In Shelling Out: The Origins of Money, originally published in 2002, Nick Szabo, a polymath and early cryptocurrency visionary, offers a groundbreaking theory on how money emerged among early humans. Drawing on anthropology, evolutionary psychology, and economics, Szabo argues that collectibles—items like wampum shells, beads, and flints—served as proto-money, enabling cooperation, wealth transfer, and survival in ways other species couldn’t achieve. This seminal essay, still influential among Bitcoin developers and economists, reframes money as a tool for solving social dilemmas, with implications for understanding digital currencies today. Here’s a deep dive into Szabo’s insights and their enduring relevance.
Read the essay: Shelling Out by Nick Szabo
The Puzzle: Why Collectibles?
Szabo begins with a historical anecdote: 17th-century American colonists, short on coins, adopted wampum—clam shell beads used by Native Americans—as legal tender from 1637 to 1661. These shells, strung into necklaces, were not mere decorations but a functional currency, traded far inland and even used for loans. This puzzled Europeans, who saw only gold and silver as “real” money. Szabo uses this to frame a broader question: why did early humans, often on the brink of starvation, invest time in crafting seemingly frivolous items like shell necklaces, beads, or unusable flint blades?
His answer: these “collectibles” were not frivolous but critical to survival. They acted as proto-money, facilitating wealth transfers in trade, marriage, inheritance, tribute, and dispute resolution. Unlike modern money, collectibles had low velocity, changing hands rarely but adding immense value in high-stakes transactions. Szabo’s interdisciplinary approach—blending Carl Menger’s monetary theory with evolutionary biology—reveals how these objects solved cooperation problems that other animals couldn’t.
Collectibles as Proto-Money
Szabo defines collectibles as durable, scarce items—like shells, teeth, or ostrich eggshell beads—that served as stores of wealth and media of exchange. Archaeological evidence supports this: beads from South Africa’s Blombos Cave (75,000 BP) and Kenya’s Rift Valley (40,000 BP) show early humans crafted these items with skill, suggesting a practice dating back to Homo sapiens’ emergence. Unlike Neanderthals, who rarely collected such items, Homo sapiens used them prolifically, correlating with a tenfold population density increase in Europe around 40,000 BP.
Drawing on Menger’s 1892 theory, Szabo explains how collectibles evolved from barter. Barter required a “double coincidence of wants,” limiting trade due to mismatched needs and trust issues. Collectibles bypassed this by acting as a medium that didn’t require simultaneous exchange, enabling delayed reciprocity. For example, a tribe could trade surplus meat for shells during a hunt, later using those shells to buy food during scarcity. This reduced the need for trust or complex favor-tracking, making trade viable between antagonistic tribes.
Solving Cooperation Dilemmas
Szabo roots his theory in evolutionary psychology, citing John Maynard Smith’s work on evolutionary stable strategies. Humans faced cooperation challenges like the Prisoner’s Dilemma, where cheating often trumped mutual benefit. Collectibles mitigated this by serving as “formal tokens of delayed reciprocal altruism,” as Szabo echoes Richard Dawkins. They enabled wealth transfers in key institutions:
Starvation Insurance: Collectibles allowed tribes to trade food or foraging rights during shortages, as seen in the !Kung San’s hxaro system, where beads bought access to neighboring territories.
Marriage: Bride prices, often paid in collectibles, balanced unequal contributions between clans, forming closed-loop cycles of exchange.
Inheritance: Heirlooms passed wealth to kin, securing survival across generations, unlike other species.
Tribute: Victors extracted collectibles from the defeated, simplifying payment schedules and reducing violence.
Dispute Resolution: Collectibles like wampum paid “blood money” to settle disputes, curbing vendettas.
These institutions, Szabo argues, gave Homo sapiens a survival edge, explaining their population boom over Neanderthals, despite similar brain sizes and tools.
Attributes of Collectibles
Szabo identifies three key traits that made collectibles effective proto-money:
Security: Wearable or hideable to prevent loss or theft, like necklaces or buried caches.
Unforgeable Costliness: Hard to fake, with value tied to rarity or labor, such as intricate shell beads or mammoth ivory carvings.
Verifiable Value: Easily appraised through simple observation, ensuring trust in transactions.
These traits, universal across cultures, explain why humans instinctively collect rare items. Szabo suggests this “collecting instinct” is genetically evolved, as archaeologist Mary C. Stiner notes: “Ornamentation is universal among modern human foragers.” By 700 BC, Lydian coins refined these traits, standardizing value and boosting trade velocity, but collectibles laid the foundation.
Relevance to Bitcoin and Beyond
Szabo’s essay, written before Bitcoin’s 2008 inception, is prescient for its parallels to digital currencies. Bitcoin shares collectibles’ traits: its fixed 21 million coin supply is unforgeably costly (via mining), secure (via cryptography), and verifiable (via blockchain). As a decentralized ledger, it bypasses trust issues, much like wampum did for tribes. Szabo’s influence on Bitcoin is widely noted—some speculate he’s Satoshi Nakamoto, though he denies it. On X, users like @BitcoinIsSaving cite Shelling Out as “required reading” for understanding Bitcoin’s roots in monetary evolution.
The essay also critiques fiat currencies, echoing Broken Money and The Bitcoin Standard. Unlike collectibles or Bitcoin, fiat lacks scarcity, losing value to inflation. Szabo notes the 20th-century collectibles boom (e.g., eBay’s art market) as a hedge against fiat’s flaws, a trend still relevant in 2025.
Critiques and Reflections
Shelling Out is lauded for its originality, blending anthropology with game theory to explain money’s origins. Its dense, academic style can challenge casual readers, but its insights are profound. Critics note Szabo’s focus on collectibles may underplay other factors, like language, in human cooperation. Some question whether collectibles’ low velocity truly rivaled modern money’s impact, though Szabo emphasizes their role in high-value, infrequent transfers.
For Bitcoin enthusiasts, economists, or anthropology buffs, Shelling Out is a foundational text. It reframes money not as a government invention but as an emergent solution to human social dilemmas, with Bitcoin as its digital heir. Szabo’s vision—rooted in 75,000-year-old shell beads—offers a timeless lens on why we value scarcity and how it shapes our future.