By Richard Holden, author Money in the Twenty-First Century: Cheap, Mobile, and Digital

In my new book Money in the Twenty-First Century, I put money in historical context to explain why it matters and what is changing. The following excerpt from the introduction of the book, argues that money as a medium of exchange is essential for economic growth and prosperity. And it explains that three seemingly-unrelated events that all occurred in 2008—the launch of the iPhone, the birth of Bitcoin, and the financial crisis—laid the groundwork for the first fundamental change to money in two millennia.

For millennia the biggest obstacle to economic efficiency was the absence of money. Or, to be a little more precise, the absence of fiat currency. Without a medium of exchange like paper money, any two people wanting to trade with each other would need to just happen to have something that each other wanted. This “double coincidence of wants” might be pretty rare. So some kind of medium of exchange that circumvents this problem is very valuable. It helps voluntary trades actually happen. And that means resources are utilized more efficiently.

It’s not surprising, then, that money has been around for a long time. The shekel—about one-third of an ounce of silver—became standard currency in Mesopotamia nearly 5,000 years ago.[i] 

The first coins were minted long ago—in the 5th or 6th century BCE. And while there is historical dispute about who minted the first coins,[ii] the new technology spread to Persia after Lydia was conquered in 546 BCE, and eventually throughout the world.

Over the centuries currencies have come and gone, the values of different national currencies have fluctuated wildly, and coins evolved into paper banknotes beginning in the Ming Dynasty in 1375. And from 1870 to 1971, convertibility of currencies into gold—the Gold Standard—was at the heart of the international monetary system.[iii] Some countries introduced polymer banknotes which made counterfeiting harder, and credit and debit cards made transacting with money easier.

But, fundamentally, very little changed for nearly 650 years. From the time of the Ming Dynasty, national governments, of one form or another, controlled centralized systems of fiat money and had legal control of what currency could be used for exchange within their borders.

And then, beginning in 2008, three seemingly unconnected phenomena may have changed everything. These three things will redefine what “money” means, what roles it performs, and who controls it. In the first decade of the 21st century we got the initial hints that interest rates in advanced economies could remain remarkably low for long periods—perhaps indefinitely. And in response to the 2008 financial crisis official interest rates in OECD countries were slashed to basically zero and have more-or-less stayed there until 2022.

In 2008 Steve Jobs, in a final act of genius, gave birth to the smart phone with the launch of the iPhone 3G. And while that launch event emphasized ordering pizzas online, making calls to friends, and carrying around songs and photos in one’s pocket, the truly revolutionary aspect was yet to be apparent. To paraphrase Jobs himself when he launched the iPod: “it’s an entire bank, in your pocket.” Powered by the now ubiquitous smartphone, digital payments with standard fiat currencies have become dramatically more common. In some parts of the world digital payment volumes outstrip cash.

And in 2008 the idea for world’s first decentralized currency, a “cryptocurrency” called Bitcoin, was announced in a seemingly obscure whitepaper. Suddenly, a single clever idea by an unknown person or group known only as Satoshi Nakamoto, ended government monopolies on money and ushered in an era of decentralized finance.

This book is about those 3 phenomena: low interest rates, mobile money, and cryptocurrencies.  It is about how they interact to change what money does and who controls it. And because money is quite literally the fuel that powers $100 trillion of worldwide economic activity every year, this book is about our economic future.

From the Ming dynasty until a decade ago everything had changed about money, and nothing much had changed. Its form had changed, its functionality had improved, but its basic economics had not. For centuries it was a centralized medium of exchange, controlled by national governments. And it conferred enormous power on those institutions. In 2022 that is still the case, but for how much longer?


[ii] Aristotle thought the first coins were minted in in Phyrgia under King Midas. Herodotus believed the Lydians were first.  Others think it first occurred on the Greek island of Aegina.

[iii] Eichengreen, Barry (2019). Globalizing Capital: A History of the International Monetary System (3rd ed.). Princeton University Press: 7.