I’ve now written the third consecutive article about Bitcoin, and after this one I’ll more or less be wrapping things up for the time being. My spare cash has basically all been invested already, and I’ve now bid farewell to the infuriating Bitcoin China trading platform. I put one bitcoin into Mt.gox and started groping my way through the game of selling high and buying low; a few days later, one coin had become 0.98 coins… It’s a bit discouraging, really… Of course I’ll keep trying my hand at it, but I no longer dare to make any big moves. For now, the main thing is just to hold the coins and watch…
The previous two articles still hadn’t touched the real significance of Bitcoin—namely, in the sense of “medium is the message,” the significance of Bitcoin as a new “environment.”
I mentioned earlier Bitcoin’s deflationary feature, its anti-counterfeiting feature, and so on, but all that was only to say that it is better than previous currencies. What truly matters is not these features that can be measured by the same yardstick, but rather its subversion of the old medium, or the old environment—just as the automobile is not merely a faster horse, but also reconstructs the entire environment of so-called “transportation” and rewrites the meaning of “travel.”
So where exactly does Bitcoin’s subversive power lie?
Some people say that Bitcoin’s number-one feature is anonymity; this understanding is as mistaken as taking the internet’s defining feature to be anonymity. In fact, the opposite is true: Bitcoin can support completely open and transparent transactions to the greatest possible extent. Its anonymity is only that anyone can create countless addresses to receive payments, and each address is merely a string of meaningless characters. But every transaction between every address is public. Every transaction since Bitcoin first went online is stored in every Bitcoin user’s wallet; every transfer of every bitcoin since its birth is recorded. In fact, Bitcoin is essentially this public bookkeeping system.
So if we know who one particular link in the chain of transactions is, and if that person is willing to say who his trading partner was, then by following the trail we may be able to trace every owner this coin has had since its birth. Paper money simply has no such function. In this sense, paper money is the anonymous currency: its chain of transactions is neither public nor transparent, and the flow of money is difficult to trace.
For example, in the Bitcoin donation channel for the Ya’an earthquake set up by One Foundation, we can see online every incoming and outgoing transaction of that account. Right now I can see that it has received a total of 235 coins. Unless the mathematical system of Bitcoin collapses entirely, no one can fake it. As things stand, Bitcoin donations have to be exchanged into RMB through someone else in order to be delivered to the disaster victims. But if the beneficiaries also set up Bitcoin accounts, then exactly whose hands each outgoing transaction from that account ends up in will also be completely open and transparent. If I am willing to publicly disclose the Bitcoin account I own, then once you declare that you have already sent the donation to my account, that fact will certainly be visible to everyone: at what hour and minute, to whom, and how much money was transferred, all clear at a glance, and no one can falsify it. There is no need for a third-party supervisory body to keep watch at all times; everyone can watch. As long as you are willing to declare openness and transparency, then openness and transparency can certainly be achieved.
Based on Bitcoin’s characteristics, at least most of the existing work of auditing and regulation is no longer necessary. Financial credit no longer needs to be protected by a privileged institution; instead, it is guaranteed by an open bond of communication.
Indeed, Bitcoin transcends state regulation, and so at this stage it seems to be used quite often for underground transactions. However, what Bitcoin escapes is only the regulation of the state or of any single power institution; in the end it will place regulation out in the open. The reason Bitcoin can be used for money laundering is not Bitcoin’s anonymity, but paper money’s anonymity—because in the process of exchanging paper money and Bitcoin for each other, the provider of the paper money does not care where the Bitcoin came from. What is being laundered is not Bitcoin but paper money. However, if everyone uses Bitcoin, then Bitcoin itself is difficult to launder, at least no easier than paper money.
Ultimately, Bitcoin has not escaped regulation; it has merely escaped state regulation. But within every small circle of circulation, the flow of Bitcoin is supervised by every participant. Anyone person or institution that wants to gain credibility in public does not need to rely on the guarantee of the state or the bank, does not need to submit to management from some superior authority, and only needs to be open and candid oneself. Bitcoin replaces top-down linear regulation with P2P networked regulation.
At the same time, Bitcoin’s issuance also completely bypasses the state. The first point many people who question Bitcoin raise is often that Bitcoin lacks the guarantee of state authority. That is true. But what exactly do we expect the state to guarantee for us? The first thing the state can guarantee is the ability to keep printing money, to “stimulate consumption” at any time, to force you to spend your money, ensuring that money is always depreciating. But what exactly is this guarantee guaranteeing? It guarantees entrepreneurs and financiers—those rich people who keep capital circulating at extremely high speeds. Even if they hold large amounts of cash, they still borrow heavily, just as Apple is doing now: even with such a huge cash reserve, it still does not fear currency depreciation, because its loans and its higher-priced products will offset the losses caused by depreciation. In short, the guarantee of currency depreciation is a guarantee for those who lead the flow of money. But what about ordinary people and salaried workers? Their capital turns over much more slowly. The income they earn now may well need to be set aside for raising children or for old age protection ten or even more years later. Even if a decent social security system partly dissolves this kind of precautionary planning, ordinary people still can never handle the circulation of funds as adeptly as the big players can. Once money depreciates, when savings and salaries shrink drastically, who can the salaried class count on to protect itself?
Yes, the state can guarantee the legal status of money; that is to say, no matter how much it depreciates, the money remains legal tender. What does that mean? When a situation of sharp depreciation like Zimbabwe’s or the gold yuan’s occurs, those currencies are still legal tender. Even if the wages you receive in the morning have fallen tenfold by the afternoon, you are still forced to accept them, because the law guarantees their validity. A kind-hearted entrepreneur may choose instead to pay wages in foreign exchange or gold and silver, but if he still insists on paying you in gold yuan, then you have nothing to say, because that is the legal currency guaranteed by the state.
The existence of a supreme central authority gives people a certain sense of security, but how much protection does it actually provide? How much of that protection could in fact be organized without a centralized institution, and how much is simply superstition?
We do indeed need police stations, fire brigades, the army, and the Red Cross. But do these institutions necessarily have to be supported by a centralized “state” behind them? Like ancient Greece, without a unified empire, relying instead on decentralized small city-states for self-governance—would that not work? Of course, you will say that the times are different; the forms of social interaction in Greek society were very different from those of modern people. But what if the forms of social interaction in the internet age are themselves again very different from what we have now? Is the pyramid structure of the state necessarily eternal?
I am in no way being anti-Party or anti-socialist; quite the opposite, the ultimate ideal of communism is the disappearance of the state. Whether or not Marx’s ideal was illusory, he at least recognized that the state is only a historical thing; it has not existed since ancient times, nor will it exist forever and ever.
The history of the 20th century seems to have proved that a completely laissez-faire market economy does not work. But does that mean the market must be regulated by a centralized institution? Because of the monetary system’s dependence on a central bank, it seems that the market regulator must be located at the center; yet what if this pyramid-shaped monetary system formed by the central bank, banks at various levels, and financial institutions were broken apart?
We still worship the myth of centralization. We believe that there is a group of economists who, day and night, monitor the market and will take reasonable measures at the proper time—just as ancient people believed that without an emperor laboring day and night, the harvest of one’s own fields could not be secured. Indeed, we need people who “labor day and night,” but this does not necessarily have to depend on a wise and mighty emperor or on a tiny clique of supremely clever economists. Just like the operating model of open-source software, all that is needed are some weaker maintainers, who cannot manipulate things behind closed doors or monopolize everything, and whose position can be replaced by other branches at any time; as for the massive work of maintenance, patching, and creation, it is shared by the whole community.
The structure of political space corresponds to the structure of the medium of communication. Oral tradition tends to sustain loose tribal organization, written tradition tends toward a centralized civil bureaucracy, printing strengthens democracy, while broadcasting tends toward dictatorship… The internet age will also promote its own distinctive spatial structure, namely the network. A decentralized, interconnected form of organization will have the advantage.
Of course, the state will still exist, but its controlling status as a center of power will fade, and what will remain more is its cultural and historical significance. Bitcoin will be one of the milestones of this network society. It has launched a transformation of capitalism’s core—the mode of operation of “capital.” In a certain sense, Bitcoin has made possible this new structure of political economy—which we may call “socialism.” Socialism does not trust capitalists and monopolists; instead, it believes in the power of communities that are broad, free, and built from the bottom up.
Translated from the Chinese original with AI assistance. The original text is authoritative.
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