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This pledge we recognise as an IOU. Banking lawyers, who never use one word when two will do, would call it a [[promissory note]]. | This pledge we recognise as an IOU. Banking lawyers, who never use one word when two will do, would call it a [[promissory note]]. | ||
Something new has happened here: in trusting the arrow maker, the furrier has acquired a new kind of asset: a token representing the promise to deliver arrowheads in the future. This the furrier can keep and present | Something new has happened here: in trusting the arrow maker, the furrier has acquired a new kind of asset: a token representing the promise to deliver arrowheads in the future. This the furrier can keep and present to the arrow maker against delivery of the promised arrow heads, or she can ''sell'' it: she might find another merchant with spare arrow heads who will exchange them for the arrow maker’s promise to deliver more later. | ||
In theory, the arrow maker’s written promise can circulate among merchants indefinitely. | In theory, the arrow maker’s written promise can circulate among merchants indefinitely. | ||
This IOU, readers will note, resembles a rudimentary form of currency. This does not function as a token of value so much as a token of indebtedness. Indebtedness, implicitly requiring trust, can only exist in a situation of trust. | |||
The fundamental application of currency is the extension of credit to those you trust. | |||
We should treat claims of those who argue for [[bitcoin]] as the panacea “currency” that can resolve the rising levels of mistrust in our system — being designed as it is to operate in a trustless environment — with caution, therefore. | |||
{{Sa}} | {{Sa}} | ||