Yanis Varoufakis: “Greece Will Adopt the Bitcoin If Eurogroup Doesn’t Give Us a Deal”

[muriel_volestrangler]

106. Here, let Yanis Varoufakis solve it for everyone

Bitcoin and the dangerous fantasy of ‘apolitical’ money

The Crash of 2008 has infused our societies with enormous scepticism on the role of the authorities, both government and Central Banks. It is quite natural that many dream of a currency that politicians, bankers and central bankers cannot manipulate; a currency of the people by the people for the people. Bitcoin has emerged as the great white hope of something of the sort. Alas, the hope it brings to many people’s hearts and minds is false. And the reason is simple: While it is true that local communities have, in the past, generated successful communitarian currencies (that enabled them to improve welfare in their midst, especially at a time of acute economic crises), there can be no de-politicised currency capable of ‘powering’ an advanced, industrial society.
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In a sense, the designer of the bitcoin algorithm (the delectable Mr ‘Nakamoto’, who has, by the way, dropped off the radar some time ago) seems to have designed the new currency on the basis of faith in the crudest version of the ‘monetarist’ Quantity Theory of Money (i.e. the idea that the value of money depended solely on the quantity of money supplied to the public) and, thus, aimed at creating the digital equivalent to… gold. Come to think of it, bitcoin was, indeed, modelled on gold.
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As with all things digital, there are a number of concerns to do with security; with the fear of hackers and e’spivs. Imagine a world that has shifted entirely to bitcoin. Would we not live in fear that some ingenious hacker will get the better of Nakamoto’s algorithm and manipulate it to his benefit? Would it be wise for humanity simply to assume that the bitcoin algorithm is un-hackable (especially so in the absence of some authority that can intervene and save the day if something horrible happens to the algorithm)? Besides, even if the algorithm is safe, there is always the danger of waking up to the realisation that one’s bitcoin stash was e’looted during the night. And if one entrusts one’s stash to some company with better firewalls and computer security, what happens (in the absence of a bitcoin Central Bank) if that company goes broke or simply disappears into the Internet’s darker crevices (with its customers’ bitcoins)?

These concerns would probably suffice to put a dent in bitcoin’s prospects. But they are not the main drawbacks of the currency. No, there are two insurmountable flaws that make bitcoin a highly problematic currency: First, the bitcoin social economy is bound to be typified by chronic deflation. Secondly, we have already seen the rise of a bitcoin aristocracy (a term ‘coined’ by Greek blogger @techiechan) which, besides the issues of distributive justice which it raises, evokes serious fears about the capacity of very few entities or persons to manipulate the currency in a manner that enriches them at the expense of financial instability. Let us look at these two problems in some detail.

http://yanisvaroufakis.eu/2013/04/22/bitcoin-and-the-dangerous-fantasy-of-apolitical-money/

Of course it was an April Fools' joke. It's deeply disappointing that any DUer could have taken it seriously.