Blockchain and the Nature of Money

There is currently a great deal of interest in the potential for technologies commonly called Blockchain or Distributed Ledger, to transform many aspects of the world financial system. Many aspects of this technology and much of the enthusiasm/hype began with an attempt to create a new form of currency/payment system called Bitcoin. This paper discusses nature of money in the modern world from the economic, legal and accounting perspectives. It argues that the current nature of money imposes a number of constraints on what can be done with Blockchain/Distributed Ledgers. These constraints will both set the limits on the benefits and ultimately shape the application of the technology. Those trying to build new financial infrastructure without an understanding of these constraints are likely to waste a great deal of effort.