[Cryptography] A little history, was What is total world transaction volume?

[John Levine]

>Could this be implemented as individuals issuing their own currencies,
>in the form of liabilities to pay bitcoins on demand?  If combined with
>a trading exchange floor to extinguish mutually canceling liabilities,
>it would keep a lot of activity off the main bitcoin blockchain. ...

>This of course would imply the ability of an individual to issue more
>liabilities than he can redeem -- i.e., fraud through inflation -- but
>presumably the pricing mechanism on the exchange would disseminate that
>information fairly quickly.

Back in the 1800s, when only gold and silver were legal tender in the
US, banks issued paper money that was redeemable in coin.  Some banks
did this more enthusiastically than others, so depending on the
reputation of the bank and how far you were from it (one could redeem
the paper only at in person at the bank's office), the value of the
paper varied.  Merchants subscribed to monthly publications like
"Bicknell's Counterfeit Detector and Bank Note List" which described
what the banknotes should look like, since counterfeiting was rampant,
and what they thought the notes were worth.  A very few were worth
par, well run banks might be discounted 1% or 2%, banks on the
frontier discounted 10% or in one case I saw as much as 75%.

Why anyone would want to return to this ridiculous way of using
money baffles me.

R's,
John