How An Ancient Stone Money System Works Like Cryptocurrency

Digital currencies, such as Bitcoin, and the blockchain technologies used to record digital transactions on a public ledger may not be so revolutionary.

At least several hundred years ago, islanders on Yap in western Micronesia used principles at the heart of cryptocurrencies to conduct business, says archaeologist Scott Fitzpatrick of the University of Oregon in Eugene.

“Stone money transactions on Yap were the precursor to Bitcoin and blockchain technologies,” Fitzpatrick says. At April’s annual meeting of the Society for American Archaeology in Washington, D.C., he explained the connection between the carved stone disks, some weighing more than a Honda Accord and standing taller than a man, and today’s cyber-tokens floating in digital space.

Based on studies of rock sources and dating of sites on Yap and nearby islands, Fitzpatrick thinks that, before European contact in 1783, inhabitants of Yap sailed about 400 kilometers to other islands in Micronesia to quarry limestone from caves and rock-shelters. Sea voyagers negotiated with local leaders for access to limestone deposits.

Stone carvers went along for the ride and formed stone disks on site. A central hole was cut into each circular chunk of rock so men could run a wooden pole through the opening to hoist the rock. These weighty pieces of currency, called rai, were transported to Yap on rafts.

Arriving back home, travelers presented newly acquired rai to their fellow community members at a public gathering. Everyone heard which individuals or clan groups took ownership of particular disks. Each rai was assigned a value based on size, evenness of shape, stone quality and risks taken on the journey. After being inspected and verified by a local chief, rai were displayed at communal spots, such as ritual dancing grounds.

Ownership of a disk could be transferred, for instance, as a wedding gift, to secure political allies or in exchange for food from residents of nearby islands after a severe storm. These deals also occurred in front of the whole community. No matter who acquired a rai, it stayed in its original location.

Bitcoin and blockchain work in much the same way, Fitzpatrick says. Bitcoin “miners” solve complex mathematical puzzles to release units of currency. Those units are transported and securely stored across the public blockchain ledger. Full transaction histories for each bitcoin are available to all network participants. Bitcoins can be exchanged for goods or services or given away at any time by participants in the digital system.

A comparison of stone money on Yap to blockchain technology “is legitimate,” says anthropological archaeologist Kathryn Sampeck of Illinois State University in Normal. Yap islanders pioneered a public, oral system for securely tracking and exchanging rai. Blockchain does the same by maintaining digital histories and updates about units of cryptocurrency.

Others disagree. Researchers such as anthropologist David Graeber of the London School of Economics and Political Science, who view money as the product of government taxation and debt, don’t think Yap disks qualify as currency. For instance, rai can’t be divided into smaller parts to make purchases or easily carried from place to place.

Digital currencies don’t live up to their name either, the same group argues. Bitcoin and its cousins are unregulated exchange units with wildly fluctuating values. That makes these digital creations unlikely to catch on among consumers and tax collectors, critics predict.

The fate of cryptocurrencies is, for now, cryptic. “Not a whole lot of people buy stuff with Bitcoin and the concept of cryptocurrencies is very abstract,” says anthropological archaeologist Joanne Baron of Bard High School Early College in Newark, N.J. Stone money’s future on Yap is also up in the air, Fitzpatrick says. Although rarely exchanged for anything these days and often abandoned in the jungle, rai are now being rescued and renovated by islanders interested in their past.

Limestone vs. Blockchain

Archaeologist Scott Fitzpatrick and finance professor Stephen McKeon, both of the University of Oregon in Eugene, see parallels between the public, decentralized way in which rai limestone money on the island of Yap was valued and distributed and the modern-day blockchain technology used for Bitcoin and other digital currency transactions.

Mining

Rai: Yap residents traveled to nearby islands where limestone was mined and carved into circular rai. At home, the miners described each item’s manufacturing history to the community so that everyone knew a rai’s worth.

Bitcoin: A Bitcoin miner solves a complex mathematical puzzle to release units of the cryptocurrency. Blockchain technology verifies the transaction for all those in the network to see.

Storage (custody)

Rai: By displaying rai in public places, villagers and others could verify the quality and features of each item.

Bitcoin: Sets of bitcoins are held in a digital ledger where network participants can check the accuracy of ownership and value claims.

Peer-to-peer negotiation

Rai: A Yapese group worked out a deal with nearby islanders to quarry certain limestone deposits.

Bitcoin: This process occurs when a Bitcoin miner receives a digital request for Bitcoins.

Exchange

Rai: After verification and placement in a public place, rai could be exchanged for various goods and services.

Bitcoin: After verification and placement on the blockchain, Bitcoins can be exchanged between owners or given for various goods and services.

Auditability

Rai: Oral transaction histories for each rai were available to all community members on Yap.

Bitcoin:  Full transaction histories for each Bitcoin are available to all those in a blockchain network.


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Author: Bruce Bower
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Ripple’s Deal With US Treasury Defines XRP as a Currency, Not a Security

Will an agreement between Ripple Labs and the US Treasury Department convince the SEC that XRP is not a security?


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Ripple signed a settlement agreement with the Treasury’s Financial Crimes Enforcement Network (FinCEN) in 2015, paying a $700,000 fine for “selling its virtual currency, known as XRP, without registering with FinCEN, and by failing to implement and maintain an adequate anti-money laundering (AML) program designed to protect its products from use by money launderers or terrorist financiers.”

The company has since modified its business practices to ensure future compliance, and now a paragraph within the agreement could have an impact on the debate on how XRP should be classified.

The ‘Statement of Facts and Violations’ in the agreement outright defines XRP as a currency that was pre-mined prior to its distribution.

 

Ripple is facing two class action lawsuits that allege XRP is a security controlled by Ripple. The company is pushing back against the claims and has hired two former SEC officials to represent it in court.

In response to the lawsuits, a spokeswoman at Ripple told CoinDesk, “This is just another example of an extortionist bringing forth an opportunistic suit that lacks merit. We feel confident that the claims regarding XRP are completely unfounded both in law and fact.”

A regulator at the US Securities and Exchange Commission recently declared Bitcoin and Ether are not securities, and made no mention of XRP.


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Bittrex Exchange Will Let Investors Swap Their Dollars For Cryptocurrency

  • A U.S.-based crypto exchange lets investors buy coins using U.S. dollars.
  • In the past, the majority of alt coins could only be purchased by first converting dollars into bitcoin.
  • Working with U.S. agencies to help solve the “regulatory puzzle” of cryptocurrencies will help unlock capital, says Bittrex Founder and CEO Bill Shihara.

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Investors now have a new way to purchase cryptocurrencies using U.S. dollars.

Bittrex, a Seattle-based cryptocurrency exchange, has struck an agreement that allows investors to buy digital coins with American dollars. In the past, only coins traded on Coinbase, a digital currency exchange in California, could be bought with dollars. That is a fraction of the approximately 1500 digital coins floating around the universe of cryptocurrenices.

To buy any of the other coins, investors had to convert their money to bitcoin first. Now they have Bittrex.

Founder and CEO Bill Shihara told CNBC that the goal is to “expand out to as many markets as possible on Bittrex,” he said on “Fast Money” Friday.

“As well as expand it so that every customer on Bittrex will be able to have access to U.S. dollar trading,” he said.

The exchange might even help move the market. Since so many alt coins could only be purchased by way of bitcoin, the value of bitcoin and many other digital currencies were closely correlated. The value of those crypto units may now begin to decouple from bitcoin, Shihara said, as more investors transact in dollars.

Currently, nearly 200 different digital coins can be traded on Bittrex. The CEO said that a “small, select number of launch partners” are working with the exchange to pay in dollars.

“In this phase, we’re stress-testing our system,” he said. “We’re working with the banks very closely to ensure that they can process the FIAT deposits and withdrawals. Also, the engine itself that we use to trade, is going to be able to properly handle the load.”

Cryptocurrency is still largely unregulated in the United States, which has led many financial institutions and investors to be cautious of the coins, amid a landscape of widespread fraud and fake ICOs. Other traders have sought out foreign markets to invest in digital assets like bitcoin.

But Shihara said working with U.S. regulatory agencies on better ways to use cryptocurrency will add value to the space.

“We think that solving the regulatory puzzle in the United States really unlocks a lot of capital that really can’t trade on a foreign exchange that doesn’t have proper [anti-money laundering] controls or proper compliance,” Shihara said.


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Author: Kellie Ell
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