Digital currencies – what money is that?

Image: Karolina Grabowska


Considerations about digital currencies; how they work and what are their possibilities

Coin as a record of informationheremoney as an institutionherethe social that conveys it

Firstly, it is important to say that money was born virtual rather than real. This means that records of debits and credits were born in “books” of religious or community leaders who centralized power before the records came to life in pieces of wood, stone or metal that circulated in general. Debit/credit records could be centralized if most exchanges took place within the confines of communities where everyone knew each other.

It was the growth of cities, and then of nations and empires, with the concomitant expansion of exchange spaces and greater regularity of trade with “foreigners”, which stimulated the monetization that made records something impersonal and fungible, and could serve to carry out even one-off transactions and with whom you didn't know each other.[I] Currency money was thus fundamental for us to move from “human societies” (as David Graeber calls them) – where its role was to mark what could not be resolved with it –, to “merchant societies” – where money calls all of itself type of relationship.

A misconception that needs to be clarified is that commerce and private agents (the Market) have to do with impersonal currency, the commodity, while debit/credit records have to do with centralized power (the State). In fact, in the past as well as in the present, Market and State are complex institutions that regulate, in more or less tacit agreements, the forms of monetary production and circulation. Both small Arab merchants created their “passbooks” using communal symbols as a unit of account, and large Italian merchants created their bills of exchange.

What happens is that when the State organizes itself territorially in an imperial way (Lydia, India and China, more or less at the same time, around the XNUMXth century BC) putting armies and slaves to walk long distances, the coined money becomes produced on a large scale (in precious metals that are now sought for this function). Throughout history, as the State puts down its roots not only in the organization of economic life but in the regulation of social life as a whole, what is happening is that privately produced currencies are increasingly referring to the currency until the banks nowadays become “mere” concessionaires of the public power. Mere quotes, given the instrumentalization they make of this power, to the point that we no longer know whether the dog shakes its tail or the tail at the dog...

But returning to the question of the information that is passed on in the records – whether they are made in the books under the custody of a central power or coined and carried in the pockets by anyone – the fact is that the information is the same and all money means only one debt title. The message engraved in the book or engraved on the coin is – you are entitled to a credit of so much x (y, z, etc). What are the x, y, z goods and how much of them you can access is another question. No wonder political economy had to theorize the “value” of things separately from their monetary prices. Going into this topic would make this reflection take on another branch, but I cannot help but point out that while the “monetary regime” (currency and the entire system that produces, exchanges, ties in a bet or investment) has some autonomy in In relation to the real economy (even disputing with it, as Keynes would say), this cannot lead us to think that this real world is absolutely separate from the monetary world, where money reigns distant and neutral, as the neoclassicals want.[ii]

But the fundamental thing to emphasize is that money is a social institution and one of the reasons for the State to become the main institution of mercantile societies is precisely to have been able to make the state currency the most used money. The history of money is thus umbilically linked to the history of states. Credibility in the state currency is confused with the credibility/legitimacy of the State itself. Perhaps few know, but historical research on the past shows that tax collection was the way that rulers found to guarantee this. By accepting the payment of taxes in the currencies that they themselves create, the rulers are not financing themselves with the public, but making this public captive of their currency.

If money is a creation of the State, then it is political in nature. And that doesn't just mean that it was born political, but its development is political. The entire institutional design that takes care of the continuous production, distribution, regulation, and even indexation and replacement (if necessary, temporarily, because if not, it will be the end of the national currency), involves interests and forums that manage them. This political dimension of money is much more than the monetary policy of a given government at a given time. This concerns the role of the State in the markets, mainly banks – concessionaires that are of the state currency as they create their own currency (credit rights) but denominated in public currency – in controlling the liquidity of the economy.

This is not done by controlling the amount of currency in circulation (impossible given the creation of banking money) but the interest rates of the system via control of public bond rates with zero risk, given the improbability of the disappearance of the nation itself. The political dimension of currency therefore concerns the entire building that keeps it alive and functioning; and, therefore, the set of self-imposed regulations that affect public spending (or fiscal policy) and public debt management (and different ways of operating it benefit different social groups), and the purchasing power of the national currency internally and externally (inflation and exchange rates).

Money is also political because the State that produces it has the main function of managing inequalities between members of societies, whose debts turned into money (and transitable with maximum freedom in time and space) can aggravate. It is no coincidence that the comings and goings of credit and currency money throughout history coincide with processes of over-indebtedness of the poorest towards the richest, which undermine the foundations of social reproduction, often leading to collapse. . Thus, it is up to the State, whatever it may be, to define which rights and duties are allowed to whom and under what circumstances. For example, can there be enslavement for non-payment? What about interest charges? And what kind of public protection should there be against extortionate charges?

This state power maintained, since before capitalism, but also in this one, the stability and longevity of the basic social arrangement. The discomfort with this on the part of private agents seems to me to be greater under capitalism than in past times. Liberals therefore invented that the ideal currency should not be political, not the State but “the society of free and equal individuals” (as if that existed). This neutral currency, above all, could not be issued by “spendthrifts” (when they spend with the people, obviously). Therefore, the rules for its issuance should be tied to something fixed above all – gold, as advocated by past liberals and mathematical algorithms, as advocated by present-day libertarians. This is naive and deeply mistaken reasoning, even when well intentioned.[iii]

By disregarding reality, they do not become transformers of it, but reinforcers of its worst aspects. For no other reason, the nerd creators of Bitcoin, instead of creating the new currency of the new world, created just one more speculative asset in the old one. Still, they made a revolution in how information was passed on. They made electronic records, which already existed, so tied to each other in a chain (hence the name blockchain of the technology used), with the information going forward with a kind of electronic signature (the hashes) in each link. This makes transaction logs not only checkable, but fast and secure.[iv]. That is, monetary transactions of all kinds, involving agents dispersed in the most distant space, can be carried out almost simultaneously. Money thus returns to being what it was back then, a mere sign in a ledger. Only now is the book itself as imaginary as the sign used within it. Even so, it does what it has to do, mobilize real wealth in time and space.


of fiducia coinsáries as virtual signs of real wealth that dispenses with mercantile ballast

The money with which we operated throughout most of the XNUMXth and early XNUMXst centuries is the national fiat currency. The colorful pieces of paper with printed images and numbers are debt securities, they differ from securities traded in the market with different maturities only because the latter pay us interest to keep them with us for some time. The currency's credibility dispenses with any backing in gold or any other commodity with its own value. What's behind a strong currency is just the strength of its economy – the internal capacity to generate wealth and external capacity to generate respect (from diplomacy to weapons).

The national currency is the only one with the legal power to fulfill the functions of money and even if internal inflation or external speculative threats can devalue the national currency, only an institutional collapse that threatens the very existence of the nation can take away this prerogative. Finally, currency value stability has little to do with the rigidity of currency and bond issuance rules and much to do with liquidity adequacy according to the phases of the capitalist cycle. If there is idle capacity and unemployment in the economy, the public currency must employ them so that more wealth is generated and its value is maintained.

The informational records contained in the paper refer to national symbols. Therefore, we often find universal symbols drawn (dollars and numbers) and strong national symbols – ranging from landscapes and animals, to national heroes and the reminder that everyone there believes in something greater (could be the “In God we trust” of the dollar, the “God be praised” of the real, or the “Currency of the people” of the yuan). The numerical signifier, refers to the particularities of things - or rather what is being accounted for (to be exchanged, kept, bet) -, and the linguistic signifiers R$ or E$ refer to the universal that is the nation which that currency is mentioned. Here, things are of no importance, but the people who maintain among themselves a contract greater than the merely economic, that of recognizing themselves as belonging to the same national unit, under the yoke of the same State.

The need for the presence of a “barbaric relic” (as Keynes called gold) in the national coffers so that the people of each nation would believe in their coins was a political convention of the time; as it is today a political convention to believe that “the State should not spend more than it collects”. These conventions are as empty in and of themselves as the aforementioned messages written on coins. If they are worth anything, it is because of the context all around them. In the same way as putting a ring on your finger is just putting a ring on your finger, but in front of the priest, the family members, after so much effort and time spent building a relationship, after so much work and wealth mobilized for the party, it is to be expected that the covenant means a promise, and that it is fulfilled!

Carrying values ​​in time has always been the main role of money, although only over the millennia has the question of what value refers to been established in a more rational and universal way. But in the past the production of future wealth would never be very different from the past. In capitalism, things are different, and so currencies, and their interest rates, are used to convey information about the future, information that has a variety of uses, including that of fueling bets. This is difficult to explain, but it is something as if the coins mirrored, and served as a criterion for comparison, the assessments made in the present of how much wealth there will be in the future.[v]. Holding money, rather than circulating it, makes it worth something, or conferring a prize, this is basic to speculation.

In addition to this speculative potential that surrounds all coins stealing them from circulation, getting them circulated is not so easy. You don't create a currency and give it credibility out of thin air! And it's no use for her to be credible and desirable in a select group of supporters. This often also happens with social currencies, which can even circulate a lot in a limited region (a neighborhood, a favela, or even a municipality) but if they do not gain scale, they never arrive and cannot leverage, after a certain limit, businesses locations. But the most interesting thing about the Bitcoin experience has stayed and grown… It’s about the technology blockchain which replaces the face-to-face personal checking of transactions carried out based on the information printed on the money by an automatic check. How is that?

Well, something that has nothing to do with verifying checks, authorizing debits and credits with the cashier's signature, or transferring amounts with the manager's endorsement. And it's not even about these checks by machines, operation by operation. It is not a question here of making sure what exactly the first child said to the second in the cordless phone game. In blockchain technology, when information moves forward, it already carries a “stamp”, a signature, which guarantees accuracy.


Private digital currencies, what can technology without política

Paper currency is already somewhat “virtual”, as the information that is written and drawn refers to the symbolic order, which in turn illustrates that behind money there is a whole institutionality that imposes rules for its production and circulation. But what happens when, sometime in human history, all information can be digitized (transformed into machine language, 0s and 1s, presence and absence of electric current)? What happens is that the information about the social combination that is behind the money no longer needs a paper to be printed, a design that appeals to the culture of the people, and a sophisticated stamp and watermark that attest the power of the controlling organs of the National State. That is, the information will be passed only by numerical registers on line.

In the race to digitize all kinds of information – whether linked to our productions (spoken and written language, mathematics, music, images, etc.), or linked to nature where what we do is just to seek to translate them (the genetic sequencing of , the chemical composition of the elements, etc) – State and Markets, once again, coexist, cooperate, but also compete. In the case of economic information on monetary transactions, private agents took a huge leap when they created Bitcoin (BTC), a completely digital currency that circulated in its own environment outside the jurisdiction of Central Banks. BTC is like that, like ancient coins, a whole system.

In this case, the system is composed of the registration of a primary operation that runs on the network of interconnected computers (which run the same program) that, when passing on the information (packages or blocks) for each link in the chain (hence the ) certify them. The various computers in this decentralized network store this information in the virtual space called distributed databaseíof , while at the same time certifying the veracity of the records through an encrypted signature, called hash.

The technology that describes this path of information tied up in packets and going down a chain being certified by network nodes is called blockchain. The operational power of machines gives their owners a more significant role in this decentralized checking and rewards their operators with new informational units, or tokens, which are the network's own currency. When it is said that BTC is mined, what is being said is that whoever is working on this process of recording/checking transactions will receive transactional units in exchange. That's why many people without resources have dedicated their poor little machine to this effort, while others with many resources have built entire buildings with computers to do it.

The creators (more likely than a creator) of BTC thought that their currency would be out of the vile political interests (it should be remembered that the Whitepaper of BTC was launched in the year of the American bubble burst in 2008) because it transited through a system that was separate from the Central Bank/private banks system. However, they seem to have ignored that, if everything went well – BTC is not an official non-mercantile currency without value in itself –, it would be a commodity currency, quoted in the hegemonic official currency, more expensive or cheaper according to its demand, and demanded more for speculative rather than transactional reasons. They ignored the obvious, that any commodity under capitalism can function as currency.

Cigarettes can be currency in prisons, oil can be currency in international markets, etc. But no commodity is absolute in the task of being the ideal money, more stable because it is scarcer, and therefore more desirable. Fiduciary money, on the other hand, which is not a commodity, which is not removed from the earth with drills, or from computers with advanced mathematics (and a lot of electrical energy), can be stable if we want it to be, and even better when we want it not to be merely stable. more suitable. In the end, BTC has become an option for those who have excess wealth, and just the dream of the moment for those who don't.

But while BTC failed as a currency, transactions in it were limited to a few markets, sometimes illegal, sometimes temporary (such as countries in crisis with their currencies, and, in this case, BTC was kind of a dollar in disguise) and became a mere asset speculative, technology blockchain gained space. This is because it works with a tracking system that can be used not only for financial transactions but for all kinds of information that we want to see reach the recipient and also be stored safely.

No other private digital currencies were created with technological adaptations, with less energy expenditure, with greater social participation in their elaboration, etc. One of the most interesting is Ethereum, which presents itself as a decentralized platform capable of executing smart contracts – given that they are immutable, or not subject to change. In the main, Ethereum is like BTC a way of recording transactions in a kind of open book, or public spreadsheet, said distributed, which does not reduce but increases security, since the information is guaranteed not by people but by an encrypted signature by the machine that attested the registration. O Ethereum it pretends to be like a big computer that can be used by everyone and everywhere to record in Ether all transactions that can be encoded.

What does all this mean? In my opinion it means that, at the world level, from a technological point of view, we can already have a currency for international transactions that is not that of the hegemonic country, which has exceptional advantages for that reason. The demand for this currency/record could be more easily restricted to its use as a means of payment, discouraging its hoarding for speculative reasons. But we could already have this (since 1944 when Keynes proposed it in Bretton Woods) long before technology blockchain; if we didn't do it, it was because we didn't reach a political agreement for that. Would it be more laborious, more prone to failure? Yes, but it is not because today this technical issue is overcome that the political issue is.

Inside countries, something similar happens. We can already eliminate banks as intermediaries, if not in credit operations, in the payment system. But the question is as much political as it is technological. So much so that banks are more likely to appropriate this technology (to improve the security of their systems and reduce costs, increasing profits) than we are to appropriate them and dismiss them. Of course, private commercial banks prefer the current arrangement, where the currency they themselves create is backed by the state. They clearly prefer that we use their currency, so much so that they make (along with the media and academia at their service) a whole anti-government “spending” speech (which would automatically put currency into circulation) and anti public debt. In this case, the chant is aimed at increasing the interest that the State pays them, who are the biggest buyers of public bonds.

But if the private powers are weak - even that of nerds brilliant - in the face of the consortium powers of large companies and banks, a more effective participation of the organized masses in the State can be more successful...


State-owned digital currencies, or what technology can do with políethics.

In recent years, the digitization of information has gained not only companies in all branches but also banks, and even Central Banks around the world. This digitization, with regard to currencies and banks, starts by replacing paper processes (such as opening an account), goes through the facilitation of payments using the internet (for example Paypal or Pix) and ends with the creation of Private cryptocurrencies (as seen above) and now also State owned cryptocurrencies.[vi] The economic gain (cost reduction) and social gain (banking democratization) is evident.

As the experience of several African countries demonstrates, where telephone companies have converted connection credits into currency. That is, given the easy access to cell phones and the internet, people could dispense with access to banks to make payments, transfers, savings and loans. Telephone credits began to function as Tokens carriers of information back and forth at a negligible cost and, even so, quite safe. This meant, and still means, the possibility of monetizing exchanges in the most backward corners of the planet and doing what, as a rule, the presence of money does – it stimulates work to produce wealth.

But it is one thing to use phone credits, or bus tickets, or whatever else the population agrees (including paper or electronic bank money), as money in place of the national currency – which is only possible because all of these refer to to that –-, and another is the national currency itself becoming digital. What does that mean? It means the end of physical currency for all uses. But it also means the construction of a whole other system – or ecosystem (since it involves different “beings” and “environments”) where it will circulate. This goes beyond a mere digital payment system, like Pix for example.

As we know, Pix is ​​not a digital currency but just an alternative to the existing ways (doc, ted, boleto, card) for making payments and transfers – a truth that will take the place of all the others because it is safe, instantaneous and free of charge. But the fact is that the currency that operates payments/transfers within the Pix system is the Real, and the construction of this system did not require a technological or institutional revolution. It does not require a special application or platform (each bank uses its own apps and ATMs) and does not use technology blockctraitor.

In addition, Pix is ​​centrally managed and operated by the Central Bank, which built a Instant Payment Systemâneos (SPI) to which banks and other financial entities are connected. Even if the system guarantees full traceability (according to the Central Bank website) this is only possible through a centralized structure (a Board within the BC) through a technology messenger used to integrate different systems from different institutions.[vii] But then, what would and what could a state-owned cryptocurrency, or a Central Bank Digital Currency (CBDC)? It would also be something based on technology blockchain and decentralized operation?

Immediately, the fact is that while the States enjoy the trust of the population in general, and of the dominant classes in particular, their coins (gold, paper or electronic digits) will be demanded for the payment of taxes to these States. States that create currency only by spending (and destroy it as they collect taxes) starve the population of their coins, and thus force their circulation. That state currencies (and the private ones denominated in them) may fail to circulate when heavyweight agents (capitalists whose spending is to employ the mass of workers) prefer to keep their wealth in currency, is something that can be counterbalanced by the State quite easily. (although it requires political convincing) without any complex mathematical equation having to be solved at the cost of a lot of mental and electrical energy.

This has less to do with currency and more to do with the capitalist irrationality that can transform everything that means money into an object of speculation. But, for this very reason, the public management of the currency is so important, as only the State can “discourage” this type of speculation against the future. As it can also reduce monetary circulation (spending less) and discourage private spending in the boom. The electronic form of money changes nothing of the general principle – states create money by spending it, and enforce its acceptance and circulation by taxing citizens; nor the need for a central body to regulate the liquidity of everything that can function as money, with a view to ensuring that the resources available in the economy – work, machines, productive capacity in general – do not remain idle.

But what would liquidity management look like in a digital currency world? Or how and who would control the creation of these coins? A state-owned cryptocurrency would in practice (or in law) end private cryptocurrencies – whether from non-banking institutions (from the Bitcoin to Facebook's Libra), are banks already repositioning themselves in this regard? Well, the scenarios are still very open.[viii], but we already know that there is no such thing as total lack of control. Even if private cryptocurrencies boast that, given their decentralized nature, no one controls their creation, we are well aware that if the State does not control them, it will be the big private ones (after all, the holders of energy power, technological knowledge , exchange companies, etc aren't we all…).

I find it interesting to think about this control from what is already happening today with banks, after all they also enjoy autonomy in the creation of private currency, but always under a certain political-institutional agreement. This agreement can range from draconian regulation (think of Roosevelt's USA, the Glass Steagall regulations and others) to general liberalization (from the 80s onwards, albeit with some retreat after 2008). Perhaps what is different here is the possibility of a super democratization of currency creation (with more and more companies being able to create their own Tokens own) but all referred – as bank money is today – to the national currency, which is above all more a name to protect than a piece of paper or an electronic digit.

This issue of political power is so relevant that perhaps this whole cryptocurrency story will come to nothing, or rather, it will lead to states and banks taking whatever they want (technology for example) and remaking their pacts. I believe, however, that if the State (the space par excellence for creating all the rules) is fully safe, the same cannot be said of the banks. These are doubly threatened, on the one hand by the non-financial companies that today operate payment and transfer services but are already starting to collide with the credit function.[ix] On the other hand, their function as tellers and deposit managers is also threatened if all citizens start to have digital accounts at the Central Banks of their countries. The fact is that the ease and very low cost of obtaining and operating the digital currency seems to call into question the power pact that had been working until now between non-financial companies (but which were financialized over the last century but are only now threatening the banking monopoly on money creation), banks and governments.

At this point, it is interesting to think about Facebook's frustrated attempt to create "its" own digital currency.[X] and in the US and Chinese state responses that follow. Mark Zuckerberg's idea was to organize a kind of consortium of companies and launch Libra, a cryptocurrency that could outperform other cryptocurrencies and private payment platforms. But, he understood the North American public power, it could also threaten the strength of the dollar, or at least the engineering established between government and banks in its management. So, three days after Zuckerberg's announcement, President Trump used his official communication channel, Twitter, to send a message – that only the good old dollar is the currency.[xi] The government's reaction led to a public hearing with the owner of Facebook in Congress, where he assured that the project would only be launched if and when the regulators approved it. But Zuckerberg also predicted – if Libra doesn't come out, Americans will soon be using a Chinese virtual currency. Perhaps he already knew about Chinese plans, plans that were evident the day after Zuckerberg's speech, when Xi Jinping announced that China should be a leader in the process of creating a public crypto that works "in people's daily lives".

To which the Chinese BC gives more details, explaining that the digital yuan will replace the entire paper currency base and use technology blockchain for its traceability and reliability. Well, in fact we still don't know how the technology blockchain can be adapted for centralized management; but we know that one thing is the disappearance of private banks (which probably will not disappear but will reinvent themselves, or will merge fully with companies) and another the disappearance of the Central Bank, or of the state currency as the most important institution of the National State. Therefore, we can only think that politics will develop the technology that suits it.

But just on the policy front there is something important at stake here, for if states are to launch their Central Bank Digital Currencies (or CDBC for Central Bank Digital Currency) to keep this important public institution in the hands of the public, it is also true that “it will be almost impossible”, as Izabella Kaminska puts it, for these currencies to be released outside of “a comprehensive national digital identity management system”. In other words, it is very likely that these currencies will need to be linked to personal accounts and that all data on individuals will end up being fully available to a central body.[xii] Of course, this is dangerous, as is the private and secret ownership of our information by private companies.


Dá to have a digital currency based on state-owned and centralized blockchain technology and for it to be more democraticática that fiduci currencyária current and the private cryptos?

I think so. If we think that it is not true that private cryptocurrencies function without any degree of centralization, and that it is not true that the State totally centralizes the management of the current fiat currency (since it confers some, sometimes great, power to the banks), we can think political arrangements are always in play and technology can be thought to fit. But let's take a closer look at why I believe in some centralization in the management of private cryptocurrencies, and that without going into the aspects linked to buying and selling them and the entire universe of brokers (which at first were somewhat independent but became more and more more linked to the traditional financial system, itself quite concentrated and centralized). The intention here is to focus only on the technological issue and see if it is even impossible to have centralized power in, by definition, decentralized blockchain.

As already mentioned, technology blockchain one of its founding aspects is the idea of ​​a decentralized checking of operations, or distributed over the user network, carried out by different machines belonging to different owners. This is because, as we have seen, it takes place through a process in which, as the information progresses, an encrypted signature (the so-called hash) follows her like a tail that keeps growing. This means that if someone manipulates a transaction that tail will appear differently on different machines indicating not only that something is wrong but from when the something went wrong. A fraud would only be possible if one could manipulate all the “values ​​of hash” that are produced automatically and without any human interaction. This does not mean that fraud is not possible, but it is unlikely as it is extremely expensive.[xiii]. But the central question is, is the checking capability really the same among all network participants?

There are two main ways of checking, or consensus-seeking protocols, that operate within the blockchain, also known as proof algorithms.[xiv] The first and original protocol is the “proof of work”, or Proof of work (also known as PoW). PoW is the oldest and most widespread solution (used by Bitcoin, Etherium and most cryptocurrencies) and is the very basis of blockchain technology – checkers are miners who, by solving the mathematical equations corresponding to encrypted transactions in an open and generalized competition are rewarded with the receipt of the network's internal currency. There is no prior determination of who is qualified to take the tests. The obvious problem with this protocol is the energy cost that grows with the growth of the number of transactions and the need to solve increasingly complex equations. Of course, those with greater computational capacity and energy availability have a greater chance of successfully mining, which means that there is some centralization of power there.

The second protocol that was developed to reduce the time and cost of this verification is the so-called “proof of participation” protocol (proof of stake, in the acronym PoS). In this, there is a prior determination of who is qualified to carry out the tests that are the participation in the network. In fact, the selection is random, but it takes into account the user's participation in the network (that is, the amount of crypto he has). Many PoS advocates say that, in addition to being more secure and energy efficient, it also presents lower centralization risks; however, it is clear that centralization is an assumption of the protocol itself and there is no limit to the number of operations that a single validator can perform. After all, as researcher Catherine Mulligan puts it, "You're only selecting validators who have more money."[xv]

I do not have the adequate technical knowledge to have an opinion on which system bears greater centralization risks, but I believe I can derive from this diversity of checking systems in decentralized private cryptocurrencies that, if in both there is the possibility of centralization (which rewards with power to create/ obtaining currency), a state cryptocurrency, at first centralizing the issuance and checking, can share this task with society and reward it with currency, right?!

Likewise, I imagine that if in both proof mechanisms there is an economic incentive for the checkers – those who will be able to add a block containing their signature (hash) – who compete with each other, and not necessarily on equal terms, this also has some parallel with the prevailing state fiat currency system and the incentives given to private banks to co-manage the system. As experts explain, “proof of stake involves a competition to see which new block has more cryptocurrencies wagered in its favor, proof of work involves a competition to see which new block has more computational work done in its favor”[xvi].

So then, isn't there also an economic incentive for banks to participate equally in creating money and verifying transactions in national currencies? And don't banks also compete with each other, and not without some concentration, and have a greater weight in checking as in creating money? From this reflection, I extract once again that the technology can be adequate, and politics is what guides the adequacy.

Finally, a comment on cryptos that are not intended to be coin-creating platforms but environments for performing/recording contracts, where any currencies can operate. This is the case of Ethereum, whose ambition since its creation in 2015 has been to be “the world computer”, or the only ledger to contain all the information referring to all contracts. Its platform is also decentralized and uses the technology blockchain, but instead of recording the monetary transactions themselves, what is recorded is the change of ownership.

if not Bitcoin the blocks carry transaction information (which is checked by numerous computers that cryptographically sign new information blocks, etc.), in the Ethereum the relevant information is varied and more complex. This platform is said to create a “standard interface” to run different types of Tokens - being Tokens “units of value that organizations or projects based on blockchain build on networks blockchain existing"[xvii]. but all these tokens, after all, they carry information that allows the change of ownership/ownership of assets; what the verifier nodes (miners) on the network Etherium do is check that everything has been done correctly in this asset exchange in accordance with the contracts.

“Peers don't need to query external databases; they don't need to follow protocols on top of Ethereum to match values ​​or track transactions. They just need to check the state, like they do with any other standard transaction. That's why ERC [20 token integration into wallets is easy and seamless].”[xviii] [xx]

This use of technology blockchain, of the “smart contracts” as it came to be called, interests us here because its flexibility is a given of the program, made to always receive new Tokens and make them dialogue with the already operative platform. It seems to me in line with the operation of a state-owned digital currency, which could operate as a central manager of a large ledger that is also distributed, consulted, moved (every time an exchange/contract is carried out) but the currency itself remains a unique creation of yours. After all, currency is a social institution, created by the State in accordance with State objectives (here and there hindered by the selfish objectives of the markets), and therefore it could never be something created by a mathematical algorithm with the mistaken objective of being scarce ( because, after all, for this schizo-liberal reasoning, men are unreliable, even more so when many are heard!).

Money should not be scarce or difficult in some circumstances (economy functioning far from full employment of available labor and capital resources) yet it should be in others (unavailability of resources); knowing how to recognize them is essential, in order to then know how to manage liquidity at both times. But such a currency could operate smart contracts at the national level, faster, more securely, and ultimately more democratically.

*Glaucia Campregher Professor of Economics at the Federal University of Bahia (UFBA).



[I] Research by historians, archaeologists and anthropologists shows that the first forms of money were born within communities rather than on their fringes (where one community relates to another) and therefore were more linked to debt records than to anything traded. The most complete evidence goes back to the Sumerian civilization around 3500 BC Physical silver was used, but as a unit which gave an equivalent product (a “shekel of silver was equivalent to a bushel of barley") and its value did not emerge from commercial transactions among Sumerians all in free markets, but from the need for bureaucracy (priests, officials, administrators of temples and palaces) to "track resources and transfer items between departments". This silver was not minted and rarely circulated, most transactions being merely registered and cancelled.

[ii] In fact, money and production are so intimately linked in capitalism that Keynes called it the “monetary economy of production”, given that the fundamental of the system is the prerogative of capitalists to decide where they will place their wealth – whether they will prefer the liquidity of money, give it up for a financial gain (interest) or invest productively (in the expectation of a profit).

[iii] This reasoning sticks with the population that thinks the State and politicians are at their own service, given to diverting money that is theirs (while it is their work that the money makes move), or to create a money/debt that will impoverish people in the future. They also don't realize that banks also create money out of thin air. And, in this case, the pursuit of private advantage is really the logic and not a deviation. Banks create money in the accounts to whom they grant credit seeking profits and facing competition. This means that they tend to give away more money the more the others give away and less the less the others do. That is, they are too careful to give credit when the economy needs it most and too careless when it is overheated. Even today, even though paper money circulates less and less, the population understands that loans come from deposits; that when a bank lends too much and its customers discover it there can be a bank run, and that if truckloads of money don't come quickly they will all go bankrupt. They do not suspect that in the era of coins and electric tokens, bank reserves could be mobilized from one bank to another in minutes. In this way, they are also far from understanding that a large part of the public debt is precisely aimed at regulating the liquidity of the economy in the opposite direction to that of the cycle.

[iv] A very didactic explanation can be found here –

[v] What does one do by comparing the interest rates on money (something over which the monetary authorities have the power to set, even if they often refrain from exercising it) with the interest rates that all goods have “in terms of themselves? themselves” (as Keynes would say in chapter 17 of his General Theory), which would be something like if we could measure how many slippers we will make 5 years from now with the slippers we make today. That is, assuming that we make more technological developments and make work in the production of flip-flops more productive, we can say that there would be a positive rate there, if productivity doubled, it would be 100%.

[vi] A balance sheet on the various experiences regarding the website indicates that ten countries have already launched their digital currency: Bahamas, Antigua and Barbuda, Grenada, Saint Lucia, Saint Kitts and Nevis, Monteserrat, Saint Vincent and the Grenadines, Dominican Republic, Venezuela and Nigeria. The Bahamas launched the “Sand Dollar”, a digital version of the Bahamian dollar (BSD) in October 2020. In the “pilot test” phase, there are 14 countries, spread across most continents: Anguilla, Jamaica, South Africa, Saudi Arabia , United Arab Emirates, Ukraine, Sweden, Lithuania, China, Hong Kong, South Korea, Thailand, Singapore and Malaysia. China having excelled in 2021 with the digital yuan (or “e-CNY”). On August 21, the capital Beijing had fully integrated with digital currency in the city's metro payment system, and in November the amount of Chinese citizens who joined the digital yuan in four months increased by more than six times. It is estimated that today more than 140 million Chinese (10% of the population) already use e-CNY. In the group of countries that are developing projects are: Canada, Brazil, Haiti, Mauritius, Bahrain, Australia, Palau, Cambodia, Japan, Russia, Turkey, Lebanon, Israel, Switzerland and the European Union, with the digital euro. According to Agência Senado, the Central Bank plans to launch the digital real by 2024, but the first coin version could be released next year.

[vii] See various notes on the BCB website, for example It is, incidentally, the same technology used today in the SWIFT international payments system, from which Russian banks were recently banned. Banning is something that only happens when there is centralization of control.

[viii] See the IMF study “The rise of digital money”. in

[ix] Such as Sociedades de Crédito Direto (SCDs) authorized by the Central Bank of Brazil in 2013. These are companies – generally startups that grew quickly – that are not authorized to become financial, and therefore cannot raise funds from third parties, but they can use their own to borrow through their digital platforms.

[X]The quotation marks are justified because the project launched by Zuckerberg proposed that Libra be a currency of a group of American companies organized in the Libra Association. Here's a good summary,

[xi] Contents of Trump's tweet: “I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air. Unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity… Similarly, Facebook Libra's 'virtual currency' will have little standing or dependability. If Facebook and other companies want to become a bank, they must seek a new Banking Charter and become subject to all Banking Regulations, just like other Banks, both National… and International. We have only one real currency in the USA, and it is stronger than ever, both dependable and reliable. It is by far the most dominant currency anywhere in the World, and it will always stay that way. It is called the United States Dollar!”

[xii] In an article from the Financial Times available here.

[xiii] Although many analysts only hypothetically consider such attacks – which result from the action of a group of miners who control more than 50% of computational power/responsibility for checking – this type of attack has already happened. Second, Leonardo Kovacs currently this risk is very low “because cryptocurrency networks have reached huge numbers of users, mainly the bitcoin. However, the possibility is never zero. The reduction of miners is a true feature, right after the movements of halving from the Web bitcoin, which increases the possibility of the attack occurring, even if it is small. Although it is very difficult for someone to get more computational power than the rest of the network bitcoin, we cannot say the same for smaller cryptocurrencies. When compared to the main ones, the smaller ones have little computational power protecting their block chains. The situation could allow a 51% attack (as already recorded). Some examples of victims of this type of attack include: Monacoin, Bitcoin Gold e ZenCash.” in

[xiv] A good presentation and comparison of both systems is available here –


[xvi] Idem


[xviii] Idem

[xx] For more details on the ECR20, see,de%20cria%C3%A7%C3%A3o%20para%20os%20desenvolvedores.

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