Bitcoin is similar to primitive money

Bitcoin is similar to primitive money, what do they have in common? Scarcity, we tend to assign value to things based on the shortage of it. It couldn’t be more true than in the case of the giant money stones of the island of Yap. One can only imagine the effort needed to transport a 9000-pound stone “coin” with canoes and rafts over hundred of miles over the open ocean.

500 to 600 years ago, a Yapese man, Anagumang, led the expedition from his native island of Yap to the distant island of Palau, 300 miles away. Natives of Palau allowed him and Yap’s people to quarry the rock in exchange for goods and services. An unusual economic exchange between these two islands began, and these stones became currency on Yap.
The Rai stone is disc-shaped, contains a hole in the center, carved out of limestone, and remained the chief currency until the 20th century.

The Rai stones attract speculators.

David Dean O’Keefe, a sailor and adventurer of Irish-born American descent. Using modern tools imported from Hong Kong, he produced them in large quantities, devaluing the currency. Unfortunately, even rock solid money is not immune to inflation.

Being such a large stone made it too difficult to move. Therefore its ownership was established by its history as recorded in oral tradition and not by its location. Thus a change of ownership and its history was brought about by adding the transfer by word of mouth.

Modern economists consider Rai stones as a primitive form of money. They often use it as an example that the value of money is based purely on a shared belief in its value. Crypto-currency provides us with a similar financial system as the Rai stone. Instead of word of mouth, we get blockchain technology.

What does Bitcoin have to do with it?

Blockchain is a distributed database existing on multiple computers at the same time. It’s constantly growing as new sets of transactions are added to it. These recordings are blocks. Each block contains a timestamp and a link to the previous block, so they actually form a chain. So every time a transaction or a change of ownership happens, this is recorded on the block. If you sell your house, the deed will contain your name and the new owner’s name forever. It cannot be tampered with because all the other blocks contain a piece of that information. Don’t forget, Bitcoin is taxable.

Marcia Santos Sadler
The Financologist