## Bitcoin, Blockchain and the History of Money ## Source details **Canonical URL:** [Bitcoin, Blockchain and the History of Money](https://www.imf.org/en/publications/fandd/issues/2018/06/bitcoin-blockchain-history-of-money-james) ## Other formats - [Markdown version](/en/publications/fandd/issues/2018/06/bitcoin-blockchain-history-of-money-james/index.md) - [Structured JSON version](/en/publications/fandd/issues/2018/06/bitcoin-blockchain-history-of-money-james/index.json) - [Bundle manifest](/en/publications/fandd/issues/2018/06/bitcoin-blockchain-history-of-money-james/bundle-manifest.json) ## Bibliographic details - Authors: HAROLD JAMES - Published: June 1, 2018 - Volume: 55 --- ### Overview - Author: HAROLD JAMES, professor of history and international affairs at Princeton University and IMF historian. - Publication: F&D Magazine, June 2018. - Central question: Is Bitcoin a plausible alternative currency? Is Bitcoin trustworthy, safe and secure? - Context: The article examines Bitcoin and blockchain by tracing long-run monetary history and recurring patterns of innovation, suspicion, and social disruption. ### Historical parallels and monetary evolution - Money has historically combined mystical or quasi-divine narratives with sovereign authority: - Coins commonly bore state symbols (example: Minerva’s owl for Athens; Roman emperors’ divine heads; British coins linking the monarchy to God). - For much of the past 2,000 years, monies sat between intrinsic value and state guarantee: - Commodity (metallic) moneys had intrinsic value but practical inconveniences (gold unsuitable for small transactions; copper problematic for large settlements). - Metallic currencies were prone to arbitrary fluctuations from new mineral discoveries (examples: California gold in the 1840s; Alaskan, Australian, and South African fields in the 1890s). - Absence of new discoveries in the early 19th century and in the 1870s and 1880s produced deflationary periods. - Nonconvertible paper currencies emerged as a state-regulated alternative by the late 19th century: - Early failures and scandals shaped distrust (examples: John Law’s early 18th century scheme; French Revolution assignats). - Literary reflection: Goethe’s Faust links unlimited note issuance to diabolical promises. - The 20th century featured widespread currency mismanagement (inflation during war and social turmoil, and deflation during the Great Depression). - By the late 20th century, improved monetary policymaking achieved price stability but raised new concerns about the store-of-value function amid asset-price inflation (stock markets, real estate). ### Functions of money, technology, and anonymity - Standard economic functions: unit of account, store of value, means of payment. - Trade-offs and logical impossibility: - It is logically impossible to combine being a really secure store of value with providing a measure of prices that are moving in different directions for goods affecting different groups. - Technological shifts: - Electronic transfers replaced paper money for many transactions and are convenient, but they are easily trackable. - Demand for anonymity (a return to the “coined freedom” of cash) drives interest in alternative payment technologies. - Cultural and privacy drivers: - Physical money is associated with privacy and individual freedom (cited Dostoyevsky’s “coined freedom” from The House of the Dead). ### Bitcoin and blockchain: characteristics and implications - Origins and timing: - Bitcoin originated around the time of the global financial crisis, in 2008–09. - The ostensible founder, Satoshi Nakamoto, is cryptically named and may not exist, fitting historical patterns of mysterious monetary origins. - Technical proposition: - Blockchain (distributed ledger) promises absolute transaction security without a central authority or bank arbitrator. - It offers the potential to replace electronic bank-account currency as electronic transfers replaced paper money and as paper money succeeded gold and silver. - Political and ideological appeal: - Libertarians see Bitcoin as a way to shrink state power. - Pariah states such as Venezuela and North Korea see it as a means to build an alternative to the international political order. - Economic analogy and production of value: - Bitcoin is analogized to gold: it can be “mined” through effort requiring large amounts of computer power and cheap energy in remote locations (examples: parts of Asia, Iceland). - This shifts the conception of fundamental value from human labor added to nature to a combination of stored energy and nonhuman intelligence. - The article suggests blockchain may point toward an era where value is increasingly created by nonhuman interactions of machines and energy. - Psychological and cultural resonance: - Bitcoin’s combination of claimed anonymity, untraceability, and security rekindles historical associations of new money with mystical or diabolical qualities. ### Key findings and implications - Recurring pattern: monetary innovation often provokes suspicion and narratives about diabolical origins. - Technology alone does not resolve core monetary trade-offs (unit of account vs. store of value vs. means of payment). - Privacy concerns and desire for anonymity are significant drivers of demand for alternatives to tracked electronic money. - Bitcoin’s technical design and origin story align it with historical precedents of contested, innovative monies that attract both utopian supporters and deep distrust. *Harold James, Bitcoin, Blockchain and the History of Money — F&D Magazine, June 2018.* --- ## Content in this bundle - **إغــراء المـال** - [إغــراء المـال (Markdown version)](/-/media/files/publications/fandd/article/2018/june/ar/james.pdf.md){rel="alternate" type="text/markdown"} - [إغــراء المـال (PDF)](/-/media/files/publications/fandd/article/2018/june/ar/james.pdf){rel="external" type="application/pdf"} - **La fascinación por el lucro ● El dinero se transforma ● Finanzas y Desarrollo ● Junio de 2018** - [La fascinación por el lucro ● El dinero se transforma ● Finanzas y Desarrollo ● Junio de 2018 (Markdown version)](/-/media/files/publications/fandd/article/2018/june/es/james.pdf.md){rel="alternate" type="text/markdown"} - [La fascinación por el lucro ● El dinero se transforma ● Finanzas y Desarrollo ● Junio de 2018 (PDF)](/-/media/files/publications/fandd/article/2018/june/es/james.pdf){rel="external" type="application/pdf"} - **James** - [James (Markdown version)](/-/media/files/publications/fandd/article/2018/june/fr/james.pdf.md){rel="alternate" type="text/markdown"} - [James (PDF)](/-/media/files/publications/fandd/article/2018/june/fr/james.pdf){rel="external" type="application/pdf"} - **Bitcoin, Blockchain and the History of Money - IMF F&D Magazine - June 2018** - [Bitcoin, Blockchain and the History of Money - IMF F&D Magazine - June 2018 (Markdown version)](/-/media/files/publications/fandd/article/2018/june/james.pdf.md){rel="alternate" type="text/markdown"} - [Bitcoin, Blockchain and the History of Money - IMF F&D Magazine - June 2018 (PDF)](/-/media/files/publications/fandd/article/2018/june/james.pdf){rel="external" type="application/pdf"} - **Очарование легкой наживы– Финансы и развитие – июнь 2018 года** - [Очарование легкой наживы– Финансы и развитие – июнь 2018 года (Markdown version)](/-/media/files/publications/fandd/article/2018/june/ru/james.pdf.md){rel="alternate" type="text/markdown"} - [Очарование легкой наживы– Финансы и развитие – июнь 2018 года (PDF)](/-/media/files/publications/fandd/article/2018/june/ru/james.pdf){rel="external" type="application/pdf"} - **利润的诱惑 - 金融与发展** - [利润的诱惑 - 金融与发展 (Markdown version)](/-/media/files/publications/fandd/article/2018/june/zh/james.pdf.md){rel="alternate" type="text/markdown"} - [利润的诱惑 - 金融与发展 (PDF)](/-/media/files/publications/fandd/article/2018/june/zh/james.pdf){rel="external" type="application/pdf"} --- _Source: https://www.imf.org/en/publications/fandd/issues/2018/06/bitcoin-blockchain-history-of-money-james_