The future of money

How did we get to the point where so much of the world’s money is, in a sense, fictional; a quiet social contract in which we simply agree that certain numbers represent a certain value? What's next for this pivotal invention that now underpins our world? Its nature, even its role, are changing. From pouch to pocket to pixel, as money becomes software, the core issue is no longer how it looks or even how it moves. It’s who decides where it goes, when it stops, and why

- Kashyap Kompella

What is money? Economists begin with function.

Money, they say, does three things: it lets us exchange goods and services, acts as a standard measure of value, and it lets us store value.

A kind of economic Swiss Army knife that is remarkably adaptable and endlessly circulated.

John Maynard Keynes saw money as a bridge between present and future. Milton Friedman warned that it could be a weapon in the wrong hands; that too much of it, too fast, would corrode a system.

Hyman Minsky went deeper still: all money is a promise, he said, but not all promises are equal. Some come wrapped in the authority of the state, others in the credibility of a bank, still others in the brute fact of power.

Today, a hundred-rupee note doesn’t in fact represent a hundred rupees. It asks to be believed as such.

What we call currency is a fiction wrapped in design: Microtext and hologram, watermark and thread, security and ceremony. We dress our illusions well.

Where coins offered a kind of weight and direct value, and the early notes were backed by metal (often gold), stored somewhere, safe and tangible, most currency is now backed by the heft of its respective state. By inertia as well, in a sense.

But really, in a world where money is mostly numbers drifting across invisible networks, what holds it up is our collective agreement. Consensus as collateral. Money is the most powerful fiction humans ever agreed to believe.

(See the story alongside for more on how this works, and how we got here.)

The death of cash

Is it accident that most money now doesn’t even exist as paper?

What does it mean that so much of the ritual and choreography around this asset is fading?

There was a time when one went to the bank to update a passbook, and to an ATM to withdraw the notes. Money still had a place, a shape, a texture.

More and more, today, it doesn't.