A few years ago, I was thinking about how to relate the changing technology of money to changes in money, and I thought it would be useful to have some rough categorisation to organise thoughts. At the time, I wrote this:
The era of Money 3.0 is just beginning. Its central dynamic is no longer connectivity (since everything is connected to everything else) but community.[From Digital Money: Money 3.0]
After a while, I realised that my initial categorisation was insufficiently granular to organise all of the thoughts I had on the topic and all of the information I had gathered on the topic. (I’m thinking of writing a book about it, which is why I have been gathering a lot of material on the specific topic of the technology of money.) A little while ago I posted a more sophisticated idea for a categorisation of the ages of money, or money eras. This extended the framework from three to five “eras”.
Our current era, Money 4.0, can be dated in retrospect to 1971 when Richard Nixon finally ended the gold standard and Visa introduced the Base 1 network for authenticating card payments based on the magnetic stripe. Money 4.0 is bits about bits, but we still apply the wrong mental model, and imagine it to be bits about atoms.[From Digital Money: Another go at categorising money technologies]
This led me to describe the future as a new age of money, Money 5.0 I suppose, where the abstraction becomes complete and there are wholly new kinds of money that are not based on debt (or, indeed, anything else ultimately tangible) or secured in some conventional way but on relationships. Having had a bit of feedback on this, I think it serves its purpose. Obviously, some aspects are a little arbitrary—starting the information revolution in 1871—but I think I can support the dating of the communications revolution to 1971, since this is roughly when company size peaked in the UK (actually it was in 1973), and anyway it fits nicely with the narrative of the 100 year interlude that I contend still constrains our mental models of what money is and how it works.
This categorisation leads me to think that we should be looking for Money 5.0 where we see private bits, not bits about anything, becoming a means of exchange. Why private bits? Well, at this year’s Digital Money Forum, we had a wonderful session on private currency, chaired by the economist Diane Coyle.
This morning I had the privilege of chairing a fascinating session at the Digital Money Forum run each year by Dave Birch of Consult Hyperion. The speakers were Professor George Selgin of the University of Georgia, and James Turk of the Gold Money Foundation. Both were arguing, from different perspectives, for private money as a competitor to government money.[From The Enlightened Economist :: Good money, digital or analogue]
George gave a superb talk on the way in which the industrial revolution in England was hampered by a lack of circulating means of exchange, so private companies stepped in to develop new forms of industrial means of exchange (copper tokens) that help commerce and trade to grow to the great benefit of the nation. It strikes me that we are now in a similar position: we have had the post-industrial revolution but we are still using industrial money and it is holding us back. This is why the virtual empires, such as Facebook, have gone on to produce wholly private currencies—everything from the Everquest Platinum Pieces of old to the Facebook Credits of today—just as the giants of the industrial revolution (eg, Boulton’s Factory) did 200 years ago. If you think that sounds fanciful, remember that the wholly virtual economy—that has no industrial analogue—is already of significant size and growing strongly.
more than 100,000 people in countries such as China and India earn a living by performing ‘micro-tasks’ in the virtual economy. Jobs include categorising products in online shops, moderating content posted to social media sites, or even playing online games on behalf of wealthier players who are too busy to tend to their characters themselves.[From Finextra: Three billion dollar virtual economy to fuel developed world – World Bank]
As the World Bank report notes, this economy is already worth several billion dollars. With better money, it could be worth several billion more.
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