Could Bitcoin Become the Currency of System D?

[Eugen Leitl]

http://www.forbes.com/sites/jonmatonis/2012/03/19/could-bitcoin-become-the-currency-of-system-d/

Could Bitcoin Become the Currency of System D?

If zeros and ones are outlawed, only outlaws will use zeros and ones.

Cryptography shall always have a place in securing our digital future and
most especially in securing our digital value. Advanced public-key encryption
for the masses cannot be eliminated nor denied b the genie is out of the
bottle and mankind is the better for it. The unintended consequence of
regulating or restricting decentralized cryptocurrencies such as bitcoin is
that their use as a currency will have been brecognizedb officially and that
usage will be driven largely underground.

ISSOUF SANOGO/AFP/Getty Images

However, underground may not be so bad anymore as Robert Neuwirth points out
in his brilliant Foreign Policy article, bThe Shadow Superpowerb. If
aggregated, this $10 trillion global black market is the worldbs second
largest economy after the United States and it is also the worldbs fastest
growing economy. The OECD (Organisation for Economic Co-operation and
Development) projects that, by the year 2020, fully two-thirds of the worldbs
workers will inhabit this shadow economy, or bSystem D.b As Neuwirth
elaborates, it refers to the entire untaxed, unlicensed, and unregulated
cash-based economy:

    System D is a slang phrase pirated from French-speaking Africa and the
Caribbean. The French have a word that they often use to describe
particularly effective and motivated people. They call them dC)brouillards. To
say a man is a dC)brouillard is to tell people how resourceful and ingenious
he is. The former French colonies have sculpted this word to their own social
and economic reality. They say that inventive, self-starting, entrepreneurial
merchants who are doing business on their own, without registering or being
regulated by the bureaucracy and, for the most part, without paying taxes,
are part of blbeconomie de la dC)brouillardise.b Or, sweetened for street use,
bSysteme D.b This essentially translates as the ingenuity economy, the
economy of improvisation and self-reliance, the do-it-yourself, or DIY,
economy.

Enter bitcoin. All kind of vibrant economic activity is occurring in this
informal economy, which in some regions is between 20-60% of GDP or more, and
every economy needs a currency. Essentially, bitcoin is the bSystem Db of
currencies b global, decentralized, and non-state sanctioned. It is still
early days but as bitcoin bypasses traditional banking and financial
institutions, it is a currency off the grid just as System D. To deny the
existence of System D is to deny the fact that economic participants find
ways to survive even during prolonged times of hardship. According to
Neuwirth bit asserts an important truth: what happens in all the unregistered
markets and roadside kiosks of the world is not simply haphazard. It is a
product of intelligence, resilience, self-organization and group solidarity.b

It is inconceivable to think of those in under-developed countries and the
developed economies of the eurozone coping without System D activity given
the recurring recessions that are exacerbated by the violent central
bank-induced business cycles. Despite increasing consumption taxes like VAT
(value-added tax), the informal economy can still provide relief through
various markets and bazaars. Americans too will need black markets to
survive. System D represents the future.

Currently, transactions within the shadow economy have to be made face to
face, but an electronic System D currency would enable remote and even
cross-border transactions. This could significantly broaden the entire
informal ecosystem because consumers would have an international reach and
merchants would have vast new choices in selecting suppliers. Not all bitcoin
transactions require a standard computer and if the mobile payment
prognosticators are correct, the mobile phone equipped with applications like
Bitcoin Android could end up originating the majority of bitcoin
transactions. Contrary to the thesis of anti-cashist David Wolman, the
unbanked and the System D traders will not migrate away from cash unless its
replacement offers similar privacy features.

Bitcoin is barely three years young. Any bootstrapped currency initially will
have a chicken-and-egg problem due to the fact that a currencybs overall
success is determined by its network effect and pervasive spread. Critics of
bitcoin as a currency are quick to point out that not many merchants accept
it as a payment type yet. That will change. And, they also point out that the
total available market is severely limited. Oh, how wrong!  Bitcoinbs first
potential mega-market just so happens to be the second largest economy in the
world and its sole competitor in that sphere is depreciating government paper
cash. Game on.