Banking On Bitcoin | Reflections

Banking on Bitcoin, 2016 [NR]

Reflections

I think it’s appropriate to begin with this thought, as written by Harari:

Money is not coins and banknotes. Money is anything that people are willing to use in order to represent systematically the value of other things for the purpose of exchanging goods and services. (177)

Therefore, while many modern people will be quick to spurn Bitcoin as a “scam” or even treacherous to the security of our financial systems, we must also consider that dollars, cents, and euros are no different in category to Bitcoin, even if it may be different in kind and substance.

With that being said, the questions around Bitcoin, then, is not if it is real (it is), and not if it is valuable (it is). The questions in my mind are whether or not the platform of Bitcoin will be able to, a) sustain its trust with the current cohort of investors, b) break through a broader collective to be competitive to the current financial systems, and c) avoid enough government regulation as to be a truly independent form of currency.

a) I have a feeling that the current cohort of investors will be on board for a long time, and they’ll continue to attract additional “early adopters” who will sustain the existence of Bitcoin for the foreseeable future. Bitcoin is not going away, and it will outlive its critics and detractors.

b) I am dubious that Bitcoin will break through to a larger collective, for three main reasons. The first is that there are limited Bitcoins (21 million) to be “mined.” That’s enough to create an artificial inflation of value (and make some people really rich), but it’s not enough to become a truly honest alternative to our existing currency. Second, therefore, is simply that Bitcoin is expensive, and its inflation is unsustainable. And, third, regulation.

c) As was featured in the film, there is no way Bitcoin is going to escape government regulation. For right or wrong, just like currency is a system of human organization, so too is government, and those authorities (and the citizenry) have a vested interest in ensuring the stability of its populace. If Bitcoin were to have broader reach without those government controls, not only would governments not like it, but there is a substantive risk of wreaking havoc on people through another avenue of wealth disparity.

The film highlighted the beginnings, philosophy, and legal battles of Bitcoin, but did not give much detail on how one actually gets Bitcoin, which is done through a process of “mathematical mining”:

After that, one can simply purchase Bitcoin from an Exchange, but as with other kinds of currency acquisition, costs are differentiated dependent on a whole host of factors.

It

was fairly shocking to learn of Charlie Shrem‘s imprisonment. It is understandable why people mistrust the government, and evaluate governments as being misunderstanding. They are, after all, like every institution, run by people.

Penultimately, Harari’s writing is critical to consider:

People are willing to do such things when they trust the figments of their collective imagination. Trust is the raw material from which all types of money are minted. … Money is accordingly a system of mutual trust, and not just any system of mutual trust: money is the most universal and most efficient system of mutual trust every devised. (180)

Money has an even darker side. For although money builds universal trust between strangers, this trust is invested not in humans, communities or sacred values, but in money itself and in the impersonal systems that back it. We do not trust the stranger, or the next-door neighbour – we trust the coin they hold. If they run out of coins, we run out of trust. As money brings down the dams of community, religion and state, the world is in danger of becoming one big and rather heartless marketplace.

Hence the economic history of humankind is a delicate dance. People rely on money to facilitate cooperation with strangers, but they’re afraid it will corrupt human values and intimate relations. With one hand people willingly destroy the communal dams that held at bay the movement of money and commerce for so long. Yet with the other hand they build new dams to protect society, religion and the environment from enslavement to market forces.

It is common nowadays to believe that the market always prevails, and that the dams erected by kings, priests and communities cannot long hold back the tides of money. This is naïve. Brutal warriors, religious fanatics and concerned citizens have repeatedly managed to trounce calculating merchants, and even to reshape the economy. It is therefore impossible to understand the unification of humankind as a purely economic process. In order to understand how thousands of isolated cultures coalesced over time to form the global village of today, we must take into account the role of gold and silver, but we cannot disregard the equally crucial role of steel. (187)

Finally, all faith traditions have always engaged the intersection of money and spirituality (though not a feature of the film) as in many teachings, money, or the love of it, is the root of all evil. So, if money is a collective figment of our imaginations, then are we not simply fabricating yet another system of human value that exacerbates our evil inclinations?

About VIA

www.kevinneuner.com

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