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Bitcoin maximalists might not trust their government, but in western economies, for the time being, the majority of tax-paying citizens do — at least with a government there is notionally someone to complain to. | Bitcoin maximalists might not trust their government, but in western economies, for the time being, the majority of tax-paying citizens do — at least with a government there is notionally someone to complain to. | ||
====Trust as feature not bug==== | |||
{{Drop|A|nd trust in}} each other is a feature of a community, not a bug, and not something that can or should be solved by [[technology]]. It is ''the'' feature, in fact, on which the whole edifice of civilisation is based. Farrington would have done well to read a bit more Graeber here. | |||
Currency has its antecedents not in [[barter]] between strangers, as is commonly supposed, but in ''[[credit]]'' amongst friends: currency would not work between hostile strangers because it is a personal promise of deferred satisfaction, and the a hostile stranger does not trust in promises or pieces of paper or bits of metal as abstract symbols. This is a matter almost of literary, and not financial, theory. Of shared meaning. I hand over my muskets for your blankets as their respective meanings to each of us is obvious, and does not depend on the other’s. Indeed it depends on a relative ''divergence'' in meaning: you must value muskets more than blankets, and I must value blankets more than muskets, or we have no deal. | |||
That an artefact with no intrinsic worth can nonetheless keep one is not an impossible scenario: | Given how fundamental this dissonance is to any market it is extraordinary how much hostility its necessary premise — there is no objective truth — generates. | ||
We can each arrive at our own values of guns and blankets and that is a fine thing. But it is not fine for tokens of abstract tokens of value such as printed promises to pay. Those we must agree about. | |||
In other words, for currency to work, there must be consensus as to its value. That is axiomatic. Hence, it is of no use between hostile strangers. | |||
===Bitcoin as metaphor=== | |||
{{Drop|[[Bitcoin|B]]|itcoin does ''not''}} fix this. It is axiomatic that bitcoin’s viability depends on community consensus in its value other than its intrinsic value. We must all believe something that is, literally, not true, and wilfully suspend of knowledge of what is true. This is how we use ''[[metaphor]]s'' — they are figurative ''tokens''. | |||
People must believe in Bitcoin as a ''token'' of value — in Farrington ’s view, of [[capital]] — whilst accepting it has absolutely no intrinsic value. | |||
As mentioned, this is also true of fiat currency. But here the prevailing paradigm, which currency plays a fundamental part, makes a difference. Within the “[[degenerate fiat currency]]” [[power structure]], fiat currency operates as a lawful means of discharging debts denominated in that currency. It necessarily has that value. If this feels circular, that’s because it is: the power structure defines both question and answer. By transacting in a currency you are committing to the metaphor: you are giving something of intrinsic value away for something of metaphorical value. You have bound yourself to the mast. The leap of faith has been made and completed: the economy works on the strength of promises calibrated by reference to that metaphor. | |||
The same might be true of Bitcoin, but only to the extent debts are denominated in bitcoin. Mostly, bitcoin is traded not as a currency but as a commodity, for which the debt is denominated in fiat. | |||
===Agency as a sustaining life force=== | |||
{{Drop|T|hat an artefact}} with no intrinsic worth can nonetheless keep a metaphorical one is not an impossible scenario: all literature depends on it. It is, near enough, the trick that fiat currency has pulled off. [[Bitcoin]]ers do not tire of reminding us of this. | |||
Currencies generate their own momentum and when enough [[systemically important]] institutions have enough vested interest in maintaining them as a viable thing — if they are making enough money out of it — the currency will generally carry on, because too many agents have too much riding on its success to contemplate it's failure. This is of course, the stuff that bubbles are made of — Enron was largely built of imaginative accounting treatment, but survived for so long in part because so many — law firms, accountants, management consultants, executives, employees, trading counterparties, academics, politicians, [[thought leader]]s —stood to gain as long as the fiction, that [[ this time is different]], carried on. | |||
But it is not inevitable that every [[metaphor]] fails. Bitcoin has proven resilient so far, and has acquired it's own momentum as it as acquired brokers, exchanges, | |||
intermediaries, [[futures]] [[exchange -traded fund]]s and their authorized participants, clearers and market makers. It even has its own ISDA definitions booklet. This is another importance of intermediation: these intermediaries all take their skim, or earn a crust of the intellectual activity of ''attending to bitcoin'', just as they once attended to [[Enron]], or tranched [[synthetic credit derivative]]s and preserving that income compels them to support the narrative. | |||
Yet another irony in a phenomenon apparently constructed out of them: the thing that vouchsafes this decentralised platform’s viability may be exactly the sort of institutions it is meant to undermine. | Yet another irony in a phenomenon apparently constructed out of them: the thing that vouchsafes this decentralised platform’s viability may be exactly the sort of institutions it is meant to undermine. | ||
==== Bitcoin as a token capital ==== | ==== Bitcoin as a token capital ==== | ||
{{Drop|[[bitcoin|B]]|itcoin is ''capital''}}, then, not ''currency'', at least not as we are used to thinking about it. [[Bitcoin]] is more like ''gold''. | |||
Its scarcity is more or less fixed, and it gets progressively harder to extract more of it from the earth. In this way the “mining” [[metaphor]] is correct. It holds its value wherever it is. It does not depend for viability or validity upon the “implied violence” of central banks, nor the indebtedness of investment banks nor the custody and connectivity of other [[Rent-seeking|rent-extracting]] intermediaries. You can take it, sort of, off the grid. | Its scarcity is more or less fixed, and it gets progressively harder to extract more of it from the earth. In this way the “mining” [[metaphor]] is correct. It holds its value wherever it is. It does not depend for viability or validity upon the “implied violence” of central banks, nor the indebtedness of investment banks nor the custody and connectivity of other [[Rent-seeking|rent-extracting]] intermediaries. You can take it, sort of, off the grid. | ||
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Farrington correctly sees a “fiat currency” as necessarily an instrument of [[indebtedness]]: a person who holds it has a promise for value from someone else. He doesn’t say so but he may say regard [[indebtedness]] as, in itself, a form of compulsory trust — trust on pain of enforcement by the state, i.e., ''violence'' — and therefore intrinsically undesirable. | Farrington correctly sees a “fiat currency” as necessarily an instrument of [[indebtedness]]: a person who holds it has a promise for value from someone else. He doesn’t say so but he may say regard [[indebtedness]] as, in itself, a form of compulsory trust — trust on pain of enforcement by the state, i.e., ''violence'' — and therefore intrinsically undesirable. | ||
Graeber might agree about currency, and monetary indebtedness, but not indebtedness in general. To the contrary, mutual, perpetual, rolling ''non-monetary'' indebtedness is exactly the glue that binds a community together. It creates ''voluntary'' trust. That kind of trust — credit — is fundamental to how any functioning civilisation works. Discharging that sort of indebtedness releases us from our ties and obligations to each other — thereby dissolves the “community of interest”. One of the things that | Graeber might agree about currency, and monetary indebtedness, but not indebtedness in general. To the contrary, mutual, perpetual, rolling ''non-monetary'' indebtedness is exactly the glue that binds a community together. It creates ''voluntary'' trust. That kind of trust — credit — is fundamental to how any functioning civilisation works. Discharging that sort of indebtedness releases us from our ties and obligations to each other — thereby dissolves the “community of interest”. One of the things that Graeber finds so pernicious about [[indebtedness]] is that it is precisely quantifiable: it sets a precise value for loyalty, and therefore a price at which loyalty may be discharged. The vagueness and irreconcilability of “social” indebtedness makes this a lot harder to do. | ||
====Currency as an anti-asset==== | ====Currency as an anti-asset==== | ||
Currency, on this view is tokenised, accountable unit of trust. That is a glass-half-full way of describing indebtedness — not financial indebtedness to or from a specific person, as arises under a loan contract, but disembodied, abstract indebtedness ''in and of itself''. This is quite an odd concept. | Currency, on this view is tokenised, accountable unit of trust. That is a glass-half-full way of describing indebtedness — not financial indebtedness to or from a specific person, as arises under a loan contract, but disembodied, abstract indebtedness ''in and of itself''. This is quite an odd concept. | ||