In this article I will question the conception according to which Bitcoin is a form of “private money”. In principle I am going to explain what we mean by public and private and how this applies to currency. Next, I will examine the components that make up Bitcoin trying to classify them as “public” or “private.” Finally, I will offer my conclusion on whether it makes sense to consider Bitcoin as “private money.”
The public and the private in the monetary
Let’s start with the dictionary and etymological definitions. The Spanish Royal Academy presents us with 9 definitions of public and 7 of private. Of these I will take those that are relevant to this discussion, namely:
Public, ca
From lat. publĭcus.
1. adj. Known or known by everyone.
2. adj. Said one thing: It is done in plain sight of everyone.
3. adj. Belonging or related to the State or another Administration. School, public hospital.
4. adj. Said one thing: Accessible to everyone.
5. adj. Said one thing: Intended for the public.
Private1da
From the part. of deprive; lat. privātus.
1. adj. Which is carried out in the sight of a few, family and domestically, without any formality or ceremony.
2. adj. Particular and personal to each individual.
3. adj. That it is not publicly or state owned, but rather belongs to individuals. Private clinic.
With those general definitions established, we can delve into the topic of currency. A currency is in principle something that is held privately (definition 2). However, the monetary status of a good depends on its acceptance as a universal medium of exchange and on the units being equal to each other, which brings a monetary system as a whole closer to definitions 1, 4 and 5 of “public”. ”.
In addition to that, we must also take into account its origin, which is related to the definitions 3 of both concepts: whether the person who issues and supports that currency is a State or an individual. This is the criterion by which Bitcoin is judged to be a form of private money, as opposed to fiat currencies issued by States. However, we will see that this definition is problematic.
What is private and public about Bitcoin?
Let’s look at the components of Bitcoin to understand if they are public or private:
- The source code: is open and is not subject to license or copyright.
- The logo: is in the public domain.
- The ledger: shared on a P2P network to any node that connects, it is understood as a public record of all transactions (public ledger).
- The keys: are created by each user on their own devices privately.
- Development and operation: carried out by independent programmers, miners and users, the former sometimes supported by some type of financing. There is no company or organization (public or private) that carries out the development of Bitcoin exclusively or hierarchically. Decisions are made by consensus, with the risk of bifurcation if this is not achieved.
The only element that we can call “private” in Bitcoin has that adjective in the name: the private key. All other elements are public in all the senses mentioned at the beginning except 3. This is crucial to understand how Bitcoin succeeded where private money failed.
The most forceful proposal in favor of a private and non-public monetary system is The denationalization of money by the economist FA Hayek. In that book he proposes a regime of free monetary competition between private companies. The role of State would limit itself to allowing the free circulation of these coinsas well as those issued by other national States.
This proposal was no longer accepted in Europe and instead the supranational currency, the euro, was created. Hayek surely knew this would be the case, since he was asking the state to act against its own interests. But in addition to that, this type of regime would carry the risk of presenting central points of failure.
That is something that, as we well know, was the crux of the cypherpunk issue in the following decades until it was solved by Nakamoto with Bitcoin. What I think is important to highlight is that this was possible not thanks to a private organization stronger than the State but, on the contrary, thanks to a technology that is more public than the State itself.
Conclusion
The binary “public = state; private = non-state” does not allow us to really understand how Bitcoin managed to effectively break the state monopoly on the currency. It was not through a private entity issuing digital currency, something that is attempted from time to time and governments are capable of quickly destroying, but rather taking the concept of public even further.
Bitcoin is a public good, so public that no particular State is capable of hoarding and controlling it. Furthermore, its blockchain technology, being a public good, allows us to conceive the public sphere as something that transcends the conception of the modern State. Instead of delegating public management tasks to officials, the blockchain allows their automatic fulfillment.
The rules of the system are public and equal for everyone, but They surpass the state model in at least two aspects: Adherence is completely voluntary rather than coercive; and there are no privileged actors in the system. First of all, it is a system based on rewards rather than punishments, as is the national state.
It’s a bit ironic that a movement advocating radical privacy has achieved the most radical form of public record yet known. It is ironic, but it is also logical, since, on the one hand, to change the system you have to invent a better one; and on the other hand, because privacy is where it should be: in the user, in the individual, and not in whoever controls the system.
Disclaimer: The views and opinions expressed in this article belong to its author and do not necessarily reflect those of CriptoNoticias. The author’s opinion is for informational purposes and under no circumstances constitutes an investment recommendation or financial advice.