As cryptocurrency soared in popularity in the late 2010s and early 2020s, there have been a lot of efforts to bridge the gap between the physical and the digital, and between the world of fiat currency and crypto.
The most effective examples have been the use of crypto cards which work both as debit cards for fiat currencies and and allow for easy on-ramps into crypto, enabling as seamless a transition as possible from crypto to cash and back again.
However, whilst this is the best way to integrate the physical and the digital, this is far from the only way, and almost from the very beginning of crypto’s history, there have been attempts to make physical representations of a currency that, by definition, only exists on the blockchain.
Literal Bitcoins
The concept of a physical cryptocurrency existed before even the concept of cryptocurrency as we recognise it today, and it is worth not only looking at these early progenitors but also the concept more broadly.
An early paper detailing the functionality of prototype digital currency Ecash explored the idea of completing transactions using the concept of blind signatures.
It was defined as similar to a type of traveller’s cheque, a type of universal currency popular before the rise of transaction cards and apps that could operate using dozens of currencies such as the Volta Card.
In practice, it worked like a gift card or gift voucher, where a sum of money would be given to the operating company for a supply of physical currency, that would, in turn, be used at participating retailers
E-gold, the first electronic currency with any form of notoriety or infrastructure, technically had a physical currency in the form of actual gold, which the digital currency was pegged to the value of.
However, in all of these cases, it was about a physical representation of a unit of value, be it a fiat currency (making Ecash a nested promise to pay the bearer on demand) or a unit of gold akin to how many currencies used to function.
Fiat currencies work fundamentally like this; whether a coin, a bank note or money in a bank account, none of those units of currency are the actual money but serve as representations of them.
Cryptocurrencies starting with Bitcoin, however, were functionally very different. If you had ten
Bitcoins in your wallet, not only would you be flabbergastingly rich, but you actually owned those
Bitcoins. What was in your wallet is, for all intents and purposes, the real currency.
However, as Bitcoin increased in popularity and interest, there was an interest in having physical forms of it rather than the coin serving as a number in a small program accessed via two keys.
Technically, the first physical crypto is a hardware wallet, which could take the form of a USB drive or bespoke piece of technology, or it could be as simple as a piece of paper with the public and private keys written down on it.
However, some opted instead to etch the numbers onto a stronger, less delicate material such as metal, and if you have already gotten to the point where you have made a metal plate with the keys on it, then it does not take much longer to get the idea to turn the metal plate into a round coin.
This led to the rather iconic Bitcoin logo being engraved onto brass coins and the concept of a physical coin.
The most famous and infamous of these was the Casascius coins created by Mike Caldwell, which consisted of a standardised design with a code printed on it which represents the value of the coin and can be used to transfer the coin into a wallet.
This means that up until the tamper-proof seal was removed and the code revealed, they could be transacted like they were any other coin.
They were very popular for a time, and over 91,000 BTC in nearly 28,000 coins were minted by Mr Caldwell, but it very quickly became a victim of its own success.
The Financial Crimes Enforcement Network (FinCEN) learned about the coins and soon informed him that mining Casascius coins with actual Bitcoin representation officially makes him a money transmitter, which requires a licence and led to the suspension of sales in 2013.
This has made them very popular collector’s items and has not stopped purely ornamental physical bitcoins from being made.
There are other, more recent attempts to make crypto notes, but it is difficult to see how, unless the law changes, so-called smart banknotes would not fall into the same problems.