Much is being written and talked about when it comes to Bitcoin these days. Smartmoney writes The Bitcoin Triples Again:
The world’s fastest-gaining currency has tripled in price again. Last week, SmartMoney.com reported that the Bitcoin had exploded from an exchange rate near zero to more than $10 in about a year, making it one of the top-returning assets of any kind. On Wednesday the currency topped $30.
I myself don’t know much about Bitcoin yet, but what I do know that most people who write about it have little to no clue about the concept and the history of money.
A money is a medium of exchange. Under free competition in the realm of media of exchange, those goods that are most desired by consumers to fulfill this role will outstrip others in this process, just as they do in any other field where demands are to be fulfilled.
It is only through government fiat and intervention that the money market has been turned into a centrally controlled and directed monopoly. As I’ve explained before:
Fiat currency is demanded by individuals in exchange transactions because its acceptance in payments of debts is enforced by the state, because it is required in tax payments, and because reproducing the same currency without state approval is prevented via the threat or use of aggression. This ensures that there will always be some kind of demand for it.
The internet, arguably the freest economy in the world today ( ironically originally created by government bureaucrats :) ) has changed and is changing the world in ways that many still cannot fathom and are slow to catch up with.
While free competition on the internet has already decentralized the market for media and communication, and has allowed to bring to bear the benefits of the free market upon an enormously large segment of today’s population, in particular the younger generation, bitcoin appears to be the internet’s first serious attempt to challenge the government’s currently global oligopoly on the production of money, and so far it seems to be a medium that is gaining in popularity. Who knows where exactly it will go?
The other day I read a criticism from a guy as to why bitcoin won’t work and why its decentralized mechanism of producing currency is flawed etc. etc. But all those who criticize the concept of a decentralized, non government controlled, currency are either paid off or missing the point:
Us libertarians do not proclaim to know which single commodity out there in the world will be the best medium to facilitate exchange for all time to come! We are not in love with gold, silver, or bytes streaming through cyberspace. All we say is this: “The initiation of the use of force is immoral.” And as I explained above, unfortunately every single pillar that fiat currency rests upon is rooted in just that. We say: Let free and peaceful people decide for themselves what they prefer as currencies, and let them produce currencies where they think they can fill the need for a stable medium of exchange better than others.
(It is precisely this that the governments of the world fear: to have to actually be subject to the mundane and annoying checks and balances called consumer demands, complaints, and competition from superior service providers. Thus, just as in the case of Net Neutrality and the FCC, you can be sure that they will use every trick in the book to curb bitcoin’s emergence as much as possible. They will say that it’s used by crazy people who sell drugs and prostitution and who eat puppies and babies etc. etc., just to get moral sanction from the public to crack down. Of course they will have to pass in silence the fact that cash fiat money, purely and 100% created by the state, is still organized crime’s prime medium of exchange.
But in the case of bitcoin a crackdown will have to be well planned and orchestrated because if its decentralized nature does indeed prove to be safe from government meddling, then its popularity will only rise exponentially!)
So, to go back to my prior point, even if bitcoin turned out to be a gigantic failure, it absolutely doesn’t matter! This is precisely the point of having free competition in the realm of money: To allow the better producers to stay in business and let the irresponsible ones fail. So long as irregularities and problems are addressed on a smaller level, the repercussions for the affected customers are far less of a drain upon society than continuous and ongoing nationwide or even global boom and bust cycles, financial crises, and fiat money and credit financed wars.
We are not wed to conclusions. We do not say that gold or platinum or bits are the one best currency forever and ever. We are only wed to a process: that of logic and evidence. Market competition and the respect for individual’s body and property leaves little room for arbitrariness and whim and forces suppliers to test their hypotheses about what is and what is not demanded by the majority. Where their decisions were wrong they will be negatively affected and try and improve, where they were right, they will be rewarded.
So to the critics of bitcoin who intend use it as an example of how decentralized currencies won’t work, impatiently awaiting its apparently oh so predictable collapse, I would say this: Why don’t you calm down and let the chips (or coins) fall where they may? :)