bitcoin currency money cashless

An Existential Threat to the Modern State?
virtual anonymous speculator open source

Bitcoin -- Currency Revolution or Bubblicious Fad?

Consensual currency could dodge the state, but could it dodge the landlord? We excerpt three 2013 articles on bitcoin from: (1) Bloomberg, Apr 5, by E. Soltas; (2) BBC, Apr 16, by R. Levine; and (3) AlterNet, Apr 17, by LS Parramore.

by Evan Soltas, by Romi Levine, and by Lynn Stuart Parramore

So far, Bitcoin's total value in circulation was $1.4 billion as of this week. That's equivalent to the currency stock of a small nation -- somewhere between Iceland and Uruguay -- and just one-thousandth of the total value of U.S. dollars in circulation. The volume of transactions in Bitcoin is growing only slowly, relative to the massive increase in demand for the currency.

Physical cash is used in a rapidly shrinking share of transactions: 27 percent in 2011. The central banks of Sweden and Nigeria have both declared goals of a cashless economy.

What's going on is a global shift to mobile payments and credit and debit cards. Plus, a rise in online retail.

Bitcoin's innovations are its status as an independent currency and its decentralized network design.

If widely adopted, crypto-currencies would cripple government in three central functions: taxation, police, and macroeconomic stabilization.

Taxation: Crypto-currency's strong protections on anonymity make it impossible for any state to know who is buying what, who is paying whom, who earns what, and who has what in savings. States could enforce reporting of Bitcoin income for individuals and businesses, as they try to do for cash, which is also hard to track. But encryption and the peer-to-peer network structure make Bitcoin even harder to follow than physical cash, and digital cash is much better than the physical kind for storage and transactions, so the scale of the challenge could end up being much bigger. And by displacing governments as currency issuers, Bitcoin also threatens their ability to finance public debt.

Macroeconomic policy: Yes, governments can influence the demand for national currencies by requiring taxes to be paid in them. But in a world where many transactions are anonymous, governments could not compile accurate economic data, without which macroeconomic policy is impossible.

To read more

Amir Taaki is a developer who works with a virtual currency called Bitcoin. His home and office is an abandoned Buddhist temple. His fellow squatters are members of the Occupy movement.

Bitcoin is often referred to as a new kind of currency. But it may be best to think of its units as being virtual tokens which have value because enough people believe they do and there is a finite number of them.

Each of the 11 million Bitcoins currently in existence is represented by a unique online registration number. Since there is no registry of these addresses, people can use them to protect their anonymity when making a transaction. The currency exists exclusively online and is independent of any government or company.

It was spawned in 2009 by an unknown person or group of people calling themselves Satoshi Nakamoto. Early adopters, including Mr Taaki, were mostly tech-minded people with distrust in regulated banking institutions.

Like other currencies it is used to buy goods and services. Companies selling anything from software, pizza and online dating are jumping on board -- accepting it as payment.

Speculative investors have caused the value of a Bitcoin unit to double in a matter of weeks. It has since become more volatile, experiencing a drop of over half of its value in one day.

The Bitcoin system isn't airtight. There have been a number of Bitcoin thefts by hackers and even a Ponzi scheme cheating investors out of millions of dollars.

The importance of Bitcoin does not revolve around the currency itself, but rather the concept of alternative currencies and their place in the global economy.

To read more

Bitcoin has burst into mainstream consciousness with a wild boom-and-bust rollercoaster ride and the endorsement of the twins Cameron and Tyler Winklevoss, the brothers famed for suing former Harvard classmate Mark Zuckerberg for stealing their social media idea. The value of a Bitcoin, which was worth $10 at the start of the year, recently leapt to $250, then nosedived to below $150 on April 11.

You start your Bitcoin adventure by installing a “wallet” from on your computer or smartphone. Now you’re in the network, and you can conduct transactions between other people in the network, much as you can call another Skype user once you’ve downloaded the program and joined the circle of Skype users.

Bitcoins can be used to buy things online. The WordPress blog platform accepts Bitcoin, and so does WikiLeaks. Some sites offer gift vouchers for stores like Amazon, and you can also find sites selling electronic goods for Bitcoin. Bitcoin is also accepted on sites such as anonymous marketplace Silk Road, where users can buy criminalized drugs.

The Bitcoin system is maintained by a volunteer open-source community coordinated by four core developers.

The excitement over Bitcoin is a manifestation of the growing distrust of government, the global financial system, and central banks, in particular.

Alternative means of trade often surface during difficult economic times. They can be as simple as a seashell or as high-tech as Second Life “Linden dollars” (remember that craze?)

When times are tough, you might start to feel a deep anxiety about those slips of paper covered with Masonic symbols in your pocket. During the Great Depression, businesses in the U.S. issued all kinds of paper and metal tokens as currency, even things as weird as rabbit tails. Many people rush to gold, as they have done lately, only to find that the prices can come down just as easily as they can go up.

Bitcoin shot up in value after the financial crisis in Cyprus, when trust in bank deposits suddenly plummeted as savers faced a one-off levy as part of a eurozone bailout. People were highly pissed off that governments could raid their savings accounts, and the desire to have some kind of currency that seemed protected from uncertainty suddenly gained new allure. Of course, you don’t get rid of the government that easily: the US Treasury is looking into applying laundering rules to virtual currencies like Bitcoin. You also don’t get rid of uncertainly by using a currency whose value is susceptible to wild swings.

Ordinary money is legal tender, and it gets to be that because a government decrees it. By law, it must be accepted for the discharge of debts. Who has to take Bitcoin? Nobody.

Money, remember, is purely a conventional item. If conventions change, it’s worth nothing. Can you buy anything with a rabbit tail today? Not likely.

To read more

JJS: None of the above writers noted that you still have to use government money to buy the non-government money. So, if the non-government money succeeded in driving out the government money, what would you use to buy the new consensual money? Gold? Titles to cars or houses or land? IOUs?

Consensual currency, even if it’s popular, still does not win economic justice. What it really does is show that people confuse money with wealth and finances with economies. People producing, distributing, consuming (and protecting) has gone on long before cash, as when people bartered. And claims to wealth (money) are not the actual goods and services that one goes and claims, just like symbols are not the thing symbolized.

While it’d be better to have democratic money instead of money be controlled by central bankers and their cohorts, that reform alone does not accomplish the just distribution of economic output. For that, you must replace taxes with fees for polluting the environment and dues for claiming land, and replace subsidies with shares of the recovered rents. Losing taxation and subsidization solves the problem of an intrusive state and keeping rents out of mortgages solves the problem of a kleptomaniacal banking system. It’s geonomics and works every time.


Editor Jeffery J. Smith runs the Forum on Geonomics and helped prepare a course for the UN on geonomics. To take the “Land Rights” course, click here .

Also see:

An Interview With James Quilligan

Dissent From a Fed Member, Cato Scholar, & UK Press

Prices Are Not Rising, the Dollar Is Falling

Email this articleSign up for free Progress Report updates via email

What are your views? Share your opinions with The Progress Report:

Your name

Your email address

Your nation (or your state, if you're in the USA)

Check this box if you'd like to receive occasional Economic Justice announcements via email. No more than one every three weeks on average.

Page One Page Two Archive
Discussion Room Letters What's Geoism?

Henry Search Engine