Bitcoin: The End of Money as We Know It Page #2

- [Voiceover] But commodities

that aren't durable,

are a lousy store of value.

A bad Cacao crop,

or a huge new salt discovery,

can throw your currency

and economy into turmoil.

A more stable system was needed.

About 2,500 years ago,

the first metal coins

were minted in China,

and in what is now Turkey.

These coins shared the

same five characteristics

with commodity money,

but were also very durable.

In some cases,

coins are the only thing left

of entire civilizations.

- Money does not originate

with governments.

Money arises naturally,

as markets begin to develop.

And as people with a

division of labor realize,

that if I have eggs,

and you have a cow,

we may need some

medium of exchange,

in order for you to buy my eggs,

or for me to buy your cow.

- [Voiceover] Coins

were an objective

and universal unit of account

and they allowed people

to buy and sell goods

over vast regions.

The market economy was born.

Coins worked,

but only if people trusted

that the king or emperor,

who issued them,

wasn't cheating on

the metal content.

Using coins also meant,

that an authority now

controlled the supply

of your currency.

Money and political power,

were inextricably

linked, centralized.

Minting coins in a steady

and predictable manner,

allowed economic

growth and stability.

The Wu Zhu coin in China,

retained its value

for 500 years.

In Constantinople, the solidus

lasted for 700 years.

- But in those times,

the coins didn't

have the milled,

this sort of milled edge.

They were flat,

and what used to happen,

was as coins were passing

from people to people,

people would cut

little bits off.

And in fact,

some of the taxation

that the kings would do,

would actually be

take one eighth

of the coin off.

- [Voiceover] Taxes

built castles,

and financed military campaigns,

expensive hobbies.

Soon, royal mints were

substituting cheaper metals,

for silver and gold.

This is called debasement.

And Europe's kings

made a habit of it.

The currency of France was

debased every 20 months,

for 200 years.

If no one can trust the

gold or silver content

of your coins,

how can you trade

with other countries?

International merchants

found a solution.

They recognized that

one persons debt,

has value.

It can be traded or transferred.

When those IOU's came

from reputable sources,

they could be used

as a form of money.

Paper money.

This money was not based

on hard commodities,

or metal, but instead,

on someone's promise to pay.

Merchant families

like the Medici,

in 15th century Florence,

acted as clearing

houses for these IOU's.

It worked like this.

An English trader ordered a

shipment of Italian cloth,

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