Finance has always been driven forward by technology, from the invention of double-entry bookkeeping by a Renaissance monk to the 20th-century quants who served up securitization, derivatives and high-speed trading. The next few years will be dominated by an attempt to reimagine money itself.

“ The European Union’s highest court has recognized bitcoin as a currency. The Bank of England has praised the potential of the blockchain. Nasdaq has started to experiment with it, and more than two dozen global banks have banded together to forge common blockchain standards for financial services. ”

Money has typically been based on a tangible, scarce and portable substance—often gold—or on tokens backed by the full faith and credit of a government. Today, proponents of the digital currency called Bitcoin urge that money can be nothing but computer code housed in a distributed network of heavy-duty servers, many of them in reassuring places like Inner Mongolia.

Are people about to entrust their life savings to a software project that can presumably be hacked? It sounds fanciful, but the World Wide Web began as an alien, leaderless network, and quickly emerged as the possessor of our most intimate secrets, from our financial details to our fantasies, licit and not. For the next few years, sensible folk will trust the Federal Reserve to manage the supply of dollars and protect their value. But if bitcoin comes packaged with seductive conveniences, it could eventually rival traditional currencies. Are people willing to surrender privacy to Google or Facebook? If it makes life simpler, faster or even just funnier, they are.

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The chief promise of btcoin is the “blockchain,” a system for establishing a tamper-proof digital record of who owns what. When you buy a house using dollars, you can pay lawyers to check that the seller really owns it. But suppose there was a rock-solid online record of who has title? When you buy a standard financial instrument, somebody has to register your ownership and monitor the flow of payments. Suppose that this was better automated, cutting costs and the risk of malfunction? The blockchain promises cheaper and more reliable transactions, and a smaller role for governments, lawyers, and those who manufacture trust.

Recently the establishment has woken up. The European Union’s highest court has recognized bitcoin as a currency. The Bank of England has praised the potential of the blockchain. Nasdaq has started to experiment with it, and more than two dozen global banks have banded together to forge common blockchain standards for financial services. Perhaps bitcoin’s innovations will be co-opted by the old guard; or perhaps bitcoin itself will win out. Either way, the money in your (digital) wallet will function differently from any we have known.

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Sebastian Mallaby is a senior fellow at the Council on Foreign Relations.