https://de.wikipedia.org/wiki/Pfennig#/media/Datei:Pfennig1.JPG

What The Middle Ages Have To Do With Dezentralized Finance

By BenjaminV | derkryptograf | 30 Aug 2020


Dezentralized Finance (DeFi) is quite new for me. Nearly every day I'm discovering new coins, new wallets and exchange or trading platforms. I did not expect the world of cryptocurrencies and DeFi so big. I mean, there are hundrets of different cryptocurrencies. There are so many interesting dApps. I'm overwhelmed.

Now, I have spend the last two weeks reading a lot about lending cryptocurrencies and earning reasonable good interest on each asset. There are a lot of different ways how you can do it. It is phenomenal. A private person like you and me can provide financial assets like a bank would do. No intermediary institution needed. We know that our modern democratic states are built with the right to exercise a monopoly on monetary policy through a central or national bank. Such a central bank controls money supply and regulates interests rates. The first national or central banks were established in Sweden (1668), the Riksbank and in England (1694), the Bank of England, at a time when most European states where ruled by absolute monarchs. It was the time after the devastating 30 Years war which left treasuries with high debts. The central bank institution was invented to migitate state debt. The way of life of some absolute monarch was very expensive. Wars which were fought were expensive, too. A central bank provided liquidity by lending government funds and controlling commerce. Since then, the role of a central bank developed with the role of the governments, for example as a provider for functioning markets or as a provider of the wellfare state.

Pfennig Persisted Over Centuries

Before that, during the middle ages, money supply was controlled by one principal autority, too. But centralized governance was lacking overall. The European countries as we know them consisted of many little state entities, principalities, church states and independent cities. Each of them had their own currency which was only valid within the principality's borders. Most of these currencies based on currencies used in the time of the Roman and Byzantine Empires. Barons, kings and earls had the right to issue their own coins. Some of these coins like Pfenning and Schilling persisted almost eleven centuries until the introduction of the Euro currency. Isn't that interesting? Like in those days, today we have a variety of different crypto tokens and coins. But only a few may be valuable enough to survive for centuries.

One of the first international trade confederations is the Hanseatic League. It connected Northwest Europe with the Baltic Sea and the territories of the North Sea. In all these different regions, in those times, traders had to pay tolls and fees in different currencies and coins. But would a merchant from Germany collect all the different coins from Scandinavic and Baltic territories? No, the most common used exchance currency were gold, silver or precious goods like spices, fur or salt. Imagine salt, spices, fur, gold and silver were cryptocurrencies today. Why would you trade them? Exactly, because they not only have a value but a special form of use as well. Maybe we should look back how merchants traded during the middle ages, when central banks did not existed, to learn more about the system of decentralized money today. What do you think?

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BenjaminV
BenjaminV

I'm a journalist who mostly writes articles related to security policy. Blockchain, Cryptocurrency and Decentralized Finance are very new to me. I'm motivated to learn more about it.


derkryptograf
derkryptograf

Hi, Cryptocurrencies, Blockchain and DeFi are very new topics for me. I'm trying to learn more about it. I'm trying to learn more about Distributed Ledger Technology and how it can change our real life.

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