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“The Pitchforks Are Coming ... For Us Plutocrats”! This is how self-proclaimed unapologetic capitalist Nick Hanauer addressed the explosion of global economic inequality. In this rather sensational title, he wrote a warning to his fellow .01%ers that the end game is in the cards with an imminent social uprising.

In the wake of OccupyWallStreet in 2011, America heard the rumbling of citizens, similar to the discontent that made president Franklin Roosevelt pass the New Deal, Jimmy Carter sign progressive legislation and made corporate executives afraid of Ralph Nader during the 60’s. We saw an apathetic and obedient populace begin challenging the managed democracy and refusing to play the game of electoral politics. Then the Wall Street fat cats ignored it and covered up the crisis with a taxpayer bailout for the banksters. As the movement lost momentum with brutal police attacks, they could just sit in chairs and ridicule the protesters, “what’s your demand?” In retrospect, perhaps the Occupy Movement was just a hint of things to come.

Though most people are not aware of it, the revolution is now underway with blockchain based cryptocurrencies. Max Keiser and Stacy Herbert of the Keiser Report tapped into a prescient picture of a future that is radically different than the current centrally controlled economy and governments. Just prior to Independence Day, these two diaspora Americans living in London pointed to the beginning of something massive with the blockchain public ledger and peer-to-peer funding. This technology innovation is a quantum shift that could be as revolutionary as the invention of the printing press, the internal combustion engine and the Internet. A Telegraph article titled “The Coming Digital Anarchy” captured the radical potential of the Bitcoin innovation and showed how from banks to markets to governments, it could disrupt the existing systems of centralized power on a global scale. In light of Hanauer’s bold letter to his fellow plutocrats, the more pressing question is how might Bitcoin’s underlying blockchain technology address the looming global issue of massive economic inequality?

Bitcoin first appeared in 2009. Four years later, it exploded into mainstream news. In 2013, the cryptocurrency made the cover of TIME Magazine and has become one of the most searched words online. In 2014, innovation is now moving fast with features on the horizon like sharable social media Bitcoin payment integration and the first Bitcoin debit card. Mainstream acceptance is accelerating and the buzz about this digital currency is not slowing down.

Much of the corporate media has fixated on what is perceived as volatility. These sensationalizing headlines like “Bitcoin Crash” for a time tried to imprint in the public mind that this crypto-currency is simply a fad, another bubble to burst or a “Ponzi Scheme”. Nobel prize-winning economist and New York Times columnist Paul Krugman once wrote a blog post with the provocative title, "Bitcoin Is Evil", questioning its ability to become “a medium of exchange and a reasonably stable store of value”. This view evoked derision from many quarters.

In the article "Why Don’t Economists Like Bitcoin"?, Adrianne Jeffries noted how the topic of Bitcoin divides people into vastly different opinions. She observed that people from computer science departments tend to praise Bitcoin while those in economics departments are much more likely to criticize it.

So what is Bitcoin really? Silicon Valley tech entrepreneur Andreas Antonopoulos described it as much more than just currency and noted how this is something that has never happened before. “Bitcoin and crypto-currencies in general don’t fit any of the traditional modes: not currency, stock or commodity, but a new asset class”. He continued, “trying to figure out Bitcoin by fitting it into an existing paradigm misses the point. Cryptocurrencies broke the paradigm. It’s a new world”.

Co-founder of venture capital firm Andreessen Horowitz, Mark Andreessen described how this technology’s powerful promise is not at first so apparent. He points out how cryptocurrencies like Bitcoin in 2014 are what “personal computers in 1975, the Internet in 1993” were in their infancy. Before that time, most people were unable to imagine the new horizons that the Internet revolution would open. Just as back then, many now might not fully grasp the potential of this new asset ledger and the free flow of transaction that digital currency is bringing. The blockchain protocol delivers a payment system that will likely change economic transactions as drastically as the Internet changed our relation to retail sales, the postal service and telephones.

Before Bitcoin, all digital money had been forced to use third parties to do ledger reconciliation and prevent double spending. Bitcoin is revolutionary in that it is the first peer-to-peer transactional system with no centralized authorities. Now you can send any amount of money to anyone in the world instantly without asking permission or experiencing account holds, exorbitant fees or charge-backs. With a simple application on a smart phone, basically everyone can now control their own transactions and become their own bank.

Bitcoin departs radically from the way money in the current economic model is now conceived and transacted. This decentralized digital invention challenges the minds of economists who are generally trained to understand money as an instrument created in a hierarchically organized society and within a form of economy that is based on centralization. Correcting economists’ misconceptions about Bitcoin can help us understand its true revolutionary potential and unveil why it is often met with such resistance and criticism. Now let’s look more closely at some of the characteristics of Bitcoin as a currency.

Design of Digital Scarcity

First, what makes something capable of becoming currency? It must be durable, resist counterfeit, be rare and easy to transport. The blockchain protocol solved the problem of double-spending in the digital realm. Bitcoin as digital cash is incredibly portable. It is also made rare with “digital scarcity”, which Richard Gendal Brown explained as a crucial aspect of Bitcoin’s irreducible essence.

Brown derived the term from an Antonopoulos interview with Adam Back on the "Let’s Talk Bitcoin Podcast". Back introduced the idea of “digital scarcity” as a way to “create a system that allows you to make objects in the digital world ‘scarce’”. Brown drew on the example of how the opposite of this happened to the music recording industry with mp3 files. He pointed out how when a digital music file was sent, it was not transferred, but duplicated over and over and thus lost its scarcity. He explained how Bitcoin is designed to solve the problem of enabling “transfer without duplication”. Bitcoin’s ability to maintain digital scarcity was a crucial element for it to function as a currency.

Network Effect

One common allegation regarding this Internet of digital cash is the idea of the currency acting as a bubble. As we know, last year Bitcoin made rapid price increases and pull-backs. It rose in one year from $12 to nearly $1200 at its peak for 2013 and is now around $600. Alan Greenspan asserted that this is a classic bubble and 2013 Economics Nobel Prize winner Robert Shiller, regarding bitcoin’s significant price jump in 2013 also claimed it to be a bubble.

Joris de Ruiter of Cryptocoins News took a close look at the trend of Bitcoin price changes and displayed it on a logarithmic scale. His research countered sensational mainstream journalism claiming Bitcoin to be a bubble as he showed how “at the end of every bitcoin bubble, the value is about 2x higher than what it was”. He also found the correlations in trend relations between Google keyword popularity and price peaks.

The volatility of this asset can be understood through a deeper understanding of the network effect, a term first coined by Robert Metcalfe to describe a phenomenon wherein the addition of more “nodes” multiplies the value of all the other nodes and also of the network as a whole. Executive Director of the Bitcoin Foundation, Jon Matonis described Bitcoin as “viral cubed – money on the Internet with a network effect”. Each time a new participant joins the system, the value of the whole network increases.

Bitcoin is the first transnational currency and its network is global. The real benefit of this network effect might be experienced in the peripheries of the Western centralized financial system. Many cannot see Bitcoin's potential in countries like Argentina where their currency loses 25 % of its value every year, or migrants in Uganda where more than 12% of their hard work is taken from them by a rapacious remittance industry. The Bitcoin network empowers those so called the other six billion, the unbanked, underbanked and exploited. In the West, Bitcoin is often seen as an instrument for speculation, yet it can actually be a tool for liberation in the Global South.

Finite Supply with Infinite Divisibility

Bitcoin self-regulates through algorithm and carries an inherently predictable monetary policy. A maximum of 21m bitcoins will be created. With this unique quality of digital scarcity, it is like gold except it is extremely portable, highly divisible and flows like no other currency has before.

On the surface, monetary policy linked to a limited or fixed supply is often characterized as inherently deflationary and this is viewed as an unfavorable condition according to economists. In traditional economics, deflation is understood as a decrease in the general price level of goods and services. Much of the criticism regarding Bitcoin relates to the question of how such a 'deflationary' currency can accommodate economic growth. Lets look at this more closely.

It will take more than 100 years (till the year 2140) to finish mining all of the 21m bitcoin and it is mathematically designed to slow mining growth to match demand. The more bitcoins that are mined, the harder the mining gets. Any increase in supply through mining will likely slow if the price goes down. Yet Bitcoin can be divided into 8 decimal points and more if consensus is reached (it is not technically infinite but very flexible). Also with its frictionless cash-like flow, the higher the price of each bitcoin, the more it spreads into an increasing number of dividing parts to more and more people.

With this new paradigm, the old argument of deflation (defined as less money chasing more products) does not apply because the utility, flow, division and adoption rates grow in tandem with the unit price. No other currency has had this capacity to divide, increase its store of value, flow, usefulness and adoption rate all at the same time with a mutual network effect. These two opposing characteristics of finite supply with infinite divisibility placed within this unparalleled flow is a crucial factor that makes Bitcoin radically different from pre-blockchain currencies.

This economist’s concern of deflationary design brings out the blind-spots of modern economics, specifically its unexamined assumptions based on narrow material production-consumption quotients. We begin to question the premise of the current economic paradigm and its ideology of constant economic expansion measured in GDP. Bitcoin is a completely new paradigm. It engages us to envision a new economy and monetary policy that is beyond the market fundamentalism which demands constantly expanding production, consumption and supply of monetary units.

Asset-Based Currency and Networked Abundance

Bitcoin is an innovation of the open-source Internet era. It is an asset-based currency and functions in a new ecosystem. How is this asset-based currency so different? To understand this we need to first explore the reality of current debt-based monetary systems. Author of "Debt: The First 5,000 Years", David Graeber noted how debt-based monetary systems create an empathy deficit. As humans, we are naturally empathic, yet the debt-based capitalistic system makes us go against our human nature. In this system, people are ruled by fear-driven logic of gain and loss and are made to compete with one another.

Antonopoulos explained how as an asset-based currency, Bitcoin exhibits very different monetary behavior compared to debt-based fiat. Antonopoulos addressed the so-called fear of deflation and elucidated how differently the idea of deflation is experienced in the Bitcoin ecosystem. Antonopoulos explained how with currencies based on debt, deflation hurts those who owe and helps those who have saved. If you are a government that is in debt, you likely don’t like deflation, while individuals who save are likely to enjoy the increase in buying power.

He argued how we only have ever seen deflation during a catastrophic collapse of demand, as in Japan 20 years ago. He explained how this is a situation where interest rates go down to zero and you can print as much money as you want; money is flowing out of the central bank, but nobody wants it because everyone knows that the economy is dead. This collapse of demand is the primary fear behind the deflation phenomenon that economists talk about, where people stop buying and it effects the overall economy in a trend of stagnation.

Antonopoulos described how this deflation was a particular experience created primarily within fiat systems and especially debt-based currency. He pointed to how the Bitcoin ecosystem creates a very different experience of deflation. In the world of a currency that is based on debt, deflation is a bad thing because it only happens when there is catastrophic collapse of demand and this tends to bankrupt the government, which is followed with the phenomena of the state’s crazed printing to mitigate the situation. Antonopoulos noted how when a currency is asset-based like Bitcoin, there is never a spiral of infinite printing and within the Bitcoin ecosystem, ‘deflation’ means we gain purchasing power and all nodes effectively become wealthier.

More people are now being paid in bitcoin. With new start-ups, blockchain-based crypto-currencies are actually creating a new economy. One of the biggest bitcoin payment processors, BitPay is reported to be processing an average of $1 million worth of bitcoin payments per day, a threefold increase from last year, serving the needs of over 30,000 businesses and organizations.

Transition into blockchain currencies has the effect of freeing people from monetary control and centralized economic hegemony. The blockchain-based borderless currency is such a game changer that it could foster a free flow of movement away from fiat debt, creating a kind of global jubilee, making personal and national debt embedded in the old fiat system increasingly irrelevant. It also could stop printing of money that is often used simply for building weapons and maintaining constant war. A shift into asset-based currency could help balance the red ink of the growing empathy deficit, transforming society into a global network of abundance.

Distributed Trust Network

The basis of Bitcoin’s distributed consensus lies in decentralized trust. Bitcoin’s trust system is not only strikingly different than that of the guarded central banks, but is a radical departure from the debt-based fiat currency system itself. Antonopoulos said that Bitcoin’s trust by computation is enabled by the “cumulative computing power of thousands of participants, accumulated over time in a chain of increasing-difficulty proofs”. He explained how the inherently open Bitcoin distributed trust network has no “levers of control at the core of the system”.

Columnist for Politix, Derek Khanna elaborated on Bitcoin creator Satoshi Nakamoto's innovation of a “system for electronic transactions without relying on trust” as “an option to ‘trust in math’ rather than politicians or bankers to manage currency and verify transactions”. He summed it up by showing how the “digital currency crowd aptly counters the US motto, ‘In God We Trust,’ with ‘In Math We Trust.’”

In order to understand Bitcoin’s “In Math We Trust”, it might help to first look at the source of trust in the U.S. fiat system. What is behind this doctrine of “In God We Trust”? Perhaps this God just is the monotheism of capital accumulation. With Western industrialization and heightened materialism, traditional communities are breaking down. This has created an alienated sense of individualism and our relationships have become more and more dictated by capitalist demands. The global market and needs of transnational corporations have gradually come to define our daily interaction, leading to increased complexity and abstraction of transactions and a privatization of trust. In the last 50 years, the banking systems have morphed into giant hierarchical structures that require all people to trust in this third party authority model. Trust has come to be enforced by coercion through a monopoly.

The global Occupy movement emerged as a response to the blind worship of this God of capital and challenged the legitimacy of its neoliberal ideology. The movement brought a radical departure from the traditional politics of representation and a new way of organizing that is leaderless and horizontal. It introduced the idea of General Assembly with a consensus model and egalitarian decision-making processes. The undercurrent of this new organizing was distributed trust in the spirit of mutual aid and voluntary association. It was a shift away from that blind, coerced trust of illegitimate authority to a peer-to-peer network expressed in the motto “In Each Other We Trust”.

The Bitcoin trust system broke away from the blind faith of “In God We Trust”, giving everyone who chooses it the option to trust math. At first glance, it may seem that an algorithm is replacing the human trust needed for transactions. This could be seen as saying; “I don’t trust another human being, institution or bank as they are corruptible, but I trust mathematics”. But interestingly, Bitcoin’s algorithmic asset ledger allows those who agree to trust it to interact with one another such that both parties can simply trust the integrity of their relationship and interaction without needing to trust anyone else. This does not eliminate trust, but rather simply removes the need for centralized authority.

The blockchain frees us from this monopolization of trust and enforced authority. This public ledger provides an alternative to walk away from such control. It brings back the autonomy of trust - restoring the capacity of the individual to freely determine their relationship and interaction with others. This autonomy of trust is a concrete and practical manifestation of the new principle that was cultivated in the Occupy Movement. This decentralized network as an undercurrent of exchange re-installs trust as a crucial foundation of our now global culture. Bitcoin enables what had been experienced mostly at a local level such as face-to-face direct transaction at a farmer’s market to grow, but this time at a global scale.

Currency as Language

With Bitcoin’s first application, we are only seeing the tip of the iceberg with the possibilities of this revolutionary blockchain invention. With currency alone, Bitcoin’s potential impact on existing system of finance and economy is earthshaking. More importantly, as legitimacy and control of currency is freed from central authority, our imagination is freed from the dominant economical model of extreme capitalism.

The blockchain technology is an open source invention arising from computer science. It engages everyone to re-imagine economy and democratically elect their own currency – one that is conceived, adopted and its flow directed by the people and for the people, not handed down by any state or corporate authority. This programmable finance is a form of free speech and as a protocol it has a potential for astounding innovation from the ground up. We are now beginning to re-envision what currency and exchange can really be in a way that profoundly affects our social and governmental structures.

Antonopoulos shared his view about how he sees currency as a token of affection and a means that allows us to express our desires and individuality. He described how “money at the very root of it is a language”. What would happen if we all begin to think of currency as forms of expression, as language by which we communicate and express our values?

Now with cryptocurrencies, we can communicate globally and circulate the world with values that we freely choose to associate with - without asking permission. What do we truly care about that we wish to communicate to one another? What parts of ourselves do we want to share or express through this new network of distributed trust?

Let’s expand the imagination to really look at currency as a language. We might come to realize that language is an exchange between people and that the meaning or value of any expression or exchange is only made in relationship. This value is created in the interaction, not in isolation. If currency is a form of expression, the more it is adopted and the more freely it flows, the richer it becomes.

Through this perspective, what do the familiar notions relating to currency such as savings, wealth and debt really mean? If currency is pure expression, who would like to save it? Wealth also can be redefined to mean mutual sharing. Expression as a form of giving only gains value through exchange. By always keeping a currency flowing, the network and value expands and all who enter it become enriched by the exchange.

As the free choice to enter an asset-based currency is made by more people, its flow that has for too long been stagnated by hierarchical institutions is released and money as a form of control like debt-based fiat loses legitimacy. We can now restore human relationship as the basis of the real economy in the sense of our deeper indebtedness to one another.

As the world goes through upheavals and decay of trickle down Reaganomics, with its mounting crises of debt bubbles, collapsing currencies and top-down austerity, the resultant social unrest and ‘pitchfork’ uprisings may seem virtually inevitable. Yet with the blockchain, we now have a decentralized solution to those centralized problems. The revolution in this era may not need pitchforks, as the ‘peasants’ can just stop paying for the plutocracy! Powered by peer-to-peer consensus algorithms, cryptocurrency is here for the 99%. We can simply walk away from the economic apartheid of debt slavery and create our own open source global democracy for all.

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