when and what happen in Wall Street’s paperwork crisis.
In 1968, Stock exchange closed on Wednesdays.
what was invented in 1969
Automated Teller Machine (ATM) Introduced by Chemical Bank
when and where the Big Bang happen
the London Stock Exchange in 1986
when and what happened in web 1?
in 1990, the following are happened: 1. open decentralized protocal (email[SMTP], web[http]) 2. community-governed, 3. limited functionality 4. no value accrual to the network.
tips: The Simple Mail Transfer Protocol (SMTP) is an application used by mail servers to send, receive, and relay outgoing email between senders and receivers. As the technology behind email communication, SMTP is the protocol that allows you to send and receive emails.
when and what happened in web 2?
in 2005, the following happened: 1. siloed centralized services (Google, Facebook, Twitter), 2. corporation-governed 3. advanced functionality 4. values accures to big tech companies
when and what happened in web 3?
in 2020, the following happened: 1. decentralized blockchain networks: bitcoin, ethereum; 2. community-governed 3. advanced functionality 4. value accrues to network participants
Web 1 used ___ unlocks ____
websites, information
web 2 used ____ unlocks _____
post, publishing
web 3 used _____unlocks _____
token, ownership
pros and cons of payment mechanisms
Advantages
● Available when other media of exchange are scarce
● Enhancement of social solidarity
Disadvantages
● Unreciprocated or forgotten gifts
● Inadequate gifts
● Unwanted gifts
pros and cons when
barter payment mechanisms
Advantages
● Available when other media of exchange are scarce
● Enhancement of social solidarity
● More likely to have parity of value than with gifts
Disadvantages
● Costs of transportation, storage and security
● Potential mismatch of tastes and preferences (lack of mutuality)
Characteristics of a good commodity for payments
● Durability
● Limited supply
● Easy to transport and store
pros and cons when
Commodities as payment mechanisms
Advantages
● Solves the mutuality problem of gifts/bartering
● May have its own usefulness or intrinsic value
● Fungibility (可塑性)
Disadvantages
● Unsuitable for large transactions （大宗交易）
● Supply of e.g. Gold may be unstable or uncontrollable（供应不可控制）
Fiat Currency
» Deposit gold/coins at trusted third party (e.g. a bank)
» Bank issues a note which entitles bearer to redeem
Problems of Bank Notes
- Discounting to face value:
- Redeemable at 100% of face value at the issuing bank
- Discount also depended on the perceived safety/distance of the bank - Counterfeiting
- Many different banks/designs makes checking validity onerous - Cost of acceptance
- the expense of checking the banknote security features and confirming
acceptability of the issuing bank
solution of Problems of Bank Notes
● U.S. Constitution, Article 1, Section 8
- Congress shall have the power to … coin money, regulate the value thereof,
and foreign coin.
● 31 USCA Section 5103
- United States coins and currency (including Federal Reserve notes and
circulating notes of Federal Reserve banks and national banks) are legal
tender for all debts, public charges, taxes, and dues. Foreign gold or silver
coins are not legal tender for debts.
what are Two types of Legal Tender
- Backed commodity
currency (Not “Fiat”)
r.g. gold standard (in and out of use since 1800s) - Un-backed currency
(fiat)
pros and cons when Commodity currency as a payment instrument
Advantages
● Governments must have enough gold on hand to exchange for cash
○ makes it hard for them to print money and thus cause inflation
○ Note, in the US the central bank was only required to have 40% of cash issued in gold!
Disadvantages
● Cannot change the money supply easily (this is useful to manage
inflation/deflation!)
● Fiat allows for global economic stabilisers, currency devaluation = rise in exports
pros and cons when Fiat currency as a payment instrument
Advantages
● Seigniorage revenue to government
○ (literally making money by making money, though this creates inflation)
● Ability to control money supply and implement monetary policy
Disadvantages
● Risk of counterfeiting
● Debasement via “snipping” or printing
● Unsuitable for very large transactions
● Cost of transporting and safeguarding
● Requires maintenance of public confidence (trust)
○ Because fiat is unbacked by e.g gold
what nations are Not contained to poor, less well-off
Turkey
- Member of G20 Nations
- Population of ~85 Million
- Reached 85% YoY inflation in 2022.
Argentina
- Member of G20 Nations
- Population of ~45 Million
- Reached well over 100% inflation in
2023.
what are Limitations to fungibility (可互换性) in today’s world
Fiat currency
● Australia has banned use of cash in transactions above $10,000 beginning in 2019, in
order to facilitate traceability
● Reporting requirements in the U.S. and elsewhere for transactions above $10,000
● Withdrawal of high denomination (€500) notes in the Euro area
Bitcoin
● Coinbase does not accept stolen BTC
● BTC auctioned by the government are “cleaned” and sell for above market price
Ethereum
● Tumbled tokens less fungible
what are Limits to bank money creation
Regulatory:
- Minimum Reserve requirements as a % of deposits
- Capital adequacy requirements
Economic:
- Borrower’s willingness to borrow at higher interest rates
- (higher rates reduce demand for loans)
- Liquidity constraints
- (banks need to have enough funds on hand for customer withdrawals)
what problem with banks?
Collapse of the U.S. banking system in the 1930s
What happens if too many people want to withdraw their money at the same time?
what are the solutions of FDR?
Government guarantees of deposits
