IT is believed that cryptocurrency, bitcoin, surfaced primarily owing to the need to eliminate the mediator between financial transactions and regulate a peer-to-peer system. While that is systematically true, the reason for crypto to emerge is to have a decentralised currency that isn’t exclusively sponsored by any state as opposed to the dollar.

What the explanations of the sophisticated system of blockchain and cryptocurrency fail to address is the impending dilemma of the dollar. It is now a known fact that the success of the US dollar lies in the global confidence upholding it unlike the other currencies (and the inherent banking system) which are bound to be backed by gold reserves.

Such declarations have been time and again made by leading economists like John Perkins (see: Confessions of an Economic Hitmen) and are boosters to the dollar dilemma.

To initiate a so-called ‘decentralised’ currency that replaces dollar before it collapses, bitcoin was introduced and not unexpectedly the initiator (that goes by the pseudonym of Satoshi Nakamoto) remains unveiled.

This implies that the global economic functioning of bitcoin through its surging popularity means that it will fill the same pockets that once bulged with dollars, thus defeating the purpose of decentralisation altogether.

Next comes gold versus bitcoin. Economic theory has always been trumped by political reality. Flipping through the pages of history, one should ruminate on the assassination of Muammar Gaddafi which, in retrospect, was the extrication of a rising vehemence against the ravelled success of dollar.

His demand for trading petrol in gold, thereby replacing petrodollars was initially met with incredulous mocking, followed by solemn threats and culminated in his ultimate removal. This historical establishment certified how jeopardising trade in gold could be for the US, should it dare to replace the dollar.

Zuha Noor

Lahore

Published in Dawn, December 27th, 2017