Philosophy's Continuous Coastline

I was very surprised - - if not, indeed, utterly astonished - - to have been asked, on the occasion of my “diamond birthday-anniversary,” for one or more essays on the economics of cryptocurrency. Economics is the study of the management of scarce resources, for which supply and demand set prices clearing markets. Cryptocurrency is a collective assertion of economic value which - - having been once accepted from or remitted to an assumed “external world” of economic value independently defined - - might be said to exist only on decentralized, publicly available spreadsheets. Although such spreadsheets are in the public domain, the user identities are encrypted. The veracity of the spreadsheets is maintained by computers continually calculating validation codes. Some prominent players in this field believe that cryptocurrency will replace gold as a non-governmental store of value in the future.

Regarding cryptocurrency: There had been some enthusiasm for “replacing the banking system” as early as the 1980’s and 1990’s, but this Promethean task was too daunting for that era. Subsequently, an anonymous group - - appropriately decentralized! - - adopted the pseudonym “Satoshi Nakamoto,” published a paper on the nascent “peer-to-peer electronic cash system," and created the first decentralized cryptocurrency (Bitcoin) starting in 2008. Focusing now on the banking term “ledger,” the basic idea of cryptocurrency is to create a decentralized ledger (blockchain) that eliminates the need for banks - - although analyzing creditworthiness and extending loans would seem to be another matter. Moreover, in a time of war, would all cryptocurrency value disappear along with destroyed electrical power grids?

World economics have moved, like an economic Zeitgeist, beyond the use of gold or other commodities as the bases for monetary systems. This Zeitgeist holds some commodities in especially low regard: For example, natural diamonds require complex valuation, possess low liquidity, and must compete with new techniques for the laboratory manufacture of diamonds. There is the potential for a nearly instantaneous, disastrous decrease in the price of natural diamonds.

On the other hand, some commodity values can also be manipulated in in a way that increases their price. Consider again the case of diamonds: Queen Victoria claimed that her sixtieth year as Queen warranted a “Diamond Jubilee” in 1897, despite older traditions setting the “diamond anniversary” as a seventy-fifth-year celebration. Imagine how many more people - - being more likely to be alive 60 years after an event compared to 75 years after an event - - are around to demand more diamond gifts for special anniversaries. In this case, supply couldn’t possibly match demand without a dramatic increase in price. Having just established a South African diamond monopoly in the years leading up to 1897, prominent Victorian Cecil Rhodes was in a position to augment his wealth during Queen Victoria’s Diamond Jubilee! Likewise, it is not clear how the effective touting of any novelty, such as cryptocurrency, could avoid the potential for creating blips in valuation that could be cashed out before public awareness crystallizes.

The economic Zeitgeist also recoils in horror from other monetary-system problems. For example, monetary systems are menaced by the effective confiscation of wealth via thievery, unlimited taxation, and the limited attention spans of spreadsheet programmers purporting to provide monetary security.

Cryptocurrency - - once understood in detail - - might possibly be favorably compared to commodity currencies as the basis for a monetary system. Yet one wonders if the touting of cryptocurrency - - especially once it is understood in detail by only a small fraction of investors - - might lead to adverse consequences. An analogy might be made to the 1929 stock market: Financial-securities enthusiasts wondered why everyone shouldn’t get rich in the stock markets.

Economics can be viewed as the science of the production, distribution, and consumption of goods and services. Within economics, there exist the subcategories of microeconomics and of macroeconomics. Microeconomics is the analysis of individual agents within markets. Macroeconomics includes - - on the production side - - the analysis of land, labor, and capital. On the distribution and consumption sides of macroeconomics, one studies the effects of explicit taxation and of explicitly redistributionist policies, as well as of inflation. Operating, as it does, without benefit of explicit government legislation, inflation is a relatively “hidden” taxation or expropriation of resources.

Another aspect of macroeconomics is the study of money, which is traditionally defined as a medium of exchange and a store of value. (Some analysts think it necessary to add “unit of measure” to the definition of money.) There are also problems in the coordination of economic policies among nation-states, including tariffs, international taxation and regulation, and foreign-exchange rates.

In order to mitigate the effects of government taxation and inflationary policies, some investors have sought a parallel universe of money (cryptocurrency) that is not secured by governmental oversight and that is harder to tax. Once older stores of value are entered into the cryptocurrency universe, legions of computer operators (“miners,” as in “data-miners”) incessantly calculate veracity codes and keep ownership records stable in the crypto-universe. This stability theoretically allows individuals to withdraw cryptocurrency in traditional forms when desired. But “bad actors” caused “bank runs” in the old days, while some form of inattentive computer operation, as well as lost passwords, betoken failure in the newly evolved crypto-world. The government has been obliged to initiate regulative legislation with the goal of making major failures less likely, but also rendering the cryptocurrency easier to tax. In the long run, the government will extract as much value as it wants from its citizens, and the advantage of cryptocurrency will be evanescent.

As one who struggles mightily to maintain a very few passwords, the current writer is the world’s last person who could possibly have any practical interest in cryptocurrency. On a theoretical level, one might ask whether some computer service-providers could possibly find a substantial profit opportunity in performing the required interface and security services for cryptocurrency operation. There will always be some fees to be paid (per processed interface transit and per each continuously updated ownership-account). Those with relative advantage in computer skills - - excellence in firing one’s own synapses and controlling computers - - might possibly detect a business opportunity. The present writer assumes that this could indeed be the case for some individuals who have a sufficiently low opportunity cost (i.e., who have few alternative activities that could generate greater value, economic or otherwise).

In the cryptocurrency universe, managers would like to recruit individuals (with low opportunity costs) to run its many required computers. These same managers would also like to recruit investors who think that there are big cryptocurrency profits to be gained while the government learns how to regulate and to tax cryptocurrency just as completely as it does all other forms of economic life. As of April 2026, the Wall Street capitalization of cryptocurrency firms is $300 billion. As of December 2025, the total of all Wall Street capitalization is $72 trillion. Thus, on this metric, cryptocurrency is approximately 0.4% of the total market capitalization on Wall Street. Who knows what profit opportunities await those with sufficiently rapid-firing synapses and computer acumen?

In our next blog posting on economics and cryptocurrency, we will examine some recent ideas about crypto-exchanges recently brought forward by the New York Attorney General.