Bitcoin

Bitcoin’s Genesis

Part VI of Money as a Reflection of Political Values, Virtues, and Human Order

Bitcoin’s Genesis
Photo by Kanchanara / Unsplash

Part VI of Money as a Reflection of Political Values, Virtues, and Human Order

Previous Parts

With the discussion around money established so far in this essay series, we now turn to bitcoin. As mentioned earlier, the political debate about money has re-entered the political sphere. A central player in that debate around money these days has been bitcoin as a monetary asset and system. Bitcoin has been upheld by many and is now the posterchild of “neutral” money. In fact, El Salvador allows bitcoin as legal tender now, and there is an ongoing debate about bitcoin in the 2024 US presidential election with candidates making speeches at bitcoin conferences and more. Given the central role that bitcoin is taking as it relates to monetary issues and the popularity it has gained, it would be worthwhile to evaluate bitcoin as a monetary asset by leveraging the discussion around money outlined so far in this essay series.

The genesis block of bitcoin (which is the first block launched in the bitcoin blockchain) included the statement: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. This statement that was engrained in the bitcoin blockchain illustrates the financial crisis at the time of bitcoin’s launch and the political and oppositional nature of bitcoin against the status quo of monetary decision making. The purpose of bitcoin was to provide a secure payment ecosystem that removes intermediaries and promotes privacy, while also establishing a fixed monetary system that is decentralized and outside human meddling. The mantra around bitcoin is financial sovereignty, liberty, and freedom, not only from the state, but also from banks and Wall Street, and, to a certain degree, from human fallibility.

Bitcoin’s narrative and appeal as a currency and a monetary system was first touted and adopted by cypherpunks, techno-libertarians, and anracho-capitalists. It seemed to be a form of financial populism which stood up to the status quo of state and banking power; albeit a very far-right form of activism. That said, bitcoin has not behaved as a currency per se since its founding. It more so resembles an investment asset class. In fact, Michael Saylor, a notorious advocate of bitcoin, has acknowledged bitcoin as an investment asset class for wealth creation, and not necessarily as a currency that can replace fiat money – rather than being used as a currency, it is complementary to fiat currency and to be used as an investment asset class (Immortal Money: Michael Saylor on why Bitcoin is Perfect Capital). Nonetheless, bitcoin’s appeal is rooted in its monetary design, decentralized payment network, and promise of being a future currency, monetary asset, and monetary system that is beyond the state, beyond the banking system, beyond trust, and beyond any human meddling (Baldwin, 2018; Sandberg and Lindblom, 2024).  

The keyword in the bitcoin ecosystem is the word “trustless”. It is a decentralized monetary system that does not rely on trust, or so its proponents claim (Baldwin, 2019; Sandberg and Lindblom, 2024). This is a powerful term as money and finance have always been rooted in trust. As Hayek had given up on trusting politicians and public institutions in monetary issues (see Part I - Politics, Values, and Money), bitcoin gives up on humans as a whole in managing monetary issues. The narrative of bitcoin is pushing for a “neutral" money that is beyond trust and human discretion. Such detachment from trust and human discretion is said to be enabled by the technology and decentralized governance system behind bitcoin.

The decentralized machine of bitcoin has now grown in appeal to many beyond its early adopters for multiple reasons, and its significant growth has made it a central topic for financial institutions, governments, and policy makers. Given these developments, it is crucial to evaluate the nature of bitcoin as it relates to our discussion around money so far in this essay series.

In Part VII, we’ll provide a defense of bitcoin – Part VII - Bitcoin and Financial Freedom

 References

  • Baldwin, J. (2018). In digital we trust: Bitcoin discourse, digital currencies, and decentralized network fetishism. Palgrave Communications, 4(1)
  • Sandberg, J., & Lindblom, L. (2024). Bitcoins left and right: A normative assessment of a digital currency. In The Philosophy of Money and Finance (pp. 303-320). Oxford University Press.

Read more