The following was written by SFL Ghana leader Narigamba Mwinsuubo

The common characteristic of both Fraudulent and Fiat money is that they violate the principle of free association. They enable the producers of paper money to expand their production through the violation of other people’s property rights. The producer of fiat money sells a product that cannot withstand the competition of free-market moneys such as gold and silver coins, and which the market participants only use because the use of all other moneys is severely restricted or even outlawed.

The most eloquent illustration of this fact is that paper money in all countries has been protected through legal-tender laws. Paper money is inherently fiat money and it cannot thrive but when it is imposed by the state it encourages development of a national currency backed by bank holdings of the state.

Bitcoin was invented to foster this new, digital style of commerce. There is no central bank or authority. Instead, Bitcoin is a self-monitoring network, spread out between the computers of everyone who uses it. All transactions are encrypted, verified and logged by other members in an intensive process called mining. For now, miners are rewarded for their work with new Bitcoins. This is how the currency is being issued into existence.

The process will continue until 21 million Bitcoins have been mined, after which no new Bitcoins will be created. Like the fixed quantity of matchsticks soldiers used as money in the prison camps, the fixed supply of Bitcoin will guarantee its scarcity and, presumably, its value.

So far, there are painfully few merchants willing to accept Bitcoin instead of, well, real money. The few regular companies who do accept it are in it more for the gimmick and publicity than genuine utility. In fact, the only people strongly motivated to use Bitcoin have been those trading illegal goods online (who want to maintain anonymity) and, increasingly, investors. Using web-based exchanges, speculators trade dollars for Bitcoins at one rate, and hope that the value of Bitcoins goes up. Sometimes it does – wildly so. The Bitcoin economy is still quite volatile, and the online exchanges are still small and vulnerable to hacking and manipulation.

The Winklevoss brothers claim they already own over $10 million in Bitcoin, and want to make the currency more available to the world (thus increasing the value of their own investment, but let’s not go there). Their idea is to launch a publicly traded Bitcoin ETF which, like the exchange traded funds available for gold and silver, will offer retail investors exposure to this exotic new currency without the complexity or volatility of today’s Bitcoin marketplace. And they’re leading just one of many outfits offering investors exposure to Bitcoin, for a fee.

The irony here, however, is that if Bitcoin succeeds as an investment vehicle it will have failed in its original role as a currency biased toward transaction instead of speculation (velocity over growth). Because if the currency is hoarded by investors instead of traded between people, it won’t have lived up to the dream of offering an alternative to expensive bankers’ money. And if no one is using it for anything real, its value will go down, taking the portfolios of its investors down along with it.

Banking in Africa is fraudulent whenever bankers sell uncovered or only partially covered money substitutes that they present as fully covered titles for money. These bankers sell more money substitutes than they could have sold if they had taken care to keep a full percent reserve for each substitute they issued. Credit expansion financed through printing money is in practice the very opposite of a way to combat the economic establishment. It is the preferred means of survival for an establishment that cannot, or can no longer; sustain the competition of its competitors. However, it’s trivial for law enforcement to follow cash into the bitcoin maze and, presumably track the goods as they leave.

This is both good and bad: bad because the bitcoin proponents see the eyes of government as tools of great evil and good because it ensures that business could (but may not) begin accepting bitcoin because it was always designed as a proof-of-concept rather than a real monetary exchange and that people can take cash from it is as happy accident. The goal, then, is to make Bitcoin as easy as transferring funds from bank to bank and account to account as well as educating the consumer about its benefits.