Can Cryptos Rebuild Trust Like This Ancient Money?

The 70s gangster movies had one scene in common: Before any smuggling deal, the two gangs would authenticate the transaction by matching the two halves of a torn currency note. If they matched, the deal continued; otherwise… You know the consequences.

Who knows, they could be using OTPs today! The instinct behind this ritual comes through evolution.

Humans learned counting long before writing. We often hear that barter, shells and gold were the earliest forms of money, but we forget the importance of tally sticks. Even economics textbooks skip it. Tally sticks were small pieces of wood, cut into two parts with some notches or cuts, describing who owed to whom and how much. The notches represented pounds, shillings, and pence — each denomination had its own standard size and position.

Archaeologists have found notched bones, one in Swaziland from 35,000 BC on a baboon’s fibula. It had 29 cuts made for counting. It seems that we always wanted to record — maybe the animals hunted, the times it rained today, or each other's debts.

The way the system worked was something like this: The stick was split lengthwise such that each half would have the same pattern of notches and the same unique wood grain. The larger half was called 'stock' and was kept by the creditor, while the smaller half, the 'foil', was kept by the debtor. Words such as stockholder and counterfoil originated from them.

Even without any central authority issuing them, they became commonplace. In that sense, tally sticks were a decentralised currency centuries before Bitcoin or stablecoins.

The best feature of these sticks was that they were forgery-proof. You couldn’t alter a notch or insert a new one because the two halves wouldn’t match when brought together.

By the 12th century, they became the official method of recording taxes and payments in England. Then, in the 17^th century, with an initial capital of £1.2 million, the government established the Bank of England. Of which, £800,000 came through tally sticks.

So yes, these small pieces of wood helped launch one of the world’s most influential financial institutions. For 600 years, it remained the backbone of the British public finance.

By the 18^th century, bureaucracy had modernised, people had become literate and modern paper-based accounting techniques had evolved. Technological progress, not flaws, made tally sticks redundant. It was a gradual transition driven from within the bureaucracy as well as society. 

Its end is cinematic, but stupid, too. In 1826, the British government officially abolished tally sticks. In 1834, the Houses of Parliament burned the stockpile of old tallies — not in the open ground, but in the furnace rooms under the House of Lords. Unfortunately, the chimney overheated, and soon the entire Westminster Palace caught fire. Even Charles Dickens mocked the absurdity of the situation.

What tally sticks teach us is that the form of money matters far less than the trust architecture behind it. People trusted tallies because they could verify them on the spot. The trust was so strong that people were open to new alternatives like paper, as the state stood behind it. Then, people even trusted digital payments as the foundations can be trusted. 

Cryptocurrencies replace the authority with technology and expect people to trust that technology, which has no proven track record. Instead of solving problems, they have added new ones around regulation, security and energy usage. Moreover, the mechanisms and concepts are too complicated, and even finance professionals struggle to understand them.

Economic struggles, surveillance and waning trust in governments worldwide have created a need to replace the current systems. However, governments cannot afford to lose control over money. They view cryptocurrencies as a threat to their own legitimacy. For staying relevant, they are increasingly pushing for central bank digital currencies, which share some crypto features, along with state backing.

Each era tries to answer the same question — who do we trust, and why? The technology keeps changing, but the psychology doesn't. We still want money that is easy to understand, hard to fake and frictionless. Let's hope cryptocurrencies or CBDCs, whichever survives, check all these boxes.