I have to disagree somewhat with a few points Mike made. I would say that gold and diamonds do have intrinsic value, based on their beauty and the desire of people to own them. I think it is too simplistic to denigrate these desires as the product of advertising. The feelings that people have which make them desire these things are as legitimate as other forms of desire. Along these lines, I think one of the factors which made gold and silver coins accepted as money was their intrinsic value. Even without being certain that another person would take the coin, a person might accept payment in such a coin because of its inherent value to him. Other early forms of money, such as beads or tobacco, also had intrinsic value in their time and place. One area I would agree with Mike is that these items may not always retain their value, since part of it is psychological. And as with any other commodity, if new supplies became available their value would fall. This might be especially pronounced with gold and diamonds since part of their value is due to their intrinsic rarity. Diamonds as common as glass would not be worth much more. (Of course, government money as common as paper is worth the same as well, as hard experience has taught us.) A particular issue of "digital cash" could be denominated or backed by anything the issuer thinks there is a market for. Gold backed digital currency would have certain advantages and disadvantages. Currency could be backed by a basket of commodities, or a synthetic average of several countries' currencies. You would not exchange your dcash for a bushel of wheat and a barrel of oil, but rather for dollars or pounds equal to the market value of these commodities. These and more elaborate possibilites are no more difficult to imagine than mutual funds or stock market index futures, not to mention the more complex synthetic investments. Hal