Cory Doctorow on 2022-07-15

My September, 2022 column for Locus Magazine

Corey Coyle/CC BY 3.0

“Five thousand quatloos that the newcomers will have to be destroyed.”

Quatloos. Credits. Euros. Dollars. Dogecoin.

Wait, Dogecoin?

At some point in your life, you’ve probably asked yourself, “What is money?” There’s something existential about pulling a bank-note out of your wallet and asking yourself, “Why does so much of my waking life revolve around getting more of these slips of green paper?” (outside of the USA, you may ask yourself, “Why does so much of my waking life revolve around getting more of these slips of colo(u)rful polymer?” but you get the idea).

The decade-plus era of cryptocurrency has popularized the answer from Econ 101: “Money is a store of value, a unit of account and a unit of exchange.” That is: money is a thing you can use to save up for future needs (“a store of value”), a way to keep track of what you can afford, what you’re owed and what you owe to others (“a unit of account”) and something others will accept in exchange for their labor or goods (“a unit of exchange”).

There’s even a folk-tale about how money came about: in the beginning (the folk-tale goes), we all bartered with one another in the marketplace. I’d bring my fat cows and you’d bring your champion-laying hens and we’d try to arrive at a “confluence of needs” in which you offered me twenty-seven chickens for my third-fattest cow.

But (the tale continues), these confluences were hard to arrive at. What if I only needed twenty-six chickens? Would our deal fall apart? Would you have to go and trade one chicken for something else I was willing to accept, like a decorative gourd or a half-bushel of wheat? How difficult (the tale insists) our trade must have been!

Then (the tale concludes), we agreed upon some intermediate, durable commodity to smooth over these seemingly intractable difficulty: gold! We chose standard quantities and purities of gold (and/or silver, copper, etc) as a unit of exchange, a unit of account and a store of value. You could have my cow for twenty-six chickens and make change with a couple of copper coins.

In this story, money came from the people, a bottom-up consensus phenomenon in which we all agreed to a coinage and therefore money comes from the people.

This story has a corollary. If money comes from the people, then taxes represent an incursion upon the people by governments, who impinge upon the private space of consensual, bottom-up trading activity with a top-down disruption.

But this isn’t a history, it’s a folk-tale. A legend.

A fantasy.

There’s no indication that coin money ever emerged spontaneously from the difficulty of arriving at confluences of needs. Rather, the historical record shows us that money is a top-down phenomenon, rooted in the needs and capabilities of states.

Many science fiction writers and readers learned this around 2012, when anthropologist David Graeber’s masterpiece Debt: The First 5,000 Years burst upon the scene, inspiring such novels as Charles Stross’s Heinlein pastiche Neptune’s Brood.

Debt describes our best, most evidence-supported historical understanding of the origin of money in the needs of the empires of the Axial Age (800 BCE to 600 CE). As imperial armies went a-conquering, they needed some way to provision the soldiers garrisoned in their far-flung territories.

The solution was elegant — and terrible. Soldiers were paid in coin, minted and controlled by the state, which punished counterfeiters with the most terrible torments. Conquered farmers were taxed in coin, on penalty of violence and expropriation.

Thus: the soldiers had coin and the farmers needed it. This meant that farmers would be willing to trade their produce for coin, which meant that soldiers would be provisioned. Tax-bills were nondiscretionary liabilities: failure to pay your tax would lead to violence and ruin.

The value of money, then, came from taxation — from the fact that farmers needed coins. This need rippled out through society: even if you didn’t farm, you would accept coins in exchange for your own labor and goods, because the farmers would accept coins in exchange for food (which everyone needs), because farmers needed coin to settle their tax-debts.

Coins became money because there was a nondiscretionary, terrible obligation that you could only fulfill with coins.

Money and conquest remained closely tied right up through the modern era. As late as the early 20th century, the British Empire used the “hut tax” to extract labor from conquered people in Africa. The hut-tax was brutally simple: every year, conquered Africans under British rule would have to pay a tax for their huts, payable only in imperial shillings. If you failed to pay your hut tax, imperial soldiers would burn it down.

Thus, “shillings” became “money.” A sizable fraction of the conquered population would accept shillings in exchange for their labor or goods, either because they needed to pay the hut tax, or because someone whose labor or goods they wished to procure needed to pay the hut tax and would therefore accept shillings in exchange.

This top-down account of money creation sounds a little counterintuitive if you’ve been raised on the barter fairy-tale, but it does answer some of life’s great conundrums: “Why do I spend so much time chasing these green slips of paper? Because these green slips of paper can be used to settle tax liabilities, and anyone who fails to pay their taxes faces terrible penalties, so there’s always someone who will sell their goods or labor for these green slips of paper, which makes them useful as a medium of exchange and of account, and as a store of value.”

It also answers the question: “Why is it so easy to find money in the budget to give $778,000,000,000 to the US military, and where did the $3.4 trillion in US covid relief money come from?”

To understand these questions, consider this thought experiment devised by economist Warren Mosler, one of the foremost proponents of Modern Monetary Theory (MMT, the theory built upon this understanding of money): Sometimes when Mosler is explaining money to an audience, he’ll hold up a handful of his business-cards and ask, “Who will stay after the lecture and help stack the chairs and mop the floor in exchange for one of my cards?”

When no hands go up, Mosler adds, “What if I told you that there were gun-toting security guards at the all the exits, and they will only let you leave in exchange for one of my cards?”

Every hand shoots up.

Mosler has just turned his cards into money, through the creation of a non-discretionary door-tax.

Now, Mosler didn’t need to get his business-cards from the audience before he could levy this tax. He is the sole supplier of his cards, and while the audience will treat them as money, Mosler won’t. Mosler doesn’t need business-cards — he needs people to help clean the lecture hall and stack the chairs. At the end of the night, when the security guards turn over all the collected cards to him, he doesn’t need them — he can’t pay for his airfare to the next lecture using his cards, or pay for his hotel room with them. Indeed, given how cheap business cards are to produce, he can just dump all those used cards in a shredder.

When people say, “Government budgets aren’t like household budgets,” this is what they mean. Mosler isn’t a currency user in this thought-experiment, he’s a currency issuer. Mosler needs your work, not your “money.” He has all the money (Mosler’s business cards). You can’t get money (Mosler’s business cards), except from Mosler. When you pay your door-tax to Mosler’s armed agents, you aren’t giving him your money — you’re giving him his own money back.

That’s why we call it “revenue” (from a Latin root meaning “return”). Money is issued by states so they can make you do work, and when you pay your tax, you return your money to the place it came from.

Which is where all those eye-popping budget numbers come from: governments simply add zeroes to a spreadsheet at their central bank. Or, as then-Fed Chairman Ben Bernanke told 60 Minutes in 2009: “To lend to a bank, we simply use the computer to mark up the size of the account they have with the Fed.” That is, money comes from keyboards, not taxes.

It must be so. No one can pay Mosler’s exit tax with one of Mosler’s business cards until Mosler first gives them one of the cards. Mosler’s supply of business cards isn’t constrained by how many he’s collected from his audience — it’s determined by how many cards he ordered from his printer. Mosler doesn’t stack up business cards and pay them out to each night’s audience, he drops them in a shredder at the end of every night and uses crisp new cards at the next night’s talk.

So it is with sovereign, currency-issuing governments: the money represented by the taxes we pay to these governments every year are simply annihilated, and the money governments spend every year is created anew.

Now, it’s possible for governments to create too much money. If Mosler hands out too many business-cards to his nightly helpers, it could create a surplus that circulates to future audiences, so that when Mosler announces that you need to help clean the hall and procure one of his cards to leave the room, the smug audience might produce cards left over from previous nights’ crowds and leave Mosler to stack the chairs and clean the floors himself.

Mosler could raise the price of leaving to two cards, or three, or two hundred, but then he might also have to raise the price of the sodas you can buy with his cards from the concession stand at the side of the hall.

This situation, where too much money is chasing too little labor, goods and services, is called inflation and it’s a subject of much conversation today.

But likewise, if Mosler demands too much work in exchange for one of his cards, there may not be enough chairs to stack to provide every audience member with the chance to earn a card and so leave the room. The technical term for these stranded people, unable to find work that will yield up the slip of paper that lets them go about their lives, is unemployed. Mosler created unemployment by spending too little, so that there was no way to earn the tokens that he was the sole originator of.

Money, then, is intrinsically linked to liabilities: something is moneylike if you need it to settle some kind of obligation. If you go to a county fair and buy midway tickets, these are moneylike to the extent that the people you want to trade with desire to ride the midway rides. The kids you bring with you might be willing to promise all kinds of labor in exchange for the tickets: “That wild mouse coaster costs five tickets; I will give you one ticket for every load of laundry you promise to fold.” Your kids might even trade among each other for those tickets: “I’ll let you ride my bike for a whole week if you give me ten of your tickets.”

However, midway tickets’ moneylike properties are weak and short-lived. Your kids won’t accept midway tickets in exchange for chores once you leave the fair. Even the drawing-near of the end of your day might devalue tickets as a medium of exchange. A kid who gorges themself on deep-fried Coca Cola syrup might decide that they don’t want to ride any more rides and thus have no need for midway tickets.

And of course, the fair itself doesn’t need to collect your tickets in order to have enough to offer rides to the next day’s fairgoers — no more than Starbucks needs to collect or borrow gift certificates from people who’ve already received them in order to issue more gift certificates in the future.

A Starbucks gift certificate is also weakly moneylike. In a town full of restaurants and cafes, you might have trouble convincing anyone to accept your Starbucks certificate in exchange for goods or services. But in an airport during a layover where Starbucks is the only thing open, you might get some takers. If the Starbucks cash-register is offline and they can only accept gift certificates, the certificates become more moneylike.

The point is that money can be thought of as “something you need to get something you want, and the more you want it, the more moneylike that thing becomes.”

Which brings me back to cryptocurrency. The rhetoric of cryptocurrency advocates often compares cryptos to the gold in the barter folk-tale: “we had trouble arriving at our confluence of needs online, then we all agreed that a Bitcoin was valuable, and it became a unit of exchange, and subsequently a unit of account and a store of value.”

But the barter folktale is a legend, and cryptos have been very bad at being moneylike. Their volatility has made them extremely poor stores of value; likewise for units of account and exchange. There’s very little that one can buy with cryptocurrency, save other kinds of cryptocurrency, or crypto “assets” like NFTs. Like Mosler’s business-cards, there’s very little one can trade them for. Unlike Mosler’s business-cards, failing to acquire the things a crypto will buy you is of little consequence to your life. If your wallet is full of US dollars (or, as cryptocurrency people call it, “fiat money”) you can buy all the necessities of life. If all you have is cryptos, you can’t buy anything (except other cryptos) until you find someone who will first trade those cryptos for fiat.

The idea that a token’s money-ness comes from how badly you want or need the things you can trade it for explains a lot about the twists and turns of cryptocurrency.

For example, it explains why Web3 — notionally a project to remake the web without Big Tech chokepoints — is so closely associated with cryptocurrency. It’s not just the ideological notion that if we paid for things, companies would abandon surveillance and sensationalism (a dubious proposition!), it’s the idea that the internet could be remade as something that can only be used by people who have cryptocurrency tokens.

The internet is not a luxury, it’s a necessity, as the pandemic and the lockdown proved. Without the internet, you are cut off from family life, healthcare, employment, leisure, access to government services, political discourse, civic life, and romance. Those are all things you need, not just things you want.

If you need cryptocurrency to access these services on a replacement, transactional internet built on the blockchain, then you will do work and sell goods in exchange for cryptocurrency tokens. They will become the new hut-tax, and the fact that everyone who wants the things the internet provides has to trade work or goods for cryptos will make cryptos very moneylike.

Indeed, this theory of money illuminates the role that ransomware plays in the cryptocurrency economy: ransomware is one of the few liabilities that can only be settled with cryptos. You can’t use dollars to pay the criminals who seize control of your family photos and accounts, or your small business’s files, or the gas pipeline control systems your region depends on. The criminals will only accept cryptos.

This salience of this fact is obvious from popular media accounts of the ransomware epidemic, which inevitably include a sequence in which the ransomware victim has to race all around town to find and understand a Bitcoin ATM or some other means of converting government money to cryptocurrency.

The person who sells the victim that Bitcoin has found a buyer only because of ransomware — the victim is willing to trade something they value for Bitcoin because if they can’t pay their ransomware hut tax, they will lose their family files, their small business, or their oil pipeline.

Science fiction is full of imaginary currencies, from Quatloos to Credits, but it’s rare that we glimpse the nondiscretionary obligations working behind the scenes, giving those tokens their value. As is so often the case, a piece of generic scenery yields up a rich source of stories when we peer at it a little harder.

Cory Doctorow ( is a science fiction author, activist, and blogger. He has a podcast, a newsletter, a Twitter feed, a Mastodon feed, and a Tumblr feed. He was born in Canada, became a British citizen and now lives in Burbank, California. His latest nonfiction book is How to Destroy Surveillance Capitalism. His latest novel for adults is Attack Surface. His latest short story collection is Radicalized. His latest picture book is Poesy the Monster Slayer. His latest YA novel is Pirate Cinema. His latest graphic novel is In Real Life. His forthcoming books include Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid (with Rebecca Giblin), a book about artistic labor market and excessive buyer power; Red Team Blues, a noir thriller about cryptocurrency, corruption and money-laundering (Tor, 2023); and The Lost Cause, a utopian post-GND novel about truth and reconciliation with white nationalist militias (Tor, 2023).