A Marxist Analysis : Bitcoin as Capitalism’s Latest Fetish of Commodity

Reading into the latest news, almost every financial or economic column I have come across is talking about Bitcoin. Its craze has even spread among my peers who are currently installing their own Bitcoin apps (i.e from Bitcoin.co.id and others) to partake in their own trading, hoping to somehow double their pocket money. Rather than simply talking about Bitcoin as another means of investment and speculation to further accumulate our wealth, in this essay, I’d like to contribute to the discussion by analyzing how does Marx’s theory of commodity fetishism could actually apply in the emergence and also rise of Bitcoin as a form of cryptocurrency. What exactly is this latest technological invention that some economist claim would transform current financial and economic system that we know today?

            Firstly, we need to clear up some ontological confusion on what cryptocurrency and bitcoin are. Cryptocurrency is a type of digital currency[1] that acts as a digital asset, working as a means of exchange that uses cryptography[2] to perform several functions such as to secure its transaction, to control the creation of additional unit and preventing double-spending, and to verify the transfer of the asset.[3] Bitcoin then is an example of cryptocurrency and was the first to be decentralized using what’s called a ‘blockchain’[4] technology. The initial idea of Bitcoin creation was published in a paper written by cryptography scientist who goes by the alias of Satoshi Nakamoto. The title was Bitcoin : A Peer to Peer Electronic Cash System[5] which contains Nakamoto’s concerns on our dependence on third parties in our current electronic financial transaction that is quiet costly and risky since it relies on our trust upon the central authority that regulates it (i.e central bank, government etc).

The solution that Nakamoto offers to this problem is the development of Bitcoin’s mechanism; an electronic payment system based on cryptographic proof instead of trust.[6] A bit different from how money is usually conceptualized, bitcoin is merely a unit of account or ledger where numbers in a computer screen exchanged online when traded from one party to another.[7] It also differs in a way that people can privately issue or ‘mine’ bitcoins whereas it is illegal in real life to actually produce your own money without the permission of central bank or any central authority. Various novelty of this technology has caused a commotion among international community who can’t come into consensus in deciding legally whether bitcoin is  money or property or commodity. However for the purpose of this essay, I am going to focus on bitcoin as a form of currency, a means of exchange that is currently hyped up as the future replacement of money.

            Secondly, we are going to talk about Marx’s theory of money as it was conceptualized in his idea of “abstract labour”[8]. Marx’s theory of money is the direct application of his Labor Theory of Value[9] where he defines ‘values’ as the objectification of labour -- the epitome of socially necessary labour where commodities exchange with each other in proportion to the labour measures they contain.[10] As Anitra Nelson put it, money for Marx is the God of Commodities where 'value' is labor objectified and alienated in commodities, and appears in circulation as 'exchange-value', which becomes money as its reification, as the  ‘value-form'.[11] For instance, this is true for the exchange of metals like iron against gold or silver where a given commodity can play the role of universal medium of exchange as well as fulfils other functions of money, exactly because it is a commodity. Money is necessary for commodity exchange and also for commodity production. This is what makes the Marx’s theory of money is essentially commodity theory of money and where commodity fetishism happens.

            Fetishism as presented in the first chapter of Marx’s Critique of Political Economy[12] is the perception of the social relationships involved in production, not as relationships among people, but as economic relationships among the money and commodities exchanged in market trade. It was discussed at the conclusion of value-form of commodities analysis to describe that labor’s social organization is interceded through market exchange[13] where the buying and selling of commodities in a form of goods and services happen. For this reason, social relations between people in a capitalist society (production-time for a commodity, who makes what, who works for whom etc) are seen as economic relations among objects, that is to say, how valuable certain commodity is when compared to another one instead of its true nature when it is seen only through its use-value. When social transactions between people becomes social relations between things, that’s when we fetishize the commodities. Commodity fetishism happens at the point of “contradiction” between the socially necessary labor time “exchange-values” and the material “use-value”. Money, as means of exchange is the only commodity that is both a general and particular commodity at the same time.[14]  It is acting through dialectical opposing forces; the immaterial (exchange-values) versus the material (use-values) combined in what makes money as money.

Then can we then think of bitcoin as a fetish of commodity or in another word, alienated objectified labor? Eventhough bitcoin as cyptocrrency could be disqualified as money because of its immateriality, it does still qualify as medium of exchange in the bitcoin ‘ecosystem’. Well, bitcoin is figuratively mined into being through the public blockchain and from the protocol’s instructions to the network’s working nodes as means of payment. Each bitcoin under Marx's Labor Theory of Value has exchange-value because of its production that is secreted out of human labor and electricity (energy used by the computer to create new block or to ‘mine’ bitcoin). Bitcoin is technologically immaterial where it is immaterially objectified in hyperreality,  making them as the “reality of the virtual” and the first non-sensory real money in recorded human history. Bitcoin may not have intrinsic material utility since it only exists in the realm of data networks, but still absurdly qualifies for both use-value when sellers trade commodities for bitcoin, and exchange-value when buyers trade bitcoin for commodities. Bitcoin’s commodity circulation cycle is managed by blockchain ledger the way that other standardized money currently used in capitalism (i.e. paper bank notes, electronic credit dollars, government bonds, etc) is being managed by central authority. In short, bitcoin does emerge with the similar function of money. This makes Bitcoin as the next commodity that people will bravely trade with and trade for despite the risk of volatility, believing in the mystic power of Bitcoin to make them richer. The latest means of speculation in accumulating more wealth for those having enough power to purchase Bitcoin and engage in the bubble before it bursts.

From Marx's Theory of Money Commodity, bitcoin could be exchanged as commodity instead of simply an addition to simple money, alienating its users from the transaction while attributing the bitcoin the mystic role entrenched in a medium of exchange. Money is hence seen as value materialized in alienated labor, a conception linked to talents and energy, known in socioeconomics as human capital while bitcoin mimics this through the amount of work and electricity (energy) needed to mine it. For Marx, transactions in trade are basically alienation under the rule of money. The fact that bitcoin is a trade-able asset, this makes bitcoin, just like money according to commodity theory, a God-like commodity that elicits excitement among people in the 21 st century; the joy felt by my peers when the price of bitcoin goes up, the anticipation of getting the extra cash. In conclusion, I think its safe to claim that Bitcoin is the contemporary epitome of commodity fetishism where social relations are now characterized by infinite and insubstantial bits and bytes, instead of among things with identities and spatiotemporal aspect.

REFERNCES

BOOKS

Junankar, P. N. Marx's Economic. Oxford, United Kingdom: Philip Allan, 1982.

MARX, KARL. CAPITAL A CRITIQUE OF POLITICAL ECONOMY,. S.l.: FORGOTTEN BOOKS, 1859.

Nelson, Anitra. Marxs concept of money: the god of commodities. London: Routledge, 2014.

Swan, M. Blockchain: Blueprint for a New Economy; O’Reilly Media, Inc.: Sebastopol, CA, USA, 2015

JOURNALS AND OTHERS

Rivest, Ronald L. "Cryptography". In J. Van Leeuwen. Handbook of Theoretical Computer Science. 1. Elsevier. 1990

Wagner, Andrew. "Digital VS Virtual Currencies." Bitcoin Magazine, August 22, 2014.

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[1] Digital currency :  (digital money or electronic money or electronic currency) is a type of currency available only in digital form, not in physical (such as banknotes and coins). It exhibits properties similar to physical currencies, but allows for instantaneous transactions and borderless transfer-of-ownership. Examples include virtual currencies (i.e. Go Pay on your Go Jek Application) and cryptocurrencies (i.e. bitcoin, POT coin, Ripple etc). Virtual currency and Cryptocurrency are two different things.

Andrew Wagner, "Digital VS Virtual Currencies," Bitcoin Magazine, August 22, 2014.

[2] Cryptography : practice and study of techniques for secure communication in the presence of third parties called adversaries. This study is at the intersection of Math, computer science, engineering, communication science, physic, and so on. We see its application from military communication, electronic commerce, to computer password.

Ronald L. Rivest,  "Cryptography". In J. Van Leeuwen. Handbook of Theoretical Computer Science. 1. Elsevier, 1990.

[3] Wagner 2014.

[4] The blockchain is a public ledger that records bitcoin transactions. It is a distributed database where each network node stores its own copy of the blockchain. Approximately six times per hour, a new group of accepted transactions, a block, is created, added to the blockchain, and quickly published to all nodes. This allows bitcoin software to determine when a particular bitcoin amount has been spent, which is necessary in order to prevent double-spending.

M. Swan, “Blockchain: Blueprint for a New Economy” , O’Reilly Media, Inc.: Sebastopol, CA, USA, 2015.

[5] Bitcoin Wiki. Category:History. Available online: https://en.bitcoin.it/wiki/Category:History  (accessed on 20 December 2017)

[6] Swan 2015.

[7] Ibid.,

[8] Karl. Marx, Capital A Critique of Political Economy, (S.l.: Forgotten Books, 1859).

[9] P. N. Junankar, Marx's Economic (Oxford, United Kingdom: Philip Allan, 1982)

[10] Marx, 1859.

[11] Anitra Nelson, Marxs concept of money: the god of commodities (London: Routledge, 2014).

[12] Marx 1859.

[13] Ibid.,

[14] General commodity : A commodity with universal value and exchangeability, epitomized in money.

Particular commodity: A commodity with singular use and narrow utility, usually exchanged for money.

Nelson, 1999. Marx's Concept of Money.