What are the origins of Seigniorage?

What are the origins of Seigniorage?

By MikeZillo | Smart Crypto Investing | 26 Feb 2021


To arrive at an answer to this question we must first take a step back in history.

Do you remember when at school they talked to you about bartering?

Well, at a certain point, however, we preferred to start using other things such as tea, shells, salt, so much that even today we talk about salary. These were all divisible and non-perishable goods, called "commodity money". Then precious metals such as gold, silver and copper take first place as a method of exchange. In particular gold, which begins to become popular at the beginning of civilization, a period that goes roughly between the fifth and fourth millennium BC. At the time we find nothing less than the visualizations of Egyptians and Sumerians.

Historians cannot explain how these civilizations, apparently born out of nowhere, manage to develop advanced technologies to extract gold and process it since it must be melted at around 1000°C. After all, only today can we have the technologies to use it in various industries, from luxury to electronics.

So, they went through all that effort to extract it and work it just to have it as an ornament?

If we read the Egyptian hieroglyphics and some Sumerian texts, it is said that gold was used by these "Gods", understood as gods in flesh and blood who came down from heaven, and taught to these ancient different things such as mathematics, astronomy, how to cultivate plants up to how to extract gold and it is clear that these "Gods" had a particular interest in this gold.

From that moment, gold also began to be used as the main method of exchange along with silver. Not surprisingly, even today, these two metals are considered the main precious metals for investment and reserve value.

We can find one of the first historical references on money with the “Code of Hammurabi”. You will probably remember from school days that we were taught to make a crucial point in history since the birth of writing. One of the first writings we have is this Code of Hammurabi, the first legislative code in history given to the sovereign Hammurabi by an Anunnaki. With the term Anunnaki, the Sumerians, indicated these "Gods" descended from heaven (An = Heaven, Ki = Earth  "those from heaven descended to Earth"). In these early Sumerian tablets we already find several topics. They talk about money, interest, payments and all these things that these "Gods" of the sky have taught us because before, these civilizations, did not know these subjects. But this is not an article dedicated to paleoastronautics, so I don't want to dwell on this topic.

Cuneiforme

Image source: https://www.history.com/topics/ancient-history/hammurabi

Returning to our dear and beloved gold, we began to divide it into equal parts through the coins which, as you will remember, minted by the sovereign who stamped his face on it and, in exchange for this coin print, he took a small part of gold. He basically gave you a coin with face value 1 but there wasn't actually 1g of gold because he was taking, for example, 0.1g of gold so this difference between face and actual value was like a mint fee to have the coin minted, a commission that was taken by the lord (seigneur), the lord's premium and...taaacc, here is where the term "Seigniorage" comes from. It is none other than the profit of whoever issues the currency!

Returning the example to our days, the issuer of currency for the eurozone is the ECB, the European Central Bank, while for the United States we can talk about the FED. So, both the ECB and the Fed, whenever they print money, a percentage will actually be kept by them as a "commission" on the printing.

Seigniorage

Image source: https://marketbusinessnews.com/financial-glossary/what-is-seigniorage-definition-and-meaning/

ECB and FED, central banks, so public one would say, which should serve the interests of citizens, right? Maybe we will have the opportunity to do some research and deepen this issue in a future article.

When in doubt I think it is a good idea to continue to deepen the crypto world, the decentralization that is highlighting the cryptocurrency sector fascinates me more and more, the idea of ​​deflationary coins and being the true owner of the coin has a certain effect.

If you are new to the crypto world I would recommend this video: https://www.youtube.com/watch?v=V-ZCAQLH2Hk

I am sure that in the near future we could connect the central bank speech to the crypto world!

 


MikeZillo
MikeZillo

Daily Trader, Mining Farm Project Manager, Blockchain consultant, Cryptocurrency evangelist. You can find more videos here https://www.youtube.com/channel/UCvyXx6I1C__zmLAYUXNZwQQ?


Smart Crypto Investing
Smart Crypto Investing

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