What is Bitcoin?
Oh, no. I don’t wanna talk about Bitcoin and you can’t make me.
Please help me. I’ve invested my life savings.
And you didn’t know what it was?
I did some research on Reddit, but it turns out it wasn’t enough.
I’m shocked. I don’t wanna talk about this bullshit.
What if I gave you a Bitcoin?
Ooh, okay. Start over.
What is Bitcoin?
Bitcoin is the first post-modern currency.
That sounds like nonsense.
It does, but it won’t when we circle back to it later. First things first: define “money.”
A governmentally-issued token of discrete value that can be traded for goods or services.
Right. Bitcoin’s none of those things.
So how is it money?
Because it’s worth something.
For the same reason money’s always been valuable. When did humans invent money?
I’m supposed to ask the questions.
I’m supposed to be a billionaire with laser nipples, but life blows. When did humans invent money?
About 10,000 BC. Right around the same time as agriculture and animal domestication. Once you go from a self-sufficient small band of hunter-gatherers to a larger and more spread-out group of farmers and herders, you need money. Forget cities. We haven’t invented cities yet. But these farmers and herders had Market Day. You can’t run Market Day on the barter system.
And you also had to figure out how to mine. Money is based on metal. They’re inextricably linked. That’s why both words begin with an “m.”
I don’t think it is.
And most of the metal was silver and gold. Copper and bronze, too, but those substances have uses. You could make cutlery and (shitty) weapons from copper and bronze, but silver and gold were too soft to work into tools. Also: silver and gold were rather shiny.
Primates prefer shiny objects to dull ones.
Yes, but we’re not discussing Floundercoin.
Is there a Floundercoin?
There was. It crashed this morning.
Can we get back to the main topic?
Sure. So: the useless, pretty metal is declared to be valuable. This weight of silver would get you this, that weight of gold could buy that. This currency has no levels of abstraction: the token’s value is the token itself. There’s a 1-to-1 relationship between what the physical object represents and what it manifests.
The thing is the thing.
I said “I gotcha.”
This is where governments come into the story.
They’re always doing that.
Technically, they were governments. This is way back, so we’re really talking about the local rich asshole with all the murderer on his payroll.
Life was so different back then.
We have our concept: certain tokens can be exchanged for goods and services. We have our materials: silver and gold, and other precious metals. Now we need a mode and a moderator, and the local rich asshole stepped in to fill the role. Money can’t be irregularly shaped and random; you’d have to weigh it during every transaction, plus it would be too easy to slice a little bit off. No: currency needed to be standardized, and thus we have the coin. That’s the mode.
And the moderator?
The local rich asshole reserved the right to make the coins, and he also told everyone how much they were worth. Plus he almost always put his face on them.
This is the divine right of kings. It is as God hath commanded.
Verily. And that system worked well for a time, except for the fact that coins are a pain in the ass, and get heavy quick. The Chinese invented paper money, because the Chinese invented everything, but the Europeans picked it up and ran it through the industrial revolution and pretty soon the whole world was using banknotes.
What are banknotes?
Dollar dollar bills, y’all. The government (acting under the auspices of a central bank) collects all the silver and gold and issues the citizens receipts. You’re supposed to be able to trade in, say, a tenner for the equivalent amount of metal.
Did anyone ever do that?
I’m sure. But mostly, people just traded the bills with each other just as they had the coins. This is the first-level abstraction: you no longer had possession of the token, you had a note promising you title to the token if you asked for it. The silver, the gold, they are still present in the transaction, if not physically. There were giant stores of silver and gold bars held by the issuer of your currency, and you owned a certain weight, represented by your cash, and when you bought a cup of coffee with a single, then–legally if not tangibly–one dollar’s worth of gold in Fort Knox would cease being yours and become the coffee seller’s.
This is starting to sound like magic.
Wait until we abandon silver and gold.
Well, this is in America. We went from basing the greenback on silver and gold to just gold. William Jennings Bryan was pissed about it. That was the late 1800’s. Then, in ’72, Nixon took us off the gold standard.
This is the second-level of abstraction. The material, which had previously held value, no longer did: the receipt for your share of the material now held the value of the material itself.
Are you positive drug-addicted philosophers didn’t come up with all of this?
No. You know what else happened in the 1970’s?
The overthrow of the studio system and the rise of the Hollywood blockbuster?
Computers. And they kept happening. Whether you wanted them to, or not. And this brings us to our third-level of abstraction, which is the abandonment of physicality. A peculiar string of electrical impulses now referenced the banknote that used to promise the silver or gold, but now did not. There is, now, nowhere even close to enough paper currency to cover the amount in trade over wi-fi and through cross-ocean cables. The money is now the money because it is money.
So how does that explain Bitcoin being the first post-modern currency?
Bitcoin flaunted its worthlessness. It’s backed by no gunships or central banks. You can barely use it, unless you’re buying slaves or heroin. It could disappear tomorrow, but so could the dollar. Sometimes, countries wake up and the money isn’t worth anything anymore. Bitcoin told you right upfront it was a delusion.
I’m going to lose my life saving, aren’t I?