Bangor (UK). The global cryptocurrency market has seen a number of recent failures ranging from the collapse of the Terra/Luna system in May 2022 to the failure of one of the world’s largest crypto exchanges, FTX. Due to these factors and other concerns over the carbon emissions of cryptocurrencies, the value of these assets could drop by $2 trillion in 2022. Cryptocurrencies may be getting a lot of attention today, but in some ways they are not a revolutionary concept. Hundreds of years ago, workers in Wales were often paid with alternative currencies rather than money.
These currencies were physical tokens that represented the value of, and were tied to, real money. Many cryptocurrencies work in a similar way, acting as digital tokens that represent a ledger of financial assets (this is known as “tokenization”). Digital currencies do not depend on any central authority such as a government or bank to maintain their exchange network. Again, this is similar to what physical tokens used to be used by Welsh mining companies.
British coinage was in poor condition at the end of the 18th century due to a severe shortage of silver and copper coins. During the Industrial Revolution, people moved from rural areas to mining and manufacturing centres. But cities required money to live, and without small change the ability for businesses to pay wages was impossible. With the influx of new workers with access to money, new shops were opened to meet the demand, creating more jobs that required paying in coins. Although the production of counterfeit coins was illegal and punishable by death, it was not illegal to produce tokens with other designs that could be used instead of coins. The first great era of token production began in 1787 with the Paris Mining Company’s token issue during the First Industrial Revolution.
This company mined at Parris Mountain on the Welsh island of Anglesey. During the Industrial Revolution it produced more copper than any other mine in the world. It also used high-quality ore from its mine to produce tokens that could be used in place of official coinage at full value in any of its shops or offices. This made Paris Mining Company the first company in the world to issue a token. These were described by numismatists of the era as the “principal tokens” of the 18th century.
Soon, practically every town in Britain was producing its own tokens. This was partly prompted by a shortage of government coins and improvements in coinage by Matthew Bolton’s Soho Mint in Birmingham, which also turned its hand to tokens. By the end of the 19th century, the total supply and rapid circulation of tokens, foreign coins and other substitutes probably exceeded the country’s official coins. The process of tokenization was later seen in other countries, especially the US.
Mining and logging camps in 19th-century America were usually owned and operated by a single company, often in remote locations with little access to cash. These companies often paid their workers in “scrips”, or tokens. Workers had limited time to use these tokens, so they had no choice but to buy goods at company-owned stores. By charging large mark-ups on items, the company could increase its profits. While token production by the Paris Mining Company was inspired by the First Industrial Revolution, the adoption and popularity of bitcoin and other cryptocurrencies has accelerated since the Fourth Industrial Revolution. Although they are more than 200 years apart, the history of these coins holds important lessons for cryptocurrencies today.
First, for cryptocurrencies to be successful, there needs to be a variety of ways for individuals to deposit crypto/tokens, as well as demand and use for crypto, which means it retains value, and a trusted environment where Goods and services can be exchanged. And second, for cryptocurrencies to be successful and sustainable in the long term, they must retain their original purpose of being an ecosystem that remains independent of any single company or government.
Attempts to lock cryptocurrencies into a single organization do not look positive, for example the failed attempt by Facebook to launch a cryptocurrency announced in 2019. The tokens of Welsh mining companies inherently fail when one or more of the three components of the ecosystem are removed by the closure of a mine or shop. And then the people who came out with the tokens lost their money, which is a lesson for us today.
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