Cattle are widely considered the oldest form of money, used over 10,000 years ago to make payments and to account for debts and credits. The inherent value was in the cow itself. Only much later, after the Stone Age, did currency emerge in which its worth was established by convention and trust, using objects like shells and shell imitations. Modern coinage and paper money can be traced to China 500 B.C. and 100 B.C., using metal and leather, respectively. Paper banknotes emerged at the end of the 17th century as a promise to pay the bearer a sum on demand. These were handwritten and signed by cashiers. Only in the middle of the 18th century did printed, fixed denominations start to appear. It then took another 100 years for fully printed notes to emerge without need for filling in the name of the payee and signing each one individually. We call this stuff cash.
Today, cash has been replaced increasingly by electronic credit and debit. In excess of three trillion dollars is moved around the planet daily. Conversions occur, accounts are changed, addressers and addressees are modified. But no money moves in the sense of coins or pigs going from my pocket or pen to yours. Everything is a scheme of pointers. The bits used to achieve such accounting don't have value unto themselves. They're only the means.
Some people, including myself, believe the next step is for some of those bits to have value. That is to say, consider a string of bits to be like a virtual cow or shell. In order to distinguish these bits (like telling the difference between a beautiful seashell and a piece of coal), they would need an agreed identity. To avoid forgery, they would need a unique and secure ID. And to stop multiple spending of the same bits, there would need to be a clearing process or a means to reveal the identity of anybody who tries to double-spend. All of these requirements are easily achieved in both traceable and anonymous systems of E-cash. In these cases, the money does move. The bits are money. The more you have, the richer you are. This is the future, though maybe only in part.
A parallel and more intriguing form of trade in the future will be barter. Swapping is a very attractive form of exchange because each party uses a devalued currency, in some cases one that would otherwise be wasted. Many of us are too embarrassed to run yard sales or too lazy to suffer the inconvenience and indignity of eBay. But imagine if you weren't. The unused things in your basement can be converted into something you need or want. Likewise, the person with whom you're swapping is giving something of value to you which is less so to them. With minimal computation, three-way, four-way, and n-way swaps can emerge, thereby removing the need for any common currency.
Swapping is extended easily to baby-sitting for a ride to New York, a mansion for a two-hundred-foot yacht, or leftover food for a good laugh. In some cases, people will swap for monetary or nonmonetary currencies. Without question, we'll see new forms of market-making and auctions. But the most stunning change will be peer-to-peer, and peer-to-peer-to-peer- ... transaction of goods and services. If you fish and want your teeth cleaned, you need to find a dentist who needs fish, which is so unlikely that money works much better. But if a chauffeur wanted fish and the dentist wanted a driver, the loop is closed. While this is nearly impossible to do in the physical world, it's trivial in cyberspace. Add the fact that some goods and services themselves can be in digital form, and it gets easier and more likely. An interesting side benefit will be the value of one's reputation for delivering on your promises--thus, identities will have real value and not be something to hide.
The point can be generalized beyond money. Peer-to-peer is a much deeper concept than we understand today. We're limited by assumptions rooted in and derived from the physical world. Information technology over the next 25 years will change those limits through force of new habits. Let me cite just one: I think nothing of moving millions of bits from one laptop to another (inches away) by using the Internet and transferring those bits through a server 10,000 miles away. Imagine telling that to somebody just 25 years ago.
Nicholas Negroponte is the founding chairman of MIT's Media Laboratory and the author of the seminal work on the digital revolution, "Being Digital" (Knopf, 1995).
Illustration by Dan Brown