The theology of bitcoin

Friday 03 April 2015

Since it’s Easter weekend, we’re looking at something a little bit different. Today’s article comes courtesy of a theologian who has spent many years and written many books and articles unpacking the vision for a biblical economy and society. (He writes anonymously here.) So, what does he have to say about bitcoin?

Read also: Keep the Faith: Churches are embracing bitcoin

Moses with bitcoin

The world of the Bible was staggeringly different to our own society. Instead of an agrarian economy, in which people lived in small groups and rarely travelled more than a few miles from their place of birth, we have a hyper-connected and industrialised culture in which mobility is a way of life and money moves around the globe in the blink of an eye. Israel in Old and New Testament times was so incredibly removed from our 21st century lives that it seems impossible to draw any conclusions for the spread of cutting-edge financial technologies like bitcoin. And yet, there may be a few lessons we can learn after all.

Gold and silver

The standard currency of the biblical age was, like elsewhere in the Ancient Near East, based on precious metals - namely gold and silver. These had the advantage of having a relatively fixed supply, and therefore fixed value. It wasn’t possible simply to create more shekels at will. ‘Fiat’ currencies didn’t exist. But whilst Israel had that in common with its neighbours, there was at least one thing that set it far apart from them.

Decentralised power

Israel’s political system was unlike any other at the time. The surrounding nations were highly centralised, with the apparatus of power controlled by a tiny ruling elite. The exemplar of this was Egypt, where the Israelites spent many years in slavery. Pharaoh was considered a god. Beneath him were the priestly class, the only ones capable of reading and writing - the administrators for the kingdom. Below them lay the vast majority of the population, who in some form or another served or were dependent on the temples and religious-political structures in place.

Israel was completely different. There was a clear ‘separation of powers’, with the king and royal court distinct from the priesthood: unlike in Egypt and other nations, there was no overlap between religious and political leaders. Moreover, political power was decentralised, with responsibility devolved to the local regions and down to the smallest communities, as appropriate. Subsidiarity, as it's known in Catholic teaching, was built in.

Why was this important? Because it was the priesthood who managed the money supply. They were the ones who ensured the weight of coins was correct, acting (in this way and in others) as a series of checks and balances on the political power of the king. Moreover, limits on the power of the king ensured that he did not amass a fortune of his own or try to co-opt the creation and maintenance of currency for his own ends. Centralisation was seen as dangerous; small wonder when the Israelites’ formative years had been spent in the most centralised state that existed at the time, and that perhaps ever will exist. Humans are too fallible to place so much power in the hands of so few.

Inflation, debt and interest

The use of precious metals meant inflation was practically non-existent, and the weight of silver required to buy an average-sized field barely changed over hundreds of years. At the same time (and again, contrary to neighbouring cultures), charging interest was banned. The reason is because interest was seen as a form of injustice. The thing that is so fundamental to our economy was essentially considered theft: it was how wealthy people forced poor people into paying them even more money. The only loans that were allowed were zero interest ones: they were intended to help people out of poverty, not push them further into it. But when a loan was taken out, the debt was viewed seriously. Defaulting was not an option. This is also the reason that inflation can be viewed as unjust from the biblical point of view: it erodes the value of money over time, meaning that debts do not have to be paid back in full - essentially making it tantamount to theft. Today’s governments know this well: as a rule, they simply allow inflation to reduce the value of their debts as a proportion of GDP, rather than paying them down.

Cryptocurrency

So, the biblical ideal for currency is that it should be non-inflationary, decentralised and outside of the control of a powerful third party. Moreover, the entire structure of the economy and finance system was intended to reduce inequality, not to increase it through debt and interest. This is obviously a very far cry from our own economy.

And yet, the biblical system has much in common with bitcoin and other cryptocurrencies. The fixed supply. Its status as external to the structures of power, be they political or financial. The fact that it is decentralised; any form of centralised power brings the risk of abuse, and money is too important to allow to be corrupted in this way. Even the role of debt. Unlike a fiat system, where large amounts of money can be created and loaned out at interest with a few keystrokes, bitcoin doesn’t allow this. It’s possible to charge interest, of course, but bitcoin isn’t structured in a way that makes it particularly easy, and the fixed money supply means there’s no need to keep up with inflation.

Inflationary fiat currencies, along with the centralisation and concentration of power they inherently represent, are utterly opposed to the ideology of money presented in the Bible. Bitcoin, on the other hand, could be considered a pretty close approximation to a form of money that ticks all the right boxes.

Happy Easter!

 

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