Marc Hochstein is the managing editor of CoinDesk and a former editor-in-chief of American Banker. 

The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday exclusively to our subscribers.

"Neither a lender nor a borrower be."

Polonius' advice to Laertes in "Hamlet" might well have been a rallying cry for the early bitcoin adopters who sought an alternative to fractional reserve banking.

On a blockchain, an asset can be in your wallet, or it can be in my wallet. It cannot be in both at the same time. You can still lend it to me, but if you do, it's like letting me borrow your lawnmower – you can't mow your own lawn until I return it. Unlike banks as we know them, lenders of bitcoin cannot create money out of thin air, Jamie Dimon's comments notwithstanding.

Quite apart from providing an alternative to central bank money creation, however, cryptocurrencies and blockchains imply liberation from more prosaic forms of credit.

For example, the peer-to-peer architecture of cryptocurrency means transactions are continuously settled on a gross, or one-to-one, basis, rather than waiting to net out a batch of debits and credits across the books of a central intermediary.

Meanwhile, blockchain securities platforms such as tZERO seek to collapse Wall Street's Rube Goldberg assembly line of trade, clearing and settlement into something closer to "one and done."

And in an emerging type of crypto transaction called atomic cross-chain swaps, it is impossible for only one side of a trade to go through. It gets done, or it doesn’t.

All of these innovations should, in theory, reduce the need for credit to bridge the gap between trade and settlement, and lead us to a world without baffling distinctions on our bank statements like "current balance" versus "available balance."

And yet, credit, in various forms, is creeping into the blockchain economy.

Consider the following:

Some out there will say: Told you so.

According to one school of thought, credit, be it net settlement or fractional reserve banking, is necessary for a functioning financial system, and to think otherwise is naive utopianism.

Expressing this view, Perry Mehrling, an economics professor at Columbia University's Barnard College, exhorted techies to wake up and smell the interdependency in a September blog post:

But there's another way to look at the situation, which might be summed up as: there goes the neighborhood.

In other words, an influx of get-rich-quick types, whether they're individuals taking out loans to buy crypto or institutional investors seeking to juice returns with leverage, could encourage the sort of behavior that bitcoin was designed to escape.

Like, say, a hosted wallet provider lending out customers' bitcoin without telling them.

"I fear the financialization of bitcoin, in the sense that it may create phantom bitcoin that may not actually exist," said Caitlin Long, the president and chairman of Symbiont, an enterprise blockchain startup.

As a Wall Street veteran, Long doesn't fit the typical bitcoiner profile, but she's been personally investing in the cryptocurrency since as far back as 2013, when her day job was running the pension business at Morgan Stanley.

"As more of the non-philosophical owners of bitcoin come in to bitcoin, where you're seeing more and more of a push toward the financialization of it, I think that would be a shame," she said. "Even though it would boost the price in the short term, it would remove bitcoin from being a true store of value."

Switching back to the securities markets, Long said she doesn’t buy the argument that net settlement is necessary for a system to function. For one thing, the practice creates little-appreciated risks.

"As long as you're allowing net settlement, you're not forcing a true-up on every trade that there is one buyer and one seller," she said. "If you're allowing net settlement, what you're really doing is allowing multiple buyers for only one asset."

Hence situations like the court case this year in which brokerage firms had sold more shares in Dole Food than the company had actually issued.

Further, Long said, the global financial markets have dragged their feet in speeding up settlement times not because the status quo is efficient but because it's profitable for incumbents.

"The whole reason we have T+3, T+2 settlement is for securities lending," she said. "It's all about brokerage firms who want to be able to lend their clients' securities to other clients and take a spread."

In this light, blockchains are not the mere fantasy of a coterie of anarcho-capitalists and Silicon Valley propellerheads, as a number of skeptical academics, journalists and bloggers make the technology out to be.

Rather, if put into wider practice, blockchains might dispel many current, widely held fantasies.

To be sure, there may be times where credit (ultimately another word for "trust") is truly unavoidable. By trusting me not to run out the door without paying, the grocer is in a sense extending me credit for the minute or so between when I pick up a jar of pickles from the shelf and when I pay at the counter.

And when you order a pickle slicer from Amazon, you are in a way extending credit to the retailer by paying and waiting a few days for the delivery.

But these are transactions involving physical objects, and the "loan" terms are only as long as they need to be. When the items being exchanged are purely electronic abstractions (as money and securities increasingly are), what purpose does credit (waiting to be remunerated) serve?

It's a question that we should at least ask, and demand better answers than "this is the way it's always been done."

This above all: To thine own trades be true.

Shadow image via Shutterstock