TL;DR
Economists have always told us the story that money came after barter, and only then came debt. But according to anthropologist David Graeber, in his book Debt: The First 5,000 Years (2011), it is not the case that we first bartered eight chickens for a goat and only later invented money. No, debt existed before it all. What does this tell us about our financial system and about Bitcoin’s role in it?
If you think Ethereum’s Proto-Danksharding aka EIP-4844 is a rabbit hole, wait until you start researching the history of money, the biggest rabbit hole of them all.
On our way down you will gather nuggets of knowledge from sociology, anthropology, engineering, and of course economics. Few people know enough about all fields to have a comprehensive view of what money is. Few… but we will.
As crypto enthusiasts, we are drawn to this what-is-money rabbit hole and a successful descent is necessary if we want to make sure our belief in crypto is valid. We’re in crypto for… the technology – right? But how does this magic new technology relate to previous ones? Understanding this will make our conviction stronger when number go down for a while…
Is Debt Our Number 1 Problem?
For many people their interest in Bitcoin springs from a sense that something is wrong with the traditional financial system. That intuition is often – justly – inspired by the image of a central bank money printer.
Then there’s the related issue of debt. People have become aware that the current level of debt in our financial system is unsustainable. The 31 trillion dollar debt of the US government is indeed unlikely to be paid off, barring a productivity miracle. A more likely solution will be to switch on the money printer and inflate the debt away, hurting every saver’s purchasing power.
Many Bitcoiners don’t like the concept of debt. Bitcoin is what one calls a ‘bearer instrument’ – like gold. Its value doesn’t depend on another party making good on its promise. A bearer instrument is great: it’s something you can hold in your vault or your hardware wallet and no authority can take it from you. So, debt is – rightly – perceived as a problem in our financial system. But does this mean that debt is always and in and of itself a problem?
Both gold and Bitcoin are in a sense ‘anti-debt’ because there is no other party involved. There is no counterparty risk. And I think because of this, many Bitcoiners shun debt altogether, viewing it as the cancer of our financial system, controlled by governments and banks.
There is probably truth to this but I challenge you to read the view of anthropologist David Graeber in his classic book Debt, the First 5000 Years, debt has existed since prehistoric times and has been the grease of the markets, however local and small. It’s perfectly natural for people to be indebted to each other. Only when a precise monetary value was attached to debt, and when governments started enforcing debt, hell broke loose. In times of famine, farmers had to take loans to feed their families. But the collateral for that loan included not just their home but also their wife and children. Because of this, the advent of debt expressed in monetary terms and enforced, introduced widespread slavery in the early big societies of Mesopotamia.
Let’s dive in and let’s have a look at what this means…
Erik started as a freelance writer around the time Satoshi was brewing on the whitepaper.
As a crypto investor, he is class of 2020. More of a holder than a trader, but never shy to experiment with new protocols.
