Economy

Why The World Can No Longer Ignore Bitcoin

Blockchain servers used in Bitcoin transactions
Blockchain servers used in Bitcoin transactions
Guillaume Maujean

-Analysis-

PARIS — The whole world has been talking about it for over a week, and yet, — admit it — you still don't quite get what all the Bitcoin fuss is about. You know it's a virtual currency. But what is the point of having a currency you can barely use to pay for the things you need every day? You know it's a formidable speculation tool. You know that, had you had the brilliant idea of buying just $100 worth of bitcoins seven years ago, you'd be a millionaire now. But you also know that the bubble of new digital gold looks like it's just waiting to burst.

And yet, in spite of everything, you should take Bitcoin seriously. Our incredulity regarding this craze is probably the same we had at the beginning of the Internet, social networks or Wikipedia. Yes, Bitcoin is a difficult concept to grasp. Yes, it's sometimes used to launder money or to finance illegal activities. Yes, the markets' current enthusiasm is perfectly irrational and savers who feel tempted to jump on the bandwagon should know they're in for a bumpy ride.

But all of these facts shouldn't conceal the essential. Beyond its ups and downs, Bitcoin tells us a story. It was born in 2009, amid the widening financial crisis, which is obviously not a coincidence. It started booming soon after Edward Snowden revealed the NSA's massive spying activities on citizens — again, this wasn't a mere coincidence.

Rising around Bitcoin is a community with a political project, that of liberating currency from governments and banks. The virtual currency is the bearer of values and of an ideology: the demand of a pure and stateless currency, the promotion of individual liberties, the defense of the free market …

While someone who went by the name Satoshi Nakamoto was creating Bitcoin, the subprime explosion and the collapse of Lehman Brothers brought discredit to the banking industry. Governments were forced to rescue those headed for ruin. Central banks ramped up the money printing process, injecting trillions of dollars into the economy to avoid another Great Depression.

Physical representation of the cryptocurrency — Photo: Marco Verch

With the help of regulators, a form of "financial crackdown" was set up in order to contain the burden of a debt that kept on skyrocketing, to the detriment of savers. Bitcoin clearly stands in opposition to this new monetary order, a protest movement against political and banking powers, deemed incapable of offering a quality currency.

Bitcoin depends on no government, no bank, no central authority. There's no possibility to undermine its value through inflationary policies or through money printing since the rules of the game have been set from the beginning, and can't be altered. An algorithm is in charge of organizing all emissions, which will decrease progressively until 2140. There will never be more than 21 million bitcoins in circulation.

The currency's scarcity is written within the "code" that serves as the sacrosanct rule of monetary policy. Each bitcoin is unique. The history of all its successive owners is registered within the famous "blockchain," though all owners remain anonymous.

The dream of philosopher Ayn Rand and libertarians come true.

A currency that can be exchanged freely anywhere in the world, that can't be traced, that includes no transaction fees … This is the touchstone of a system in which individuals are finally emancipated from all political arbitrariness. The way to free ourselves from the grasp of government and the control it has over our private data: the dream of philosopher Ayn Rand and libertarians come true.

Economists Odile Lakomski-Laguerre and Ludovic Desmedt, produced an enlightening study that noted worries are not just technical, related to data safety through encryption. "(They are) also philosophical and political: it's about thinking about means to circumvent the state monopoly on the control over and offer of money, and to give back full power over its use to the community."

But for the system to live on and to grow, it will need a form of collective support. Initially, Bitcoin was a geek thing. It went on to convince a libertarian-minded community that despises state intervention and public regulators, which considers individual freedom a supreme value, and which grants machines and computer codes more legitimacy than it does to human intelligence. This community dreams of turning cryptocurrencies into a real alternative financial system, with its most fervent supporters secretly dreaming that Bitcoin will bring about a new monetary, and therefore economic, world order.

But Bitcoin's rise can also be stifled or brutally stopped. With its current value, Bitcoin's market capitalization (about $200 billion) is already bigger than that of a global corporate like Coca-Cola. It's a lot for such a young currency, and it's also just a drop in the ocean of the $80,000 billion available in cash around the world. This is probably the reason why governments, central bankers or regulators look down on this financial oddity.

When its value raises further, when private individuals are able to buy more commodities with their bitcoins, in other words, when it starts threatening their own authorities, governments will no doubt pay a lot more attention to it. That is when they will look for ways to bring it down, like Washington dismantled a too-powerful Standard Oil in the early 20th century. Bitcoin has already resisted a fair share of shake-ups, from successive crashes and the collapse of fraudulent platforms to waves of cyber attacks. Soon, we may see whether Bitcoin will be able to survive the moment the establishment takes it seriously.

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Geopolitics

Why This Sudan Coup Is Different

The military has seized control in one of Africa's largest countries, which until recently had made significant progress towards transitioning to democracy after years of strongman rule. But the people, and international community, may not be willing to turn back.

Smoke rises Monday over the Sudanese capital of Khartoum

Xinhua via ZUMA
David E. Kiwuwa

This week the head of Sudan's Sovereign Council, General Abdel Fattah El Burhan, declared the dissolution of the transitional council, which has been in place since the overthrow of former president Omar el-Bashir in 2019. He also disbanded all the structures that had been set up as part of the transitional roadmap, and decreed a state of emergency.

In essence, he staged a palace coup against the transitional authority he chaired.


The general's actions, which included the arrest of Prime Minister Abdalla Hamdok, are a culmination of a long period of tension between the civilian and military wings of the council.

A popular uprising may be inevitable

The tensions were punctuated by an alleged attempted coup only weeks earlier. The days leading to the palace coup were marked by street protests for and against the military. Does this mark the end of the transition as envisaged by the protest movement?

Their ability to confront counter revolutionary forces cannot be underestimated.

The popular uprising against Bashir's government was led by the Sudan Professional Association. It ushered in the political transitional union of civilians and the military establishment. The interim arrangement was to lead to a return to civilian rule.

But this cohabitation was tenuous from the start, given the oversized role of the military in the transition. Moreover, the military appeared to be reluctant to see the civilian leadership as an equal partner in shepherding through the transition.

Nevertheless, until recently there had been progress towards creating the institutional architecture for the transition. Despite the challenges and notable tension between the signatories to the accord, it was never evident that the dysfunction was so great as to herald the collapse of the transitional authority.

For now, the transition might be disrupted and in fact temporarily upended. But the lesson from Sudan is never to count the masses out of the equation. Their ability to mobilize and confront counter revolutionary forces cannot be underestimated.

Power sharing

The transitional pact itself had been anchored by eight arduously negotiated protocols. These included regional autonomy, integration of the national army, revenue sharing and repatriation of internal refugees. There was also an agreement to share out positions in national political institutions, such as the legislative and executive branch.

Progress towards these goals was at different stages of implementation. More substantive progress was expected to follow after the end of the transition. This was due in 2022 when the chair of the sovereignty council handed over to a civilian leader. This military intervention is clearly self-serving and an opportunistic power grab.

A promised to civilian rule in July 2023 through national elections.

In November, the rotational chairmanship of the transitional council was to be passed from the military to the civilian wing of the council. That meant the military would cede strong leverage to the civilians. Instead, with the coup afoot, Burhan has announced both a dissolution of the council as well as the dismissal of provincial governors. He has unilaterally promised return to civilian rule in July 2023 through national elections.

Prior to this, the military had been systematically challenging the pre-eminence of the civilian authority. It undermined them and publicly berated them for governmental failures and weaknesses. For the last few months there has been a deliberate attempt to sharply criticize the civilian council as riddled with divisions, incompetent and undermining state stability.

File photo shows Sudan's Prime Minister Abdalla Hamdok in August 2020

Mohamed Khidir/Xinhua via ZUMA

Generals in suits

Since the revolution against Bashir's government, the military have fancied themselves as generals in suits. They have continued to wield enough power to almost run a parallel government in tension with the prime minister. This was evident when the military continued to have the say on security and foreign affairs.

For their part, civilian officials concentrated on rejuvenating the economy and mobilizing international support for the transitional council.

This didn't stop the military from accusing the civilian leadership of failing to resuscitate the country's ailing economy. True, the economy has continued to struggle from high inflation, low industrial output and dwindling foreign direct investment. As in all economies, conditions have been exacerbated by the effects of COVID-19.

Sudan's weakened economy is, however, not sufficient reason for the military intervention. Clearly this is merely an excuse.

Demands of the revolution

The success or failure of this coup will rest on a number of factors.

First is the ability of the military to use force. This includes potential violent confrontation with the counter-coup forces. This will dictate the capacity of the military to change the terms of the transition.

Second is whether the military can harness popular public support in the same way that the Guinean or Egyptian militaries did. This appears to be a tall order, given that popular support appears to be far less forthcoming.

The international community's appetite for military coups is wearing thin.

Third, the ability of the Sudanese masses to mobilize against military authorities cannot be overlooked. Massive nationwide street protests and defiance campaigns underpinned by underground organizational capabilities brought down governments in 1964, 1985 and 2019. They could once again present a stern test to the military.

Finally, the international community's appetite for military coups is wearing thin. The ability of the military to overcome pressure from regional and international actors to return to the status quo could be decisive, given the international support needed to prop up the crippled economy.

The Sudanese population may have been growing frustrated with its civilian authority's ability to deliver on the demands of the revolution. But it is also true that another coup to reinstate military rule is not something the protesters believe would address the challenges they were facing.

Sudan has needed and will require compromise and principled political goodwill to realise a difficult transition. This will entail setbacks but undoubtedly military intervention in whatever guise is monumentally counterproductive to the aspirations of the protest movement.

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David E. Kiwuwa is Associate Professor of International Studies at University of Nottingham

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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