How Future Bitcoin Can Prevent a Future Greece

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If the idea of Greece rapidly switching to an alternate currency seems ridiculous, consider that it is happening already. In Greece, companies are doing what they often do in times of currency crisis, which is paying suppliers and employees in IOUs, or scrip, which are promises to pay back a debt as soon as the banks unlock a firm's money.

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I asked Michael Casey, the senior adviser to the MIT Media Lab on cryptocurrencies--and until recently, a reporter at The Wall Street Journal--whether or not the technology underlying bitcoin, known as the blockchain, could be used to issue this scrip.. One idea, says Mr. Casey, is that Greece could create a "collateralized currency" backed by state-owned assets. Cryptocoins representing a fraction of all the country's islands, ports and factories would hold their value as long as people believe the underlying assets do.

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"The reason why barter was flawed is you can't cut a horse in half in return for a bunch of arrowheads or whatever," says Mr. Casey. But crypto-tokens that individually represent a portion of an asset are infinitely divisible, he says, and "if you have infinitely divisible claims on an asset, then you could trade a third of a horse for a trip to Acapulco."