Digitizing Money

The establishment of fiat money has made it easy - even mandatory - to create digital ones. The advent of the Internet and establishment of monetary authorities that control and issue money have made the idea of digitizing money, i.e., making the most of digital or online currencies and letting such authorities keep tabs on who owns how much, a feasible and even necessary one.

Proof of this is the evolution of alternative modes of payment to the point that they have become the main methods for transacting today. 

For example, credit cards, fund transfers and PayPal have become standard forms of payment these days. And in the United States, in particular, paying in cash is looked upon as

unconventional or even suspicious in some cases. The ramifications of this evolution are huge.

One of them is the ever shrinking amount of physical money circulating in many of the world's biggest economies and financial systems.

Becoming exceedingly digitized, how does money in its digital form work? And a more specific concern with the digitalization of money is this. What systems are in place to prevent double spending of money, i.e., what's to stop me from digitally reproducing my money so that I'd have  so much more than what I actually have? You know, like creating duplicate copies of my favorite songs for listening on my different devices.

Most financial institutions today address this issue with centralization. What this means is

there's only one party responsible for keeping records of financial transactions under a particular system, i.e., keeping track of who owns what and how much. Everyone who transacts under such systems has an account, which has a specific ledger under which all transactions and balances are recorded and maintained. Everyone - including you and me - trust the systems of financial institutions to keep accurate records of our balances and these institutions, in turn, trust their computer systems. In short, the solution of centralization of records is based on a ledger that's stored in one big-ass computer system or network. Prior to the creation of the blockchain, there have been many attempts to create alternative digital forms of payment that have failed

because of one very important issue; preventing double-spending sans a central authority. That's why the centralized records keeping solution has persisted until this day - it generally works.