With its volatile currency and dysfunctional banks, the country is the perfect place to experiment with a new digital currency. ... His occupation is one of the world’s oldest, but it remains a conspicuous part of modern life in Argentina: Calle Florida, one of the main streets in downtown Buenos Aires, is crowded day and night with men and women singing out “cambio, cambio, cambio, casa de cambio,” to serve local residents who want to trade volatile pesos for more stable and transportable currencies like the dollar. For Castiglione, however, money-changing means converting pesos and dollars into Bitcoin, a virtual currency, and vice versa. ... That afternoon, a plump 48-year-old musician was one of several customers to drop by the rented room. A German customer had paid the musician in Bitcoin for some freelance compositions, and the musician needed to turn them into dollars. Castiglione joked about the corruption of Argentine politics as he peeled off five $100 bills, which he was trading for a little more than 1.5 Bitcoins, and gave them to his client. The musician did not hand over anything in return; before showing up, he had transferred the Bitcoins — in essence, digital tokens that exist only as entries in a digital ledger — from his Bitcoin address to Castiglione’s. Had the German client instead sent euros to a bank in Argentina, the musician would have been required to fill out a form to receive payment and, as a result of the country’s currency controls, sacrificed roughly 30 percent of his earnings to change his euros into pesos. Bitcoin makes it easier to move money the other way too. The day before, the owner of a small manufacturing company bought $20,000 worth of Bitcoin from Castiglione in order to get his money to the United States, where he needed to pay a vendor, a transaction far easier and less expensive than moving funds through Argentine banks. ... Avalancha offers customers a 10 percent discount when they use the virtual currency, because accepting credit cards generally ends up costing Avalancha more than 10 percent as a result of the vagaries of the Argentine financial system.
In a matter of months, this word, blockchain, has gone viral on trading floors and in the executive suites of banks and brokerages on both sides of the Atlantic. You can’t attend a finance conference these days without hearing it mentioned on a panel or at a reception or even in the loo. At a recent blockchain confab in London’s hip East End, the host asked if there were any bankers in the room. More than half the audience members, all dressed in suits, raised their hands. ... Now, everyone’s trying to figure out whether the blockchain is just so much hype or if Masters’s firm and other startups are really going to change the systems that process trillions of dollars in securities trades. When investors buy and sell syndicated loans or derivatives or move money around the world, they must cope with opaque and clunky back-office processes that rely on negotiated contracts between buyers and sellers, lots of phone calls, lots of lawyers, and even the occasional fax. It still takes almost 20 days, on average, to settle syndicated loan trades. ... A June report backed by Santander InnoVentures, the Spanish bank’s fintech investment fund, estimated the blockchain could save lenders up to $20 billion annually in settlement, regulatory, and cross-border payment costs. ... Venture capitalists plowed $400 million into dozens of digital currency startups in the first six months of this year, a fourfold jump from all of 2013, according to industry news site CoinDesk.
There is a common story about what money is, which is based on a common story about how money came to be. In the beginning, people lived in small communities of blood relatives and fended for themselves. They hunted and gathered for their subsistence, and learned how to weed out undesirable plants so that they would have easy access to plants that produce food. As people became more adept at cultivation, populations grew. And people found that they could not always grow or procure from nature the things they needed in order to survive. Trade was born. ... People in different communities had surpluses of different goods. They traded these goods with one another. They established value and conducted their trade by bartering a certain quantity of one good for a quantity of a different good. ... lugging around his own goods in sufficient quantities to trade became burdensome and impractical. Furthermore, stockpiling his surplus might have worked up to a point, but once the mice and the weather got at it, it quickly became worthless. ... In some accounts, people decided to use a thing of value to them, and intrinsically recognisable as valuable to others, for money. It would initially serve as a means of exchange, and would gradually take on other classic functions of money as people expanded their use of it to include the payment of fines, tribute or fees (as in ancient administrative states, tribute-based empires or the tax collectors of the Old Testament). Certain kinds of shells were good: they were pretty, of uniform size and shape, easily transportable, and durable. Precious metals were even better: they were universally valued; they did not rot, rust or degrade; and they were easy to store and to transport. ... Other accounts consider implausible the idea that certain things are of intrinsic value. ... an important problem in the history of money: is it a commodity in itself, or a token of an existing agreement, an agreement in turn resting on a prior social relationship? ... are new forms of money really more efficient? They often come at a price, after all. What does efficiency mean? Efficient for what purposes, and when?