I found an early description of b-money in parable form, which was sent on Jan 16, 1998 to a private mailing list (libtech) run by Nick Szabo. It may still be useful for getting an intuitive understanding of the basic principles behind b-money as well as Bitcoin (to some extent), so it seems a shame to just let it sit in my email archives.
Imagine that you are the first person to contact a previously isolated
civilization. You discover that its people have not yet invented either
commodity money or fiat money. Yet they do not use direct barter either.
Instead everyone simply “remembers” how much money everyone else has. When
Alice needs to pay Bob for services rendered, she simply shouts out “I
give x dollars to Bob.” and everyone else mentally subtracts x dollars
from the amount of money Alice has and adds x dollars to the amount of
money Bob has. (Everyone in this civilization is always within shouting
distance of everyone else.) It is not possible for someone to have
negative money, because everyone can easily alter their voice and
appearance and create a new identity.
You find that disputes are resolved without any institutions vested with
special powers. If Alice has a complaint about Bob, they each shout out
their arguments. Everyone else makes a decision about what awards, if any,
Bob should pay to Alice. Then they mentally subtract this from the amount
of money Bob has and add it to the amount of money Alice has.
In this civilization, money is created around a fire where everyone
gathers in the evenings. Anyone who wishes to create money brings some
valuable good, which must be traded in a competitive market, and throws it
into the fire. Others mentally add the market value of the good to the
amount of money that person has.
As you leave this charming civilization, you realize that you forgot to
ask some important questions. How do these people decide when to create
new money? Do prices generally inflate or deflate? Would there be large
scale fraud by established businesses if/when prices rise sharply and
suddenly? What would happen if the civilization starts having more regular
contact with the outside world? You hope your economist friends can help
you out...
I sent a bunch of messages to the list before and after, but yes that was the main one about b-money. BTW, for anyone interested in the history, looking back at the responses in my libtech archive (which I was not supposed to keep, according to the list rules) it seems clear that Nick already had similar ideas when I posted that message and was trying to solve the “Byzantine Agreement” problem in a practical way, whereas I for some reason confidently stated “an ideal broadcast channel [...] can be implemented with existing cryptographic tools”, which probably explains why I made my ideas public first and ended up getting a large share of the credit later. There’s probably a rationality lesson here, but I’m not sure what.
Interesting. The story of Bitcoin is increasingly sounding like that parable about the blind men & the elephant plus a cautionary story about priority. :)
I found an early description of b-money in parable form, which was sent on Jan 16, 1998 to a private mailing list (libtech) run by Nick Szabo. It may still be useful for getting an intuitive understanding of the basic principles behind b-money as well as Bitcoin (to some extent), so it seems a shame to just let it sit in my email archives.
Imagine that you are the first person to contact a previously isolated civilization. You discover that its people have not yet invented either commodity money or fiat money. Yet they do not use direct barter either. Instead everyone simply “remembers” how much money everyone else has. When Alice needs to pay Bob for services rendered, she simply shouts out “I give x dollars to Bob.” and everyone else mentally subtracts x dollars from the amount of money Alice has and adds x dollars to the amount of money Bob has. (Everyone in this civilization is always within shouting distance of everyone else.) It is not possible for someone to have negative money, because everyone can easily alter their voice and appearance and create a new identity.
You find that disputes are resolved without any institutions vested with special powers. If Alice has a complaint about Bob, they each shout out their arguments. Everyone else makes a decision about what awards, if any, Bob should pay to Alice. Then they mentally subtract this from the amount of money Bob has and add it to the amount of money Alice has.
In this civilization, money is created around a fire where everyone gathers in the evenings. Anyone who wishes to create money brings some valuable good, which must be traded in a competitive market, and throws it into the fire. Others mentally add the market value of the good to the amount of money that person has.
As you leave this charming civilization, you realize that you forgot to ask some important questions. How do these people decide when to create new money? Do prices generally inflate or deflate? Would there be large scale fraud by established businesses if/when prices rise sharply and suddenly? What would happen if the civilization starts having more regular contact with the outside world? You hope your economist friends can help you out...
This was your message to his list?
I sent a bunch of messages to the list before and after, but yes that was the main one about b-money. BTW, for anyone interested in the history, looking back at the responses in my libtech archive (which I was not supposed to keep, according to the list rules) it seems clear that Nick already had similar ideas when I posted that message and was trying to solve the “Byzantine Agreement” problem in a practical way, whereas I for some reason confidently stated “an ideal broadcast channel [...] can be implemented with existing cryptographic tools”, which probably explains why I made my ideas public first and ended up getting a large share of the credit later. There’s probably a rationality lesson here, but I’m not sure what.
Interesting. The story of Bitcoin is increasingly sounding like that parable about the blind men & the elephant plus a cautionary story about priority. :)