Once upon a time we traded directly; the herbs I’ve grown for the eggs your hens laid. But that limited trade to very local systems, and meant most goods couldn’t be traded over long distances. So we developed a use of rare metals (most often gold and silver) as proxies for value. Their rarity ensured a measure of stability, but they were difficult to transport. Enter the banks, organisations whose 4000 year old origins are in supporting trade, farming and manufacturing. Currency eventually became a state matter, issued most often by national banks. With retail banks ubiquitous and providing banking services for individuals.
Given that we now have electronic transactions; online, via the internet, via bank cards of various forms and even into near field communication do we still need money? There are very few transactions I make in cash, and increasing numbers of retail outlets which only accept card payments.
Paul Kemp-Robertson proposes a future of branded currency, where banks are not necessary in a video explaining the future of money.
There are concerns about how bitcoins are used, they’re used in all transactions on the Silk Road, providing users some level of anonymity and avoiding any sort of regulatory oversight. Other concerns relate to just how they work – it seems to be easy to manipulate the market. Although bitcoins can be traded for national currencies it has not been considered a currency and therefore has not been under formal regulation.
That lack of oversight may change; the US regulators have shown increasing interest as the use of Bitcoins has grown. It’s an interesting move if the world’s largest economy recognises a virtual currency this could mean the geeks will rule the banking system.