“Bitcoin is the worst form of money, except for all the others.” Alex, a researcher who presents himself under that name, reached that conclusion after years of studying the philosophical and political implications of the digital currency created by Satoshi Nakamoto.
The thesis was presented during the Adopting Bitcoin 2024 conference, which took place on November 15 and 16 in El Salvador. In that context, and to illustrate his point, Alex cited a phrase from Winston Churchill, British Prime Minister during World War II: “Democracy is the worst system of government, except for all the others that have been invented.”
Just as the politician defended democracy as a system of government, despite its defects, The researcher argues that bitcoin It is the best option available compared to the traditional financial system.
To do this, examine the monetary systems of the past and how the currency of Satoshi Nakamoto differs from them. The term “monetary systems of the past” refers to to gold, fiat money and credit (such as loans, debts or bank deposits).
“The impossibility of adequately accounting for the value of gold gives rise to an imaginary fantasy of gold as possessing a special form of intrinsic value beyond the ordinary sphere of use value,” the philosopher states, while detailing: “We cannot put an exact price on gold, so we imagine that it has a magical value that goes beyond its usefulness.”
On the other hand, he says that BTC, unlike gold, “is structured around a pure lack of intrinsic value.” That is, it is not structured around a central entity that guarantees its value from a symbolic point of view.
However, Alex mentions the narrative of BTC as “digital gold” due to its inherent scarcity (it has a limit supply of 21 million) and is not exposed to the monetary policies of central banks. In addition, it highlights that since it is a digital asset, there are no costs for safekeeping or transfers.
Regarding fiat money, the speaker defines it as a creation of a State or sovereign entity and its intrinsic value is granted through laws, regulations and government policies. Highlights that it is a legal creation and not something that exists naturally. “Money is a creature of law, the soul of currency is not in the material of the pieces, but in the legal ordinances that regulate its use,” says Alex, using the formulation of the German economist George Knapp.
For the philosopher, meanwhile, BTC has value as money “only to the extent that there is a community of users willing to accept and maintain the digital asset in exchange for goods, services or other forms of money.”
With this phrase, the theory is reinforced that BTC is an example of digital money that works without the intervention of a central entity and that the market is what determines its value.
Alex is a philosopher and researcher specialized in monetary systems, finance and bitcoin: Source: Adopting Bitcoin 2024 YouTube.
Regarding credit money, Alex focuses on bank loans and the solvency of debtors. “A $1,000 loan from a bank would not have the same value as a $1,000 loan from a beggar. Therefore, banks must stand out as the last or even the only reliable debtors, which means that their promissory notes must be accepted without discount from their face value,” he highlights.
Bitcoin differs here because it replaces the need to trust a debtor, such as a bank, and is based on its technology, the transparency of its network and its limited supply. In this way, it eliminates dependence on traditional intermediaries.
Likewise, he explains that with bank loans and deposits in checking accounts, the system generates more digital money than the cash in circulation. Alex says:
“It is perhaps even more curious that we readily accept the creation of new money out of thin air by the conventional commercial banking system. At least BTC is not parasitic on the national currency of any sovereign state.”
Alex, philosopher specialized in monetary systems, finance and bitcoin.
Although both banks and the Bitcoin network use a ledger to record user transactions, there is a fundamental difference: in Bitcoin, transactions They are completely public, they are immutably registered on the network and cannot be manipulated.
That transparency and security are something that the traditional banking system, with its private and centralized records, it cannot match.
To conclude his presentation, he ironically refers to bitcoin as “the worst form of money” due to its volatility and the possibility of it being used for illicit purposes. “Bitcoin, like any digital currency, can be used for illegal activities due to its pseudonymous nature,” says Alex.
But, he posits: “All of these points of criticism apply equally and perhaps even more pertinently to our current forms of conventional money.” Additionally, it expands:
“It is not difficult to argue that our current system of money, banking and finance already contains elements of a Ponzi scheme, with a small minority of agents and institutions in a privileged position to profit from the rest of the people in the system. The criticism against BTC almost seems like a form of Freudian projection, where the shortcomings of conventional money are attributed to BTC.”
Alex, philosopher specialized in monetary systems, finance and bitcoin.
In this way, instead of focusing on BTC, what it does is compare the digital currency with the traditional financial system and analyze whether Are the criticisms fair or do they simply reflect the inherent problems of fiat money.
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