Digital Cash | Finn Brunton

Summary of: Digital Cash: The Unknown History of the Anarchists, Utopians, and Technologists Who Created Cryptocurrency
By: Finn Brunton

Introduction

Welcome to the fascinating world of cryptocurrencies as portrayed in Finn Brunton’s ‘Digital Cash: The Unknown History of the Anarchists, Utopians, and Technologists Who Created Cryptocurrency’. Delve into the historical context that laid the foundation for Bitcoin and eventual rise of cryptocurrencies. Explore the complexities of currency experimentation such as Technocracy Inc.’s energy certificate scheme and how alternative currencies reflect human biases and beliefs at unique points in history. Understand the impact of technology on the evolution of money, including early attempts at building digital cash and anonymous transactions while learning from failures that transpired throughout the process.

Technocracy: A Historical Alternative to Bitcoin

The Great Depression of the 1930s led to the circulation of US dollars to slow down, prompting many municipalities to issue their own currencies, while Dow Chemical company created magnesium coins, and stores bartered commodities. Enter Howard Scott’s Technocracy, Inc., which promised an alternative monetary system centered on “energy certificates” — the means of exchange that would replace government-issued greenbacks. The certificates, with a two-year expiration date, were organized around a Dewey Decimal System, cataloging all goods and services available for purchase in the Technate. The Technocracy movement borrowed from Depression-era science fiction, fueled by the hope for a technically-enabled, utopian future. The energy certificates are a part of a long line of monetary agreements that reflect human biases and beliefs unique to their historical context.

The Evolution of Money: Past, Present, and Future

Money has come a long way since its inception, evolving from barter to physical currency and now to electronic payment systems. In the past, the authenticity of bills and checks was determined by quality and markings. However, with the introduction of electronic money, privacy concerns have emerged. The rise of credit cards led to new utopian thinking about money, such as creating an Electronic Value Exchange. The downside of this concept was that credit card issuers could track not only how much customers were spending but also where and when. The dystopian possibility of credit card transactions being used to track enemies of the state was first raised in 1975 by computer scientist Paul Armer. Eventually, electronic benefit transfer cards replaced food stamps, leading to monetary coercion. While electronic payment forms offer convenience, there is a need for regulation to balance privacy concerns.

The Rise and Fall of e-Cash

David Chaum, founder of DigiCash, was concerned about how closely monitored credit card transactions had become, leading him to develop a new virtual currency – e-cash. E-cash would be anonymous and issued by DigiCash with a certificate ensuring that the currency had been acquired correctly. The lack of a central bank would mean that e-cash would work similarly to other currencies, with a unique serial number for each note verifying its legitimacy.
To maintain anonymity, e-cash notes would have a blinding factor, a random number that would be multiplied by the serial number known only to the customer. This feature would prevent e-cash notes from being tied to a specific person while still ensuring that money laundering could be prevented. Testing began on the concept with a St. Louis bank in the mid-1990s, but it failed to gain widespread adoption, leading to the eventual collapse of DigiCash. Chaum’s vision demonstrated that successful currency innovation requires more than just technology, but also a deep-seated dissatisfaction with the current system.

The Virtual Currency Revolution

In the 1990s, a group of libertarians inspired by technology and healthy living sought to create a new legal tender through virtual currency. They envisioned a future filled with digital bits in place of physical atoms and had an obsession with extending life through biostasis. Friedrich Hayek, an Austrian economist, was their hero, and they believed income inequality was desirable, with the superwealthy becoming benevolent patrons of the arts and technology. The Extropians, a group of libertarians committed to market infallibility, envisioned a currency issued by the Virtual Bank of Extropolis featuring Hayek on the bill. They acted as beta-testers for cryonics and cryptocurrency, exploring questions around building digital cash and preventing token fraud.

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