The earth-shattering thing about bitcoin isn’t its fixed money supply. It’s not the carefully tuned algorithm that keeps its growth at a steady rate, or the inability of a political body to play with its value. What’s new and government-toppling about bitcoin is that it’s a framework for starting a new economy.
Gold and silver have coexisted with governments and nation-states for thousands of years. If the economic properties of bitcoin — its finite supply — were inherently state-smashing, we’d be living in a very different world before the computer were even invented. No, bitcoin’s revolution isn’t what the Bitcoin Foundation calls its “non-political economy.”
In fact, you could argue that “non-political economy” is an oxymoron. If we define “political” as only referring to the workings of a state, then sure, you can have a non-political economy. But in the colloquial way that people often talk about “politics” — the “internal politics” of a workplace or social club, for example — there’s no such thing as a non-political economy. Any kind of money — whether it’s gold, dollars, bitcoin, or licking things to claim them as your own — only has any value if everyone in the economy agrees that it does.
You could say that this observation doesn’t challenge the neoclassical economic theory of money very much at all. For example, bitcoin has value because there’s a demand for it, plus it’s in short supply. This is like saying that general relativity is consistent with the Genesis story, because the Earth could have been created in six “relative” days. It’s not technically wrong, just not a very helpful way of looking at the world.
I like the way David Graeber puts it in Debt:
[Money] is not a “thing” at all. You can no more touch a dollar or a deutschmark than you can touch an hour or a cubic centimeter. Units of currency are merely abstract units of measurement…If money is just a yardstick, what then does it measure? The answer [is] simple: debt. A coin is, effectively, an IOU.
Brett Scott expands on this:
Perhaps we can tinker with the word ‘money’ itself. It’s a mass noun, like you’d use for some kind of tangible substance, and it makes money sound like a ‘thing-in-itself’. As a kind of mental discipline, I prefer to use a different word: COGAS. It stands for ‘claims on goods and services’, which is all money really is.
So money is just a way of measuring who owes what: you give me something or do something for me, and now I owe you something equally valuable in return. That’s a social relation. And if a big group of people get together to agree on how their social relations should work, it suddenly starts to look political. Even the decision to use bitcoin requires the initial political decision to not screw with its politics in the future.
But wait just a minute. You see what just happened? A group of people decided that instead of using a national currency, with properties they don’t like and can’t control, decided to instead use bitcoin. That’s your revolution.
Bitcoin’s real contribution to the world is its source code. The blockchain, the network protocol, the cryptographic verification — anyone can take this and build a currency with any economic properties their community needs. I’m not convinced that bitcoin’s Austrian School properties can sustain a global (or even local) economy, but you know what? That’s okay. If I ever feel the bitcoin economy has become too unequal, unbalanced, or stagnant, it’s now trivial for me to start my own damn currency.
A single bitcoin belongs is a measurement like a centimeter, but the bitcoin community is a social network. People use bitcoin because other people they trade with use bitcoin. If my town is running low on bitcoin but has a lot of resources to share internally, we can create our own local currency to free up bitcoin for importing and exporting. Or I could join an online network of artists who work on one another’s projects, and we’d create our own internal currency that plays by whatever rules we need it to.
There is no perfect monetary system for every situation. Bitcoin is not going to be the one world currency, and it doesn’t need to be. A lot of people compare Bitcoin to the Internet, but it’s more like CompuServe. It’s the first of many digital, non-state currencies to come, that will all interoperate with each other in ways we can’t even dream of yet.
Definitely read the whole Brett Scott article quoted above. It’s a great piece on the nature of money, and what inventing a bunch of different currencies could mean.