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Moneys at the Margins – From political experiment to cashless societies

January 2017

January 2017

Authors:

Darmstadt University of Applied Sciences

We conceptualize the emergence and spread of monies in society based on the metaphor of a game actors learn to play which is grounded by the emergence of institutions supporting this game. Based on this approach, Bitcoin is viewed as an emerging money game shaped by different groups and interests pitted against other established money games played in society. We find that the Bitcoin money game has been evolving since its inception, moving through three different phases: a confrontational phase following the inception of Bitcoin, a phase of horizontal integration with incumbent firms and merchants, and a phase of an emerging vertical integration with powerful state actors. While claims about Bitcoin's antagonism towards the incumbents of the financial system are not entirely unwarranted, private firms and government agencies have significantly contributed to the shaping of the Bitcoin money game even to this day. Contesting the idea of Bitcoin as a merely disruptive force, we offer a re-reading of the evolution of Bitcoin up to date which points out that Bitcoin might end up fortifying the position of the central money games in society whose power it was meant to challenge.

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Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

Moneys at the Margins – From political experiment to cashless societies

Moritz Hütten, Goethe University Frankfurt

Matthias Thiemann, Goethe University Frankfurt

Abstract

We conceptualize the emergence and spread of monies in society based on the metaphor of

a game actors learn to play which is grounded by the emergence of institutions supporting

this game. Based on this approach, Bitcoin is viewed as an emerging money game shaped by

different groups and interests pitted against other established money games played in

society. We find that the Bitcoin money game has been evolving since its inception, moving

through three different phases: a confrontational phase following the inception of Bitcoin, a

phase of horizontal integration with incumbent firms and merchants, and a phase of an

emerging vertical integration with powerful state actors. While claims about Bitcoin’s

antagonism towards the incumbents of the financial system are not entirely unwarranted,

private firms and government agencies have significantly contributed to the shaping of the

Bitcoin money game even to this day. Contesting the idea of Bitcoin as a merely disruptive

force, we offer a re-reading of the evolution of Bitcoin up to date which points out that

Bitcoin might end up fortifying the position of the central money games in society whose

power it was meant to challenge.

Introduction

At the time of writing, the death of Bitcoin has been announced for a total of 121 times.

At the same

time Bitcoin trades at over $1000/BTC

with an estimated market cap of over $16 Billion

and

increasingly is being integrated into the governance of mainstream monetary systems. How can we

square this circle? How can a seemingly illegitimate crypto-coin (CC) such as Bitcoin prevent its death

and become woven into the global fabric of the monetary systems most citizens usually encounter?

This chapter examines how Bitcoin came to secure a place as money at the margins of the global

monetary system by focusing on the possibly most controversial question surrounding Bitcoin: what

makes Bitcoin money? We draw on scholars from heterodox economics and other social sciences to

answer this question. We contrast the orthodox functionalist understanding of money as a medium

of exchange, measure of value, and unit of account with an alternative approach that views money

as a form of game played within a society. When the dominant money game with its two-tiered

banking system at the center went into crisis in 2008, activists seized that opportunity to position

Bitcoin as an alternative money game. Despite being neither widely accepted by merchants nor

backed by any nation-state, Bitcoin was able to not only survive but prevail and flourish, slowly

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

weaving itself into the dominant money games. We track the evolution of the money game of Bitcoin

and its leading supporters, tracing the cognitive split between its positive and its more illicit aspects

which allowed it to flourish and to maintain itself. From this processual intertemporal perspective,

we trace the cooptation and normalization of a project that was initially strongly anti-statist and anti-

establishment, and now is becoming integrated within the dominant money game. The rest of the

chapter proceeds as follows: first, we examine the topic of theorizing money; second, we discuss the

initial positioning of Bitcoin against the dominant money game; third, we develop original three

phases which defined the evolution of Bitcoin as a money game based on our evaluation of recent

journalist, academic and governmental publications; and fourth, we summarize our findings

concluding how the Bitcoin money game changed and shifted since its inception, and how this might

affect other existing money games .

How can money be?

Since its inception, Bitcoin has been the source of scandal and controversy. However, nothing divided

the minds as much as the claim whether Bitcoin can or cannot be money. What may appear as a

straight forward question turns out to be anything but clear. If we want to know how Bitcoin can be

money, we must first gain clarity on what we mean by money. Just about anywhere in the world

today, money is one of the most central institutions that organizes society, positing a fundamental

puzzle: why would anyone accept inherently useless money for inherently useful goods and services

(see Shackle 1974 in Ganssmann 2002, Menger 1892)? Why do people all around the world partake

in such an odd endeavor? When one poses the question like this, the answer seems immanent: each

individual participates because he or she knows that everyone else does, too. But if the use of money

is inherently circular, how can we think about the origin of money without already presuming what

we seek to explain? How do we ever get started with money?

One of the most prominent answers to these questions was that money has value because coins are

made from valuable materials. While the idea of grounding the value of money in a truly valuable

commodity has re-emerged countless times throughout history (e.g. bullionist movements described

in Carruthers and Babb 1996, or the gold standard of the post-war Bretton Woods system), this

approach however is difficult to reconcile with the spread and rise of paper money. The problem

paper money posed to this theoretical approach could be postponed for some time with reference to

the convertibility of paper money into the truly valuable commodity, but with the end of Bretton

Woods in 1971 even this tie was cut. How can paper money be valued without a truly valuable good

backing it? Paper money can work perfectly fine as long as the people using it trust in it. This is what

the term “fiat money” (from fide, to trust) suggests. However, when the real issue of money is trust,

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

and not what commodity backs it, we quickly run into tautologies. If everybody trusts because

everybody else trusts, who started trusting first? Where do we get started with trust?

Heterodox economists and sociologists have offered nuanced answers to this question, providing

helpful alternatives to the widespread but limited orthodox positions on trust and money. The

Economist John Maynard Keynes was convinced that the primary concept of money is the unit of

account in which debts are expressed. Keynes goes on to describe debts as contracts of deferred

payments (Keynes 1971: 3). Money in this view is closely tied to the concept that debts will be

discharged in the future. This understanding is echoed by the sociologist Geoffrey Ingham who states

that the specific feature of money is not so much facilitating “spot” exchanges, but the “projection of

abstract value through time.” (Ingham 2002: 128). In this view, money always bridges from a given

present into an uncertain future. Insofar all money is fiduciary at heart and society depends on

creating stable arrangements that allow for the development of trust that money will still be valued

when that future arrives. In this sense, the history of money is a history of trust, not between two

individuals, but instead between an individual and a community as a whole (Aglietta 2002: 32 ff).

Michel Aglietta further differentiates between two types of trust that money requires. On the one

hand, he describes methodical trust as a form of trust that comes with routines and traditions as well

as past experience of successful interaction, founding a “framework of references and roles within

which private agents mould themselves” (Aglietta 2002: 34). On the other hand, he describes

hierarchical trust as trust that originates from political authority which imparts it on money.

Both forms of trust correspond to a particular institutional underpinning of money. Methodical trust

corresponds to horizontal integration with businesses and individuals trusting that a form of money

will be accepted in ongoing exchange. Vertical trust corresponds to vertical integration with a

political structure able to enforce or change the conditions under which a form of money is accepted.

Most importantly, both forms of trust are not equals: “Hierarchical trust is superior to methodical

trust because the political entity with authority over money has the power to change the rules.”

(Aglietta 2002: 35). The importance of hierarchical trust is a notion that other scholars capture when

they speak about the hierarchy of money (Bell 2001, Mehrling 2013). However, sovereign authority

over money has also been a lasting source of discontent, fueling fears that the state can use political

authority to bend the rules when it wants to cover its own financial needs, thus devaluing everyone’s

money in the process (Keynes 1971).

Within such tensions, we must find stable institutional arrangements that allow us to believe that

money will have value in the future. However, finding such an arrangement is not a one-time

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

achievement, but rather a continuous process that allows us to effectively treat value as invariant

even when we know it is not (Mirowski 1991: 579). Money must be produced and reproduced in

social settings, meaning that we are doing money more than anything else (Ganssmann 2012a: 1).

Consequently, we must not ask what money is, but how we are doing it under different conditions

and in different social settings, and most of all over time. In his earlier writing, Nigel Dodd (1994)

argued that each function of money depends on extended social relations which relate to a

geographical or geopolitical area and eventually culminates in what he called a monetary network (p.

XII), that is the governance arrangement which provide institutional stability to a form of money.

In Dodd’s analysis, monetary forms are different from each other because monetary networks differ.

Such differences include the political means of validation of forms of money and the institutional

mechanisms that hold social relations steady. Echoing Aglietta’s argument that money requires

systemic or impersonal trust, Dodd described what information participants require to foster the

emergence of trust in the monetary network, including a standardized accounting system,

information that justifies expectations that money can be reused in the future, information about the

spatial and legal proliferation of the network, and information on the behavior and expectations of

others. Money is thereby a social fact, or rather a social convention based on an articulate

governance network where its social and political origins are obscured by the seeming importance of

a money object. But how do these monetary networks develop over time. How does the use of

money evolve before this background?

Social conventions of money can be understood in parallel to the rules of a game that people play

(Ganssmann 2002: 25). While rules of games can be known explicitly as long as they show

themselves in the conformity of action and regularity, they do not need to be known explicitly.

Games and conventions can be learned through imitation without making all rules explicitly known in

the process. The explicit and implicit rules nonetheless define obligations and duties, sanctioned and

forbidden moves in relation to a particular game. They are iterative. Rules require repetition which

creates continuity but also room for change. Heiner Ganssmann builds on Ludwig Wittgenstein to

promote a third solution to our original money paradox, neither committing to ideas of commodity

money, nor to circular explanations of utility:

[…] The pawn in chess neither has meaning in the sense of representing something, of being

a sign of something, nor is it just the piece carved out of wood. What the pawn is, is

determined by the rules of chess. (Wittgenstein 1984a: 150 in Ganssmann 2012a: 20)

In this view, money is defined by the money game that is being played. To know more about money,

we then must ask how that particular game is being played. Money games can widely differ

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

depending on how money can be used, accessed, validated, controlled, what goods it can mobilize,

and who is excluded. Narratives of money are important in building trust in a particular money game

(e.g. narratives of commodity backed money can build trust), but they are not the hidden ground of

functioning money.

Some general assumptions about money can be made, nonetheless. On the individual level, money

does not come about as an ad hoc insight. In contemporary capitalist societies, money games are

learned over time, mostly from an early age onwards, building routines and cognitive capacities that

allow people to handle and recognize money. Beyond the taken for granted use of money lies a

continuous training process in which the use of money is learned. This helps explain how there can

be both general knowledge about money and also specific monetary practices affected by categories

of race, gender, class and so on (Zelizer 1997). On the institutional level, a money game must have a

nominal unit of account distinct from other commodities, an orderly minting process through which

funds become available to agents, and there must be a settlement of balances to maintain monetary

constraints (Cartelier 2013).

In addition, money games are always politically charged because decisions are being made as to

whom gets what and how (Carruthers and Babb 1996). Money games are also strongly connected to

political power and the predominant money games of the present prevailed because they did “fit”

with state structures and political forces constituting their players in particular constellations

(Helleiner 2003: 224). Bitcoin was built to challenge the predominant money game, so we must ask

two questions: what is the dominant money game, and how does Bitcoin want to be different?

A Slingshot full of (virtual) Coins

Bitcoin was initially positioned as a clear criticism of the two-level money system consisting of central

banks and commercial banks (Paul 2016: 9, Nakamoto 2008). With its criticism, this cryptocurrency

points to a dominant money game that must be understood as tis source of discontent. What can be

said about the dominant money game? Even after the emergence of the modern nation-state, public

money and private money have existed site by site, and the now dominant money game must be

understood as a co-evolution of both forms of money (Keynes 1971). On the one hand, there is public

money (Knapp 1904), which has value because it is accepted to discharge tax debts. Such money is

based in the coercive power of the sovereign to tax. Such money commonly is accepted because and

insofar successful states monopolize the coercive power to define what counts as abstract value

capable of discharging tax debts (Ingham 2007: 269). On the other hand, there is private bank

money, which can be understood as an IOU issued by a bank, which is accepted because there is

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

some form of private collateral is backing it. However, what makes both money games problematic is

that the upsides of each money game also cause their inherent weaknesses. For public money, the

power of the state to make the rules can be abused in the state’s favor when it decides to default on

debt obligations. For private money, the power of private money to expand the money supply for

economic growth can create inflation and instability, and, in the worst-case, bank runs. The

downside of both money games were only curbed when they united and hybridized into state-

backed credit money in 1694 with the creation of the Bank of England (Ingham 2004).

Central Banks combined the public backing of the public money (thetaxation power of the then king)

with the flexibility of private money. Such an institution generated an institutional control over the

conduct of the sovereign, predominantly his war expenditures, generating the constitutional

monarchy of “the king in parliament” (Ingham 2004). Under this arrangement, the stability of public

money and the flexibility of private money could coexist, forming the minting process of this money

game. What was central to the now emerging money game was that the central bank provided

lender of last resort function for the private banking system and the money it issued (Ingham 2006,

2007). What occurred was an evolutionary process of building vertical trust (Aglietta 2002) while

curbing the dangers of despotic excesses undermining this trust.

Emerging nation states could not dispense with the need for banking money, yet had to use the

power of lender of last resort sparingly. As such, further measures to stabilize this money game

emerged, creating the growing area of banking regulation (Chick 2013, Knafo 2013). Over the

twentieth century, a dominant type of money games closely tied to territorial states became so

thoroughly entrenched that it became widely perceived as the “natural” monetary order.

Nevertheless, this type of money game is a contingent historical development (Helleiner 2003: 218).

Built over this period were governance arrangements forming the institutional foundation of our

current state-backed credit money that is guarded and strictly regulated by the state.

What brought stability to this public-private hybrid money game could once again destabilize it,

specifically the power of the lender of last resort to suspend monetary constraints could act as an

inflationary scourge (Aglietta and Orlean 1984). In the financial crisis of 2008, with central banks

acting as quasi-sovereigns, fears of despotic abuse of power debasing money and subsequent

instability reemerged. Bitcoin has been clearly emerged as a criticism of this development. As a mode

of governance, Bitcoin mobilizes two popular approaches to limiting political power: commodity

backing and market competition. Bitcoin was meant to promote both approaches not through a

community deliberating on governance standards, but instead by embedding techno-libertarian

beliefs into the coding of the underlying protocol. Bitcoin was built as a supposedly “trustless” and

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

decentralized payment network. Users are meant to become independent of a trusted third party

processing and watching over transactions, and instead rely on an algorithm facilitating a sort of race

which rewards a distributed network of computers for staying honest and including any transaction

that is technically valid.

Bitcoin provides the institutional preconditions for money exemplified by Jean Cartelier: funds are

denominated in a unique number of account (BTC/Satoshis), the minting process is integrated with

the code distributing funds to those who maintain the network, and accounts are settled with the

network functioning as a decentralized clearing house. By eliminating dependency on a third-party,

users are meant to be empowered insofar as they are granted full control of their money. It is this

central characteristic that has led to Bitcoin being lauded as a libertarian watershed freeing its users

from governmental oppression (Cox 2013).

Bitcoin thus can be understood as a political experiment promoting a radically different money game.

It has much in common with activist initiated local currencies in which activists seek to promote

reform of the monetary system by building and pioneering alternative money games. The social

utopianism that is central to its monetary theory is seeking to change economic reality and society as

a whole (Dodd 2015: 79 f). There are thus two money games at play with Bitcoin: the dominant

money game backed by the coercive power of the sovereign and extensive institutional

underpinning, and the alternative proposed money game which originally lacked coercive power and

institutional underpinning beyond what the coding provides. How could Bitcoin ever establish itself

side by side with such dominant existing money games, lacking everything that seems fundamental

to the making of money?

The evolution of the Bitcoin money game

In this section, we examine the development of the Bitcoin money game over time to understand

how Bitcoin could prevail despite starting out without any institutional underpinning or political

backing. We analyze how Bitcoin acts in vivo, so to say, to understand this puzzle and draw further

conclusions on its implications for the future of the Bitcoin money game and its impact on the

dominant money game. We evaluate recent journalistic publications on Bitcoin (e.g. Vignia and Casey

2014, Popper 2016) as well as publications by government agencies from the US and Europe (e.g. ECB

2012, ECB 2015, Lo and Wang 2014, Brainard 2016) and other scholars in the field (e.g. Böhme et al

2015, Weber 2016) to develop a periodization of the development of Bitcoin. We identify three

phases of the Bitcoin money game: a phase of initial confrontation (Phase I), a phase of attempted

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

horizontal integration (Phase II), and finally a phase of likely vertical integration (Phase III). While

phases might overlap and actors of one phase remain relevant throughout other phases, we argue

that the development within each phase can best be characterized by attributing it to the interaction

with a particular set of key-actors shaping decisive aspects of the development of the Bitcoin money

game.

I Money against the State, Confrontation Phase (2009-2014)

Introducing a new money game is anything but easy, as proponents of a new money game are

confronted with the basic problem of gaining traction in a two-sided market, consisting of merchants

and customers. For both sides, a new money game becomes interesting because their counterpart

joins in and vice-versa. Nonetheless Bitcoin did utilize the financial crisis of 2008 to promote itself as

an alternative money game supposedly removed from political intervention and ‘disruptive’ state

and central bank monetary policy (Nakamoto 2008). However, most decisive for the early

development of Bitcoin was that the proposal provided a “fit” with long held political beliefs and

libertarian visions of stateless money. The technology also spoke to “cypherpunk” dreams of bringing

cash more thoroughly into the digital age (Popper 2016: 16). Entry costs had become low due to

technological advancements and design decisions that required no upfront payment other than

committing the time to look into this novel proposal. Bitcoin quite literally began as one person’s

proposal to another, with someone under the pseudonym Satoshi Nakamoto proposing it, and

computer scientist Hal Finney giving the proposal a try as a monetary experiment (Popper 2016: 25).

Attempts to build money based on cryptography are not unprecedented. There have been other

money games based on cryptography, such as DigiCash and Hashcash, which failed to become stable

for one reason or another and were unable to build a critical mass of consumers (Tumin 2002: 75).

While heavily technical, this crypto-community was no stranger to activism. Efforts to bring

encryption to the civil society have created severe political conflicts, including frequently reemerging

calls for banning secure encryption for civilians altogether (Ludow 2001). Some of the early

advocates of Bitcoin like Roger Ver and Ross Ulbricht were very much driven by strong political ideals

and were intrigued by the idea of circumventing the state and building an anarchist society organized

only by the market (Popper 2016: 69 f). Such techno-utopianism often has been dubbed the

“Californian ideology” (Barbrook and Cameron 1996). At this early phase shortly after the inception

of Bitcoin, its development resembled the “communitarian spirit of an open source project” (Wallace

2011). With nothing to purchase and hardly any exchanges operational, hoarding and tinkering were

what were largely done with Bitcoin. As the unknown creator Satoshi Nakamoto put it, users should

get some Bitcoin “just in case it catches on” (Nakamoto in Casey and Vigna 2015: 46).

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

While early advocates viewed Bitcoin as a permanent challenge to territorial state-backed currencies,

the initial crypto-coin exhibited parallels with other local currencies. Local currencies, such as the

Chiemgauer (Thiel 2011) or the Brixton Pound (Dodd 2014: 380), seem to predominantly focus on the

role of money in facilitating exchange, while seeking ways to discourage hording. Bitcoins’

emergence as money starts from hoarding, which helped Bitcoin to overcome the problem of users

having to participate in an unproven payment network and allowed for gradually building confidence

in the network. The predominance of hoarding and the importance of the specific ideological vision is

also echoed by the first institution, the Electronic Frontier Foundation, an international NGO

advocating digital rights, joining the money game of Bitcoin by accepting donations in Bitcoin. When

the global digital money transfer firm PayPal was pressured into ceasing to process donations to

WikiLeaks in 2010, demonstrating the salience of the interconnection of finance and government

(Popper 2016: 57), members of the Bitcoin community called for WikiLeaks to accept donations

through Bitcoin. In 2011, Wikileaks began accepting donations through Bitcoin (Redman 2016).

Circumventing state limitations regarding particular transactions illustrates both the iterative

character of the money game of Bitcoin and how it was positioned as an alternative to established

money games, insofar as the Bitcoin money game was visibly operating outside of established legal

frameworks and institutions were influencing how this money game is played and what moves are

viable. The Bitcoin money game is iterative insofar as the game becomes more confrontational at this

point, not just avoiding state regulation, but actively defying it and eventually alienating the creator

of Bitcoin. WikiLeaks joining the Bitcoin money game greatly contributed to the departure of Satoshi

Nakamoto, who seemingly did not foresee how rapidly the uptake of Bitcoin would progress (Wallace

2011).

Following the first adopters, non-state institutions emerged that were tightly linked to the

functioning of Bitcoin, actively developing business models that where based on Bitcoin’s status as a

money game at the margins of the dominant system and in turn building the foundation of the

Bitcoin ecosystem. Various Bitcoin-specific financial intermediaries began to emerge, such as

currency exchanges, mining pools, digital wallets and transaction anonymizers (Böhme et al 2015).

Throughout this early phase, Bitcoin was hardly integrated with the formal economy. Instead, it

almost functioned as a catalyst for those inspired by the political vision of Bitcoin to build institutions

that are strongly integrated with the functions of Bitcoin. The biggest representatives of this

development were Mt.Gox, SilkRoad, and SatoshiDice, all of which provided a service unique to this

money game as well as the first broad institutional underpinning of Bitcoin.

Mt.Gox

allowed for the exchange of national currencies into units of Bitcoin. Mt.Gox was one of the

first to build standardized interfaces with other money games, contributing to an increase in

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

speculative activities in the process by allowing users to buy and sell units of Bitcoin more rapidly.

While there were other exchanges in existence at the time, at its peak Mt.Gox handled almost 90% of

the traffic occurring on all exchanges combined (Wallace 2011). Its attractiveness resided partly on

the fact that Mt.Gox was avoiding financial regulation of both the jurisdiction in which it was located

and the regions in which its customers resided, as well as ignoring anti-money laundering regulations

and “know your customer” requirements. However, Mt.Gox re-introduced third party intermediation

and concentration to a degree that the exchange began acting as de facto bank for Bitcoin users,

marking the first notable departure from the initial vision of Bitcoin which had insisted on a lack of

third party intermediation. The risks of such intermediation became evident when eventually Mt.Gox

filed for bankruptcy with Japanese authorities in 2014, causing the loss of 850 000 BTC and thereby

demonstrating the inherent risks in the money game of Bitcoin at that time (Dierksmeier and Steele

2016).

The importance of Mt.Gox for this phase was rivaled only by the emergence of the black market

vendor SilkRoad. Originally founded in 2011 by Ross Ulbricht, the service was quick to gain traction

by allowing users and vendors to predominantly exchange various narcotics for BTC (Bearman 2015).

SilkRoad was a truly unique advance from the mailing of narcotics around the globe to individual

customers that was previously hampered by the lack of a reliable and anonymous payment channel.

Furthermore, Ulbricht explicitly identified strongly as a libertarian who was intrigued by the Bitcoin

proposal. SilkRoad was incentivized by the prospect of Bitcoin circumventing existing regulations of

financial transactions. Once again, the Bitcoin money game shifted in a novel direction, furthering

access to services conflicting with rules outlined in other money games and bolstering a particular

confrontational interpretation of the Bitcoin money game. Eventually, the FBI caught up with the

creator of SilkRoad, which led to the arrest of Ulbricht in 2013 and the subsequent closure of the

original SilkRoad.

At the time of SilkRoads closure, other illicit and legitimate services had begun to flourish in the

Bitcoin ecosystem. SatoshiDice emerged as a popular gambling service in 2012, harnessing the

technological benefits of Bitcoin and the underlying blockchain.

SatoshiDice utilizes the fact that the

maintenance of the public ledger of Bitcoin continuously produces randomized numbers, allowing

users to place reliable online bets without having to trust in the soundness of a third-party code. At

the time, SatoshiDice was responsible for about 50% of the volume occurring in Bitcoin transactions

(Matonis 2013). Other vendors offered access to games such as blackjack or roulette where BTC was

used as wager. Partially attracted by the weak regulations of Bitcoin, these vendors built on the key

properties of Bitcoin, predominantly privacy, payment irreversibility, and cost savings, rendering it

the ideal digital casino chip (Matonis 2013).

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

While at the beginning thousands of BTC could be bought for a few dollars, or even cents, the price

of the leading crypto-coin skyrocketed throughout the two years following the inception of SilkRoad

and Mt.Gox. The development emphasized the dual nature of Bitcoin as both a payment network

and a speculative asset (Glaser et al 2014). This phase also illustrated the importance of ideological

convictions in participating in a particular alternative money game. Why would anyone place trust in

the Bitcoin money game? We find continuous references to Bitcoin as finally allowing people to

switch over to what they believe “good” money looks like (e.g. Popper 2016: 53 f). As a concept of

money, Bitcoin resembles “free banking” ideas previously popular in the pre-1914 era allowing for

any bank to issue money and have market forces control its value (Helleiner 2003: 4),as well as ideas

of commodity money or commodity backed money such as an idealized gold standard removing

money supply from governmental control. Bitcoin could also benefit from existing interest in privacy

in ownership through cryptography, while not requiring a firm commitment of resources or any

noteworthy initial investment to participate beyond having access to a computer with an internet

connection.

Bitcoin also built on the (re-)emerging distrust in other money games. With the proposal of a

decentralized and hard-capped money game, Bitcoin positioned itself in stark contrast to established

money games at the time. Events such as the Cyprus-crisis of 2012/2013 made citizens painfully

aware of the previously invisible political dimensions of the dominant money games. This crisis led to

a steep rise of interest in Bitcoin related apps, especially in countries suspected to have a troubled

banking sector (Luther and Olson 2015: 25 f). However, spikes in interest do not necessarily produce

spikes of adoption.

Throughout this early adoption period, moves in the Bitcoin money game were often transactions

strongly regulated or outright forbidden in other money games, such as gambling and the purchase

of illicit goods. The Bitcoin money game was a money game emerging at the margins of current

regulatory frameworks and legal spaces of legitimate money use. Yet, while notions of

empowerment and self-determination are common amongst advocates, Bitcoin was never a project

developed by the financially vulnerable or excluded. Instead, Bitcoin has been driven by a tech-savvy

predominantly male elite, or, more generally, by groups otherwise understood as privileged, not

marginalized.

Furthermore, the motive of financial speculation has been present from the very beginning of

Bitcoin. The emerging institutional underpinning changed the money game of the original CC,

causing shifts in the governance of Bitcoin without altering the code base. Various institutions ended

up re-introducing the very third party intermediation Bitcoin was meant to displace. While this

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

allowed for the Bitcoin money game to interface with other money games (predominantly through

unregulated exchanges), this re-intermediation softened the initial political vision of Bitcoin. A niche

market emerged within the Bitcoin money game driven by overlapping normative (crypto-anarchism,

libertarians, gold bugs) and strategic (profits, law avoidance, cost savings) considerations. Bitcoin’s

followers were “fighting the good fight” against perceived oppression and restrictions of the

dominant money game.

II The great moderation, Horizontal Integration phase, (2012-2015):

The second phase of the Bitcoin money, which can be described as the “Horizontal Integration

Phase,” can be characterized by two main currents. The Horizontal Integration Phase was marked by

a notable departure from the more confrontational tone of the earlier phase as well as a steep

increase in strategic motives for taking part in the Bitcoin money game, which was often combined

with only a secondary interest in the actual usage of Bitcoin. Most notably, there was an increasingly

publicly announced interest in Bitcoin by key incumbents in the global IT-sector. Firms such as Baidu

and eBay, and the acceptance of Bitcoin through Overstock.com, among other companies,

represented the development of Bitcoin throughout this phase. We look at the position taking of

each in turn.

One of the first big names to recognize Bitcoin was Baidu, a Chinese internet search giant and the

Chinese equivalent to America’s Google. Contrasting the start-ups marking the first phase located at

the fringes or in the shadow of the formal economy, Baidu was anything but unheard of. With Baidu

having a market capitalization of $53 Billion, recognition of Bitcoin came from a giant of the internet

industry . Baidu Jiasule, a subdivision of Baidu selling cloud storage, allowed customers to make BTC

payments for this service. In its public announcement, Baidu addressed Bitcoin as a “trendy”

technology with which they wanted to associate and less as a political proposal that could challenge

government authority and control of the money supply.

Baidu’s support hence stands in stark contrast to the strong anti-government sentiment prevalent

among the libertarians and crypto-anarchists of the initial phase. Instead, Baidu is known for its

willing compliance with requests from Chinese censors and has been at the center of other scandals

fueling calls for boycott by Chinese citizens (Huang 2016).

Nonetheless, its position taking towards

Bitcoin seemed to indicate a possible mainstream adoption of the Bitcoin money game.

Another strong signal of support came from then eBay president John Donahoe who argued that

Bitcoin would become a “very powerful thing” that the firm was closely monitoring. While he made

clear that there were no immediate plans for integrating Bitcoin with either e-Bay or its subsidiary

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

PayPal, Donahoe’s interest in Bitcoin signaled that Bitcoin was a viable technological innovation with

possibly disruptive consequences. This heightened exposure of Bitcoin also fueled the speculative

interests of incumbents of the IT industry and greatly increased the visibility of the Bitcoin money

game. Yet this came with a severe shift in the framing of Bitcoin.

Instead of (explicitly) endorsing Bitcoin as a political experiment, incumbent firms drew on the less

confrontational framing of Bitcoin as a borderless payment network. They endorsed a disruptive

innovation, not a political movement. Previous research indicates that signals from high status actors

are key for driving the adoption of a new technology (Podolny 2008). The reciprocal relationship

allows for incumbent firms to signal that they sense developing trends by associating with Bitcoin.

Nonetheless, it is very notable that the incumbent endorsement was much more driven by strategic

than normative considerations. Furthermore, contrasting the start-ups of phase I, this time around

adoption was superficial and no commitments to “fighting the good fight” were made, other than

overhauling the dated IT-infrastructure of existing payment channels. This openness also has been a

fundamental characteristic of Bitcoin, setting it apart from other more strictly regional currencies.

While Bitcoin started from strong normative demands regarding privacy, disintermediation, and self-

determination of money users, almost no commitment or changes in conduct honoring these

demands are required from firms which begin to accept BTC payments.

A more mixed endorsement reminiscent of Phase I came from Overstock.com adopting Bitcoin.

Overstock.com was the first major retailer to accept payments in BTC for its entire range of goods.

Overstock.com CEO and Chairman Patrick Byrne supported Bitcoin not only a technological

innovation but also a political cause (Metz 2014). Others to join the Bitcoin money game by allowing

customers to pay in BTC for a limited range of goods and services were OkCupid, Virgin Galactic, and

TigerDirect. Mike Maxim, chief technology officer of OkCupid, described Bitcoin as a way to

“differentiate their product from other dating sites.” Judd Bagley, director of communications for

Overstock.com, also mentioned how their Bitcoin adoption not only generated press coverage, but

also led to members of the Bitcoin community advertising Overstock.com to other users (Bogle

2014). Other companies in this second phase of the evolution to accept Bitcoin were Dell, Expedia,

Shopify,

Wordpress, Reddit, and Mega (Dodd 2014: 365).

Once again we can return to the question of why someone would place trust into Bitcoin. While

government agencies began to crack down on the more deviant organizations of Phase I, incumbent

firms began to take an interest in Bitcoin, furthering the institutional underpinning of Bitcoin by

linking it with sections of the formal economy and fueling hopes of mainstream adoption and building

methodical trust. Initially strong political demands (full anonymity, freedom from government, rule

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

avoidance) were toned down by these incumbent corporations in favor of more moderate voices. The

early involvement of many institutions involved in Bitcoin was a taxing learning experience leading to

arrests or freezing of funds. Conflicts with prosecutors gave the impression of severe lack of

understanding the existing political and legal dimension of the financial system on the side of Bitcoin

advocates and developers, leading for example to Mt.Gox having its US-accounts frozen. A growing

focus on Bitcoin as an efficient borderless payment network and increasing media coverage, as well

as hopes for mainstream adoption, empowered more moderate voices in the Bitcoin community.

Consequently (moderate) Bitcoin advocates were able to strike loose alliances with powerful

incumbent actors, the latter seeking to set themselves apart from their competitors. This division in

the existing money game between unwelcome criminal actors and welcome disruptive innovation

was also echoed within the community of Bitcoin users. This was most strikingly illustrated by the

creation of the Bitcoin Foundation, a non-for-profit that sought to develop standardization and unity

in the community, while departing from the more radical politics associated with the initial phase of

Bitcoin (Popper 2016: 138 f, Weber 2016). Frequently, the integration of Bitcoin as a payment option

was superficial, and real life adoption as a means of payment has been stagnating ever since.

With

an eye on mainstream adoption, other more practical concerns moved to the forefront, such as how

to properly tax Bitcoin earning without risking a fallout with financial regulators.

While Bitcoin as a technology is heavily imbued with political convictions (Golumbia 2015), many

advocates of Bitcoin began to perform a cognitive split, setting apart Bitcoin as a radical and conflict

laden political experiment from Bitcoin as a disruptive borderless payment network. Once the latter

framing became more pronounced, incumbent firms could more easily interface with Bitcoin, thereby

watering down the political proposal of Bitcoin and alienating some early supporters in the process.

Early experiences with exchanges moving into the focus of prosecutors also led to attempts by some

exchanges to become more compliant by gathering data on customers and by, for example,

registering with the US Financial Crimes Enforcement Network (Popper 2016: 138). Beyond first

attempts of fending off Bitcoin as an illegitimate and law-avoiding Internet curiosity, incumbent firms

also became involved in an alternative strategy of “pacification” (Oliver 1991 in Cashore and

Bernstein 2007) by creating new initiatives (e.g. the R3 consortium of 70 major banks in 2014

exploring how to harness blockchain technology) seeking to adopt the technology through

cooptation, while at the same time seeking to avoid its explicitly political normative demands. The

cognitive differentiation between the controversial political experiment and welcome technological

innovation which underlie this engagement would find its counterpart in the reception of Bitcoin in

the regulatory community and lay the foundation for its legitimate integration with other money

games.

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

III Vertical Integration Phase (Since 2013):

Regulatory responses to Bitcoin have always been more ambivalent than one might have expected

considering its early framings as internet drug money (Chen 2011). Regulators found themselves in a

position where they were to curb the downsides of an unregulated and anonymous payment

network without scaring off emerging fin-tech benefits. As Lael Brainard, member of the Board of

Governors of the Federal Reserve System, stated when referring to the prospects of the distributed

ledger technology (DLT): “We will work together to foster socially beneficial innovation, while

insisting that risks are thoroughly understood, managed, and controlled.” (Brainard 2016). The early

proposal of the Bitcoin money game was grossly at odds with existing regulation, either ignoring it

due to naivety and a lack of knowledge, or outright breaching it to facilitate illegal transactions.

Nonetheless, when the first widely received public hearing on Bitcoin was held by the US Senate

Committee on Homeland Security and Governmental Affairs in November 2013, the regulatory

environment of the US proved generally amenable. While concerns about drug trafficking and other

prohibited activities were prominent, it became clear that Bitcoin was also considered a viable

technological innovation by US officials (Raskin 2013).

This was the onset of a normalization process that separated Bitcoin transactions into cases of

legitimate use and those of deviant conduct. Firms and merchants in the Bitcoin ecosystem

increasingly voiced their desire for stringent regulation of Bitcoin. This group was faced with the

problem that even when they wanted to comply with regulation, it was unclear what exactly was

required from them. As the pre-eminent American technology commentator put it,

“Bitcoin businesses — particularly those involved in trading bitcoins for dollars — sometimes

complain that they operate in a grey area, where it’s not entirely clear how or if they are in

compliance with a patchwork of state and federal regulations.” McMillan 2013

Reoccurring experiences with theft and fraud had also left many users more willing to consider the

upsides of more stringent regulation. However, the Bitcoin money game was also stuck in an odd

spot. While some recognized individuals and firms took an interest in Bitcoin throughout Phase II,

horizontal integration was stagnating and Bitcoin did not seem to move towards building a critical

mass when it came to real life adoption. Yet, excitement about the underlying technology, the

blockchain, or rather DLT, was building:

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

“Nevertheless, there is growing recognition that the lasting legacy of Bitcoin most likely lies

in the technological advances made possible by its protocol for computation and

communication that facilitates payments and transfers.” Lo and Wang 2014

State regulatory responses are closely tied to the second cognitive split occurring with Bitcoin. On the

one hand,Bitcoin had been associated with crime, money laundering, and scandal. On the other

hand, blockchain intrigued incumbents of the financial industry and government agencies (Maurer

2016: 85 f). In contrast with the more controversial Bitcoin, the blockchain technology has seen a

steep increase in legitimacy and uptake (for a more detailed depiction see also Campbell-Verduyn

2017). Nonetheless, because blockchain is the technology underpinning Bitcoin, separating the policy

response to one from the other has been virtually impossible. Instead, government agencies both in

Europe and in the US seem to be willing to consider a trade-off where they avoid outright prohibition

in favor of pushing for a normalization of the Bitcoin money game. Furthermore, overtly strict

regulation would risk quickly driving Bitcoin activity elsewhere, weakening the grip of regulators on

the institutions and intermediaries developing in this ecosystem (Böhme et al 2015).

There has yet to be a stringent international regulation on Bitcoin. Regulation generally varies on a

country to country basis.

Often some sort of legal definition as money of Bitcoin is acknowledged.

This is not so much a scholastic debate as a question of taxation. For example, based on Sweden’s tax

office challenging a court decision the Court of Justice of the European Union ruled that Bitcoins are

exempt from value-added tax, rendering Bitcoin to be currency instead of a commodity (Clinch

2015). However, Bitcoin’s wider recognition as a currency by state authorities has been limited and

commonly accompanied by steep warnings about the volatility and risks of virtual currencies, as well

as concerns about central banks authority on monetary policy. Generally, government agencies

demand compliance with Anti-Money Laundering and Know Your Customer regulations (see

Campbell-Verduyn and Goguen this volume).

On occasion, payments in BTC have been accepted by government agencies. For example, in the

Swiss city of Zug, citizens were allowed to pay government services of up to 200 Swiss francs in BTC.

However, this development is mostly owed to Switzerland seeking to foster a sort of blockchain

Silicon Valley, or crypto valley, and has limited implications for the general acceptance of Bitcoin by

state agencies.

On occasion, Bitcoin has been endorsed by hedge-fund managers as something that

should be included in modern portfolios and Cameron and Tyler Winkelvoss sought to get a Bitcoin

exchange trading fund (ETF) approved by the U.S. Securities and Exchange Commission (Roberts

2017). While the filing for the ETF was recently rejected on the grounds of finding the Bitcoin market

still insufficiently regulated, it was also indicated that this ruling might change in the future as Bitcoin

markets become more regulated (Shin 2017). What should be considered here is the productive site

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

of regulatory power. As with many previous conflict laden financial practices, it is political authority

that creates moral and legal space for financial markets to operate and consolidates and legalizes a

professional domain for particular financial practices (De Goede 2005: 124).

The creation of such a moral and legal frameworks does not only concern private enterprises. Bitcoin

has been increasingly identified with the long held dreams of central bank control tied to the

abandonment of cash altogether. A recent publication of the European Central Bank (ECB) pointed to

the possibility that a major failure of an established virtual currency could harm the trust in e-money

altogether (ECB 2015: 27). Bitcoin greatly contributed to “destigmatizing” the concept of a cashless

society by making digital money cash-like (Kaminska in Smith 2014). As central banks contemplate

the idea of issuing their own central bank-backed cryptocurrencies, they might need to shape the

regulatory framework that sets the ground for a lasting vertical integration of Bitcoin and other CCs,

as well.

Moneys at the margins

What we also have witnessed more widely in the last decade is the prevalence of three unique

trends: first, an increased interest in free banking and frictionless e-commerce payments; second,

increased interest in communitarian regional currencies as permanent reform movements (Helleiner

2003, Ingham 2002); third, the vast spread of special purpose moneys issued by private enterprises,

such as air miles and supermarket loyalty schemes, (Dodd 2005: 391) or companies like Amazon,

Google, Apple, Alipay, Groupon, and others issuing their own payment options to increase consumer

loyalty and market share (Mariotto and Verdier 2016: 15).

The Bitcoin money game has benefited from all three of these trends in its growth and diffusion.

Bitcoin’s evolution has been building on the increased interest in free banking and a permanent

reform movement creating a better form of money. It has been exploited as a form of special

purpose money by companies seeking free advertisement, and it has been promoted as a frictionless

e-commerce payment network. Therefore, it is decisive to look at how Bitcoin developed over time

and what developments it set in motion that reach beyond Bitcoin:

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond: The Challenges and Opportunities of Blockchains for Global Governance, edited

by Malcolm Campbell-Verduyn. Routledge 2017 (in press, preprint)

Source: Authors

Evolution of the Bitcoin money game

Phase

Motivation of Key-

Institutions

Key-Institutions

Positioning of the

Bitcoin money

game

Bitcoin Framing by

Key-Institutions

Commitment to

Bitcoin by Key-

Institutions

Introduction

(2009 - 2014)

Normative

Strategic

Shadow Economy

Confrontation

Political Challenge

Strong

Horizontal

Integration

(2012 - 2015)

Strategic

Incumbent Merchants

Cooptation

Borderless

Payment Network

Weak

Vertical

Integration (Since

2013)

Strategic

Government Agencies

Normalization

Distributed Ledger

Technology

Provisional

Evolution of the Bitcoin money game

Phase

User motivation

Key-Institutions

Positioning

Bitcoin Framing

Introduction (2009 -

2011)

Normative + Strategic

Shadow Economy

Confrontation

Political Challenge

Horizontal

Integration (2012 -

2015)

Strategic

Incumbent Merchants

Cooptation

Borderless Payment

Network

Vertical Integration

(2013 ongoing)

Strategic

Government Agencies

Normalization

Distributed Ledger

Technology

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

Originally, Bitcoin started off as a strong political experiment gaining support from activists,

“believers,” and an emerging shadow economy providing first use cases for this money game. Actors

displayed both normative and strategic convictions, and Bitcoin was challenging established (national

and supranational) money games. The weaker second phase of the horizontal integration of Bitcoin

amongst firms closer to the formal economy followed. Incumbent firms with an IT affinity positioned

themselves towards the emergent money game. However, while Bitcoin resonates with crypto-

anarchist ideals (Ludlow 2001), political goals became less pronounced and focus on borderless

payments and technological innovation decreased. While Bitcoin remains disruptive, voices in favor

of circumventing regulation have become less vocal. Furthermore, incumbent firms show much less

commitment to Bitcoin than the start-ups of Phase I in only superficially integrating Bitcoin as one

payment option among many for a limited range of (often virtual) goods. Adoption as a medium of

exchange and the subsequent horizontal integration have largely stagnated. Instead, state actors

have become more prominently involved.

Further formal regulatory action must be taken considering the shadow economy of Bitcoin.

Regulators must curb the downsides of Bitcoin to harness the emerging greater blockchain

environment. The evolution of the Bitcoin money game parallels the development of the blockchain

as an emergent technology, but it is not synonymous with it. Rather, private and state actors seem to

be building an infrastructure which benefits Bitcoin as they move towards developing a framework

that allows them to harness the emerging technology (Rotolo et al 2015) in general. Yet,

commitment by state actors in the US and Europe has been predominantly provisional in the sense

described by Jacqueline Best (2013), which allows regulators to embrace the emergence of DLT

whilst revising or revoking should negative future events occur or new dangers become apparent.

The Bitcoin money game started from confrontation, but then showed signs of cooptation when

incumbent firms reframed the meaning of Bitcoin. Even more important in shaping this money game

is the prospective normalization through powerful state actors starting to build a legal framework for

cryptocurrencies. Bitcoin was caught in a trade-off where it had to forgo some explicit normative

demands to interface with other money games and the formal economy. From there on, explicit

normative demands did not vanish, but decreased in favor of broader adoption and regulatory

compliance. This is not to say that there are not plenty of Bitcoin “believers” still looking to Bitcoin as

a political experiment allowing them to put their money where their political beliefs stand. However,

in actuality, Bitcoin does not seem to have delivered on the aspects that fuel this enthusiasm.

Instead, the Bitcoin environment has been highly centralized in terms of funds, expertise, and

authority (Atzori 2015) and has even bred what some call a “Bitcoin aristocracy” (Varoufakis 2013).

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

Bitcoin has been a continuous exercise of building an institutional underpinning. First, we find a

shadow economy rendering Bitcoin almost as a special purpose money, allowing for transaction that

are otherwise sanctioned or not possible in other money games. In this process, Bitcoin empowers

marginal figures of society and marginalized ideologies and activities, insofar as they were

technologically proficient enough to participate in the money game.

Second, Bitcoin was used by incumbent firms for a limited range of goods, raising hopes for

horizontal integration with a broad set of merchants. In this phase, marginal figures and ideologies

are pushed aside for an ideology more fitting with legitimate commerce and the mainstream belief in

technological progress (trendy technology). Third, Bitcoin is becoming increasingly integrated with

the regulatory frameworks for example in Europe and the US. Here, the cooptation of Bitcoin

becomes almost complete, seeking to eradicate both illicit activities as well as illicit ideologies.

The development of Bitcoin is paralleled by the ever present role of it as a speculative asset rather

than as a medium of exchange, and in each step in the evolution of Bitcoin as a money game leads to

the appreciation of Bitcoin as an object of speculation (Glaser et al 2014). Once again, why would

someone trust Bitcoin based on this phase of the money game? One simple answer is that stagnant

real-life adoption has been offset by a lasting speculative interest in Bitcoin, in particular now that we

have seen almost a decade of a lingering financial crisis. Another answer is that government agencies

might drag Bitcoin along while they make their way to harbor coming FinTech innovations. Adoption

of Bitcoin could be driven by states stepping in as the great equalizer, bestowing (some) political

authority upon Bitcoin.

Considering our focus on money games, the third phase strongly links Bitcoin to the dominant money

games. One of Bitcoin’s most lasting achievements has been how it has shaped the wider debate

surrounding virtual moneys. More than any other form of electronic money, Bitcoin has sparked

debates on the materiality of virtual money (e.g. Selgin 2015, Maurer et al 2013). Central bank

interest now goes beyond the question of how to properly regulate CCs like Bitcoin. Instead, central

banks actively explore the possibility of making the transition to central bank issued “digital

currency” (Merch 2016). Bitcoin has become a primer for a cashless society, opening up a debate

that might transform the dominant money game it was meant to challenge while at the same time

providing the technology that could become the foundation of this transition. The future of digital

currency connects with long held dreams of phasing out paper money altogether (Rogoff 2014).

Despite claims about decentralization and anonymity, Bitcoin has introduced a tremendously

auditable and transparent digital payment system. Increasingly, research output from central banks

and other monetary institutions like the International Monetary Fund explore how the end of cash

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

can be effected and how DLT could take a role in achieving this end (Barrdear and Kumhof 2016,

Kireyev 2017). Bitcoin could end up greatly empowering the central banks already located at the

apex of power, significantly expanding their capacity to administer (unconventional) monetary policy.

Eventually, Bitcoin could contribute toward fortifying the dominant money game it was meant to

challenge and transforming the global governance of money flows in a manner far removed from its

original vision.

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

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intention of creating an online exchange for Magic:The Gathering game cards; however, it was never used for

that purpose. In 2010, McCaleb turned the website into a Bitcoin online exchange where buyers and sellers of

Bitcoins could be matched. Confronted with the tremendously fast growth of his platform, McCaleb decided he

was “in over his head” (McMillan 2014) and sold the platform.

Hütten, Moritz, and Matthias Thiemann. “Moneys at the Margins – From political experiment to cashless societies” In Bitcoin and Beyond:

The Challenges and Opportunities of Blockchains for Global Governance, edited by Malcolm Campbell-Verduyn. Routledge 2017 (in press,

preprint)

SatoshiDice reported first year earnings of 33,310 BTC. During the year, players bet a total of

1,787,470 in 2,349,882 individual bets at an average monthly growth rate of 78%. Earnings were calculated

from eight months of data covering May to December, 2012 (Matonis 2013).

The development of the Bitcoin money game insofar can be compared to the broader theme of the

establishment of non-state marked driven governance standards which has also inspired our analysis of the

Bitcoin money game (Cashore and Bernstein 2007)

For a translation of the announcement by Baidu see: http://www.coindesk.com/chinese-internet-

giant-baidu-starts-accepting-bitcoin/

/ ; Baidu stopped accepting Bitcoin only two months later when Chinese regulators restricted financial

institutions from handling Bitcoin transactions: https://www.bloomberg.com/news/articles/2013-12-07/baidu-

stops-accepting-bitcoins-after-china-ban

Martin Gauss of Air Baltic addressed this issue most explicitly when he justified his company’s acceptance of

payments in Bitcoin as driven by the outlook of the resulting press coverage, granting an advertisement a

company of this size could otherwise not afford. The commitment was therefore superficial insofar as all

incoming payments were immediately exchanged into euro currency by a third party handling the transactions

(see Koenen 2015).

http://www.coindesk.com/information/what-can-you-buy-with-bitcoins/

Websites like coinmap.org still only list about 8700 venues worldwide at the time of writing, often including

small and local businesses offering a very limited range of products.

https://www.loc.gov/law/help/bitcoin-survey/

http://www.coindesk.com/blockchain-innovation-switzerland-crypto-valley-new-york/

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Iris H.-Y. Chiu

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TELECOMMUN POLICY

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Utopianism and the Future of Money

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Nigel Dodd

The Dynamism of Authority in Global Governance

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Malcolm Campbell-Verduyn

This chapter outlines a novel approach for examining how, who, and where authority is exercised in global governance. Rather than an attribute, authority is re-framed as a dynamic process by drawing on notions of power and legitimation developed in constructivist literatures on identities and practices in sociology, IR as well as GPE. Post-structuralist insights are engaged along with interdisciplinary studies emphasising the importance of discourses in legitimating power both in finance specifically and in contemporary governance more generally. Professionals are finally identified as a “special” category of non-state actors exercising authority beyond the so-called public-private divide.

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Marcella Atzori

La versione italiana di questo documento e disponibile al seguente link: http://ssrn.com/abstract=2731132The core technology of Bitcoin, the blockchain, has recently emerged as a disruptive innovation with a wide range of applications, potentially able to redesign our interactions in business, politics and society at large. Although scholarly interest in this subject is growing, a comprehensive analysis of blockchain applications from a political perspective is severely lacking to date. This paper aims to fill this gap and it discusses the key points of blockchain-based decentralized governance, which challenges to varying degrees the traditional mechanisms of State authority, citizenship and democracy. In particular, the paper verifies to which extent blockchain and decentralized platforms can be considered as hyper-political tools, capable to manage social interactions on large scale and dismiss traditional central authorities. The analysis highlights risks related to a dominant position of private powers in distributed ecosystems, which may lead to a general disempowerment of citizens and to the emergence of a stateless global society. While technological utopians urge the demise of any centralized institution, this paper advocates the role of the State as a necessary central point of coordination in society, showing that decentralization through algorithm-based consensus is an organizational theory, not a stand-alone political theory.

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Article

Jan 2014

Die Gesellschaft des Geldes

Book

Jan 2012

Axel T. Paul

Bitcoin as Politics: Distributed Right-Wing Extremism

Article

Jan 2015

David Golumbia

Bitcoin is promoted as an alternative to currency, and even at times as an alternative to money, but neither Bitcoin’s development nor its promulgation emerge from thoughtful analyses of money or currency as they currently exist, let alone the thought and history that have figured in their development. The grounding problems that Bitcoin advocates consider central are not the ones that major thinkers about money or currency, from the Right or the Left, have deemed important. On the contrary, those grounding problems are largely ideological: the desire to bypass the (apparently lawful) credit card and PayPal “blockade” of WikiLeaks, on the one hand (usually mentioned as the instigating event in the widespread use of Bitcoin), and the desire to bypass central and/or commercial banks for either the creation of money (as many of the more rabid advocates insist) or the provision of financial services (the main interest of Satoshi Nakamoto’s original Bitcoin paper), on the other. The former ideas emerge from a libertarian, anti-state politics familiar from much of the WikiLeaks story. The latter ideas emerge from the profoundly ideological and overtly conspiratorial anti-Central Bank rhetoric propagated by the extremist Right in the US, and which despite its overt “anti-bank” rhetoric, on most thoughtful analysis, serves rather than resists the interests of banks and big finance (much as despite its anti-bank rhetoric, Bitcoin itself is now promoted by banks, investors, and venture capitalists). Scholars of money like Mary Mellor and Ann Pettifor have suggested meaningful alternatives to the current money system, but Bitcoin has very little in common with their proposals, which would require societal assent as well as technical innovation. The lack of any thorough, non-conspiratorial analysis of existing financial systems means that Bitcoin fails to embody any true alternative to them. The reasons for this have little to do with technology and everything to do with the existing systems in which Bitcoin and all other cryptocurrencies are embedded, systems that instantiate the forms of social power that cannot be eliminated through either wishful thinking or technical or even political evasion: the rich and powerful will not become poor and powerless simply because other people decide to operate alternate economies of exchange. Lacking a robust account of transforming these systems of power, even without Bitcoin’s flaws, a “perfect” cryptocurrency would exacerbate, rather than address, the existing serious problems with our monetary and financial systems. Because it operates without such an account, Bitcoin’s real utility and purpose (and that of the cryptocurrency movement in general) can be better understood as a “program” for recruiting uninformed citizens into a neoliberal anti-government politics, understanding the nature and effects of which requires just the attention to political theory and history that Bitcoin enthusiasts rail against.

Re-risking in realtime : on possible futures for finance after the blockchain

Article

Jan 2016

Bill Maurer

Contemporary financial technology (“fintech”) efforts to enhance the clearance and settlement of transactions may reopen of long-settled questions about accounting, its role in the development of capitalism, its theological undertones, and its practical efficacy. This essay considers distributed ledger technology, the database systems underlying Bitcoin and similar digital currency experiments. Distributed ledgers do more than record transactions. They can also verify them without apparent human intercession, and they can execute more complicated tasks that take on the appearance of and have some of the same practical effects as contracts. If double-entry bookkeeping animated the modern constitution of subjects and objects of property, what do distributed ledgers herald?

Bitcoin vs. sovereign money : on the lure and limits of monetary reforms

Article

Jan 2016

Axel T. Paul

Although indispensable and in daily use, money and more specifically money creation in our two-layered fractional reserve banking system is still poorly recognized by social science at large. Its main features are outlined in order to identify (a) money’s double nature to be private and public at once and (b) inflation and speculative excess as two of its inherent dangers. Bitcoin and sovereign money are discussed as prominent examples of, on the one hand, private or libertarian and, on the other hand state-oriented or social-democratic monetary reforms, each intended to solve one of the two systemic problems our currency order. The new money’s respective advantages notwithstanding, it is shown that neither Bitcoin nor sovereign money can overcome money’s double nature or realize the dream of an eventually neutral money.

Can non-state global governance be legitimate? An analytical framework

Article

Jan 2007

Steven Bernstein

Moneys at the Margins – From political experiment to cashless societies

Abstract

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