Writer Nick Harkaway recently paralleled the vast troves of gold in The Hobbit to the idea of danger as a commodity. “If dragons and such like gold,” he wrote, “despite having no use for it, it’s going to end up in their hoards. Any non-dragon gold represents either danger…or personal dangerousness…in which case, the actual currency is not gold, but lethality. Gold is just a token of how appallingly dangerous you are.”
We may not have Smaugs, but we definitely have gold. We also have investment bankers, email scammers, Ponzi schemers, tax legislators, black-hat hackers, and varying sorts of criminal (and legal) entrepreneurs devoted to screwing the average person out of their assets. The way that the developed world makes money is an arthritic old system riddled with loopholes and corruption, and yet, after all these decades, we still subscribe to gold-based currencies.
“Those who have embraced Bitcoin as the lingua franca of our monetary future are deemed wild risk-takers.”
Perhaps this is why Bitcoin has been so well-received – it is, after all, the first currency designed for controlled deflation. Bitcoins are created out of a tedious mining process (read: computers solving massive problems), and more simply can’t be “made” on demand. At the same time, it’s new and exotic, and those who have embraced Bitcoin as the lingua franca of our monetary future are deemed wild risk-takers. It’s not the only sort of cryptocurrency on the market either – there are plenty of new challengers primed for attention. Rewind to Harkaway’s danger hypothesis, and we’ve got a new parallel between cryptocurrencies (ostensibly the future of human money) and the “personal dangerousness” that comes with such decentralised, unpoliced technology.
It’s no surprise that the editorial vitriol surrounding Bitcoin’s meteoric rise to fame has mostly been along the lines of “hey, anarcho-libertarian crazies, take your imaginary money and shove it.” But at heart, a self-regulating currency represents a burgeoning sense of resentment against financial institutions and governments around the world. In its virtual crypto-form, Bitcoin is something that people can (with some learning) understand and control. Of course, critics argue that cryptocurrencies mostly benefit the rich, who can afford to play with its wildly fluctuating value and still keep their heads above water. People in need don’t care about encrypted money – imagine someone in a welfare line complaining about their concerns with anonymity.
But with so much focus on Bitcoin’s intangibility, many don’t realize that developing countries are already living in a monetary future in ways that we won’t see in the U.S. or the U.K. for years. Kenya, for instance, has been quietly running on “mobile money” since 2007. The m-Pesa’s best feature is convenience – you can buy m-Pesa with cash and load it on a regular dumbphone without a bank account or permanent address. The transition from analogue to digital money means that Kenyans don’t have to lug wads of cash around or travel long distances to the bank. The m-Pesa also cuts out the tedium of waiting for bank clearances and remittance payments, creating a seamless, thrumming web of free commerce. It’s a practical virtual currency made for real people in real situations. That isn’t to say that Bitcoin isn’t as legitimate as m-Pesa – simply that this smart, localized technology has been fantastically adopted across the country; here we have a currency that isn’t simply being evangelised by thrillseekers who can afford to watch the Bitcoin market – m-Pesa is used by farmers and shopkeepers on a daily basis.
But with the shiny new god of virtual currency must also come a new Smaug. Intrepid money launderers have already established firm footholds in existing virtual infrastructures: video games. Most recently, a Farmville gang scammed the Romanian government into paying them for 1,860 cows that didn’t really exist; the case is now heading to court. Like something out of a Neal Stephenson novel, gangs are becoming better at washing dirty money in virtual auction houses and e-shops, because the items being bought and sold are basically easily-manipulated lines of code. There’s even the laughable news that the NSA actively monitors games like World of Warcraft for “terrorist activity” in the in-game economy.
At the end of the day, money makes the world go ’round, and virtual currencies will still accomplish the same function that hard cash does. Nothing will change about being able to pay an (arbitrarily decided value) for a mountain bike. What will change is everything else. Consider the beginnings of Apple’s iBeacon system, which monitors “granular shopping” habits. Using a location-based app and Bluetooth, Apple can tell when you enter their stores, and to an extent, what you’re doing in the store. Now throw in digital cryptocurrencies, current retina movement tech, and the lazy-human love of streamlining services, and you’ve got an exact scene out of Minority Report: a commerce-saturated world without wallets, where our money knows what to do without us telling it. We’re almost there.
Yet, in the face of all this paradigm-shifting madness, it’s good to see the Bank of England sticking by physical money like a stoic old guard. Ever-conscious of how filthy and tattered paper money can get, it recently introduced indestructible polymer notes that were tested for structural integrity in microwaves.) Perhaps there’s something psychological at work here; there’s something deeply satisfying about handling a sheaf of crisp new banknotes, because money ultimately represents the value of someone’s work. Perhaps our human love of tangible acquisition, and the deeply satisfying need to pile things high in hoards will always require us to have a physical token of value.
Follow Alexis Ong on Twitter here @steppinlazer