The "It's Libertarian So It's Bad" Argument Against Bitcoin

A very silly piece from the Business Insider is making
the rounds this morning for those who wish to stand athwart the
digital future sneering “but it’s libertarian.” (The
article has pretty much no intellectual value for anyone else.)
(For an earlier take on people who have a hard time swallowing the
libertarian implications and practice of the digital past, present,
and future, see
this from me earlier this week.)

The article by Jim Edwards posits that “Bitcoin
Proves the Libertarian Idea of Paradise Would be Hell on
Earth,” with a bill of indictments against the surging digital
currency that applies in pretty much every respect to any currency
at all.

Criminals can use it! It can be stolen! (We all have things that
are valuable to us on our hard drives. Bitcoin may end up being the
most valuable thing lots of us have on our drives,
but—back up, back up, back up. Undoubtedly a trustworthy and
robust system of outsiders serving the function of digitally
storing your wallets on other than just your harddrives will become
common, just like pretty much every other valuable human need gets
met by the market. Like every human endeavor, some crooks might get
involved as well, naturally.) 

Edwards is right, let’s just return to barter…this whole
“currency” thing seems toooo risky.

Edwards also gives way too much importance to
a supposed bug in the system that might allow colluding miners
to cut out other miners (a problem that is probably fixable in the
open-source debuggable Bitcoin system and that need not destroy the
value of the currency to most users), and then gives even more
scary attention to the notion that people can use Bitcoin as a tool
to commit crimes, in case you didn’t get it the first time and
repetition might make it start to scare you.

He also is incensed that due to the nature of how it has rolled
out, a small number of people have a lot of Bitcoin. This has
little to do with its value as a means of exchange, unless he is
imagining a world where suddenly the only thing that has value is
Bitcoin and those of us lacking it are screwed. And for someone so
worried about centralized power and manipulation of currency, he
doesn’t seem to have thought a lot about the Federal Reserve’s role
in the economy, even though circumventing it is one of the
libertarian joys of Bitcoin.

Edwards hits on one point that, right this second, makes Bitcoin
less than ideal as a currency: its huge day to day fluctuations in
value in relation to all other monies and commodities in the world.
It seems obvious to me that we are seeing lots of churn in Bitcoin
based on people seeking in it not a currency but an investment
vehicle, because of its huge zooms in value very recently.

We are still in the beginning of the world understanding how it
wants to use digital currencies, and I would expect that in the
near future we will see far more stability in Bitcoin’s day to day
value–though where this level will be in terms of the U.S. dollar
is impossible to say.

What seems easy to say is that for anyone who has ever tried to
transfer money, nationally or internationally, that the values in
ease, speed, and cost of digital currency means that it will have
the same leveling effect on industries like banking and finance
that depend largely on their middleman function that already we’ve
seen happen in book sales, video rentals, and travel agents.

People who doubt this are letting their ability to write Bitcoin
and other digital currencies off as “libertarian” blind them to
economic trends of the past 20 years in the digital age. If you can
understand the value of, say, PayPal, then you already understand
the value of Bitcoin; except Bitcoin doesn’t have a middleman
skimming.

The Internet has made life very unstable for those who made
their living as middlemen skimming–even more unstable than the
recent day to day value of Bitcoin.

Yes, it’s decentralized, hard to control, hard to tax, arising
from the free play of the market rather than government
command–it’s pretty libertarian stuff. The world can be, at its
best, a pretty libertarian place. Don’t let that scare you away
from the future, libertarian haters. (Or go ahead! See if I
care!)

For more on Bitcoin from a libertarian perspective, see
this great essay by John Mather defending it from old-school
Austrian economists who see it as essentially a non-money, and a
Ponzi scheme.

Reason on Bitcoin, and our recent December feature by
Jerry Brito on the many
uses for the Bitcoin protocol besides a currency.