Bitcoin, announced to a small list in 2008 after the great banking crash, seemed to offer the millennial generation a solution to a millennials old problem – ensuring the fairness of money.
People flocked, coders, techies, thinkers, academics, ancaps, artists. The currency went up and up, reaching great new heights in 2013, nearly surpassing gold itself, something it did just a few months ago.
But the experiment is not just in code, it’s not just about banks or money. The whole thing is a complicated machine that includes some sort of core dna (code protocol) through which many smaller cells (nodes/miners) co-ordinate to allow functions (people to transact).
If evolution tells us anything is that sometimes this protocol needs to be changed, but change means losers and winners, so who decides and how? The bitcoin whitepaper, which some want to deface, says the hardware network share makes such decision, but it’s not hard to dispute this, just as a dictatorial government can dispute judicial rulings.
What happens then? Chaos, of course. Governance, therefore, on a conceptual level, is highly important. But how do we ensure good governance? If matters are indeed so fragile that some developers can simply discard objective rulings, how do we keep them accountable to the point where they would not consider discarding such objectivity?
The answer to that question is the real reason why bitcoin was invented. While some hail its decentralization as a means in itself, it in fact appears to have been only a way of achieving the actual goal.
The goal being, not some fringe subjective thoughts of some individuals at the barrel ends of society, but the implementation of the highest thinking that our mankind has so far achieved. That is, the insight of Friedrich August Hayek, who, after spending much of his life studying money, gave us this insight:
“The past instability of the market economy is the consequence of the exclusion of the most important regulator of the market mechanism, money, from itself being regulated by the market process…only competition in a free market can take account of all the circumstances which ought to be taken account of.”
For that to become a reality, an ancient privilege needs to be given once more to the people. That is the sovereign’s ancient prerogative over money. Hayek says in The Denationalization of Money:
“When one studies the history of money one cannot help wondering why people should have put up for so long with governments exercising an exclusive power over 2,000 years that was regularly used to exploit and defraud them. This can be explained only by the myth (that the government prerogative was necessary) becoming so firmly established that it did not occur even to the professional students of these matters (for a long time including the present writer!) ever to question it. But once the validity of the established doctrine is doubted its foundation is rapidly seen to be fragile.”
The above statement engages in a scientific exercise that aims to discover what is, objectively, but it is easy to see why the end conclusion is not desirable to some entities. Here, intellectual minds can reasonably take two paths based on their overall inclinations.
The first path is pessimistic, a path Nakamoto took and set the tone for bitcoin even to today. That is, the nation or banks or external enemies will attack to try and crush this insight and force with an iron fist their millennial old prerogative.
The second path is more optimistic and requires a trust that those who currently hold power, are generally intelligent, generally reasonable, generally more aware of many complex matters, and generally familiar with history which has conclusively proven that what appears to be good and obvious as well as in the interest of most must necessarily prevail.
That is, instead of considering the status quo as enemies and engaging with them in a confrontational way, Hayek’s insight can be implemented incrementally in a persuasive manner that would lead to the agreement of its implementation by what we must assume are the more intelligent humans for otherwise they would not maintain the positions they currently do.
Reality has a way of imposing itself, regardless of anyone’s thoughts. Certain things simply are. The insight of Hayek cannot be resisted and is not being resisted. In fact, both the Republican party in USA and the Conservative party in the United Kingdom supports it. That’s as mainstream as it gets.
However, that does not mean bitcoin must be the one thing that replaces all money, something which fully contradicts Hayek’s insight. Bitcoin’s purpose appears to be solely the forcing of private money into the market and giving the sovereign no say whatever regardless of his pleasure.
Once that is forced, as it has been, the market mechanism must regulate bitcoin, just as it regulates all else. That means, the currency is not some emotional thing, but just one among many, where they all compete, and in such competition are refined/improved.
It is this market mechanism that keeps developers in check, whether in bitcoin, in ethereum, at the bank of England, or at the FED. It is by their constant knowledge that the market will leave for another currency or come to a currency, that all actors are forced to act objectively, thus in the end delivering the best money for all society.
As such, bitcoin is always at risk of being judged as inferior by the free market under which it has willingly subjected itself and which will mercilessly judge it.