4737 words and the reading time is about 16 minutes
Chinese version:
My friend Mr.Yu asked me a question on WeChat:
…What is the backed for the issuance of tokens in the metaverse? There is no gold reserve and no state power endorsement
This has aroused great interest in me because this question is exactly the same confusion in my heart when I first came into the blockchain forest in 2018.
At that time, in order to solve my doubt, I bought a lot of books on currency and finance to learn, and it is only now that I have a superficial understanding.
Feynman said that simply explaining the problem to others can help you learn better. This is why I wrote this article. By the way, this article also will be a part of my other article series : D
What are the right questions?
There are actually several questions:
What are tokens?
What is currency? What is the currency issued by the country? What is a gold reserve?
What are tokens?
According to the definition given by the US-listed company Coinbase:
From a technical point of view, a token is another term for a cryptocurrency or a crypto asset. … Bitcoin and Ethereum are also tokens (but we’ll give them their own names for they are the two giants of crypto)
Here we make it clear that tokens are actually cryptocurrencies, a distributed ledger software system derived from Bitcoin and based on blockchain technology, which can realize the function of currency.
What is currency?
We usually say the word "money" more than currency, so what is money/currency?
Check out Wikipedia's definition:
Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context.[
There are three main functions of money:
* medium of exchange
* unit of account
* store of value
Sometimes it is also a standard (means) of deferred payment
Money has historically been an emerging market phenomenon with intrinsic value as a commodity, but today's money system has begun to become a reserveless fiat currency with no use. Its value comes from social conventions, declared by the government or legal institutions as a currency stipulated by law, and must be compulsorily accepted as a payment method within the jurisdiction of the country/region
Traditional economics believes money is the product of commodity exchange, and physical currency first appeared. For example, nomadic people use livestock and animal skins as money, and agricultural people use grain, cloth, agricultural tools, pottery, seashells, pearls, and jade as money.
The ancient physical currency with wide circulation is shells. In Chinese characters, most of the characters related to wealth value are related to shell characters, such as expensive(贵), rich(财), greedy(贪), poor(贫), rich(财), and purchased(购).
China was the first country to use coins and paper money. In history, Emperor Wu of the Han Dynasty took back coinage rights for the first time. The central government uniformly minted the wuzhu coin, ending the chaos of local coinage. Jiaozi in the Sichuan area of the Northern Song Dynasty is the earliest paper money in the world.
Episode 1: The story of the first set of RMB issuance
On December 1, 1948, with the approval of the Central Committee of the Communist Party of China at that time, the People's Bank of China was established in Shijiazhuang City, Hebei by merging Beihai Bank and Northwest Farmers Bank based on the then Huabei Bank. ". To distinguish it from the local banknotes issued by banks in the liberated areas in the past, such as Beihai coins issued by Beihai Bank, Jinan coins issued by Jinan Bank, Luxi coins issued by Luxi Bank, etc., this new set of banknotes is based on the issuing bank—— The name of the People's Bank of China, known as "RMB". Paper money was originally called "new currency", "renminbi note" and so on, and it was not officially named until June 1949.
This is the origin of the central bank and the legal standard currency after the founding of the People's Republic of China.
Before this, the liberated areas were geographically separated from each other and did not circulate currency such as legal currency issued by the Kuomintang government. Instead, they established banks in their base areas and issued currencies that circulated in their base areas. By 1947, the liberated areas began to join together, thus raising the demand for a unified currency.
In April 1947, the Central Committee of the Communist Party of China announced the establishment of the "North China Financial and Economic Office" with Dong Biwu as the director, to unify the financial policies of the liberated areas in North China, adjust the financial relations and income and expenditure of the liberated areas, and at the same time start the work of unifying the currency. On August 1, 1947, Dong Biwu drafted the "North China Finance and Economics Office Organization Regulations", which was approved by the Central Committee of the Communist Party of China on August 16. Article 5 was "preparation for establishing central finance and banks".
On October 8, 1947, the "Preparatory Office of the People's Bank of China" was established with Nan Hanchen as the director. By the end of December 1947, the preparatory office of the People's Bank of China was established in a farmer's yard in Jiayu Village, one mile away from Xibaipo, Pingshan County, Hebei Province. In the autumn of 1948, the preparatory office was moved to Shijiazhuang.
In the second half of 1948, the Preparatory Office of the People's Bank of China reorganized the banknote printing factories in the three liberated areas of North China, Central China, and Northwest China. On December 1, 1948, the North China People's Government issued the "Jinzi No. 4 Announcement", announcing the establishment of the People's Bank of China as the banknote issuing bank in North China, East China, and Northwest Liberated Areas. Nan Hanchen was appointed as the general manager of the People's Bank of China, and the deputy general managers were Hu Jingyun and Guan Xuewen. On the same day, the People's Bank of China issued banknotes of the People's Bank of China, namely RMB. The first RMB in history was No. 00000001 with a face value of 50 yuan. It was printed with the words "People's Bank of China" and "37 Years of the Republic of China" written by Dong Biwu, then chairman of the North China People's Government. The first RMB was issued at the Bank of Pingshan County, Hebei Province. Then, 20 yuan and 10 yuan denominations of RMB were issued.
It was issued on December 1, 1948, and ended in 1952 when the national economy of the People's Republic of China was recovering. During this period, the People's Bank of China unified the issuance of RMB and gradually accepted the currencies issued by the liberated areas. The circulation of foreign currencies, silver dollars, and gold is prohibited, making the RMB a unified national currency.
With the gradual advancement of the People's Liberation Army, the RMB has covered the whole country. On March 10, 1949, RMB was issued in the Central Plains Liberated Area. At the end of May 1949, after the Chinese PLA occupied Shanghai, it took over the National Government's Central Mint and Central Printing Factory (now China Banknote Printing and Minting Corporation) and began to use the equipment and personnel here to print RMB. In June of that year, the Shanghai Silver Dollar War broke out. Some merchants hoped to prevent RMB from entering the Shanghai market through silver dollar transactions. The new government used tough administrative measures to control Shanghai’s financial market and promote the use of RMB in Shanghai.
According to statistics, the total amount of RMB issuance increased from 60.7 billion yuan in April 1949 to 280 billion yuan at the end of July, rapidly increasing to 2 trillion yuan by the end of November. By the end of February 1950, it reached 4.1 trillion yuan, and the circulation increased to 4.91 trillion yuan in March. The amount of money printed has increased by more than 80 times in one year, and severe inflation has followed:
From January 1949 to February 1950, the wholesale price index of 13 major cities across the country increased by 91 times in RMB. Among them, the comprehensive prices of five commodities in Tianjin, namely flour, millet, wheat, yarn, and fine cloth, rose even more. increased by 103.7 times. In March 1950, the Administrative Council of the Central People's Government promulgated the "Decision on Unifying National Financial and Economic Work" to conduct unified management of various financial and trade materials, and allocate them strictly according to the plan to ease the pressure on the economy.
On July 23, 1950, the Hainan Military and Political Committee issued a circular announcing that the tickets issued by the Qiongya Revolutionary Base would cease to circulate. The circulation area of RMB was extended to Hainan.
In April 1951, the Northeast Bank and the People's Bank of Inner Mongolia were unified in the People's Bank of China system, and the RMB replaced the Northeast currency and the New Mongolia currency as the standard currency in the Northeast and Inner Mongolia regions;
At the end of 1951, the RMB became the standard currency in Xinjiang; on July 15, 1957, the RMB replaced the Tibetan currency and became the standard currency in Tibet.
This is the origin of new China's legal currency (RMB).
Interlude 2: The short story of Q coin
Launched by Tencent in 2005, Q Coin is a virtual currency on QQ. However, in March 2007, Tencent began to completely shut down the service of converting game currency into Q Coin. The frenzied trading of Q Coin on the Internet was affected.
Previously, 14 ministries and commissions, including the Ministry of Culture, the Ministry of Public Security, the Ministry of Information Industry, and the People's Bank of China, jointly issued the "Notice on Further Strengthening the Management of Internet Cafes and Online Games", stipulating that virtual currency issued by online game business units cannot be used to purchase physical products; Reselling virtual currency, etc. is strictly prohibited.
… The People's Bank of China should strengthen the regulation and management of virtual currencies in online games to prevent virtual currencies from impacting the real economic and financial order.
Strictly limit the total amount of virtual currency issued by online game business units and the purchase amount of individual online game consumers;
Strictly distinguish between virtual transactions and physical transactions in e-commerce. The virtual currency issued by online game business units cannot be used to purchase physical products, but can only be used to purchase virtual products and services such as online games provided by themselves;
If consumers need to redeem virtual currency into legal tender, the amount shall not exceed the original purchase amount;
Reselling virtual currency is strictly prohibited.
Violations of the above provisions shall be punished by the People's Bank of China in accordance with Article 32 and Article 46 of the Law of the People's Republic of China on the People's Bank of China. …
In fact, the "essence of money" is a specter of economics
someone said:
...Not as many people are fooled by love as by delving into the nature of money.
This question is fascinating, but Galbraith, a master of economics, joked that all the answers to this question are "full of contradictions". There is still a consensus on value storage), and it is also believed that in order to meet the above functions, the currency should have the following attributes:
Exchangeable: Each currency unit must be interchangeable, for example, if a pig is a currency unit, it is very unlikely that a fat pig and a lean pig are actually interchangeable
Durability: This means that perishable items such as grain are not suitable for currency
Divisible: This means that livestock such as cattle and sheep are not suitable for currency
Removable: can be easily carried
Acceptable: Everyone is willing to pay with it
Limited Supply: Circulation must be limited
Seeing the above characteristics, we can understand why primitive human society chose shells as currency because it perfectly meets the above requirements.
Readers like you who think more deeply may ask:
Can something that meets the above property requirements also serve as currency?
Does the currency have to meet all attribute requirements?
This is related to what we are going to talk about below:
In recent years, economists including Keynes and Friedman have begun to pay attention to a specter, an impossibly nonsensical case of money that has burst into monetary history. This case has shaken some of the above attributes and has begun to revive Define the essence of money:
It is the stone coin of Yap Island
The story of Yap Island allows us to go beyond the currency concept of gold reserves (traditional gold and silver standards) and understand what currency is more simple.
Yap Island and its currency system
Located in the South Pacific, Yap Island was once a colony of Spain and Germany. Its economy is far from developed.
There are only three products on the market - fish, coconut, and the only local luxury - sea cucumber. Besides, there are no other commodities that can be exchanged, no crops at all, and almost no arts and crafts; the only domesticated animals are pigs. After the Germans came here, they also imported some cats; the local trade was very little with the outside world.
This is certainly the simplest and most self-contained economic system one can find. In view of this savagery, is it not here that only barter is to be found?
In fact, on the contrary, Yap Island has a highly developed currency system:
The local monetary system was formed by the fei —a large, thick stone wheel that ranged in size from 3.5 centimeters to 3.6 meters, with the largest stone coins weighing 4,000 kilograms. The stone for the coin was quarried from a small island in the Palau archipelago 300 nautical miles from Yap.
The value of the fee coin is determined by its size but also by the smoothness of the texture and the whiteness of the limestone.
After being discovered by Europeans in the 19th century, Yap people learned to use iron tools to cut and make stone coins. Soon after, they also began to use European ships to transport stone coins back to Yap Island. This resulted in Yap islanders being able to make bigger and heavier stone coins, but these modern handicrafts are less valuable than stone coins made by traditional crafts before (inflation, isn't it?)
The discoverer of fei coins believes that the locals adopted this peculiar form of currency because it was not portable and required "four strong men to steal a pig's worth of stone coins", but he finally found that the fei coins It is also rare for a currency to move from one house to another. There are many transactions here, but the debts that arise are generally offset by each other, and the accounts are reserved for future transactions.
The guide told Forness (the discoverer of the fee coins) an even more startling story:
... In a nearby village there was a family whose wealth was undoubtedly known and known, yet no one, not even the family themselves, had seen or touched such wealth;
The wealth of their family was a gigantic fee coin, the size of which was only mentioned in the mouths of the ancestors; and for the past two or three generations, this piece of fee currency has been lying on the bottom of the sea, until now!
Many years ago, when it was transported here from Babel Tuap Island, this fee coin sank to the bottom of the sea due to a storm. That's how the story goes, but anyway: it's admitted that... the fact that the fee coin fell into the sea during transport is nothing to argue about, and it's also acknowledged that even if it sinks hundreds of feet in the sea, it's Blockstone transaction value should not be affected either...
The purchasing power of the stone remains valid as if it were visibly placed outside the master's house. The wealth it represents is the same as the gold hoarded by misers in the Middle Ages, or it can be regarded as the silver coins accumulated in the treasury of any country. We have never seen or touched these silver coins, but this does not affect us. their paper credentials for transactions.
Feicoin surprised many "exchange medium currency theorists", which completely subverted the concept that currency must have movable properties and triggered people's rethinking of the concept of what currency is.
The Tally of the British Ministry of Finance is the origin of the word stock. Like the currency, it is also a unique footnote of the essence of currency. Interested students can read "Unofficial History of Currency" to learn more.
Let’s take a break after writing this article. This article will first use a few stories to give you a preliminary impression. The next article will explain in detail what currency is.
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