I recently saw an interesting interview with former Canadian prime minister Stephan Harper1, where the topic of Bitcoin briefly came up, and I noticed that he referred to Bitcoin as a “private digital currency”.
I think it’s wrong to call Bitcoin a private currency. In fact, I view Bitcoin as a type of commons, a digital commons.
The word “commons” comes from the Latin communis, the same root that gives us “commoner”, “community”, “communism” and “commune”, and describes something “belonging to all, owned or used jointly, general, of a public nature or character”2.
According to Wikipedia (which is another spectacularly successful digital commons):
The commons is the cultural and natural resources accessible to all members of a society […]. These resources are held in common, not owned privately.
At first glance, the above sentence might seem to dispute the claim that Bitcoin is a commons. After all, Bitcoins are privately owned, and no-one can spend or take ownership of your Bitcoins without getting hold of your private key (which amounts to stealing them from you).
In fact, I posted a message on the Fediverse claiming that Bitcoin is a commons and the argument that Bitcoins themselves are privately owned was brought up as rebuttal by some people.
You can read the whole thread here: https://mastodon.xyz/@jcbrand/105646757598892890
The paradox in calling a privately held asset a commons is resolved when one zooms out and looks at the Bitcoin network as a whole, from which Bitcoins arise and derive their utility.
When I call Bitcoin a commons, I’m referring to the Bitcoin network.
In fact, it’s debatable in which sense Bitcoins themselves actually exist. They have no corporeal existence and no separate existence independent of the Bitcoin network. They exist only as entries in a distributed ledger (the blockchain) that is secured, updated and maintained via mining nodes on the network.
It is the network that gives the Bitcoins value, how much value is largely subjective and based on what people are willing to exchange for them3.
The next rebuttal that one might think of, is that the network isn’t a commons, because it’s comprised of private entities that all act in their own self-interest and use their own private hardware. As someone replied on Mastodon, “the network is just a metaphor for privately owned hardware”.
I believe this to be an oversimplification of what the network really is.
The network transcends the hardware, but even if it was just the hardware, that hardware can be owned by anyone. It can be owned by governments, public universities, book clubs, communes, worker cooperatives and any other form of human organisation that one could imagine.
You could also theoretically run Bitcoin without computer hardware on a pen and paper system. People could do the proof of work (PoW) calculations (the factoring of prime numbers) by hand and then mail copies to other participants, who would verify them and update the blockchain (written on paper) with the new transactions.
Transactions would take days or weeks to clear and reorgs would probably happen more frequently. Also the PoW difficulty would have to be such that human beings could do the factoring by hand, but aside from that, I’m not aware of anything about Bitcoin that intrinsically requires digital computers and hardware (although they are a practical requirement).
The network comes into being as soon as the participants (aka nodes) are able to connect to one another, agree on a protocol and adhere to the rules of the protocol.
Bitcoin is a peer-to-peer (p2p) network, which means that any node can connect to any other node and there is no central hub through which traffic must be routed (as would be the case in a centralized network like Facebook or Visa).
The distributed consensus mechanism based on proof-of-work (aka the “mining” of Bitcoins) is the way in which the rules of the protocol are enforced in a decentralized, p2p manner without a central authority.
The Bitcoin protocol is described and implemented by the Bitcoin-core software, which Satoshi Nakomoto wrote and published as free and open source software.
It’s generally accepted that free and open source software forms a digital commons, since anyone in the world is allowed to study, modify, run and distribute the software without encumberance4.
The global database used by the Bitcoin network, the blockchain, is also a commons in the sense that anyone can download it, study and modify it, and distribute it to others.
If you want others to accept your modifications to the blockchain as valid updates to the ledger, you have to conform to the protocol rules and also provide proof of work by way of generating a hash that conforms to a specific difficulty function. This requirement is in order to maintain the integrity of the ledger, the security of the network and to create distributed consensus in a trustless environment.
In fact, in order to fully participate in the Bitcoin network, you have to download the entire blockchain.
One could argue that the requirement to fulfill the proof-of-work in order to update the ledger in some way negates the proposition that Bitcoin is a commons. To me this is akin to the argument that Wikipedia is not a commons because there are moderators who delete unwanted edits to a page. I don’t think this argument holds5.
The Bitcoin protocol itself is designed in such a way as to make the network permissionless. What this means is that no-one can interfere in the operations of the network in order to prevent you from participating (in the form of mining, sending or receiving Bitcoins or verifying transactions).
With the caveat that no single entity acquires 51% of the hashing power of the entire network. But even then, in such a scenario this would be seen as an attack on the network and an attempt to break the agreed upon rules.
If a successful attack or hard fork were to happen which changes the properties of Bitcoin so that it becomes permissioned in some way, it would no longer be a commons, but it would also no longer be Bitcoin.
So, given the fact that the necessary software to bootstrap, run and maintain the network is a digital commons, the fact that the network is permissionless and allows anyone in the world to participate, the fact that the database is public and accessible to all, and the fact that you’re not dependent on any particular private entity’s hardware to participate, it’s clear to me that the Bitcoin network (the thing that gives birth to Bitcoin the currency and to some extent gives it value) is a digital commons.
But let’s take this analysis a little further by comparing Bitcoin to something that’s meant to be similar, but is actually very different.
Various central banks are working on what’s called “Central bank digital currencies”, or CBDCs. These CBDCs are directly inspired by Bitcoin and cryptocurrencies in general and are in some sense a response to the existence and rise of Bitcoin6.
In any case, CBDCs will most likely not form a commons. They won’t be permissionless because only trusted parties (banks) will be able to “mine” new currency units, and the software necessary to bootstrap, run and maintain the CBDC network will most likely not be free and open source.
In fact, given that central banks and their member banks are usually private entities owned by private shareholders, I’d contend that CBDCs are actually the real private currencies!
Similarly, Libra, the proposed cryptocurrency initiative by Facebook and a consortium of private componies, would also not be a commons because issuence won’t be permissionless and the node software probably not free and open source either.
Bitcoin, and some other cryptocurrencies, are special and different from CBDCs and private currencies like the proposed Libra, and that comes from it’s nature as commons. An open network that’s non-exclusionary, with the source code, protocol and the database publicly visible for all to see and verify.
Footnotes
- I came away very impressed by Stephen Harper, especially since he’s willing to criticize central bank policies and is willing to admit that they’ve blown huge asset bubbles (thereby massively increasing income inequality).↩
- etymonline↩
- This would also largely be my response to Stephen Harpers question as to what makes them a store of value.↩
- These are known as the four freedoms that define free software.↩
- I like my puns intended.↩
- I also believe that they arise out of the desire of central banks to do away with physical cash altogether and to have totalitarian control over the issuance and usage of money.↩
