The history of banking, or why do we need blockchain. Part I.

In our economic cycle, we have already been thinking about what we need cryptocurrencies for. It is worth considering why we need blockchain. As you will see from the history of banking, he is really needed by humanity.

Banks are not a discovery as old as the currency (of course in its broad concept, not necessarily coin-oriented), but also not much younger. Let’s go back to ancient Greece …

Fraud, forgery and theft

In ancient Greece, it was originally the temples that served as banks. The priests, like the Hellenic gods, treated everyone equally. That is why they lent both individuals and rulers.

The idea of ​​keeping money in these buildings was based on a certain social contract. Well, the temples were considered sacred and untouchable. In addition, they often had their own militia, which guarded the treasury. If we were to compare our time to those conditions, the “home” of Apollo in Delphi could be, for example, JP Morgan, the temple of Artemis in Ephesus – BNP Paribas, and the abode of the goddess Hera (yes, this mean goddess who did not like Herakles) – Citigroup.

Individual bankers also appeared in the arena of history. These, however, did not really call themselves that. They were called ‘trapezitei’, not attractive from the point of marketing, because they worked on a trapeze, or … a table.

Unfortunately, these bankers (let’s forgive for the sake of your trapezitei languages) have not always been fair to their clients. To this day, the forensic speech of Isocrates from 393 BC, in which he represents the interests of the anonymous son of the favorite of King Satyros, has survived. The unfortunate had been cheated by Pasion, an Athenian banker who had misappropriated the money deposit entrusted to him.

Pasion appears in this story as a mean, smart banker. In order to appropriate the coins entrusted to him, he committed forgery, fraud, theft and bribery. Isokrates, however, reveals what the process of concluding transactions with bankers in Greece looked like. They were entered without objective witnesses, so in the event of a conflict, hard testimony and word against the word did not count.

The said Pasion took the funds of his client in the deposit, but instead of keeping them in a safe place, he circulated using private interests. He probably thought he would get it back when the young man came back, but he miscalculated. Defending himself against punishment, he claimed that no transaction took place. In the background throughout history, we have fakes and a mysterious “disappearance of slaves who were witnesses of the accused.” Admit it yourself – a story worthy of the “Crime Crisis of Ancient Athens.”

How did the matter end? We do not know. However, it shows how the then banking services market operated. Bankers did not keep full reserves and turned their clients’ money. It was not necessarily the norm, but as you can see, it happened.

Everything must be in writing!

Another proof of how the financial system worked at that time was Demosthenes’ speech from 362 BC Three decades have passed since the Pasion case. In this document we already find information that bankers kept special accounting entries. From their balance sheets, one could read who and how much money he paid and paid them. Look, if they did it in thousands of copies, and together with all their clients, we could talk about some very primitive form of blockchain! This system has already allowed the payment of funds to third parties according to the depositors’ instructions.

The hard part of the banker?

Demosthenes, however, points to some problems of financial markets related to the bankruptcies of the banks themselves. Ends the speech with a punch line, according to which:

“(…) in difficult situations [borrowers – note. as above] demand loans and believe that they should be granted loans based on their reputation; however, when their financial situation improves, they do not return money but refuse repayments. ”

Greece was already in contact with financial crises that are familiar and us. According to the researchers, recessions occurred, for example, in the years 377-376 and in 371 in the year BC, when the banks Timodema, Sosinoma and Aristolocha were falling. The bankruptcies were due to inflation, driven by the very fraudulent banks that falsified their balance sheets, but also political events, such as the Peloponnesian war (it can be compared to the First World War, the Hellas), or social revolts.

In spite of the risk, the banking activity gave great profits. The aforementioned Pasion earned 100 million a year, which today – according to historians – is equivalent to 2 million dollars. At the time of his death, the banker had a fortune of 60 talents, or some 44 million dollars …

To be continued.

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