Interesting. This coincides with me recently reading an article about currency in National Geographic January 1993 issue. Did you know North American Indians used a shell named Dentalia as their popular currency (medium of exchange) until 1900 or so? They still value it even today because of its decorative/cultural value. Back when it was used as currency, it was limited by the difficulty in harvesting it from the sea bed.
Back then, only about 8% of the US money supply was constituted by bills and coins - the rest being in banks accounts and maybe some other things. Virtual money! Up to 92% cashless. In fact, some of the money is off limits. If everybody were to withdraw all their money it would collapse the banking system.
There're things I wonder about. I wonder about how do you take into account increasing population? Obviously, with more people, you're going to need more coins and bills. Moreover, if cash somehow loses its value then you may need more of it too. So essentially currency must be created to accommodate its continued use in a changing world. You need to have a currency that can be created with minimal troubles and is convenient to use. For example, if it requires $1000 of labor and manufacturing to make a single penny then it's not cost effective for its intended value, unless you want a single penny to be worth on the order of $1000 or more. To create new currency you ideally need to keep the production costs below the intended value of the currency. Lastly, you need to create money that cannot be easily counterfeited or otherwise sabotaged. So not only is the currency based on shared trust, it's based on constant policing and security measures.
My feeling is we're only a few steps away from a cash-less society. We have to figure out ways of securing the digital medium to ensure digital cash can remain safe and hence trustworthy as a medium of exchange. As well, we need to wait for the rest of the world to embrace the necessary digital transformations.
So, broadly, we're not talking about gaining trust via using a currency with inherent value, like gold or even Dentalia shells, but by way of our ability to ensure its continued protection against counterfeiters.
I'm definitely not a financial guy. My area is more computer-oriented. Still, I find the topic really interesting. I don't thinking weed is a good currency unless you mean illegal currency.
Smart people game the system and make money. Some of them cheat, and they get burned.
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