertainment aimed at common people. Average people had the extra cash to buy newspapers. Merchants started advertising in the newspapers to reach the average people.
Entrepreneurs took advantage of this and started publishing newspapers, magazines, and other publications aimed at a mass audience for the first time. That led to the birth of what we call popular culture.
Other aspects of popular culture included theater and music for the working class; called Vaudeville in the United States or Music Halls in the British Empire, and recreation for the working class. The first amusement parks and arcades appeared in the late 19th Century. Circuses, carnivals, and other traveling shows catering to common tastes appeared at the same time.
Popular culture was impossible before paper money; because average people lacked the means to pay for entertainment before its invention. After paper money, it became profitable to entertain the working class.
Paper Money and Banking
Before paper money, banks only served the rich, governments, and large merchants. Once paper money was available, banks could serve the working and middle classes.
Before the Civil War, banks in the United States actually printed their own paper money or banknotes. After the Civil War, banks served as a distribution for government-printed paper money.
This allowed the development of a large middle class of small merchants. Such merchants were able to get credit from banks, safely store their capital, and take out mortgages to buy real estate for the first time.
The expansion of banking led to a massive increase in economic activity that raised tens of millions of people out of poverty. Paper money made this all possible and cryptocurrency can do the same thing.
Cryptocurrency is the Paper Money of the 21st Century
The effects of the paper money revolution are being repeated in some developing nations today by cryptocurrency and other forms of digital money. A consumer revolution is taking place in Africa because of digital money.
Use of Vodacom’s M-Pesa, a digital currency for mobile phones, increased by 50% between 2016 and 2017, Mobile World Live reported. As of November 2017, M-Pesa had 7.9 million users in Tanzania and three million users in Mozambique.
People use M-Pesa to store money and make payments directly over mobile phones in Africa. Vodacom reported processing $7.3 billion worth of M-Pesa transactions a month in November 2017.
The success of M-Pesa indicates that average people will accept and use digital money. Interestingly, M-Pesa is not a cryptocurrency; instead it is simply a digital coin which is not secure enough for banking.
The next step in currency evolution will be banking solutions for mass markets around the world. Such solutions will be based on cryptocurrency and administered through the blockchain. Cryptocurrency and blockchain provide the level of security necessary for banking.
Rubius Wants to lead a Cryptocurrency Revolution
Rubius Inc. is a blockchain software startup dedicated to creating such solutions. Its CEO Joseph Rubin is betting big on cryptocurrency with plans to build a “new world bank” to offer financial solutions to people all over the world.
To this end, Rubius’s earliest products include the RUBY Ethereum-based cryptocurrency and the Aryl wallet. Aryl is supposed to serve as a gateway to the new world bank. Aryl’s utilities include the Volatility Shield feature, which is designed to protect assets from market volatility by utilizing static or stable currencies.
Paper money dramatically changed the world in the 19th and 20th Centuries and created the modern economy. Cryptocurrency holds the potential to make even more dramatic changes in the 21st Century. Rubin hopes his company will be at the forefront of the cryptocurrency revolution.
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https://rubius.io/rubius-whitepaper.pdf
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