In 2013 The Atlantic magazine published a list  of the 50 greatest breakthroughs since the wheel. They asked a variety  of eminent scientists, historians and technologists to rank a list of  innovations and then put them together into a feature. Number one was  the printing press, but what caught my attention was the appearance of  paper money at number 42. It made me think that in the great sweep of  things the replacement of commodity money by records of some kind  actually goes back a lot further, to the grain banks of ancient  Babylonia and to the marks made on cuneiform clay tablets, and extends  right up to the present day where there are a number of fascinating  discussions going on around the use of cryptography to manage  distributed ledgers. Was paper money as big a breakthrough as the clay  tablet was or the blockchain may be?

That question in turn led me to think about the relationship between  money and the technology of money. You can’t invent coins unless someone  has already invented smelting, you can’t invent banknotes without  printing, you can’t have Western Union without the telegraph and so,  rather obviously, on. Yet the interaction between money and the  technology of money is more complex and less well-understood than you  might think. As Jevons wrote, back in Victorian times:

It is a misfortune of what may be called the science of  monetary technology, that its study is almost of necessity confined to  the few officers employed in government mints. Hence we can hardly  expect the same advances to be made in the production of money as in  other branches of manufacture, where there is wide and free competition.

Well, that was then and this is now. The “science of monetary  technology” is becoming more widely studied and with the arrival of  smart cards, mobile phones and Bitcoin it has become easier than ever to  create your own money and experiment with it. You can for instance  download an app for the Brixton Pound, a local currency in London, to your smartphone nowadays and there are kids sitting in basements dreaming up the next DogeCoin and Drachma. Kids like my son who trade World of Warcraft Gold via his iPhone with insights and dexterity to match Wall Street’s High Frequency Traders (HFTs).

Looking for Narrative

The iconic technology of modern money is the credit card. You might  therefore be surprised to know that the first mention of a credit card  that I have found as part of a fictional narrative is in a text from  1886 called Looking Backward, 2000-1887  by Edward Bellamy. This was one of the best-selling books of its day (I  have a 1947 edition in front of me so it was still being reprinted 60  years later) and has a “guy falls asleep under hypnosis and awakes 114  years later to find a model society, then finds it’s all a dream” story  arc that is hard to read with modern eyes, because the perfect society  that Bellamy imagines is a communist super-state that looks like  Disneyland run by Kim Il Sung. Everyone works for the government, and  since government planners can optimise production, all of the  “inefficiency” of the free market is gone.

‘People found ways to work with multiple currencies before, they will again’.

‍
— Source: Dave Birch.

The time-travelling central character is told by his host in the year  2000, the good Doctor Leete, that cash no longer exists. Instead, the  populace use “credit cards”. That strikes me as a pretty imaginative  prediction a generation before the Western Union charge card was  invented. It’s also rather unusual for a utopian vision since, as Nigel Dodd observes in his 2014 The Social Life of Money, from Plato to Star Trek they generally-speaking don’t include money at all, never mind cash.

Given that Bellamy failed to predict television, computers, airplanes  and the knowledge economy, he makes a couple of other really insightful  predictions about the evolution of money. When talking about an  American going to visit Berlin, he notes how convenient it is to use  cards instead of foreign currency:

“An American credit card,” replied Dr. Lette, “is just as good as American gold used to be”.

What an excellent description of the world after the end of the gold  standard, with Nixon’s 1971 cusp still a century away at the time of  writing. However, I think that the most fascinating question on the  future of money comes later in the book, when Edward asks his 21st  century host

‘“Are credit cards issued to the women just as to the men?”

and is told

“Certainly.”

This is a wonderful example of how science fiction isn’t really about the future, but about the present: the retort “certainly”  is clearly intended to surprise the Victorian reader as much as the  glass tunnels that surround pavements when it rains. In this article, I  hope to present a narrative just as surprising to contemporary audience  and I intend to do so (while using technology as the driver and  infrastructure for change) by following Bellamy’s example and looking to  the social sciences to make my prediction.

Money is a Technology

The late professor Glyn Davies, who wrote a definitive history of money,  gave a presentation at the first-ever Consult Hyperion Forum back in  1997 in which he said that the impact of technology on money was,  overall, decentralisation. He used the memorable example of the tally  stick and the creation of the London money market to illustrate the  point. Around the same time, my colleague Neil McEvoy and I wrote for Wired  magazine arguing that while the new technologies for the medium of  exchange were being deployed in a reactionary fashion to bring  improvements to the current money system of national fiat  currencies, they would in future drive such decentralisation and be used  to create wholly private currencies. The argument was that emerging  technologies, particularly the synthesis of cryptographic software and  tamper-resistant smart card would, we said (as did many others), make  the cost of entry into the currency ‘market’ quite small.

Many organisations, we therefore predicted, might then wish to enter  this market, for example as a means of supplying credit (as envisaged by  the Nobel prize-winning economist Frederick Hayek in 1970s), of  encouraging customer loyalty (explored by lateral thinker Edward de Bono  in the 1990s) or for political reasons explored  by “Satashi Nakamoto”, the mysterious inventor of Bitcoin, and others  since 2008. We explored the Hayekian view, arguing that whereas the  world’s currencies are currently organised on broadly territorial lines,  one might imagine a future in which currencies occupy (overlapping)  niches according to the virtual, as well as geographic, communities to  which people belong and a vigorous ‘foreign’ exchange market where  people (or, more likely, their computers) trade these currencies.

Hayek put forward  the proposition that the provision of private currency would be more  likely to result in sound money than state currency because the issuers  of that private currency would have to compete in order to keep the  value of their currency up. It was an interesting thought experiment,  but it was difficult at the time to see it as anything more. Hayek  himself discussed the practical barriers, noting the problem of “cash  registers” or “vending machines” handling notes and coins of differing  denominations, size or weight, whose relative values would fluctuate.  However, Hayek foresaw (perhaps he too had read Bellamy) that:

Another possible development would be the replacement of  the present coins by plastic or similar tokens with electronic markings  which every cash register and slot machine would be able to sort out,  and the ‘signature’ of which would be legally protected against forgery  as any other document of value.

We now have the digital money and digital identity technologies to  make this vision both real, cost-effective and desirable and the “tokens  with electronic markings” that Hayek predicted are the mobile phones  that all of us now have. But while money is still created by banks now, will the issuing of the new currencies be restricted to banks? When de Bono wrote The IBM Dollar  back in 1993, he said that he looked forward to a time when “the  successors to Bill Gates will have put the successors to Alan Greenspan  out of business”, arguing that it would be more efficient for companies  to issue money than equity.

Interest in this model has been rekindled as interest in the “blockchain” has grown. The blockchain is the distributed public ledger  technology that underpins Bitcoin, and can be seen as a consensus  database that everybody can copy and access but by clever design cannot  subvert: a permanent record of transactions that no-one can go back and  change. Many people think  that this technology has considerable promise and indeed one of the  early and high profile adopters of Bitcoin, Overstock.com, has recently  filed to offer securities as “digital securities … the ownership and  transfer of which are recorded on a cryptographically-secured  distributed ledger system using technology similar to (or the same as)  the distributed ledger technology used for trading digital currencies”.

Cuius Regio, Eius Pecunia

While Hayek and de Bono looked to economics to create their  narratives, there might be other factors that determine the kinds of  money we create. Values, for example. This leads me to think another  obvious category of currency issuer: the community that uses the  currency, especially with sentiments around anti-globalisation  abounding, adumbrating the link between decentralised digital money and  personal identity that I explored in my 2014 book Identity is the New Money.

Following that anti-globalisation chain of thought, one rather  obvious type of community that might want to issue its own currency is  the city. In the Long Finance exploration of the world of financial services in 2050, “In Safe Hands”,  Gill Rowland, sets out a scenario that has city-states replacing  nation-states as the basis of society and commerce. This appeals to my  long-held appreciation of Jane Jacobs’ work on the city as the basic economic unit.

Rowland makes a passing but powerful observation on this future,  saying that individuals will protect their “personal identity, credit  ratings and parking spaces” at all costs and that since monetary  arrangements (nation-state fiat currencies) will have collapsed, the  commercial paper of global corporations will be used as international  currency which as a technologist I interpret in the “de Bono meets the  blockchain” framework discussed earlier that would make for a plausible  but wholly different economy. We will have multiple identities, use  multiple monies (but not cash), through services provided by different  entities, and be defined by our social network and reputation. There  will be social and political implications impossible to foresee clearly.  But we do know that we will, if anything, be underestimating the  long-term implications of these changes.

This perspective suggests that the traditional national and  supra-national view of the link between geography and currency is too  restrictive: perhaps in the future, all money will be local, belonging  to the community in which it is used, it’s just that “local community”  will mean something different in the connected world. Whether the  community is Totnes or the Chinese diaspora (an example of what Rowland  calls an “affinity group”) or World of Warcraft won’t matter, but  the shared desire to minimise transactions costs for “us” at the  possible expense of transactions costs from “them”, will. Since the  overwhelming majority of retail transactions are local, most people’s  transactions most of the time will be in their local currency with  minimal transaction costs. A small number of transactions will be in  “foreign” currencies (ie, someone else’s local currency).

Paying with your mobile phone at Wagamama

From this perspective, the widespread view that “alternative” money  can work in isolated local environments but not at scale is wrong,  because both locality and globalisation will mean something different  and there’s no reason why interconnection between local money of one  form or another (via markets) cannot operate globally. Local currencies  right now are a form of electronic voucher  rather than money, but in this community-centric vision of the future  one can easily imagine an Islamic e-Dinar or an IBM Dollar  interconnecting  through Ripple, a payment settlement application, to provide a seamless global means of exchange.

This is more of a reconnection with the past than it may seem at  first. If we look at the history of money management by ordinary people,  the relative use of the money instruments available is fascinating. In  Britain, for example, right up to the 19th century, there were normally  several currencies in circulation in addition to Sterling. This  situation, having been temporarily banished by state capitalism in the  post-Bretton Woods world, is likely to be restored as Hart argues  and I see no reason why people (aided and abetted by their mobile  phones and smart watches) could not adjust. This “new local” version of  money must sound as crazy to you as the idea of central bank and cheques  did to the inhabitants of Stuart England, but it really isn’t. Trying  to imagine a wallet with a hundred currencies in it and a Coke machine  with a hundred slots for them is naturally nuts. But your phone and the  Coke machine can negotiate and agree on currencies (or, more  importantly, currency markets) in a fraction of a second, the time it  takes to “tap and go” with your iPhone, Samsung MST or Microsoft HCE  wallet.