Is blockchain just big stones with holes?

An ancient currency on an island in the Pacific Ocean will ease the understanding of how the “revolutionary technology” works with “information technology chains”

Yap is an island located in Micronesia.

Scattered over the island, you can find some big round stones with a hole in the middle. They are called “Rai-stones”. These stones are the citizens’ private money.

The stones are too heavy to be moved. The biggest weighs up to four tons (about 8820 pounds).

The hole in the middle is made so you can put a stick through it and move them after all. First and foremost, from the island Palau to Yap. Palau was Yap’s answer to “The Royal Mint”. It was on Palau the stones were mined and later transported by canoe and outriggers to Yap. There they were in more than thousands of years used as assets and means of payment. 

Because the massive stones cannot be moved so easily, the system works so everyone on the island knows who owns which stones.

When a stone changes owner, everybody is informed. The stone is not moved. The change is downloaded to the collective memory.

Everybody also knows the value of the stone. Among other things, its value is determined concerning its history. A stone with an exciting and exotic history is more valuable than a stone with a dubious reputation.

The system has many advantages. Everybody is informed and involved and has thereby also accepted the system and the value of its elements. 

Should an owner die, then the stone does not lose its value. And a fact that must not be underestimated: the stone does not lose its value because a single owner owes himself to above the chimney.

The citizens of Zimbabwe and Venezuela would have had it a whole lot better if their values had been parked in large stones with holes in and not in banknotes guaranteed by the national banks.

The real points are that the system is transparent and that everyone accepts the reasons and knows the history.

There is a stone that ends at the bottom of the ocean. But since everyone agrees that it is still on the bottom of the ocean, it is included in the value chain like all the others.

We turn the time to the world in 2018 on the blockchain. During a networking event in Bangkok with blockchain technology as a headline, the presentation was opened with the story of Yap and the big stones with holes. Because it is the simplest way to explain the blockchain phenomenon.

Now we only use mathematical formulas and computers, but the principle is the same. Everybody knows everything and the history is complete.

 Blockchain is the underlying technology for cryptocurrencies. The transaction takes place directly between those involved with the blockchain chain as the common overall collective memory that cannot be changed. But every transaction is registered.

In Asia, there is a rapidly growing understanding that blockchain is a new technology that, like any other new technology, will disrupt and revolutionize the known systems. It is a superstructure on the Internet, which in this context is as old technology as the electricity and combustion engine.

 It’s massive decentralization, which means we can do everything directly with each other in a safe environment. It is still so early a stage in development that it hides a little the clouds, what it means to the individual. For now, the cryptic currencies have taken all the focus.

In 2016 a Chinese professor believed that in 2018 we would see the first changes in everyday life. Patrick Dai, from Asia’s largest blockchain platform, the Singapore-based Quantum Foundation, believes it may take ‘two, three, or maybe up to five years before technology becomes ‘consumer-based.

 The sharing economy will get a big boost because it is based on trust. Blockchain is a new way of transferring assets and values. From person to person with confidence based on math and computing power.

The Asian pioneers agree that we will experience the first breakthroughs within IoT (Internet of Things), health care, and supply chains.

 Governments are currently on the sidelines. Which always happens during new technological breakouts. But states and communities will also be able to use the technology, for more efficient service and legislation.

 The principle behind the Rai stones was created in the distant past. Now they also use credit cards and banknotes at Yap. But the stones still represent a value that changes hands at social events like weddings and funerals. Confidence in the system is still based on the common memory – now in the new technology blockchain, just parked in computers.

About the author

As an entrepreneur, Sven embraced the world of high-tech development and engineering. He traveled all over the world supporting projects from telephone to radar- and navigation sites. He joined the world of Compumatrix in 2006.
A GOAL is a mental anchor you throw into the future.


  1. Interesting read, Sven. Since the beginning, mankind has created methods of valuing assets. I agree that for anything to be of value, there must be agreement between two or more parties of that value, and that collective memory over time keeps the asset desirable.
    The blockchain then, is based on collective memory and the agreement that an asset is desirable.

  2. Very interesting Sven. Interesting that people always had a way to create wealth, The biggest rock, the most gold or most paper money. None of them really being worth any more than the other one. It was just in the minds of the people who agreed that it was so. Now that we have the block chain we can really keep track of what we own and trust in what we do as we trade using the computer system.

  3. Sven thanks for very illuminating and informative blog.I see your likening of cryptocurrencies/blockchains to the Rai-Stones of Micronesia.It thrived for several centuries on trust and faith and the value of each stone was honored. It was common,open knowledge of who owned what.Simile to that with digital currency is remarkable though a bit more sophisticated.

  4. Sven .. interesting read, now those stones were not easy to transport ,hole or no hole .. lol
    now the concept of the blockchain being a big stone with a hole in it is and interesting thought.The Mesopotaian shekle if I remember in studies was the know form of currency … That was used 4 or 5 thousand years ago .. Now Bitcoin and cryptos are our new currency . who would of thought. Wonder how many hundreds of years will there be another form of currency?

  5. Absolutely fascinating and such a lovely comparison to the ‘tech’ version. I love to learn new things, especially those with historic notes. For all the things one reads about the ‘scam of bitcoin’ the blockchain system cannot be so maligned. We are on the cusp of a big and marvellous change!

  6. what an interesting look at many perspectives — the thoughts behind possible scams ?? and the how to of so many different currencies through time — and just wonder out loud if being around couple hundred years ago and silver and gold — it is just a thought ?? great read truly —

  7. Now, that is a fascinating story, Sven! I love history, and the Zimbabwean Rai stones are actually an excellent analogy for the blockchain and cryptocurrency revolution. What’s old is new again, so to speak, and in this case, far more sophisticated! Like you said, it’s all about confidence in the system, and along with many, many others, I’m astounded at just how quickly, solidly and ingenuously the blockchain has been adopted, thus far!

  8. Sven,Very interesting story of Rai-stones,In ancient times, man made stone his asset,ever barter system,traded with various currencies,we are now entering the modern age of cryptocurrencies,trade and accumulation of assets has been human nature in every age,now our journey with the blockchain and crypto currencies is a long way off.

  9. Pretty hard to “scam” a stone, but at some point is was tried I am sure. A neat story/history about accepted means of wealth gathering. Missing for me is the “value” of the stone and what is the purchase power or is that not a format or use for a stone? Many types of currency around the world, from shells gathered on the beach to horses on the Plaines, but we have morphed to printed paper not backed with any value except trust.

  10. Good comparison analogy Sven! The Common Memory as you put it is also similar as historical documents, or the things such as istoria or provenance which follows paintings and other valuable assets around all of their existence to bestow heritage and value. Blockchain is not going anywhere as long as technology exists and continues to grow, and thus establish such a decentralized chain of preservation. So Sven I applaud your so vivid a comparison, and so often it is these comparisons that modern technology derives, or come from…. 1st a thought and then a eureka moment and we have innovations, and anyone can take part.

  11. Loved your story about the big stones with holes in them used for currency on the island of Yap! To me, this was much more interesting than reading mathematical formulas and computer programs. Though taking this idea and going with the times, the blockchain system that is decentralized is the new way to hold the value. (It was good to know that the person whose stone is on the bottom of the ocean floor still holds the value of that stone)

  12. What a great analogy to the block chain. YES, just a big rock with a hole in it. Collective memory being the factor that retains and keeps the value. The trust factor is eliminated, however, because of the math that proves the work done to bring a Crypto coin into existence and then traded on the block chain. It’s a beautiful system. As far as governments getting involved? They cannot control what they don’t own or create so they will always be on the ‘sidelines’ – except for the crypto they create which would be no different than the fiat, but just called crypto to make it look different 🙂

  13. Thank you Sven , I read your Blog with much intrest and how you used the big rock with the hole in it for currency and the blockchain comparison . I was wondering if they chipped off the rock to buy food. wonder what they gave for change. ( pebbles ) just kidding .. and thank goodness our crypto wallets are smaller that what one would need for that stone currency..
    Even though I am joking around , I really liked you blog and thank you so much. .

  14. Fascinating Sven. The stones are a good analogy for the blockchain. The stones are decentralized in that there is no issuing authority behind them. Everyone agrees on the value, and who owns them. Everyone agrees when there is change of ownership and who is the new owner. The key word here is Consensus.

  15. Very good and interesting blog. The blockchain, has always been a big mystery to me. When I go there I just sit and stare hoping some numbers and letters will jump out and explain to e why we are here. No big mystery that I feel so intimidated. I know I have to get more involve with this process because, I know that this is the future for many technologies to come, .and eventually it will involve us all whether we want it or not.

  16. What an enlightening read, Sven. Although the concepts of how the blockchain works are simple to grasp, they are not easy to explain. Now, when describing the blockchain to someone else, I now have a practical aid to which I can refer. A few examples:
    Just like cryptocurrencies, Rai-stones were not easy to mine.
    Secondly, the value of the stone was known collectively. The memory of the blockchain cannot be changed simply by changing a single computer. All computers have to recognize the creation or transfer of any cryptocurrency.

    1. Good point. This blog is one of the simplest explanations of how a blockchain works. What stood out to me was the fact that Rai stones with a dubious history were less valuable. In the blockchain, however, each transaction needs go through each block before it can be approved. This leaves no room for any doubt concerning its validity and maintains the cryptocurrency’s value.

  17. Great information and history lesson. I see the correlation between the stones and Blockchain. Somedays we wonder how things came to pass and your view of the stones makes a lot of sense. Having been involved with Blockchain contracts in the medical field, before it was popular, I understand how it works.
    Newer folks in our group are always leery of what the whole Blockchain System is or how it is adaptable to our program or similar programs that involve every aspect of our lives. There is so much in the way of “new” proposals daily. In my view Blockchain was a great discovery in Palau and Yap. All built on trust. Truly amazing. Thanks Sven

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