1. Philosophy of Money
Money is a paradigmatic functional kind. Anything that fulfills the functions of money counts as money. In this way, money is similar to doorstops. Money is also a paradigmatic social kind. Our willingness to treat something as money is what makes it money. So, anything that a group of people decides to treat as money, counts as money.
For economists, money is a commonly accepted medium of exchange. So, anything that enough people agree to accept as a medium of exchange counts as money. For something to be a medium of exchange is for it to be a proxy for goods and services in an economy. Rather than having to barter, we introduce something that tracks the values of the things we barter and stands for them. This helps us to avoid the problem of the coincidence of wants, which is that very rarely do two people want exactly what the other has.
So, money emerged to track value across time and space. But not all money is created equal. We can ask three questions about something as money:
- Is it money?
- If it were money, would it be good at being money?
- If it were money, would it be good that it’s money?
The answers to these questions come apart. Consider the Turkish lira. It is a commonly accepted medium of exchange in Turkey, so the answer to question 1 is yes. But it is not doing so well at being money; its current annual inflation rate is 64%. So the answer to question 2 is no. Is it good that it’s money? On the one hand, it’s good that Turkish people have access to money. On the other hand, the inflation of the lira is ruining a lot of their lives, and it would be better for them to have access to another form of money.
Consider a weird example: human teeth. They are clearly not money. But would they be good at being money? They seem to have a lot of features that make for good money. They’re small and light and portable, easy to identify and verify, they come in different sizes, relatively scarce, and so on. They’d function decently well as money. But that would be an absolute disaster! A world with teeth as money is a world in which people are attacked for their teeth, people are harvested for teeth, and many other atrocities occur.
The most important questions to distinguish are (2) and (3). From the fact that something is good at being money, it does not follow that it would be good for the world that it be money.
This is important for the present purpose because most discussion of bitcoin considers how well it fulfills the functions of money. But it may be that bitcoin doesn’t fulfill the functions of money very well and yet it’s still good for the world that it exists; or it may be that bitcoin fulfills the functions of money very well and yet it’s bad for the world that it exists.
Whether bitcoin fulfills the functions of money is largely a question for economists to answer. But whether bitcoin is good for the world is a question for philosophers. And it’s the question we chose to answer in Resistance Money: A Philosophical Case for Bitcoin.
2. How to Evaluate Bitcoin
People are biased. That’s no secret. It is tempting to think that philosophers, because we teach Critical Thinking and Logic and such and are well aware of the phenomenon, are less prone to bias than others. But we know this is not the case. And so, when it comes to evaluating bitcoin, people bring their biases. And this especially occurs because bitcoin is a monetary technology. Some people own bitcoin – they would like to see its price increase, and so approach it from that biased perspective. Some people don’t own bitcoin but could have – they don’t want to have been wrong when they decided not to buy it, and so approach it from that biased perspective.
The Veil of Ignorance, invented by John Harsanyi and popularized by John Rawls, helps us to mitigate against biased evaluation. In the thought experiment as Harsanyi presents it, we step behind the veil by forgetting who we are in the world. We remember everything else about the world: its governments, the distribution of wealth, and indeed we can know every fact about every person in the world—except which one of them is us. Then we ask questions about the world.
One question is particularly relevant to bitcoin: would you want to step back into a world with bitcoin or without bitcoin, if you didn’t know who you’d be?
This helps us remove bias because we can’t merely consider whether we would be better off in a bitcoin or non-bitcoin world; we must consider everyone in the world, since from behind the veil we could turn out to be anyone. It also forces us to attend to the empirical facts. In particular, we need to know who is using bitcoin and how they’re using it and how it helps them, and who bitcoin harms and how it harms them.
A straightforward way to use this information would be utilitarian. Simply add up the positive and negative utils in each world and pick the world with the highest value. That suffers from the same problems that standard utilitarianism suffers from; the two that are particularly important are the distribution of those utils and the risk. The former problem is that it might be that one of the worlds – the bitcoin world or the non-bitcoin world – has a much higher utility but there are very few people who have massive amounts of it and then most people have negative utility. You’d be reasonable for preferring the world that has less utility overall but where more people enjoy positive utility. This relates to the second problem, which is risk attitudes. It’s sensible to choose a world with less overall utility if it’s a less risky choice.
The problem gets more acute because you’re not just applying your own risk attitude, but choosing risk attitudes for everyone else. You’re choosing for the whole world whether it will be a bitcoin world or not. In “Taking Risks behind the Veil of Ignorance,” Lara Buchak sensibly suggests that we ought to be more risk-averse when making choices for others than when making choices only for ourselves: “the default risk attitude we take ourselves to be required to adopt when making choices for others is the most risk avoidant of the reasonable risk attitudes” (631). And this is the case even if in fact the people for whom we’re making choices would themselves be more risk-tolerant or even risk-seeking.
We needn’t assume utilitarianism to reason behind the veil. We can use any decision procedure we want – or none at all. We’ll need to consider the situation for each individual in each world, and we’ll still face the same issues regarding the risks for each of them in the bitcoin world and the non-bitcoin world.
3. Evaluating Bitcoin
So, let’s evaluate bitcoin from behind the veil.
The first thing to consider is the problem of monetary luck. We’re each born in a particular country with a particular monetary system. Some of those monetary systems are fair and the rulers are responsible. Some are unfair, with irresponsible people in charge. Which one you are born into has nothing to do with you; if you are in a good system it’s good luck, and if you’re in a bad system it’s bad luck. Furthermore, it may be difficult or impossible to change your monetary circumstances—especially if you’re born into a bad monetary system.
Nearly a quarter of the world’s population today live in monetary systems with double-digit inflation. From behind the veil, you have a 23% chance of stepping back into a monetary system with double-digit inflation. If you choose the bitcoin world, you have another option in case you are in such a monetary system. Bitcoin is a system with rules, but no rulers. You know how much bitcoin there will be at any given time based on the algorithms, and you know that nobody can change it. It might not be the best rules, but they are stable, and you can opt in or not.
The second thing to consider is privacy. It’s no secret that personal financial data is a highly desirable commodity to a large number of corporations who want to use or sell that data for profit. One can buy things in cash, but that’s often difficult due to location and volume, and it can be risky carrying large amounts of cash around. Bitcoin offers privacy similar to cash, but for digital payments. It’s not perfectly private because there are ways to connect bitcoin addresses to real-world identities, and since the blockchain is immutable any future mistake can be traced back to earlier transactions. But neither is cash perfectly private, due to the possibility of physical surveillance. For some people, privacy is nice. For others, it’s essential for survival. From behind the veil, you could be one of them.
Another thing to consider is censorship. Authorities on payment networks and within banks have the ability to shut down accounts, freeze accounts, seize funds from accounts, block transactions from an account, block transactions to an account, and block particular types of transactions. They have used these abilities to target people with certain identities—the “banking while black” phenomenon in the U.S., Uighyurs in China, women in various patriarchal countries, and so on. They’ve used their powers to block transactions they don’t approve of, such as sex work, marijuana sales, pornography, gambling, and so on. From behind the veil, you don’t know whether you’ll have a targeted identity, or want to purchase things that the authorities disapprove of.
Another thing to consider is inclusion. Around 1.5 billion people in the world are unbanked. The percentages are highest in low- and middle-income countries, but 22% of India is unbanked (228 million people), 11% of China (130 million), and 79% of Pakistan (113 million). 54% are women, and even in some highly banked countries women are mostly unbanked; Turkey is 25% unbanked but 71% of Turkish women are unbanked.
To flourish in the contemporary world, people need access to digital payments technology. For many of them, credit cards and debit cards are not an option. Bitcoin requires only a mobile phone, and 94% of adults in the world have a mobile phone. The bitcoin network is unable to exclude anyone for any reason, including on the basis of race, gender, orientation, age, and so on.
Most of these weigh in bitcoin’s favor. But it’s not all to the good. We must also consider the potential harms of bitcoin, including its role in sanctions evasions, ransomware, and energy use driving climate change. Because it is censorship-resistant and mostly private, bitcoin can be used to get around sanctions and as payment for illegal activities. Bitcoin uses a lot of energy, and when bitcoin price goes up the energy use also goes up as mining becomes more profitable. The percentage of that energy that is carbon-emitting—about 43%—contributes to climate change.
From behind the veil, we consider the bitcoin world and the non-bitcoin world and decide which world we would want to re-enter if we were equally likely to be each person in that world. We consider each person’s life in each world, adopt a conservative risk-attitude, and make our choice.
We think that most people would rather step back into the bitcoin world. That means that we recognize that most people in the world are better off with bitcoin around than without. That means that, if we care about them, we should support the bitcoin network.
