Bitcoin Is Not a Monetary System By Jeffrey Tucker
Every since I started writing about cryptocurrency last
Spring, my inbox has become a hub for Bitcoin questions. I completely
understand – even to me it’s still the most implausible idea ever that
some code-slinging, nameless geek somewhere could somehow invent a new
currency made from 1s and 0s, throw it out there on an open forum, and
(in a mere five years), it would obtain a market capitalization worth
nearly $10 billion.
Spring, my inbox has become a hub for Bitcoin questions. I completely
understand – even to me it’s still the most implausible idea ever that
some code-slinging, nameless geek somewhere could somehow invent a new
currency made from 1s and 0s, throw it out there on an open forum, and
(in a mere five years), it would obtain a market capitalization worth
nearly $10 billion.
What does it all mean? Well, it took me some serious study
to figure out how all the technologies hang together and why.
Understanding Bitcoin requires knowledge of monetary theory, open-source
programming, distributed networks, cryptography, and process-oriented
software development — and that’s quite a big undertaking. This accounts
for why people are so confused as to how a protocol could become the
basis of a new global monetary order.
to figure out how all the technologies hang together and why.
Understanding Bitcoin requires knowledge of monetary theory, open-source
programming, distributed networks, cryptography, and process-oriented
software development — and that’s quite a big undertaking. This accounts
for why people are so confused as to how a protocol could become the
basis of a new global monetary order.
However, I actually don’t think that a lack of technical
knowledge really accounts for why even some very smart people are having
a hard time making sense of the success of Bitcoin. A hint towards the
answer came in an email from a correspondent who asked me a particular
question about how contracts and accounting will work once Bitcoin “is
implemented as a currency.”
knowledge really accounts for why even some very smart people are having
a hard time making sense of the success of Bitcoin. A hint towards the
answer came in an email from a correspondent who asked me a particular
question about how contracts and accounting will work once Bitcoin “is
implemented as a currency.”
I got stuck on the word “implemented.” That’s the core of
the fallacy; and, again, it is completely understandable. Hayek wrote in
1974 that governments have owned and managed monetary systems for many
hundreds of years, even back to the ancient world: the coin of the realm
has been seen as a government responsibility. In the 19th century, all
governments were expected to implement a system that best met the needs
of the population.
the fallacy; and, again, it is completely understandable. Hayek wrote in
1974 that governments have owned and managed monetary systems for many
hundreds of years, even back to the ancient world: the coin of the realm
has been seen as a government responsibility. In the 19th century, all
governments were expected to implement a system that best met the needs
of the population.
In the 20th century, government took this idea much
further. It would not just print the money, it would not just oversee
the system and determine what constituted money, no – it would use
‘science’ to find the optimal money-creation rate and cartelize the
banking system to make sure that it was exactly as it should be. Every
aspect of the money system — and we are talking about half of every
economic transaction — would be overseen by the state in conjunction
with private partners in industry.
further. It would not just print the money, it would not just oversee
the system and determine what constituted money, no – it would use
‘science’ to find the optimal money-creation rate and cartelize the
banking system to make sure that it was exactly as it should be. Every
aspect of the money system — and we are talking about half of every
economic transaction — would be overseen by the state in conjunction
with private partners in industry.
And so it has been for all these years. No living person
remembers a time when money had any existence outside public management.
In effect, all governments of the world made money a socialistically
owned good. And what happened? It became a tool of politics; it declined
in quality, buying less and less in terms of goods and services; in
effect, it became the main means of funding the expansion of power over
liberty.
remembers a time when money had any existence outside public management.
In effect, all governments of the world made money a socialistically
owned good. And what happened? It became a tool of politics; it declined
in quality, buying less and less in terms of goods and services; in
effect, it became the main means of funding the expansion of power over
liberty.
The emergence of cryptocurrency smashes that paradigm
entirely. “Satoshi Nakamoto” never asked for anyone’s permission to
release his code-based model for the ideal currency, he didn’t submit a
working paper to the National Bureau of Economic Research, he didn’t
meet with Federal Reserve economists, testify to the Senate Banking
Committee, or get the ear of the chairman of the Fed. He went straight
to the public.
entirely. “Satoshi Nakamoto” never asked for anyone’s permission to
release his code-based model for the ideal currency, he didn’t submit a
working paper to the National Bureau of Economic Research, he didn’t
meet with Federal Reserve economists, testify to the Senate Banking
Committee, or get the ear of the chairman of the Fed. He went straight
to the public.
He bypassed the entire structure of power and released it
on a distributed network. He invited the world to participate. In other
words, he was not proposing a system at all, it is not a top-down plan
for monetary reform. We’ve seen scads of those — thousands upon
thousands — emerge over the last hundred years. None of them have come
to anything. You can talk about monetary rules, policy reforms, audits,
and exchange rate fixes all you want, but here is the grim reality:
government owns the money and it will use it to serve its ends.
That’s why a totally different approach was necessary: the
free market. The free market is not a system, it is not a policy
dictated by anyone in particular, it is not something that Washington
implements, it does not exist in any legislation, law, bill, regulation,
or book. It is what you get when people act on their own, entirely
without central direction, and with their own property, and within human
associations of their own creation and in their own interest. It is the
beauty that emerges in absence of control.
free market. The free market is not a system, it is not a policy
dictated by anyone in particular, it is not something that Washington
implements, it does not exist in any legislation, law, bill, regulation,
or book. It is what you get when people act on their own, entirely
without central direction, and with their own property, and within human
associations of their own creation and in their own interest. It is the
beauty that emerges in absence of control.
Does that sound like anarchy? It struck Karl Marx that way.
What he did not understand was the central insight of the liberal
revolution of the 18th century: society can manage itself and create its
own beautiful order without any central control. Bitcoin is a
paradigmatic example, but only one of a million now emerging all over
the world.
What he did not understand was the central insight of the liberal
revolution of the 18th century: society can manage itself and create its
own beautiful order without any central control. Bitcoin is a
paradigmatic example, but only one of a million now emerging all over
the world.
Who or what is chronicling these revolutionary developments and
plotting to push them further as a means of achieving greater freedom in
our own lives, and therefore in society as a whole? Liberty.me. Our
purpose is to invite everyone into a close engagement with the wonderful
upheavals going on right now.
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