Bitcoin – worthless yet traded for millions

Global exchanges are currently offering an offer that many “digital natives” do not want to refuse: “Trade on the official cryptocurrency exchange,” the announcement reads.

In the spring of 2021, bitcoin made headlines because its value “exceeded the magic limit of $50,000” per unit (Rs 38.37 lakh). But how did hackers’ criticism of so-called “paper money” – the money we use every day – turn into a piece of code that is rarely used for purchases but has become popular as an investment target?

criticism

Let’s start in 2008, when Satoshi Nakamoto – a pseudonym for an individual or group – created Bitcoin. According to Nakamato, his work was motivated by the criticism of modern money, or the so-called mandatory money. The word ‘fiat’ is Latin and means, roughly, ‘done’.

Nakamoto’s diagnosis of the fiat money problem, in their own words: “The fundamental problem of traditional currencies is the degree of confidence necessary for them to function.” According to critics of fiat money, this trust is abused – by devaluing central banks, by banks that speculate with investors’ deposits, and last but not least, by financial institutions that charge fees for transfers.

This is all wonderful in and of itself. This money defines an entire society in which the production of this bare wealth is paramount – thus cars, cucumbers, and tables are not made because someone wants to drive, eat or use them but someone wants to use them just for the sake of making money. That one invests money and thus through capital has real control over the workers. That this matter then sets up a production process that transforms money into more money, so that workers collect this abstract wealth and separate from it at the same time. Nakamoto may not know it, but he is the subject of their criticism. But in general, Nakamoto is not interested in money.

Instead, what they care about is the question of how all this works best. For example, they see fiat money as a bad way to carry out the “useful” functions of money. In their words: “What is required [instead] It is an electronic payment system based on proof of encryption rather than trust, allowing two willing parties to transact directly with each other without the need for a trusted third party. “

So Nakamoto and others created bitcoin to better perform these functions, with no devaluation, no costs, and no payment uncertainties. This seems like a worthwhile endeavor to them precisely because they know that everything depends on money in this society.

However, there is still a contradiction: creating something that is supposed to make a capitalist economy work better, by declaring that the substance around which everything revolves – money – is somewhat secondary that can be replaced by something else like that.

fake money

Let’s take a closer look at this contradiction. at appearanceBitcoin, like money, appears to be a defining business. Nakamato: “We define electronic [coin] as a series of digital signatures.”

Why not – bearing in mind that we know that paper money was also originally worthless pieces of paper that the state said could be used as a means of payment?

But what Nakamoto and others are unfortunately missing is Content from the definition of the state. With a monopoly on the use of state force Committed Its citizens in property and impose With its laws the fact that printed bills must be accepted by all citizens as a means of access to all private wealth – thus wealth itself. Through state sovereignty, money is set as the measure and means of abstract wealth.

Of course, Bitcoin does not have this content at all, which is why it is not money, but a piece of code that is designed so that it can be transferred back and forth, particularly anonymously and securely, as data and is otherwise completely self-referential in all respects. . Whoever has Bitcoin has nothing but this itself, a piece of information technology one can put into a virtual vault and then transfer back to other addresses – if they have an interest in that piece of data.

Critics of paper money noticed this in their own way, and immediately found a solution. According to Nakamoto, “The main point is that there was an exchange of money once [like US dollars or Indian rupees] Bitcoin can happen, and commodity producers have a way to value Bitcoin as possible Average Exchange” (emphasis added).

On the face of it, this is an admission that Bitcoin has neither value nor money. The inventors of Bitcoin took the position that there should be a relationship between their product and real money, therefore, thanks to the dollar price of bitcoin, one can flip the equation so that all goods that can be expressed in dollars can be expressed in bitcoins as well. Using the same reasoning, one can also declare that cars, option and schedules are money – because by the price of these commodities one can also express every other good with a given quantity of option. But by this point, the “Bitcoin Economists” had already overlooked various other contradictions.

At the beginning of the history of bitcoin, in May 2010, a colleague named Laszlo Hanyecz ordered two Papa Johns pizzas and, as a trial, paid them 10,000 bitcoins. The actual cost of the pizza was $41, so with his transaction, a relationship was established: that 10,000 bitcoins were worth $41. Of course, this did not change the fact that Bitcoin is inherently worthless, but soon some seasoned Internet entrepreneurs began selling goods for Bitcoins on this basis.

Determining the value of Bitcoin as a result of these transactions only reflects the price that is ultimately paid, because there is absolutely no value that finds its expression here in the Bitcoins themselves. So bitcoin could have been a gimmick for digital currency enthusiasts, nothing more. But then, bitcoins were discovered by those who are an authority in our society to create value from nothing.

stock trading

The exchange asserts in its own way that bitcoins are completely worthless. Phantom capital experts especially appreciate this characteristic, as it is completely non-specific. So they take the very absence of any value and use it to speculate on the “promise to pay” digital currency.

Such stormy trades are, of course, part of the core competency of financial capital: Bitcoin is listed as a trade article, so virtual money becomes a speculative investment. The digital currency is awarded a an averagewhich is still not profitable, but on the contrary provides bitcoin with an extension pricewhich have been securitized by the stock exchange.

Because the price of bitcoin does not depend on anything other than speculation, and since it does not represent anything other than speculation, it is in its own way in good hands on the exchange. It has become an object of value whose value does not depend on anything but speculation to increase its value.

Nobody involved in the stock market finds this crazy. Instead, those who initially got a few beers from friends who paid for them with bitcoins and who are now millionaires through financial capital speculation are considered “visionary”. And the exchange announces that anyone can now participate in this nonsense, simply via an app.

This is a sharp development. What started as cash for the function of money, what happened to create a form of value that is not money and what is ultimately traded as if it were on the exchange (exactly because it has no value otherwise) is today Bitcoin.

In the logic of capitalism, another false critique has allowed money to blend in with established circles of finance and turn into a business. In the best of these worlds, even big bullshit is valuable as long as it allows someone somewhere to make more money than money.

If you are interested in digging deeper into the criticisms of Bitcoin, read this excellent article. This article was first published by Kontext: Wochenzeitung In Germany. Posted in the wire With permission after translating it with www.DeepL.com/Translator Then he edited it the wire for clarification.

Peter Schadt is a secretary at the German DGB trade union. His doctoral thesis, titled “Digitization of the German Automotive Industry”, was published in German by Pape Rosa.

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