Some thoughts on cryptocurrency

May 13, 2018 - Reading time: 2 minutes

The hype around Bitcoin within the last six months got me thinking about cryptocurrency and whether it's possible to make a cryptocurrency that works. Bitcoin has a decade long history. According to the original whitepaper it was supposed to disintermediate banks and financial institutions who had ruined the economy so badly. When you look at Bitcoin today it's an absolute failure in those terms. Banks and financial institutions are making themselves into Bitcoin intermediaries and the usual suspects are benefiting from it.

A heretical thought is that maybe it's just not possible to make a cryptocurrency for the arbitration of use values. That is to use as a way of buying and selling ordinary commodities, like clothes or groceries or furniture. "Simple commodity exchange" as economists call it. Perhaps this is why there has never been a practical micropayment system for the web which doesn't depend on banks. Maybe cryptocurrencies are too easy to hoard and so nobody wants to spend them on anything. The always declining availablility results in there being no incentive to spend and a lot of incentive to collect an increasingly exclusive thing.

Another thought is that maybe money was never really about exchange and was always just a way of exercising power within a society. Perhaps the story about money being an exchange medium was always just folklore to placate the populace. If you look at it this way then so long as there are monarchs, presidents and central banks there won't be any workable decentralised money system, because in many societies political power is very unevenly distributed. Any new money system invented won't fit with the existing power structure and the social conventions which that generates and so won't get much traction.

I hope I'm wrong about the above, and that workable cryptocurrencies have just not been invented yet. The lack of progress since the creation of Bitcoin inclines me to believe otherwise though, because it's not as if smart people havn't been thinking about this problem.


The blog of Bob Mottram, a Free Software hacker and maintainer of the Freedombone project.

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