Debt, Liberty Reserve, Bitcoin and beyond

Russ Allbery has provided an insightful review of The Making of the Indebted Man

A related work that has been quite popular and may interest people is Debt: The First 5000 Years by David Graeber. Of particular note, Graeber is an anthropologist and looks at it from the perspective of relationships between individuals and how they form communities and society as a whole. This is particularly relevant to those in non-profit and voluntary organisations such as free software projects.

One striking fact that comes out in many of these texts (from both the left and the right side of the political spectrum) is the basis of modern fiat currencies in debt. An often cited example is the loan that created the Bank of England in 1694, which still hasn't been repaid to this day.

Systems like Paypal and Liberty Reserve are also based on debt, linked to currencies that are themselves debts. This is one area where Bitcoin largely stands alone, as there is no financial transaction that underwrites it, other than a lot of very big electricity bills for people mining Bitcoin with GPUs. Instead of putting trust in the government or the counterparty, trust is placed in the algorithm (just as trust in gold and silver is based on their unique and distinctive physical qualities). Whether or not Bitcoin is the way of the future is not yet completely clear, but what these books tell us is that a move away from a debt-based currency has major social and political consequences far beyond the technical issues.