A digital thing can be copied for nothing. Money must not behave that way — spending it has to remove it from the sender — which is why digital money needs something no other digital good needs.
Copying, and the two ways of stopping money from being copied: a bank, or a shared list.
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A bank keeps it
- One organisation holds the record
- Mistakes can be reversed
- It can also freeze or refuse you
Everybody keeps it
- Thousands of copies of one record
- Nobody can change or reverse it
- Nobody can help when you are wrong
The real choice: It is not control against freedom. It is control by an organisation you can complain to against control by a rule that cannot be complained to at all.
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Real-world examples you can name
M-Pesa mobile money — launched 2007
Money is sent as a text message and cashed in or out at a local agent, so a phone becomes a bank account without a bank. Research has linked it to households moving out of extreme poverty, particularly those headed by women.
Who it affected: People with a phone but no bank branch within reach.
Bitcoin and the public blockchain — network live January 2009
A currency with no issuing bank, kept honest by a shared append-only ledger that thousands of computers verify. The proof-of-work method that secures it consumes electricity on the scale of a mid-sized country.
Who it affected: Holders and traders, people in countries with unstable currencies, and everyone affected by the energy used.
The Colonial Pipeline ransomware attack — May 2021
A ransomware group reached the company's network through a single reused password on an old VPN account. The company shut the pipeline down for several days as a precaution, causing fuel shortages along the US east coast, and paid a ransom of which US authorities later recovered part.
Who it affected: Drivers and airports across the eastern United States.
The most important case here: M-Pesa mobile money (Kenya, 2007) matters more than cryptocurrency for most people: it gave millions who had no bank a way to hold and send money, using phones they already owned.
Buying and selling online
E-commerce and marketplaces
Shops online, and marketplaces where millions of sellers reach buyers through one platform.
E-trading
Buying and selling shares or currencies through apps, often in seconds.
Targeted marketing
Adverts chosen for each person from their browsing and purchase data.
Additive manufacturing
3D printing builds objects layer by layer, so a spare part can be printed near the customer instead of shipped.
New kinds of money and goods
Cashless society
Cards and phones replace cash. Sweden is among the least cash-using countries, which worries people who cannot use digital payment.
Micro-transactions
Small in-app payments for extras, which add up without feeling like spending.
NFTs
Non-fungible tokens: a blockchain record of owning a digital item. Prices boomed in 2021 and collapsed soon after.
How this is tested — money questions reward precision, and vague answers about cryptocurrency are extremely common. It comes up two ways:
Paper 1 — structured question
- Part b: explain why digital money needs a record
- Part c: evaluate a digital payment system's impact
Paper 2 — source-based question
- Q2: explain a claim about payments in a source
- Q4: synthesise sources on financial access
The trap: “crypto has no middleman”: The record still exists and somebody still maintains it. What changed is who, and whether a mistake can be undone.
Explain one reason why digital money needs a shared record.
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Evaluate the impact of mobile money services in countries with limited banking.
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See the answer broken into clear points, with guidance on how each point earns marks.