Introduction Money used to be simple. Everybody liked the shiny yellow metal we now call gold. However, at a certain point, some so-called ‘states’ made the whole practice of exchanging gold rather...Show moreIntroduction Money used to be simple. Everybody liked the shiny yellow metal we now call gold. However, at a certain point, some so-called ‘states’ made the whole practice of exchanging gold rather more complicated, as they issued vouchers that were said to ‘represent’ an amount of gold. Even more farfetched was their later decision to cut any links between our metal of desire and the vouchers we got accustomed to. In the present day, our vouchers often lack any physical qualities, and seem to be nothing more than digits projected on a computer screen. It is perhaps remarkable that the proverbial man or woman in the street does not at all seem to be concerned with how abstract our money really is. Its omnipresence and utility have made almost every inhabitant on earth comfortable using it. We hardly reflect on its nature anymore. And so, now that an entirely novel type of money – cryptomoney – is coming to the forefront, we are quick to accept it as just another incarnation of a phenomenon that we have been familiar with ever since we started appreciating a certain shiny yellow metal. But I believe this to be a mistake. Cryptomoney has the potential to transform our financial system just as radically as the move from gold and silver to fiat money, or the abandonment of the gold standard once did. This is because there are certain qualities to cryptomoney that are fundamentally different from the money as we know it. It seems, however, that although some people are interested in comparing different types of money from an economic standpoint, not many care about the philosophical implications of choosing one system over another. I believe this to be a second mistake. The economist Leonidas Zelmanovitz is right when he says that ‘the value of any monetary policy is contingent on its adherence to a coherent set of philosophical assumptions’. But this works both ways, and we should also not neglect how our philosophical assumptions are challenged by the sort of money we use. If cryptomoney would make it harder for us to adhere to our ideas about justice, equality, fairness etc. that underlie our financial system, we should try to prevent it from gaining too much prominence. The question that lies at the origin of this investigation is the following: should we want to replace ‘traditional’ money with cryptomoney? The answer to this question will be negative: in this paper I will argue that it is impossible to replace traditional currencies with any form of cryptomoney and not as a direct result undermine national sovereignty and increase inequality within countries, and between them. The former is under threat because of the decentralized market-based nature of cryptomoney that leaves powerless governmental tools to execute monetary policy. The latter is the result of the disproportionate advantage more affluent people and countries will gain over their poorer equivalents as a consequence of the way cryptomoney works. If we see the consequences of these two effects through, we arrive at the conclusion that any form of replacement of traditional money by cryptomoney means a redistribution of power from (democratic) states to the market, from people to algorithms, from economically less developed countries to economically more developed countries, and from the poor to the rich. Such a redistribution, I will argue, is unjust and undermines the legitimacy of states. To support this conclusion, I have divided this thesis in four chapters. In chapter one, I will answer the questions what money is and how cryptomoney is a separate subset of the money family. A definition of cryptomoney will also be provided, as there are many virtual phenomena called cryptomoney that are really something else. Through this definition we will come to see that cryptomoney functions quite differently from the money we use today. And because cryptomoney’s ability to change our society stems in part from its technicalities, I will then give a concise explanation of how cryptomoney works. One of the really novel aspects of cryptomoney is the way it is safeguarded against fraud. The technology that does this, the ‘blockchain’, is the reason why cryptomoney could be the first serious competitor to national currencies since gold. Important as this all is, we will not discuss the mathematical or programmers’ side of cryptomoney in detail; it has been done elsewhere. Rather, we move on to the second chapter and discuss the consequences that a financial regime based on cryptomoney would have for states and individual users. We refrain from giving too strong a normative judgment here, and merely list and explain some of the most important practical advantages and disadvantages that the introduction of cryptomoney could have, in order to better understand why cryptomoney is so attractive to some of its proponents. In chapters three and four we shift our attention to the main question of the thesis: is cryptomoney a good idea? Now there might be many arguments that could be given either for or against using cryptomoney, and some of these will be discussed in chapter two. Many of these arguments, however, are mostly pragmatic in nature, and therefore not very interesting for a philosophical inquiry. Others do merit more thorough examination, but are contingent on the type of cryptocurrency used. However, there are two arguments against cryptomoney that are rather more substantial. In chapter three, we will explain why cryptomoney necessarily undermines national sovereignty, and why that would be bad. Chapter four does the same for equality. These arguments hold for any form of cryptomoney as defined in chapter one, as they are the direct result of the way cryptomoney functions. Furthermore, they transcend all pragmatic arguments, because of the strong commitment many of us have to sovereignty and equality. Naturally, not everyone believes in these values. And although I will give some arguments in favour of sovereignty and equality, this thesis does not have the explicit aim to convince those that a priori disagree with me that these two principles are desirable. There are many libertarians and anarchists who are outright opposed to the basic idea of statehood, and do not think that national sovereignty is worthwhile at all. Likewise, there are some who claim that (some sort of) inequality has utility, usually because it yields a desired effect. For some niche thinkers it could even be good in itself. This paper might not be for them. Of course, many of cryptomoney’s (dis)advantages will only become apparent in a future where cryptomoney sheds its volatile state and blossoms into a type of money on par with the money we have now. That it could come that far is an underlying assumption for this research. It is made plausible throughout, and in chapter one especially. Interest in cryptomoney surges and it has already proven to be a very popular type of artificially created money. At the same time, it would be folly to claim that we are on the brink of a true cryptomoney revolution. The trade volume of all cryptocurrencies combined is still quite small, and no single currency, not even the (in)famous bitcoin, is anywhere near a position where it could start replacing even the weakest of national currencies. So uncertain is the future in fact, that it is even possible that we are already past the peak of cryptomoney. And that would then actually be a good thing, as an ascension of cryptomoney will lead to an increase of the problems noted in chapter three and four. In a way, you could say that this inquiry aims to make itself obsolete, because in the end it argues that cryptomoney would be bad for us. Still, if we manage to keep the use of cryptomoney at bay, and all the different cryptocurrencies lose their value, that would not mean that the phenomenon could not still be valuable as a hypothetical alternative to traditional money, capable of shedding light on our current monetary institutions and the normative foundations on which these are based.Show less
