Before we get to the books, we better clarify what a cryptocurrency is. all currencies are digital now, more or less. what distinguishes a cryptocurrency?
There are many different ways to create digital currencies. cryptocurrencies are just one of them. they are not equivalent. The point about a cryptocurrency is that the value of the coin is determined by crypto alone. it is not determined by something else. So, for example, if you were to make something like bitcoin and issue it against a 100 percent gold reserve, that wouldn’t be a cryptocurrency. it would be a digital version of gold, because its value is not held by cryptography. its value is maintained by pegging it to gold. a cryptocurrency like bitcoin or ethereum is not tied to anything. its value is only determined by, as its adherents would say, the power of mathematics. I’d say because of the power of popular deception, but that’s a different point.
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I understand that a coin can only be accessed through cryptography or an algorithm solution, but how can that coin, once it is in circulation, be free from government control in one way or another, given that money, in a general sense, is a social technology?
The government prints £50 notes and they circulate. the government does not control how they circulate. there are no rules about what you can or cannot do with the £50 note. you could certainly make an electronic version of a £50 note, if you wanted. I’m not sure we really want to do that.
I think there is a different debate. one of the principles of my book is that we have it a little backwards. we should have a discussion about what kind of money society wants and then have technologists implement it, instead of technologists giving us a menu of options, which we may or may not have to take.
“it should be society that decides how we want the money of the future to work”
For example, people often say that if you’re going to have an electronic version of cash, then you have to find a way to electronically replicate the anonymity of cash because that’s one of its key features. and that is not obvious to me. it’s not obvious to me that cash should be anonymous. I can see many good reasons why it should be private. that’s a different argument.
what is the a priori requirement for cash to be anonymous? I don’t get it.
what is the distinction you are making there between private and anonymous?
If something is private I can send you some electronic money without you having the slightest idea who I am and without the bank knowing either. but, if it turns out that I have committed some kind of crime, then the police can show up with a warrant and someone, depending on the structure of the system, will tell them who I am. but they won’t tell you. you are private as long as you behave, but if you break the law, you will no longer be.
There is a big difference between this kind of conditional anonymity or pseudonym and unconditional anonymity which is very important to me, but quite possibly only to me.
And those who advocate unconditional anonymity believe that it is crucial that electronic money is not identifiable under any circumstances?
correct. and one of the bogus arguments you see from time to time is that it should be anonymous for small amounts. so if you are going to store up to £500 in your e-wallet then you should be anonymous. but I don’t buy that argument, because I think if you have a non-zero amount of anonymity, then you have anonymity because, if I’m a criminal, I’ll get a million of those £500 wallets, and now I’ve got £500 million anonymous.
What I mean is that it should be society that decides how we want future money to work, given that it can exhibit all sorts of counterintuitive properties that physical money can’t. it should be society that then goes to the technologists and tells them, ‘implement that’. that’s not what we have right now.
I don’t know if you’ve looked at the Bank of England’s current consultation paper on digital currency. It’s actually a very good document. and I think they are getting close to what I would consider a decent solution. there’s a brookings institution article that came out recently on design options for a digital currency, which is very similar in its conclusions to a draft i just submitted to payment systems and strategy magazine on the same topic. I can see some of the thoughts starting to coalesce into reality.
what is the basic impulse of the bank of england piece?
The basic idea is that you don’t want the bank to manage the digital currency itself, for two reasons. one, because you can’t, although I don’t really think that’s the barrier that they think it is. gmail has two billion users or something like that. I’m sure you can download some software that will let you manage a couple of hundred million, so maybe that’s not that big of a barrier.
But as I’m sure you’re well aware, there’s an impact on commercial banks if you remove their money creation function. it wants to leave credit creation in the hands of commercial banks and then have commercial banks distribute digital money on behalf of the central bank.
The cheapest and easiest way to implement a digital currency would be to have everyone log into the bank of england and get a digital currency account. then everyone could send digital money to everyone else at zero cost. that would easily be the most efficient way. In those circumstances, what would the banks do? that might be a bit too disruptive.
“it was ironic that the us treasury. uu. print and post stimulus checks in the same week the Chinese were piloting the digital currency in four cities”
what the chinese have decided to do is go for what they call a ‘two tier system’ and i think the bank of england will follow the same path, where the bank of england will manage the digital currency. —they will set the general parameters—but people will interact with commercial banks as they do now. And by the way, such a system was launched 25 years ago in the UK in Swindon. people have totally forgotten about it now, but natwest launched a system called mondex, which just had its silver wedding. I shot a little video with some of the key players. I’m pretty nostalgic about it, really. People have forgotten Swindon’s crucial role in the future of money, but there will be a plaque there at some point, or perhaps a statue of some kind next to Don Rogers.
His book is called The Monetary Cold War. What is the monetary cold war and what arguments are you building in this book about the future of money?
The book consists of three parts. the first part talks about what digital money is. explains what a digital currency is and what a cryptocurrency is.
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The second part of the book addresses why we’re talking about this now, which I think is quite interesting because the technology has been around for a while. What is it now that makes us discuss all these things?
and the third part talks about what the implications might be. and that’s where this idea of the ‘cold war’ comes from. mark carney has said that we need some form of what he called “a synthetic hegemonic currency”, in other words a digital currency to deal with, again, his words are not mine, “the destabilizing dominance of the us dollar “.
The big picture folks (niall ferguson being a good example) have discovered that if there are global digital currencies that allow people to trade safely, but are no longer under the control of the world’s banks clearing system usa money center york, that will have interesting consequences. there are a lot of countries, not just enemies of the united states, but also its allies, who find the ability of the united states to wield soft power through the financial system as ‘irritating,’ as ferguson put it, which i think which is a beautiful word to describe it.
People think of digital currencies in terms of making national markets more efficient, and the Bank of England’s calculations on this were unequivocal. i can’t remember but i think they said that if we issue a central bank digital currency worth a third of gdp this would permanently increase gdp by up to 3% partly due to efficiency cost savings but also in part because it provides a platform for innovative new products and services. so moving to digital currency is a good thing.
“It is not at all obvious to me that cash should be anonymous”
but it has international implications. what if the Chinese digital yuan becomes the standard trading currency along the “belt and road”? you’d have a couple billion people who wouldn’t be using US dollars anymore. demand for US dollars would fall, as would demand for US dollar-denominated securities. America’s cost of financing its deficit would begin to rise. And the next time the US tries to impose sanctions and say, “If you don’t do this, we’ll shut you out of the international financial system,” the target country will simply say, “Whatever.” instead, we’ll use yuan’.
When I was writing the book, I had two different kinds of metaphors in mind. she was thinking it’s like a space race. the chinese decision to go digital currency is like a sputnik moment that the united states will have to respond to, because i thought it was ironic that the us treasury was printing and posting stimulus checks in the same week the chinese were testing digital currency in four cities. there’s a couple of people I quote in the book who say it’s kind of a space race. in the end i decided to use the libra digital currency from facebook and china to illustrate this tension between private and public, east and west, all these kinds of things. I decided it would be a better central narrative for the rest of the book. given that, the story looked more like a cold war for control of the financial system. in any case, the monetary cold war was a better title than “the monetary space race”.
the point you made about the belt and road and the possibility of imposing sanctions is more like the kind of interaction between the soviet union and the united states during the cold war, when both sides were running around the developing world trying to resist carrots and sticks to try to get people on your side.
yes it looks more like that.
Coming back to the middle section, you mentioned that the technology had been around for a while, but there were specific reasons why it started now. Is this specifically China’s attempt to build something outside of the US global financial system?
I think it’s more a question of several things coming together at the same time. On the one hand, we have had the technology for a long time. there have been some business ideas around this. you have platforms moving towards it. you have several of these things happening at the same time. and then you have encouragement from china doing it. but china is not reacting to pound. Chinese digital currency has been planned for a long time. maybe the time has changed a bit, but it goes back years.
Has the US overuse of what the economist called “financial carpet bombing” reached a climax? possibly. Could it be that the cost of technology has dropped considerably? possibly everyone has a smartphone now. Is it because of Chinese long-term planning? possibly. Is it because the arrival of what we will temporarily call “smart contracts”, although they are not even smart contracts, opens up some new and innovative possibilities? it could be that, but really, it’s the combination of all these things together.
Let’s move on to the books you have chosen to better understand cryptocurrencies. The first is The Age of Cryptocurrencies: How Bitcoin and Blockchain are Challenging the Global Economic Order by Paul Vigna and Michael Casey.
This book is excited about new technology. they are journalists and it is very well written. it’s a very enjoyable read and although I knew a lot of the things in it, I actually enjoyed reading it as part of this larger overall narrative. It is a very nice introductory book. if you read books by bitcoin crazy people, you don’t get that bigger narrative. this book stands out well, and if you want an introduction, it’s a good place to start.
Is it perfectly accessible for the intelligent but general reader?
yes. absolutely.
and what is your general theme; what is the story they are telling?
The story they’re telling is that this is something really new. this is not progress in the sense of putting a Band-Aid on credit cards, so you can use them to book hotels. this is a genuinely new way of doing things. And actually, I think they’re right. it was something really new.
touches on the relationship between the global financial crisis and cryptocurrencies, which I think is interesting. they’re a little out of breath for the blockchain, but that’s ok. I guess I would see bitcoin much more as a protest movement now than when I was originally reading this book in 2016.
what do they say in the book about the role of cryptocurrencies specifically, in relation to digital currency in general?
They talk a lot about mistrust of financial systems. I think some of that idealism is gone now. They say financial markets are especially ripe for blockchain innovation, the idea that in the long run the most innovative part might be the smart contract that runs on top of it, rather than the underlying currency. I think that’s probably true. tells that story very well. In summary, I think that if you don’t know much about the subject and want to know a little about what bitcoin is all about, this is a good book to start with.
Let’s move on to digital money: the unknown story of the anarchists, utopians and technologists who created cryptocurrencies by finn brunton. what part of the history of cryptocurrencies does this book tell?
I think people who are crazy about bitcoin have an almost religious attitude towards it and see it as a kind of revelation. but of course the truth is that bitcoin is part of a much longer evolutionary family tree of electronic cash technologies, in which, due to my great age, I have been involved for a very long time. what brunton does very well is talk about this longer history and context: where did bitcoin come from? it was based on all these previous developments and emerged from a certain context. talks about the cypherpunk groups and libertarian ideologies that underpinned these earlier developments.
bitcoin was not something that fell from the sky. it is something that evolved. I find it fascinating, as do readers who are more interested in what it does than how it works. I really like your writing style. It is a very well written book and I really enjoyed reading it.
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what is the background of bitcoin?
he talks about things like david chaum’s digicash in the 1990s, adam back and hashcash, bit gold and this kind of thing. it talks about how different people were building and developing different parts of it. It’s a bit like the story of the steam engine. someone had a steam engine, then someone else invented a condenser, and then someone else invented a regulator, and all of a sudden you had steam engines that could do a hundred miles an hour. it’s that kind of story he’s telling.
How does utopian anarchism fit in?
he talks about this idea of the wild west. people in that community talk about this world of bitcoin being the wild west, but they have a very romantic and essentially fictional image of what the wild west was. After all, if the Wild West was everything they say it is, we’d still be in it. but it was not like that. it wasn’t very good so we don’t have it anymore.
Uncharitable people might see it as a kind of angry adolescent masculine pseudo-libertarianism. it is not real political libertarianism. it’s more of a mommy-won’t-let-me-buy-a-playstation kind of libertarianism. anyway, it’s a very good book about the fact that this is an evolutionary tree which, by implication, will continue to evolve.
Even if it was initiated by libertarian types, obviously it has now been assumed by a much broader strip of people. What is the point that these coins were initiated by people with radical utopian dreams, but in reality they have been incorporated for other reasons now?
I think it will be difficult to convince me that Bitcoin has been integrated. It is possible that I can persuade myself that Bitcoin advertising has become generalized. But the number of people who have bitcoins is still small. I think most bitcoins are still in the hands of “whales”, as they call them. It is a very thin and opaque market that is subject to transparent manipulation. and most participations are totally speculative. Actually, nobody uses bitcoin at all.
That is why Brunton’s vision attracts me as part of an increasing and evolving phenomenon, which will continue to evolve.
But do you see any way that it could evolve from this strait base of people? Do you have any obvious use in conventional finances?
No, I don’t think I do. It is probably like the new steam machine that was used to pump water from the cornual mines. It was the first, it was irremediably inefficient, but it was the only way to do something in particular, so inefficiency was tolerated. But you did not put a newly arrived steam engine on wheels to create the flying Scottish, you continued to evolve the technology and I think that is what will happen.
Let’s go to the history of money: from ancient times to the present of Glyn Davies, a book that covers much more than only cryptocurrencies.
This is one of my absolutely favorite books. Many years ago, when I worked at Mondex on Swindon, I quickly realized, being an intelligent person, who actually all this matter of money was much more interesting than I had thought. And, what is more, as soon as you are forced to sit and write a computer code, you realize that nobody understands it. Then, I wanted to understand a little more about him and his story. And I left and bought this book and it is simply wonderful. I read it as a novel, wanting to know what will happen next. I love everything. It is beautifully written and really interesting.
There are many others that could point out now. There is the rise of Niall Ferguson cash. The money changes everything from William Goetzmann. But this still remains.
“People have forgotten Swindon’s crucial role in the future of money”
When I was younger, I organized a conference on digital money. And I called Glyn Davies, that she did not know me about Adam, and asked if she would come and give a talk to establish the historical context. She kindly came and gave a fabulous talk about the history of money. I love that book. it’s fantastic. She unfortunately is no longer with us.
I can see that we are now in the fourth edition of the book. When did you write it?
was first published in 1994.
Do you have any kind of general theme?
yes. The general issue is that every innovation in the history of money has served to reduce centralized control. And the last great evolution involved the agreement between the monarch and the commercial classes, which led to the central banking and the national currencies and all that kind of thing. And that is the future. Future technological developments will continue to reduce central control.
Is digital money probable to continue developing that trend?
I think you can argue that it has already happened. The question is whether it is going to decentralize even more and the answer, I think, is probably “yes.” In any case, I don’t think you can think about the future of money if you don’t understand where it came from and how it has worked in the past. And Davies is excellent to provide that perspective.
Let’s pay paid: Dongles stories, checks and other money -related things, edited by Bill Maurer and Swartz Lana. What story does this book about cryptocurrencies tell?
A few years ago, when I was trying to read about the history of money and trying to find out where the money was going, I began to read things from social anthropologists such as Jack Weatherford and others. And I began to realize that money could not really be understood by just observing technology and financial services. You had to look at the general panorama to understand it and felt that anthropology contributed something very special.
The subtitle of this book is Dongles stories, checks and other things related to money and talk about checks, credit cards, dongles and smartphones, not from a technical perspective, but trying to ask: “What do they mean these?” And for someone. Like me, that I am not an expert on that side of the subject, it is a very good introduction to think of money objects in a different way. I was recently at the annual conference of the European Association of Social Anthropologists. Very kindly they invited me to participate in a session on digital money and I am very fascinated with all that. If you are interested in a topic, it is very useful
There are some fabulous books about the evolution of money that could recommend a thousand times, such as the debt: the first 5000 years of David Graeber, James Buchan’s icy desire: the meaning of money and Niall Ferguson’s money. I can point out all these books and all are fabulous, but paid is a small pleasant book that simply deepens that more anthropological side of things. I just remember that I enjoyed reading it, so I thought that people might like, as something a bit different.
The final book is about the basic concepts of Bitcoins and Blockchains by Anthony Davies. What light does this book shed on cryptocurrencies?
I thought I should probably include something that covers technical details. This book is very clear. It is a good place to start for a non -technical intelligent reader and I thought I should include a book like that. He is a couple of years. It is written with a useful perspective on how things have really evolved and developed.
What is your next book about?
I am working at this time, will the robots need passports? It is a digital identity. My obsessions are digital money and digital identity. After writing a couple of books about digital money, I am now writing a book about digital identity. I thought it would be an interesting angle to talk about how, although we have not really solved the identity problem of people, there is already a much greater problem in relation to things. We are going to connect many more things to the Internet than people and we don’t know what they are.
Is it about making sure things have consistent identities so they can communicate with each other?
That is part of that. For ‘things’ I mean that in a quite generic way. It is also related to issues on artificial intelligence. On one level, there is the trivial question of how I give permission to your car to park in my garage. That sounds very easy when futurists place it on a PowerPoint slide and say: “Well, one day your car can negotiate your own parking.” That is true, but when a level of detail falls, there is absolutely nothing there. How the hell do you know what my car is? How did you know that it was allowed to park there? How do you know I gave permission to my car to park in the garage? etc., etc.
But things will also get worse with the arrival of artificial intelligence. For example, if I see something on Twitter, how can I know what comes from a person, much less what person comes? I just made a call with the Tony Blair Institute, I didn’t even know there was such a thing. They were calling me about the government’s policy in the matter of identity. I had to tell them gently that there is none, which I think was a bit disappointing for them.
The point is that we already have enough problems, because we have not discovered how to administer the identities of people online and we are about to put billions of more things online as well. I thought it would be a fun idea for a book.
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