The Bitcoin Big Bang: How Alternative Currencies Are About to Change the World

Chapter 8 Building the Nautiluscoin Economy

The truth is no online database will replace your daily newspaper.

—Clifford Stoll, Newsweek, 1995

Currencies have evolved over the past five millennia from commodity backed to government backed. Seashells, animal skins, and shiny rocks have all served as currency and the de facto trusted third party. As governments gained wealth and power, they replaced commodities as the middleman. However, the temptation to devalue fiat currencies has proved to be the Achilles' heel of all government-backed mediums of exchange. This threat of devaluation makes fiat currency an inferior store of value. Since the financial crisis of 2008, many investors have reverted to the protection of gold as a store of value.

While gold has a long history of acceptance as a medium of exchange, its value is based completely on the belief that it can be converted into fiat and accepted for goods and services. There may be a scarcity value of gold, but as the demise of wampum illustrates, scarcity is not the primary driver of a commodity-based currency. When global traders needed to transact outside of North America, they quickly abandoned wampum in favor a currency that was widely accepted. Interestingly, despite the belief in gold as a currency, it is not widely accepted by merchants. In fact, digital currencies are accepted more broadly than gold and are easily transported.

The attributes of global merchant acceptance and easy transport make digital currencies ...