Not so novelBitcoin is fiat money, too

  • So to anyone invested in, mining or building applications for distributed ledger money such as bitcoin or ethereum: read your Kindleberger.
  • Distributed ledgers, which borrow private computers from around the world to update the same list of accounts, address one ancient challenge of finance: how to make sure a transaction between two people located far apart is credible to both.
  • Bankers talk about “governance”, ways to ensure private banks and central bankers make sound decisions—so they create just enough money make commerce easier, but not so much that the system collapses through inflation or panics.
  • Take bitcoin: if a supermajority of the computers running the bitcoin distributed ledger run an upgrade, the upgrade becomes the new code.
  • In bitcoin, the people who own the computers verifying transactions—the “miners”—want code that increases fees for miners.

FINANCIERS with PhDs like to remind each other to “read your Kindleberger”. The rare academic who could speak fluently to bureaucrats and normal people, Charles Kindleberger designed the Marshall Plan and wrote vast economic histories worthy of Tolstoy.

FINANCIERS with PhDs like to remind each other to “read your Kindleberger”. The rare academic who could speak fluently to bureaucrats and normal people, Charles Kindleberger designed the Marshall Plan and wrote vast economic histories worthy of Tolstoy. “Read your Kindleberger” is just a coded way of saying “don’t forget this has all happened before”. So to anyone invested in, mining or building applications for distributed ledger money such as bitcoin or ethereum: read your Kindleberger.

Start with A Financial History of Western Europe , in which Kindleberger documents how many times merchants in different centuries figured out clever ways of doing the exact same thing. They made transactions easier, and in the process created new deposits and bills that increased the supply of money. In most cases, the Bürgermeister or the king left these innovations in place, but decided to control the supply of money and credit themselves. It is good for the king to be in charge of his own creditors. But also, it has always been tempting for private finance to create too much money. There is no evidence that money born on a distributed ledger will be clean of this sin.

Distributed ledgers, which borrow private computers from around the world to update the same list of accounts, address one ancient challenge of finance: how to make sure a transaction between two people located far apart is credible to both. Other innovations have done the same….

Not so novelBitcoin is fiat money, too