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The Satoshi Revolution: A Revolution of Rising Expectations.

Section One: The Trusted Third Party Problem

Chapter 1: Listening to the Past

by Wendy McElroy

Politics Versus Ideology (Part 3)

A lot of people automatically dismiss e-currency as a lost cause because of all the companies that failed since the 1990’s. I hope it’s obvious it was only the centrally controlled nature of those systems that doomed them. I think this is the first time we’re trying a decentralized, non-trust-based system.

Satoshi Nakamoto

Bitcoin Avoids the Lethal Problems of Earlier Private Currencies

(Caveat: I do not mean to credit Satoshi Nakamoto for all good things within cryptocurrency, as I may seem to be doing. Visionaries came before him and forged new paths. For example, Timothy C. May’s “Crypto Anarchist Manifesto” was published in 1988 and opened with the remarkable sentence, “A specter is haunting the modern world, the specter of crypto anarchy.” The genius of Nakamoto was twofold. He produced an elegant, original technology that rivals the Gutenberg printing press and allows the implementation of economic crypto anarchy; and he saw clearly its broad political, revolutionary significance. As much as anything, Nakamoto is a symbol and an aegis for others who have done or are doing fine work.)

Part of the Satoshi Revolution’s brilliance lies in the fact that it is profoundly political without being ideological. Most people see little difference between the political and the ideological or, if they do make a distinction, they believe ideology is the set of beliefs that determine the specific political positions a person takes. In many cases, they are correct. But not in all cases. Sometimes politics and ideology are distinct.

Bitcoin is political in the same sense as the Gutenberg printing press (1448).

Although his press was not the first one, Johannes Gutenberg (c.1400-1468) pioneered innovations that were almost as creative as those of Nakamoto. For example, he used a durable oil-based ink rather than water-based ones that did not last well. He used a strong alloy to create close to 300 separate type bits that could be quickly assembled into uniform templates; prior printers used fragile wooden bits or carved the letters of each page into a wooden block to be inked. Then Gutenberg. Opened a world of information and ideas to the average person who no longer needed to rely on authorities for ‘truth’. The printing press decentralized knowledge from the hands of authorities to those of the common man, and knowledge is power. This made it not only a technical marvel, but also an agent of social change and revolution.

Those who ruled would have prevented the shift in power by plugging the flood of opinions and ideas, if they could have, because an illiterate, uninformed public is easier to control. A literate, informed public serves the goals of populists and reformers who threaten the status quo which is the main reason state censorship existed then and now. Unfortunately for the ruling class, literacy increased and more people judged for themselves which religious and political beliefs resonated inside of them as real.

One example of social upheaval: without Gutenberg’s printing press, the Protestant Reformation is difficult to imagine. When Martin Luther launched the Reformation in 1517 by nailing his Ninety-Five Theses to the door of a German church, the document was rapidly translated from Latin into German, copied and reprinted. Luther, the man, could reach only those within the range of his voice. Luther, the mass-produced author, spread ideas across Europe in months. Within three years, hundreds of thousands of copies of his Theses had been cranked off hundreds of printing presses. The Catholic Church responded by excommunicating Luther and prompting him to flee into hiding. But ideas do not respond to hellfire, nor do they flee.

The Gutenberg printing press was a powerful, political tool which sparked movements and revolutions. But the printing press itself was not ideological because any idea could be assembled in templates and printed en masse for people to read: Catholicism or Protestantism, individualism or socialism, Karl Marx or Ayn Rand. The machine itself was neutral. The printing press had strong ideological implications, it could be argued, because it did empower the individual and the masses. In other words, it was a populist force. But authorities also used the new technology to their own statist advantage. As magnificent as the printing press was, it was a tool to produce good or ill, depending on the purpose of the user.

Bitcoin is similar. It empowers the individual which is a profoundly political act. But that empowerment makes everyone freer to choose whatever ideology they wish. Bitcoin itself has no settled ideological slant. That’s why individualists, anarchists and socialists alike can use it as a way to pursue their own goals, whatever those goals may be. Amir Taaki, a developer of the Darkmarket/Openbazaar and Dark Wallet, is an aggressive left-anarchist. He spent time in Rojava [Syrian Kurdistan] helping to found a People’s Republic through the introduction of Bitcoin. Rojava was “under embargo, so there’s no way to move money in or out,” he explained. “So we have to actually create our own bitcoin economies. Now we have a technological tool for people to freely organise outside [the] state system. Because it is a currency not controlled by central banks.”

Bitcoin is a mechanism that can achieve a galloping diversity of goals. This is a great strength.


The answer lies in history and requires a bit of background.

A key difference between the radical, individualist movements of the 19th and 20th centuries is that the earlier one focused intensely on the importance of private money and private banking to achieve personal freedom. The radicals placed a primal emphasis on the right of every individual to create their own currency and to function as their own bank. It was a natural right every bit as important as freedom of speech or freedom of religion.

Some 20th-century advocates of private money, such as Rothbard or Hayek, took a similar approach. Rothbard wrote, “Let us first ask ourselves the question: Can money be organized under the freedom principle? Can we have a free market in money as well as in other goods and services? What would be the shape of such a market? And what are the effects of various governmental controls? If we favor the free market in other directions, if we wish to eliminate government invasion of person and property, we have no more important task than to explore the ways and means of a free market in money.” Most modern advocates, however, argue in utilitarian or public-policy terms instead of civil liberties.

Their 19th-century counterparts were more consistently accurate in placing monetary theory at the core of all freedoms. The pivotal individualist-anarchist Benjamin Tucker believed the right to issue private currency was so important that it could destroy the State all by itself. The money monopoly was the means by which the State sustained itself and robbed the average person not merely of money but also of economic opportunity by controlling credit. Nothing was more important than to destroy the money monopoly.

Two specific events sculpted the approach of individualist anarchists to the banking monopoly and private currency. James J. Martin commented on one of them:

“Few instances in American history have created as much curiosity concerning economic and financial matters among amateurs and members of the general citizenry as the panic of 1837…Banking abuses came under concentrated scrutiny and gave rise to many proposed radical remedies.”

The other event was the Civil War in which the North used the Legal Tender Acts and the National Banking Act of 1863 to finance its side of the conflict. Through these measures, Congress guaranteed the notes of authorized bankers and legally protected them from liability for debt. The act also established a national tax of 10 percent for all money not authorized by Congress.

Fresh with a knowledge that private currency not only could work but had been working well for well over a century, the 19th-century radicals responded. They did not merely theorize; they vigorously issued private currency and experimented with new economic models. Their efforts are fascinating to review but they are also cautionary tales as to some pitfalls that private money should avoid.

A major problem for 19th century individualist anarchism in America was the movement’s determination to link private money to the labor theory of value. The theory states that the economic value of a good or service is based upon the amount of labor required to produce it rather than upon what a capitalist wants to charge or what a purchaser is willing to pay. Radical individualists back then generally rejected profit from the capital because it constituted value in excess of the labor invested in a good or service. They rejected excess profit in three forms: interest on money, rent, and profit in exchange – all of which were called “usury.” If the main political goal of 19th century radical individuals was the abolition of the State, then their main economic goal was the abolition of the “money monopoly.” By the term “money monopoly,” they referred to three different but interacting forms of monopoly: banking, the charging of interest, and the privileged issuance of currency. In short, unlike Gutenberg’s printing press and Bitcoin, their private monies were grounded in ideology and a badly flawed ideology, to boot. This greatly reduced the social value of their currencies as a tool. For one thing, when the labor theory of value became less popular, the currencies seemed to be discredited.

Josiah Warren provides a real-world example of the problem of attaching an ideology to money. Warren, who is credited with being the first American anarchist, based his political thought on two concepts, both which were common within the 19th-century radical individualist movement. The first was “Sovereignty of the Individual,” which meant every human being was a self-owner with jurisdiction over his or her peaceful actions. The second was “Cost is the Limit of Price” or the labor theory of value.

Warren tested his specific solution to the money monopoly and to the “inequity” of interest through a Time Store from which he issued Labor Notes. In 1827, the business opened with $300 worth of groceries and dry goods that were offered at a 7 percent markup from Warren’s own cost in order to cover expenses such as overhead. This was before groceries were pre-packaged, pre-weighed and it was common for buyers to bargain with the shopkeeper rather than pay a posted price. One of Warren’s innovations was to post prices for goods which drove prices even lower because transactions consumed less of his time. The customer paid in traditional money for the good and, then, compensated Warren for his time through a Labor Note which obliged the customer to provide Warren with an equivalent amount of the buyer’s time. If the buyer were a plumber, for example, the Labor Note committed him to render his services to Warren for “X” units of time in plumbing work. The Labor Notes were circulated and traded. Warren’s goal was to establish an economy in which profit was based solely on the exchange of time and labor.

To some degree, he succeeded. People travelled from a hundred miles away to avail themselves of Warren’s low prices. After a few years, Warren declared the experiment to be a success and closed the store’s doors. Whether the store was a success is questionable, however. And, if it was a success, it was probably due more to low prices than to the Notes that came close to being a barter system. Whichever is true, it is difficult to see how this novel currency could have functioned in dense populations where people were not acquainted with each other, or for commerce on a grander scale. And exchangers still had to trust other people.

Some might state the lesson of attaching an ideology to an instrument for political liberation as “get the damned ideology correct this time.” I believe this is the wrong lesson. The point of empowering people is to give them the tools to decide on ideas and life for themselves, not to deliver a predigested message. That’s the lesson of Gutenberg and Bitcoin.

It is also a reason to stand hard behind the original vision of Bitcoin, because the power Nakamoto produced can be used well or badly depending on the intentions of the user.

And, now, Satoshi?

To paraphrase George Bernard Shaw, I hear the future knocking on my door. And as I throw it open, I see Satoshi Nakamoto standing at my threshold with a grin on his face, asking to come in. Just as I begin to wave him through, however, Murray Rothbard appears and shoves him aside with the words “Not so fast there, Saschik, I have something to say to her first!” And, if for nothing more than the fact that he infused the modern freedom movement with Austrian economics, my old friend and mentor deserves to take the next step.

[To be continued next week.]

Wendy McElroy has agreed to ”live-publish” her new book The Satoshi Revolution exclusively with Every Saturday you’ll find another installment in a series of posts planned to conclude after about 18 months. Altogether they’ll make up her new book ”The Satoshi Revolution”. Read it here first.

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