Cryptocurrencies: Information and Secrecy in the Conflict Over Authority and Trust

• In Event: 355 - Section on Economic Sociology Roundtable Session (one-hour).
  In Refereed Roundtable: Table 06. Trust in Uncertain Markets

Abstract

The emergence of bitcoins as an online currency has been accompanied with considerable scepticism about its significance as a new kind of money. Production of the first bitcoins began in 2009, but it was only in 2013 when its exchange value soared to over 1000USD per 1BTC. For now, bitcoins appear to be more like a speculative commodity than a viable medium of exchange or a legitimate unit of account. But a closer look at its innovative mode of production reveals the potential of cryptocurrencies in general, and not just bitcoins, to constitute radically decentralized forms of social organization.
The coupling of cryptographic technology with peer-to-peer distribution across the Internet eliminates both authority and trust as sources of value for cryptocurrencies. This is unprecedented, as national and local money rely on some proportion of state authority and trust networks for their value. But this same reliance on authority and trust also impedes the widespread adoption of cryptocurrencies. The sites where this conflict takes place include the technological artifact of the code itself, Internet forums, exchange markets, physical points of transaction, as well as the law . This paper identifies the relevant actors in these sites, and proposes a theory to assess the conflicts among them based on how trust and authority are related to institutions regulating the distribution of information and the keeping of secrets.

Author

• Alex Tham, Princeton University