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Bitcoin and the Case Against Consumerism

Bitcoin is inherently a deflating currency: The total supply is capped at a technical level and in time coins will inevitably get lost due to people losing their keys, people dying without passing on their passwords, hardware malfunctions and sheer bad luck. In other words the total amount of Bitcoins existing will decrease as time goes on.

Assuming that Bitcoin will indeed be used as a currency (and store of value) in the future, this consequentially means that the value of any given unit of Bitcoins has to increase.

Time and again the concern that people will be less and less inclined to actually use and spend a currency that will only increase its value in the future is echoed. Why spend a Bitcoin today when you can buy twice as much with it the day after tomorrow?

Closely related to that line of thought is the idea that an economy that is closely tied to such a currency will eventually succumb to the non-spending sentiment. The reasoning is that modern economies, and by extension modern societies, are wholly dependent on people spending their money as fast as possible. The more the average citizen consumes and spends, the healthier the economy, or so the belief held by many (armchair) economists.

It is true that the economies of the modern welfare societies are heavily tied to consumerism and spending. It is also true that a large part of our spending goes into buying, consuming and finally throwing away rather frivolous junk. Day in and day out we spend our money for things we do not really need. After we have already met our basic needs (shelter, food, even a modest level of comfort) we go on to spend the rest of our so called disposable incomes. And that's just what we do: We dispose of the money and in the process fuel our throw-away culture with trinkets, doodads and vain consumables.

It's the stuff that has its only long lasting effect in the form of trash in a landfill. Only briefly wanted, but ultimately unneeded, and certainly not necessary: short-lived consumerism at its finest.

To fire this cycle of production, consummation and trashing even further, and to take it to another level, many of the products that we are buying in the hope that they will serve for longer time spans, have their termination date already built-in. This so called “planned obsolescence” ensures that many appliances and other products, that could potentially fulfill their function for many years or even decades, are engineered in a way that inevitably causes them to malfunction much earlier than their natural usage decay would dictate.

Why build intentional flaws into a product that causes it to break apart rather sooner than later? The reason is again our consumerism fueled economy: If people could buy household appliances that worked for decades rather than two or three years, the companies selling them would make considerably less money. Money is what it's all about, the desire to get as much of it as possible, for the company, for its shareholders, for the overpaid board of directors.

If making more money means building products that are essentially headed for the landfill right out of the door, that's of minor concern to the money making scheme we call our economy. With people all too willing to buy into that cycle with their money, we have created a system where longevity and environmental concerns are at best secondary thoughts to the profit-above-all system we call a living.

Enter Bitcoin, the currency that could potentially disrupt this system by discouraging needless consumerism. It's important to note that Bitcoin's deflationary nature is in a flux. Right now Bitcoin is actually inflationary, because a lot of coins are flooded into the system through mining every day. As long as the adoption rate outpaces the inflow of new coins in the long run, Bitcoin's price in fiat terms can still go up when viewed at longer time frames (months or years). That's what we are seeing right now: The exchange rate for fiat currencies go wildly up and down, but there is a clear logarithmic longterm growth that characterizes adoption rate, future expectations and speculation all at once.

In a future scenario, when most of the 21 million coins have been added to the network and adoption is at its peak, Bitcoin should theoretically reach a price equilibrium with a slightly deflationary slope. This possible future state could be characterized as stable, because the upward price pressure coming from the deflation should be relatively minor compared to the size of the whole network.

So, when critics are talking about the “unspendable” deflationary currency, they are talking about the current adoption phase that precedes a possible future scenario where Bitcoin is fully adopted. Nobody knows how long this phase will last or if Bitcoin will even ever really reach the state where it could achieve its equilibrium. For that reason, it's fair enough to assume high price growths in the foreseeable future, if (and that's a strong “if”) Bitcoin will be successful at all.

The depicted scenario is now an economy that has largely come to depend on people buying useless or soon-to-be useless stuff versus an up and coming currency that promises potentially high value gains for the time being. How could this play out?

Modern, western economies have not always relied upon the blind consumerism model. There was a time when the longevity of products was valued, not only by the customers, but also by the companies producing them. The turning point came arguably when the American automobile industry reached market saturation for the first time and decided to bring new car models to the market each year. The plan was to convince their customers that they always needed the newest design, even if the changes to a model were largely superficial. More and more industries adopted the fast product cycles and decades later we have an economy which is largely driven by market forces of products that are renewed constantly and most of the time the changes are still purely visual.

It's clear that thriving economies can exist without throwaway products and without people climbing over each other to spill their money for them. Bitcoin, if successful as a world currency, could be the catalyst forcing throw-away economies to rethink their ways. No longer would spending money as fast as possible on the nearest piece of soon-to-be trash a driving force for people or the market. Instead the system of production and usage would hopefully return to a longterm viable equilibrium, devoid of consuming for consummation's will and not at odds with our environment.

Bitcoin | Economics


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