Review: The Politics of Bitcoin

David Golumbia. The Politics of Bitcoin: Software as Right-Wing Extremism. Minneapolis: University of Minnesota Press, 2016. (Available at Powell’s and other fine bookstores near you.)

This small book – perhaps 35,000 words, almost a pamphlet – places the Bitcoin bubble in political and economic context. The author, Professor David Golumbia of Virginia Commonwealth University, is a former software engineer and financier turned academic.

The Politics of Bitcoin is largely an overview of the marketing of Bitcoin and similar cryptocurrencies which, Golumbia finds, is full of right-wing conspiracism and financial flummery. Theories about the evils of central banking, sometimes anti-semitic, and the evils of government regulation are rife. He also points out that as money, so far Bitcoin and similar cryptocurrencies so far are failures.

The book provides an introduction to Bitcoin and blockchain for people unfamiliar with those, and the mainstream economic understand of money, for people unfamiliar with that.

Money, by the usual economic definition, is “a medium of exchange, a store of value, and a unit of account.” Golumbia points out that Bitcoin is at most useful as a medium of exchange. Even so, Bitcoin is only used in a few markets, mostly those for illegal goods and services. Bitcoin is extremely volatile, and because of this is not useful as a store of value and a unit of account; as with any volatile currency one has to spend it quickly, lest its value be destroyed by the shifting market. So far, the main success of Bitcoin is as medium for speculation. It has all the problems of an unregulated currency, as well as a few unique to its technology. It is a sign of the failure of the economic theory behind Bitcoin that it can inflate and deflate rapidly. If the naïve economic ideas underlying the design of Bitcoin were valid, it would be a rock-steady store of value.

He also points out that the technology, by design, has a strong, perhaps insuperable, bias towards neoliberal economic models, making regulation of an economy through banking and fiscal policy difficult; an economy based on Bitcoin would be similar to a late 19^th century economy, enormously subject to fraud and boom and bust cycles – in other words the abandoned economics in which all but the very wealthy suffer.

It is a useful book, gathering all these arguments in one place. The extensive bibliography in particular is valuable. If Professor Golumbia continues working on this subject, I would be interested in seeing interviews with some of the original cryptocurrency theorists, who are still, as far as I know, alive, as well some coverage of the left-wing anarchist hopes for cryptocurrency. So far as I know those have been exploded, but I think studying their failure would be worthwhile.

So, a worthwhile book. Four stars.