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+++ S P E C I A L R E P O R T +++
"Digital Currencies: Doing Money Better”
Dr Elwyn Jenkins, BEd(Hons), MALitCom, PhD 
Business Technologist & Futurist
Specializing in Online Payment Systems, 
Digital Currencies and Digital Investment Tools
 August 27, 2001
Money has not been done well regardless of the civilization and regardless of the concept adopted. Through five different concepts, money has been misapplied in each culture, has been politically motivated and manipulated. The new era where we now have connectivity around the world provides a new environment where money can be de-politicized and re-conceptualized so that human beings can be enabled to more fluidly use "money-made-new" to be used as a medium of exchange person-to-person and business-to-business, a standard of value, and a store of value into the future. The digital revolution has touched our lives in nearly every corner of human existence. We have digital sound, digital photography and digital computing devices. Everyone has thought that money has become digital and has grown used to using credit cards online as a digital means of making payments. Unfortunately the digital revolution has not done money well and in this highly digital society we live in we are hampered in global exchange, global valuations of goods and services and global value storage because of this misfortune.

The key principle of the Digital Revolution is that something in our lives can be created through the use of millions of numeric representations. By using an interpretation system, those digits can be brought back to life to display that which was created and recorded. This is a remarkable of achievement of mankind, but it is not the principle of digitization that has altered our lives so dramatically. It is what digitization has now enabled us to now do. Digits when stored on a device form patterns and it is those patterns that make it possible for our lives to be transformed. Digital patterns are relatively easy to identify using computing devices, so much so that searching for a pattern and retrieving everything of that pattern and thereafter is a matter of just a minute amount of time to accomplish.

This article focuses on the concept of money and examines the latest concept of money that has been created and adopted by thousands of people now - almost all of whom are Internet junkies. This is digital money, money done right. It is a concept of money that is revolutionary, de-politicized, global and transforming -- in short it is digital money, a digital remaking so that money is made-new.

Origins of money
Money did not originate with the need for commerce, nor to expedite commerce (See: "A History of Money" Glynn: 1996 University of Wales. pp. xii-xiii). Specifically it came into existence through political expediency and the will of people to force their own judgment upon the shoulders of others. From the demands for tribute, exacting of blood-money, requirements for bride-money, participation in religious rites and human desires of ornamentation money came into being. Primarily the political nature of human beings fostered concepts where money was needed to participate with the most powerful. Even in commerce where barter was a primary method of exchange, money came into being where the wealthy could demand their price because they had money where the underling did not and therefore would take almost any money in return for goods and services.

The concept of money did not originate with one culture or one civilization. Money grew in different ways from various cultures of the world both distant and recent. Just as different languages have arisen, all basically to communicate, so too did the concept of money arise from the human conditions to provide mechanisms as a medium of exchange, as a standard of value and for storing value into the future. Just as people used words to signal meaning, money has been used to signal value.

Money has gone through centuries of development. The concept of money has not developed in the same way, or at the same time through history. The most consistent concepts across cultures exists today. However, this consistency is misleading as there are groups of people right around the world who do not ascribe to the political forces today that have managed to force upon us all the concept of money in use within nations and between nations today.

Four concepts of money
There are five concepts of money that have been widely used throughout the centuries that people have adopted the concept. Each of these five concepts have been used to some degree as a standard in major civilizations ("Signifying Nothing: Semiotics of Zero", Rotman, Macmillan Press, 1987). Each has their own particular fault.

Gold: money itself - Actual gold shaped into coins (at one stage) is money. It perhaps gained its greatest fans because it could be used for ornamentation. That is, you could actually wear your money, as a ring, as a crown or other form of ornamentation to display your power and wealth. For more utilitarian purposes you could also purchase sacks of rice, flour and barley. You could also store gold and have that value for uses in the future. Payment was done in terms of weighing gold, in fact the terms "spend", "expenditure" and "pound" all come from the term expendere meaning to weigh. You paid in a measurement of gold. Around 700 BC the Lydians created coins from precious metals making trade much easier. Each coin was a particular weight. Coins were also divisible making it possible to give a "quarter" - being the gold coin cut into four equal pieces. Gold is heavy and it also wears out from use, as well it is possible to shave a coin and retain some of the value. Some coins were "bad" money in that they were meant to be a certain weight by shape and name but the actual weight was not quite right because of wear and tear as well as fraudulent activity. Having gold in actual circulation was shown not to be practical after some time..

Imaginary money - In Venice and Amsterdam whose international trade was particularly vulnerable to the instabilities caused by debasement of gold coinage, banks created "imaginary" coins - a particular weight of gold that could be recorded but was treated as a coin such as the Florin de Banque, but it could be exchangeable for an actual amount of money (gold). It was actually a form of credit issued by the bank - it was called "bank-money" which actually was intrinsically worth more than gold coins because it was the preferred means of being paid. But then, fraudulent dealers began writing their own notes and presenting them to banks. As banks grew bigger and dealings were less on a person-to-person basis there was a need to regularize the way paper was handled promising gold in exchange.

Paper money - The Chinese had sorted this out thousands of years earlier by block printing these notes so that if it was not an officially printed note, then it would not be accepted. Essentially the bank held the value, while issuing a paper note to identify the value that would be redeemed in gold or silver when returned. After awhile no one wanted the gold and silver, just notes being much easier to handle with which to conduct business. Various standards of paper were issued by different banks. The Bank of Scotland issued a different note from The Bank of England. Where trade was effected between parties they needed to know how to convert value from one to the other. Eventually, people found that the value of a note to be expressed as the value of another note from another bank to be far better to understand than how much gold it actually could be redeemed for. After awhile various currencies arose that standardized paper money. This was effected by governments who wanted to make it easier to exact their taxes and revenues. While the value was often implicit that a certain amount of gold could be obtained for a note, explicitly people used the currency term and thought of the "real thing" being the note or its representation rather than the gold it represented.

Xeno money - this is the US Dollar today in either its paper or digital form. There is no hidden treasure, no icon of value, no redemption of some precious metal. This very second it has no value - it only has value going forward in some context. It is only valued in that it can be used in particular contexts because a society agrees that it can be used to achieve a human purpose. The meaning and value of this money floats on a daily basis so that it has a value in terms of other currencies on a minute-by-minute basis. The problem with this money is that if the political will and the economic forces that created this money become powerless to govern and control, then the money itself becomes powerless in relation to all others. This is perhaps all right for those who live in the USA - the most powerful nation in the world, but those who live in Belarus where the Belorussian Ruble is worthless due to the poverty and lack of strength of the government to solve political and economic problems. Xeno money, or fiat money, is not the answer to global and de-politicized needs for a medium of exchange, 
Digitization and money
Around the world today, the vast bulk of all transactions are digital. Each xeno-money currency floats in some relationship with or is tied to the US Dollar. Many people think that digitization of money has occurred. The digital revolution has drastically changed communications with sound recordings now being digital, telephone equipment that is digital gives better results digitizing the human voice and allowing millions of calls to share the space that only hundreds would have taken in the world's pipelines. And money, in its "digital" state is thought to have been revolutionized in freeing it from a relationship with gold or other "thing" of value.

In effect what has happened to money in this digital revolution is that the synthesized or fabricated "thing" has taken precedence over the corporeal. Let make an analogy with music. Since the digital revolution at least two possibilities have been effected with digitization of music. First, the voice in singing and instrument vibrations have been digitized to record music with the greatest clarity of any recorded music that has ever been. Second, at the other end of the spectrum, voices are no longer used and instruments as we have known them - like guitars, violins and trumpets - are no longer needed. It is possible to synthesize all these. Digitization in this case means that the digital version is not actually a recording but the creation of something for which there is no reference - there is no voice, there is no violin in spite of the sound being actually like a voice or a violin. Now I rather enjoy synthesized music, although I must admit it has something missing that in the more corporeal music is found. Synthesized music lacks a certain human quality; it is too perfect and too regular to be the only music of choice.

Now the analogy cannot be pushed too far. However, it is sufficient to say that synthesized music cannot fill the total function of music where ever is required to function. Similarly, in terms of money, synthesized money has a particular role that it can fill, but it is rather inadequate to fulfill all the roles to which we put money. The problem, however, is far more serious than simply a selection of one type of digitization applied to money and its management. On the one hand there are the digitized implementations of money that few individuals can ever hope to either understand or use for common purposes. At the other extreme large corporations and at least two or three associations that represent large corporate interests have a stranglehold on the provision of money to be used in physical places of commerce and in the online world. Their stranglehold is largely holding the world of consumer money in an analogue world where credit card accounts, and poorly constructed legal agreements make the world of consumer transactions a minefield that only large traders can afford to operate within.

The problem is that the world of credit cards and debit cards was established largely on a national and a currency basis using analogue "cards" that have a numeric description with no real security mechanism. They were borne in an era before digitization and are the most inappropriate method of making transactions online. Underlying this and rarely discussed is the fact that actual digitized money is rarely made available to the consumer or to ordinary people who wish to trade across borders or who wish to forward money to family or friends.

Assuming that individuals even want to participate in a more totally digital form of money as it practiced today, the world of commerce and government regulation preclude digital monetary activity. Few if any can have direct access to highly digital forms of doing business. But even in this world, such activity is so highly regulated that even those who do participate, do so at the government's pleasure within specific guidelines that meet the objectives of government and which do not often coincide with making it possible for individuals to participate in wealth creation.

Digitizing money: doing it better
The digitization of corporeal money has effectively never been attempted by large corporations, governments or others of power. That is, where corporeal money is concerned, digitization of companies who produce precious metals has been done, and digitization of paper trading concerning corporeal money is currently practiced, but actual digitization of corporeal money itself has been left to a small enthusiast company in the south of Florida, USA. Gold itself is digitized. Taking the music analogy yet again, this is like saying that recording studios who have power in bringing music CDs to market have never digitized a live band. They have digitized synthesized version of the band's actual music and they have even synthesized the voices of the band, they have digitized the scores from which the musicians play, but they have not yet actually digitized the music a live band actually plays and sings and made that available for people to purchase. To actually hear a live band you need to go and see the live band - all you are allowed to purchase are synthesized versions of what the band plays and sings.

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About the author: Dr Elwyn Jenkins is a business technologist who translates academic and futurist concepts into commercial reality today. His interests and capabilities are drawn from an understanding of futurist academic concepts grounded in delivery of those concepts in leading edge technology. Dr Jenkins specializes in developing business cases, technological specification and establishing, enthusing and leading teams of people who will effect those plans to make them into real business systems. He is also founder and CEO of Standard Reserve Holding Limited. http://www.standardtransactions.com
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