Introductory Economics teaches that there are 3 fundamental properties of money: divisibility, transferability, and storing of value. Traditionally, various commodities which were rare, small, and relatively indestructible such as precious metals were the dominant currency or at least backed the value of dominant currencies. As governments became more stable and dominant in people's lives in the last two centuries, they were able to abandon all commodity backing of their treasury notes whilst letting currencies stand on their own merit as stores of value. This served to further governments grip over its populace by permitting enormous macroscopic control over wealth, interest rates, and inflation in the economy for good or ill.
We are now entering the information age where anyone may be able to create their own effective "virtual" currencies through modern technology. This soon will allow encrypted and anonymous transactions which will effectively transfer value beneath the radar of government. Governments will try to suppress this activity, but ultimately currency simply represents information and the preservation of information is a law of physics. With satellite internet available in a wristwatch, who will possibly be able to destroy the flow of information? Currency is an important example of the gradual inevitable decline in power and authority of governments and the rise of the multinational corporations as the dominant world powers of the future. After all, the modern system of Nation-States is an idea less than 200 years old, having been created at the Congress of Vienna. It will pass, like all previous forms of rule and diplomacy, into mere history texts.
The currencies of the near future will be varied, exchangeable, customised to individual financial needs and desires, and backed by a tradable basket of securities. To buy a haircut, you could be paying with shares of IBM and GOOG whilst the barber is receiving credit towards his new telescreen and futures contracts on organic wheat. I must thank David Friedman for first sharing this revelation with me in his book 'The Machinery of Freedom.'
This post was prompted by this WSJ article describing the current "virtual" currency, QQ, now being suppressed in Zhong Guo for doing just what I have described, undermining the legitimacy of the Yuan. As with other forms of information oppression, Zhong Guo is doomed to fail.