Short and Sweet
What does bitcoin have in common with the ancient stone money of Yap?
“That does not render bitcoin invalid or the blockchain useless,” writes Gillian Tett in a recent Financial Times editorial. “After all, the mainstream currencies on which our lives depend rely on sometimes tenuous social norms as well. One way to frame the contest between bitcoin and fiat currency is thus as a battle of norms — and of distributed versus hierarchical trust.” Tett, perhaps inadvertently, makes a point a good many gold enthusiasts will embrace. Bitcoin is more readily comparable to fiat currencies than gold – as its value rests completely in the faith that it will not be printed without restriction.
Therein lies bitcoin’s ultimate weakness as a store of value. Who’s to say that any number of copycat cryptocurrencies won’t invade the space and undermine bitcoin’s value? (In fact, a good many already have with varying degrees of success.) Who’s to say that some enterprising software geek doesn’t find a way into the blockchain and begins producing bitcoin willy-nilly? (Which is what happened, by the way, to yap stone money. [More]) Tett ends her essay with some advice for Elon Musk – a new and ardent supporter of bitcoin: “Perhaps Musk’s next trip should be to Micronesia, where those now-useless stone circles still litter the landscape as a sign of what happens when norms and patterns of trust change.” To get to the heart of what Tett – an anthropologist as well as a first-rate journalist – means by that statement, you will need to read her essay in its entirety at the link above. In Musk’s defense, he also expressed an interest in Tesla building its gold reserves.