Money has fascinated me as a social phenomenon since I studied economic anthropology and learned how many ways humans have devised to measure value, conduct trade and create social indebtedness. Learning about Bitcoin made me realize that we have the power to create new kinds of money. We have only scratched the surface of that design space, and I expect it to open up over the coming years as we look for money that can address globalization, wealth inequality, climate change and the acceleration of AI.
Seven foundations for money
A deep dive into the monetary theory those designs can rest on, and the experiments and alternatives already built on each foundation.
XA world currency
One place I look for inspiration is the currency designs worked out before blockchains existed.
Bancor
Bancor is the clearing unit Keynes and E. F. Schumacher designed in 1940–42. It measures who owes whom through an International Clearing Union, and charges both persistent surplus and persistent deficit, so imbalance corrects from both sides instead of piling up with whoever exports most. The IMF implemented a limited version of the idea in Special Drawing Rights, without the charges on imbalance that gave the original its force.
Ducat
In Denationalization of Money (1976) Hayek sketched a private currency he called the ducat, sold at first for national currencies and then held stable against a basket of goods, so that it would trade at a growing premium as those currencies depreciated. Imagining how it would work as a protocol: a commodity-indexed currency lent into existence, with the protocol acting as an algorithmic central bank, where the rate on new credit rises when the currency trades below its basket and falls when it trades above.
Terra
Terra is Bernard Lietaer's 2001 revival of a 1930s idea: a trade reference currency issued as receipts for a warehoused basket of the dozen most traded commodities. Holding it costs the real cost of storing the goods, so it circulates instead of being hoarded, and in a slump a company's unsold inventory turns into money exactly when money is short. Imagining how it would work as a protocol: perpetual futures already track commodity prices, so the basket can be an onchain derivative, held as an ERC-20 with programmatic demurrage.
Land-backed money
Land is the root factor of production, before labor, commodities and energy, and I have long thought it could be the ultimate backing for a currency: its supply is fixed by definition, it is spread across the whole planet, and it is the source of what we eat, build with and live in. Precedents for this idea include John Law's land bank of 1705, Robert Swann's world currency based on community land trusts of 1978, and today's food-backed local currencies.
Parcels enter the pool as tokens tied to legal title. The currency is a claim on the use of that land, in degrees: the right to occupy it, to build on it, to farm it. And following Henry George, the value the community creates on the land flows back to the community.