
Shelling Out: The Origins of Money (2002) - mgdo
https://fermatslibrary.com/s/shelling-out-the-origins-of-money
======
Wildgoose
I highly recommend that people read "Debt: The First 5,000 years" by David
Graeber which is a fascinating and erudite exploration of the development of
money.

~~~
dalbasal
I've made that recommendation, with mixed results. I think it has less impact
unless you studied/read a little classic economics.

Most economics "schools" start from a standard Smithian narrative for the
invention of money. Spot traded goods, durable goods as values stores and
eventually some sort of money.

The money supply narrative is completely separate. It's explained via the
"money multiplier" effect, which turns 1X amount of money into nX via lending.
Generally, it's taught via the lens of central bank policies, monetarism and
macroeconomics.

Graeber merges these narratives. Debt predates money, and is the primordial
money. All through history nearly all money has been debt and actual money (eg
gold) just got used to quantify debt. Gold rarely exchanged hands or even made
it to the hands of most people.

Once you start with debt instead of money, the picture changes. Familial,
religious or cultural obligations form the basis of well obligations, debt.
That's the origin of money.

Graeber is also politically eccentric and that appeals to people with
sympathies to his views, but for an average reader... It's not revolutionary
unless you already know/care about the mainstream ideas.

~~~
xchaotic
Yeah, the biggest value in the the "history of debt" is the unlearning and
debunking myths that are taught as 'science' in economics schools. There were
no 'barter' economies, money did not 'evolve' from barter etc. Even otherwise
respectable names in economics built their theories on top of these ideas
which are in fact pure, convenient fantasy.

~~~
dsimms
so much this, and it's repeated over and over ...and over in the book.

------
dpflan
I thought Niall Ferguson's _The Ascent of Money_ to be an informative book the
history of money if you're looking for more topical reading.

>
> [https://en.wikipedia.org/wiki/The_Ascent_of_Money](https://en.wikipedia.org/wiki/The_Ascent_of_Money)

~~~
stuxnet79
I would recommend watching the documentary instead as it is the same content,
but nicely summarized. I only discovered the documentary after reading the
book however.

~~~
dpflan
(Good call; I haven't watched the documentary. I'll check it out ;))

------
taw55
Obligatory reminder that money != coinage != barter != banking

~~~
zaphod4prez
Hm. I have to say I think this isn't quite right. I guess it is, strictly
speaking, true that these concepts are "!=". However, I think that the vast,
vast majority of people err on the side of thinking that they're far more
separate than they actually are. Money, coinage, banking, and debt (I'm
ignoring barter here and adding debt) are so intimately related that, really,
none of them exist in anything resembling their current iterations without all
the others. And talking about "money" in the sense of exclusively a medium of
exchange is _really_ hard for people these days to wrap their heads
around...none of us have had any experience with such a thing whatsoever.

All that said, I'd be curious to hear you expand on your original comment. How
are you defining each of these things? What are you trying to say by noting
that they're not equal? What are the implications?

------
ThomPete
Best book I have read on money is "The End of Alchemy: Money, Banking, and the
Future of the Global Economy" by Mervyn King (former CEO of Bank of England)

He has a real knack for putting everything into context and explores the sub-
prime crisis without pointing fingers.

Highly informative.

------
jokoon
I'm still curious about what are alternatives to using money. Surely there
might be politics and some philosophy involved about how you manage and
organize society. Aren't local currencies a part of the solution?

Money is great because it lets individuals manage their own selves, but I'm
still a little worried about how fraud, abuse and mismanagement can wreak
havoc in society when money is abused.

Regulating money and everything involved around money seems to be a hard
thing, and at some point moving away from money or finding other ways to do
things could make sense... Although I'm curious.

Don't economists write some philosophy about those things?

~~~
jsykfyi
The same problem exists, regardless if its a fiat central bank or open source
decentralized software token system: how is the money distributed and created?

[https://en.wikipedia.org/wiki/Wildcat_banking](https://en.wikipedia.org/wiki/Wildcat_banking)

[https://en.wikipedia.org/wiki/Private_currency](https://en.wikipedia.org/wiki/Private_currency)

[https://en.wikipedia.org/wiki/Liberty_Reserve](https://en.wikipedia.org/wiki/Liberty_Reserve)

Even given the Cryptocurrency ecosystem, there's threats of fraud like Tether
(theory: [https://hackernoon.com/the-curious-tale-of-
tethers-6b0031eea...](https://hackernoon.com/the-curious-tale-of-
tethers-6b0031eead87)), or the inherent history and math behind Bitcoin and
many proof of work cryptocurrencies distributing the supply to only a small
group of users and cutting off the ease of producing more coins as easily to
later users who use the software.

Deflationary systems (or systems which skew how labor is rewarded, i.e. PoW
with changing rewards for work) run the risk of creating a class of slaves
from new generations, or users who simply arrive days too late:

    
    
      Best estimates are that there are about one million 
      holders of Bitcoin;  47 individuals hold about 30 percent, 
      another 900 hold a further 20 percent, the next 10,000 
      about 25% and another million about 20%, with 5% being 
      lost.  So 1/10th of one percent represent about half the 
      holdings of Bitcoin and 1 percent close to 80 percent 
      (http://www.businessinsider.com/927-people-own-half-
      of-the-bitcoins-2013-12). The concentration of Litecoin 
      ownership is similar 
      (http://litecoin-rich-list.blogspot.com).  
      Most of the big wallets have been in place from early on, 
      so sitting back and watching your capital grow has been a 
      very successful strategy.

~~~
CryptoPunk
>>or the inherent history and math behind Bitcoin and many proof of work
cryptocurrencies distributing the supply to only a small group of users and
cutting off the ease of producing more coins as easily to later users who use
the software.

Keep in mind that the value of money derives from the net utility it provides
in all of the trades it is used in throughout its lifetime. By implication,
the only scenario where a new currency would displace old ones through market
mechanisms like competition (as opposed to political ones like state mandates)
is one where the value added by swapping out the old money with the new one in
trades exceeds the cost for the economy to purchase the new money from those
that minted it.

In other words, it's a net gain for society for a new money to displace the
old one through market competition, regardless of the initial distribution of
the new money.

The effect of the initial distribution on long-standing wealth distribution
also diminishes over time, given a particular holding of currency can only be
spent once. For long-run wealth distribution, what matters most is avenues to
extract economic rent on a recurring basis, like regulatory capture, political
privileges, etc, and new forms of money like cryptocurrency could alleviate
these.

~~~
nosuchthing
How do you foresee cryptocurrency alleviating those problems when existing
capital can simply produce and acquire the majority of coins/tokens in
existence?

For all we know the executives at the Goldman Sachs spent a few million
dollars slowly purchasing BTC any any of the other altcoins since day 1.

Money only has value if someone is willing to accept it. Existing capital
merely transfers into whatever other forex, seashell, or feather trading
system there might be.

    
    
      For long-run wealth distribution, what matters most is 
      avenues to extract economic rent on a recurring basis
    

That's oddly simplistic. No mention of wages, education, and tax policy?

    
    
      regulatory capture, political privileges, etc, and new   
      forms of money like cryptocurrency could alleviate these.
    

How would new forms of money impact any of those?

There's certainly the possibility it could make all of those issues 1000x's
worse.

~~~
CryptoPunk
>>How do you foresee cryptocurrency alleviating those problems when existing
capital can simply produce and acquire the majority of coins/tokens in
existence?

That is still a net gain for society.

Look at it this way: cryptocurrency could potentially replace high rent-
extracting institutions, and it would only be able to do so if it provided its
owners with much lower levels of economic rent than the institutions it
replaced (that's where it derives its efficiency advantage). Just to clarify:
economic rent is defined as income that is not derived from productive
activity. It is unearned, from a broader economic perspective.

So now imagine the wealthy shareholders of Goldman Sachs sell their shares,
and buy up all of the cryptocurrency. They're still very wealthy, but the
assets they own don't hold the same unfair advantage that the GS shares that
they once owned held.

That is what it means to be in a fairer world. Eliminating opportunities for
exploitation (which can roughly be mapped to rent seeking) is how you durably
reduce income unequality.

>>That's oddly simplistic. No mention of wages, education, and tax policy?

It's simplistic because it's a very broad analysis that only distinguishes
rent-seeking from none-rent-seeking activity.

In this case I think it's appropriate given cryptocurrency has the potential
to have a very fundamental impact on the macroeconomic picture. Moreover,
speculating about the finer details of its impact might not be all that
useful, given how hard it is to anticipate exactly what those more specific
effects will be. The broader effects are easier to predict and thus a more
appropriate object of speculation in my opinion.

------
nosuchthing
The author of the main article is Nick Szabo, who some theorize as the most
likely candidate for being Satoshi Nakamoto. Szabo developed an early
cryptocurrency called Bit Gold, which was never implemented, but has been
called "a direct precursor to the Bitcoin architecture.".

[https://en.wikipedia.org/wiki/Nick_Szabo](https://en.wikipedia.org/wiki/Nick_Szabo)

Was there a reason this comment was flagged? It seemed very relevant given the
topic and recent trends in cryptocurrencies.

Please discuss if there's critique; the comment:

The Origins of Cryptocurrencies, with Bitcoin or Ethereum in particular are
really important for people to be aware of.

These "coins" were produced simply by running some software. If you look at
the math under the hood, you'll notice the algorithm distributed most of the
coins essentially for free to a very very small group of people.

    
    
      Best estimates are that there are about one million 
      holders of Bitcoin;  47 individuals hold about 30 percent, 
      another 900 hold a further 20 percent, the next 10,000 
      about 25% and another million about 20%, with 5% being 
      lost.  So 1/10th of one percent represent about half the 
      holdings of Bitcoin and 1 percent close to 80 percent 
      (http://www.businessinsider.com/927-people-own-half-
      of-the-bitcoins-2013-12). The concentration of Litecoin 
      ownership is similar 
      (http://litecoin-rich-list.blogspot.com).  
      Most of the big wallets have been in place from early on, 
      so sitting back and watching your capital grow has been a 
      very successful strategy.
    
    
      The distribution of Bitcoin holdings  looks much like the 
      distribution of wealth in North Korea and makes the 
      China’s and even the US’ wealth distribution look like 
      that of a workers’ paradise
    

[http://www.businessinsider.com/bitcoin-
inequality-2014-1](http://www.businessinsider.com/bitcoin-inequality-2014-1)

It's essentially a penny stock deception, where the early users who generated
the coins for low cost, or free, control the majority of the supply to
manipulate the market spot price and than launch marketing campaigns and
propaganda in an attempt to convince the uninformed public to buy their
software coins.

While there may be issues with fiat systems, it's far better than purchasing
any of these crypto beanie baby schemes.

Case study in cryptocoin market manipulation:

[https://pastebin.com/RdRAULtT](https://pastebin.com/RdRAULtT)

[https://pastebin.com/1NTTBCXM](https://pastebin.com/1NTTBCXM)

[https://news.ycombinator.com/item?id=7126153](https://news.ycombinator.com/item?id=7126153)

~~~
CryptoPunk
>>It's essentially a penny stock deception, where the early users who
generated the coins for low cost, or free, control the majority of the supply
to manipulate the market spot price and than launch marketing campaigns and
propaganda in an attempt to convince the uninformed public to buy their
software coins.

While I welcome a debate on the public welfare effects of cryptocurrencies vs
fiat, and disagree with your broad brushing of it as a "deception", this is
really off-topic.

~~~
doots
The distribution of cryptocurrency and unfair access to minting and production
of what's claimed and marketed as currency is completely relevant given the
subject of the paper.

The math behind Bitcoin or altcoins reveals a system that grants production of
the supply to a minority which worsens with time. New users aware of the game
theory behind the math know it's not worth buying or mining. Of course, one
can gamble on an irrational market or the other users who lack understanding
of the mechanics.

~~~
CryptoPunk
I don't see how cryptocurrency and the issue of whether its mining is fair (I
would argue its the fairest method of distribution ever devised, given in the
case of every major cryptocurrency, 1. information about it was published
before mining on it began, even if only a small number of nerds had the
foresight to immediately take advantage of that information, and 2. its mining
method makes for a totally competitive market that is blind to any factor
except time and capital expended, but I digress) is relevant to a paper on the
origins of money.

If the OP has an axe to grind against it and those with the foresight to start
mining early, maybe they can wait for a more relevant story to emerge. As it
is, the comment is guaranteed to rapidly divert attention away from the main
topic of the submission into yet another debate over cryptocurrency.

~~~
nosuchthing
The question purposed is "are cryptocurrencies a worthy alternative to
existing mediums of exchange".

While future iterations may change, we can examine existing implementations.

Upon investigation of the math/economics/game theory behind Bitcoin and most
other existing altcoins it becomes evident that the longer a cryptocurrency
has existed, incentive to opt in decreases due to the work economics baked
into the code.

Old users expend low capital costs to produce a product (in this case an
alternative money token), and then the rules change for new users who exert
the same work energy to receive less payment. (early users were paid in larger
block rewards for less effort, i.e. a user with a CPU on day 5 will be paid
signifigantly more than a user with the exact same CPU on day 500, and by day
5000 the same work is worthless)

An economic model that pays some people more for the exact same work is
exploitative.

If all users are paid a consistent amount for the same work, this particular
disincentive for new users would not be a problem.

~~~
CryptoPunk
>>The question purposed is "are cryptocurrencies a worthy alternative to
existing mediums of exchange".

The question was never posed by the story submitted. It was asked as a segue
into a missive against cryptocurrencies and the alleged unfairness of those
with foresight to mine early getting rich as a result of the market value of
what they mined rising.

>>and then the rules change for new users who exert the same work energy to
receive less payment.

Like I said, not only is this inaccurate (e.g. the rules never change in
mining), this is a major diversion from the topic of the story, and is going
to turn this into another cryptocurrency debate, which you seem intent on
having.

~~~
nosuchthing

      Like I said, not only is this inaccurate (e.g. the rules 
      never change in mining)
    

You are incorrect.

[https://blockchain.info/charts/difficulty?timespan=all](https://blockchain.info/charts/difficulty?timespan=all)

[https://bitcoin.stackexchange.com/questions/40411/can-a-
smar...](https://bitcoin.stackexchange.com/questions/40411/can-a-smart-mind-
explain-block-difficulty-calculation-in-lay-terms)

The topic of the story covers the history of money.

The comment merely informs the history of crypto currencies like Bitcoin which
is marketed as an alternative money ( "Bitcoin, an Electronic Cash System" ).
The minting, economics, and game theory of said crypto currencies is the
highlight of the comment in regards to money/value/exchange systems.

The author of the paper, Nick Szabo, is a direct contributor to the concepts
behind the current trend of crypto exchange systems.

See:

[https://en.wikipedia.org/wiki/Medium_of_exchange](https://en.wikipedia.org/wiki/Medium_of_exchange)

[https://en.wikipedia.org/wiki/Alternative_currency](https://en.wikipedia.org/wiki/Alternative_currency)

~~~
CryptoPunk
The difficulty changes don't involve a rule change. The difficulty is always
determined by the same set of rules.

>>The author of the paper, Nick Szabo, is a direct contributor to the concepts
behind the current trend of crypto exchange systems.

That only tangentially connects this to cryptocurrency. The topic of the paper
is the origins of money, with a heavy emphasis on early human prehistory. Like
I said, if you have an axe to grind against cryptocurrency and those who had
the foresight to mine it early, save it for another thread and don't turn this
one into yet another debate about it.

------
CryptoPunk
How poetic that the author invented some of the key concepts behind Bitcoin
and Ethereum (a proof of work based blockchain, the smart contract, etc) which
introduced a new paradigm for money, and could potentially change how humans
trade into the future.

~~~
45h34jh53k4j
Poetic, or maybe he is the real Satoshi :-)

