I live in the United States of America, but I am not from here. Americans use the Dollar as Money. The Dollar has been a relatively stable currency during the post-WWII world, so most American citizens (myself included) are used to this stability. In many other countries around the world, this is not the case.
Crisis
I grew up in the 70s and 80s Communist Poland. It was a different world. During the early 70s, the country was relatively prosperous due to foreign debt-fueled “New Development Strategy.” This ground to a halt during the 1973-74 Oil Crisis, which led to massive inflation, spiking the prices of consumer goods in Poland. The Government softened some of the impacts through additional borrowing and food price controls. Economic growth tanked by the end of the decade.
The 80s began with an ongoing economic crisis. Eventually, the Government could no longer keep food prices low. The price hikes resulted in strikes and factory occupations and then erupted into the massive Solidarity movement. A tense struggle and negotiations between the workers and the Government took place under the shadow of possible Soviet intervention. On 13th December 1981, General Jaruzelski declared Martial Law which lasted until July 1983. The economic situation continued to deteriorate. Massive debts incurred in Western currencies and artificially low exchange rates wreaked havoc. Shortages, rationing, brownouts, empty store shelves were common. By 1985 my family had left the country.
Magic Dollar
All this is only a short simplification, of course. I was very young. But I spent much of my time standing in long lines (multiple times in a row) to purchase rare goods like bananas or coffee. I played by candlelight during brownouts, wandered through vast supermarkets with empty shelves, and laughed at frequent sightings of toilet paper armor. One of the most vivid experiences for me was visiting foreign currency stores: a chain of stores known as Pewex carried western goods. It was used by the Government to earn hard western currency. The shelves here were overflowing with candy bars, chewing gum, Coca-cola, Legos, etc. Stepping inside transported me to the threshold of a parallel world. To enter, one only needed the correct currency.
When I first stumbled on Bitcoin[1] during its early days, I didn’t make much of it. I tried mining some on my computer and promptly forgot about it. I stumbled on it again last year while looking for some examples of micropayments. At first, all the negative stories and excessive hype surrounding it put me off. But, a nagging feeling kept bringing me back. It was a portal reminiscent of Pewex. Inside the Bitcoin network, you enter a zone that slips between borders.
When we lived in Germany, my uncle was allowed to visit us in Hamburg. On this trip, he smuggled a gold coin in the heel of his shoe. He exchanged it into German Marks (this was the pre-Euro era). He took the money back to Poland, where it was worth much more due to the debased Polish currency.
When the Soviet system finally collapsed, Poland underwent an economic “shock therapy.” All price controls were lifted resulting in massive devaluation of most assets. When I visited in 1991 the country was shell shocked. Crime was rampant. Everything appeared to be crumbling. US Dollar had a frightening purchasing power relative to the local currency. Most people opted for the Dollar when offered a choice. Money changers were on every corner.
Looking back at my time in Poland, I was obsessed with money. Not money as something to accumulate or spend, but in a more abstract sense. I collected coins and stamps from around the world, and of course, comics. All of these objects acquired a patina of valuable means of exchange. You could trade a duplicate stamp for one you didn’t have, or trade a rarer more valuable one for several other of lesser value to gain a broader more comprehensive collection. It was a form of barter. It was something that the adults around me were doing as well. Trading valuable hard-to-obtain items like western cigarettes, or bottles of vodka for essential goods and services. I sometimes drew fake treasure maps. I rarely imagined gold as the treasure. Most of the time I imagined a cache of US Dollars where treasure should be found. With the Dollars, I’d have the keys to the Pewex universe.
This is a long-winded way to say that we take our money for granted. We rarely think about how it comes into being, how much it is worth, and how it circulates. Bitcoin is different from our everyday Money. It is open-source Money issued outside the purview of governments. In the past, gold played a similar role. Most Money derived its value from gold or silver. Today many believe Bitcoin is the new gold. But, it is Bitcoin’s ‘outsideness’ quality that attracts me the most.
Many economists proposed similar monetary ‘outsider’ systems. For example, Friedrich Hayek thought Money should exist outside the direct control of the state. Another well-known economist, Karl Marx, wanted to demolish the state to ensure that ‘the government of men gives way to the administration of things.’ Another Marxist philosopher Althusser elaborated on this insight:
the only way to save communism was to entirely reject the ‘metaphysics of the subject’ by embracing the idea that history administers itself without any help from humans, that it is a ‘subjectless process.’
Mark Alizart’s Cryptocommunism (Theory Redux) (p. 19). Wiley.
Althusser is said to have been inspired by feedback loops in cybernetic systems. All these ideas begin to look a lot like Bitcoin with its decentralized network, self-adjustable hash rate, and stable monetary issuance.
What about all the negative stories surrounding Bitcoin?
- excessive power usage
- it’s a Ponzi scheme
- it’s worthless
- only criminals use it
- it’s a speculative gambling casino
- etc.
These concerns are valid, and I will explore them in future posts and comics. But, I hope I am getting closer to showing that Bitcoin is more interesting than that. I see it as an avatar—imperfect to be sure—a prefiguration of something else: a global synthetic store of economic value. Something like it has never existed before. What kind of a world does something like that bring about? What happens to Fiat Money in that kind of world? What happens to traditional investment instruments like land or stocks? Like in my native Poland in the 80s, what happens to countries where the currency loses all value? What happens in times of social and economic turmoil? What if these people now have access to this global synthetic economic store of value?
I plan to regularly release essays and comics that deal with all the different ideas and philosophies that emanate from Bitcoin. I want to examine the good, the bad, and the ugly of the Bitcoin network. From the utopian promises to the seamy underbelly. If that sounds interesting, sign up for my newsletter. The form on the top right of this blog >>>
NOTES:
[1] I view “Bitcoin” as a larger ecosystem that includes various Bitcoin forks. I will mostly focus on the three best-known ones: BTC, BSV, BCH.