Cryptocurrencies and What They Mean for Sharing

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Matthew Slater:

"Current projects in Iceland, Scotland and Poland each plan to issue a cryptocurrency equally to every citizen, which sounds like sharing, at least at the start of the currencies' lives, and it could be good for the economy (if only the economy measured real activity, and not only movement of legal tender) by providing an extra source of liquidity, and a fall back mechanism, in the unlikely event of a total banking collapse.

But our individual experience of money and the economy does not give us a very helpful view by which judge its sharing qualities. We must at the very least look at how a currency is issued and how or whether it is redeemed to understand

Hopefully, Shareable readers understand how around 97% of all modern money is issued, not by the government as a public service, but by banks as interest-bearing loans, for profit, and without any consideration for the wellbeing or stability of the economy. If you don't know this, please watch Money as Debt!

The function of the dollar then, as defined by its issuer, the global banking cartel, is to extract money out of the economy in the form of interest. The more dollars lent out, the more interest comes in. The function of bitcoin, is completely different. Bitcoin is a tool, accessible to anyone with an internet connection, for making quick, almost free transactions from anyone to anyone, and storing them in a log which everyone agrees upon, and which can never be changed. Coins are issued to those computers which perform the service of securing the network.

So another plus for bitcoin is that it gives no credence, value, attention, worship or energy to those most unsharing of institutions, banks.

Many activists hope that bitcoin could destroy first Western Union, then Visa / Mastercard, and then serious impact the major banks. But that is as far as bitcoin can take us, and it is arguable whether destroying banks will actually promote sharing.

You see all the fiat currencies, and almost all of the hundreds of crypto-currencies, of which bitcoin is only the first and largest, are all working within the same monetary paradigm. They are all uniform commodities, issued by an 'authority' in a limited quantity. And they derive their 'value' through 'price discovery' in markets against other commodities. In this paradigm Golgafrinchian leaf money is deeply funny. In this paradigm money has to be somewhat scarce, otherwise no-one would want it, and without people competing to accumulate money and become 'wealthy', the economy would freeze up and mankind would return to the stone age.

Our money today is designed by rich people, and it serves to make them even richer. When our medium of exchange is a commodity, then the rich, who collect and control commodities, also control the economy. If they spend, the economy goes, if they save, the economy stops.

So what is the other paradigm of money, which is seen frequently in history, but rarely in the present? It is money as credit. That is, money which has no value of itself, but which derives its value from trust in its issuer. This difference between a commodity and the promise of a commodity is crucial. Anyone can write an IOU, and anyone can accept it. Where trust exists, money is not needed for trade, only a reliable record of credits and debits which must eventually cancel each other out. Lack of money should never be a problem for a trusted person because their peers will give them credit ex nihilo.

LETS and timebanks have been working on this principle for the last 20 years, and the WIR bank in Switzerland for 80 years. But credit money systems like greenbacks and the tally sticks which prevailed over 700 years of economic stability in England, are definitely out of sight and out of mind. We can see many reasons why: communities are eroding, trust is scarce, markets are globalising, and economists no longer study money.

However credit money is money for sharers, because the trust implicit in it binds communities together. In New Zealand right now, savings pools are springing up in every town, as members lend each other money, interest free, to help them out of debt. All report that relationships and trust are strengthened, and with them economic resilience.

Back to crytpocurrencies. The next generation of cryptocurrencies will not make the assumptions that bitcoin did, which modeled itself on gold. They will allow the creation of indelible, unalterable programmable public data, which will have many many revolutionary applications. (One startup, Ripple already allows P2P credit in arbitrary units, but they are not promoting that application at the moment.)

These things may all come to pass, but we must not rely on technology to fix these things. Cryptocurrency can help with accounting, it can show our reputations, it can find trading partners, level playing fields, and store money. We are being robbed blind when we put our trust and our money with sober logos, ubiquitous PR, long-winded contracts and besuited officials.

But it takes a conscious decision, a personal policy, to extend credit, extend trust to each other in order to escape their tentacles together!" (