How Bitcoin Works vs. How I Imagined it

What I imagined bitcoin would do

When I first started to get a grasp of what bitcoin was I imagined that it was capable of redefining social hierarchies and possibly even eliminating them. I thought that it would be the first currency that was truly defined and run by the people. No one person could change its worth and no one person could be worth more than their labor. I imagined a day where the person in charge didn’t get more just for the sake of being in charge. I don’t think we need to do away with capitalism but monopolistic power should be done away with. I thought bitcoin would be the way to do that. 

To me, the whole point of bitcoin was to make a decentralized form of currency. It would cut out a lot of people involved in deciding how the money works. The taxation of bitcoin at the value of the dollar is a sure sign that it will not be as revolutionary as I hoped it would. It doesn’t seem to be capable of eliminating governmental bodies altogether. Bitcoin is not going to work because it doesn’t solve the root of the problem I had hoped would be solved. The problem is that we are still letting a few people make the decisions for whole communities. When our republic was first formed in the late 1700s this was not a bad thing. Our ability to communicate across the colonies was still very limited to letters and physical modes of communication. It was not possible then for all the farmers in the midwest to show up to a meeting at Washington D.C. to discuss farming policies. Today this is very much possible. We can vote, write, and even video chat from anywhere in the world with almost instant feedback. These technologies offer us the ability to take a step further in eliminating inequality and hierarchical structures. 

How bitcoin has progressed so far

The classic tale of bitcoin working is when someone was finally able to order a couple of pizzas with it in 2010. At the time the value of 10,000 bitcoins was worth about 40 U.S. dollars. He spent the money to trade for the pizzas and people laugh now because the worth of those 10,000 bitcoins would have been a constantly changing but large sum of money. Today it would have been worth over 400 million dollars at around 40,000 dollars a bitcoin. The value of bitcoin is decided by the amount of work a computer does to encode it into the blockchain. This work offers security for the currency but the work required is done by computers, not human beings. This is significant because in a human sense the value of the work is not very significant. Bitcoin is inherently speculative in that it is simply worth what people deem it to be with no basis in actual human labor. Bitcoin as a form of labor has the same value as someone replaced by a machine. When an employer develops a machine to replace someone’s work the employer doesn’t keep paying the employee. The employee is simply let go. Thus, bitcoin itself should have no value. It is just the machine in which value can be transmitted. The idea that someone could save bitcoin in 2010 for a few bucks and have it be worth millions today has nothing to do with the labor it takes to make bitcoin, and everything to do with the imaginations of human beings. There are some fees to running the bitcoin machine to be sure, but bitcoin itself has no inherent value. In order for bitcoin to work, labor must first be converted to bitcoins. In the current state of things labor is converted to the dollar and then to bitcoin. The funny thing is that we tried to invent bitcoin to reinvent the value of labor, without ever setting a value for labor. While many render the rise in the price of bitcoin to its success, in actuality the rise in the price of bitcoin is how we know it’s failing. We don’t need to define the value of a bitcoin, we need to define the value of labor. We need to be able to convert how much me writing this article is worth in relation to the pizza someone just made down the street. 

Defining the value of labor

The difficulty in defining labor is that the value of it changes relative to the person. Food is of value to everyone but this article I am writing is not. Someone has to decide that it is worth some value. There are two main ways to solve this problem. We either have a computer to calculate the worth of something through mathematics or we set up a voting system in which human beings have to vote on what something is worth. Mathematics works until you bring in the human element. As of right now, I don’t think technology is capable of accurately defining the value of art or any kind of skill. I think humans, while inherently biased, are still more capable of defining the value of labor. In order to do this, we need to develop a review system that rates products and gives something an inherent value. The problem is that I don’t go around rating the quality of work and in most cases, I don’t have the expertise to rate different types of work like pizza or architecture. I think it would have to be developed more like a literature review system but we already know that that system is incredibly flawed. This is why bitcoin doesn’t work in a short time. Currencies need time to be adopted but any natural adoption of coin will naturally just be absorbed into the current value of things. If we want bitcoin to change hierarchical values we need to be able to define value without them. Bitcoin does not do this. We need an equation that converts labor into currency first for bitcoin to work as a currency without the dollar. Until we have an equation of labor bitcoin is simply left to the imagination. One day I hope we can make the conversion of bitcoin or some other cryptocurrency into a defined value of labor. Until then I guess we hope its value goes as high as the sky.

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