What Iceland’s history reveals about the future of money
Sweater season offers economic lessons for 2025
Hi there,
I hope you’ve all been busy enjoying pumpkin season! It’s one of my favorite times a year.
If you hadn’t noticed, I’ve turned off the subscription payments for this newsletter and will keep it free until I can return to monthly posts. That means it’s a great time to share with anyone you think might enjoy it, because all the formerly paywalled content is now free as well.
Meanwhile, at work, I’ve been writing a series of guides related to growing your income and sustainable shopping habits. The latter encouraged me to explore the history of cozy sweaters, since wool is one of the most eco-friendly clothing materials available in relatively affordable varieties.
There are quite a few economic lessons still relevant to our world of international transactions, especially when we think about the Vikings.
When you think about sweaters, there are several internationally popular styles that may come to mind. The Fair Isle sweater style is one, named for the Shetland Islands that were a vital outpost for the Vikings roughly 900 years ago, and perhaps also a few other Nordic-inspired styles, such as the lopi (aka lopapeysa) sweater, which increased in popularity just a century ago as Icelandic people returned to using more local wool at home. The photo of me above shows an example of a lopi sweater.
Before winter fashion styles became a widespread export from these regions of Europe, cloth was used as a type of currency (called vaðmál) in communities short on silver. It was perfect for cross-border transactions and ideally suited for unbanked communities.
Not All Types Of Money Become Cash
Archeologist Michèle Hayeur Smith wrote in her book, “The Valkyrie's Loom,” that “cloth was used for all legal transactions, to pay tithes and taxes or settle fines, for internal trade and for export as well as home consumption.” As the book title suggests, cloth and clothing production was largely considered women’s work.
There were medieval laws regulating what type of cloth could be used as currency and how it was valued (usually measured in silver, the way that today we often describe bitcoin’s market price using dollars). This homemade cloth became so widespread on these chilly islands and peninsulas that Smith wrote, “it is ubiquitous as a measure and medium of exchange in Icelandic legal texts, sales accounts, church inventories, and farm registers into the 17th century.”
The cloth currency slowly decreased in prevalence over roughly 200 years as foreign powers (like Denmark for Iceland or England for Scotland) strived to enforce economic laws that benefited the colonial power. However, there’s still evidence of communities engaging in peer-to-peer trade. Forbidding cloth trade didn’t stamp it out. Only access to more efficient money alternatives killed the cloth currency, over centuries, in a death by a thousand cuts.
I won’t dive into how inflation impacted the use of cloth as currency in centuries past, instead quickly fast-forwarding to say that, while reading, I was struck by how many similarities there are between vaðmál and digital assets. The notion of self-custody and peer-to-peer transactions, regardless of any central bank or middleman, stands out as one such similarity. And, although it may not be the best money, it is useful in specific circumstances.
Self-Custodied Money Can Survive For Centuries
According to Orri Vésteinsson, an archeology professor at the University of Iceland, land, cattle, gold and silver were preferred forms of money when people had access to them. Vaðmál was primarily used as a store of value, he told me via email, and would be better described as a commodity rather than as cash.
“The modern analogue to this is the commodities market, where commodities can be exchanged directly on the basis of their own value even if for modern minds it is impossible to conceive of this without translating the value into the currencies we use, dollars, euros etc.,” Vésteinsson said.
There’s a lot of debate surrounding crypto today regarding whether it is a “better” money than dollars, which are subject to inflation, or if bitcoin is even money to begin with. After all, we don’t consider commodities like oil a type of money. There’s debate over whether the core functionality of crypto is trading and storing value or to eventually be used as cash. Perhaps the answer is, like vaðmál, it is a better store of value for people who can’t use land to do so (since it’s stationary) or cattle (which die faster than cloth decomposes) or gold (which is hard to move in large quantities). And it can be used as a cash of last resort in rare circumstances.
Servants were often paid in vaðmál, Vésteinsson said, but only because they had a subsistence lifestyle that revolved around bartering. People who had expendable income used silver or gold. Maybe having money that is rarely used as cash is perfectly functional for a few hundred years, until better technology comes along.
Vésteinsson emphasized that the cloth commodity was valuable because it could keep people warm in cold environments. It would eventually be worn. Yet any old sweater couldn’t have been substituted, because the regulation of vaðmál is what gave it widespread export value to other Nordic regions.
According to Smith’s book, the cloth regulations changed over time, becoming stricter and more clearly defined. This means the same piece of cloth might trade hands a few times then eventually be retired for wearing as the vaðmál norms changed. Yet the asset class itself survived for centuries.
There is no money without regulations. Fashion, on the other hand, offers more flexibility in both form and function.
Global Fashion Trends Require International Transactions
Homemade cloth production continues to be a valuable form of women’s work. Knitting is popular throughout Iceland today, for both exported sweaters and local tourism. Tour guide Hélène Magnússonis told me that between 1200-1500 tourists came to take her Icelandic knitting tours over the past decade. And she’s already completely booked tours in 2025 that cost roughly €2,100-2,800 each, not including airfare.
“Knitting came to Iceland relatively late, in the beginning of the 16th century, but it became right away an important part of our economy and culture,” Magnússonis said. “The Icelandic sheep and its special wool has a lot to say in that matter. Today knitting is still very much a living tradition that goes way beyond the iconic Icelandic lopi sweater.”
Thanks to platforms like Etsy, knitted sweaters are now a popular export for skilled craftswomen seeking access to international markets.
For example, Icelandic knitwear designer Jóna Örlygsdóttir sells hundreds of handmade sweaters every year via Etsy and a German website for handmade goods called DaWanda. She also made my sweater pictured above.
“Everybody here knows someone who can knit a traditional lopapeysa,” said Örlygsdóttir. “I get most of my orders from Germany and North America, but also from Canada and other countries in Europe. I have also knitted a few sweaters for Japanese people.”
These days, any knitwear company around the world might offer a version of lopi sweaters, while dozens of retailers on Amazon sell Fair Isle-inspired sweaters, in addition to mainstream brands like J.Crew. But the most eco-friendly way to acquire the style is a handmade version, not by a fast fashion company. And in Kyiv, Ukraine, the mother-daughter duo behind WoolpointKnitwear has tapped into that market for handmade sweaters. Any style you want, they can make it.
Yana Dziumak, the business-oriented daughter, told me that COVID robbed her family of their former jobs. Then when the war crippled the local economy, they looked for something they could do while staying close together. Her mother’s knitting skills became a boon for the family, armed with an Instagram account (they can accept custom orders via DM and transact directly using crypto wallets, although most customers prefer Etsy) and a knack for self-styled photo shoots.
“We use battery-powered lamps and can work without light, and thankfully, our postal service is equipped with generators to keep operating even in the harshest winter days without power. So we stay resilient—we can’t afford to give up,” Dziumak explained how they continue even when the war knocks out their power for several days. “Almost every time I try to photograph new designs for our shop, the shoot is interrupted by air raid sirens or explosions…. It sounds terrible, but we know one thing for sure—we are on the home front and have no right to give up.”
Shipping is the biggest hurdle for their small business, not money. They have access to both self-custody wallets and international credit card transactions. Gone are the days when people needed to barter with cattle. However, cloth retains value and feminine skills endure, even when other white collar jobs become scarce.
“With the skies closed over Ukraine due to nightly air attacks from Russia, we've had to adjust,” Dziumak said. “Packages now travel by truck to Poland, where they can finally be sent by air. Despite these challenges, we maintain a delivery timeframe of 5-9 business days for express orders.”
Handmade sweaters are not as cheap as fast fashion sweaters. However, they’re still more affordable than luxury brands. And they are a more sustainable option than mass produced knitwear, which is also shipped internationally. The key to incorporating sustainability principles into your closet is to value clothing rather than treat it as disposable.
Whether or not you’re interested in cozy fashion during sweater season, I hope you’ve been as inspired as I was to learn about the evolution of cloth and trade across Europe.
I’m not entirely sure which digital asset projects I’ll experiment with next year. (I always love hearing from subscribers about what you’re up to!) No matter what it is, I’ll keep y’all informed via this newsletter so we can continue on this journey together, figuring it out as we go.
Until next time, take care everybody!