There’s been a lot of news recently, especially with the advent of a news cycle focused on a potential recession, on the role of bitcoin and cryptocurrencies from a short-term investment perspective. Some have placed bitcoin and cryptocurrencies in the category of hedges, a form of digital gold or silver that can be used to store value through inflation and the debasement of fiat currency.
Yet that misses the forest for the trees. Bitcoin and cryptocurrencies at scale are not just a hedge for inflation and an ever-expanding monetary supply — they are a fundamental hedge against bad governance and bad governments. In this respect, it may be easier to evaluate them along a longer-term horizon then just a short-term store of value.
Start with the fact that bitcoin and cryptocurrencies are structured to be independent from central authorities and that decentralization is an explicit goal of the system. Bitcoin can be considered the first prototype of something more exciting than digital cash because it focuses explicitly on governance and issuance.
It’s not a central authority, governed by statute or accredited by loyalty or expertise that determines the current amount of bitcoin in circulation but rather individuals contracting together under a set of laws codified in code.
Anybody can start a node — it seldom matters where you live or whether you happen to be a political leader or economic leader in that area. And while mining has grown inevitably into a more centralized affair as it has become more commercial in nature, the egalitarian approach to electrical and computing power being the barrier to make economic returns in the system makes it more open to general access than appointed councils of technocrats.
The miners who issue bitcoin and cryptocurrency are a…