Resistance Money

I recently ordered a new book dedicated to Bitcoin, "Resistance Money" by Andrew Bailey, Bradley Rettler and Craig Warmke. I bought it because I am myself highly interested in what Bitcoin and the cryptoverse mean for our societies and how they'll transform them.

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I've only began reading it and this is probably only the first in a longer list of comments I'll make on the book as I progress through it.

The book starts by elaborating around its title: Bitcoin is "resistance money" - neither intrinsically good nor bad, depending on what's being resisted. Indeed the criminals and hackers using it are resisting a good functioning of the society, which is bad. But dissidents in many countries, refugees, citizens in hyperinflationary regimes can also use Bitcoin to resist the depraved and bad policies to which they are victims. That is good. On balance, the authors predict, you should by the end of the book prefer a world with resistance money than without.

Senator, menace, monk

The authors then explain that to counter autocratic forces, there were three possible "posts": "Senator", "menace", or "monk" This echoes a similar analysis I published 5 years ago in my semnial article The Exit Machine. In that article, I casted the anlysis in a frame provided in the early '70-ies by the renowned political scientist Albert O. Hirschman: "Exit, Voice, and Loyalty".

Although Hirschman's work is not quoted in the book, "Senator" is nevertheless Hirschman's "Loyalty" response: one trusts the system can better itself and attempts to use its rules and activate its levers to that end.

"Menace" is Hirschman's "Voice" taken to the extreme.

"Monk" is in turn Hirschman's "Exit" from a system deemed irreformable.

Fail or Jail

In the second chapter, the authors present the dilemma that Satoshi faced when creating Bitcoin: either "create worthless digital tokens" or "risk a one-way ticket to the slammer". They walk the reader thought the enlightening stories of DigiCash, Liberty Dollar, e-Gold and other previous attempts at issuing digital money. "In the failed projects with trusted third parties", write the authors, "federal authorities seized the assets of managers, pursued makers for counterfeiting, and charged mediators with money laundering and running unlicensed money-transmitting businesses."

I delved myself into these aspects when analyzing one of the main design constraints of the whole Bitcoin system (including its creator, the still unidentified Satoshi Nakamoto), that of anonymity. I would have benefitted from the wealth of information in this book, had it been available then, but I still learned a lot from a paper by L.H. White: “The Troubling Suppression of Competition from Alternative Monies: The Cases of the Liberty Dollar and E-Gold”. The work of L.H. White is by the way quoted extensively in the book.

It is worth observing that, at least in Europe for now, new cryptocurrencies do not face the same dilemma anymore, thanks to the MiCA regulation which legitimizes crypto-assets and creates a compliance framework, protecting future "managers", "makers" and "mediators", to the extent that they follow the rules of the new, dedicated law.