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Bitcoin’s status isn’t as simple as ruling if it is more a private token or a public ledger

There is a lot of current interest in various “crypto currencies” such as Bitcoin, but that does not mean there have not been previous combined ledger and token recording systems. Others have noticed the relevance of Crawfurd v The Royal Bank (the case where money became money), and we are going to write about this yet again.

Very roughly: a Bitcoin is a cryptographic secret that is considered to have some value. Bitcoins are individual data tokens, and duplication is prevented through a distributed shared ledger (called the blockchain). As interesting as this is, we want to point out notional value existing both in ledgers and as possessed tokens has quite a long precedent.

This helps us remember that important questions about Bitcoins (such as: are they a currency or a commodity?) will be determined by regulators, courts, and legislators. It will not be a simple inevitable consequence of some detail of implementation as this has never been the case for other forms of value (gold, coins, bank notes, stocks certificates, or bank account balances).

Value has often been recorded in combinations of ledgers and tokens, so many of these issues have been seen before (though they have never been as simple as one would hope). Historically the rules that apply to such systems are subtle, and not completely driven by whether the system primarily resides in ledgers or primarily resides portable tokens. So we shouldn’t expect determinations involving Bitcoin to be simple either.

What I would like to do with this note is point out some fun examples and end with the interesting case of Crawfurd v The Royal Bank, as brought up by “goonsack” in 2013.

Example ledgers and tokens

Bank accounts

Any time we visit an ATM, direct deposit our pay, or write a check we are converting money between ledgers or between tokens (bills) and ledgers. The fluidity is one of the reasons it is hard to even define terms when asking “how much money is there?” (see money supply).


Charlie Shrem is considering introducing a set of shared duplicate hand-maintained ledgers to replace the private portable currency of a prison (where he currently resides). The currency in question is largely cans of mackerel.

Canned fish (Wikipedia).

Frankly his Mackerelcoin, or MAK ledger system proposed seems too laborious, and would leave a long undesirable trail. I seems likely one encountering a Mackerelcoin society would be very motivated to invent a currency to eliminate the ledgers and ledger recorders. Perhaps instead of transferring “one MAC” to obtain a haircut one could hand over one actual can of Mackerel.

Sumerian Bulla ledger (previously distributed money becoming a central ledger)

Cyrus Cylinder front
Barrel-shaped clay cylinder covered with lines of cuneiform text (Wikipedia).

An interesting item dating to one of the posited origins of notional money is the Sumerian Bulla (see also Eleanor Robson, D.J. Melville. Tokens: the origin of mathematics. Mesopotamian Mathematics (published by St. Lawrence University).

Multi-stamped bulla (Wikipedia).

Essentially small tokens or figurines were used to represent purchased or sold animals or food. To prevent fraud and tampering all the tokens were stored in a trusted location in a cast Bulla. To avoid the trouble of having to crack open the Bulla one decorated the outside of the Bulla with impressions of the tokens within. Eventually only the impressions (or stylizations of the impressions) are used and you have writing and a public ledger.

So we have an example of something like a portable primitive currency (the tokens) being displaced by a centralized ledger around 8,000BC.

Rai stones (previously distributed money becoming a shared ledger)

Rai stones are large punctured stone disks used as currency in Micronesia around 500AD through at least 1871AD.

Rai stone at Yap (Wikipedia).

Interestingly enough the stones do not actually need to be moved to change owner. From the Wikipedia:

While the monetary system of Yap appears to use these giant stones as tokens, in fact it relies on an oral history of ownership. Being too large to move, buying an item with these stones is as easy as saying it no longer belongs to you. As long as the transaction is recorded in the oral history, it will now be owned by the person you passed it on to—no physical movement of the stone is required.

Presentation of Yapese stone money for FSM inauguration (Wikipedia).

So we have an example of something like a public currency being converted into a shared ledger around 500AD.

My favorite ledger/token issue

In recording wealth and debts one often has to choose between ledgers (such as bank account balances) or tokens (such as coins or bills). Each has its advantages and disadvantages and the trade-offs come out different depending on what you are doing. Your coffee loyalty card may use simple ink stamps as tokens (as one needs low value and high connivence) while you purchase the coffee using state supplied bills (as they are harder to forge or duplicate). At the other extreme are land deeds which are more public records than portable tokens.

Now we ask: does your ledger or token behave more like property (where the rule of nemo dat quod non habet or recovery of stolen goods from innocent third parties applies) or a bank note (where such recovery is not assumed).

What we have seen is the law tends to be set to meet the market needs, and not off implementation details (such as the traceability of parties, tokens, or ledger entries). For details see Banknotes and Their Vindication in Eighteenth-Century Scotland. This describes the case of Crawfurd v The Royal Bank, where Crawfurd found a bill stolen from him at the Royal Bank of Scottland (confirmed by the serial number) and sued for it to be restored to him (which would the the legal principle if Crawfurd had found a pocket watch that had been stolen from him at the bank). The court ruled the Crawfurd could not recover the note (even after stipulating it had been stolen by a 3rd party). Money changes color when it changes hands.

Bitcoin transactions are pseudonymous in that users can use (if they choose) arbitrary addresses for transactions, but input Bitcoins are linked to output Bitcoins. And some fraction of Bitcoins have known tainted ownership histories (despite having been mingled with other coins). So it is not immediately obvious if Bitcoins will be treated like bearer bonds or registered securities.

Notice how law (both common and statute) doesn’t decide these issues entirely on the implementation details. Coins historically are considered fungible due to their presumed identicalness and impracticality of tracing. Bank notes (even those issued by private banks, not governments) got similar treatment, despite having serial numbers due to their importance to efficient commerce.


Bitcoin’s fate will be decided in the market, courts, and legislatures. It isn’t going to pivot on some convenient technical detail such as it similarity to private tokens or a public ledger. Bitcoin having a currently confusing legal status (US IRS treating it as property, versus a US Federal judge treating it as money) isn’t proof it is going to collapse. Most other currencies (including bank notes) went through similar travails. While I am not a fan of Bitcoin, I don’t claim it is obvious if it has a future or not.

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Data Scientist and trainer at Win Vector LLC. One of the authors of Practical Data Science with R.