“We think of ‘virtual money’ as this kind of brave new world that’s just happening now. Actually, it is the original form of money, and it has been the predominant form of money for most of history.”—David Graeber, author of DEBT: The First 5,000 Years, on NPR’s Planet Money
“Even when money seemed to be material treasure, heavy in pockets and ships’ holds and bank vaults, it always was information. Coins and notes, shekels and cowries were all just short-lived technologies for tokenizing information.”—from The Information by James Gleick
We live in an exciting moment in the history of money. For the first time, technologies exist that allow money to serve its original, primary purpose:
The purpose of money is to record value across a network of people.
The first known forms of money were records maintained within small networks of people. Indeed, some of the first known writings of any kind are records of credit and debt on Mesopotamian clay tablets.
It makes a lot of sense. If you lived in a village and wanted to keep track of how much everyone earned and owed, would you smelt gold into coins or write it down?
If the world stayed small and interconnected, there would have been no need for new forms of money to be invented. Every transaction could be easily recorded in a shared ledger.
But the world grew. As countries and civilizations expanded and collided, it became impossible to maintain a shared record of value. Physical money was invented as a workaround to a hyperextended network. Gold was inconvenient, but it had the advantage of being accepted by a large, diverse set of people. Paper money appeared as a stand-in for gold. Fiat currencies were introduced by countries powerful enough to enforce their value.
With the rise of the modern banking system, most money became virtual again. Money moved into accounts and financial networks. This virtual money had many advantages over the kludge of physical money, but it required financial gatekeepers to make it possible. With the rise of the computer, banks digitized their virtual accounts and expanded their networks, but without any fundamental change in their practices.
The Internet created a shared global network of information… but one of the most important forms of information was left out of the equation: money. And, for decades, not much changed. Governments controlled physical currency. Banks controlled digital currency. And modern money, for all its advances, still lacked many of the advantages of Mesopotamian clay tablets.
In 2009, Bitcoin was invented and changed everything. The world’s first decentralized digital currency, Bitcoin accounts and transactions required no gatekeepers and were recorded across the largest human network: the Internet.
Now Ripple seeks to expand on what Bitcoin started. More than just a digital currency, Ripple is the world’s first open transaction network. It serves as a decentralized, shared record of accounts and transactions of any kind. By creating this global ledger, Ripple does for money what the Internet did for all other forms of information.
With Ripple, the history of money comes full circle. Once again, money can serve its primary purpose—to track value across a network—but, for the first time, that network can be the entire world.