A very silly piece from the Business Insider is making the rounds this morning for those who wish to stand athwart the digital future sneering “but it’s libertarian.” (The article has pretty much no intellectual value for anyone else.) (For an earlier take on people who have a hard time swallowing the libertarian implications and practice of the digital past, present, and future, see this from me earlier this week.)
The article by Jim Edwards posits that “Bitcoin Proves the Libertarian Idea of Paradise Would be Hell on Earth,” with a bill of indictments against the surging digital currency that applies in pretty much every respect to any currency at all.
Criminals can use it! It can be stolen! (We all have things that are valuable to us on our hard drives. Bitcoin may end up being the most valuable thing lots of us have on our drives, but—back up, back up, back up. Undoubtedly a trustworthy and robust system of outsiders serving the function of digitally storing your wallets on other than just your harddrives will become common, just like pretty much every other valuable human need gets met by the market. Like every human endeavor, some crooks might get involved as well, naturally.)
Edwards is right, let’s just return to barter…this whole “currency” thing seems toooo risky.
Edwards also gives way too much importance to a supposed bug in the system that might allow colluding miners to cut out other miners (a problem that is probably fixable in the open-source debuggable Bitcoin system and that need not destroy the value of the currency to most users), and then gives even more scary attention to the notion that people can use Bitcoin as a tool to commit crimes, in case you didn’t get it the first time and repetition might make it start to scare you.
He also is incensed that due to the nature of how it has rolled out, a small number of people have a lot of Bitcoin. This has little to do with its value as a means of exchange, unless he is imagining a world where suddenly the only thing that has value is Bitcoin and those of us lacking it are screwed. And for someone so worried about centralized power and manipulation of currency, he doesn’t seem to have thought a lot about the Federal Reserve’s role in the economy, even though circumventing it is one of the libertarian joys of Bitcoin.
Edwards hits on one point that, right this second, makes Bitcoin less than ideal as a currency: its huge day to day fluctuations in value in relation to all other monies and commodities in the world. It seems obvious to me that we are seeing lots of churn in Bitcoin based on people seeking in it not a currency but an investment vehicle, because of its huge zooms in value very recently.
We are still in the beginning of the world understanding how it wants to use digital currencies, and I would expect that in the near future we will see far more stability in Bitcoin’s day to day value—though where this level will be in terms of the U.S. dollar is impossible to say.
What seems easy to say is that for anyone who has ever tried to transfer money, nationally or internationally, that the values in ease, speed, and cost of digital currency means that it will have the same leveling effect on industries like banking and finance that depend largely on their middleman function that already we’ve seen happen in book sales, video rentals, and travel agents.
People who doubt this are letting their ability to write Bitcoin and other digital currencies off as “libertarian” blind them to economic trends of the past 20 years in the digital age. If you can understand the value of, say, PayPal, then you already understand the value of Bitcoin; except Bitcoin doesn’t have a middleman skimming.
The Internet has made life very unstable for those who made their living as middlemen skimming–even more unstable than the recent day to day value of Bitcoin.
Yes, it’s decentralized, hard to control, hard to tax, arising from the free play of the market rather than government command–it’s pretty libertarian stuff. The world can be, at its best, a pretty libertarian place. Don’t let that scare you away from the future, libertarian haters. (Or go ahead! See if I care!)
For more on Bitcoin from a libertarian perspective, see this great essay by John Mather defending it from old-school Austrian economists who see it as essentially a non-money, and a Ponzi scheme.