Cryptocurrencies – Are They Really A Novelty?

13th Jan 2018 / Global

By Ugo BardiInsurge Intelligence: Maybe you think that bitcoin and the other cryptocurrencies are a completely new form of currency. After all, nothing like that could ever exist before the age of Internet, right?

 

Well, not exactly. It is true that the modern cryptocurrencies are based on the Internet, but the basic concept of “virtual currency” predates the Internet, by at least a millennium. During the Middle Ages, people made an extensive use of a virtual currency in the form of holy relics.

 

Get Briefed, Get Weekly Intelligence Reports - Essential Weekend Reading - Safe Subscribe

It is a story that needs to be told from the beginning. First of all, all human societies are kept together by money. Without money, there cannot be commercial transactions, and without that no complex society can exist.

 

For a long time, thousands of years of human history, money was based on precious metals, mainly gold and silver. Coinage was the technology that propelled the Romans to become an empire: they used precious metal money to pay their legions, to bribe their enemies, and to keep the empire together.

 

But the same technology that created the empire also doomed it. When the imperial mines ran out of precious metals, the Empire ran out of money. That generated a complex chain of events and the agony of the Empire lasted for a few centuries. But the origin of all the troubles was simple: it was a financial collapse. No money, no legions — no legions, no Empire.

 

Then, the Middle Ages came. An age of the scarcity of precious metals, it was not by chance that it saw the birth of legends involving dragons hoarding gold in their lairs. People desperately needed some kind of money. But what to use if gold and silver were mostly gone?

 

The Romans of imperial times had already tried virtual currency — for instance paying their soldiers with pottery. Eventually, the last breed of Roman troops were simply paid with food. But these ideas didn’t work very well, as you may imagine.

 

The disappearance of the Western Roman Empire didn’t eliminate the need of some kind of currency. Something that could play the role of money was desperately needed and it was found: relics! Yes, exactly that. The bones of dead holy men (and women) had all the characteristics of money. They were rare, hard to find, limited in quantity, had no value of their own, and they could be traded, exchanged, and hoarded. They were also supposed to have thaumaturgic virtues but, really, they were the true currency of the Middle Ages.

 

As you start thinking of relics in terms of currency, then a lot of things click together in the history of the Middle Ages. For instance, the rise of the power of the papacy in Rome. How could it be that the Germans Emperors couldn’t use their mighty armies to defeat the popes who had little or no military resources? It was because the Catholic church controlled the relic-based financial system. And it is well known that money is often more powerful than armies.

 

The church had the power of determining whether an object claimed to be a holy relic was real or not, so it acted in some respects as bank. It validated relics, even though it couldn’t create them (not explicitly, at least). But that was enough to play a pivotal rule in the medieval financial system. The papacy gradually lost its power grip in Europe only when new mines in Eastern Europe provided enough precious metals for coinage.

 

If relics were currency, then you can also understand the incredible craze that had overtaken people during the Middle Ages. People were digging everywhere for holy relics, an activity that was mostly virtual because nobody could prove that the bones that were found had been there before.

 

Sometimes the craving for bones was so strong that people who had a saintly reputation were literally cut to pieces immediately after their death by crowds craving for their bones. Having such a reputation could even be dangerous, the life of a saint could be cut short by someone who wanted to make a profit out of his bones.

 

Relics were much of a virtual currency, just like bitcoin. They had no more substance than the stuff dreams are made of. Nobody could really tell whether a fragment of bone claimed to be holy came from a cow or holy man. Nobody could tell whether a wood splinter was really a chunk of Christ’s cross. To be sure, the Church could declare (or deny) the authenticity of a specific relic; but it was still a declaration wholly based on faith. It was all virtual: a game of make-believe, just as today is the case for all kinds of money, including bitcoin.

 

But if money is a dream, don’t discount its power. Dreams (and money) are what keeps human societies together. Bitcoin — or some other form of cryptocurrency — is the new money. Maybe it will turn out to be a nightmare, but maybe it will help us keep our dreams alive.

 

Notes

As far as I know, so far historians have not noted that Medieval relics can be seen as a form of currency. However, I may cite Gibbons in his “Decline and Fall of the Roman Empire” (1776) when he says (Book XXVIII) that “the relics of saints were more valuable than gold and precious stone”, hinting at the commercial worth of these objects.

 

To give you some idea of the craze for relics that had overtaken our ancestors, let me translate for you an excerpt from the book by Edgarda Ferri “The Great Countess” (“La Grancontessa”) (2002) which tells the story of Countess Matilda of Canossa. All this takes place around the year 1000 in Europe. Note how the relics are mined out with some effort (just like bitcoins) and how the pope acts as the “bank”, validating the find. But note also how, just as in the case of bitcoins, it is not the bank (the church) that creates the new money. This particular trove of relics was created by group of citizens (“miners”) of Mantua who had the resources and the clout needed to carry the enterprise to completion, eventually involving in the game even the Pope and the Emperor. And nobody dared to cast doubts on the improbable story.

 

Longinus the Roman soldier pierced with his lance the side of Christ on the cross on the Golgotha. Out of the wound, there poured blood mixed with water which, falling on his sick eyes, suddenly healed him, converting him to the Christian faith. Searching for safety, Longinus arrived in Mantua carrying with him a little box which contained a sponge and a fistful of sand soaked with lumps of the blood that came from Christ’s body. He was martyred by the Romans outside the walls of the city, in the place that today takes the name of Cappadocia. All traces of his body were lost for a long time. 800 years later, on a summer night, the apostle Andrew appeared to a Christian of Mantua and showed to him the place in the garden where Longinus had buried the precious box. The Mantuans dug there, found the relic, and they also found the bones of the martyr. The very Christian king Charlemagne charged the pope to go there to have more precise news. The Pope examined the find, released a document, he declared the relics of the holy blood to be authentic, dedicated to them an oratory near the hospice of St. Madeleine, ordered that the day of the ascention the relics were to be exposed to the veneration of the believers. In the end, he brought with him a little of the holy soil to give it to the Emperor as a gift, who devoutly deposed it in the royal chapel of Paris.

 

 



The European Financial Review

The European Financial Review is the leading financial intelligence magazine read widely by financial experts and the wider business community.