Is Bitcoin Evil?

Bitcoin will ultimately fail for the same reason our paper money is currently failing.

Both are a pseudo-currency and neither are founded on work—which is what made the gold standard a viable economic foundation. The US dollar is little more than free-floating, fiat money with a strong proclivity toward inflation. It’s been in that condition since 1933 for Americans and for the rest of the world since 1971. As predicted by those who know a few things about the way the world works, that condition has only worsened since. 

Bitcoin is just a digital version of the same. The last bitcoin is to be mined in something like 2041, which apparently makes it scarce. But a TOSHIBA 64k home computer is also scarce—yet few people are looking to own one. Considering the value of any currency is determined not just by its scarcity but by the demand for it, Bitcoin’s real value is in its novel popularity with those disillusioned by mainstream currency—the same way Donald Trump is popular in neocon politics.

What makes the US dollar somewhat stable today is the fact that it—for the moment—remains the world’s reserve currency and is therefore in demand. But how long will that last? Maybe it won’t be the BRICS currency, but something sooner or later will become the new reserve currency just as soon as the US falls completely out of favor with the rest of the global market. While a large number of economists think that’s impossible, I’m not so sure. Remember 2008? That was impossible too.

My prediction is that Bitcoin will eventually go the way of dot coms, probably sometime after 2041, when late investors are disillusioned by the gibbous wealth of the early investors—perhaps at the same time the USD goes the way of the former gold standard.

So why is a gold standard—or some standard attached to work, like property once was—necessary for a stable economy? Irving Babbitt, writing in 1924, seven years before the US was taken off the gold standard, explains,

Though money is only a conventional token, the nature of this token is, nevertheless, not a matter of indifference. The reason for the gold standard is simple: gold involves in its production an amount of work equal approximately to the work involved in producing the various commodities for which it may be exchanged. If for any reason gold is produced more abundantly and with less effort, or if the reverse takes place, the monetary standard fluctuates; and this is an evil, but a trifling evil (human nature being what it is), compared with that which results from the substitution for gold of paper or some other medium of exchange that when, tested in terms of work, has little intrinsic value.((1. Irving Babbitt, Democracy and Leadership (Indianapolis, IN: Liberty Classics, 1952), 233.))

If a substitution of gold for paper is evil in this sense, because it has little intrinsic value, then more so are all cryptocurrencies, since they were created to be divorced from any standard realized through real effort—unless you consider blockchain intrinsically valuable. Perhaps it appears to be now, but wait till it’s no longer the popular kid in town.

Disagree? Feel free to school me in the comments.

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