This proposal for a radically decentralized informational cryptocurrency was first presented at the COSM Conference (https://cosm.technology) in Bellevue, Washington on October 23, 2019.
Back when money was gold coin, an economically sound DIY mint was possible. By a DIY mint, I mean a do-it-yourself mint where the individual, acting purely as an individual, could create money from scratch without any insult to the economy. Thus an individual could mine for gold, purify it to the government’s standards, and then, with a suitably engraved coining press, manufacture coins indistinguishable from those of the realm.
Such coins would be perfectly legitimate except for one small detail, namely, the government, to profit from the making of coins, insisted on minting all coins themselves. Thus the government would charge a premium (or tax) on top of the gold brought to the mint. Such a tax, called seigniorage, ensured that coinage remained a government monopoly.
Yet except for this small detail, the DIY coins and the government coins would, for all economic purposes, be equivalent. True, to the overly scrupulous, the DIY coins would be “counterfeit.” But precisely because the government mint would otherwise have taken the same gold and turned it into identical physical coins, such a concern is devoid of economic significance (even if it has moral significance).
In consequence, a DIY mint that uses gold to form coin indistinguishable from government coin is economically legitimate. Not so a DIY mint that uses a printing press to form currency indistinguishable from government paper money. Any such DIY mint is a counterfeiting operation whose economic impact is deleterious.
Why is a DIY mint legitimate in one case and not the other? With gold, value is intrinsic, embodied in the currency. With paper, value is extrinsic, depending on the trustworthiness and authority of the governing body issuing the currency. Counterfeiting undercuts the latter, but not the former.
With the stage thus set, I want to inquire whether an economically sound DIY mint is possible in a purely informational world. At the same time, I want to see what lessons we can draw from such an inquiry for our own world. In the hybrid world of information and matter that we inhabit, gold has proven monetarily convenient, allowing for an economically legitimate DIY mint of the sort just described. But absent matter, is a DIY mint still possible?
What if gold were merely as an accident of geological history? What if rather than being rare it were abundant? More radically, what if all commodities were abundant and economic value resided in the arrangement of matter rather than in matter as such? More radically still, what if all value henceforth resided in information? What could money look like then? What should money look like then? Would an economically sound DIY mint be possible in such a world? [Read more…] about Is a DIY Mint Possible: Money Creation in a Purely Informational World