Tuesday, June 17, 2014

What is Bitcoin?


Bitcoin is not what you think it is.  This is the sort of thing that comes out when you listen to Bitcoin insiders who actually build the software that makes Bitcoin a thing.
Everyone in this room understands that Bitcoin is not a currency. It is a value transfer network with a decentralized consensus mechanism. 
Translating from techno-geek to poli-geek, Bitcoin makes voluntary polities. In plain english it allows people to congregate into one or more novel, voluntary associations, entering and exiting them at will.

The point of doing that is to establish convenient states of "we" as in we dollar spenders, we mastercard holders, and even we believers in this or that social habit or norm. This is incredibly valuable. It allows participants to exchange value within an enhanced trust set of rules. In the real world, this is a more granular edition of what european countries faced when they looked at joining the euro zone. A number of countries for whom joining was economically a bad idea did it anyway because they saw advantage in adopting a shared identity. Greek euro bonds suddenly sold at nearly the same low interest rates as German euro bonds. The market priced nation state bonds by the identity, and the repayment risk, of the most trustworthy of the big euro economies for years. It took the admission of a massive violation of trust and the rules of the euro (Greece's accounting fraud scandal) before national bond pricing was restored.

In this view, nation-states create a massive bundle of shared values, and a number of them are expressed through the currency. Bitcoin as software allows anyone to express shared values, sometimes economic, sometimes as expressions of solidarity. The politics of which shared values will be expressed is independent of the software. It pretty much can be anything.