The world is turning digital. As the world goes, so goes the money. But will the decline of physical cash create new opportunities for human flourishing and financial inclusion? Or will it put new and potentially dangerous tools of surveillance and control into the hands of corporate or political authorities?
Some argue for digital currencies controlled and administered by central banks—Central Bank Digital Currencies (CBDCs). But even they concede that the introduction of CBDCs will tip the balance of power even further toward institutions and away from individuals. We’d do well to consider alternatives before resigning ourselves to that outcome.
Bitcoin—the oldest, most well-understood and most used cryptocurrency—is the obvious alternative.
Headlines focus on flashy topics like price speculation, use by criminals, or environmental impact; but behind the hype lies an inclusive global monetary system with millions of users—and more every day. Bitcoin is here to stay.
Bitcoin has seen diverse adoption—from Russian political dissidents, to women entrepreneurs in Afghanistan, to victims of monetary repression, to Black Americans blocked from accessing financial services, to anyone who aims to build a nest egg but can’t afford a whole house. People on the margins know that Bitcoin is for them.
Bitcoin is for anyone.
Some already invest in bitcoin the asset; governments should invest in the Bitcoin network. And this is true even if they continue to work toward CBDCs. Bitcoin provides an important alternative to centrally controlled Russian, Chinese, or U.S. digital money.
Here’s why. The Bitcoin network is open: anyone can see the code and verify that it is what it’s supposed to be, and anyone can build new financial applications within it. Its native asset is inflation-resistant: supply is capped and can also be verified by anyone. This makes Bitcoin savings technology for the masses; all it takes is a smartphone. Dollars are great for spending. But in a world of inflationary risks, an asset in which anyone can save is a lifeline for those without access to the stock market or gold or real estate. Bitcoin, furthermore, cannot be controlled by any despot or corporate machine.
The result is alluring: the benefits of a big-tech network (Facebook or Twitter) without centralized control. But instead of hosting political arguments or memes, this one is for money. Bitcoin could do for money what the internet did for information. Like the internet, it needs infrastructure to make good on this promise.
We could focus only on CBDCs, as hypothetical alternatives to Bitcoin. But there’s a better way, as illustrated by El Salvador’s recent adoption of bitcoin as legal tender and resolution to invest in Bitcoin the network. Governments should follow El Salvador’s lead and build infrastructure to expand access to Bitcoin.
They should invest in three areas:
—Technology: Governments can give away cell phones preloaded with a Bitcoin wallet, and subsidize Wi-Fi and mobile internet access. Bitcoin’s Lightning Network (LN) allows for instant and nearly-free transactions, without limit (the old canard that Bitcoin can only process seven transactions per second is outdated). Governments should sponsor LN nodes and software to ensure even wider access, and offer developer grants to promote efficiency, innovation and better user experience.
—Education: We need reliable training in how to acquire, store, spend and receive bitcoin, in all major languages. We need educational materials, software and hardware designed by and for members of deaf and blind communities. Public high schools, community colleges and four-year programs should prepare students to understand and use Bitcoin. Public colleges and universities should sponsor Bitcoin research to help the world better understand and evaluate it.
—Environmental Impact: Energy use secures the Bitcoin network. The more computing power miners use when collecting transactions and competing to publish them, the harder it is to break the network. Bitcoin’s formidable security does not come through military might or political power—unlike the U.S. dollar. It comes at the price of electricity, a fact that has raised eyebrows given that some of that electricity comes from burning coal or natural gas. Governments should sponsor and incentivize sustainable Bitcoin mining—new dams, wind farms, solar farms, geothermal mining operations and the like.
These tasks contribute to the Bitcoin network without compromising its fundamental promises. It would remain open, inflation-resistant and beyond the control of any business or nation.
Bitcoin skeptics claim that Bitcoin struggles to scale, is for the educated and wealthy, or causes environmental harm. The investments described above, if implemented, would answer each objection. Lightning Network infrastructure helps Bitcoin scale: fast and nearly free payments for all. Education and development expand access to the network. And investments in sustainable mining drive hydrocarbon-burning miners out of business. Investments in infrastructure don’t just make Bitcoin more widely available; they make Bitcoin better, by alleviating the problems skeptics raise.
CBDC proponents say governments should invest in those instead. But CBDCs don’t actually exist, and even when they do they’ll be no replacement for Bitcoin. There’s no guarantee they’ll be resistant to censorship of “unacceptable” kinds of transactions, like physical cash is. And their supply can be inflated at will, making them poor stores of value. Enabling negative interest rates that chiefly punish the poor for trying to save is a bug, not a feature.
To build Bitcoin, finally, is to nurture a global network; it is to reject nationalism and invest in humanity rather than a local monetary system just for citizens. The United States has a long history of attempting to export freedom through war. It should try investing in Bitcoin, and so export freedom through peaceful means.
Money will be digital. But it’s up to us what kind of digital money we have, and what kind of future it enables. We must choose wisely.
The views expressed in this article are the writers’ own.