a blog

by Josh Nicholas

The long history of financial technology

One of the best things about history as a subject is its power to put us in our place. Progress - especially of the technological kind - is very rarely as radical as we think.

When I think about all the hype surrounding the blockchain, I start to think of all the other technologies that have been used as immutable ledgers.

The tally - a wooden stick used to keep track of financial transactions - is a perfect example.

The sum involved in a transaction was represented by notches in a stick of wood, which was then split to furnish both payee and payor with tangible and tamper-proof evidence of the event. Although often inscribed with symbols to identify the measuring unit or to give other information about the transaction, the basic data in the form of different width notches, was understood by both the literate and the illiterate. This feature invites speculation that the use of the tally may have predated written communication.

The exact grain of the wood in each tally is different, meaning they are all but impossible to forge. The tally essentially achieved with nature something the blockchain does through an encrypted public ledger.

According to Willard Stone, the tally may go back as far as the ancient Greeks. Maybe even to 484BC.

Herodotus tells of a Greek from Miletus, because of the insecure conditions in Ionia, giving half his fortune to Glaucus, a Spartan known for his honesty, together with tallies... Many years had gone by when the sons of the man by whom the money was left came to Sparta, and had an interview with Glaucus, whereat they produced the tallies, and asked to have the money returned to them.

From there the tally pops up all over the world and throughout history. Marco Polo described their use as IOUs in China. French monasteries used them to keep track of deposits. The British exchequer used tallies both to keep track of taxes paid, as well as what was lost during currency debasement.

When the Bank of England was foundedin 1694, one of its first acts was to make a loan of ~€1,200,000 to the Government. Acknowledgement of the debt was in the form of tallies, the longest of which exceeds eight feet in length (these are still in existence and unredeemed).

This isn't to say that the blockchain isn't a spectacular achievement. It very much is. But we should recognise that a lot of today's financial technologies aren't solving unsolved problems. They are just more efficient ways of doing what we already do.

We may be seeing an unprecedented technological boom. But most of our problems aren't new and we've been using technology to solve them since year dot.