Nick Szabo  🔑

Alas, cheap transportation and industrial era tools greatly inflated them and often made counterfeiting easy. Validation lore wasn't up to that challenge; secure validation became too expensive.

20% of coins were already counterfeit by his day. He may have delayed the inevitable, but during the remainder of the 18th century, the problem only got worse, driven by craftsmen of Birmingham who also gave us much of the industrial revolution.

By the end of the 18th century merchants had mostly given up on high-value coins in favor of harder to counterfeit bank notes, moving away from trust minimization by substituting IOUs for the actual metal. A trust that in the 20th century would be heavily abused.

Bitcoin is superior to gold precisely because it has much lower friction both in transactions (LN allows cheap trust-minimized payments) and storage (nothing can be cheaper to store than a private key and monetary inflation is fading out).

Transacting in Bitcoin may be cheaper than transacting in actual gold coins or bullion. But it isn't cheaper than transacting with bank-issued IOUs denominated in an redeemable in gold, particularly when those IOUs can be transferred electronically for next to nothing.

One simple solution to Bitcoin's transaction-cost problem would be to build a banking system on a bitcoin standard. But then the bank-money transactions would not possess the same security and "pseudonymity" as ones conducted in bitcoin itself.