Privacy is Fungibility: Why Endogenous Tokens Are Not Money

In this paper, we make a case that endogenous tokens such as cryptoassets are not money. First, we define and classify tokens found on public, permissionless ledgers, contrasting them with privately issued stablecoins and proposed CBDC designs. We then discuss the work of Kahn et al in Money is Privacy on cash versus simplified credit, and we extend their analysis to the situation found on most public, permissionless ledgers. Many public, permissionless ledgers utilize an account-based abstraction for balances, resulting in a default state that maps onto the most harmful models of agent interaction enumerated in Money is Privacy. The conclusion is threefold: that most blockchain economies lack a cash-like primitive; that stablecoins do not intrinsically fulfil this role; and that the reliance of a network on an endogenous token for security exposes holders even of a privacy-preserving asset to the same risk, if that asset relies on the same global ledger state as the endogenous token.