The Developing Cryptocurrency
Saifedean Ammous wrote, “The Bitcoin Standard: The Decentralized Alternative to Central Banking” in 2018, ten years after the Bitcoin phenomenon began in November, 2008. An individual, or perhaps a group of individuals, used the pseudonym Satoshi Nakamoto to announce that they have produced a “new electronic cash system that’s fully peer-to-peer, with no trusted third party” (vx). Bitcoin is a form of currency but without the involvement of banks or governments. It is digital cash that can be used like any other form of money. Bitcoin was not the first to attempt electronic currency, but much like Facebook was not the first social network to hit the internet, when Bitcoin arrived, it exploded in popularity.
Ammous’s book is organized into three sections and ten chapters. The first three chapters provide the reader with an interesting history lesson on the different forms currency has taken over the centuries. He covers salt, large stones, seashells, cattle, gold, silver, and finally arrives at government-backed paper money. It is an interesting history, albeit a well-documented history. Niall Ferguson’s “The Ascent of Money” provides a similar history lesson of money in human society. It always proves to be extremely helpful to understand the history of a subject; it enables us to better understand how we arrived in the present day. He correctly concludes, “History shows that a sound monetary standard is a necessary prerequisite for human flourishing” (p. 30).
However, Ammous starts to show his true intent with this book in chapters four, five, and six when he bemoans going off the gold standard and governments begin to allow fiat currency run wild under the influence of Keynesian economic philosophy. His analysis runs too critical and too extreme, going so far as to say, “Keynes had no appreciation of saving or capital accumulation and their essential role in economic growth” (p. 92). Ammous’ treatment of Keynesian economic thought is unfair and it signals the reader that he is an ardent supporter for the idea of cryptocurrency in general and Bitcoin in specific. Ammous starts to build his case in these chapters and he sounds less like an historian and more like a salesman prepping his customers for the big sales pitch. He hints at the direction of the rest of his book when he says, “More of people’s money is being placed in government-supervised banks, making it vulnerable to confiscation” (p. 69). The reader is now ready to listen to the advantages of Bitcoin, chapters eight thru ten.
Ammous does an excellent job of describing what cryptocurrency is and since this movement is relatively new, the beginner will appreciate the explanation. The principal purpose of Bitcoin was to become sound currency that could be trusted, much like the gold standard was for centuries. I respect Ammous’ concern for hard money, fiscal discipline, and the achievements that the gold provided the world’s economies. But that original vison has changed and herein lies a lot of confusion for the general population. Bitcoin has become less of a currency and more of an asset, to be bought and sold like any investment. Buy low, sell high—just like any other stock or commodity. Bitcoin has proved to be no different in this respect: and just like undisciplined speculation can happen from anything such as tech companies and tulip bulbs, Bitcoin has experienced this same buy-and-sell frenzy. As of today, the price for a single Bitcoin is $17,881.57 USD (Source: crypto.com, 11/10/2022).
This reveals that cryptocurrency is not “new” in several important ways. It is still just a monetary unit, a tool of value that parties agree upon to use in buying, selling, investing. However, the same dynamics of human greed are still applicable. There is an optimism among Bitcoin supporters that this new form of digital currency can bypass the old rules. There is a latent presupposition with Ammous that cryptocurrency is the last, best defense the masses have against big government and big business. He views central banks, governments, and multinational corporations in an Orwellian, dystopian manner and Bitcoin is what will keep such a bleak future from happening. He wants to eliminate these third-party institutions and let people buy and sell directly with each other. Cryptocurrency promises to be the next step in human-society evolution that achieves the further economic liberation of the individual.
The economic principles of work, saving, disciplined investing are never going away—and neither is human nature. Financial strategies outlined by the likes of Dave Ramsey and Warren Buffet will not be made null and void by Bitcoin. Ecclesiastes 1:9 still holds true, “What has been will be again, what has been done will be done again; there is nothing new under the sun.”
Nevertheless, I do find the new forms of old ideas extremely interesting. We are living in a fascinating time period of human development, despite the pace of change being a little scary. The full extent of what Bitcoin can become is yet to be made clear. Cryptocurrency is unfolding before our very eyes much like the internet did in the nineties. It is best not to ignore this development; instead, cautiously watch and learn.
Those who are on the cutting age of Bitcoin will do well to heed the lessons found in Kathryn Schulz’s book, “Being Wrong.” Even if Bitcoin fails, lessons will be learned as to why it failed and then a new, improved version will arise. Electronic currency is here to stay: “Nearly 75% of retailers plan to accept cryptocurrency payments within the next two years” (cnbc.com/2022/07/29, article by Cheyenne DeVon). Afterall, we learned from Admiral Kirk in Star Trek IV: The Voyage Home, that human beings do not use money in the twenty-fifth century. Bitcoin might one day be looked upon as the one small step for monetary man that led to the giant leap for monetary mankind.
About the Author
Troy Rappold
B.A. Communication - University of Colorado M.Div. Theology - Cincinnati Christian University Currently enrolled in D. Min. program at George Fox University7 responses to “The Developing Cryptocurrency”
Leave a Reply
You must be logged in to post a comment.
Troy, such a great summary of the book and comprehension of bitcoin. Before I read this book, I viewed bitcoin as an investment more than a currency and it seems you share that view. It also seems like you share my concern that Ammous is overly optimistic about bitcoin’s advantages and lack of disadvantages. What would be your biggest concern about bitcoin becoming a mainstream currency?
Solid post, Troy. Well stated on all fronts.
In light of all the news this week, how do you see this impacting cryptocurrency going forward? And as far as your intrigue with it, is that something you might further pursue?
I appreciated the comment on Ecclesiastes. Solid point to help us maintain a kingdom-orientation.
Troy, thank you for your excellent engagement with Ammous’ writing and for your thoughtful critique. As I read it, it highlighted for me how deeply Ammous is shaped by his Lebanese heritage and the role the central bank has played in that country’s current challenges. It left me wondering to what degree he is reacting to that context (though he has lived and studied in many places outside of Lebanon as well)? Raises the issue of implicit bias.
You write: “But that original vison has changed and herein lies a lot of confusion for the general population.” Could you say a bit more about what you mean by confusion for the general population?
Elmarie: Nearly all you hear about in the news about Bitcoin is its current valuation, who’s buying and who’s selling. You don’t hear a bout it becoming a form of currency for the future, like the founders intention. You hear about Bitcoin as if it is only an asset class–to be bought or sold.
Troy this is a great observation.
Troy thank you for highlighting Ammous’ biased application of Keynes.
How do we as leaders live into the tension of Ecclesiastes 1:9 and the idea of “Admiral Kirk in Star Trek IV: The Voyage Home, that human beings do not use money in the twenty-fifth century.”?
Thank you, Troy.
You mention that Ammous treats the Keynesian unfairly. Could you elaborate on that?