Bitcoin in Context

Bitcoin in Context

This is a slightly different perspective on money than Bitcoin users are used to, firstly because it involves looking at the past rather than the future, and secondly because it draws on anthropology more than economics.  I outline the two broad competing theories about the origins of money, then give a very quick history of money through the ages, what we used as a means of exchange, a store of value, and a unit of account.  Then I suggest three alternative conceptual frameworks for thinking about money, that is as a language, as a symbol, and as a form of collective memory.

The Origins of Money — Credit and Commodity

The textbook story of where money comes from, first told by Aristotle then repeated by Adam Smith, says that as early humans started to specialise in given jobs, they would trade away surpluses using barter. So if you have spare fish and want shoes you need to find somebody with spare shoes who wants fish.  The challenge of finding such a perfectly suited trading partner, fulfilling the so-called “double coincidence of wants,” makes the system very inefficient.  The suggestion is that early societies naturally settle on a standard commodity that can be used as an intermediary good, so barter continues, but without the need for double coincidence.  That intermediary good is, in essence, a form of money.

The problem with barter economies like this is that according to anthropologists like David Graeber there is no evidence they’ve ever existed, and there is significant evidence to suggest they did not exist!  He argues that what you get in primitive societies is a gift economy.  In this case if you have surplus fish, you simply share it with your hungry neighbour.  In exchange you get social debt, which may just involve allegiance or social status, or may involve a reciprocal gift further down the line.  Essentially your neighbour now “owes you one.”  If a traveller is passing through the village you may not be so generous, there is little benefit in gifting to someone you will never see again.  So barter may occur, but it is not the primary means of exchange.  Within the village, constant gift giving means that everyone is in debt to everyone in the most abstract and convoluted of ways, and the result is interdependence and community cohesion.  We see this with indigenous communities to this day, such as the Tiv women of central Nigeria who are constantly giving gifts, but never of the same value, as to respond to a gift with an equal gift would end the social debt and, by implication, the relationship.

In fact, barter appears as a dominant means of exchange only in communities that are used to having money, but have lost access to it for some reason, usually owing to political collapse.

So on the one hand we have barter, and on the other we have gifting culture, and these two modes of exchange allude to a broader divide between money as a commodity, and money as credit.  Anthropologist Keith Hart talks about this as the two sides of the coin of money, on the one side you have a commodity value of a coin, the pound/dollar/shekel all at one point referred to weights of a commodity, on the other you have the source of institutional trust that endorsing that money’s value, be it a queen or god or a map of Europe.

We’ll see this tension throughout the history of money, and still see it with Bitcoin today, between money as commodity and money as credit.

A Very Brief History of Money

The first groups with which men could enter contracts & exchange were the gods (I’m drawing here on the work of anthropologist Marcel Mauss). Gods were the true owners of things of this world, as a result they were our most important trading partners, and it was also easy and safe to exchange with the gods, as distinct from an untrusted rival tribe.  To this day you have societies like the Toradja of Sulawesi, Indonesia, who have little native concept of “purchasing”, but have a tradition of transactions with their gods.

As early civilizations built the first cities, we see money in both its forms, as a commodity, with Sumerian temples using barley as a unit of account to manage their staff, and as a credit, because that barley would circulate primarily in the form of promissory notes, in this case etched into cuneiform tablets.  We see something similar in Egypt but with wheat as the commodity of account.

Coins as we know them appear in Lydia (now Southern Turkey) in 700 BC, made of electrum, a mixture of gold and silver.  Coins appear independently in China shortly afterwards, though they take a very different form, with small metal tokens shaped as spades and knives.  After Alexander the Great the tradition was established of depicting the sovereign’s head on the coins, and that continues into Rome…though it wasn’t a guarantee of respect.  We know when the Emperor Caligula died all the coins with his head were melted down and reissued so that his reign would be quickly forgotten.

As late as Charlemagne (about 800 CE) Roman coins are still in wide circulation, and later the Byzantine gold coin known as the Bezant circulated widely.  During the Middle Ages there is an acute shortage of coinage across Europe, and by some accounts the Crusaders were partly motivated by the desire to get their hands on hard currency.  In the 13th century Marco Polo reports that in China the rulers have convinced their people to accept “the Bark of Trees, Made Into Something Like Paper, to Pass for Money” which naturally causes a bit of a sensation.

Europe’s shortage of precious metal is very suddenly swept away with the discovery of the new world.  Not just with the pillaging of the Inca and Aztec civilizations, the real treasure was in the ground, in the form of rich silver deposits across Mexico and Bolivia.  Vast quantities of precious metal get shipped back to Europe and a number of things happen, the Spanish  “piece of eight” becomes the first global currency, Spain is crushed by a resource curse, having lost the incentive to invest in more productive economic activity, and Europe experiences the “price revolution”.  Across Europe the cost of food rises markedly between the 1540s and 1640s, although overall it works out at an annual inflation of about 2%.  That may seem like very little to us now, but at the time it was a big deal.  Incidentally, most of the precious metal leaves Europe as quickly as it arrives, shipped to the Far East to be exchanged for silks, spices, teas and so on.

The next big innovations all come from Northern Europe, in 1609 the Amsterdam Exchange Bank is created which pioneered cheques and direct debits.  In 1656 the precursor to the Swedish Riksbank is created, the first bank to lend in excess of its metallic reserves, and issues the first European banknotes.  In 1694 the Bank of England is created, which introduces various innovations, including the monopoly rights of note issuance and later a formal gold standard.  In the 1700s we see some interesting experiments in currency, tobacco is made legal tender in Virginia and Maryland, and we see paper money used extensively in the colonies and in Revolutionary France.  In the early 1800s you have the Napoleonic Wars and the coinage crisis, caused by war debts and a shortage of silver, and after a few hiccups the pound sterling becomes the global currency, backed by the gold standard.  Over the next few years the gold standard spreads.

By the beginning of the 20th century almost all industrial countries have pegged their currencies to gold.  Of course if you’re all pegged to gold, you’re all pegged to each other and that’s all well and good until World War I, after which a number of countries throw out the rulebook, then we have the Great Depression and World War 2, after which the Bretton Woods Conference agrees on a dollar-based world economy.  Most countries peg their currencies to the dollar, and the US makes the dollar exchangeable for gold.  Dollars are easier to store and use than gold, so countries accumulate them.  In 1971 Richard Nixon closes the gold windows, breaks the gold standard, and we enter what CA Gregory calls the Era of Savage Money, floating currencies and free markets.  Incidentally Nixon’s act may have been the largest transfer of wealth ever seen, from the dollar-rich developing world to the gold-rich United States.

Now, that’s a very linear history of money, but history is never linear, and there are a lot of overlapping stories and blurred edges.  One thing we find when we look at the blurred edges is that money is a lot more than a means of exchange, a store of value, and a unit of account.

Money as Language

Money is an understanding that two parties will behave according to a certain set of rules, or protocol.  In this sense, money is a language.  Structuralism is a school of thought that said we can understand all human culture as language, with every instance and utterance conforming to a set of invisible rules, sometimes without us even realising it.  But we don’t even need to be structuralists to see the parallels between money and language.

Just as the Lydians were minting the first coins, the neighbouring Phoenicians were developing the world’s first alphabet.  Human credit and human thought were both codified and standardised at the same time in almost the same place.

If we look at gift economies, they operate with complex sets of rules of who should give to whom and when.  That is as true for the Trobriand Islanders practicing kula gift exchange as it is for a modern Westerner buying a round of drinks.

If we look at “primitive money”­ in societies with no states or markets, whether Iroquois wampum, African cloth money, or Solo­mon Island feather money, we find that it is used almost exclusively for social protocol.  Marriages are arranged with payments, deaths are avenged, honour and status are allocated, political allegiance is pledged.  Money is a political and social language used to say things that, for cultural reasons, we cannot say with words.

Bitcoin is sometimes compared to Esperanto, a nationless protocol, but it has plenty of precedents.  Cowrie shell money flourished from the 14th century right up to the 1880s, under European imperialism.  Most cowrie shells first grew in the Maldives, were then exchanged with Bengalis for rice & commodities, the Bengalis used them to trade with European merchants, and the Europeans used them to pay slave traders in West Africa.  Transnational protocols are not always utopian.

Money as a Symbol

Money is also a symbol, and has been called “the symbol of all symbols”.  In fact the word symbol come from the Greek symbolon, a metal  object broken in two to serve as a pledge for two parties in a contract.

Money is a political symbol.  We saw this with the sovereign’s head stamped into coins from Ancient Greece onwards, one of the earliest and most pervasive forms of political propaganda.  Today that propaganda is more likely to take the form of images of high technology, whether it be on the Canadian dollar, or the West African franc.

We see political tensions play out when two rival currencies represent opposing sides in a wider debate.  During the post-Soviet transition, US dollars were more than just a means of exchange, they were an embrace of the West and its promise of riches. As new currencies were introduced, they were met with an ambivalence that reflected widespread disappointment with post-Soviet realities. Anthropologist Jennifer Dickinson found that when Ukrainians greeted their new national currency, the hryvnia, with confusion, mistrust, and open mockery, they were treating it as a proxy for the shaky institutions that issued it.

Money can be deeply entrenched in identity,  witness how nationalists in Britain and the United States show pride in the status of their currencies, while the Russian Central Bank is currently holding a competition to design a symbol for the ruble, seen as a key ingredient in the country’s identity as an economic power.  Even the euro was part of a wider effort to build a European political identity from scratch, but with less success. The European Central Bank decorated euro banknotes with imagery of fictional buildings and bridges, all typical of certain styles but not specific enough to upset national sensibilities. Pictures of nowhere. Or, as we might render it in Greek, “Utopia.”   A charade designed to mask the great void within Europe, a political bloc that lacks a sense of self.

Money is even a religious symbol.  The Russian thinker Vasiliy Rozanov saw coinage as offering a metaphysical connection to ancient civilization (see Ure 2010 for more on this).  Those ancient civilizations’ coinage often featured gods and mythical figures on it, and there is evidence that Indian gods that made their way onto coins lasted far longer than those that did not.  Gods weren’t just on the coin, they were the coin, with changes in coinage sometimes sparking a kind of moral panic.  The Incas described gold as the Spaniards’ god. Karl Marx said money succeeded God as the fetishized source of human agency.

There is no question that Bitcoin is rich in symbolic meaning, something I’ve explored before.

Money as Memory

Money is also a form of collective memory, or to put it in broader terms, money is a medium for transmitting information.  Let’s go back to the village economy of early humans, everyone is in debt to everyone, and everyone more or less keeps track of those debts, albeit in an abstract way.  Money, is what happens when you have an economy that has become so complex that people need help remembering who owes what to whom.

The word “money” comes from the Roman mint at Juno Moneta, who was the equivalent of Mnemosyne, the Greek god of memory.  As Keith Hart puts it, money is a way of keeping track of our exchange with the rest of humanity.

This is where Bitcoin comes into its own, the blockchain is literally a giant artefact dedicated to the act of remembering who has given what to whom.  But it’s not a new function, merely a refinement of an established role.


To wrap up, we’ve seen the materiality of money change from the functional, to decorative, to the representational.  We’ve seen the source of authority change from the gods, to godly rulers, to elected rulers, to appointed technocrats.  Throughout this, money continues to perform its core role, which is as a means of allocating resources.

I have omitted a huge amount of monetary history: the role of salt, community currencies, the Lombards, the role of paper money in revolutions, the richness of counterfeiting culture, fractional reserve lending, and the rise of mobile money.  I haven’t explored the social differentiation of money, the way we treat tips and wages and sweepstake wins as all slightly different types of money, something explored in the work of Viviana Zelizer.

Regardless, I hope I’ve gone some way in convincing you that money can be seen as a language, a symbol, and a form of memory.  My final piece of evidence is that money is one of the few things that has never experienced metrication.  We standardised time into seconds, distance into metres, voltage into volts and so on.  We have never, and will never, standardise monetary value in a similar way, because it is based entirely on ever-changing human relations.

This text was (loosely) the basis of a talk I gave last November, viewable below.

2 Replies to “Bitcoin in Context”

  1. Hi Lui,

    Thanks a lot for writing this article, I got a lot out of it, as I’m currently writing my undergraduate thesis on a similar subject. What especially intrigued me was the connection with fiat monies and revolutions. Would you mind elaborating on this, or else providing some resources?

    1. Hi Erik, glad you liked it. I would suggest looking at John Kenneth Galbraith’s “Money: Whence It Came, Where It Went” …below is an extract:

      “Having recent experience of inflation, people cherish stable prices, and having long experience of stable prices, they become indifferent to the risk of inflation. And, on the whole, older communities are less inclined to monetary experiment than newer ones.

      Thus the United States came into existence on a full tide not of inflation but of hyper-inflation — the kind of inflation that ends only in the money becoming worthless. What is certain, however, is the absence of any alternative. Taxes, had they been authorized by willing legislators on willing people, would have been hard, perhaps impossible, to collect in a country of scattered population, no central government, not the slightest experience in fiscal matters, no tax-collection machinery and with its coasts and numerous of its ports and customs houses under enemy control.

      Plausibly too we have here the explanation as to why the revolutionary role of paper money is so little celebrated. The American Revolution would immediately, and the French Revolution would eventually, acquire great respectability. School books would tell schoolchildren of their wonders. But a line had to be drawn. It could not, either in decency or safety, be conceded that anything so wonderful was accomplished by anything so questionable as the Continental notes of the American Revolution or the assignats of the French Revolution.


      Paper was similarly to serve the Soviets in and after the Russian Revolution. By 1920, around 85 percent of the state budget was being met by the manufacture of paper money.”

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