Definition of terms is important before we visit bitcoin seigniorage.

For example, the term inflation originally referred to the increase in the amount of money in circulation without a corresponding amount of new goods being offered in the marketplace. The well understood effect of such money creation ex niholo is a general rising of prices. It took less than a generation of Keynesian economics to change the definition of inflation from cause to effect, enabling modern economic dogma to shift blame of high prices away from the widely understood cause to the latest boogieman of their own creation.

A similar phenomena is happening concerning the term seigniorage.

The definition of seigniorage is “a government revenue from the manufacture of coins calculated as the difference between the face value and the metal value of the coins.” The term originates from Middle English seigneurage and from Anglo-French seignurage right of the lord (especially to coin money), from seignur. (Source: Merriam-Webster online May 17, 2018)

Unfortunately modern Keynesian economics has changed this definition to mean “the profit that a government makes from printing its own money” (Source: Cambridge Dictionary online May 17, 2018) or “the difference between the value of money and the cost to produce it.”(Source: Investopedia online May 17, 2018).

The two different dictionaries have two different meanings. The outcome of which definition prevails or if a new definition emerges will likely be determined by the success or failure of bitcoin maximalists in the decade ahead. To control the dialogue and we must own the definitions.

A late 2017 so-called definitive book Seigniorage: On the Revenue from the Creation of Money by Jens Reich recognizes “historically, this has been the government’s revenue from the supply of coin” and then spends a 150 pages of worthless drivel why seignorage now also includes revenue from fiat currency (which he defines as currency which is supplied through government spending and removed from the market via taxation)and credit currency (which he defines as a regime in which the currency is supplied to the public via lending on behalf of the government or its authorities.) (pages 7–8)

This change in definition of seigniorage lumps a genuine benefit provided by past lords, sovereigns and governments that put useful interchangeable coinage with intrinsic value into the hands of subjects, while at the same time providing legitimate revenue for government, into the same category as the destructive policy of money creation from nothing (ex nihilo) by fiat (defined by authoritarian decree) which by definition includes money created by deficit spending and unsound banking.

Again, defining terms is vital for the future discussion and path of bitcoin seigniorage.

Silver Seigniorage Benefits The Governor and The Governed

I was born in 1949. So as a child I had the unique perspective experiencing pocket change when a penny was copper, a nickel was nickel, and dimes, quarters, half-dollars, and dollars were silver. The coinage had real weight and substance. A nickle bought a Three Musketeers, split three ways with two friends! Or a Snickers or Milky Way or a CocaCola! Silver dollars, halves, quarters and dimes were all circulating and at the time of minting had the following ASW (actual silver content).

Mercury Dime .0723 troy oz. ASW
Washington Quarter .1808 troy oz. ASW
Franklin Half Dollar .36169 troy oz. ASW
Morgan Dollar .7734 troy oz ASW

“In his meticulously researched two-volume work, Pieces of Eight, constitutional lawyer Edwin Vieira Jr. shows beyond any doubt that the constitutional dollar in the United States is an historically determinate, fixed weight of fine silver.”

“The United States has a legal and constitutional silver standard, although we would not know it today, since the government has illegally and unconstitutionally removed silver as currency and replaced it with the Federal Reserve notes that we know as dollar bills. The term “dollar bills” obscures the actual and tangible meaning of “dollar” as a specific weight of silver.”

“. . .The dollar sign, “$,” in such a regime means 1 silver dollar of the official weight of 0.7734375 troy ounces of pure silver. The word “dollar” means the silver coin of that specific mass.”

Or put another way a silver dollar containing .723 ounces of silver contains .935 dollars of silver but has a face of one dollar. The difference is the seignoriage belonging to the “the right of the lord” to coin money while the dollar price of silver is fixed to the dollar at $1.29 per troy ounce.

“The price of silver more or less stayed at $1.30/oz from the founding of the United States through the Civil War. Prices were exceptionally turbulent during the Civil War (rising to nearly $3/oz) and stayed above $1.30/oz until the late 1870s. Prices generally declined through the latter years of the 19th century, dipping below $0.60/oz in 1897, mostly hovering in the $0.50s through to World War I. From a low of about $0.25/oz in 1932, silver generally climbed thereafter, moving to above $0.70/oz after World War II, past $0.80/oz in 1950, and crossing $1/oz in 1960.”

From the last part of the 19th Century through 1960 silver coin seigniorage revenue of the United States was substantial and silver coinage put a hard asset in the hands of citizens. But as the dollar price of silver began to rise above $1.30 due to inflation, the seigniorage disappeared and citizens could profit by melting circulating coinage for its silver content. The decade of the 1960’s was a period when Gresham’s Law took effect. Silver coins were melted or hoarded and our current bad money (tokenized pocket change) quickly drove out good money (silver coinage).

Gold coinage never developed as a means of trade in the United States, even though the gold coinage face value and intrinsic value were the same (their was no seigniorage or demurrage ). Gold certificates,as well as, gold banknotes, silver coinage, nickel coinage, and copper coinage served this purpose. All had a significant lower intrinsic value than the face value Gold was first and foremost held as a reserve by which all things were governed and measured.

And since the dollar was defined as a fixed amount of silver and silver was fixed at a specific ratio to gold, Gresham’s law dictated that the bad silver coinage would circulate while good gold coinage would be hoarded or helds the reserve.

The seignorage of today’s tokenized coinage is the difference between the face value, the production costs, and base metal value. Today’s pennies are made from copper plated zinc. While our nickels, dimes and quarters are made from a copper-nickel combination. Interestingly, the dollar has been debased so much that pennies cost 1.5 cents to manufacture. This inverted situation is known as demurrage and is not considered seigniorage.

Gold Coinage With No Seigniorage Was Used Primarily In Settlement As Sound Commercial Banking Developed Under a Gold Standard

The history of gold coinage is somewhat different than silver.

Alexander Hamilton, first U.S. Secretary of Treasury under President George Washington, priced the American dollar at 24 ¾ grains of gold (not quite 1/20 of an ounce, making its price $19.39.) This set the “gold standard.” The price of gold remained approximately $20 per ounce until February 1934, a period of 142 years and a ratio to silver of 15:1 as the dollar was defined as 0.7734375 troy ounces of pure silver.

The establishment of this fixed gold/silver ratio created a plethora of disparities. The history is beyond the scope of this article, but one result is the most gold coins minted prior to 1850 were melted or exported by gold bullion dealers.

“ Although today it is common to read that the United States was on the “gold standard” from 1795 onward, in actuality our country did not adopt the gold standard system until the year 1900, at which time the United States was one of the last developed nations to do so. Under the gold standard, countries participating in this stored gold coins and bullion in central banks and simply exchanged currency or certificates among themselves to settle transactions. Thus, after the year 1900 large quantities of American coins were stored in European, South American, and other vaults and were seldom moved. In the meantime, within the United States gold coins were rarely seen in day to day commerce.”

“If you had been a typical citizen in the year 1900, chances are that during everyday grocery purchases, real estate transactions, and any other business transacted during a given 12-month period not a single gold coin would have been encountered, particularly if you lived in the East (gold coins were seen in circulation with more frequency in the West). Although gold issues were not needed in everyday circulation, they continued to be minted in record quantities. For example, the year 1904 saw a coinage of over six million double eagles at Philadelphia and over five million in San Francisco. What happened to them? Most were shipped overseas.”

“Gold coinage continued in large quantities, and in the 1920s, when gold coins were mainly kept in banks and rarely seen in circulation, record numbers were produced. The year 1928 saw a production of 8,816,000 double eagles, an all-time high!”

The reigning gold coin of the United States was the Double Eagle with a denomination of $20. (Its gold content of 0.9675 troy oz.) was worth $20 at the 1849 official price of $20.67/oz.) The coins are made from a 90% gold (0.900 fine = 21.6 kt) and 10% copper alloy and have a total weight of 1.0750 troy ounces.

It was minted beginning in 1849. Regular production began in 1850 and continued until 1933 when Franklin D. Roosevelt made gold ownership illegal, confiscated gold at $20.67, and then revalued gold to $35 per troy ounce.

Saint Gaudens Double Eagle $20 Gold Coin

The Double Eagle gold content reflected its face value, hence, no revenue from seigniorage was received by the United States government. Neither did gold coins widely circulate. However, they were far more prevalent in the West than in the East. And the vast majority of Double Eagles were held in reserve by private banks who issued commercial paper and foreign central banks who did not want to hold private American banknotes or U.S dollars.

By the nineteenth century with the development in methods of communication and simultaneous development of sound commercial banking, non-inflationary purchasing media (commercial paper) was created by U.S. banks representing new goods being offered in the marketplace redeemable in these new goods as well as gold.

U.S. private banks provided the innovation of creating non-inflationary purchasing media to entrepreneurs and commercial enterprises producing goods being offered in the market which was then used to pay employees and suppliers who, in turn, used this new purchasing media to buy the new goods being offered, including new gold production.

The newly created goods acted as collateral for the money creation. The newly created money was not created ex niholo. The newly created money represented new goods produced by commercial enterprises and as these goods were sold in the marketplace the newly created purchasing media was retired.

This is the classic gold standard developed by the private sector that learned through the development of sound commercial banking how to expand and contract the money supply in an honest and fair manner. As the new goods were sold in the marketplace the banknotes were retired, hence non-inflationary money creation. This was such a successful model the process was repeated time and again creating what is known as the Gilded Age.

The idea that 19th Century bankers profited from interest collected from money created out of nothing, like modern bankers, is a canard. These bankers innovated the concept of monetizing the production of new goods using gold as a clearing standard and earned interest on the innovation by providing this service to producers.

In Bitcoin lingo, the classic gold standard was built on centralized side chains of gold. Gold was the decentralized standard used by these centralized side chains to settle accounts.

If a bank was suspected of creating banknotes ex nihilo or if it was thought they overvalued new goods produced by issuing too much credit (ie. financing buggy whips in the new age of automobiles), their banknotes were redeemed for gold and the ability to make new loans curtailed.

The U.S. economy grew at a pace never before known and never known since and without a nationwide financial crisis or recession. Gold acted as the decentralized governor or governance system by which all things in the marketplace were measured.

In Bitcoin lingo, the classic gold standard was built on centralized side chains of gold. Gold was the decentralized standard used by these centralized side chains to settle accounts.

The creation of non-inflationary money was fine tuned in an unfettered banking environment, not by Keynesian or Monetarist economists who, at best think they know better, and at worst are stooges for crony capitalists.

The gold standard was simply that, a standard. Gold acted as the decentralized governor or governance system of the banking system in which each participant was centralized.

It was not a 100% gold standard described by gold socialist Murray Rothbard and others, but a dynamic living economy of non-inflationary money creation and retirement. There was no political agenda or magic macro-economic formulas for its success.

The miracle of the Gilded Age in the United States was due to what E. C. Harwood described as The Lost Art of Sound Commercial Banking and is the furthest advance in the history of sound money and banking.

Bad loans resulted in the loss of gold reserves. There was no central bank, but bank clearing houses were formed to hasten the retirement of newly created banknotes as the goods they represented were sold. It is this classical gold standard that was co-opted with the creation of the Federal Reserve. And it is this model that must be revisited if there is to be a Bitcoin Standard.

With the legalization of gold by President Gerald Ford in 1974, gold coinage again appeared on the stage of the United States. The government of South Africa supplied the initial demand with the Krugerrand. But since the dollar was not tied to gold, the first gold coins minted in the United States were private. The first Harwood One Ounce Gold Piece was son struck on October 30, 1978.

One of the best kept industry secrets is that a private company innovated decimalized troy ounce gold coinage, producing 1/2, 1/4, and 1/10th ounce two years before any government.

As the gold price rose in 1979 smaller denominations of gold coinage were needed. There was a great deal of interest in gold by small investors, but a one ounce gold piece was simply too much for many to handle at one time.

To meet this demand the South African government introduced a small, odd sized coin the 2 Rand also promoted as the Baby Rand that was a spin off of the old fixed rate rand. Several private companies introduced gold coins in metric weight; 5 grams, 10 grams, 20 grams, etc.

All failed.

Many respected sound money economists recommended gold-gram coinage since it is the international accepted decimal unit of weight. Moreover, a troy ounce is divided into 20 pennyweights. A decimalized troy ounce unit of account made no sense or so it was thought. Unfortunately the market rejected the idea of gold-gram coinage.

The unrecognized problem is was that gold traded internationally in dollars per troy once. The chance that an investing public could relate to gold grams was nil, in spite of the fact that metric weight has been designated by governments as the official international standard of weight.

The solution to acceptability was a decimalized troy ounce weight, a solution that is taken for granted today but was radical and innovative at its introduction. Immediately following the success of the Harwood Gold Piece, in 1979 the Adam Smith Tenpiece was introduced which contains one tenth ounce of gold. This was quickly followed by the Hayek Half and Hazlitt Quarter. The following year (1980) the Deak Fivepiece was introduced.

The author would like to thank Bernard von NotHaus who personally delivered this original 1987 Gold Standard Corporation brochure in 2004

The private issue decimalized ounce concept was so successful that South Africa quickly dropped its Baby Rand program and introduced corresponding decimalized troy ounce coins in the fall of 1980. Since then many nations have adopted the format innovated by the private sector including the United States government.

Decimalized gold coinage was a big step in the right direction. For the first time gold was now in the hands of the small investor. But while the decimalized troy ounce coinage is a decent store of value and unit of account, it has shortcomings as a means of trade.

Modern gold coinage is not interchangeable. It is purchased at one price and sold at another. Even for identical gold coins there is a spread between buying and selling of 2% to 10%. Nor can can coins of different weights be interchanged. For example, two half ounce gold coins are not interchangeable with one one ounce coin.

The reason is twofold. First, labor costs are fixed regardless of coin size. Second, tolerance levels increase on smaller denominations of coins.

Machine tolerance is the extra gold put into a coins to guarantee the weight. When making gold planchets (or blanks) the gold is first rolled into strip. The planchets are then taken from the strip in a cookie cutter fashion. If the strip is rolled too thin the planchets are underweight, and must be remelted and the process repeated. By the same token, if the strip is too thick then too much extra gold is given away, which would soon put a minter out of business.

As coin size decreases machine tolerance increases. Moreover, labor costs are fixed regardless of coin size. This is why smaller coins go for a higher premium.

Bitcoin is a Digital Asset With Qualities Superior To Gold

Giant Rai Stone of Yap

To the best of his knowledge this author has found little or nothing written about bitcoin seignorage. Perhaps this is because bitcoin cannot be coined in a literal sense and can be best understood as a giant monolithic Rai stone of Yap seen by all.

Bitcoin exhibits all the qualities gold. It is decentralized, it is fungible, it provides anonymity, and bitcoin provides permission-less value transfer. Bitcoin, like gold, has trustlessness.

Bitcoin also has one quality or shortcoming (depending one ones viewpoint) gold does not have. It has no physical presence. This quality gives bitcoin its most distinguishing quality.

Bitcoin is unconfiscatable.

Hodlers are the New Monetary Sovereigns

Imagine for a moment if you were king. How many of us think we could rule better than those in power?

In my radical youth of the Viet Nam era early 1970’s I seriously considered organizing a band of like-minded hippies to overpower the local radio-TV station. Fortunately, my followers were wiser me. And for my own part things fell apart rather quickly as I tried to figure out just what I would say or do that would make things different or any better.

My point is that power is an awesome responsibility. And as bitcoin hodlers we are the new lords over a sovereign new money. Hodling is dynamic growing monetary energy at rest, locked in a box with a private key, waiting to be unleashed at an opportune time by the hodler. This is an awesome power that hodlers must recognize and reverence with utmost responsibility.

Bitcoin cannot be literally coined. Further, its usage is limited in much the same way as gold coinage usage is limited. The cost of transferring $800,$80.00, $8.00, $.80 or $.08 is same as transferring $800,000. And while transfers can be made quickly, security demands the transfer is not instant but must be confirmed on the network.

In this sense, just as gold was never used to buy a candy bar or cup of coffee, bitcoin will never be used to buy a candy bar or cup of coffee.

However, there is nothing to prevent an off-chain centralized coinage tethered to bitcoin to accomplish this task. Further, it is the authors opinion that it is the obligation of bitcoin hodlers to do just that.

The emphasis for acceptance has wrongly been focused on retailers rather fellow-entrepreneurs, wage earners and other savers. Retailers are in business and business is still primarily done in each host country fiat currency and as such most immediately sell all or most of their bitcoin into fiat to meet operating costs.

Entrepreneurs paying a portion of due bills to suppliers and employees in bitcoin is another matter. This a new capital formation. This is new monetary energy at rest, locked in a box with a private key, waiting to be unleashed at an opportune time by a new hodler at his discretion.

And one of the best ways new bitcoiners came about was the lesson they learned when they were sent small amounts of free bitcoin in 2013 when it was under $300. With today’s large fees such free giveaways of small amounts of bitcoin is impractical.

Bitcoin Coinage Is A Prerequisite For A Bitcoin Standard

While bitcoin will never be used to purchase the proverbial cup of coffee, it is the obligation of bitcoin hodlers to provide a centralized efficient and honest coinage tethered to bitcoin that can do just that.

A centralized bitcoin coinage can provide instant free micro-transactions tethered to bitcoin and collect a small fee (seigniorage) when users exit the centralized network. In other words, as Hodlers we have the privilege to organize and provide free usage of bitcoin pocket change for micro-payments and we should do so ASAP.

This author has a very limited expertise in understanding seignorage and the forgotten 19th Century innovation of commercial banking. The author is also a hodler quite willing to lend his time and 10 btc to accomplish the task and is seeking nine other hodlers with 10 btc along with skilled developers for a trading platform, website, wallet, marketing skills, security skills, auditing skills, and legal structure and compliance.

This is not an ICO. This is not an altcoin. This is Bitcoin Coinage. And unlike the millions raised for the latest ICO, 100 bitcoin should be sufficient to accomplish the task.

If you share the same vision, have 10 btc to spare or appropriate development skills for hire, please contact me at and let’s see if we can get this done.



Ugly Old Bitcoin Standard Bearer

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store