In Gold We Trust? The Future of Money in an Age of Uncertainty (Kindle Single)

With early investments in social media companies such as Twitter, Tumblr, Foursquare and Zynga, Fred Wilson has become one of the world's most watched angel investors. And one of the opportunities he is watching most attentively is the emerging industry of digital money.

I think it's as clear as the nose on my face that the fiscal path we're on is simply not sustainable. And when I'm asked to describe the situation we face, to me, it's always like a cancer, and it's a cancer that truly is going to destroy this country from within." This was not some crazed right-wing extremist speaking, nor even Alan Simpson,

The value of this early money, whether gold, silver, cowry shells or barley, was essentially the same as the value of the quantity of the stuff from which it was made. Economists call this "commodity money". Paper money, by contrast, tends to be worth far more than the paper it is printed on. One of the key technological challenges was to

bad money drives out good, if they have the same value.

Social websites such as Second Life and even Facebook have experimented with creating their own currencies. But the most interesting innovation so far has been the launch in 2009 of bitcoin, a digital currency with an encrypted soundness algorithm designed to allow the supply of bitcoin to grow in a way that is mathematically inflation-proof.

Bitcoin, invented by a mysterious figure, Satoshi Nakomoto, whose true identity is the subject of many a conspiracy theory, experienced even more of a rollercoaster ride than gold in 2011, soaring in value from less than $1 a bitcoin to almost $30, before plunging below $5. Many thought that this apparent bursting of a bitcoin bubble would put an e

In December 2010,

Carrying bulky bags of barley when on a shopping trip is not very practical. Moreover, barley is perishable, so not a good store of value over long periods of time. That is why, around 5,000 years ago in present-day Iraq, some forgotten financial innovator came up with the brilliant idea of expressing a fixed weight of barley, 11 grams, in terms of

You can just as easily trade your stuff for money and then sit on the cash until you are ready to buy something. That is the third function of the technology that is money, and the part most prone to "technological failure": to be a store of value over time.

A different version of dollar collapse, described by analyst and trader Jim Rickards in his book, Currency Wars, comes complete with deliberately wicked foreigners.