Consumer Electronics

Crypto, Venmo, NFTs, Tokens: Where Is Money Going?

Cash is always king, but even cash is morphing in wild, unpredictable ways

A colorful image of stacks of currency among many tall pieces, as if in a cityscape.
Jorg Greuel/Getty Images

When was the last time you thought about money? Sure, you pay your monthly bills—and budget and keep track of all relevant balances. But how often do users of money allow themselves to wonder about the nature of the medium of exchange the world is built around? Rachel O’Dwyer, a lecturer in digital cultures at the National College of Art and Design, in Dublin, has given the topic a lot of thought. She’s spent years talking to finance industry experts about and researching the dynamic history of financial exchange media. And she’s now condensed those insights into her new book Tokens: The Future of Money in the Age of the Platform.

The upshot: Although cash—that is, notes and coins—once upon a time revolutionized the way the world conducted business, it’s only part of the story of modern commerce. Another tectonic shift is today underway as technology changes the way transactions are carried out. So are the old, reliable paper notes, as a result, destined to become just a historical footnote? IEEE Spectrum spoke with O’Dwyer about her book and what might be in the offing as transactions go digital and money ventures out beyond the nation state.

“This is something that really fascinates me about these tokens: they’re money or money-ish, but they’re also a kind of social currency or social media.”
—Rachel O’Dwyer, National College of Art and Design, Dublin

Rachel O’Dwyer on:

IEEE Spectrum: In your most basic definition, what is a token?

Rachel O’Dwyer: Well, my definition of a token might not be everyone’s definition, but I understand a token to be something that is kind of more and less than money. So, the standard economic definition of money is something that is a means of exchange, a unit of account, and a store of value. And I feel like tokens are more, and they’re less than this. They’re less because money is designed to be fungible. It’s designed to be liquid and a means of exchange. Tokens tend to come with strings attached that place limits on their fungibility or their liquidity—special conditions about who can spend them or when or where. Amazon, for example, pays its Mechanical Turk workers outside of the United States and outside of India in gift-card balances that can be spent only by the worker and only in the Amazon store.

A token for her thoughts: Author Rachel O’Dwyer delivers new perspectives on the ancient medium of money.

This is an example of a token—an example of them being less than money. But in some ways tokens are also more, in that people will use tokens, particularly in online communities, not only to spend, but also to communicate with one another, to brag, to troll, to “flex.”

In the United States you have Venmo, an extremely popular payment program where people obviously send each other money for things like rent. But they also “flex,” showing off about what they’re spending. They troll their ex-girlfriends and use it for stalking.

Dogecoin is a speculative currency, but it was also initially a token that users used to reward each other for socially valuable content online. And this is something that really fascinates me about these tokens: They’re money or money-ish, but they’re also a kind of social currency or social media.

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“The earliest forms of exchange media weren’t money as we know it; they were tokens.”
—Rachel O’Dwyer

In the book, you say tokens are like a genus, a taxonomic rank. Sort of like primates—which are, of course, an order. But following the primate analogy, money could be the homo sapiens among primates—part of the set, yet different in significant ways. If you see it differently, could you tell me how my analogy is flawed?

O’Dwyer: No, I think that’s a good analogy. Sometimes people think of tokens as a limited form of money or tokens being a subset of money. Whereas, if anything, I think of money as being a subset of tokens.

We tend to think about tokens being something that’s quite contemporary—something that reared its head with NFTs. But actually, tokens have always sort of ghosted the monetary economy and have been around before sovereign money, before publicly mandated money, before state-backed money. The earliest forms of exchange media weren’t money as we know it; they were tokens. Mesopotamian grain tokens featured the earliest forms of writing; they were these sorts of clay tokens that kept account of stored grain that was stored in these shared warehouses. And that’s not only the first examples of writing, but it’s also the first form of, I guess, accounting—and the first form of exchange media. They’re writing, they’re sort of proto-money, and they’re also tokens. People used the tokens to calculate what sort of shares you had of stored grain in these warehouses as a way of going into debt with other people.

Tokens are now smart or programmable, which is to say the conditions governing their use, redemption, and transferability are hard-coded in an object.

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So, tokens have been doing the job now mainly carried out by money since long before money existed.

O’Dwyer: Exactly. Tokens have been around, as I said, for millennia. We had alms for the poor in medieval Europe. So, these were relief tokens that were given to the poor to be exchanged for things like bread and charcoal and wine. And if you had this token, it not only gave you access to these subsistence goods, it also sort of marked you out as somehow being worthy of subsistence. There’s a whole long history of these sorts of relief tokens, where charitable institutions find ways of turning cash, which was seen as being a dangerous form of relief, into some kind of a special token with strings attached. So, this was a token that came not only with value but with values or morality attached to it. In other words, How can we teach the poor about good spending habits or good morals?

“We have increasingly programmed tokens, and they are encoding particular values into spending.”
—Rachel O’Dwyer

In Ireland in the 1980s and the 1990s, alongside social-welfare payments, we had a token called the butter voucher, which allowed people who were receiving social-welfare payments to access butter. And what’s kind of interesting about the butter vouchers… When you talk to people over the age of 40 in Ireland, they’ll tell you all the things that you could access for a butter voucher besides butter. So, a shop would take them for cigarettes, for alcohol, and all sorts of things. Even though there was an attempt to encode different kinds of values and morality into food stamps or into these special tokens for the poor, often the poor and other everyday people had their own ways of getting around the terms and conditions of the tokens and making them work for themselves. And what we see today, obviously, is that a lot of the time these conditions are now hard-coded or programmed into tokens because the tokens are increasingly digital. In the United States, for example, instead of food stamps, you now have the EBT card. It’s an electronic card that basically just prevents people from buying things that aren’t sanctioned by the U.S. authorities for purchase through the food-stamp program. So, you can’t buy hot deli meals, for example. You can only buy cold food. You can’t buy hygiene products. You can’t buy cigarettes or alcohol.

And there is really no wiggle room in these new kinds of tokens. So, we have increasingly programmed tokens, and they are encoding particular values into spending. So, it’s an economic model that’s not just about who has access to credit or finance or money. It’s also encoding values at the point of transaction and the point of spending.

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“We’ll probably continue to see platforms take money in more unexpected directions.”
—Rachel O’Dwyer

You wrote that private money is inevitable, and the state’s role in money issuance will be absorbed by platforms with a legacy in processing data and programming behavior. So what do you see as the consequences of private entities such as Facebook being more and more in control of identity and commerce at that level?

O’Dwyer: I’m surprised if I said that it was inevitable, because I think what was very interesting about Facebook’s attempt to issue its own currency was the pushback by the state against private currency. When Facebook announced that it was going to issue its own token in 2019, I think a lot of people thought that battle was then fought and won—that we were witnessing a battle for control of money and payments between the state and the platform, and the state prevailed. And at the moment that Facebook and other big platforms were poised to take control of currency issuance, stronger regulation and the development of proposals for state-backed digital currencies, or CBDCs, worked to suppress the expectation that platforms will issue and guarantee money in the future.

But I think where the balance falls is still very much unclear. In China, for example, Alipay and WeChat Pay, which are two incredibly powerful and popular payment apps, have experienced very strong regulation by the Chinese government in recent years— particularly because they were seen to compete with the government’s launch of a digital yuan.

And yet, most people continue to—and actually prefer—to use these applications rather than the state pilot. What’s more, even though we’ve seen strong regulation of payment and crypto in recent months, particularly in the United States, we’ll probably continue to see platforms take money in more unexpected directions.

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In reading your account of what happened with Facebook’s fizzled Diem token, I don’t see the U.S. government having erected a brick wall. How likely is it that its moves amounted to spraying cold water on Facebook and the social media giant will come back later?

O’Dwyer: I guess what’s interesting is this isn’t Facebook’s first attempt to to issue money. They’ve had numerous failed currencies and wallets in their 15-year history, and Libra is just one of those. But there have been concerted attempts over the past five or six years by big platforms in the West to develop a super app similar to the Chinese model of WeChat or Alipay. And I suppose Elon Musk’s claim that X will become a banking platform is maybe the latest one of those. But for now, governments have pushed forward to erect barriers against this. One example is the U.S.’s 2020 Keep Big Tech Out of Finance Act.

But, as you say, it’s all still very much up in the air.

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You note that despite all the hyped promises of cryptocurrencies and the blockchain, what they’ve really done so far is just change the middlemen. Can the average consumer count on the blockchain to keep tyranny from riding in on the coattails of so-called progress?

O’Dwyer: Absolutely not.

“[Web3 is] not about actually removing power or creating new forms of trust. If anything, it’s allowing a lot of malfeasance and problematic, scammy behavior to operate in this sort of murky space.”
—Rachel O’Dwyer

What we’re seeing right now with FTX and the conviction of Sam Bankman-Fried is a case in point where some of the claims that were being made around crypto are being disproven—particularly, that if you had lost your trust in centralized banking or in centralized institutions, crypto and the sort of radical decentralization of finance was supposed to offer you a sort of trustless alternative­.

What we’ve seen is that, actually, these private institutions are a lot less accountable, a lot more scammy, and a lot less trustworthy. And in recent years, we’ve heard a lot about Web3. There are claims that it’s going to shake up the power of platforms and decentralize the Internet. Similar claims were made with the advent of Bitcoin with respect to banks and the state.

One of the things I find most fascinating about the history of alternative tokens and alternative economies is that this idea of decentering power and removing the middleman crops up time and again. Pierre-Joseph Proudhon, [the 19th-century French philosopher and economist] sometimes referred to as the father of anarchism, designed tokens to do away with what he called the ‘parasitic middlemen’ in the 1800s. So, too, did key figures in the development of alternative economies, like Silvio Gesell and Josiah Warren. They wanted to create tokens that would remove unnecessary power and privilege. So, what’s striking is that while these men, on the one hand, preached the end of power, they allowed all kinds of power and privilege to flow unchecked. And I think the same can be said for the politics of Web3 today. They preach decentralization, but in a lot of cases there’s just a replacement of incumbent payment processors or incumbent banks with new fintech players. It’s not about actually removing power or creating new forms of trust. If anything, it’s allowing a lot of malfeasance and problematic, scammy behavior to operate in this sort of murky space.

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“I think that any of the [blockchain] iterations we’re seeing—including smart contracts and smart payments—look a lot more like TheHandmaid’s Tale than any resistance to the situation depicted in the book.”
—Rachel O’Dwyer

In the book, you refer to a scene in the The Handmaid’s Tale where a woman found herself unable to make purchases using a smart token that had been programmed to deny the transfer of funds based on gender. What role do you think blockchains will play in preventing such dystopian outcomes from becoming reality? And, considering what you just said, I’m assuming your answer will be nothing.

O’Dwyer: Yeah, I haven’t really considered blockchain as being a way of preventing that.

When I was thinking of TheHandmaid’s Tale, I suppose I was seeking a good illustration of what happens when tokens become programmable either at the behest of the state or the platform. So, that way, tokens can then be used to survey or profile users or condition their behaviors. For me, that example in TheHandmaid’s Tale is a perfect illustration of that.

But I guess proponents of the blockchain would say, when payments become decentralized, then nobody can control what you do.

But we know that with any actual iteration of these, there is always permission. They’re always controlled. So, if anything, I think that any of the [blockchain] iterations we’re seeing—including smart contracts and smart payments—look a lot more like TheHandmaid’s Tale than any resistance to the situation depicted in the book.

Okay, so let’s spin things forward. There are already Amazon Go retail outlets, in which there’s no checkout as we’ve come to know it. Biometric identification linked to an agreed-upon form of payment handles the transaction seamlessly for the items you carry out. So, my question to you is: Thirty years from now, what will grocery shopping look like? Do you think we’ll see widespread adoption of the Amazon Go model? Or will retail shops go away entirely?

When I was at [the global fintech conference] Money 20/20 a couple of years ago, they spoke a lot about this idea of frictionless payment. Payment would become so ambient that it would sort of disappear into the background. You wouldn’t even be aware that you’d made a transaction. And it comes being presented as being something a little bit more convenient. You don’t ever have to worry about fumbling for your notes or your change at the checkout [or when you stop to refuel your car,] so your car would automatically pay for gas. Your pool would automatically order filters. And maybe you would go into an Amazon Go and just grab the things you need, and your transactional data would also then potentially update supply chains and make them run better. That means the groceries and things that you want are more likely to be available for you, and you’d automatically get coupons more suited to you, et cetera, et cetera.

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“It’s often framed as being something we gain­—as in we’re gaining kind of a lack of friction.... But look at what we’re losing. We’re losing the right not to be tracked, losing the right not to be identified.”
—Rachel O’Dwyer

I’m forgetting an important layer of this—that Internet of Things and generative AI could one day intervene, so that your refrigerator and your cupboards will talk to your local grocer and say, “Listen, he’s running out of X and Y. Send us some more X and Y to this address today.”

O’Dywer: This bit about the Internet of Things brings to mind Mark Weiser and the early ambient-computing imaginaries from the turn of the 21st century. Weiser was one of the earliest proponents of ubiquitous computing, and he wrote these papers like “The Computer for the 21st Century.” He had this idea that computing should disappear into the background; you shouldn’t be aware of it.

But should transactions be something that disappears into the background, so you shouldn’t really be aware of it? It seemed like a very privileged frame in one way. And then, I suppose, the second thing that worries me about it is the idea that cash, an anonymous bearer instrument, completely disappears from this model.

It’s often framed as being something we gain­—as in we’re gaining kind of a lack of friction because we don’t have to, like, wait around, we don’t fumble with our change. But look at what we’re losing. We’re losing the right not to be tracked, losing the right not to be identified.

And poor people and elderly people who still rely on cash are increasingly being discriminated against by these sorts of cashless systems. Even as governments are paying lip service to financial inclusion or banking beyond banks or bringing the elderly into the digital fold, they talk about the vision of the cashless society. But all of these things, I think, are worrying. I think we have a right to cash. We have a right to this anonymous instrument for exchanges, and we lose all of that when we move to these fully automated systems.

But do I think that is the future of digital payments? Yeah, probably.

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