Last week i went to the London School of Economics for the LSE Sociology Forum: Bitcoin, alternative currencies reloaded, a panel dedicated to the decentralized, peer-to-peer currency Bitcoin. Historian Garrick Hileman, sociologist Nigel Dodd and financial activist Brett Scott were sitting around a table to reflect on the question:
Is Bitcoin the new gold? Shaking up online and offline worlds, the online currency Bitcoin has increased its ‘value’ at immense speed in the last year. Being immune from government interference and private manipulations, it has been celebrated as a new alternative currency by some and condemned as source of unpredictable risk by others.
If, like me, you’re not sure you perfectly understand the functioning and meaning of Bitcoin, then head to Brett Scott’s blog post How to explain Bitcoin to your grandmother .
Going to that conference was probably the best move i made that week. It was engaging, smart and eye-opening. And thanks to the presentations, i think i might even sound slightly less clueless next time The Boyfriend tells me about his Bitcoin adventures.
Interestingly, the room was packed and when one of the speakers asked who among us owned bitcoins, no one raised their hand. I wondered how (if?) different the discussion would have been like if users of Bitcoin had been in the audience.
Garrick Hileman was the first to take the stage. Hileman is an economic historian at the London School of Economics and he talked succinctly and articulately about the history of alternative currencies and why all of them have failed so far.
and UK) and he’s been exploring alternative financial communities, a section of which is alternative currency for a number of years now. You can buy his book with a number of alternative currencies. He’s sold 30 copies with bitcoins so far.
Scott reiterated that the figure of Satoshi Nakamoto is indeed important as its mythical character creates an emotional bond with the currency. Which is probably the reason behind the existence of the dogecoin.
The problem of Bitcoin is that the public doesn’t understand it. Experts explain it in reference to itself, instead of in relation and contrast to ‘ordinary’ currencies.
Another important point Scott brought about is that Bitcoin is not as apolitical, neutral and liberal as it is claimed to be. Society is neither apolitical nor neutral so how could Bitcoin be that paragon of liberality? He illustrated the comment with his experience of the Bitcoin Expo where there was a massive gender imbalance. The conference was 90 to 95% male. His talk at the conference was therefore about Bitcoin and gender.
The topic of gender-imbalance reappeared later in the Q&A. Is there something inherently male about Bitcoin that attracts males? Or is there something about Bitcoin that repels women? You can read more about the topic in Scott’s blog post Crypto-patriarchy: the problem of Bitcoin’s male domination.
Bitcoins are accepted in stadscafé De Waag in Delft as of 2013. Photo by Targaryen
The last speaker was Nigel Dodd, an Associate Professor in Sociology at LSE. His new book, The Social Life of Money, will be published by Princeton University Press this year. The main purpose of the book is to reformulate the sociological theory of money in the aftermath of the global financial crisis, focusing on the question of how money can be wrested from the domination of banks and the mismanagement of states and restored to its fundamental position as the ‘claim upon society’ that Simmel once described in The Philosophy of Money.
Dodd started by stating that he is favour of monetary liberalism and that consequently he is in principle pro-Bitcoin. Except that he thinks that something is weird behind the philosophy of Bitcoin. Bitcoin is sexy but it is also misleading. He added (in reference to one of Garrick Hileman’s last points) that if Silicon Valley is involved, it gets even sniffier.
From here my notes are getting a bit messier as this guy thinks and talk brilliantly but also very fast.
We need to see Bitcoin in the context of other monetary systems. There are 72 to 73 other digital currencies so there is a lot going on besides Bitcoin.
The monetary theory is another problem. For all its radical aura, Bitcoin rests on a backward monetary theory. It actually has a lot in common with the politics of austerity that regard money as a ‘thing’, a commodity. That’s something that Bitcoin celebrates too, whether or not it realizes it. There is a limit in the number of Bitcoin that can be generated. Just like there is a limit with gold. Also it’s mathematically possible for Bitcoin to be controlled by one computer and because of that it is similar to money.
So what makes Bitcoin different? Usually institutions protect money as if it were a commodity. Bitcoin does the same except that it does away with the intermediary. What makes Bitcoin attractive is that it’s managed by a bunch of machines. However, that there are always humans behind the machines.
Money as a claim upon society/social life. All currencies interpret this claim in their own way, whether we’re talking about time, gift giving, trust, etc. The claim of Bitcoin is technology of mistrust, you don’t need trust with Bitcoin: machine do all the job. But again, there isn’t a machine that operate without humans.
According to Dodd, every currency fulfills a different social need but which one Bitcoin fulfills is still unclear.
For Dodd, money is a process, not a ‘thing’ and Bitcoin is the only currency that doesn’t acknowledges money as a process. It’s the least sociological form of money we have.
An interesting question that emerged during the Q&A was the possibility to make Bitcoin taxable. Dodd explained that for most regulators, the number one financial obligation is tax. If Bitcoin starts to threaten that, it won’t simply evade tax but it might also stop the whole machinery of tax.
The Financial Times crowd has long been skeptical of Bitcoin, mostly because the currency is not regulated. Bloomberg even published an article titled Virtual Bitcoin Mining Is a Real-World Environmental Disaster (a theory which is obviously questionable.)
With tax, Bitcoin would receive a certain legitimacy. Business would find that very seducing. Each regulation could actually help Bitcoin. For Hileman, Bitcoin is actually the best challenge we have to the current financial system.
Photo on the homepage by Rick Bowmer.