Money Without Middle-Men

How Old Money Works

Ask yourself: why is it that you’re willing to give some person you don’t know some of your stuff in return for funny looking paper notes? The answer to this is actually pretty simple: you’re willing to do so because you feel sure that someone else will give you more stuff in return for the new paper notes you’re getting.

Why not keep doing things the old way?

…you might well ask. After all, if it’s been working for over ten-hundred years. Why change to some crazy new thing we barely understand yet?

  1. Someone makes money that isn’t real and then spends it, making us all have to trust money a little bit less and so making real money a little bit worse.
  2. Someone steals your money right from the Big Powerful Group that is holding it.
  3. Someone pretends to be you and spends your money.

How New Money Works

So finally, this puts us in a position to understand how this new kind of money works. This new, completely computerized money needs to be able to do all the things old money does — let you trust that it’s working when you’re using it even if you don’t trust the person you’re using it with, be sure that no money is being spent many times, etc — only it has to do a better job (for anyone to care about it), and it has to do all of this without the use of anything you can touch –like paper notes and pretty rocks — and without a Big Powerful Group in the middle of it to manage everything!

Keeping track of how much money everyone has

This can be thought of as the most important thing, and the thing from which everything else will follow. In order to do it, we will do something that is kind of like what the Big Powerful Group does with old money; we’ll have a place where we keep track of every single time a payment is made. But, since we don’t have a Big Powerful Group to trust to keep this place hidden, we instead decide that this place will not be hidden; in fact, everyone who uses this money will have their own place where they store this very same stuff!

Tests that have to pass before somebody pays

When you want to spend money, your payment has to pass two main checks:

How we make the passing of tests harder

In short, we decide that in order to say that the checks have passed, your computer has to not only run the checks themselves, but also find the answer to a hard problem. (If you aren’t interested in the details of that hard problem, you can pass over the next two big group of words):

Making New Money

Notice two things:

  1. Money doesn’t just get passed around between people; at some point, it has to come from somewhere.
  2. As we saw earlier, in order to make sure money gets spent the right way, people have to offer up their computers to do a lot of work. But computers doing work takes power (which takes time and money), so we need to give them a reason to do this work.

Making sure you are who you say you are

This is actually the easiest piece to solve; everyone who uses this new type of money has two “keys” — groups of numbers and letters. One of these keys is kept hidden and only known by the person who owns it, and the other everybody can see.

More Than Just Money

All of this stuff that makes new money work, it turns out, can be used for other things too. Think of it this way; what our three “checks” eventually did was give you the power to ask computers to do something and have everybody agree on the result. With some even newer types of new money, you have more room to say what exactly it is you want to tell the computers to do. Like say you decide that for some people to give you money, more checks need to pass — say, a Check #4 and a Check #5 — checks that you yourself come up with. Or maybe, instead of letting money get spent, the computers do something else entirely that doesn’t even involve money. Once the relationship between computers we saw above is in place, there’s no end to what can be done [6].

Next Steps

Will there be a day when most people have an understanding of how new money works? Maybe not; when it comes to stuff on computers, it seems that for things to work, they need to get easy enough for most people to use without having to really understand them at all. If you are like most people, you probably can’t explain how it is you’re reading this right now, and yet here we are. It’s not possible to say whether new money will one day reach that point, but given the state of things, for better or for worse, it’s not crazy to say that the world of new money may continue to grow faster that most can imagine [7], and those who don’t even so much as know how to think about it could quickly get left behind.

Footnotes:

1. So much power, in fact, that some Big Powerful Groups have said that they are too big to ever not be big anymore, which, or course, just makes them even more powerful.

References / Further Reading

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