Having gone through my daily portion of Bitcoin-reads (and being somewhat sceptic), it struck me that one of the compelling arguments of collective currencies: 'money to the people' is highly flawed. It is the strong resentment against governments and financial institutions that makes many people believe that it would be good to take the power of money-creation out of governments' hands. But what would happen if we would indeed forget for a moment about the governments?
Crowd based currencies: exclusive and leading to private gains
As nice as it appears, these new currencies will then not be as evenly spread as the current ones in existence. There is quite bit of knowledge and expertise involved in obtaining, developing and working with new crowd-based currencies. So the 'democratic' nature of these currencies is not as democratic as we may think. The amount of people that may vote and can use cash is considerably wider than the amount of people able to use or make virtual currencies.
As nice as it appears, these new currencies will then not be as evenly spread as the current ones in existence. There is quite bit of knowledge and expertise involved in obtaining, developing and working with new crowd-based currencies. So the 'democratic' nature of these currencies is not as democratic as we may think. The amount of people that may vote and can use cash is considerably wider than the amount of people able to use or make virtual currencies.
We should realise ourselves that in essence, any currency, whether it is a government-owned or private in nature, leads to a certain distribution of value and wealth for the issuer and among the user base. And the question that is not being asked, at present, is whether the new crowd-based currencies will distort the distribution of value and wealth in society? Nor do we ask ourselves the question if we would prefer to be subject to the consequences of behaviour of (collective) private entities, manipulating a currency while we can't influence them, instead of a government structure (however flawed it may appear).
The redistribution of value that can occurs with these new currencies may look democratic, but that is a wolfe in sheep' s clothes. Effectively the new currencies are and will be the domain of private individuals trying to seek private gain rather than anything else. And there is no guarantee whatsoever that this constellation will have the interests at heart of all people in society. It will be Darwins' survival of the fittest all over again, which will exclude certain groups of citizens from participating fully in society. As democratic as a crowdbased currency looks: you will still be a puppet but on a different string, with unknown gains being made by unknown players in the value chain of this collective currency.
Currencies should be as fair as possible
Thus, the claim that crowd-based exchange mechanisms or digital currencies are more democratic than the existing ones must be strongly rejected. They are not and they lead to a very uneven an undemocratic redistribution of value in society. The central question in this debate should be which institutional design prevents the most harm from being done.
Thus, the claim that crowd-based exchange mechanisms or digital currencies are more democratic than the existing ones must be strongly rejected. They are not and they lead to a very uneven an undemocratic redistribution of value in society. The central question in this debate should be which institutional design prevents the most harm from being done.
Despite all the existing flaws that may be present in our governments or current monetary situation, the truly democratic currencies and those that may do the least harm are those operated by the governments that we can vote in or out.
