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A Literal Economy: Collaboration Produces New Currency

In his Philosophize This podcast, Stephen West stresses that there is something essentially innate in human beings that make them crave social interaction. Luckily, our digital world enables not only connectivity, but networked sharing and collaboration, which is fundamental to the human experience. Our new digital tools have increased the possibilities for engaging not only in communication, but collaborative efforts and collective action. Just about anyone can use the tools of the Internet to collaborate with others online to create, organize, or remake something new. The new forms in which we can communicate change how we view collaboration and create new biases around how we understand mutual cooperation, which lead to the emergence of new forms of economies. The forms in which we can communicate online now emphasize the value of peer-to-peer cooperation and the collective sharing of knowledge, ideas and one’s own expertise. The Internet has become a space mainly concentrated on social interaction as it relates to the sharing of information, and the pooling of information, where individuals both learn and produce something new together. Wikipedia is a pertinent example that demonstrates the importance and value of shared knowledge and collaboration.

Using Wikipedia one can search information on just about anything one can think of. In light of the abovementioned, using Wikipedia I can look up Harvard Professor and author, Yochai Benkler, and learn that he examines just what I need to know— the ways in which information technology permits extensive forms of collaboration that have potentially transformative consequences for economy and society. He writes in The Wealth of Networks that, “our ability to broadly produce and share in the information age represents a powerful new alternative to a hierarchical economy in which a few powerful elites manage a majority of the resources and creative potential.” The alternative is an economy that relies on social interaction, on peer-to-peer exchange, on open collaboration and free networking.

This new economy that Benkler speaks of, the networked information economy, is one that emerges only because of the new information technologies. He explains that with the emergence of new information environment individuals are free to take a more active role than was possible in the industrial information economy. This is because in this new economy, individuals are responsible for not only consumption, but also production. The economy that relies on individual and cooperative practices emphasizes decentralized social production. Therefore, Benkler writes that what characterizes the networked information economy is decentralized individual action, and specifically, “new cooperative and coordinate action carried out through radically distributed, nonmarket mechanisms.” Individuals can now reach millions around the world, whenever and wherever and create large-scale cooperative efforts from which we see the expansion of free and open-source software.

Bitcoin is an example of an open-source software that shows how social interaction and exchange is becoming important for not only the emergence of an information economy that relies on the exchange of ideas, but of literally a new economy, one that has the potential to be completely digital. In 2008, Satoshi Nakamoto invented Bitcoin, the new electronic cash system that is fully peer-to-peer. The open-source online payment network is not controlled by anyone, yet everyone can take part in it. Unlike with cash and credit cards, Bitcoin eliminates the need for central banks to control the money supply. Paul Kemp Robertson, Cofounder of Contagious Communications, identifies Bitcoin as a non-bank future currency that uses peer-to-peer technology to operate with no central authority or banks.

Bitcoin is completely de-centralized and also thrives on a process called mining that takes place between networks. Although users could purchase bitcoins, new bitcoins could be created in this process called mining where people’s machines would be used to create new coins by solving intricate puzzles. People can through mining make a new batch of bitcoins by helping to solve a puzzle, which would regulate how quickly coins could be created. To control production and prevent inflation in their value, the difficulty of the puzzles would increase if the computer starting solving them too quickly. In this way, there is also decentralized production of this new digital currency. It is open source in that its source code is publicly available to anyone to modify or enhance and all users are free to choose what software they would like to use.

Since no one owns bitcoins, there is no hierarchical economy in which a few people (or central authority) manage the resources and creative potential of Bitcoin. Rather, it is part of this new-networked information economy that comes about because of information technology that emphasize and add value to individual and mutual collaboration and production. Since Bitcoin is a peer-to-peer network, when making a purchase, the same bitcoin cannot be used more than once, since everyone else on the network can also see that the currency has been used. For its general users, Bitcoin functions as a digital wallet where users can send and receive bitcoins. However, people can still mine for more bitcoins and produce the currency through creative interaction between one another. How Bitcoin works is explained briefly in this video below.

Bitcoin serves to show how information technology can lead to different ways of socially interacting and producing the potential for a literal new economy online. Needless to say, as seen in the end of the video above, Bitcoin does have drawbacks, but what is important to note is the potential of this peer-to-peer network. It provides us with a literal answer as to why the developers and miners of Bitcoin would be satisfied in working to create this online currency and network, and why regular consumers would also wish to participate in this literal economy. Foremost, the function of Bitcoin is practical in that it is a convenient way to make quick, paperless, and worldwide (no exchange rate) purchases with the same currency. It is another advanced step past credit cards and PayPal.

Yet, unlike credit cards and PayPal, what is more satisfying and what differentiates Bitcoin, is its peer-to-peer network, its de-centralized nature. People have the ability to produce their own currency and then engage in transactions with others without having any exterior force overseeing or managing the finances. The information about specific transactions and the mining of bitcoins remain in and amongst the people collaborating in Bitcoin, or amongst the networks. We can use our new digital tools to participate and be part of our own electronic economy, one that is completely open and transparent to only each other, and one that puts the power in the users hands. As Benkler writes, “enabled by technological change, we are beginning to see a series of economic, social and cultural adaptations that make possible a radical transformation of how we make the information environment we occupy as autonomous individuals, citizens, and members of cultural and social groups.” It should be satisfying knowing that Bitcoin shows the potential for how our collaboration can lead to individual/collective autonomy and personal/cultural control even over something as centralized as money, to which we feel so powerless. Together people have the power to both imagine the world in which they want to live and produce the world they have envisioned.

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