Republished from Eileen Workman: “As I compare Bitcoin (1st generation crypto-currency) to some new ideas for second-generation crypto-currrencies that will be asset-backed and don’t have upper limits to their creation, what jumps out at me are these thoughts: Bitcoin is created out of thin air (not backed by anything tangible or relatable to human society) and will be rendered deliberately scarce after a short time window of opportunity for the creation of new coins from “nothing.” That structure is designed to protect the profits and elite status of its “early adopters.” There’s no reason to stop making new Bitcoins ever, unless the AIM of shutting down production is to force late adopters (and later generations of humans) to have to bid up the price of the existing currency in order to be able to use it, thus reaping huge windfall profits for the early adopters. And who are the “early adopters?” Well, you’re not going to find too many grandmas, or working mothers and poor people out there mining Bitcoins. Nor are they investing their hard-earned money into Bitcoins; they can’t afford to, and they don’t understand enough about the technology and how their money is protected (or not!) to take that level of risk with their personal savings. The early adopters are mainly high-tech-savvy, single young white males from middle class backgrounds and with good educations, who also have strong libertarian leanings. Ironically, that’s the same class of people that has always been part of the elite establishment; this time though, they’re rising to elite status through the power of technology, their control over it, and their expertise with it. The older systems that created elites relied upon status being connected to land ownership rights or claims against natural resources through birth and through royal conveyance. That blue-blood, wealth peerage system was upended by the industrial revolution, when plucky venture capitalists (again, mainly savvy white males) were able to amass enough wealth to overturn the former aristocracy by virtue of their cleverness with new ideas and their head for business. Today, technological savvy is seeking to upend the old financial savvy so it can claim supremacy and power in the world. Same old wine; just a different bottle. The disenfranchised remain the same as well. The poor, women, minorities, the elderly, the infirm, those who don’t have competitive drives but have cooperative drives that serve to benefit ALL life…these are the people and values that constantly get ignored in the race for supremacy, power and social domination. Bitcoin will, in time, disenfranchise the next generation of humanity, because those kids will be born into an era where all the “free” Bitcoins will have already been distributed, so their only way to access the Bitcoin system will be to buy their way into it, by acquiring Bitcoins from an early adopter or someone who has already been successful within the system. So once again the early adopters will grow rich, as did their forefathers after they co-opted all the planet’s lands and resources, or after they claimed ownership of all the society’s factories and outputs in order to possess all the traditional capital. This it does not SOLVE the problem of a power/dominator system, in that it merely resets the win/lose game in ways that will benefit a brand new generation of winners, in relationship to the masses of losers who will not benefit from a technologically elitist system. We need a RADICAL currency redesign- a genuine win/win system – if we’re going to change the game and solve the problems we’re creating as a species. That system may involve a crypto-currency, but it will also include: ~A conscious means of monetizing the things we humans most value, in an EQUITY (not a debt) based system. ~No upper limits on how many “new” dollars can be issued; human population, need and creative capacity will determine the amount in circulation, not an artificially driven, scarcity-based approach that unfairly drives up the price of accessing the system. ~A DEMOCRATIC means of distribution, that does not unfairly benefit “early adopters.” ~A voting process by which people can use their equity in the society to affect what the society chooses to create, do, and honor. This is not a “tirade” against bitcoin, or against young, techno-savvy white males. My son is one…I LOVE the men (and women) who serve this function! I just don’t want to see it become the next power-elite class, and watch it rise AT THE EXPENSE OF everyone else.”
There are trade-offs with Bitcoin and there are alternative currencies (some which are even unlimited in number), but Eileen is off to say that it is a system that creates wealth for just a few people. She is correct that early adopters may become more rich just by holding them; however, that is the case for any system, including state-managed fiat currency where The State gets to use their notes first (besides printing them). The key is that it’s a unit that can be verifiably traded… and just like dollars, some people will benefit by holding them and trading at certain times, but their value will fluctuate based on their popularity. The price of access is not driven up over time; deflation is something else entirely. Some of her complaints are simply inherent in marketplaces. I love to see even more and better crypto-currencies catching on, but I’ll take Bitcoin over any other traditional monetary system.
I do not think currency reform is a fruitful avenue for progressives. It depends on some of the same kind of magical notions about money that right-wing monetarists believe in. As an economist, I think you should focus on credit reform, not currency reform. (Some people seem to have the two confused.)
Bitcoins in particular are guaranteed to (and do) suffer from asset bubbles because they are pegged to nothing real. Second generation private money will almost certainly suffer from similar defects.
I think Eileen is right.
I believe we need a currency that values the commons and which is earned into existence for contribution to the common good. And it should be distributed through a network of not-for-profits that are licenced by We The Community to issue such currency.
I believe we need a standard measurement of value that is universally understood and which, once created, can be traded on a social stock exchange. I suggest a credit system that is backed by time contributed to the common good, say one hour earns 50 credits.
The amount of currency that can be issued I don’t think should be restricted. It should only be restricted by the amount of time that people are willing to contribute to the conserving and protecting the common good. That will avoid inflation.
Such a credit system would provide liquidity to resources that are wasted – unemployed people, spare network capacity and so on and an e-marketplace would enable them to be traded for other things of value to the community.
This means that nothing needs to be wasted.
I also believe that such a credit system would value everyone’s contribution to the common good. It would be fair and operate on Edgar Cahn principles which are an hour for an hour. Timebanks in other words.
In my opinion we need an alternative currency that counterbalances the negative effects of money (greed, selfishness, loneliness) by producing outcomes that share and produce community in all of its forms.
We’re not that far away from a world where such an alternative currency will be worth something to everyone.
“The question is not if, but when the first attacks will occur, who will be behind them, and how much damage will they cause.” – if it really happens, there’s always stays an opportunity to use real money, as we all used to read here.