“People coming out of a calamity are open to sweeping changes,” writes the historian Margaret MacMillan in this week’s Economist. She’s not the first to apply the old idea of ‘never waste a good crisis’, often attributed to Winston Churchill, to the pandemic. MacMillan sees COVID-19 as “challenging the old order” on many fronts, from the political to the ecological and economic.
Macmillan is surely right to expect big changes. You don’t hear much about ‘getting back to normal’ any more. Just as World War II led to the creation of the United Nations in 1945, NATO in 1949 and the transfer of global leadership from Britain to the United States, there’s speculation about where today’s crisis will take us. After all, it’s comparable to a world war in global reach, mortality and social disruption.
There’s a pattern to the hopes that any crisis raises. Everyone thinks that whatever they already wanted to happen—whether it’s action on climate change, Universal Basic Income, updating the university system or reforming the financial markets—is now so obviously a good idea that it must finally come to pass.
Is this, for instance, a chance for the tech giants to make the online world dominate the offline? Are we morphing into versions of the screen-addicted, individually isolated population of Pixar’s WALL-E who do nothing but sit inactive in their chairs, staring at offers from Buy n Large (slogan: “everything you need to be happy”).
For supporters of Bitcoin SV, the crisis suggests possibilities to push forward the project in ways they were already pursuing. For some, the connection between health and BSV is a concrete, literal one: EHR Data wants to put individual health records on the BSV blockchain. If that had already happened, efficiencies in testing and tracking might have led to better outcomes for individuals and society.
For others, the opportunities for BSV are not so literal. National currencies will be horribly in debt after this. At some point, too much money will be chasing a reduced supply of goods and services and the result, according to classical economic theory, will be inflation.
With its limited supply, Bitcoin is often said to be deflationary, meaning that through scarcity, its value rises, making it possible, in time, to buy more things with a certain number of Bitcoin. That sounds good in theory, but if it makes people hang on to their money, waiting for it to be worth more, that won’t be good for economies that urgently need activity.
Arguably, the crisis has demonstrated some advantages to the traditional money system. The fact that governments can simply create money out of nothing, albeit putting their countries in debt for the future, means that people can be furloughed (paid for not working), and essential goods and services can be bought. As inflation works its way through the system, individuals will find, to their distress, that their savings are worth less but government debt will become correspondingly less burdensome.
So, does the crisis make traditional monetary systems look more credible than Bitcoin? Well, no, for several reasons.
Firstly, Dr. Craig Wright, as Satoshi Nakamoto, defined his creation in the title of his whitepaper as “A Peer-to-Peer Electronic Cash System”. Bitcoin was always designed to work within existing frameworks of national law and government. He never envisaged it as money to be hoarded for speculative purposes. (Anyone trying to do that in the past couple of years will have been sorely disappointed.)
So is Bitcoin deliberately deflationary? That may just be a side-effect of a more important priority: Dr. Wright explained to George Gilder at the CoinGeek Conference in February that he wanted a limited supply in order to remove the need for any authority to have power over Bitcoin. If it were possible to increase the supply of Bitcoin, then someone, or some body of people, would have the power to make those decisions. He wanted a system over which nobody has that kind of influence.
Whatever economists say (and some predict that far from leading to inflation, we’re heading for stagnation because too many people won’t be able to afford to buy things), there’s a common sense appeal to the idea of ‘stable money’ which can’t be messed with by politicians.
Second, the energy in the BSV world today is around the building of applications on the blockchain—apps that allow micropayments in ways that have not been possible on the Internet. “Bits” and “coins” are being properly integrated. It’s all about creating a system that will accommodate more and more transactions. This is a use of money that’s a million miles from the world of huge government debt and long-term financial obligations. It’s all about utility for users, whether in business or as individuals. In that sense, Bitcoin is simply not part of the macroeconomic debate.
Finally, and more generally, the crisis has prompted some basic questions about money which could lead to more acceptance of Bitcoin. Whilst the self-employed and many others suddenly find themselves in financial difficulties, governments talk with confidence about whisking up billions to bail them out. So where does money come from and why is it so easy for governments to manipulate? Is it even real?
When you try to explain Bitcoin to someone who is new to the idea, they often get stuck on ‘believing’ in it. If it’s just code inside a computer, can it really be money? Well, compare the 21 million Bitcoin that will ever exist with the infinite numbers of dollars, pounds or whatever that governments are conjuring up. In what sense is Bitcoin less real than units of currency that only exist as a result of a meeting of panicked politicians trying to cope with a crisis?
The 2008 financial crisis coincided with the emergence of Bitcoin. Back then, the emphasis was on Bitcoin’s monetary properties. The Coronavirus crisis is less about money and more about public health, work, transport and other aspects of the real world. How fitting then that Bitcoin is running in parallel again, with its emphasis on real world utility.
For this crisis, BSV is more in competition with Silicon Valley than with Wall Street. And Silicon Valley is not necessarily having a good crisis. Far from saving the day with tracking apps, the virus may be exposing the fraught relationship between the likes of Google and Apple and elected governments over who has the right to our data.
So where will we be when this lousy war is over? Will there be an acceptance that international bodies such as the World Health Organisation need rebuilding? Will it be seen as the time when the centre of world power shifted from the United States to China? And in technology, will it mark the transition from the Internet, with its clumsy payment methods, to the Metanet, with its unique ability to charge and reward the smallest actions?
If money is in short supply, as it surely will be, then the advantage of the BSV vision of being able to pay for things in quantities that are so small you will hardly notice, will surely seem even more obvious than it already did to its supporters.
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