Ole question about whether we can evaluate Bitcoin with

Ole
Bjerg is an associate professor at the Copenhagen Business School. He wrote the
article, ‘How is Bitcoin money?’ for Theory, Culture and Society, looking at
the ontological comparisons between modern forms of currency and the
cryptocurrency that is Bitcoin. Bjerg did this using Slavoj iek’s ontological triad of the real, the symbolic and the
imaginary. He also compared Bitcoin with money analysing Bitcoin with three
theories of money; Fiat Money, Credit Money and Commodity money.  He then posed the question of whether Bitcoin
is the next step for modern economies as being the new currency or whether it
was a ‘Ponzi’ scheme internet fad that would eventually collapse.

Bitcoin
was founded by Satoshi Nakamoto. It is an electronic payment system between individuals
that is independent from any other currency or state control. Users transfer
virtual coins by having unique digital signature, stored on a person’s hard
drive in their virtual wallet. Transfers can only be made through private
digital key codes, and all transactions are recorded. The main aim of Bitcoin
is to create a form of money that does not rely on trust in any central
authority, therefore theoretically it cannot be abused. This concept is heavily
underpinned by libertarian ideologies that critique our current money system,
which is exploitative and risky. Bitcoin operates through incentives and
competition amongst its users, which in layman’s terms means that there is
competition rather than trust, which keeps Bitcoin fair and honest as a system.

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Bjerg
argues that Bitcoin is a necessary topic of philosophical analysis due to the
current turmoil of our monetary and financial systems. However, it poses the
question about the way we view money. It’s a social construct that wouldn’t
exist without the interaction of members of a society but can we actually call
Bitcoin money. It doesn’t operate in the same way that our monetary systems currently
operate so therefore can we evaluate Bitcoin using theories that Bjerg did such
as fiat theory of money, commodity money or credit money. It poses the question
about whether we can evaluate Bitcoin with theories concerning money and
currency. The relevance of Bjerg’s work is significant as it’s a current and
increasingly growing topic in news at the moment due to the rapid growth in
popularity and value. However, this adds to how we are able to define Bitcoin
because it is talked about in different formats. For example, it is recognised
as a speculative investment rather than a transactional purpose in the
traditional sense like physical money.  Therefore,
it is not like the currencies we understand today but then it is a cryptocurrency
which as the name and purpose suggest is similar to physical coins and
currencies. This continues the debate about what Bitcoin actually is (Golumbia,
D 2017).

The
context of the article is both explanatory and analytical. It is explanatory
when explaining what Bitcoin is and how it operates but also is explanatory in
the describing of the theories of money. This is beneficial to the expected intended
audience of academics and students at a higher education level interested in
business and economics as well as other social sciences. The article is
analytical when Bjerg evaluates and assesses the differences in money and
bitcoin and the effects bitcoin could have as the next currency. This is useful
to audiences in industry as it can be a starting block for risk analyses as
well as independent private investors interested in investing in Bitcoin or
other such cryptocurrencies.

Another
concern in Bjerg’s work is the use of iek
in explaining Bitcoin in conjunction with
commodity theory. Bjerg suggests that iek’s theory of the real changes throughout his writings so
therefore it asks the question about how can we use it to explain Bitcoin. Therefore,
we can begin to assess the validity of the article’s argument in terms of how convincing
they were. This review is of the opinion that Bjerg doesn’t reveal much about
his viewpoints as he shows both the positives and the negatives of bitcoin as
well as assessing the outcomes of Bitcoin taking off in popularity and replacing
our current monetary systems compared to its remaining something niche to invest
in. Currently, people pay a price Bitcoin which they deem to be of value, which
is supported by Altmann’s statement, “Value is the epigone of price”. Bjerg
shows that if Bitcoin was to collapse as it currently stands then it wouldn’t
be as catastrophic as if the British Pound was to collapse right now. This is
due to the decentralised nature of Bitcoin and therefore the evaluation of Fiat
money theory used with Bitcoin is a relevant use as it shows how because the
state can’t interfere with bitcoin the infrastructures that surround our
current monetary systems such as banks and the economy wouldn’t be affected if Bitcoin
collapsed. However, if Bitcoin was to succeed against current currencies, it
could potentially render the banks and relevant infrastructure as useless.

In the
UK, Sterling is the national currency which is supported by the Bank of England
and reserves of gold which provide a physical asset against which the currency
is backed. This gives sterling value. According to Altmann’s analysis of Simmel’s
philosophy of money, “In the beginning, money is made for its function because
it has value but in the end, it has value only because of its function” (Altmann,
S P. 1903).  However, this is not the
same for bitcoin because it is a decentralised system meaning it’s not backed
by a government, state or host nation. It is not bound to a single country.  “The money system and the banks and the state
are all in effect aspects of one another” whereas Bitcoin is decentralised (Lanchester,
J 2016). There is no logical explanation to why bitcoin is worth so much in
value compared to the pound vs the dollar when there is nothing backing it like
a host nation where its strength is based on their economy’s health and current
interest rates. Therefore, it is difficult to grasp the strength of bitcoin as
there isn’t a host nation. This means that if more bitcoin was to be released
than the current “asymptotic trajectory of 21 million by 2140” we wouldn’t know
the effects compared to the effects of governments printing more money. (Bjerg
2016) Also, as Bitcoin is not part of any regulatory environment such as the
world bank it provokes feelings of lack of transparency and risk as it is hard
to predict its future effects. This is due to traditional mechanisms that
determine the value of currency don’t apply to Bitcoin, with the possible
exception of the demand of bitcoin.

In conclusion, the article explains Bitcoin through theories of money which
raises concerns about validity due to the concept of whether bitcoin is money
or not. Also, the use of iek’s
ontological triad of analysis raises questions over the relevance of such a
theory when explaining Bitcoin as the theory itself varies in explanation.
However, Bjerg’s article is well laid out and both
explanatory and analytical making it easier for the reader to follow and
understand. Finally, the main concern of Bitcoin in this review is the regulation
of Bitcoin and determining its value, which was shown in the example of the UK
sterling currency aforementioned. Currently 1 bitcoin equals £9689 (Bitcoin.com
2018) so looking forward if bitcoin was to become the currency of the future the
individual value of a bitcoin would have to significantly lessen if it was going
to replace current currency for nominal activities such as grocery shopping.