1. art and entertainment
2. shows and events
3. festival

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Cover page for the project report – 2nd semester, BP 2:
Year: 2014
Semester: 2
House: 21
Project title: Bitcoin as a reaction to the conventional-monetary system
Project supervisor: Johan Fischer
Group No.: 19
Students (full name and student ID No.):
Phillip Crilles Bacher
Jonatan Henriquez Ussing
Mathias Bak
Mathies Raaskou Nelbom
ID: 52079
ID: 53132
ID: 52461
ID: 52113
Number of characters in the assignment (excluding appendices1): _120665____
The requirements towards the size of the project report depend on the group size:
In groups of two to three members, the required size is 40 to 60 standard pages. In groups of four to five
members, the required size is 50 to 70 standard pages. In groups of six to seven members, the required
size is 60 to 80 standard pages. In groups of eight members, the required size is 70 to 90 standard pages.
Appendices are not included in the calculation of the number of pages and characters. If the project
report deviates from the above specification of the number of pages and characters, it will be refused
assessment, which means that the student(s) cannot participate in the examination. Appendices are not
included in the calculation of the number of pages and characters. A standard page has 2,400 characters
per page.
1
This cover page is not included as it is for administrative use only and therefore not part of the project report
Roskilde Universitet
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Chapter 1: Introduction.....…………………………………………….…………………………..………..…………………....3
 Problem Area.………………..………….………………………………………………………………………………..…..3
 Research question...……..……………………………………………………………..……….………………………...5
Chapter 2: The methods of the project……...………..…………………………………………..…..……………..…....7
 Methodology……...……………………………………….…………………………………………………………..……..7
 Methods………………………………………………………….……………………………………………………..……....8
o Structured Interviewing………………………………………………………………………………..…...10
o Questionnaire……………………………………………….…………………………………………..……….11
Chapter 3: Theory chapter……………………………………..…………………………………………………………..…….13
 Money……………………………………………………………………………….………………………………………….13
 Brief history of money…………………………………………………………….……………………………………..13
 Today’s money……………………………..…………………………………………….………………………………...15
 Importance and management of money…………………………………………..….……………………...17
 Digitalisation of money …………………………………………….………………………………………………...18
 Operationalization of the concepts ……………………………………………………………………………..20
Chapter 4: Distinguishable properties of Bitcoin………..……………………………………………...…..….….26
 The ideological roots of Bitcoin…………………………….………………………………………………..…….26
 The road to serfdom and denationalized money………..……………………..………….….……..…..27
 Central features of the Bitcoin system………………………………………………………………………….29
o Peer to peer transactions………………………………………………………………………………….30
o The system and the software…………………………………………………………………………...30
o Mining and money supply…………………………………………..…………………………………….31
 Bitcoin’s functionality………………………………………………………………..………………………………...32
o As a means of exchange…………………………………………………………………………………...33
o As a unit of account…………………………………………………………..……………………………..33
o As a store of value…………………………………………………………………………………………….33
 Conclusion…………………………………………………………………………………………..……………………….34
Chapter 5: Bitcoin in Argentina………………………………………………………………………….………………..….36
 Introduction……………………………………………………………………………………………..………..………..36
 State of Argentina’s economy………………………………………………………………………..…………….37
o Devaluation of Argentine peso……………………………………………………………….………..38
o Demand for dollars…………………………………………………………………………………….…….39
 Use of Bitcoin………………………………………………………………………………………………………..…....40
 Reasons for the use of Bitcoin………………………………………………………………………………....….41
o Ideological reasons…………………………………………………………………………………….…….41
o Practical reasons………………………………………………………………………………………….…..42
 Conclusion …………………………………………………………………………………………….…………………….44
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Chapter 6: Bitcoin’s challenge to the hierarchy of money ……………..………………………………….…..47
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The social organization of money ……………………………………………………………………..…..…….47
Ideology in Bitcoin ………………………………………………………………………………………………....……48
The intentions behind the Bitcoin community………………………….……………………………...….48
Difficulty of regulation………………………………………………………………..………………..………..…...49
State regulation of Bitcoin ……………………………………………………………..……………………..…….51
Effects of Bitcoin on governments’ ability to regulate…………………………..………..…………...53
The utopian world of Bitcoin…………………………………………………………………..…………………...53
Chapter 7: Conclusion …………………………………………………………………………………………………………….56
Bibliography ………………………..………………………………………………………………………………………………….59
Appendix 1 .………………………..……………………………………….………………………………………………………….66
Appendix 2 ………………………..……………………………………….………………………………….……………………….68
Appendix 3 ………………………..……………………………………….………………………………….……………………….70
Appendix 4 .………………………..……………………………………….………………………………………………………….78
Appendix 5 .………………………..……………………………………….………………………………………………………….79
Appendix 6 .………………………..……………………………………….………………………………………………………….80
Appendix 6 .………………………..……………………………………….………………………………………………………….81
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Chapter 1: Introduction
Problem area
With money comes power and prestige, and when some people have plenty of and most do
not, money becomes an unequal construction. Money, in its current form, is also like a
language (Jacob & Slaus 2012); it is a social construction meant to facilitate constructive
cooperation and interaction between individuals. Both money and language become
meaningless unless they are assigned some sort of meaning or value by both sender and
receiver. Just as language is a means of interaction between ideas, money is the means of
interaction concerning the exchange of goods and services (Jacob & Slaus 2012).
Money then can be perceived as a sort of language, it is a social construction, which like many
other constructions can be restructured. For most of history, the power and legitimacy to do
this has belonged to the state. Money has in this sense been a hierarchical structure. However,
we have recently witnessed an influx of new crypto currencies all over the world, which has
challenged this authority. The most famous and discussed example is the cryptographic
currency called Bitcoin. This currency is based on a system where the act of a payment itself is
purely peer to peer. The act of transaction is thus not owned by anyone as the system does not
have to go through a third party, such as a bank or money agency like PayPal in order to make a
payment. Furthermore, the money supply is not controlled by a printing press owned by a
central bank. The creation of bitcoins happens as a result of the solution of incredibly complex
cryptographic protocols, called “mining”.
Bitcoin was created by an unknown developer under the pseudonym Satoshi Nakamoto in
2009. Bitcoin has been designed in a way that keeps every major institution, banks and
governments alike, from taking ownership of, or in any way regulating the financial transactions
taking place. Furthermore, the Bitcoin system promises more privacy than regular bank
transfers due to encryption of all data.
Those who advocate for the use of the currency often point to the critiques of our present
monetary system (Nakamoto 2009) and most, if not all, Bitcoin advocates that we have
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encountered seemed to hold views typically identified amongst libertarian and Austrian
economists. The aim of this report is neither to debunk these economic views nor to speculate
whether Bitcoin or any other type of commodity money will be the world’s next reserve
currency a hundred years from now. Our aim is to acknowledge how Bitcoin is actually a
symptom - a symptom of a fiat monetary system that is being increasingly contested.
The economic anthropologist Bill Maurer (2012) claims that we are living in a time where the
social organization of money is questioned and alternative systems are experimented with, like
never before. The emergence of things such as Time-banking, Islamic banking and the creation
of multiple crypto currencies are a few examples of this trend. Maurer identifies this trend as
the unravelling of the social organization of money. This exact choice of words is shared by
Maurer’s colleagues Nigel Dodd and Keith Hart. They all agree that many of the recently
invented currencies are reactions against a monetary system that is viewed by many as unfair.
Supporting this claim is the fact that many of these newly invented currencies and systems of
payment were either invented or grew in popularity in the aftermath of the recent global
financial crisis.
A question to be raised is whether Bitcoin really is a reaction against the role that these
different institutions play in the conventional, predominant monetary system. A matter that
has always been much discussed, but as mentioned, grew in the aftermath of the global
financial crisis.
Bitcoin’s popularity is gradually rising worldwide but it is said that those who may benefit the
most from the Bitcoin system are the residents of countries like Argentina (Matonis 2013) for
different reasons that will be analyzed in this report. Explained shortly, Argentina is characterized
by having a growing economy, but the country has had and still has an economic and political
instability related to the devaluations of the national currency, inflation and considerable strict
capital controls. We have chosen to take a closer look at what is happening in Argentina because its
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use in that country can give us an understanding of its use and assess whether it can be described
as an unravelling of the social organization of money. These thoughts have led us to the
formulation of the research question.
Research question
-To what extent is Bitcoin a counter-reaction to the conventional monetary system?
We aim to answer the research question via the help of 3 working questions. Each will be
answered in its own chapter.
WQ1: What properties distinguishes/characterises Bitcoin?
In this working question we discuss how Bitcoin works. We will start out by discussing what the
ideological roots of Bitcoin are, and how these fundamental economic ideas have affected the
design of the system. While discussing how the Bitcoin system works we will analyse it in detail.
WQ2: Can the increase in Bitcoin usage in Argentina be attributed to the country’s economic
and political situation?
In this chapter we will look at the case of Argentina. First, we will give our assessment of the
country’s economic issues. Then we will take a look at the highly controversial way in which the
government has tried to tame these issues. In particular we want to look at the way in which it
has imposed strict capital restrictions and have released misleading inflation rates statistics.
Here we will draw on our findings from the first working question. If Bitcoin, due to its
decentralised nature, is a system that is inherently difficult to regulate, why would it be
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employed in such a way in Argentina? Is Bitcoin actually being implemented as a tool to avoid
the highly controversial and restricting governments?
WQ3: How has Bitcoin challenged the role of the state in the hierarchy of money?
With this working question we wish to discuss our findings in relation to our research question.
We will take a brief look into what the implications are for the economy, and for the role of the
state in managing the economy.
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Chapter 2: The methods
In this chapter we are going to discuss the methodological requirements and decisions we
made for this report. First, we are going to present an overview of the epistemological
considerations, the research strategy, methods, and empirical data and how these are
connected and reflected in the report. We understand these as being collaterally affected with
the report and being necessary for completing this study with the expected output while being
aware of its strengths and weaknesses.
Methodology
Our research question will be answered through a process of induction as we have not stated
any theory or hypothesis which might provide an answer. Induction symbolizes that connection
between theory and research in which the research happens first. We justify the answer of the
research question through the process of induction, which is accomplished through the
investigation and examination of the case we will analyse. As Bryman states, “induction
contains a deductive element too” (Bryman 2012: 26), and we will in our report incorporate the
use of a deductive element too. It will materialize into what could be said to be a theory
chapter focusing on money, its existence its role and its changing nature. We perceive the
theory chapter as the background knowledge for understanding the case of Bitcoin and the
world in which it exists, enabling us to justify our analyse. As stated earlier, even though we
have a theory chapter our conclusion in the report will be justified by a process of induction,
meaning that the theory chapter does not enable any hypothesis or possible answer to the
research question. After saying this, it can be said that we use an iterative approach in our
report, meaning that our conclusion will take form as we move forward with our case.
Our epistemological position regarding the report will be critical realism, based on the idea that
“an appreciation of the context is crucial [...] because it serves to shed light on the conditions
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that promote or impede the operation of the causal mechanism” (Bryman 2012: 29). Critical
realism thus focuses on contextualization. We believe that contextualization has already been
illustrated in the first chapter of the report, in which we relate the context of our case to our
research question. Another example of this contextualization will be in Chapter 5, where we
present the Argentine situation and thus outlining the context. The essential characteristic of
critical realism is to admit that the generative mechanisms are not directly observable, but the
effects are. From the critical realist’s judgement we accept that the conclusion to our report
might be temporary and, as the generative mechanisms are not directly observable (in this case
society) the conclusion might change over time. This is of particular importance in our situation,
as our problem area is very contemporary, and as most scientific research in the object of study
is very new.
Methods
Our main research strategy will be the qualitative research but we mix it with elements of
quantitative methods. The qualitative research strategy for our report will have a case study
design. The reason why we have chosen a case-study design is to investigate one case in depth,
acknowledging the relation between it and the further analysis of its potential and ability for
changing the role of money. The deeper aim of the research, as all case-study research, is to go
in depth with the case in order to allow a generalization of a wider phenomenon. It is to say
that we can’t generalise the case “Bitcoin” in other countries taking the point of departure from
one single country, as the phenomenon Bitcoin has had a special impact in a country like
Argentina. We aim to have the possibility for generalising the phenomenon Bitcoin in the
countries that are similar to Argentina, which might experience or have the same
characteristics that lead to a spread of Bitcoin. As a critique to a case study research, some
researchers believe that intense exposure to a case study can lead to biases in the findings.
Naturally, we will try to escape from this critique.
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From the distinction of Yin (2009) (Bryman 2012) of the different types of cases, our case is a
representative case. It exemplifies a commonplace situation by capturing its circumstances and
conditions. (Bryman 2012).
In this report we are going to employ a wide variety of data. To collect and describe the
relevant background and definitions in the theory chapter we will mainly be using books and
articles within the areas of economics and sociology. The point of having a theory chapter is to
be able to execute the concepts and theories correctly. We have been facing some constraints
in our choice of empirical data, primarily due to the very little academic research done on the
area. Bitcoin is still a relatively new phenomenon, and therefore most of our academic sources
are very new. This is also a problem, as there is not a lot of research done on specific cases of
Bitcoin usage. However, we assessed that with some help from the Bitcoin community, we
would have enough material to carry our argumentation. We are aware of the dangers of
biased data that this poses, but as we are all agnostic about Bitcoin, we believe we have been
able to present and research the report in a relatively objective manner.
The theory chapter itself will be the basis of our analysis. Since we consider the theory chapter
as the foundation on which the report will be built on. Nevertheless, there are many concepts
which will not be introduced in the theory chapter. Examples of such are our brief explanation
of the Austrian business cycle. We have chosen to advocate a relevant theory chapter that tries
to explain what money is how technology changes our society and how these two are changing
each other, but as we are working inductively our theory is primarily serving as a brief
background chapter to the analysis. The data used for this chapter will come from
acknowledged theorists and will be gathered mainly from books and academic journal articles.
A distinctive feature of the theories is that all have different focus: historical focuses, orthodox
and critical explanations of money and how money and technology are embedded into society.
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For the case study of Argentina, we will be drawing on the same knowledge as presented in the
theory chapter, adding further with knowledge from articles and academic journals specifically
relevant to the case. The new data will come from reliable websites, articles, and academic
journals and from our own data collection which will give us a better insight into the cases. Due
to time-constraints, we will not be able to collect more data than we did. Therefore, we cannot
guarantee of the reliability of our data. We are also aware that data coming from websites has
to be carefully evaluated as it can be characterized as untrustworthy or not credible.
Nevertheless, this data can also be meaningful and exceptionally unique, and would otherwise
be very difficult to obtain. We will have to balance between having too much unreliable data
and not having enough data. By trying to stay critical and knowing the limits of which
arguments that we can support with our data, we believe that we have balanced this the best
way possible given the slightly underground nature of the topic.
We were sure we wanted to write a report about Bitcoin and even though it is a worldwide
phenomenon, we chose to focus on one country. The truth is that there wasn’t that much data
when focusing on a single country, but we thought that Argentina was the right place due to
discussions on it as one of the countries that got most benefits from the use of Bitcoin. We
decided to make an Interview with a Bitcoin user in Argentina and to make a questionnaire
directed towards the users of Bitcoin in Argentina. Our findings will especially be presented and
utilized in the last 2 chapters.
Structured Interviewing
As stated earlier, we have collected data and, although our overall research strategy will be
mostly a qualitative based research, we will also connect it to a quantitative research by
employing a structured survey. We aimed to interview a very active person in the Bitcoin
community willing to participate and collaborate in our report. This interview will be a focused
interview, in which we use mostly open questions about the Bitcoin phenomenon, aiming to be
relevant to the interviewee and of interest to us. Open questions allow the respondent to
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answer in his own terms, and we try not to suggest any kind of answer to the respondent.
These open questions will give us a better insight while being useful for exploring new areas in
which we had limited knowledge. Another advantage is that the respondent is allowed to
present arguments for his answers. We will use this kind of interview to contrast and compare
with our other findings.
We are aware that this kind of interview is time-consuming for us while administering it and
that is the main the reason we chose only interview a person.
Questionnaire:
We have decided to employ a web survey in our search for an answer to our research question.
We will now present our thoughts on the issues of population, sample design, sample frame,
sample size and reliability. This quantitative research will be done through computer-assisted
personal interviewing with help of the web application SurveyMonkey, which provides a
“platform for devising interview schedules” (Bryman 2012: 216). This research takes the form of
a self-completion questionnaire and has a structured interview schedule with closed questions.
(Appendix 1)
Our population consists of bitcoin owners in Argentina. We can make this differentiation on the
basis of the definition of a population defined by Bryman as “The universe of units from which
the sample is to be drawn” (Bryman 2012: 714). This selection of our population is justifiable
because we wish to investigate the reason they own bitcoins. A problem with this population is
that we cannot measure the exact size of the population, because the IP addresses are not
stored in the block-chain.
As for our sample of the above mentioned population, we will be utilizing a “snowball sample”.
We have chosen this method because it shares a lot of the same properties as convenience
sampling, but it allows for the sample to not only be drawn from a selected group. So we can let
our survey circulate in the online community surrounding our population, and thereby achieve
a bigger sample, increasing the representation. There are some limitations to this approach of a
sample. We are not able to ensure that the sample is representative of the whole population
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and can thus not generalize about our population. However, we will be able to say something
about the tendencies in the part of the population which we reached through the forums
where we distributed our survey. Keeping this in mind, it is also important to note that the
most frequently used way of buying bitcoins is through the Internet and therefore we can safely
assume that no-one in our population is excluded from the sample.
Our sampling frame will consist of the various websites on which we posted the link (Facebook
Group 1) (Facebook Group 2) (Reddit). However, part of the actual frame will remain relatively
unknown, since there is the possibility for other people to repost the link on other websites. We
have discarded every respondent that was not a resident in Argentina. The relative factor here
is the fact that the link to the survey must originate from where we originally posted it, and so
the frame will remain within the community. Furthermore, we decided to translate the survey
into Spanish, to make it more friendly to non-English speakers. Besides, by writing the survey in
Spanish, we restricted it for people that are not part of our population (such as non-Bitcoin
users outside Argentina). This will constitute a non-probability sample.
As for the size of the sample it is 18. The finalized question is in the appendix (Appendix 1)
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Chapter 3: Theory Chapter
Money
Money is a centre of social organisation, all wages are paid and all almost consumption
happens through it. It is the social organisation of most of our economic conduct.
Understanding the monetary economy thus requires an understanding of the importance and
meaningfulness of money itself.
Money has three central functions: It is a means of exchange, facilitating all trade in our society.
It is a unit of account, meaning that it can be used as a standard tool to measure the value of
goods and services. It is also a store of value as it can be used to save for future investment or
consumption. Money is also an impersonal tool that links us with society and the market.
However, the way in which we use that tool is highly personal (Hart 2007).
Brief history of money
Without a social convention that allows us to trade with each other, the human race would
most likely not enjoy the standard of living that we do. This convention is what gives money its
value. Without it humans would be left to barter, which always requires: “a double coincidence
of wants”, which is rarely happening. Barter becomes difficult, as any deal would happen
without a clearing mechanism (Tobin 2008). Throughout history, a large variety of means of
exchange have been implemented. Examples can be grain crops, cows, salt or other
commodities that had general usefulness and therefore functioned well as a clearing
mechanism when monetary systems were still primitive (Tobin 2008). Even cigarettes have
been used in prisons under the Second World War, where shavers became scarce among
American prisoners of war (Tobin 2008). The evolution of money took it towards coins, which
were usually built of some precious metal, easily divisible and scarce (and thus valuable) (Tobin
2008). For much of human history, and indeed most of known western history, coins were
made of, or were convertible to, precious metals which were the preferred means of exchange,
units of account and stores of value.
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Money as token money started when Italian goldsmiths offered gold owners to store their gold,
giving the owners the convenience to trade with receipts of that gold. Instead of having to bear
gold, merchants in Italy could trade with these receipts as promises to the gold. As merchants
and goldsmiths realised that they could not have all the gold in reserves that they claimed they
had, they started delivering receipts of gold they promised to repay in the future. This
renaissance phenomenon became the basis for fractional reserve banking. States and banks
started to provide token coin as well as paper that were redeemable in gold, silver or copper.
With time, states and central banks started to monopolise these currencies. The recurrent
problem was that the banks, not too surprisingly, had difficulties with paying back the promised
money, as they only had a fraction of what they owed. Therefore, during wartime and other
emergencies, governments quickly learned that purely irredeemable paper money, fiat
currency, was quite effective at paying debts and wages (Tobin 2008).
Most countries in the Western world used the silver-standard until England’s abandonment in
favour of the gold standard followed by Hamilton’s complementation of gold to silver in the
late 19th century. The gold standard was interrupted by the collapse of the international
monetary system by the time of the first world-war (as money had to be printed in order to
fund the war) and was revived in another form at the famous Bretton Woods conference in
1944 (Eichengreen & Flandreu 1997). The death punch to the Bretton Woods system came in
1971, when the US budget deficits were too large (largely due to the Vietnam war) to deliver
gold to the government of France. The US dollar would therefore no longer be convertible to
gold. From here on the international reserve currency, the dollar, was now a fiat currency, and
many formerly pegged for currencies would become flexible (Kenen 2008).
As previously mentioned, with the fall of the bretton woods system in 1971, governments did
no longer equalise their imbalances on gold, but now in fiat currency. In the current economic
climate, many governments run on a budget deficit. Here they can both tax their citizens, sell
their bonds or just print money and earn money from seignorage. Seigniorage is a source of
revenue as government-issued currency has a zero-percent interest rate (Tobin 2008). As
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governments are no longer needed to have any gold-reserves, policy-makers face fewer
constraints.
Understanding money and how it has always been changing as a result of political and social
processes is therefore important because money have always been a centre of social
organisation and hierarchy. John Kenneth Galbraith said that all human actions could usually be
understood in the light of the pursuit of either money or power (Stillwell 2013), although these
two things are for the most part the same thing. Whether Galbraith was right or just
exaggerating slightly only makes little difference to the point that money is important, and the
way they work are rarely neutral.
Today’s money
The clearing mechanism we have today is therefore token money or fiat money - meaning that
they have no or very little intrinsic value. It merely represent the act of transaction between
debitor and creditor, between buyer and seller (Bell 2001). Fiat money thus relies on strongly
embedded social conventions for its success.
In the case of fiat currency this social convention is institutionally dependent on the state as the
issuer of currency and the enforcer of contractual obligations. In the nation state, the sovereign
holds the power and authority to choose a country’s currency and determine the value of it. In
many cases, the government wields constitutional authority to define the so-called legal tender
and the laws surrounding debt repayments and the keeping of contracts (Tobin 2008). Every
citizen in a given country is, without any known exception, legally obliged to accept the legal
tender in a transaction (Tobin 2008).
A distinction between two types of money must be made: those commodities that have an
inherent value and those purely token money, which only relies on social conventions. The
debate between which kind of money should be used is still a point of major discussion, and it
will be reflected in this project as well.
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Importance and management of money
Money plays a particularly important role in the redistribution of resources between the
different sectors in society. These sectors form the base for economic activity can be the
organization of production and consumption or the distribution of income and wealth etc.
Monetary policy, cut to the bone, consists of the government's monopoly on the issuance of
legal tender, the amount of money banks and financial institutions are allowed to borrow and
manipulate the overall interest rate. However, the actual process of the implementation of
policies is much more complicated, as much of the power may have been given to central bank.
This itself constitutes for many an intense discussion. Recently there has been a tendency for
the central banks being more and more decentralized. Resulting in a situation where the
governments are relinquishing some of the tools previously available to them.
Changes in the total amount of money in the economy have major consequences on all the
major macroeconomic indicators, including areas such as unemployment, economic growth,
interest rates, balance of payments, inflation and exchange rates. The reason why money
supply affects the economy is that the money supply and the money demand determine
between them the rate of interest, having a crucial effect on aggregate demand and the
performance of the economy generally. (Sloman 2009).
The supply of money has a big impact on demand and interest rates. Most directly is the money
supply’s effect on the interest rate, since interest rate is essentially the price of money: Because
the supply of money goes up, the price of money will go down. As an indirect consequence of a
bigger supply of money, but through the lower interest rate, the general demand will go up
because the price of borrowing money goes down with the interest rate (Stillwell, 2012). This
can be an important tool to fight unemployment or stimulate the growth of the economy, and
is usually preferred over Fiscal policy, which in Neo-classical macroeconomic theory which also
stimulates aggregate demand in society, but where this demand instead will have a countereffect in the form of rising interest rates, which will then lower aggregate demand. This is called
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the crowding out effect, and the crowding out effect is the reason why many policy-makers
prefer to use monetary over fiscal policy (Blanchard 2008).
Our society is heavily relying on this monetary management, and this heavy management can
only happen with fiat currency, exactly because their supply can be altered to adjust to the
general state of the economy.
Money can also have a destructive capacity. In Keynes’ view, speculative gain, understood as
selling a commodity for more money than you paid for, confers uncertainty and instability to
the economic system. From here, we can relate the financial institutions’ role on determining
the likelihood of prosperity and recession (Stilwell 2013). This has shown to be true during the
Global Financial Crisis: many analysts claimed that speculative elements in financial markets
caused the vulnerability to the crash, while failing financial institutions were one of its
remarkable manifestations.
Monetary factors, especially those related to speculation, confer particular features of
instability to the economy. Stilwell affirms that speculators instead of investing the savings
redirect money into speculative activities, causing a press on the market rate of interest, with
potentially damaging outcomes for investment, employment stability and economic growth.
(Stilwell 2013) One of these monetary factors is the particular monetary policy which a
government implements. “People may hold assets in the form of money for transactions,
precautionary, and speculative purposes. Their inclination to do so determines the overall
liquidity preference in the economy, which influences the prevailing rate of interest and
therefore affects the levels of investment and income.” (Stilwell 2013 p.292). From the last
statement we can conclude that money and the economic activities can influence the liquidity
or “change the amount” of money, having consequences in the investment and income.
With commodity money it is a different case. As it is usually bound up on a scarce resource,
altering the supply of commodity money would require obtaining more of that scarce resource,
given more of it even exist. In the case of Bitcoin, money supply, as we will explain, is decided
by an algorithm and known beforehand. It is the constraint of acquiring gold that monetary
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policy makers are no longer facing when altering the money supply. For economists who
believe that monetary policy is best of when managed, i.e. virtually everyone, this is a good
thing. The degree and goals of monetary policy is also a point of debate: should monetary
policy primarily focus on keeping a stable price-level or do combating unemployment come
first? Sometimes an expansionary policy may be necessary to the latter, while a contractionary
is necessary for the former. To sum up, the debate between advocates for commodity and fiat
currency is in large part a debate about the role of states and banks. Monetary policy is a highly
political question (Sloman 2009, Colander
2013).
Digitalisation of money
One of those older theorists treating money as a sort of progressive social technology (Dodd
2012) was Georg Simmel. One thing that is important when understanding Simmel is that he
used pure concepts and often played them out against each other in order to get a better
understanding of a topic. Such a concept of money is created in his book: the philosophy of
money. Even though we will explain the concept of perfect money, it is important to state that
it is operationalised by Simmel as something that we will always be working towards - a sort of
technically unfeasible utopia.
So what is perfect money? Perfect money consists of three features: First and foremost, it has
complete stability in value - no inflation. Second, People will not have equal amount of money,
but the price mechanism will, through money, somehow make up for this.
Third and by far most importantly, Money, Simmel claims, will gradually lose its material solidity
and substance. At the same time it will become more and more functional - its actual purposes
will be revealed gradually, as it loses its substance.
Money has throughout all of history become more all purposive and less substantive. Today,
this change in the direction that Simmel’s prophesied is visible more than ever. Factors that
could be mentioned as contributing to this transformation into more and more electronic
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money are globalisation, which have broken down barriers of time and space, increasing the
capacity for the movement of humans and information across large distances and the digital
revolution.
One mark of technology is visible on changing power structures in our globalised world: smaller
fractions within our society are also being empowered through technology. This empowerment has
been visible the last few years with new agents on the global stage challenging the classical power
hegemony of the nation state. For instance, as we saw at the beginning of the Arab Spring, social
media have opened new channels for networks and relations. In Cairo in 2011, the potential of a
people empowered by social media technology was displayed. In countries as diverse as Brazil,
Turkey and Spain, social media networking has served as a central tool for the organisation of largescaled protests that wouldn’t have been possible a century ago. Social media is playing a larger and
larger role in the political game around the world (Shirky 2011).
Just as it changes politics, technology could very well change the future of economic power
structures, and one of the places in which this have become visible is in the state monopoly of
money creation.
It is in this context that Keith Hart, an economic anthropologist writes the following:
“From having been an object produced by remote authorities, money is becoming more
obviously a subjective expression of our own will; and this development is mirrored in the shift
from ‘real’ to virtual’ money” (Hart 2007: 16). Hart advocates for the changes that digitalisation
does to our economy, claiming that individuals will have better means of taking responsibility of
their economic actions and that this will lead to a better understanding of the social-economic
forces which influence our society (i.e. the political forces of monetary institutions). This will
again lead to more personal agency in our economic conduct as the currencies we use will
become multiple. It will also lead to the creation of new economic networks on a global scale.
Money is becoming even more impersonal, but the networks on which they rely will become
more effective as well (Hart 2007).
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Supporting Hart’s notion that money, due to its changing nature and substance, seems to
become more of a subjective scheme of empowerment is Bill Maurer and Nigel Dodd. They all
talk about, what we in the problem area described as the “unravelling of the social organization
of money”. This phrase seems to suggest that there is some sort of change going on in the
relationship between those actors that are now connected by money: banks, consumers and
particularly governments. It is in the context of a global digital fiat money system that Bitcoin is
arising. It is therefore an example of this unravelling that we described.
Several academic researchers (Karlstrøm 2014, Maurer et al. 2012, Filippa 2014 etc.) have all
assumed that there are ideological motivated ideas behind the influx in crypto currencies. The
bulk of academic research on Bitcoin (and crypto currencies) simply assumes that it is some sort
of libertarian monetary web-insurgence. It is this notion that we want to take a closer look at by
asking ourselves whether Bitcoin actually is a reaction against the social contract between
states and citizens, aimed at changing the central pillar of the social contract:
money.
Operationalization of concepts:
Cryptography
This is the discipline of making sure that communications are kept safe. In this report the
communication that needs to be kept safe is the keys.
Commodity money:
Money with a value “bound up” on something. A currency which can be converted into something.
It has some sort of inherent value. The gold standard is a commodity system. Although its value
seems abstract, Bitcoin is another example of a commodity money (Tobin 2008)
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Fiat currency:
Is the “opposite” of commodity money with no inherent value, represented by a piece of paper, a
coin or a number on your internet bank. It usually derives its value in usage from its legal status
and governmental regulation. Its creation depends on central institutions in our society. By the
absence of any inherent value, the variation in the money supply of fiat money is made
possible. Throughout the twentieth century, most governments changed dispensed commodity
money with fiat currency. After its introduction, the economy has been more inflationary
overall. However, during the gold standard, times of rapid inflation also happened, which there
can be a tendency to forget (Tobin 2008).
Bitcoin network
The Bitcoin network is to be understood as computers running any kind of Bitcoin core software,
called a node. These nodes are divided into two main categories, nodes and full nodes. The full
node has a complete copy of the entire Block Chain.
Bitcoin core
Is the name of a piece of software it serves multiple purposes, it is a wallet, it provides the standard
for the Bitcoin protocol, contains the Block chain.
Bitcoin wallet
Is a tool which provides the user with the ability to transfer and store funds.
Bitcoin protocol
We perceive the Bitcoin protocol as the language that all nodes on the network have to use.
Essentially it is the language that computers on the Bitcoin network use to communicate.
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Block chain
Is sometimes referred to as the ledger, because it keeps a record of all transactions ever made on
the Bitcoin network
Keys
There are two kinds of keys, a public key and a private key. The public key is used for receiving
incoming payments, while the private key is used to authorise an outgoing payment.
Hashing
Is a process of solving complex mathematical functions to ensure the security on the network.
Sovereignty:
In our project sovereignty is explicitly concerned with the government’s ability to decide its
own economic policies in order to meet its social obligations:
“The sovereign state should be able to direct its political, economic and social life in accordance
with its values and without external influence, pressure or coercion. Alongside this, the
sovereign state now has a moral obligation to protect and extent the political, economic and
social rights of its citizens.” (Wall 2012).
Monetary system:
A monetary system is the wider system of money-use in the economy. It can also be an
international system, such as the Bretton Woods system.
Monetary policy:
The act of influencing the economy by manipulating the total amount of liquid assets (money)
in the economy. Monetary policy is typically conducted by the central bank, and is often aimed
at setting a specific interest rate. It can be either expansionary or contractionary depending at
what the goal is.
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The money supply can be altered in a number of ways:
- Open market operations, selling reserves or government bonds in return for cash.
- Lower reserve requirements for banks, aimed at a larger supply of money for lending in the
economy.
- Borrowing money to banks at a discount rate
(Colander 2013)
Fractional Reserve Banking
The conduct of the commercial banking industry, where banks only holds a fraction of their
customers deposits in reserves, typically at the central bank. The rest of the money is lent out,
and the interest from lent money creates new money. The required reserve ratio will typically
be dictated by the monetary policy (Colander 2013)
Inflation
An increase in the overall prices of goods and services in the economy. When this happens,
each unit of currency loses its value in comparison to the overall price level.
Inflation can be two equivalent processes: an increase in the money supply which decreases the
value of each unit of money, or an increase in the overall price level.
Inflation is measured in consumer price index which is the change in price of a particular basket
of goods from year to year (Parkin 2008).
Central bank
The institution that serves as the monetary authority, having monopoly on deciding the legal
tender and the manager of monetary policy, heavily influencing the interest rate. It is also in
many cases the lender of last resort, meaning that it helps out banks that cannot pay back what
they owe. We saw this with the bailout of the banking sector in the US at the beginning at the
financial crisis.
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Bitcoin/bitcoin
The two different uses of the word, Bitcoin and bitcoin, is manifested in the spelling. Bitcoin
with a capital B will refer to the system surrounding the actual currency, bitcoin as here will
represent the unit or the actual coin.
Libertarianism
Libertarianism is a philosophical and economic standpoint that emphasises the individual right
to liberty as the being the single most important value in society. The importance of liberty
makes all constraints on personal freedom unethical - even when it comes to which substances
citizens wish to consume or which guns they wish to own. How Libertarians justify their strong
emphasis on personal liberty varies greatly.
The best way to protect liberty is to organise a society in a decentralised manner. The central
role of the government should therefore be to protect individual property rights.
The best way of organising society is to trade through the market as the market is a
decentralised human mechanism of interaction. Besides, as human beings are viewed as
rational, the market is the best way of competition.
Libertarians are also sceptic toward any sort of state intervention, particularly as the state
usually has imperfect information of what the effects of intervention will. As the mechanism of
the market forces is usually infallible, as it is the aggregate sum of all human interaction, it is
better at self-regulating (Friedman 2008).
In our project we use to the concept of Libertarianism to describe groups of libertarians such as
Anarcho-capitalists. We have excluded monetarists and many classic liberals, as these groups
do not represent the same rigid version of libertarianism as many Bitcoin users do.
Sound money
Sound money is a term coined by Ludwig Von Mises in chapter 21 of his book Theory of Money and
Credit. Mises say: “It is impossible to grasp the meaning of the idea of sound money if one does not
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realize that it was devised as an instrument for the protection of civil liberties against despotic
inroads on the part of governments. Ideologically it belongs in the same class with political
constitutions and bills of rights”
The way we operationalise sound money is this. It is a type of money whose supply cannot be
altered, and therefore, many libertarians believe, protects civil liberties.
Purchase power parity
“a method of comparing income that takes into account the different relative prices amoung
countries” (Colander 2013: 559)
Peer to peer
Is a type of computer network where the peers connect to each other to share resources. It is
decentralised, one peer might disappear, but immediately there is someone else to take their
place. Usually a peer to peer network is mutually beneficial.
Crypto Currency
A Crypto Currency is a currency based on the solving of cryptographic riddles and is to
distinguished from Electronic Currency, which has to be digital.
Globalisation
Is the global interconnectedness caused by technological advances making the exchange of
information, beliefs and the increased mobility of people happen at an ever growing speed.
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Chapter 4: Distinguishable properties of Bitcoin
In this chapter we aim to provide basic knowledge about Bitcoin as well as our perception and
idea of it. We hope that this process will provide us the tools we need in order to analyse the
usage of bitcoins in Argentina. We will briefly discuss the ideological roots of Bitcoin and explain
its features. In the end we will also assess it practical functionality, as this deserves some
attention as well.
The ideological roots of Bitcoin
Before moving on to the more complex and indeed fascinating aspects of the Bitcoin system,
we want to take a brief look at its ideological roots, as Bitcoin is as much of an ideological
experiment as it is a practical system (Karlstrøm 2014).
Some have claimed that Bitcoin was a cyber-anarchist project from the very start, tracing its
roots back to the “cyberphunk” (not to be confused with cyber-punk) movement in the early
nineties (Karlstrøm 2014). These cyberphunks met up in small communities to teach each other
hacking tips. It was from the technological developments in the field of cryptography coming
from this community in the 80s that the Bitcoin system would later develop (Karlstrøm 2014).
From the very beginning there was a strong sense of libertarian sentiments among these
cyberphunks, and with time, what seemed as a nerdy hobby, came to resemble more and more
actual “cryptographic activism”. One such example is seen on in the 1992 “crypto anarchic
manifesto”; a letter from a man named Timothy C. May to his hacker-friends from silicon valley.
In it May writes:
“The State will of course try to slow or halt the spread of this technology [Cryptography], citing
national security concerns, use of the technology by drug dealers and tax evaders, and fears of
societal disintegration. Many of these concerns will be valid; crypto anarchy will allow national
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secrets to be trade freely and will allow illicit and stolen materials to be traded. An anonymous
computerized market will even make possible abhorrent markets for assassinations and
extortion. Various criminal and foreign elements will be active users of CryptoNet. But this will
not halt the spread of crypto anarchy.
Just as the technology of printing altered and reduced the power of medieval guilds and the
social power structure, so too will cryptologic methods fundamentally alter the nature of
corporations and of government interference in economic transactions. Combined with
emerging information markets, crypto anarchy will create a liquid market for any and all
material which can be put into words and pictures. And just as a seemingly minor invention like
barbed wire made possible the fencing-off of vast ranches and farms, thus altering forever the
concepts of land and property rights in the frontier West, so too will the seemingly minor
discovery out of an arcane branch of mathematics come to be the wire clippers which dismantle
the barbed wire around intellectual property.
Arise, you have nothing to lose but your barbed wire fences!” (May 1992).
As we mentioned in the theory chapter, many scholars (Maurer 2013, Karlstrøm 2014,
Chowdhury et al. 2013) hold the view that Cryptography can utilised as a tool to challenge state
monopolies and that is indeed how its appears in this letter. It seems natural to assume that
Bitcoin, building on the technological and ideological of fundament of the Cyberphunks, is a
libertarian project and that is indeed the predominant view in more or less all the literature on
the topic that we have read. When navigating the forums at bitcointalk.org, we also found
strong libertarian sentiments and Austrian economic analytical standpoints. It therefore makes
sense to direct our attention to an assessment of this school of thought.
The road to serfdom and denationalized money
Perhaps the most important influential austrian economist was Friedrich A Hayek. As a child,
Hayek had experienced the Austro-hungarian hyperinflation. Early in his career he predicted the
great depression and he ended his career advising Margaret Thatcher. Hayek and Ludwig Von
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Mises are famous for their laissez-faire market apologetics and critique of interventionism,
which they fear will end in authoritarian government and increasingly worsened economic
slumps(Kirzner 2008). The Austrian business cycle theory, in short, posits that central banks,
unlike the market forces, are not able to set the right (or “natural”) interest rate because
market mechanisms are so complex that no one can calculate what the interest rate ought to
be. By setting artificially low interest rates, the central banks are pumping cheap credit into the
economy, which in effect cause malinvestments and lead economies into dramatic busts like
that of the great depression (Kirzner 2008). For this reason, austrian economists are very
sceptic toward any kind of monetary policy, viewing it as not only state interventionism, but as
a road that leads to less freedom for all citizens.
Austrian economics is also relevant because of its view on money and its uncompromising
critique of the monetary system of fiat currencies. In his book; The denationalization of money,
Hayek argued for a complete privatisation of the money supply. By abolishing the central bank
and government monopoly on money, banks and individuals would be able to issue their own
money. This would cause the almost infallible market forces to sort out the best currencies
through competition. The major decisive factor for the competitiveness of a currency is its
stability in value (Brown 1982). This would mean a comeback for commodity money, which
unlike Fiat money, can’t be created out of nothing. Fiat money can simply be printed with the
printing press lever on high. This, Hayek and Mises agree, will create inflation:
“The most important thing to remember is that inflation is not an act of God, that inflation is
not a catastrophe of the elements or a disease that comes like the plague. Inflation is a policy.” (Von Mises, economic policy p. 72)
Besides ending these occasional surges in inflation as governments could not just inflate
themselves out of fiscal troubles, the grant to issue private money would also end
governmental supremacy in restricting capital from moving across borders. Furthermore, it
would not enable the governments to use the same degree of coercion on its citizens (Brown
1982). There is one specific state institution that is the enemy number one: the central bank the very institution that issue fiat currency. Fiat currency removes the constraints on the
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manipulation of money that governments had under the gold standard. The government can
only be constrained again with so-called “sound” money: privately supplied commodity money
with intrinsic value (Velde & Weber 2008). It is only the money supply of sound money that
cannot be manipulated, and that would require the abolition of the monopoly on which the fiat
currency regime relies. The battle for freedom against the unjust rule of the state is therefore
about money itself (Hayek 1976).
Bitcoin could be the very currency that Hayek speculated of. Its advocates emphasize both its
stability in inflation (or its pseudo-stability), and its ability to wrestle economic hegemonic
power out of the hands of governments and banks (Maurer 2013), but most of all: its
“soundness”.
It is not uncommon to hear this line of reasoning from people in the Bitcoin world. Bitcoin has
the potential to become a game-changer, and could be regarded as the next step in an
“evolution of money” (Maurer 2013) that will allow some groups to challenge state monetary
hegemony.
The question then is how this austrian economic view on money mixed with the cryptographic
technology on private communication are reflected in the design of the Bitcoin system. In order
to answer this question, we must take a look at the central features of Bitcoin.
Central features of the Bitcoin system
Before we start to go into the economical feature of the Bitcoin system we take a closer look at
the nuts and bolts of the transaction process, which is essentially the basis of the system. The
following explanation will be using a very vivid language, because we are not computer
scientists. However it is important to note the properties only real manifestation in the physical
world is through electrical impulses i.e. one’s and zero’s, in a computer.
At the center of it all we have the Blockchain, this as the name suggest is essentially a chain of
blocks. The blocks are aligned according to the order by which they are solved. Now the word
solved is by no means random, as each block consists of several mathematical equations, called
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hashes. These hashes contain the information needed to verify a transaction, that is one
transaction to each hash in a block.

Peer to peer transactions
The currency Bitcoin is based on a system where the act of a payment itself is purely peer to
peer (P2P). The transaction itself is not controlled by anyone as the system is constructed in a
way that makes it unnecessary to go through a third party, such as a bank or an agency (as
paypal), in order to make a payment (Nakamoto, 2009). Bitcoin encloses lower transaction
costs and potentially more liquidity as a payment is supposedly just as fast as sending an e-mail.
The decentralised nature of the Bitcoin system is also what creates the biggest difficulty when it
comes to regulation (Karlstrøm 2014). Without any exact institution responsible, regulators are
faced with a new kind of challenge (Filippa 2014). We will discuss the implications of this in
depth more depth in chapter 6.

The system and the software
Just as the transactions are facilitated by no-one in particular, the central Bitcoin system is not
controlled by any entity or institution (such as a central bank) which is the reason Bitcoin is
being called a decentralized currency (International Business Times 2014). In place of the
human institution in charge of the creation of the Bitcoin, the ledger (a public accounting book)
is a part of the blockchain - the central pillar of the Bitcoin system. The ledger serves to account
and verify all financial transactions made in Bitcoin (Nakamoto 2009), and therefore acts as a
recorder of all bitcoin transactions as well as the guarantee of their validity. At the same time
the ledger can also be perceived as a kind of server, a network in which anyone can join in.
The accessibility of the network is due to a piece of software called Bitcoin Core (Khan Academy
2014). It currently operates on version 0.9.1 as of 08-04-14, and is published under the MIT
license (Open Source Initiative 2014). Consequently, no one owns the Bitcoin Core. This has
some interesting consequences: there is nothing to suggest that Bitcoin Core or the associated
protocol is completely developed or ever will be. It can be said to be in a constant so-called
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beta state. Because of this, Bitcoin as a whole might change. Although anybody, under the MIT
license, can make changes to the source code of the software, it will only be implemented
when a majority of the network has adopted the updated version of the software. The Bitcoin
network is therefore a complex social, yet impersonal network in which everyone with the skills
and the will can join in and develop (Maurer 2013).

Mining and money supply
The money supply of the Bitcoin system is dependent on the action of “mining” bitcoins. They
are rewards given for solving the hashes in the block chain. To state it more simple: bitcoins are
created when the cryptographic codes that make up the validation process of all transactions in
the system are solved (Nakamoto 2009).
This is a very important feature of the Bitcoin that bears strong resemblances to the economics
of the gold standard (Maurer 2013). There is a huge difference between the kind of mining
required to obtain gold and the kind of mining required to “mine” a bitcoin by solving a block of
cryptographic riddles. Nevertheless, both processes requires labor, which again requires energy
or resources. The mining of actual gold may require human effort, but “In our case, it is CPU
time and electricity that is expended” (Nakamoto 2009, P. 4).
Therefore the choice of words is not coincidental: “mining” should be regarded as a reference
to the gold standard (Maurer 2013). This is what Bill Maurer refer to as bitcoin’s “digital
metallism”. Bitcoin is a sort of return to the gold standard in the sense that it has an inherent
value and the debate among Bitcoin advocates thus bear strong parallels to certain aspects of
the debate for and against the gold standard.
A question to be raised then is why anyone would support the gold standard over a fiat
currency. One primary idea of the gold standard is to fix the quantity of money, by securing its
issues to a rare resource – for example gold. Money has been secured this way in the past,
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either to precious metals as coins were made of these metals, or as receipts that were
exchangeable for a prefixed measure of the metal (Colander 2013). Gold standard and Bitcoin
advocates alike believe it is imperative to have a fixed supply of money, and indeed the supply
of bitcoins is fixed. It is fixed through the solution of blocks, which happens about every ten
minutes (bitcoin.org). It is also this aspect of Bitcoin that, to its advocates, resembles sound
money.
It is also this process of creating money that stands in stark contrast to that of fiat currencies,
where the supply of money is altered and manipulated by the monetary policy of the central
bank (Colander 2013).
With time, the difficulty of mining Bitcoins has increased as these cryptographic protocols are
becoming ever more complex as it has to match the computing capacity. The so-called mining
computers are computers whose sole purpose is to solve the cryptographic riddles that are
required for the validating-process to be completed. These computers have experienced an
evolution in mining, giving rise to computers specialized in the task. Despite the improvements
in mining computers, those cryptographic codes that it takes to solve a block are also becoming
more difficult. Consequently, the mining industry is increasingly resembling more and more
economies of scale (Maurer 2013). The system is designed in a way that ensures that the
complexity of the cryptographic protocols are matching those of the aggregate processor
power.
3. Bitcoin’s functionality
Now that we have explained the central features of the Bitcoin system, we wish to evaluate
Bitcoin on the foundation of the criteria of traditional currencies being as explained in our
theory chapter: a means of exchange, store of value and unit of account.
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As means of exchange
As a means of exchange the single biggest challenge facing bitcoins is that it is hardly accepted
by any merchants and are therefore said to be very illiquid in practice (Chowdhury et al 2013).
It is unclear exactly how widely bitcoin is used and it is therefore also very difficult to determine
exactly how liquid bitcoins are. Nevertheless, by using a combination of data from Bitpay and
Coinmap it is possible to get an idea of how widespread the use of bitcoins is. The payments
firm, Bitpay, claims to have more than 30000 different businesses and charities accepting
bitcoins and through Coinmap (Coinmap 2014) we receive a visual representation of where in
the world they are accepted. Coinmap currently has 4410 (18-05-14) listed bitcoin accepting
locations. It is therefore clear to us that the general acceptability that normally gives money its
liquidity is not very present in the case of Bitcoins. This seriously damages Bitcoins practical
usability.

As a unit of account
When assessing Bitcoin’s function as a unit of account, there are two main points that we will
present here. Again, as with using Bitcoins as a medium of exchange, there seems to be no
inherent problem with using bitcoins as a unit of account. Yet, it becomes a problem that their
use is still very limited and it is therefore very hard to be sure that it can be used to compare
prices (Chowdhury et al 2013).

As a store of value
On the matter of Bitcoins as a store value, things such as the safety of storage and the risks
involved ought to be considered. Bitcoins are stored in electronic wallets, which is simply a file
containing information about key pairs, transaction preferences, default and reserve key,
accounts, version number and key pool (Bitcoin Wikia, 2014). This wallet can be denominated
to be the place of materialization for Bitcoin.
The content of the wallet is the proof of ownership and as such this is what is to be kept safe.
this can be done in a number of ways, both virtual and physical. The most common way that
wallets, i.e. Bitcoins, are lost is through user errors. This is similar to dropping money on the
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street. None of these create any considerable or unique problems for Bitcoins as a store of
value.
Conclusion
Bitcoin has the following properties which distincts it from any fiat currency:
1) Bitcoin’s value is bound up on something outside itself. The process of mining is a reference
to the mining of gold, and is therefore a return to a digital version of the gold standard. Instead
of digging through hard ground, a miner of bitcoin dig through incredibly complicated
cryptographic protocols that make up the verification process system itself. In many ways the
debate between bitcoin and fiat currency is parallel to the debate between gold standard
economics and fiat currency. However, it is important to state that bitcoin is not backed by
anything other than energy needed for its mining, and in this sense it’s value still rely on social
conventions in some sense.
2) The supply of bitcoin is fixed: bitcoins are released as the blocks that make up the block chain
are solved. This is a major point of contrast to fiat currency which is created out of debt or
simply printed. It also means that inflation, understood as the production of money, according
to Bitcoin advocates, can be kept in check.
Bitcoin works with varying degrees of success as a means of exchange, a store of value and a
unit of account. The major challenge facing Bitcoin as a functional currency is its volatility in
value as well as its general acceptance. Its price (not to be confused with its value) is dependent
on the demand and supply and is therefore often subject to speculation. What we can deduce
from these findings is that Bitcoin lacks in practical functionality and not in theory. (Appendix
6).
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The Bitcoin system is completely decentralised. Instead of a central monetary institution there
is nothing more than a ledger that records every transaction and ensures that double spending
can not occur.
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Chapter 5: Bitcoin in Argentina
Introduction
Argentina used to be one of the richest countries in the world (The Economist 2014b) with its
peak in 1914 after over 40 years with an average growth of 6%. Back then, Argentina’s gross
domestic product per capita topped that of France, Italy and several other European countries.
The question is: what went wrong? The last century of the country’s history has been marked
by military coups and a level of economic output per capita that has been continually
converging with the rest of its historically much poorer region. Although Argentina has been a
democracy for over 30 years, it has not seemed to stabilise the situation much. The political
economy of the country has gone from extreme neoliberal reforms to heavy state control.
Applying the metaphor of the pendulum seems to be fit, as Argentina’s economy tends to swing
from one extreme to another. We do not want to go more in-depth with the history of the
country here, but it is important to understand how Argentina’s last one hundred years have
been a story of turmoil which has left its mark on the country, both economically, politically and
culturally. Traditionally, Argentina has been a country of weak institutions whose decisions
primarily focused on short-term problems and certain of the country’s divided interest groups
(The Economist 2014b). “For Argentina, problems are largely unique and very much domestic.
They are the consequence of many years of self-inflicted policies that have led to an unstable
macroeconomic environment and, even worse, social uprising.” (Vuletin & Puzuelo 2014).
One interesting mark of the tumultuous history of Argentina is visible in the history of
alternative economic systems. The first alternative Argentine currencies came into existence
when the province of la Salta issued its own circulated bond in 1985. One year later all of its
surrounding provinces invented their own currencies as well. This was a time that bears huge
parallels to the present: the Argentine legal tender, the peso, was also inflationary. Despite, or
maybe because of this, the government actually tolerated the existence of these alternative
communities. There have also been other examples of alternative Argentine currency-systems,
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such as the ironic “nodine” (no dinero), an absurd sort of “social” currency that would refer to
what was perceived as money’s inherent function of dehumanising exchange (Pearson 2003).
The crisis of 2001 opened up for larger alternative networks of economic bartering in which the
legal tender of Argentina was not used, but people met in “clubs” of informal networks called
Club Global de treque to barter. These barter clubs all had their own set of rules, but they were
usually quite formal. They were in many ways quite smart: you came with what you could, and
then people exchanged whatever they had for a number of hours (Pearson 2003).
It seems as if Argentina has past experiences with failing currencies and a tradition for utilising
alternative monetary systems when the legal tender fails. What we are witnessing today, does
in many ways resemble a mere continuation of this tradition that has marked Argentine
monetary culture. Argentina’s population has more than any other country had a culture for
adopting alternative social money systems.
Today, the most interesting case for Argentina is Bitcoin. The most interesting case for Bitcoin is
also Argentina, as the country faces some rather unique challenges in its monetary issues that
enable alternative currencies to be more competitive with the country’s fiat currency.
State of Argentina’s economy
In recent years, Argentina’s growth rates have been quite high (World Bank 2014). The
government has invested heavily in social institutions, particularly those tied to education and
health care. Last year the growth in debt rose with around 2,5% to gross domestic product. Of
course, whether such debt-rates are actually a problem at all is a debate in itself. Still, most
western countries run government deficits much higher. Thus, by some measures, the
Argentinian economy is actually doing well enough.
Nevertheless, there are major problems: skyrocketing Inflation, currency devaluations and
depleting foreign reserves (Vuletin & Puzuelo 2014). What severely worsens the already
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problematic situation of Argentina is the unreliability of the government when it comes to
dealing with these problems in a serious way. For the last ten years, unofficial inflation
measures (by the financial firm Pricestats) have shown inflation rates more than double the
value of the official measures. This has caused much critique of the Argentine government for
evading, rather than addressing, the issue. For instance, the Argentine bureau of statistics,
INDEC, has been accused of measuring the inflation rates with a cherry-picked basket, in order
for the inflation rates to look as low as possible (Economist 2014a, IMF 2013). This has caused a
crisis between Argentina and the IMF in which Argentina has been threatened with expulsion if
INDEC did not start using proper measuring methods, and stopped threatening unofficial
inflation measuring groups (Economist 2014a). This threat worked, and in February INDEC
adjusted its basket of goods to better measure the actual rates of inflation. This resulted in the
highest inflation rates for more than a decade (appendix 4).
The power relation between the Argentine central bank and the government shifted in 2012,
when a new monetary reform was passed by the senate. This reform gives the government an
unlimited ability to use the central banks foreign currency reserve, to e.g. pay of its debts
(Business Insider 2012). This combined with the governments unreliable history, does not
make the situation any less problematic.

Devaluation of Argentine peso
As explained, the Argentine peso has for decades experienced multiple oscillations regarding its
value. The financial crisis of 2001, also called “The Argentine Great Depression”, had political
and economic impacts that resulted in the end of the peso’s fixed exchange rate and caused a
devaluation of the Argentine peso, having a lot of consequences for the life of the economy
(Kehoe 2007). This event, like in the current situation, resulted in the rise of some of those
alternative currencies and barter networks that we quickly discussed in the intro to this
chapter.
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Early 2014, the currency devalued even further. It was the biggest devaluation since 2002
(Vuletin & Puzuelo 2014). A positive feature of the devaluation of the peso was of course the
easy payback to the actual external debt, and the improvement in the balance of payments in
which there is a boom in the exports and a decrease of the imports (as for the outside countries
some Argentine products are cheap, but for the Argentinian people it is expensive to travel or
buy products from the foreign countries). A positive balance of payments is a good symbol for
an economy (Kehoe 2007). The inflation has created a chain of expectations which results in
even more inflation, severely hurting almost every Argentine’s Purchase Power parity.

Demand for dollars
The devaluations and high inflation rates have caused the demand for US dollars to rise, as the
trust in the Argentine peso plummeted dramatically. The reason is obvious: the peso has for
long not been considered a stable currency, and is therefore less and less fit as a store of value
(Economist 2012). In the beginning, it was allowed for people with a monthly income of over
900 US dollars in pesos to save up in US dollars. However, as the government under President
Christina Kirchner, had sold up too much of its reserve currency the exchange rate on dollars
rose dramatically (Vuletin & Puzuelo 2014). This unsustainable situation of excess demand for
dollars mixed with the lack of supply, created a large black market for dollars, the so-called
“blue dollars market”. The inflationary peso was simply not demanded - people wanted to use
alternative currencies to store their wealth.
In order to guard itself against capital flight, the government of Argentina started out by making
illegal all selling of dollars, unless bought from a government agency.
Typically, an Argentine citizen could only buy dollars in case of travel, given that they presented
both tax identification number and informed exactly where they were going, and for how long
time (Economist 2012). Shortly after introducing these laws, the Argentine
government imposed a 15% tax on credit card transfers abroad (Bloomberg 2014) and a 50%
tariff on all imported goods. Furthermore, the legislation made it possible for tax officials to
surveil personal banking detail to an unprecedented extent (Salerno 2014).
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The intentions of these policies are quite clear: by this sort of regulation, the Argentine
government wants Argentine money to stay inside the country. The government simply seeks
to force people to save up in pesos by banning the trade of dollars and other foreign currencies.
This has proven not to be so easy. Last summer, the price of the blue dollar topped at a black
market exchange rate of 70% higher than the official exchange rate (Vuletin & Puzuelo 2014),
indicating that the harder it is to obtain dollars legally, the heavier the demand for blue dollars
in the country seems to become. In general, this has caused a perfect storm: Increasing
governmental control fuelling the market for blue dollars.
Argentina’s governments haven’t proven to be able to normalise the situation. Instead it has
implemented short-sighted policies that have only created a more unstable economic
environment, resulting in large-scale social protests (The Guardian 2014). It is out of this
context that a bitcoin economy is slowly growing.
What may almost seem as a necessity of adopting alternatives to the Argentine peso is the
reason we believe there is a certain propensity for Argentines to implement Bitcoin.
Use of Bitcoin
According to statistics from The Genesis Block, a Bitcoin market analysis company, Argentina’s
share of global trade in bitcoins rose from 0,7% in March 2013 to 3% by July same year (Stacke
2013). What is interesting to note, is how the blue dollar market exchange rate peaked during
this period too. There may therefore be a connection between the events in the wider society
and the adoption of alternatives to the peso, including both Dollars and Bitcoin. While dollars
can be restricted (yet not always succesfully), bitcoin is still legal (Bitlegal 2014).
Another statistic from the Bitcoin market, Localbitcoins.com shows that Bitcoin is indeed in
demand in Argentina (Appendix 5).
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The fact that the bitcoin market is growing is made apparent on the social media and on the
Internet, where the Argentine bitcoin community seems quite active. The trade with bitcoin
happens over several online markets in Argentina such as Localbitcoins.com, or through an
organisation like Fundacion Bitcoin Argentina. It can be used for much online shopping, for
instance MercadoLibre, which is a company owned by Ebay.
Reasons for the use of Bitcoin
After having discussed the context of the Argentine economy, established that there is actually
a market for Bitcoin in the country and argued why there is a connection between these two,
we want to turn our focus towards whether Bitcoin is actually a social rebellion against central
Argentine institutions. To answer this question we have used a structured interview and a
questionnaire which we shared on some Argentine bitcoin social media groups, primarily on
facebook. The questionnaire was individual and it was asking about personal opinions, beliefs
and actions. We did this in order to acknowledge what motivates Bitcoin users. What we found
was that the explanations of the use of bitcoin could be put into three categories being: (1)
Ideological reasons, (2) practical reasons related to Argentina’s domestic monetary situation
and (3) Speculative reasons. However, these reasons are not exclusive. The way we see it, they
can easily go together, but do not necessarily have to.

Ideological reasons
We first interviewed Gabriel, an Argentine IT-worker who trades and uses Bitcoin. Gabriel
started out by downloading a Bitcoin wallet and some client programs for transferring Bitcoins.
At the same time he started studying some economics out of the context of Bitcoin, which he
believed was carrying potential to change the economic and political landscape of his country.
Bitcoin, Gabriel told us, caught his interest because it appealed to his libertarian economic and
political views. When he was asked whether he believed that the majority of other Bitcoin users
were libertarians of some sort he answered: “Anarchists and anarcho-capitalists, and
libertarians, yes. It is much easier to understand the Bitcoin phenomenon coming from that
background. These people are against the central banks. It is to understand the power and
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potential of Bitcoin; from our point of view. We want Bitcoin to triumph because it challenges
“the playing rules” of the financial monopoly on a global level. Many people want Bitcoin to
triumph because of its technical aspects; others for the ideological aspects. Others, like me,
want both.”
When asked about which characteristic of Bitcoin users found most important, the most chosen
answer in our questionnaire was that Bitcoin “challenges the authority of banks and
governments” being 44,44% of the answers (8 people) (Appendix 1.7). Indeed, this confirms the
importance of a sense of ideology in the bitcoin community. Not completely however, as the
second most important characteristic being 22,22% of the polled (4 people) who chose that the
most important characteristic was less transaction costs. To learn about the way Bitcoin users
perceive themselves, we asked them to tell us whether they had any friends who also used
Bitcoin. The majority (83%) answered yes. This might indicate that Bitcoin spreads through
social relations. However, when asked whether the respondents perceived Bitcoin as a
community, the answers didn’t enable us to identify any clear tendency.
This rebellious aspect of Bitcoin is what attracts those Utopian in spirit. Gabriel speaks about
the global potential of Bitcoin and thinks of it as a revolution: the government, he told us, is a
self-instated, god-like figure. Bitcoin is the first tool that provides the means to avoid these
central institutions and therefore it is the challenge to them. This is the revolutionary, visionary
aspect of Bitcoin.

Practical reasons
Yet, at the same time Gabriel clearly attributed the extent of usage of Bitcoin in Argentina to
those domestic factors that are rather unique:
“It [the political and economic issues in Argentina] is one of the main reasons Bitcoin has had
more success in Argentina than other place. Especially because of the inability to exchange the
Argentine pesos to the US Dollars. People want to avoid Argentine pesos because they are
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devaluing constantly and is the “bad currency”. The economic tendencies speaking about good
currencies and bad currencies explain that the good currencies are those used for saving. Bad
ones are those people want to get rid off. The Argentine peso is a bad currency. Also, the
government isn’t saying the truth about the inflation rate, even though they may say so.”
The importance of the economic situation in Argentina was also evident in our polls. We wrote
some statements in which the respondents could choose to agree or disagree with that
statement. 76.47% ( 13 people) believed that restrictions for exchanging currencies was an
important reason for the adoption on the use of Bitcoin, even though only 23.53 % (4 people)
of those polled believe that Bitcoin is more stable than the Argentine peso. 82.35 % (14 people)
(Appendix 1.8) agreed that Bitcoin was getting more popular in Argentina. So although there
may seem to be certain ideological reasons for using Bitcoin, its growth and usage is heavily
formed by the context of the surrounding social world and political landscape.
The FIP (Federal Institution of Public money) is restricting the exchange capabilities to other
currencies from the Argentine peso. This institution determines what amount of dollars are
allowed to exchange. Bitcoin enabled easy exchange of currencies and with lower costs, and
the Argentines who know Bitcoin get more benefits than most Bitcoin users, because of the
hard restrictions and costs the government dictates while not using Bitcoin. Bitcoin definitely
allows an easier and absolutely cheaper alternative way of changing Pesos to the
USD. However, when asked the question: “do you use bitcoins in your everyday life?”, 39,9% of
the respondents of our questionnaire answered yes. We were actually surprised by this
number, as it indicates that it to some extent is possible to use bitcoin in everyday activities.
The significance of this is that the social convention needed for a currency to survive and thrive
actually, according to this data, is present. However, we did not define everyday activities, and
this proves that we actually do not know what kind of things the bitcoins were used for.
Although the government is trying to hide the tremendous inflation rates, people’s
expectations are that inflation will continue, as well as further devaluations of the national
currency. Bitcoin might lose value, but some like Gabriel, believe that it will not devalue as
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much as the Argentine peso, even though the Bitcoin is volatile in price. It is possibly a better
store of value than the Argentine peso. The results from our questionnaire show that 82.35 %
(14 people) of those who used Bitcoin for the reason “protecting money from devaluation” gave
an importance of 4-5 points, thus being one of the most important reason for owning Bitcoins.
(Appendix 1.5).
Gabriel made a good point which was that even if the Bitcoin was more stable than the
Argentine peso (which it probably is) people are waiting for Bitcoin to get more stable and get
recognized as a legal currency. This paradoxically shows the dependence that any currency
actually has on those institutions that can establish the social conventions needed for any
means of exchange to become accepted.
So what is happening in Argentina is both a counter-reaction against unjust policies and a larger
ideological movement. Despite this, it will take time, Gabriel believes, for an actual Bitcoin
economy to develop. Bitcoin is not yet widely accepted as a means of exchange, although it is
clearly a growing method of exchange. In Argentina, what people need is a relatively wellfunctioning store of value. This may seem peculiar, as we have stated that Bitcoin is actually a
rather poor store of value. Yet, if the alternatives are limited, a poor store of value is probably
better than a completely dysfunctional store of value. Although Gabriel claims that Bitcoin can
be a better currency for the storing of value, he states the easier reversibility to the USD and to
any other currencies.
From Gabriel’s point of view, fitting very well with what we have studied in previous parts of
this chapter, the Argentines, especially the young, are prepared for new technologies and are
open-minded in spirit. From his point of view, Argentina is mentally and technologically
prepared. Given Argentina’s history with alternative currencies and economic systems, it was in
some sense not surprising that a phenomenon like Bitcoin would have an impact. It also
provides a perfect opportunity for Bitcoin to develop further. Bitcoin is employed in Argentina
more than any other Southern-American country. This being said, Bitcoin is still an underground
phenomenon.
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At last, we have to mention that Bitcoin is also being used as a subject of speculation:
“Saying it shortly, it is from my point of view more stable than the Argentine peso but Bitcoin
doesn’t have price stability either and not having a price stability plays against the Bitcoin as a
means of exchange. The massification of the Bitcoin will occur when the price of Bitcoin becomes
stable and the massification of the Bitcoin would also help to the stabilisation for the price of the
Bitcoin. Sadly, there’s a lot of speculative use in the Bitcoin system nowadays. Many people is
getting to know Bitcoin because it has many advantages, but the biggest use of Bitcoin nowadays is
speculative. It is to say that many people like me and my social circles use Bitcoin as a form for
applying libertarian ideology, and we use it more for buying products or services via internet, we try
to receive payments in Bitcoin.”
Conclusion
In Argentina, Bitcoin is both a necessary and a revolutionary ideological tool.
1) It is necessary as it is one of the last resorts if you want a decent store of value in Argentina.
It is simply perceived as being better than the peso. It is also a way to avoid the capital controls
that the Argentine government has imposed. Some users of Bitcoin use it primarily for this
purpose. Therefore, most Bitcoin users are aware that bitcoins are a risky store of value and
prefer the US dollars, which are much easier to obtain through bitcoins. Bitcoin allows the
Argentines to exchange currencies evading devaluations and having a better as a store of value
- like the US dollar. This act can both be perceived as ideological in itself, because it defies
governmental directives, but it can also be a pragmatic way of saving one’s wealth by
overcoming these restrictions. In many cases, however, it is both.
2) At the same time, the choice to adopt Bitcoin has an ideological dimension to it as well:
Bitcoin is by its users perceived as a tool to wrestle economic power out of the hand of
governments and back into those of “the people”. This is what makes it an ideological weapon.
The fact that Bitcoin is a challenge to state power proved to be one of the major reasons why
people chose to use it.This is the aspect of Bitcoin that attracts the libertarian spirits, and what
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we found was that many Bitcoin users are exactly that. This statement is backed up with our
general findings from the questionnaire (Appendix 2).
What we can say from our findings, is that people with libertarian worldviews most likely has
the tendency to be more fascinated by Bitcoin and see better reason embrace it.
Despite this, many Bitcoin users are users because of the desire for personal profit (Appendix
1.5). Bitcoin trading can also be understood many times as a speculative act. Being critical to
our findings, we believe that people normally don’t like to say that they are speculators. We
mean that although 66.66% (12 people) of those polled gave 4 to 5 points importance to the
act of speculation and earning personal profits, we see the possibility that many do not want to
recognize that the real reason for using Bitcoins is speculative. This fact can be understood as
“social desirability bias”, in which the perception of the social desirability of an answer can have
an effect on the respondent’s answer (Bryman 2012).
The increased usage of Bitcoin in Argentina can largely be attributed to the economic and
political issues that the country faces, but so can distrust in public institutions for the most part.
“There is no top-down process in the Bitcoin system, so in that sense all the users are equal with
the same “playing rules”” - Gabriel (Appendix 3).
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Chapter 6: Bitcoin’s challenge to the hierarchy of money
The social organization of money
As we presented in the theory chapter, money is a social organisation in a sociological sense: it
is the medium of most of the economic interaction on which our society relies. It is the clearing
mechanism, that allows us to meet the coincidences of want. Most people spend their whole
life chasing money, yet they will never have enough of it. Although money is actually not scarce
it still seems as such to most people. Money is one of the most crucial social constructions in
our lives and to our civilisation: it brings into play both the human capacity for destruction and
creativity.
In the national capitalist political economic system of today, money is also a hierarchical
political structure. As described in our theory chapter, the legal tender is issued by a monetary
authority, often the central bank. Often however, the specific monetary policy is decided in the
executive branch of the government in order to meet certain economic and social goals.
Money is never neutral, and which form of money is the best is a question of ethics,
functionality and perhaps most of all which goals an economy should serve in the society. The
current monetary system, many libertarians claim, comes with a certain political and social
order that is not desirable. For example controlling the money supply places fewer constraints
on the state, which, according to many libertarians, has a tendency to invade spheres to which
it does not belong. Wars for instance, would be more difficult to fight under a gold standard,
where the debt of the war couldn’t just be repaid by printing more money (Tobin 2008).
Ideology of Bitcoin
In chapter 4, we argued how the decentralised aspects of the Bitcoin system is exactly an
attempt to create a technical alternative to a central bank and the hierarchical structure of fiat
money. One imperative to do so, a common austrian critique sounds (Kirzner 2008), is the
central bank’s inability to calculate the interest rate equilibrium. Therefore, even if they are
well-meaning, central banks will necessarily cause booms and busts by pricing money wrongly.
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In the case of Argentina it was not necessarily the interest rates that were to blame, but the
economic situation was still inflationary, due to devaluations etc, and were thus related to
governance failures.
But the ideology goes, as we know, even further than that. Even if a central bank could, by
coincidence, exert effective monetary policy, it would still be morally wrong to even have one in
the first place. Libertarianism, claims that the act of taxation is an attack on the freedom of a
sovereign individual and therefore categorically wrong (Friedman 2008).
This philosophy and its economic equivalent indeed played a primary role in Bitcoins adoption
in Argentina even though it was helped very well underway by the country’s political and
economic circumstances, consequently reducing the trust in the governments ability to manage
the economy. To libertarians it became just more obvious, in Hayek’s words, that: “Practically
all governments of history have used their exclusive power to issue money in order to defraud
and plunder the people” (Hayek 1976, p.
18).
Our overall impression with the Bitcoin community in Argentina suggests that the vast majority
of the community held some sort of Libertarian, anti-state view. We actively searched for a
more left-winged Bitcoin proponent who could maybe even reflect socialist opinion (Anarchosocialism perhaps), but that failed.
The intentions behind the Bitcoin community
The nature of Bitcoin is such that it is in opposition to the kind of money favoured by
institutionalists, Keynesianists and other types of economists who prefer heavy government
management. Because the nature of the Bitcoin system is such that a complete takeover would
be virtually impossible, and as such no central entity can be in control, it stands in a very sharp
contrast to the general practice of the financial sector, where we generally have, although
with varying degrees, state control and monopoly. Nevertheless, we still have to take notice of
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that desire, which Gabriel gave sound to as well, for bitcoins to be generally accepted including by the government.
What we have argued throughout this report is thus that Bitcoin is both in theory and practice a
libertarian project in Argentina and elsewhere. Many Bitcoin proponents are opposed to
governmental monopoly in the creation of money and fractional reserve banking, or just all that
comes out of the fiat currency regime. The Bitcoin system is the tool that enables them to
challenge this monopoly. Furthermore, the peer-to-peer aspect of Bitcoin resembles a reaction
against corporate forces who have, in Bill Maurer’s words, “taken ownership of the act of
transaction itself” (Maurer 2011). The system is also a potential tool which can be utilised for
overcoming capital restrictions and is generally difficult to regulate. It is these functions that
have caused the Argentine population to embrace it.
Difficulty of regulation
Due to its characteristics, the debate about the regulation of Bitcoin outside of Argentina has
seemed to revolve mostly around the buying and selling of illicit goods, money laundering
schemes and so on. This might have something to do with the scandals surrounding silk road.
However, what we are primarily interested in, as the working question states, is whether
Bitcoin can pose a potential threat to governmental sovereignty in economic policy. In
Argentina we saw a clear tendency to avoid government restrictions, and this means that the
government is actually losing some of its sovereignty.
It is possible to regulate Bitcoin. The problem however, is that the system will never be
regulated in the same sense as fiat currencies. Without any center of control or governing body,
who should be held responsible in case something goes wrong or in case the state decides to
shut Bitcoin down for good? The state has the constitutional authority to do so, yet web
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systems have in the past proved rather difficult to shut
down.
The blockchain may be public, but it does not contain any specific names, IP-addresses or
anything similar. It simply shows some codes referring to a person’s Bitcoin address. This may
not be completely anonymous, but the act of unveiling the actual identities of the transacting
peers is rather complicated and can be made further difficult by a so-called anonymisation
service - programs that cloaks the identity of its users even more (Filippa 2014, Twomey 2013).
The Bitcoin system is simply designed to resist attempts of regulation and the collection of
taxes from wealth or income. Even if the legislative power of a country decides to change laws
to ban all kinds of crypto currencies, it would be difficult to track down individual traders and
miners and close to impossible to shut down the Bitcoin system from altogether. It is this fact
that poses what some would call an almost existential threat to many nation-state issued
economic policies (Soltas 2013). The Argentine government is in many ways losing its support in
the population, but it seems to pay a price which is higher than any new government can make
up for: it is losing the control of its monetary system. Not just because of those events, which
some believe are self-inflicted, but because alternative currencies put even heavier pressure on
the states control over its monetary policy.
At its current state, Bitcoin is still used in scale too little to actually pose a serious threat to the
monetary system (Elwell et al 2013). However, there are no doubts that it has the potential to
do so, and there is no doubt that this potential motivates many Bitcoin advocates.
Bitcoin’s effect on the monetary policy would cause the central bank’s to lose several of the
state’s primary current monetary tools.
Consequently, the control over the quantity of money in the economy will be lost. Without this
ability the government would lose its ability to stimulate aggregate demand in the short run in
order to reach its optimal output, or its potential gross domestic product. If the central bank is
no longer able to control money supply to lower or higher interest rates, contractionary and
expansionary monetary policy will be impossible and the economy simply cannot be managed
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as it is today. What is important is to remember that these are some of the most important
tools that are used to stimulate aggregate demand, combating unemployment and obtain a
certain level of growth. With money whose supply is impossible to manipulate, the state will no
longer be able manage the economy, and the social contract between state and citizen, as we
know it now is under pressure. It is fundamentally this social contract that is under attack from
Bitcoin.
State regulation of Bitcoin
It is therefore imperative for nation states to regulate Bitcoin and other crypto currencies, and
there are possible ways to do this. In December, Brazil introduced a cryptocurrency law
allowing the state to tax 15% on capital gains (Filippa 2014). As Bitcoin received legal
recognition, the velocity of bitcoin trading increased rapidly. The legal recognition was actually
positive for the Bitcoin system in (Filippa 2014).
Other countries have done the exact opposite of Brazil: India, Indonesia, Thailand, China and
Russia all seem to take hostile stances toward Bitcoin (Filippa 2014). Countries such as Canada,
Finland and Denmark seem to lean more toward labelling crypto currencies as a sort of
commodity, putting Bitcoin under the same or very similar tax compliance laws as those
covering barter (Filippa 2014).
Despite attempts to regulate Bitcoin for stabilising it, many governments will probably never be
able to fully tame it. The laws may be there and they may even work to a certain extent, but
how will governments ensure that these laws are kept? I.e. how will government will collect
taxes on bitcoins, when the system has as much privacy as it does?
Some would claim that the Bitcoin system itself is quite dependent on some sort of stabilisation
or regulation it is to grow outside the libertarian community. In that sense Bitcoin is better off if
it is being regulated under the law. Gabriel too believes that bitcoins will be generally accepted
if the government or reliable institutions also accept it. Yet, for many Bitcoin users the idea of
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zero regulation is the exact idea of the system, and these people might be difficult to control
due to their liberal standpoint.
The right solution seems to be self-regulation, by an alliance of private Bitcoin companies
analysing the market risks (Filippa 2014). All remaining possible methods seem to focus on the
bitcoin exchange markets; sites where bitcoins are bought and sold.
One possible solution is to track and shut down those sites where these exchanges happen.
However, if there is one thing we know from the battle against internet piracy it is that once a
site is shut down, a new one can easily open a few hours later. The site “Pirate Bay” is a good
example of this.
Other solutions that the government can use to engage with Bitcoin is to try to change the
public perception of it or combat Bitcoin as a sort of financial terrorism. This latter strategy was
employed by the US government when it shut down “E-gold”, an electronic currency that was
convertible to actual gold (FBI 2009). Lastly, a government could decide to regulate Bitcoin on
the same terms as a financial security, which would require regulations of the bitcoin markets
again.
No matter what approach a government would decide to take, it would face difficulties
regulating Bitcoin, and to stand in a situation in which it must choose between regulation,
toleration of Bitcoin or a harder crackdown (as happened in China).
For now, the reaction from Argentina have not been swift. The official website of the Central
Bank of the Argentine Republic has released a public document of an alert: “because of its
increasing interest” that the so called “electronic currencies” are not supported by any
international authorities. We would say that the communication is trying to alert that virtual
currencies are “unreliable”. The Central Bank of the Argentine Republic is also alerting that
they are analyzing some scenarios for verifying that operations with these do not constitute a
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risk for illegal actions (CBRA 2014). However, as explained earlier the action of this institution as
many others, is limited.
Effects of Bitcoin on governments’ ability to regulate
Some believe that Bitcoin and the decentralised crypto currencies are heralding the end of the
present social organisation of money (Hart 2007, Maurer 2013).
However, the complete national economic policy sovereignty has been threatened for a long
time, primarily by globalisation. Financial systems allow capital to move offshore in just a click,
global trade patterns have caused the globalisation of consumption, creating difficulties for
many countries in maintaining the balance of trade and Governments are constrained by tax
competition (Wall 2012). Furthermore, modern financial tools move larger amounts of capital
across borders to an unprecedented level, just by clicking a computer. The evolution of money
has also taken it further away from any materialized value. Global monetary capitalism is
already digitized to a very large extent and has thus removed itself from space and time as it
moves towards ever less material grounding. This was what Simmel had foreseen when he said
that money would become “detached from every substantial value”. It would head even more
towards its perfect concept. This has been particularly obvious in the field of finance, where
trade with derivatives and other complex financial products represent higher levels of
abstractions. The fact that these products are traded globally only makes it more complex to
understand the evolution of money.
The government is thus already constrained in its options in economic policies. Bitcoin merely
adds to the issues that sovereign states face in a globalised world of abstracted power relations.
The Utopian world of Bitcoin
The world that some Bitcoin users seek to create will to a large extent be one in which
everything is decentralised. A world in which technology has enabled the market forces to
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separate itself from the state and to a large degree work as the primary social system of
interaction.
Georg Simmel said that this would be the evolution of money, that money would gradually
become more and more functional in their nature:
“It is not technically feasible to accomplish what is conceptually correct, namely to transform
the money function into a pure token money, and to detach it completely from every
substantial value that limits the quantity of money, even though the actual money suggests that
this will be the final outcome.” (Simmel 2004, page 165)
What does this mean? Money would lose its material substance first. Then its pure concept what people actually need it for - will be revealed. In other words: Money’s function will grow
on the expense of its substance.
We have indeed had an historical abstraction of money: from barter economies with useful
materials to coins to notes, to electronic digits on a computer screen. Money seems more and
more disembedded from any specific location and culture and if Bitcoin heralds the future,
which we cannot say, it will also disembed itself from the state and the social hierarchy of
which it is a part of.
Still, Bitcoin paradoxically seems to go against this complete disembeddedness in one sense,
while towards it in another.
It may be purely digital, computerized and decentral, but it is also scarce and has a sort of
digital metallism. It is a return to the philosophical notion of “sound money” and it is also an
abstraction of economic power away from governments and large corporations. A move
towards a market that will be more independent from the rest of society.
As we mentioned in the theory chapter, technology has changed the empowerment of the
spread of ideas coming from people who want to change existing power structures. In the case
of Bitcoin, the technology has also enabled its proponent to actually implement the change
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they want. In that sense, Bitcoin can be seen as a part of a much larger trend in an abstraction
of power from nation state to groups and individuals in society. One could imagine that the
group that embraced the technological change of the internet the most were the cyberphunks
of the early days of the internet.
But what will the consequences be? And is this desirable?
To answer this question we need to ask ourselves some other questions: what is the goal of the
economy? Is the market supposed to serve social goals or is the government supposed to focus
on facilitating the market? In many ways this is a debate about ideologies: should we obtain the
“highest good for the highest number” or is freedom for the individual more important?
Furthermore, can a completely free market actually ensure social and environmental goals?
Proponents of the really free market will say yes, but institutionalists, Marxists, Keynesianists
and even some Neo-classical economists disagree. The state have always played a major role in
reaching a large trajectory of social goals: the maintaining of public health and institutions,
social security for the needs, preservation of the environment, research and development and
scientific research. How a completely free market would respond to these needs nobody can
really know.
It seems as a sort of utopian dream to believe that simply tearing down all major economic
institutions will somehow create a better world. It is to note the importance of speculation too.
Bitcoin has shown to have a speculative tendency in some periods of time, so it is to note the
perils that a utopian Bitcoin world would confine.
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Chapter 7: Conclusion
To what extent is Bitcoin a counter-reaction to the conventional monetary system?
The point of this research question was to assess whether Bitcoin is in fact a reaction to the
governmental monopoly that creates a hierarchical monetary system
We started out by stating that the features of Bitcoin makes it difficult for any institutions to
exert control of or regulate Bitcoin. This, we claim, goes very well hand in hand with those
libertarian ideologies that oppose the political influence over the market and particularly over
the money supply. Bitcoin itself constitute an alternative to legal tender fiat currencies, where
the money supply cannot be altered or manipulated by anyone at all. Bitcoin is thus, in some
sense, similar to Friedrich A Hayek’s proposal of private money. In general, the central features
of Bitcoin seems to have been influenced by an Austrian economic theoretical framework, and
is therefore compatible with the libertarian ideology.
In our second working question we took a closer look at the case of Argentina in order to know
whether and to what extent its political and economic situation played a role in its citizens
adoption of Bitcoin. We found that it did, and that a majority of those who own bitcoins for one
reason or another often reflected exactly this libertarian ideology. They opposed governmental
monopoly in the creation of money for exactly this reason. It is our understanding that these
people believe that no central entity should have control over a currency which they are forced
to be dependent on for their livelihood, we conceive this as their motivation. Bitcoin is thus
employed as a political weapon to challenge the authority of governmental institutions in the
creation of money.
However, with that said, we also made a number of findings, contributing to our
understanding of Bitcoin:
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From our study of Bitcoin in Argentina we found that Bitcoin grew out of a certain context of
distrust in the central institutions of a country and a necessity of adopting alternatives to the
legal tender.
Bitcoin is also employed for speculative activities in the search for individual profit. This is
hardly surprising, and we will not begin to speculate in their speculation.
It is the opinion of this group that Bitcoin at the time is an experiment and a provocation, and
should not be regarded as a complete monetary system yet.
Further research:
In this report we took a rather narrow look by picking a case study of Argentina. As everything
about crypto currencies is rather new, we thought that this would be our best strategy.
Possible further research on crypto currencies could focus on the ethics and politics of Bitcoin
such as whether it is actually democratic and legitimate to create an alternative currency that
challenges state power instead of trying to gain political influence and change the monetary
system through legislation.
In this project we focused primarily on the role of the state and the central bank, and how their
conduct conflict with certain ideologies. Instead of having this focus, we could have assessed
Bitcoin as a counter-reaction against fractional reserve banking more explicitly. This however,
would have us pick another case study, as the opposition to fractional reserve banking is not a
primary concern in Argentina (although monetary policy and fractional reserve banking are
clearly related).
As time passes, the Bitcoin (or crypto currency) phenomena might develop in other places. For
instance, we have been reading reports about a growing Bitcoin phenomena from Cyprus who
recently had a banking crisis, including bank runs. The same is the case for Greece who also
have had monetary issues. Particularly with our knowledge from this project, there might be a
possibility for certain key variables to appear in these cases.
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In a whole different project, it could be interesting to do research on how the technology of
crypto currencies could be implemented in a national economy. How could nation states utilise
some of the brilliant technical features of these systems for the purpose of economic
development?
In this project we did not discuss the topic of taxation. In a future project we could bring up this
issue and discuss how governments could adjust to difficulties of taxing bitcoin. Governments
will thus have to try to adapt to a more electronic economy, where people are to going “back”
to cash-like systems where tracing individuals is as difficult as ever. Income tax, as we know it
today, may for example become very difficult and the state may have to find alternatives if it
wishes to uphold a certain quality of social security.
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BIBLIOGRAPHY
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Ellwell C. K., Murphy M. Seitzinger M., “Bitcoin: questions, answers and analysis of legal issues”,
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Friedman D. D., “Libertarianism: The New Palgrave Dictionary of Economics”, Second Edition, 2008
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Hart K., “Money is always personal and impersonal”, Anthropology today, Volume 23, October 2007
Hayek F., “Choice in currency: a way to stop inflation”: Institute of Economic Affairs 1976
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“Bitcoin gains traction in Argentina”, Financial Times, April 16, 2013
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Websites
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www.Bitlegal.net, Legal situation of Bitcoin, 25-05-2014
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Appendix 1 Questionnaire
1. Are you currently a resident in Argentina? Yes/No
2. Do you own any Bitcoins? Yes/No
3. Do you use Bitcoins in your everyday life? Yes/No
4. How much of your private economy on scale from 1 to 10 is Bitcoin based?
5. If you own Bitcoins for one or more of these reasons, tick on them and indicate how
important are they (5=very important)

To speculate and obtain personal profits

To avoid capital movement restrictions

To protect your assets from inflation?

Because of distrust towards governmental economic policy

To protect my personal freedom
6. Do you generally believe that the government should decide what kind of money its
citizens should use? Yes/no
7. What is the characteristic of Bitcoin that you think is the most important?

Privacity

Less transaction costs

Value stability in relation to the Argentine peso

Challenging the authority of banks and governments

None of these
8. Tick the boxes you think are true:

I believe that the restrictions while exchanging currencies have importance in
the adoption of the use of Bitcoin

I generally think that the government should decide which currency the citizens
should use

I believe that Bitcoin is more stable than the Argentine peso

I believe Bitcoin is becoming more popular in Argentina
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9. Are you friends with other Bitcoin users? Yes/No
10. Do you conceive Bitcoin as a community that hold the same ideas or beliefs?
Yes/No/Not entirely
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Appendix 2 Coding Schedule Questionnaire
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Appendix 3 interview with Gabriel Drach
Jona: Hi Gabriel, first of all I would say thanks for willing to collaborate to our project.
Gabriel: You are welcome, I think it is very interesting what you are doing and I would like to
help if you need my help. I have plenty of time today too.
Jona: Perfect, let us start then with the interview. What is your education? What are you
working on?
Gabriel: I have no University education but I have 2 higher degrees relating IT, I have been
working as an electronic technician an in the IT world for more than 20 years. Nowadays I’ve
been working in a multinational firm from India and at the same time I’m working for the
expansion of the use Bitcoin and libertarian issues in a political level with other people.
Jona:What is your relationship and experience with Bitcoin?
Gabriel: I started to engage me with Bitcoin for two years ago more or less. In 2010 I
downloaded the official “wallet”, but I didn’t use it. For two years ago I came again to the issue
and I enjoyed because of my political views and the libertarian thinking. When I engaged for
two years ago in Bitcoin I had more background and technical knowledge about economics and
I started to see with more clarity the things Bitcoin entails.
Jona: Do you think that the majority of people that uses Bitcoin have a libertarian ideology?
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Gabriel: Anarchists and anarcho-capitalists, and libertarians, yes. It is much more easy to
understand the Bitcoin phenomenon coming from that background. These are against the
central banks. It is to understand the power and potential of Bitcoin; from our point of view, we
will Bitcoin to triumph for challenging “the playing rules” of the financial monopoly in a global
level. Many people want Bitcoin to triumph for the technical part and some for the ideological
part, some both, like me.
Jona: Are you familiar and acknowledged of the economic and political situation of
Argentina?
Gabriel: Yes, quite a lot, and my social circles are very engaged with the liberal thinking too.
Jona: Do you think that there is economic democracy in Argentina- meaning that people can
decide to devaluate the Argentine peso? Who would you blame for the inflation in
Argentina?
Gabriel: Inflation is a technical consequence of the actions of the central bank. The actual
government is not exclusively failing, they are creating money for “covering up” the financial
holes. The increase of the money supply is the principal cause for the inflation in Argentina.
Other problems are the building of barriers of transactions, the difficulty for exchanging
currencies because the Argentines always saw the dollar as their “refuge”, having them under
the bed or in external banks. There are many restrictions in, FIP (Federal Institution of Public
money) determines what amount of dollars you can buy in relation to your income and the
truth is that anybody knows how this system works.
I can explain the case of some friends I have who had bank accounts of dollars, everything clear
and legal and when they tried to buy Euros because they had to travel to Europe and the same
bank wasn’t allowed to change it for Euros because the FIP system didn’t allow it and they had
to change to Argentine pesos.
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Jona: Why do you think people in Argentina use Bitcoin?
Gabriel: Argentina has a characteristic at a social level, specially the young people, that they are
not mentally limited. There is no that frontier saying “I’ll take what they give me”. In Argentina
people react against what they don’t like and that is one of the reasons that there are many
argentines that emigrate to the U.S. or Europe because of better options. That’s why many new
technologies, in fact there are many new firms that export high quality software from
Argentina. My point is that Argentina is mentally and technologically advanced and adding the
actual economic situation it was expected that a phenomenon like Bitcoin had an impact and
possibility to develop further. Bitcoin is employed in Argentina more than any SouthernAmerican country, and that is true but proportionally, there are many people that doesn’t know
about Bitcoin, but it is rapidly increasing. The last week came me news that there is group of
taxis in Buenos Aires that accepts Bitcoin as payment. There are also some firms in Argentina,
and mostly in Buenos Aires that accept payments in Bitcoins For the “general massificated use,
Bitcoin is limited because
Jona: Do you think that the economic issues that Argentina faces has anything to do with the
reason some people use bitcoin instead of Argentine pesos? To what extent?
Gabriel: Yes, it is one of the main reasons Bitcoin has had more success in Argentina than in
other places. Specially because of the inability to exchange the Argentine pesos to the USD.
People want to evade Argentine pesos because they are devaluing constantly and is the “bad
currency”. The economic tendences speaking about good currencies and bad currencies explain
that the good currencies are those used for save and spare, and the bad ones are those people
want to get rid off. The Argentine peso is bad currency. Furthermore than that, the government
isn’t saying the truth about the inflation rate, even though they say so.
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Jona: Do you think that the restrictions for exchanging currencies will empower the use of
Bitcoin?
Gabriel: Yes, many people are getting to know bitcoin because they are experiencing the
restriction for changing the ARS to the USD. This issue has helped and helps a lot for the
Argentine people to get to know Bitcoin. Bitcoin is volatile, and many people want to save and
spare money in something stable and many people are still afraid of Bitcoin
Jona: Do you think Bitcoin is a more stable currency than the Argentine peso?
Gabriel: It is a difficult question, because the functionality issue is important. Although the ARS
is continuously devaluing rapidly, it doesn’t have fluctuations and is just expected that it will be
devalued, it is the accepted currency. Because of the volatility of the price of the Bitcoin
without having a legal state defined, and unable so far for the mass of people, it is not generally
accepted. A thing is what I think in terms of Bitcoin and if I had to choose between currencies I
would choose Bitcoin every time I could but the reality is that so far the massification of the
Bitcoin has not happened yet. Even though, as said earlier, there are firms and organizations
that accept Bitcoin and it is able to work with Bitcoin but it is not massificated and all the
people earn their income in Argentine pesos. and many try to get rid of them. My opinion is
that Bitcoin is better than the Argentine peso and technically better too, but for the daily use,
people have to use Argentine pesos. Saying it shortly, it is from my point of view more stable
than the Argentine peso but Bitcoin doesn’t have price stability either and not having a price
stability plays against the Bitcoin as a means of exchange. The massification of the Bitcoin will
occur when the price of Bitcoin becomes stable and the massification of the Bitcoin would also
help to the stabilisation for the price of the Bitcoin. Sadly, there’s a lot of speculative use in the
Bitcoin system nowadays. Many people is getting to know Bitcoin because it has many
advantages, but the biggest use of Bitcoin nowadays is speculative. It is to say that many people
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like me and my social circles use Bitcoin as a form for applying libertarian ideology, and we use
it more for buying products or services via internet, we try to receive payments in Bitcoin.
Jona: So you prefer to use Bitcoin if you can rather than ARS?
Gabriel:Yes, absolutely. Just for the fact of contributing in the massification and expansion of
the Bitcoin
Jona: Do you see the possibility of a general use of Bitcoin instead of the ARS? (very
speculative question)
Gabriel: I believe Bitcoin will be expanded and massificated and those who will use Bitcoin will
be people that need to facilitate transactions and the exchange of currencies for travelling,
primarily because these are excessively expensive or in some cases prohibited. In those people
Bitcoin will have an increasingly usage. Another reason is that unfortunately the majority of
Argentines doesn’t have spare ability (because of the devaluation of the ARS) and for this
reason in my opinion there is a bigger chance that the Argentine peso is destroyed than the
Bitcoin being the national currency in Argentina. Bitcoin will never be the national currency but
it will live together with the all other currencies and probably it will be used more commonly
for international transactions rather than local. Bitcoin is expanding in Argentina because of a
means for changing the currency, nowadays it is easy to change from Argentine pesos to
Bitcoins, and from Bitcoins you can change to the USD. This is one of the approaches and
positive characteristics that Bitcoin has.
Jona: How do u conceive Bitcoin? A system? an easy way to make money? A subject? A
hobby? revolution?
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Gabriel: For me bitcoin is a revolution, it is not an economic system in the sense that it doesn’t
impose or restricts anyone. It is a revolution in the use of money, in the transaction of value for
value. Bitcoin is a revolution in the extent of the idea that there is a god, which nowadays is the
“state” that judges everything. Bitcoin, my opinion holds the belief that the commercial
transactions are the ones that judge who has the power, and the same reason is why economic
institutions are created. Bitcoin challenges this power, of a central institution. Bitcoin helps to
skip the values of third entities, and the value Bitcoin has is the value people gives and the use
it has. Bitcoin has use value, and is the value that every currency should have. Bitcoin is just
another currency that needs people to accept it, but has more positive characteristics. It is a
revolution too because it comes to the principles of money without any institution agreeing.
Jona: Do u conceive Bitcoin as a community? Is it a community that holds the same ideas or
beliefs?
Gabriel: It is a community but there is no general common beliefs. In the libertarian ideology is
where the discussions become more ferocious. I don’t know if in that sense is a community. For
being something new there will be a group of people that joins and gets closer and in that
extent is a community and is expanding rapidly in the amount but the people that is joining
right now doesn’t have the technical nor economic nor political background needed for finding
out the revolution that it really is. Although they can see the practical issues of the Bitcoin.
People tends to see more the practical things. People wants solutions to the daily problems.
The massification of Bitcoin is given to the practicality of its use rather than being against the
central bank. Actually the majority of people think that there has to be a central bank that helps
all of them in the critical situations. Many of the reasons people doesn’t use Bitcoin is because
the governmental institutions haven’t given Bitcoin a legal status, even though it doesn’t matter
because it works anyways, People is expecting that the actual God which is the state judges if
Bitcoin is good or bad.
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The Bachelor Study Programme in Social Science
Jona: Do you think that Bitcoin can be “a subjective expression of the own will for challenging
remote authorities”? (Keith Hart)
.
Gabriel: In my opinion it is a consequence of Bitcoin, no the cause. I don’t think that Bitcoin has
been created with the idea of changing the economic system tyrannical in which we are
situated. Bitcoin is coming to the base of what money is. Bitcoin has characteristics that makes
it very precious, but if anyone accepts bitcoin, bitcoin doesn’t have value.
Jona:How do you see Bitcoin in terms of society? Can you see Bitcoin as potential for
decreasing “inequality”? (Simmel)?
.
Gabriel: From the libertarian point of view economic inequality will always exist so far, even
though two people produce absolutely the same thing, the value of that thing will always be
different. The only equality that should exist is the equality in terms of law regarding
employment contracts. If you look at the poorest countries, or those countries where people
suffer most poverty, you might found out that what it isn’t there is liberty. Liberty for doing
whatever they like from their production, and earn what they want from it. A person that
doesn’t want to work will be poorer than a person that does want to work, there will be an
economic inequality. I’m not concerned that much in the inequality but the frontiers for anyone
to develop. Bitcoin helps to remove frontiers for those who really are hard-working.
At the same time it allows low-cost transactions. A case I know and has been discussed it
Bitcointalk is that there was a person who transferred money (in Bitcoins) to Africa without
almost any costs, while transferring through Western Union it will have costed him around 40%
of the money he would transfer. And these transfers can of course create more economic
equality to some extent.
Jona: Do you think Bitcoin can help to create a better world?
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The Bachelor Study Programme in Social Science
Do you think Bitcoin will create a different relationship between governments, banks and
citizens? In what way?
.
Gabriel: I think Bitcoin will definitely help to lower the transaction and currency exchange costs
around the world. If I was the boss of Western Union, I would be very worried. I don’t care that
much what currency I send from a place to another but the costs they are charging and Bitcoin
helps a lot in that matter, specially for those that doesn’t have that much. People who are living
in Argentina and knows Bitcoin, they stay in Bitcoin, as a means of currency exchange and
better store of value in relation to the ARS. Even though the Bitcoin devalues and is volatile, it is
more safe from devaluing than the ARS. This does not only happen in Argentina and will not
only happen in Argentina and the best characteristic is that the states can not build a barrier for
that. When Bitcoin gets accepted socially and massively, the state can not control it. In my
opinion the states will have to say how they want to work with Bitcoin. The most acknowledged
ones are trying to charge Bitcoins with taxes, accepted not as money, but as a commodity.
Bitcoin is not anonymous, is pseudonymous, when they can relate a person with a Bitcoin
account it is possible to follow tracks and what the person has done with Bitcoins.
//
Jona: Well Gabriel, I will say that the interview is over. You have been very helpful and I have
enjoyed very much this interview.
.
Gabriel: Thanks, I have enjoyed it very much too. I hope you have luck with your project and I’m
looking forward to see it.
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Roskilde University
The Bachelor Study Programme in Social Science
Appendix 4
(Source: INDEC vs. Pricestats.org, graphic made by the Economist)
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Roskilde University
The Bachelor Study Programme in Social Science
Appendix 5
(Data from, Localbitcoins.com, 2013)
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Roskilde University
The Bachelor Study Programme in Social Science
Appendix 6
80
Roskilde Universitet
Den samfundsvidenskabelige bacheloruddannelse
Roskilde University
The Bachelor Study Programme in Social Science
(Data from,
http://bitcoincharts.com/charts/chart.png?width=939.6666660000001&m=bitstampUSD&Sub
mitButton=Draw&r=730&i=Daily&c=0&s=&e=&Prev=&Next=&t=S&b=&a1=&m1=10&a2=&m2=
25&x=0&i1=&i2=&i3=&i4=&v=1&cv=0&ps=0&l=0&p=0&, 29-05-2014)
Appendix 7
Summary
This project revolves around Bitcoin, a crypto currency that was created in 2009 by a developer
under the pseudonym, Satoshi Nakamoto.
The project’s focus is on Bitcoin as a reaction against the role of the state in the creation of
money. It focuses in particular on Argentina, a country whose population has adopted bitcoin in
large part due to a failed monetary policy. After presenting our findings from Argentina, we
discuss in more broad terms, what the implications of our findings are for the state’s ability to
control its monetary policy itself, and what this means for the role of the state in the creation of
money.
The project has been divided into 6 chapters and a conclusion:

Chapter 1: Introduction
In the introduction chapter we present the Bitcoin phenomenon and our problem area. Some
of Bitcoin’s features are briefly presented and we formulate our research question and working
questions.

Chapter 2:Methods chapter
In the methods chapter we discuss our choice of methodology for the project. We discuss how
our research takes form and critically assess the methods we have used.

Chapter 3: Theory chapter
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Roskilde Universitet
Den samfundsvidenskabelige bacheloruddannelse
Roskilde University
The Bachelor Study Programme in Social Science
In the theory chapter we present a brief discussion of money such as its usage, history,
importance for the social order and how it is affected by the technological evolution. In this
chapter, an explanation of some central concepts are also presented in order to help
our readers understand.

Chapter 4: Distinguishable properties of Bitcoin
In this chapter we analyze the Bitcoin system more in depth. We look at its ideological roots
and argue how some central features of the Bitcoin system have been affected by particularly
an Austrian economic theoretical framework. We analyze Bitcoin from a theoretical standpoint
too, looking at its functionality as a means of exchange, as a store of value and as a unit of
account.

Chapter 5: Bitcoin in Argentina
In this chapter we introduce Argentina’s economic situation, whose national currency is marked
by inflation and devaluations. We show how this has boosted the black market demand for
alternative currencies and argue for a relation between the increase of Bitcoin users in
Argentina and the country’s economic situation. In this chapter we take a closer at Argentine
Bitcoin users, what motivates them and what their opinions and political standpoints are, and
what that has to do with monetary policy.

Chapter 6: Bitcoin’s challenge to the hierarchy of money
In this chapter we discuss our findings from the two previous chapters and put it in relation to
our research question. Here, we will also discuss the difficulties of regulating bitcoin, and
discuss the intentions of many Bitcoin users in this light-
All these chapters help us reach our conclusion, that Bitcoin is a reaction against the
conventional monetary system. After concluding this we bring in a few ideas for relevant future
studies
The project is primarily in the fields of economics and sociology.
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