Many investors compare Bitcoin to gold as a store of value and even refer to Bitcoin as “digital gold”. This comparison is believed to be one of the drivers behind the meteoric rise of Bitcoin in recent months.
However, according to an article by researchers at the University of Oregon, Bitcoin may be less like gold than it is more like old stone money.
Scott M. Fitzpatrick of the University of Oregon’s Department of Anthropology worked in collaboration with the Inman Research Scholar and Finance Professor Stephen McKeon of Lundquist College of Business to establish the precedents of Bitcoin as “rooted in the ancient past that encompassed production, movement and business Use of traditional forms of “currency” involved, the most famous and famous of which were the famous Yap stone money “to explore.”
In the article, the authors discuss the origins of Bitcoin and its consequences for global trade, and highlight what could be learned from studying the ancient stone currency. Specifically, they note that the underlying technology that powers Bitcoin, known as blockchain, has a lot in common with the Yapese islanders’ ledgers, which are used to document ownership of their giant stone coins.
Satoshi Nakamoto, a pseudonym adopted from an anonymous person or group, introduced the concept of bitcoin in a white paper distributed to members of an Internet cryptography mailing list. In the paper, Nakamoto outlined a virtual peer-to-peer currency network in which highly secure distributed ledgers known as blockchain are used to document transactions and currency ownership.
In addition, new bitcoins could be created or “mined” by computers that validate these cryptographic ledgers when bitcoins change hands. The creation rate of new bitcoins has been built into the log so that inflation is limited and known in advance.
Similarly, in what is now Micronesia, Yapese islanders sailed hundreds of kilometers to mine limestone that they had made into giant stone sculptures known as rai, which were used as currency. These stone coins were so heavy that islanders drilled holes in the center so they could be carried on long poles. The tradition goes back to the European contact with the Yapese in 1783 and formed the basis of their monetary system.
While it looks like a giant stone coin has little to do with Bitcoin that has no physical presence, the sheer weight and difficulty of moving the Rai from one holder to another creates an amazing resemblance.
An owner of a rai may not be able to physically possess it. You can leave it by the roadside or with its original owner who traded it for something good or a service. Hence, for each rai, the Yapese created an oral property book, in fact a pre-computer blockchain, detailing the origin of each piece of stone money, its transactions, and its ultimate owner.
“Given that real ownership of Rai was often impractical, an owner would only consider it valuable if he could trust that all participants in the economic system would agree to the ownership record,” write Fitzpatrick and McKeon. “In fact, it wasn’t a bearer property. Ownership was determined solely through the ledger. Similarly, Bitcoin is often referred to as “trustworthy”. It is noteworthy that it originated during one of the worst economic recessions in recent history, a time when confidence in the financial system was at an all-time low. “
Further similarities with Bitcoin will follow. The difficulty of mining limestone, processing it into rai, and then transporting the currency helps to limit supply and create a scarcity that prevents inflation. Bitcoin is mined by computers solving complex math problems at high and growing costs.
Of course there are some differences. Bitcoins can be broken down into smaller units, while the Yapese did not have a system for issuing smaller denominations of Rai by breaking them into pieces. Bitcoin allows holders to be just as anonymous as Satoshi, while the Yapese system is based on a ledger in which all participants in transactions are known by their real names.
After all, all bitcoins are the same. However, a rai has derived a certain value from its size and craftsmanship, adding a work of art to the currency.
It is not known whether Nakamoto or his staff included the Yapese or ancient currencies in their Bitcoin design. However, it is known that some of the principles behind Bitcoin have been confirmed through history and that this could give an indication of the longevity and use of blockchain-based cryptocurrency as an asset class.
– By Michael Maiello for Lundquist College of Business