Bitcoin advocates insist the cryptocurrency isnt in a
Every group, every project, and even every person practices governance of some form or another. For example, a person self-governs. She decides how she lives and what to do each day. In fact, one of the great crimes of humanity is slavery, for it takes away the ability of an individual to self-govern.
A family practices governance as well — how decisions are made each day, how kids are raised, etc. Some form of governance is identifiable in every group, no matter its size. The local Elks club has a method of governance, as does a church or a multinational corporation. And of course communities — be they villages, towns, states, or nations — have ways of governing themselves. Even an anarchist advocates for governance — he just wants each individual to govern himself or herself without any input from others in the community.
And this is true — gold is an inanimate object that has no need of governance. But Bitcoin — like other cryptocurrencies — is not an inanimate object. It is, at its core, a software project. Yes, it is much more than this; it is also a system of money and a social experiment.
But fundamentally cryptocurrencies always start as — and remain — software projects. They have developers who make decisions about the project: Should we change this code or leave it alone? And as such, they must be governed. Currently, Bitcoin is governed by the consensus of a number of entities of different levels of influence.
Miners exert probably the most influence, followed closely by the core development team. Merchants also exert some influence on the project. Stories about Bitcoin BTC have become hard to avoid recently, especially in stories regarding the loss or theft of most of the holdings of the major Bitcoin exchange Mt. Gox , but the meaning of those stories is much harder to judge.
While it is widely understood to be an alternative form of money, according to most formal definitions Bitcoin is currency rather than money , and at any rate may be better understood not as a financial instrument but as the realization in software of a politics , one based on outdated conspiracy theories, most of which emerge from the far Right.
Rather, the flaws lie in the diagnosis itself. Like many of the most influential ideas associated with what I and other scholars have called cyberlibertarianism , enthusiasts demand we understand Bitcoin as a welcome political intervention, but when pressed for details about that political intervention, its advocates unfailingly turn back to technical and engineering matters.
It was developed by a shadowy figure or group of figures who went by the name Satoshi Nakamoto , who has not been heard from since ; in part it delighted hackers because it gave them a means to donate to WikiLeaks when MasterCard and Visa prohibited such donations. Without getting into the weeds of its technology—again, I think too much attention is paid to this part of it and that this actually distracts from its political and financial functions—here is a short summary of how it works from a recent piece by Adam Rothstein for a more complete technical discussion see t his post by Michael Nielsen:.
Basically, [Bitcoin] is a peer-to-peer database that lists a number of units of value, or coins, by unique addresses, and assigns them to personal owners by more unique addresses. The database makes sure that only the right coins are assigned to the right owners by keeping a single list of who owns what, called the blockchain.
It also makes sure that the blockchain cannot be falsified, by placing the transactions between pieces of a complicated code, which are called the proof of work.
Since every computer on the network is simultaneously generating the proof of work and is rewarded for doing so by being given a fraction of new BTC according to the amount of work they are doing, in what is called mining , it would take a computer that is more powerful than all the others combined to mess up the record.
So, through this peer-to-peer verification system, the record stays legit, without needing the need for a centralized bank to be in charge. Money and currency are not the same thing. The store and measure of value functions require State or other overarching institutional backing and, historically, have required State interventions to ensure stability—functions that Bitcoin cannot force nations to relinquish.
And by the civil law of contracts, the government determines what settles a legal monetary contractual obligation. The nature of money is highly complex. It is not well understood. Yet cyberlibertarians continually write as if money is simple, straightforward, that any attempt to delve into its complexities is disinformation propounded by central bankers, and so on—despite themselves being unwilling even to investigate the basic parameters of the thing they claim to have bettered.
But as many economists have pointed out, alternatives to national currencies abound —from frequent flyer miles to credit card bonus point programs, from grocery-store coupons to high-value goods like fine art, precious metals, and gems—and it is only in this trivial and colloquial sense that Bitcoin is money. None of these alternative currencies pose any threat whatsoever to national sovereignty over money, a fact that Bitcoin advocates seem unable to process.
In fact, they make continual reference to the superiority of gold-backed money , despite the fact that governments fixed even the price of gold at many moments in history to tame volatility, and in the face of current stories about gold and silver prices being part of the actually conspiratorial LIBOR price fixing scandal.