The basic idea of digital money is that digits can represent economic value. This value can be transferred by means of an accounting ledger. For example, ledger A might include:
Alice = 0001, Bob = 0000
Alice = 0000, Bob = 0001
Here, 1 unit of value has been transferred from Alice to Bob. By adding a digit, it is possible to create an alternative ledger. For example, ledger B:
Alice = 0001§, Bob = 0000§
Alice = 0000§, Bob = 0001§
Here, 1 unit of some other value category, as represented by the digit §, has been transferred to Bob. This process can be repeated to create a number of value categories, for example, ledger C:
Alice = 0001$, Bob = 0000$
Alice = 0000$, Bob = 0001$
Economic calculation, however, deals with only one value category, namely that of the real goods and services being exchanged for numerical units. Therefore, the artificial creation of value categories is inconsistent with the existence of goods and services in (only one) reality. This inconsistency has been traditionally dealt with via a central authority that declares only one ledger as real or authentic, for example, ledger C.
These considerations have a clear parallel in Plato’s philosophy. According to Plato, the physical world of goods and services is a mere reflection of an ideal reality. Numbers, in particular, are a primary element of reality so understood. Numbers are ideal forms that symbols and objects instantiate. For example, the digit ‘1’ and the apple that Bob gives to Alice in exchange for this digit are instantiations of the number one ideal. In other words, both the apple and the unit of value have oneness.
In Plato’s view, then, ledger A would suffice as a representation of all economic value. The number ‘1’ that is transferred from Alice to Bob is an instantiation of an economic value ideal. Additionally, Plato’s conception of reality includes moral entities, such as gods, the Good, Justice and Wisdom. These are authorities upon which the value of ‘money’ has been historically derived. To follow the same example, God might provide the basis of trust and authenticity for ledger C’s dollars.
The internet is a de facto computer network that works without any central authority. People’s computers adhere to a single communication protocol because there is a natural incentive to do so. The problem of ‘internet money’, then, is the problem of achieving the same natural consensus on a single accounting ledger (Maanmieli, 2019). This is the problem that Satoshi Nakamoto solved in 2008.
With Bitcoin, the authenticity of an accounting ledger (the blockchain) can be mathematically proven by any node of the network. This means that the digit ‘1’ as it appears on the blockchain (ledger A, by analogy) is unlike any other Platonic instantiation of the number one in a computer or accounting ledger. It is a unique number one in that it has the additional property of scarcity. Accordingly, the Bitcoin protocol sets a limit of 21 million to the issuance of bitcoins (Antonopoulos, 2017). This limitation makes those 21 million units unique among any other set of numbers that human beings symbolically represent, creating absolute scarcity in the immaterial world of numbers.
This existential fact has the following consequence. Suppose an alternative ledger (ledger B or C, by analogy) is created via the introduction of extra digits or a different protocol. This ledger represents a logically inconsistent claim on the uniqueness of a transferable number. The alternative protocol may have different computational properties, but these properties do not confer any different numerical properties to the accounting ledger.
The same logic applies to a numeral system such as the decimal system or a network protocol such as TCP/IP. A natural consensus is formed around certain digits, since there is no rational incentive for a user willing to communicate with others to deviate, thus creating a ‘different number one’ or a ‘different internet’.
The creation of alternative blockchains (‘cryptocurrencies’) is inconsistent with the idea of a decentralised digital money. There is no logical room for alternative digital ‘moneys’ on the internet, in the same way that there is no logical room for alternative categories of economic value. Humans can certainly create our own shared values, as we have traditionally done, and try to impose them on others. However, this moral phenomenon is contrary to the cooperative phenomenon that has given rise to the internet and Bitcoin.
Antonopoulos, A. M. (2017) Mastering Bitcoin: Programming the Open Blockchain. O’Reilly.
Maanmieli, J. (2019) “Money is a token of cooperation: The biology of indirect exchanges.” Alethes.net. https://alethes.net/journals/money-is-a-token-of-cooperation
Nakamoto, S. (2008) “Bitcoin: A Peer-to-Peer Electronic Cash System.” https://bitcoin.org/bitcoin.pdf