Information technologies have developed various financial instruments to help us transact online. If you have online business, you can accept payments via Stripe. When you want to pay for a product/service abroad, or maybe send some euros to your family abroad, you can do it directly from your bank app.

This is not true If you reside in Serbia. And likely not true in the large part of the world. But even in the most developed societies banks sometimes fail, and bank applications break. In such scenarios it takes time to recover access to your funds.

News article. Such a case happened just a few days before I started writing this.

In the digital age we are witnessing a transition from centralised platforms to decentralised protocols. Like a recent exodus of X users to Bluesky and Mastodon. I gave a talk last year about decentralised social media protocols. Now I will talk about the digital cash protocol.

But before that, let’s first examine what money is.

Short history of money

Money is not a “natural” thing. Money is a human abstraction. A tool that solves a problem. Money, although most people don’t view it as such, is technology.

To see the problem we must go back to the world without money.

Barter

Without money, people would exchange their products in barter - direct exchange of goods and services. This practice has endured thousands of years of civilisation especially with the development of agriculture, when people started cultivating soil to produce various goods. Farms often produce an excess of one thing but need others. To this day you can see barter on the farmers market. While farmers have certain potential for this type of trade, for others barter is limiting or impossible. Barter exchanges take place only if each trading partner has a direct personal need for the good he receives in the exchange. But even in those cases the goods are often too bulky and cannot be subdivided to accommodate them to the needs.

Money is a (partial) solution for problems of barter exchanges.

Medium of exchange is something both parties are willing to accept in exchange for goods and services. In the history of mankind, a great variety of commodities—cattle, shells, nails, tobacco, cotton, copper, silver, gold, and so on—have been used as a medium of exchange. In the most developed societies, the precious metals have eventually been preferred to all other goods because their physical characteristics (scarcity, durability, divisibility, distinct look and sound, homogeneity through space and time, malleability, and beauty) make them particularly suitable to serve in this function.

When a medium of exchange is generally accepted in society, it is called “money.”

Commodity money, while great store of value, can be a difficult medium of exchange. Imagine doing a large trade with silver coins. Imagine going to shopping today with coins. The invention of paper and a printer enabled paper money. A third-party would offer a service to store your commodity money and issue a paper certificate for which you, or anyone else, can redeem it. The ability to move value around on paper made trade much easier. Social cooperation flourished. Increased exchange of ideas and more economic specialisation meant people could grow more food and make more stuff. But now third-party trust is required. Soon governments took over the printer and abused it to print more money than there is the backing asset.

Money without backing asset is called fiat money. We use today. It is backed by the government and is reflection of the nation-state power. It is often inflated. There is no guarantee it will follow it’s historic performance, or even exist in the future.

Money of the Internet

The internet has erased borders allowing instant information transfer across the globe - global village. You can surf the web, make audio and video calls, play games, all in a mostly permissionless manner. You cannot transfer money in permissionless manner. Cross-border transactions are expensive, slow, and often impossible. The financial system is made for fiat money, for nation-state control. It favours developed societies over developing ones. In the digital age we need cheap, fast, and permissionless payments - accessible to everyone.

Until recently, the new information technologies have been unable to create any new monies. They have been able to develop various new instruments to access and transfer money. These new electronic techniques of dealing with money are very efficient and beneficial, but they must not be confused with the creation of electronic money.

The first electronic money is Bitcoin, created in 2009. It is built on top of the decades of innovation in the field of cryptography. It is backed by mathematics and energy. In fact it is backed by so much energy that no single actor can manipulate it. It is decentralised and permissionless because anyone can contribute to the network and transfer value. It is scarce as there is a limit to the number of coins which will ever exist. We have a hard electronic money capable of micro and high-value, local and global transactions, at any time. Technology unlocking a new level of social cooperation among humans, also capable of supporting a new dimension we are entering with the advancement of the AI.

How can electronic money empower AI?

Pay per request

Electronic money can replace expensive subscription based model with pay-per-use model. That can be done through HTTP 402 status code - payment required.

ChatGPT is the most popular AI chatbot. Today you can pay 20$ per month to OpenAI through traditional payment networks for full access to ChatGPT. This is inefficient because there is a high percent of the unbanked globally. Because the payment gateway might decline you for various reasons. Because you might use the service less then what you paid for. There is no way payments will look like this in the future.

alternative: There are wrappers around ChatGPT(and other models) which let you pay per request by integrating HTTP 402 with cryptocurrency.

AI agents economies

We are going to witness the rise of AI agents. They don’t have an ID and a bank account. There will be thousands and millions of them. They will specialise in different things, and often to complete a task will need to interact and pay to other agents, who will need to pay to other agents… the number of transactions will be massive. For this payments need to be fast and cheap. Fortunately, agents can create digital wallets.

To sum it up, money is a technology which makes trade easier. Monies compete. Commodity money is generally a good store of value for future trade. Fiat money is a good medium of exchange for short-term trade. Electronic money can be both.