A Magazine About Food, Art & Exchange In Midtown Kingston, Published By The Hudson Valley Current.

The Bitcoin Story


Crytocurrencies Change the World

By Paul Smart

    Bitcoin, Bitcoin, Bitcoin. Cryptocurrencies. Economies. Big words, two of them not yet covered by spell check in most systems, that come down to money. Like our president, they’re sucking up all our news space. But what do we really need to know about each? What should we be paying attention to?

    According to Wikipedia, today’s great crowd-sourced leveler, “Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts in a particular country or socio-economic context. The main functions of money are distinguished as: a medium of exchange; a unit of account; a store of value; and, sometimes, a standard of deferred payment. Any item or verifiable record that fulfills these functions can be considered as money.”

    Right. Or maybe it’s just the next big thing, in terms of Bitcoin and all cryptocurrencies, while simultaneously further distancing the term “economy” from its origins combining the Greek words for “household” and “management” to describe what the Australian academic Paul James succinctly stated two years ago was, “a social domain that emphasizes the practices, discourses, and material expressions associated with the production, use, and management of resources.” Or, as others have generalized more freely, any transaction involving value and items.

    Much is written about these days regarding the different forms of economies, from the market-based system of supply and demand, which most of our world recognizes to “command-based” economies, where political agents directly control what is produced and how it is sold and distributed. Plus, there is coverage of newer concepts like green and sustainable economies, and realization that much of what gets discussed about economics in the U.S. media these days reaches no further than our “financial economy” and its players, from banks and Wall Street to investor/hoarders of all sorts.

    Think, as a side note, of how our concepts of art have shifted due to the high prices being paid by certain collectors, or the phenomenon of auctions and massive international art fairs. Have the underlying aesthetics of beauty changed as a result of the money injected into art of late?

    Technically, Bitcoin and all cryptocurrencies are based on digitally-protected methods valuing trading systems not based on banking systems and their political fault-lines, or even “fiat” currencies based on national currencies (themselves backed by those nations’ ability to impose taxes, establishing demand for such currencies). Proponents speak of cryptocurrencies having value that, like old legal tenders based on gold or silver standards, is based on verifiable systems of trade. Critics talk about a system geared solely towards the storing and building of value and little else.

    “Is Bitcoin a good replacement for money? This is a popular question these days, but it’s poorly framed,” wrote the rising philosopher of future economics, London-based Umair Haque in November. “So what are the attributes that make something useful as money? Not intrinsically useful; easily transportable; rare and not easy to counterfeit; widely accepted; liquid even during panics; can pay taxes with it and a stable store of value. Bitcoin does well on the first three. However, it does poorly on the next four. It is not widely accepted. It has high transaction costs and hasn’t been tested during a financial crisis. No government accepts it for payment of taxes. And as its recent bubble-esque behavior demonstrates, it’s not especially stable.”

    To work, Haque wrote, currencies need to easily recognizable in terms of value and exchangeable in some way, among other things. Others bring up past digital currencies from the dot-com boom years such as Flooz and Beenz. Where are they now?

    Then there’s the 1919 couplet—”Money’s a matter of functions four/ A Medium, a Measure, a Standard, a Store”—used for generations of Economics classes; and there are those who scoff at any economic tool not designed for exchange, which basically means a role in community. They also tend to be those remaining voices still questioning the dominance of the financial industry in all discussion of anything “economic.”

    Those voices are increasingly joining a new movement led, among many, by the former Greek finance minister Yanis Varoufakis, who has claimed capitalism is coming to an end because it is making itself obsolete via consolidation of resources by giant technology corporations and the use of artificial intelligence to break down the role of labor as a key element in any economic thought. New companies such as Google and Facebook, notes the man who took on the EU over community-breaking Greek debt payments, represents a new system where companies are profiting from capital being both bought and produced by consumers.

    “Firstly the technologies were funded by some government grant; secondly every time you search for something on Google, you contribute to Google’s capital,” he told an audience of top new economists in London this autumn. “And who gets the returns from capital? Google, not you. So now there is no doubt capital is being socially produced, and the returns are being privatized. This with artificial intelligence is going to be the end of capitalism… New technology is going to destroy a lot more jobs than it creates. Karl Marx will have his revenge. Capitalism is going to undermine capitalism, because they are producing all these technologies that will make corporations and the private means of production obsolete.”

    “Money as we know it doesn’t measure value well. It doesn’t internalize hidden and shifted costs, nor does it track the uncounted gains that we give, whether through emotional, social, or creative work,” Haque has chimed in, addressing Bitcoin, directly, as something based on falsely-imposed scarcity. “To reinvent money, a digital currency must improve on money’s three functions, each of which are currently failing. But digital currencies don’t really improve them — much less transformatively reinvent them. If anything, they make them worse, in many ways… Society needs better currencies that can yield greater, more enduring investments in higher qualities of life. But digital currencies as they stand aren’t there yet. Those making them haven’t really understood the roles money plays in a society yet, and so they don’t improve the three functions of money. Buy them, sell them, play with them, have fun, by all means. But if it’s revolution you want, there’s more work to be done.”

    Concurrent with all the economic talk surrounding Bitcoin and the cryptocurrency phenomenon, modern philosophy is resurging with new thoughts about the ethics surrounding all greed, or what Wikipedia now defines as, “the inordinate desire to acquire or possess more than one needs.” Whereas much of today’s financial industrial definition of “economy,” as well as the new Bitcoin bubble, can be traced back to the ideas expressed in financier Ivan Boesky‘s 1986 commencement address in which he said, “Greed is all right… greed is healthy. You can be greedy and still feel good about yourself” (immortalized in the fictional Gordon Gekko’s line, “Greed is good”), others are stressing the 20th century social psychologist Erich Fromm’s description of economic greed as “a bottomless pit which exhausts the person in an endless effort to satisfy the need without ever reaching satisfaction.” Today’s world extends this to include economics’ and money’s role defining and aiding the idea and growth of community.

    Remember, in all this Bitcoin/Cryptocurrency babble, that there really was not much discussion of “the economy” until the coming of the Great Depression in the 1930s, and the overcompensation some have called hoarding started soon after its demise.

    And that, in the end, there are other values tied to “money” besides its accumulation—meaning its role in making communities viable and independent, and all of us able to feel valued in ourselves.