Crypto credit money — Will this time be different?

In the previous article, we looked at the two dimensions of money — base money and credit money. We also looked at the different kind of monetary systems that existed in the last 5’000 years and possible scenarios for the future.

The key question is — will it be different this time? Will we enter a phase of crypto-based money without having some form of crypto-credit money or will credit money be included in the crypto sector?


Here is the summary of the monetary systems from the past 5’000 years.

The first conclusion from the previous article is that monetary systems are not static, but are ever evolving:

  • The monetary system started with commodity-based money and decentralized credit money.
  • The next phase was sovereign coin-based money and decentralized credit money.
  • The next phase was national-based money (either from the sovereign or central bank) and private-credit money.
  • The next phase was the current central banking based money and its central credit money system.

The second conclusion is that the decentralized credit money system has existed for thousands of years without central intermediaries.

How did decentral credit money worked in the past?

As we are in the crypto age, let’s analyze how decentralized credit systems worked in the past.

It was all based on the bill of exchange — these are legal documents enforced by the court system. Anyone can issue a bill of exchange, it has only 8 attributes, including the wet signature of the borrower. The borrower has to pay, not to the issuer, but to the owner of the bill of exchange. This gives value to every bill of exchange as they are backed by the borrower’s obligation to pay. This allows the use of bills of exchange as a mean of payment:

Bills of exchange are enforced by the court system — there is no court hearing, there is only validation of the evidence, analysis of who has to pay whom, and a court decision. It is as simple as that.

The bill of exchange system is a P2P system backed by the court system. Every lender can create new credit money — the bills become the credit money, till they are paid back to the holder. One doesn’t need banks to create the credit money, every person can do this via a bill of exchange.

This system works as well today, even without the blockchain. This system has been the basis of all decentralized credit money systems in the last 5’000 years.

But there are limitations to this system:

  1. Wet signature has to be used — digital signatures are not accepted by the court system.
  2. Nominations of the bills were arbitrary — tokenization was not possible.
  3. Time periods on the bills of exchange were different.
  4. Insurance mechanisms were missing, except the strong support from the court system.

Bill of exchange networks could become arbitrarily complex, with multiple borrowers, lenders, and holders. But without central middlemen:

How could it work in the future

Here is a more detailed view of how it could work:

  • Elastic crypto credit money is created in P2P borrowing/lending transactions.
  • Elastic crypto credit money is destroyed when the loan time period is finished.
  • Bitcoin, Ether, and stablecoins serve as base money.
  • A pulsating supply of elastic crypto credit money is placed on top of the base money.

It would work very similar to the bill of exchange system, but it has to address the weaknesses of the previous systems:

  1. Bills of exchange cannot be used because of wet signatures — We have to use standard contract law.
  2. Different nomination issues — Tokenization of loan obligations via standard ERC20 contracts.
  3. Different time periods of the bills of exchange — Tokenization via standard ERC20 contracts help here.
  4. Insurance mechanism is missing — Decentralized insurance mechanism will be introduced.


Our forecast for the future is the following:

  • There will be a national crypto-base money like Venezuela’s Petro.
  • There will be a decentrally created crypto credit money on top of the national base money.
  • In parallel, there will be a global base money (BTC, ETH, …).
  • In parallel, there will be a global decentralized credit money.

This future does not depend on central bank based money creation or commercial bank credit money creation. Instead, it will be an alternative financial system. However, it’ll not really be a new system as it has existed for the last 5’000 years. Only this time it will be empowered by the blockchain.


Our forecast roadmap:

  • It all started 10 years ago with the creation of decentralized crypto-based money — Bitcoin.
  • 5 years ago, decentralized programmable smart contracts were added.
  • Now we are in a phase where stablecoins are emerging.
  • In 5 years, there will be decentralized elastic crypto credit money


This time will not be different, there will be crypto credit money as well. It’s not yet there, but it might be there faster than anyone is anticipating.

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