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, then across East Africa, launched 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.
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.
Model answer plan
See the mark-by-mark plan — for / against / judgement, with marking guidance — in study mode.