Banks are information intermediaries. Gone are the days of the merchant dumping a hoard of physical gold into the vaults for safekeeping. Nowadays, if you have ‘£ 350 in the bank’, it merely means the bank has recorded that for you in their data centre, on a database that has your account number and a corresponding entry saying ‘350’ next to it. If you want to pay someone electronically, you essentially send a message to your bank, identifying yourself via a pin or card number, asking them to change that entry in their database and to inform the recipient’s bank to do the same with the recipient’s account.
Thus, commercial banks collectively act as a cartel controlling
the recording of transaction data, and it is via this
process that they keep score of ‘how much money’ we have.
To create a secure electronic currency system that does not
rely on these banks thus requires three interacting elements. (...)
(More in the PDF.)