IDEAS home Printed from https://ideas.repec.org/a/eee/streco/v69y2024icp83-95.html
   My bibliography  Save this article

Technology versus trust: Non-bank credit systems from notarized loans in Early Modern Europe to cryptolending

Author

Listed:
  • Fantacci, Luca
  • Lorenzini, Marcella

Abstract

The application of distributed ledger technology (DLT) in the financial sector has fostered the development of new services that are frequently referred to collectively as ‘decentralized finance’, or DeFi. In the wake of these recent developments many observers and practitioners regard DLT as a major technological disruption to the financial system, possibly leading to the complete disintermediation of banks and to their substitution with a network of bilateral relations between borrowers and lenders recorded in a common ledger. Recent historiography has shown that a potentially analogous system existed in Ancien Régime societies whereby finance was provided not only by specialized intermediaries, but also by an ‘informal’ credit network where debtors and creditors entered directly into relationship through notaries. In this paper, we carry out a systematic comparison between cryptolending, an extreme form of DeFi at the technological frontier, and the early system of peer-to-peer lending represented by notarized loans in the early modern period. Our aim is to assess the true novelty of current practices and to understand if, and in what sense, the technological innovation represented by DLT can effectively produce a structural change in the functioning of the financial system.

Suggested Citation

  • Fantacci, Luca & Lorenzini, Marcella, 2024. "Technology versus trust: Non-bank credit systems from notarized loans in Early Modern Europe to cryptolending," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 83-95.
    • Handle: RePEc:eee:streco:v:69:y:2024:i:c:p:83-95
    DOI: 10.1016/j.strueco.2023.11.010
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0954349X23001662
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.strueco.2023.11.010?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Pompermaier, Matteo, 2022. "A complicated puzzle: spinsters, widows and credit in Sweden (1790–1910)," Financial History Review, Cambridge University Press, vol. 29(1), pages 29-51, April.
    2. Philip T. Hoffman & Gilles Postel-Vinay & Jean-Laurent Rosenthal, 1998. "What do Notaries do?. Overcoming Asymmetric Information in Financial Markets: The Case of Paris, 1751," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(3), pages 499-499, September.
    3. Jiahua Xu & Nikhil Vadgama, 2021. "From banks to DeFi: the evolution of the lending market," Papers 2104.00970, arXiv.org, revised Dec 2022.
    4. Marcella Lorenzini, 2018. "Borrowing and Lending Money in Alpine Areas During the Eighteenth Century: Trento and Rovereto Compared," Palgrave Studies in the History of Finance, in: Marcella Lorenzini & Cinzia Lorandini & D'Maris Coffman (ed.), Financing in Europe, pages 107-134, Palgrave Macmillan.
    5. Giuseppe De Luca & Marcella Lorenzini, 2018. "Conflicts, Financial Innovations, and Economic Trends in the Italian States during the Thirty Years’ War," Palgrave Studies in the History of Finance, in: Lilia Costabile & Larry Neal (ed.), Financial Innovation and Resilience, chapter 0, pages 165-185, Palgrave Macmillan.
    6. David Carvajal, 2018. "Private Credit in Spain During the Late Eighteenth and the Early Nineteenth Centuries: Institutions, Crisis and War," Palgrave Studies in the History of Finance, in: Marcella Lorenzini & Cinzia Lorandini & D'Maris Coffman (ed.), Financing in Europe, pages 207-236, Palgrave Macmillan.
    7. Sirio Aramonteand & Wenqian Huang & Andreas Schrimpf, 2021. "DeFi risks and the decentralisation illusion," BIS Quarterly Review, Bank for International Settlements, December.
    8. De Filippi, Primavera & Mannan, Morshed & Reijers, Wessel, 2020. "Blockchain as a confidence machine: The problem of trust & challenges of governance," Technology in Society, Elsevier, vol. 62(C).
    9. Carboni, Mauro & Fornasari, Massimo, 2019. "The ‘untimely’ demise of a successful institution: the Italian Monti di pietà in the nineteenth century," Financial History Review, Cambridge University Press, vol. 26(2), pages 147-170, August.
    10. Franklin Allen & Elena Carletti & Itay Goldstein & Agnese Leonello, 2015. "Moral Hazard and Government Guarantees in the Banking Industry," Journal of Financial Regulation, Oxford University Press, vol. 1(1), pages 30-50.
    11. Darrell Duffie, 2019. "Prone to Fail: The Pre-crisis Financial System," Journal of Economic Perspectives, American Economic Association, vol. 33(1), pages 81-106, Winter.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhang, Ying & Gong, Bing & Zhou, Peng, 2024. "Centralized Use of Decentralized Technology: Tokenization of Currencies and Assets," Cardiff Economics Working Papers E2024/14, Cardiff University, Cardiff Business School, Economics Section.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. BELAŞCU Lucian & HOROBEȚ Alexandra & MNOHOGHITNEI Irina, 2022. "Bitcoin is so Last Decade – How Decentralized Finance (DeFi) could Shape the Digital Economy," European Journal of Interdisciplinary Studies, Bucharest Economic Academy, issue 01, March.
    2. Raphael Auer & Bernhard Haslhofer & Stefan Kitzler & Pietro Saggese & Friedhelm Victor, 2024. "The technology of decentralized finance (DeFi)," Digital Finance, Springer, vol. 6(1), pages 55-95, March.
    3. Abate, Giorgio & Branzoli, Nicola & Gallo, Raffaele, 2023. "Crypto-Asset Markets: Structure, Market Developments in 2022 and Policy Considerations," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 76(3), pages 353-386.
    4. Jacobs, Mattis & Kurtz, Christian & Simon, Judith & Böhmann, Tilo, 2021. "Value Sensitive Design and power in socio-technical ecosystems," Internet Policy Review: Journal on Internet Regulation, Alexander von Humboldt Institute for Internet and Society (HIIG), Berlin, vol. 10(3), pages 1-26.
    5. Schinckus, Christophe, 2022. "A Nuanced perspective on blockchain technology and healthcare," Technology in Society, Elsevier, vol. 71(C).
    6. repec:arp:sjbmms:2022:p:1-7 is not listed on IDEAS
    7. Carlo Campajola & Marco D'Errico & Claudio J. Tessone, 2022. "MicroVelocity: rethinking the Velocity of Money for digital currencies," Papers 2201.13416, arXiv.org, revised May 2023.
    8. Aikman, David & Bridges, Jonathan & Hacioglu Hoke, Sinem & O’Neill, Cian & Raja, Akash, 2019. "Credit, capital and crises: a GDP-at-Risk approach," Bank of England working papers 824, Bank of England, revised 18 Oct 2019.
    9. Miquel-Flores, Ixart & Reghezza, Alessio & Buchetti, Bruno & Perdichizzi, Salvatore, 2024. "Greening the economy: how public-guaranteed loans influence firm-level resource allocation," Working Paper Series 2916, European Central Bank.
    10. Schnabel, Isabel & Weder di Mauro, Beatrice & Schäfer, Alexander, 2016. "Bail-in Expectations for European Banks: Actions Speak Louder than Words," CEPR Discussion Papers 11061, C.E.P.R. Discussion Papers.
    11. Steven J. Davis, 2019. "Rising Policy Uncertainty," NBER Working Papers 26243, National Bureau of Economic Research, Inc.
    12. Zuobin Ying & Wusong Lan & Chen Deng & Lu Liu & Ximeng Liu, 2023. "DVIT—A Decentralized Virtual Items Trading Forum with Reputation System," Mathematics, MDPI, vol. 11(2), pages 1-23, January.
    13. Böyükaslan, Adem & Ecer, Fatih, 2021. "Determination of drivers for investing in cryptocurrencies through a fuzzy full consistency method-Bonferroni (FUCOM-F’B) framework," Technology in Society, Elsevier, vol. 67(C).
    14. Saengchote, Kanis, 2023. "Decentralized lending and its users: Insights from compound," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 87(C).
    15. Pompeu Casanovas & Louis de Koker & Mustafa Hashmi, 2022. "Law, Socio-Legal Governance, the Internet of Things, and Industry 4.0: A Middle-Out/Inside-Out Approach," J, MDPI, vol. 5(1), pages 1-28, January.
    16. Kaire Põder, 2010. "Credible commitment and cartel: the case of the Hansa merchant in the guild of late medieval Tallin," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 10(1), pages 43-60, June.
    17. Janbaz, Mehdi & Hassan, M. Kabir & Floreani, Josanco & Dreassi, Alberto & Jiménez, Alfredo, 2022. "Political risk in banks: A review and agenda," Research in International Business and Finance, Elsevier, vol. 62(C).
    18. Wee Chian Koh & Shu Yu, 2021. "A Decade After the 2009 Global Recession: Macroeconomic Developments," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 12(02), pages 1-24, June.
    19. Vernikov, Andrei, 2019. "The drivers of institutional change in a post-socialist economy: The case of deposit insurance introduction in Russia," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 11(1), pages 129-143.
    20. Leonello, Agnese, 2018. "Government guarantees and the two-way feedback between banking and sovereign debt crises," Journal of Financial Economics, Elsevier, vol. 130(3), pages 592-619.
    21. Chand Bhatt, Priyanka & Kumar, Vimal & Lu, Tzu-Chuen & Daim, Tugrul, 2021. "Technology convergence assessment: Case of blockchain within the IR 4.0 platform," Technology in Society, Elsevier, vol. 67(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:streco:v:69:y:2024:i:c:p:83-95. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/525148 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.