I’m struggling to decide whether or not Bitcoin (and cryptocurrency in general) is a capitalist tool, or a conspiracy to exploit it.
It doesn’t help that nobody can explain it plainly.
The original white paper, penned by Satoshi Nakamoto (still an unsolved nom de plume), reads like it’s an outline of time travel or something. Stories about factories in China mining the stuff raise more questions than they answer: for starters, “mining” is a familiar word, though here it describes computers solving complex problems, and therefrom inventing more Bitcoin out of digital air.
The fact that Silicon Valley startups are rushing to exploit it is about as comforting as the Winklevoss twins’ early efforts to corner the market.
I get that it’s the currency of choice for ransomware attacks and drug dealers, but why highlight those benefits by calling it “crypto, which means secret or hidden?
So is Bitcoin a plot to undermine the economy? No, but its proponents are much to blame for the misunderstanding. I dared to write at Forbes a few years ago about its implications for markets and valuation, and a horde of fanboys stepped up to tell me I didn’t get the tech right, or otherwise had no business commenting about their business.
Those implications deserve to get talked about more often.
Money (currency) is a platform for assigning value, guaranteed by the authority of an issuing government, so we don’t have to barter with one another. Governments not only make it cash or its digital simulacra “legal tender,” but change it via monetary policy. Value is variable, decided by monetary policy and comparisons to other currencies.
Bitcoin blows that up. No government owns it, and the only reason its value fluctuates is when people’s opinions of it change, and then get expressed in one of those fiat currencies (that fluctuates). So it could be the ideal mechanism for capitalist markets worldwide, kind of like an Esperanto for transactions.
This is one of the places the whole crypto-thing gets in the way, along with the gobbledegook about how Bitcoin even come to be. Anonymity isn’t the selling point…cash was (and is) anonymous…but rather its independence, along with the potential transparency behind it.
And then the implications get far bigger.
Transactions, or any interactions between people more broadly, usually require institutions, processes, services, and other qualifiers and enablers: things like buying or selling a house, trading equities, and factory supply chains don’t just involve handing over cash. Larger transactions get more complicated and time consuming, or are the exclusive domain of institutions that possess the infrastructure and reputation to accomplish them.
Blockchain, the concept underlying Bitcoin, blows that up, too. Imagine the public ledger that enables Bitcoin transactions as a platform for also keeping records (which are vetted by users for accuracy). Money would have a memory, or long tail, thereby obviating the need for any other authorities to verify or approve its use.
This would change the very concept of markets, insomuch that the information that enabled transactions would be embedded in the transactions themselves. Commerce could be conducted by anyone, anywhere.
That’s the very definition of a laissez-fair economy, isn’t it?
Again, the crypto-thing doesn’t do this idea justice, since the driver of such revolutionary change wouldn’t be anonymity, but rather the inescapable reality of disclosure.
Bitcoin (and blockchain generally) could well be tools that improve capitalism, but right now it all comes across as a sideshow…and somewhat threatening to we who are uninitiated in its dark arts.
What’s a good antonym for crypto?[this essay originally appeared at Recapitalism]