Bitcoin: Revolution or Reorganization?
“Bitcoin represents a significant threat to the currency domination of the USA, which is the only thing propping up the nation’s status as a worldwide superpower.” -Rick Falkvinge, Founder of the Swedish Pirate Party
“I see Bitcoin as one of the biggest things for potentially reducing the power of state and uplifting the power of the individual to happen for … forever maybe.” -Zander Marz, Author
Much has been made of bitcoin lately. From established financial companies like Visa critiquing it, to Ron Paul claiming that it could be the “destroyer of the dollar.” What was once solely in the domain of the tech-savvy, has quickly spread to mainstream society. Even after multiple scandals and thefts, bitcoin is showing very little signs of going away. There are even some traditional financial institutions that have come to embrace it.
“We believe Bitcoin could become a major means of payment for e-commerce and may emerge as a serious competitor to traditional money-transfer providers. As a medium of exchange, Bitcoin has clear potential for growth, in our view.” -Bank of America
Major websites like Reddit and Overstock have come to accept bitcoins. You can even gamble with bitcoins in Las Vegas. Because of this rapid and widespread adoption, many are quick to claim bitcoin as something antithetical to the system, and even as revolutionary. One thing should be remembered before making such claims, though…Bitcoin is still capital, and, despite what some Marxists may believe, capital will not destroy itself.
Startups like Circle claim to want to bring bitcoin to the masses, by creating an accessible experience similar to that of modern banking websites. Banks like JP Morgan and Sberbank, Russia’s largest bank, are also trying to create their own web payment systems to compete. In peddling to the majority, and trying to bring the idea of bitcoin to the public, these companies are ignoring the extremely unequal distribution of capital and the means of production in our society. Bitcoin and other crypto-currencies will never be useful to the public at large, simply because the masses do not own capital.
In order to get bitcoins, one can either “mine” for them, or simply buy them through an exchange with traditional currencies. Mining for bitcoins, much like traditional manufacturing, requires significant access to means of production…computers in this case. When bitcoin was first introduced, it may have been possible to mine bitcoins with a small collection of consumer grade desktops, but as time has progressed, and bitcoin blocks become more complex, mining has become completely out of reach of the average person. On eBay, bitcoin specific computers are sold from around $1,000 to $6,000. Blockchain.info estimates that, globally, bitcoin miners use about $150,000 of electricity a day. These figures clearly place bitcoin mining out of the reach of anyone living paycheck to paycheck, or without a significantly higher than average income.
Bitcoin mining pools also exist. The pools allow many people to band together and combine their computing power in order to generate bitcoins that they would not be able to on their own. Unfortunately, the payouts on many pools amount to mere pocket change. Additionally, when mining for bitcoins in a pool, there are a number of extra steps that must be taken. This leads to an even higher barrier of entry, due to a greater amount of technological proficiency.
The other method of getting bitcoins is to simply convert them from real currency. There are many exchanges that offer this service, but doing so requires one to actually have real money. Even if someone does have extra currency that they wish to convert to bitcoins, the process is not a simple one. Bitcoin exchanges generally require a direct bank transfer, and a waiting period. Even when using a more user-friendly bitcoin exchange, the problem of involving a bank account still remains. One of the perks of using bitcoins is anonymity involved. When using bitcoin exchanges, your bank account information is given to the exchange, invalidating part of this anonymity. There is nothing stopping a bitcoin exchange from selling or giving this information to authorities or other businesses. While details of your individual purchases would be anonymous, it would be entirely possible for an investigative government to know who has how many bitcoins and where they got them from. There is also nothing stopping a bitcoin exchange from simply folding and taking your money with it, provided your wallet is hosted with them. Even if one has the money to spare to convert into bitcoins, exchanges eliminate some problems with traditional banks, while creating a host of new ones.
Because bitcoin is capital in a different form, it maintains many of the inherent problems with capital, while introducing new ones. While it is touted as a revolution in currency, it is merely restructuring currency to favor the new generation of information capital. As old capital, finance and industry, scramble to take advantage of the temporary fractures it has created, tech entrepreneurs have already begun to use them to solidify their grip on the system.
“Lots and lots of my bitcoin friends, they’ve literally left the country because the regulations and rules are just too burdensome in the U.S. And, you know, I’ve left the country myself as well.” -Roger Ver, bitcoin millionaire
As tech companies like Google and Amazon spend increasingly large amounts of money on lobbying and government influence, they are making room for other tech companies to enter the lobbying arena. The Federal Election Commission has even approved bitcoin donations to PACs, opening the door for anonymous funding of political campaigns. While traditional capital is limited by numerous laws regarding election contributions, tech capital has been given a green light to potentially sidestep all these laws through bitcoin’s anonymity.
While bitcoin may eventually replace bank accounts and debit cards on a consumer level, it has no real value to those at the bottom of capitalism. Touted as a financial revolution, it is serving no other purpose than to restructure capital towards those companies and entrepreneurs based on information and technology. While it may be an attack on the financial industry, it is not an attack from the bottom. It is a grab at the reins of power by wings of capital that have grown too big to be regulated by their former masters.