Money is a central issue in economics, and therefore in politics. In recent years, there has been increasing talk of digital currencies. The emergence of the bitcoin cryptocurrency a little over ten years ago has sparked the interest of many people and institutions, including the central banks of major economic powers. It is therefore time to take a closer look.
To reflect on the issue of digital currencies, let’s start by realizing that we are in fact talking about a digital transaction system , not to be confused with the currency itself: a digital euro would always be a euro, would be governed by the same rules. (creation, destruction, storage, etc.) imposed by the European Central Bank.
What transaction system would we like ?
To avoid creating one more control and monitoring tool, the only solution would be to replicate the cash transaction system which:
is completely focused (possibility of carrying out a transaction from one party to another directly without depending on a third party) ;
is anonymous (no need to be identified) ;
does not allow just anyone to create money.
With physical money, it’s easy: a transaction from A to B corresponds to the transmission of physical objects (coins and banknotes) from A to B. When B receives banknotes from A, the latter no longer has them ( no creation). No need for identification or any third party to ensure the transaction: the value is carried by objects that are moved.
Are cryptocurrencies the solution ?
In the digital world, it is much more complicated to combine these three properties. It is easy to implement a centralized system that guarantees the third property, but not the first two. Bank transfers for example: banks act as central authority which operates a writing game (subtract X € from A and add X € to B). It does not work anonymously (banks must know A and B) or acentrally (A cannot transmit the money to B without going through the banks).
We often hear that cryptocurrencies like bitcoin make it possible to do without banks and other trusted third parties because they are decentralized while being secure. But do they necessarily correspond to something desirable ? To answer this question, we must explain a minimum of how cryptocurrencies work.
A cryptocurrency is above all a blockchain, i.e. a register (the history of all transactions in the system) which has consensus [ 1 ] (everyone has the same register) and which is tamper-proof ( impossible to modify an entry in the register once it has been written), all without depending on a central authority. Each participant has an identifier, and the amount available in their account is calculated by looking at the history of transactions concerning this identifier.
Regarding anonymity, a blockchain can therefore only pseudonymize transactions, since like bank transfers it is a writing game and it is therefore necessary to identify the starting accounts [ 2 ] and arrival of each transaction. It should also be noted that if the system is decentralized, it is not focused: two parties cannot carry out a transaction without depending on the rest of the network, because the latter must validate each transaction to add it to the ledger and return it. thus effective (writing in the register is performative, by definition).
We do not have the place here to go into the technical details, but it should be understood that the main innovation which makes it possible to ensure the security of blockchains requires a lot of calculation (therefore of electricity expenditure [ 3 ] ) to validate transactions (this is referred to as proof of work ) – this is called mining . To the point that the energy part of the cost of validating a transaction in practice concentrates this activity in the hands of a small number of actors, which limits decentralization accordingly (to encourage mining despite this, miners are rewarded with newly created cryptocurrency when they validate transactions).
Cryptocurrencies are therefore quite far from offering the ideal transaction system, and also have other concerns such as their inability to manage a number of transactions corresponding to what we would actually need, even on a local scale. Finally, what little they allow, they do at the cost of unacceptable energy consumption given the current climate crisis [ 4 ] .
The main counter-argument to this criticism (once the so-called ” green energies ” have been put aside …) is an alternative, less energy-consuming method of validating transactions: the proof of stake , or rather than having us make unnecessary calculations , the system encourages keeping and accumulating money … Beyond serious technical security issues, proof of stake therefore raises the concern of even more linking money to the technical transaction system than proof of work.
The control of money, for example monetary creation, is a powerful tool which should be put at the service of the social and the ecological, whereas it is currently in the hands of finance (it is the private banks which have printing in the euro zone). The geographic and temporal limitations of money can also be important economic tools that must be able to be democratically controlled.
Typically, alternative local currencies can encourage short circuits and discourage accumulation, for example by automatically devaluing money that goes too long without being spent [ 5 ]
Is a reasonable digital currency possible ?
Maybe, but with other technologies. For example, the free Taler project is a transaction system (usable with any currency) that reproduces as much as possible the properties of cash, being based on a system of exchange of value-carrying tokens, rather than on a register.
Pablo (UCL Saint-Denis)