Money is Memory
This paper argues that the benefits of money to a society are achieved through its function as memory; ie, money's ability to keep track of transactions between economic agents. This paper was written 12 years before the Bitcoin whitepaper was released, but it essentially argues that a perfect ledger of transactions - a perfect memory - could function as an ideal form of money in practice.
Bitcoin uniquely achieves this recordkeeping ability, serving as the only completely trustworthy, transparent ledger of transactions accessible to anyone. Kocherlakota, 12th President of the Minneapolis Federal Reserve, predicted bitcoin's ability to be ideal money a decade before its genesis.
EXCERPT
Others have noted that, as emphasized in this paper, fiat money helps to keep track of past actions. In early work along these lines, Ostroy (1973) discusses the recordkeeping role of money in a model in which static competitive allocations are implemented using decentralized pairwise exchange. Lucas (1980) uses a back-of-the-envelope calculation to argue that money is a much cheaper means of keeping track of past reallocations of resources than other means of recordkeeping. In a random matching model Aiyagari and Wallace (1991) show how money becomes redundant when agents have access to a historical record of all actions take in past matches.
The contribution of this paper over this past work is to emphasize both the singularity and the generality of money's recordkeeping role. I show that the technological benefits of money are completely subsumed by the technological benefits of just one type of technological innovation: memory.
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