There Is No Native Money on the Blockchain Yet
Tally sticks, mutual credit, and endogenous stablecoins — why blockchain hasn't produced real money yet, and how mutual credit could change that.
Bitcoin was designed as a peer-to-peer electronic money system. It has caused genuine breakthroughs. It birthed a new asset class and a surprisingly rich class of nerds. But the one thing it was designed to be, it isn’t. Money. A medium of exchange. An alternative to state-sanctioned currency.
In some ways Bitcoin qualifies. It’s fungible, durable, portable. But it isn’t stable, and stability is one of the defining properties of money. Bitcoin, Ethereum, and the rest are exciting assets precisely because they’re not money. We buy and hold them for their potential to appreciate. I don’t know any landlords who accept ETH for rent. I once spent what is now hundreds of dollars on a cup of coffee, back in 2015, trying to prove to friends that Bitcoin was real money you could spend in the real world. A friend told me to stop. He was right, financially speaking. But I was trying to make a point.
When it comes to actually pricing goods, services, labor, and capital, even the crypto industry reverts to fiat. Most things are denominated in U.S. dollars wrapped in a cryptographic container we call a stablecoin. Collateralized or algorithmic, these stablecoins aren’t stable in any absolute sense. They’re stable relative to an external peg, usually the dollar. In essence, they extend central bank monetary policy into crypto markets. Even DAI, the most sophisticated crypto-collateralized stablecoin, is an algorithmically controlled asset that mimics the behavior of fiat money. You might feel comfortable entering a five-year contract denominated in DAI rather than Dogecoin. But DAI is still pegged to the U.S. dollar, which makes it an extension of an external economy, not something native to the internet.
What Would Native Internet Money Look Like?
Here’s the question worth asking: Can we imagine a form of money that is neither pegged to fiat nor to arbitrary goods like gold, but that still allows us to price things, make long-term commitments, predict future costs, and build markets? A form of money we’d trust enough to sign a five-year contract in, without using the dollar as a reference?
To get there, we have to redefine stability. Instead of treating it as a numerical relationship between abstract units, think the way most people actually think about money. What can I do with this? How many hours do I need to work to pay rent? If I want a laptop, what’s it going to cost me? Will my savings buy the same things next week?
When you think like this, you realize that money as a medium of exchange isn’t really an asset in any tangible sense. It’s an entry in a ledger, tracking human activity and the availability of resources at a given moment.
The Oldest Ledger
We aren’t the first to think this way. Before gold, before most forms of currency, there were tally sticks. Artifacts dating back 40,000 years, to the very beginning of human language and exchange. A piece of wood broken in two, each half held by one party to a transaction. When the halves come back together, the obligation is settled. This is the first ledger in human history.
Tally sticks recorded debt, though not financial debt as we understand it today. Something more like time-delayed barter, or barter transcending time and space. I’ll give you an animal from my farm today. You give me bags of rice a few months from now. The sticks tracked that relationship across time.
The moment these sticks became tradable, something important happened. A farm owner could pay a worker with a notch on a stick instead of a bag of wheat. The worker could take that stick to a bakery and get bread, even if the baker had no use for what the farm produced. Now we’re talking about multilateral, asynchronous exchange. Value produced in one moment and consumed in another. The teleportation of value.
What’s interesting about the supply of tally sticks in circulation: it wasn’t constant, wasn’t scarce, and wasn’t unlimited. It expanded and contracted based on the real state of the economy. Sticks were created when work was done, destroyed when obligations were redeemed. An elastic money supply that adjusted itself based on actual economic activity in real time. Economists call this an endogenous money supply: arising from within the system rather than imposed from outside it.
Mutual Credit: The Oldest Monetary System Still Running
Mutual credit is the modern descendant of this principle. You may have heard of it as barter networks, business-to-business trade networks, or peer-to-peer cashless systems. These networks have existed for millennia, and they tend to arise wherever central fiat currency fails. You find them in Argentina, Lebanon, and across the developing world. There are active trade networks in the U.S. too, though almost none of them use blockchain technology.
At ReSource, we asked: how could endogenous money creation be ported onto a blockchain? How do you build money that’s truly native to the internet, not reliant on external pegs or external economies?
The answer turned out to be old. Very old.
Spending Money Into Existence
In a mutual credit system, money is created when it’s spent into existence. A farmer delivers a harvest and receives 20 ReSource dollars as payment. Those dollars didn’t come from a bank, a treasury, or a liquidity pool. They were created at the moment of the transaction, backed by the goods and services traded within the network.
To make this work on-chain, we had to solve a problem that no one had addressed before. The ERC-20 token standard only supports balances of zero or higher. You can’t go negative. That rules out mutual credit entirely, since the whole system depends on participants issuing credit by spending into negative balances and then earning their way back to zero by providing goods and services to the network.
So we built a new token standard. The ReSource dollar (rUSD) was, as far as we could find, the first stablecoin that enables on-chain negative balance accounts. If you’re creditworthy, you get a credit line and can spend money into existence as a business, freelancer, or sole proprietor. That credit is destroyed when others in the network purchase from you and your balance returns to zero.
The circulating supply maintains its value because every rUSD in circulation has a corresponding debt somewhere in the system that must be repaid. In the case of default, those debts are legal obligations that can be transferred to a debt collector. You still need a functioning legal system. This isn’t anarcho-capitalism. It’s a new monetary primitive built on a very old insight about how value actually works.
Decentralized Risk, Without the Courts
The hardest question in decentralized credit: how do you assess creditworthiness and enforce obligations without a central authority?
The ReSource Protocol handles this through a distributed network of competing underwriters on an open market. Underwriters stake collateral tokens to approve credit lines. If a borrower they’ve underwritten defaults, their stake is slashed. Reserve pools funded by transaction fees provide additional default insurance. And when accounts do default, they’re auctioned off on a secondary debt market to the highest bidder, so the protocol itself never has to interface directly with court systems.
What Actually Happened
The mechanics are interesting, but what matters more is what they made possible. By the time of this talk in early 2022, the ReSource network had issued over a million dollars in interest-free credit. Users spent it on payroll, groceries, health care. Not a single U.S. dollar was lent. The value was created endogenously from network activity, just like tally sticks 40,000 years ago.
And the protocol is open. You don’t have to trust the ReSource network specifically. Anyone can use the ReSource Protocol to create their own mutual credit network, design their own underwriting and risk management schemes, and serve their own circular economies. Any jurisdiction, any supply chain, any city.
The first true form of native internet money turns out to look a lot like the first form of money, period.
This essay is adapted from a talk I gave at ETHDenver in February 2022. Watch the original talk. For the full technical specification, see the ReSource Protocol Whitepaper, co-authored with Julian Feder.