The Power of Digital Barter

The author of this post is Filippo Belfatto.

What has come first, the barter economy or the invention o currencies?
I think this is the key question of nowadays. Since 2008, with Nakamoto’s invention, Bitcoin, people start thinking about it (or at least this is true for me)^[1].

Pursuant to Article 9 CISG: “The parties are bound by any usage to which they have agreed and by any practices which they have established between themselves"^[2]. I’d stress out some terms of the provision because I think they are fundamental in order to answer the question. Hence, the Article sets out that parties are bound by any usage and by any practices, someone may argue that the norm gives relevance to the freedom of contract^[3]. Thus, in accordance with the aforementioned international law it might be said that people have the power to make a contract also without the Law.

It sounds a little strange but, usages and practices are something other than law. They stay and “rule” outside of the extent of law-rules. In a hypothetical state of nature, these are instruments (like code, provisions) that people use to make contracts. Usages and practices, rectius trust, are language. So, the core concept of liberty of contract is the use or practice which parties have decided in order to exchange goods or services. This is the barter economy.

The barter economy system has some flaws, one of this is trust and the need to take-give goods between parties. In fact, until trading goods and services were limited to a small community and direct relationships, the barter economy was fair enough. As trade increased money filled flaws. But, the power of money exceeded the barter economy and gives rise to the finance capitalism. Money became the language.

Hence, after this little preamble, I think barter came first. So now, there is one niggling problem, the innovations in the field of money have usually been about the convenience of form rather than the concept itself. For example: the movement from coins to paper was great because it solved a weight problem, also think about the dematerialization of securities. In all these years what we are lacking is a fundamental re-invention of the concept of money^[4].

Maybe today those days came, people used barter, different type, shape and material of money to exchange goods before the Roman Empire. In human history fiat money is bound to sovereign power^[5]. Kings, Parliaments, States acknowledge that people make transactions only if they trust each other.

Again like Nakamoto said, trust is fundamental in transactions, in a barter economy parties trust each other on the ground of usages and practices which they have agreed. In capitalism or currencies economy, parties use fiat money because they trust it because of the law.

So fiat money became the language on top of which parties make the contract. In fact, sovereign money is rule, norm itself. And, because fiat money is a language and rule created by someone, this subject is able to meddle inside the freedom of contract. What if people could use something other than fiat money? I think individuals are able to make transactions with a new language that is set out by Blockchain technology.

From my point of view two consequences fall within all of this. On one hand, individuals completely trust algorithms and they use cryptocurrencies to barter goods and services. Please note that in this way something has changed: (i) “money”, the language, is digital and it is created by a subject that is able to do “only” this task, (ii) the liberty of contract falls within the extent of the technical possibilities granted by the algorithm, (iii) parties of the contracts are bound by any usages or practices which they have agreed^[6]. On the other hand, States and regulators should start thinking about how to help people using cryptocurrencies. I don’t think regulators will prohibit cryptovalues like drugs and similar stuff. Instead, I think States might make one step out from liberty of contract in order to prescribe forms and formalities of the new concept of barter.

Almost all laws of Europe come from ancient Roman Empire system of law. In those past days, barter was natural, an everyday contract type. Hence, law prescribes, defines and sets out requisites and procedures of form in order to give enforce to contracts. Parties had to make rites, ceremonies and lots of formalities (speech and gestures) and only after these rituals (these procedures have been thought to manifest will) the contract would be binding^[7]. The reason why the Roman law system was like this is, people were not accustomed to fiat money as much as today. Romans and peregrinus were bartering every day on the grounds of usages and practices. So, individuals were exchanging goods and services because of their trust in the counter part. In this system, law is the language to grant trust if one party does not know or can’t rely on the reputation of the other party. But law is not the object itself of the agreement.
I’ll hope for this, for laws that set out requisites, formalities, “digital rites” in order to improve the trust if and only if I need so.

Anyway, one last thing, regardless of what’s coming next, I think cryptocurrencies will bring a re-invention of bartering and so, it should be said that “cyberspace does not affect real world” is no longer true. Hence, in my vision, cryptocurrencies and Blockchain technology will become a mass-instrument if: (i) people will start studying the language, the code grounds of technology or, (ii) someone like big tech companies will create and sell APIs in order to make easier the use of cryptocurrencies and Blockchain technology^[8].