If we’re going to create digital money, there’s one specific feature of digital things we need to counteract. Digital things are easy and free to copy, and once you do, every copy is just as good as the original. Everything else about being digital is great, like being able to send a photo from one side of the world to another in milliseconds.

But if we’re talking about money, we cannot allow free creation of money at will. It’s one of those things that sounds good at first but turns out very bad in the end. It happened more than once in history already, with awful consequences for the people using that abundant money.

Basically speaking, if you double the amount of money but there is the same amount of stuff to be bought, sooner or later the quantity of that money that you’ll have to pay to get the same thing will also double, and you’re back in the same place.

For example, imagine there are 100 of us living on an island and we created a total of 100 coins for us to use as money, so we have 1 coin each. There’s one apple tree on the island. The tree gives 100 apples. If the apple’s price is 1 coin, that means we all get to buy one. Great.

Now imagine we want to be able to buy 2 apples each, so we think it’s a good idea to just create 100 more coins, so each of us would have 2 coins. After all, one apple, one coin. We go to the farmer and say we want 200 apples, but the tree only has 100. What happens next?

First of all, the farmer realizes having an apple tree is a goldmine, since it looks like everybody want apples.

Two questions appear then: How can we ensure that every coin is the real thing and it’s not a forgery? What can we do so that we don’t create too much money?

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