new
money—or
reducing the precious metal
content
in
coins—thus
making the existing money
worth less. This had been a
passionate political cause, in
certain circles, since the end
of the gold standard, the
policy by which every dollar
was backed by a certain
quantity of gold.
The gold standard was the
most popular global monetary
system at the start of the
twentieth century. Not only
did gold link paper money to
something
of
physical
substance; the standard also
served as a mechanism for
imposing restraint on central
banks. The Federal Reserve
and other central banks could
print more money only if they
managed to get their hands on
more gold. If they ran out of
gold, no more money and no
more spending.
The
restriction
was
suspended during the Great
Depression, so that central
banks around the world could
more
money
to
stimulate the economy. After
World War II, the world’s
leading economies went back
to a quasi–gold standard, with
all currencies having a set
value in gold—though it was
no longer possible to actually
turn dollars in to collect
physical
gold.
In
1971
Richard
Nixon
finally
decided to cut the value of the
dollar loose from any anchor
and end the gold standard
permanently. The dollar and
most other global currencies
would be worth only as much
as someone was willing to
pay for them. Now the value
of the dollar arose from the
commitment of the United
States government to take it
for all debts and payments.
Most economists approve
of the move away from the
gold standard, as it allowed
central banks to be more
responsive to the ups and
downs
of
the
economy,
putting more money into
circulation when the economy
grew or when people weren’t
spending and the economy
needed a jolt. But the policy
has
faced
impassioned
criticism, particularly from
antigovernment circles, where
many believe that the end of
the gold standard allowed
central banks to print money
with no restraint, hurting the
long-term value of the dollar
and allowing for unbridled
government spending.
Until 2008, though, this
was a relatively niche issue,
even among libertarians. That
changed during the financial
crisis,
after
the
Federal
Reserve helped bail out big
banks and stimulate the
economy by printing lots of
money. This fanned fears that
the new money flooding the
market would make existing
money and savings worth
less.
Suddenly,
monetary
policy was a mainstream
political issue and the Fed
was a sort of national villain,
with “END THE FED” bumper
stickers becoming a common
sight. The issue became one
of the first criticisms of the
existing financial system that
gained popular appeal after
the financial crisis.
When Satoshi released
Bitcoin, just months after
these bank bailouts, the
design
provided
a
tidy
solution for people worried
about a currency with no
restraints. While the Federal
Reserve had no formal limits
on how much new money it
could
create,
Satoshi’s
Bitcoin software had rules to
ensure that new Bitcoins
would be released only every
ten minutes or so and that the
process of creating new coins
would stop after 21 million
were out in the world.
This
apparently
small
detail in the system carried
potentially
great
political
significance
in
a
world
worried
about
unlimited
printing of money. What’s
more,
the
restraints
on
Bitcoin creation helped deal
with one of the big issues that
had bedeviled earlier digital
moneys—the matter of how
to convince users that the
money
would
be
worth
something in the future. With
a hard cap on the number of
Bitcoins,
users
could
reasonably
believe
that
Bitcoins
would
become
harder to get over time and
thus would go up in value.
These rules were all a late
addition to the code and
Satoshi had not played them
up early on. But now that he
needed to sell it to the public,
this feature of Bitcoin became
a big draw. Martti Malmi, the
young man who wrote to
Satoshi in early May, proved
the wisdom of emphasizing
this. Martti didn’t know
cryptography
but
as
a
political
junkie
he
was
immediately
drawn
to
Bitcoin’s
revolutionary
potential.
“There’s no central bank
to debase the currency with
unlimited creation of new
money,” Martti wrote on the
anti-state.com forum.
This was the first but not
the last time that the Bitcoin
concept’s many layers, and its
openness
to
new
interpretations, would allow
the project to pick up crucial
new followers.
Satoshi
quickly
gave
Martti practical suggestions
for how he could help the
project. The most important
was the simplest: to leave his
computer on with the Bitcoin
program
running.
Five
months after Bitcoin was
launched, it was still not
possible to trust that someone
somewhere was running the
Bitcoin program. When a new
person tried to join, there
were
often
no
other
computers
or
nodes
to
communicate with. It also
meant
that
Satoshi’s
computers
were
still
generating almost all the
coins. When Martti joined in,
he quickly began winning
them on his laptop, which he
kept running except when he
needed the computing power
for his video games.
As
to
the
more
complicated
programming
needs, Satoshi told Martti that
there was “not much that’s
easy right now.” But, Satoshi
added, the Bitcoin website
did
need
introductory
material for beginners and
Martti seemed like the right
person for the job.
“My writing is not that
great—I am a much better
coder,”
Satoshi
wrote,
encouraging Martti to try his
hand.
Two days later, Martti
proved Satoshi right by
sending
a
lengthy
but
accessible
document
addressing
seven
basic
questions, ready to be posted
on the Bitcoin website. Martti