Bitcoin transcends the nation-state and all expectations that come along with being associated with a fiat standard. Let’s talk about what it means to be a state currency so that we can understand Bitcoin’s transcendence.
How Fiat Is The State
Fiat currency, by definition, is a government-issued currency that is not backed by a commodity, such as gold. Governments manage nation-states and control the supply of fiat currency — this can be referred to as M1 supply, which encompasses most physical representations of money.
Now, most of us (speaking from the western point of view as an American), do not currently have all of our money as cash tucked under our mattress, or nestled into a physical wallet which we carry around daily. Most of us use a bank because it is unsafe to carry all wealth as cash that can be taken by force, if you’re one of the lucky few that possess too much cash to carry.
When you agreed to bank that state-issued currency that the government can increase the supply of, therefore devaluing your cash (inflation), you were required to do a couple of things. The first requirement was you needed to be 18 years old (excluding tailored accounts). Why did you need to be 18? Because you need to be legally capable of making bad decisions and sticking your name on them so they can come after you.
Once you’ve met the age requirement, or a guardian agrees to sign their name on your behalf, you need to provide your personal identification, usually your Social Security number (serial number) that was issued by the state. The bank needs to know everything about who you are, and where you live.
Once you’re a proper legal product of western civilization with the necessary identification and the bank accepts you as a client, they then have the opportunity to use all of your money to make themselves more money, and yet will typically charge you a maintenance fee — among other fees — to do so.
Want to make a withdrawal? Show your state-issued identity. Take out a loan? Show your state-issued identity, plus all the financial records we’ve kept of every transaction you’ve ever made with us, and then we will view your credit score, which is tied to your state-issued identity where we judge your capacity for borrowing and paying back money.
You do not move in this financial system without the state’s knowledge. Sure, you can take out some cash and buy whatever you want here and there (yet why is bitcoin the one most often stated to be used for drugs?), but to accomplish any purchase of worth, the state is going to be part of it, just like they will be part of allowing you to have the cash, to begin with.
How Bitcoin Is Stateless
Editor’s note: the following story is from a presentation at the HCPP hacker conference in Prague.
I heard a wonderful story this past weekend.
Here follows the account of Tey Erjula, the “invisible man.” But first, a quick reminder of what bitcoin is.
“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution” – Satoshi Nakamoto, Bitcoin whitepaper.
In its purest form, Bitcoin is meant to allow transactions without the need for middlemen. Sending money from one person to the next, with little to no fees, no third parties, quickly.
Now for the story: Tey Erjula is born in Kuwait, raised in Lebanon, worked in Dubai, and moves to the Netherlands in 2010. It is also important to note that his father is Syrian. In 2014, around the climax of the civil war in Syria, his work contract in the Netherlands came to an end. At this point, immigration services in the Netherlands tells him he must return to where he came from.
He informs them he came from Dubai, and they say no because he is not a national of Dubai. He then tries for Lebanon, yet with the same result. Because he is not a product of the state, absent nationality, they won’t allow his return.
So, our friend needs a visa, as he is only a national in Syria. While at war, Syria refused to assign new visas. He does not want to return to Syria, as it is in the midst of a civil war. Since his work contract has run out, and he does not want to return to Syria, the only option is to apply for asylum in the Netherlands so that he can stay. Then, he renounces his Syrian citizenship, becoming stateless, and approaches immigration services once more seeking asylum.
In order to seek asylum, he is required to go to a refugee camp, as he is technically a Syrian refugee seeking asylum. Now, keep in mind that he worked in the Netherlands already. He has a house, a dog, belongings and speaks the language, so he’s hardly a foreigner at this point. His name and personal information as a contracted worker in the Netherlands, as well as his fingerprints and all forms of identification, are stricken from the record. He will possess a new identity at the end of his asylum period. He’s told this process will take three months.
It takes two years. Two years of living in a refugee camp, in a country that you have a house in. You cannot leave the camp without identification because there is no path of recourse within the country you live in without identification (ownership) from the state.
Remember what we said you needed to use the banks earlier? That’s right, state-issued identification. He has become invisible.
Skipping ahead, Tey talked of his struggles with eating the same food, over and over and over. After a certain point, the same food repetitively can make anyone depressed, especially if it wasn’t good to begin with. Luckily, Tey owns bitcoin and has a mobile device with him. He finds a local pizza shop that accepts bitcoin as payment, and in the absence of identity, the absence of a bank, the absence of state ownership, Tey purchases a pizza. Once delivered, the refugee camp workers obviously react by asking “HOW?” because obviously, no one has access to the financial institutions in the Netherlands that are in this camp, and he couldn’t have paid online with cash, so they were perplexed.
Now, Tey becomes the bank of the refugee camp. He started this with the intention of getting things into the camp, so people could be happy. Then it evolved. Suddenly people are using bitcoin to send money out of the camp to relatives. Relatives are sending Bitcoin into the camp to help with goods and services.
Suddenly, refugees have access to a financial system, while they are stateless.
Bitcoin has no state-issued identification, no fingerprints, no credit score, and no middlemen. All Bitcoin needs is two willing participants with a functional wallet and access to the internet. The stateless emergence of Bitcoin does not nullify the state, nor does it require the absence of the state. Bitcoin simply allows you to transcend the state.
This is a guest post by Shawn Amick. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.