Money-games as an analytical framework for understanding the emergence of crypto-coins Moritz Hütten, [email protected] Johann Wolfgang Goethe-Universität Frankfurt am Main A contribution to the International Conference on Public Policy, Milan, July 1 - July 4, 2015 Introduction The recent and still ongoing financial crisis has sparked an increased interest in the topic of money. Positions that have been taken for granted have become more uncertain, and questions regarding the nature and functions of money have become more prominent. This interest not only has fueled an academic body of research regarding the topic, but it also has inspired practical experiments by various activist groups to establish alternative forms of money. In this paper, I will explore the emergence of the cryptocurrency Bitcoin as a representative of such an experiment. In this regard, I will focus on what I believe to be the most controversial aspect of Bitcoin: the idea that it could indeed be money. While there seems to be little dispute about the underlying technology being substantial, the same cannot be said about the proposition of Bitcoins being a form of money.1 To understand how Bitcoin could be money, I will build on the writings of Heiner Ganssmann and Nigel Dodd. Central to my approach will be a proposition I have found with Ganssmann to think of money in terms of a money game where money receives its "meaning" from the rules of the game (see Ganssmann 2002). Ganssmann suggests the idea of a simple money game. I want to further bolster this concept by including consideration of Nigel Dodd about money functioning before a social background. To account for this background, Dodd writes of monetary network of information. This network is supposed to describe the “minimum requirements regarding the information which must be present to in order for monetary transaction to proceed, even among the smallest groups.”(Dodd 1994:XXIV). In his description of this network, he names five types of information which are needed: a standardized accounting system, expectations regarding the future, 1 I will talk of Bitcoin when I mean the technology in a broader sense and of Bitcoins in the plural when I mean Bitcoin as currency. legalistic information in the form of rules, knowledge about the expectation and behavior of others, and knowledge about the spatial expansion of the network (see Nigel Dodd 1994, XXIV). I believe the two propositions are complimenting each other, and it could be said that money games are being played upon the background of monetary networks. For money to facilitate exchange between strangers, there are basic criteria which have to be fulfilled as they have been proposed in the model of a simple money game. Yet to give depth to the phenomenon, a richer set of information in the sense of a monetary network defining the unique landscape of each money game is necessary. I want to explore Bitcoin as an emerging money game in this sense and to identify some reasons why anyone could want to take up that money game based on various events in the short history of Bitcoin. Money-games as an analytical framework In this section, I introduce the theoretical approaches which I am utilizing to come to an understanding of the emergence of Bitcoin. Based on the approach which I develop in this section, I will then try to answer the question: “Why would someone want to use Bitcoin as money?” in the upcoming section. One curious aspect of money is its capacity to bridge distances in time and space. Money can facilitate transactions between people who might never come into personal contact with each other or postpone transactions until sometime in the future. The question is, how can money do this? A centerpiece of the functioning of money is trust. Trust can be based on various reasons. These reasons can include calculated expectations, confidence, habit, or even faith (see Dodd 1994:XI). For money to be able to function, trust in money is essential. When trust in money is present, money can achieve a wide variety of things, but when there is a breach of trust it is not easily repaired and a loss of trust might undermine the function of money altogether. This is all the more problematic because it is not all that clear what constitutes money. It may not be apparent in the day to day routines that revolve around money, but the uncertainty about what constitutes money becomes an increasing problem when new money schemes or money-like schemes emerge. At present, it is not only Bitcoins alone that challenge what we believe to know about money, but several thousand of alternative monetary systems (see Dodd 2014:314). The emergence of new monetary systems does not just concern activist groups which consciously want to change how we use and think about money, but also commercial enterprises which provide money-like services from Facebook credits to bonus miles. This again makes it very hard to impose monetary policy on such schemes, or to decide if it should be imposed to begin with (see Dodd 1994:XIII). We come to see an empirical richness which has heightened the conceptual muddle and renders an exhaustive definition of money unlikely altogether (see Dodd 2005:387). I therefore will not attempt to give an exhaustive definition of money in this section, but instead offer a certain perspective from which to think about money. A fundamental problem is, as Dodd puts it: “not that nobody knows exactly what money is, but that monetary theorists have been convinced that they do.”(Dodd 1994:XIV). Instead of focusing on the properties of certain objects, a valuable contribution to the understanding of money can come from considering the social relations which make monetary transactions possible (see Dodd 1994:XV). Heiner Ganssmann takes a similar approach to money. For him, money is a social fact that comes about when a group coordinates in a certain way and develops what can be called a collective intentionality regarding a money object (see Ganssmann 2002:22- 24, Ganssmann 2012:23). In this sense, a certain regularity in action defines money. What is important about social facts is that they involve social action, and social action involves uncertainty (see Ganssmann 2012:XV). Accordingly, we have reciprocal expectations of what the other one will do, but such expectations are formed on the background of the knowledge that we can deviate from these expectations (see Ganssmann 2012:137). We can surprise each other positively with a creative solution, or we can surprise each other negatively with opportunistic actions (see ibid.). Although this uncertainty bears more risk of failed interaction, it also reveals something about the actors involved: they can handle uncertainty to some degree. Our actions surrounding money are not an inescapable fate, but they are shaped within this uncertainty, which leads Ganssmann to say that we are in fact “doing money” (ibid.). By "doing money," he means that the money game is defined by its very performance through which the money object receives meaning. When money is "done" successfully, it absorbs some of that uncertainty, but it still plays out in front of that background of uncertainty which is part of social actions (see Ganssmann 2012:138). In this sense, money replaces many uncertainties, yet the certainty that just about everybody is going to need money is created in the process (see Ganssmann 2012:3). Money is something that has to be produced and reproduced in a social setting (see Ganssmann 2012:1). Both authors are on to a similar question. Ganssmann wants to know how we can overcome that uncertainty and become able to “do” money; Dodd wants to know what the social conditions are which allow us to place trust into money thus rendering it capable of fulfilling its function. Ganssmann is closer to the field of economics through his considerations about individual actors dealing with uncertainty, while Dodd brings in a more sociological perspective by using overarching structures to understand how trust is constituted. In my opinion, these two approaches complement each other. The starting point for me is Ganssmann's reading of Wittgenstein. He points to an interesting statement of Wittgenstein about Frege's thoughts regarding arithmetic. According to Wittgenstein, Frege is considering one of two alternatives: either a sign has meaning because it represents an object, or it is just a shape drawn on paper. Wittgenstein does propose a third solution and illustrates it with an example from a game of chess: “There is, as the game of chess shows, a third possibility: The pawn in chess neither has meaning in the sense of representing something, of being a sign of something, nor is it just the piece carved out of wood. What the pawn is, is determined by the rules of chess.” (Wittgenstein 1984a:150 in Ganssmann 2012:20) Unlike the first two options, this solution states that the meaning of a sign is derived from the rules of the game in which it is used. Gansmann applies the same solution to money. He questions whether we can understand money similarly by saying that a banknote, for example, does not have meaning in the sense of representing a good or utility, but it has meaning within a money game (see Ganssmann 2012:20). This again would lead to the conclusion that the meaning of money can only be understood in reference to the money game in which it is being used (see Ganssmann 2012:28). Ganssmann himself proposes a simple money game which stems from the writings of Catelier. For him, a simple money game would have to consist of three rule complexes.