Algorithms, Blockchain & Cryptocurrency by Gavin Brown

Author:Gavin Brown
Language: eng
Format: epub
ISBN: 9781838674977
Publisher: Emerald Publishing Limited
Published: 2019-12-11T00:00:00+00:00

CAN CRYPTOCURRENCIES FIX THE SYSTEM?

It is clear that Hayek in the Denationalisation of Money did not envisage the technological advancement and societal and economic shifts which led to ‘ordinary’ individuals being able to create global monetary substitutes (e.g. Bitcoin). Hayek argued that the solution to the boom bust economic cycles caused by malinvestment, FRB and unconstrained credit lay in the removal of the state and its largesse from the monetary process. Previously, this has been imagined by the academy and society as per the previous section, it was not envisaged that globally accepted perfectly transparent individually created money substitutes would compete with national money and via this competition provide Hayek’s stabilisation mechanism.

Denationalising the money supply for Hayek involved Banks making their own decisions regarding lending, making these transparent and relying on the market via consumers moving their deposits to coordinate sensible lending decisions. This is as without state involvement allowing for the expansion of the money supply, consumers would regulate the banks as their individual deposits are those being directly lent.

A currency coded on the blockchain is perfectly transparent, its functions are publicly available, if one owns a Bitcoin, they own a fixed portion of the total supply. The final amount of Bitcoin to exist is immutable, the pound in your bank account is a fluid proportion of the total money supply. So if a nation abandoned its currency and converted to Bitcoin, then its monetary expansion is determined not by political whim and action, but by a predefined code. This is not the space to address the ongoing battles and debates in economics surrounding the causes of crisis, but it is useful to note that proponents of cryptocurrency may have a wider economic ideology as well as individual level support form a decentralised currency, and it is useful to consider what an economy with a denationalised currency may look like.

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