The origins of money are fascinating. There has been much debate as to whether the concept of “money” arose from a system of barter, store of value or a system of debts & credit. Around 2500 years ago the Greeks, Romans and Chinese began to create minted money. Official emblems were minted into these scarce resources. Chariots adorned silver dekadrachm and emperors adorned a gold aureus. Paper money emerged due to a shortfall in gold coins, ease of use [gold is heavy!]. The first paper money system originated from China over seven hundred years ago. These took the form of warehouse receipts whereby a piece of paper backed up your deposits of scare commodities like grain or gold. Between the late 17th and early 18th century the dominant bankers in the city of London were goldsmiths. Gold was transacted and receipted in exchange for paper. The distribution of credit emerged shortly thereafter. Financial institutions began soon after to issue private bank notes and these acted as a liability of these banks. Many of these banks failed during the civil war period.

The Ledger

The starting point is that our financial system operates on a ledger system. The ledger is a method to record financial relationships [debt], economic transactions and act as a principal recording of accounts. Five thousand years ago the earliest form of writing on our planet, called proto-cuneiform, was invented in Mesopotamia during the Late Uruk period. Proto-cuneiform consisted of pictographs — simple drawings of the subjects of the documents — and early symbols representing those ideas, drawn or pressed into puffy clay tablets, which were then fired in a hearth or baked in the sun. Ledgers are made up of transaction and balance ledgers. Bitcoin is a mechanism to store transactions. Etherium on the other hand stores balances. Fundamental to accounting is the notion of a hierarchy between a general and sub-ledger. Sub-ledgers usually contain more detail. Using the Banking analogy we may describe the US Federal reserve as a central ledger for money and the thousands of regional & national US banks operate sub-ledgers for money.  Any transaction has two places on a ledger – one on the debit side and one on the credit side resulting in a balancing between assets and liabilities. There are certain characteristics of ledgers that are desirable including immutability, time-stamped, consistency, ownership, accuracy and descriptive. Modern day ledgers are observable via everyday payment systems. The earliest forms of payment systems were negotiable order [cheques]. The main characteristics of these payment systems enlighten the mechanical description of crypto-currency. The payee details define which ledger the transaction is being to and payer from which ledger the transaction originates. Important details include a time-stamp[date], a payee, a payer, signature and amount.


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