Bitcoin and Gold
Currencies for After the Crash
A CultureMap®
by Christine Sismondo
Published on 6/22/15

At first glance, Bitcoin and gold seem like polar opposites. Gold is a familiar and tangible object; Bitcoin, a currency that exists only in the virtual world, is a novel abstract concept that cannot be held or seen. Despite their differences, both types of wealth are hoarded by those who think the international monetary system is on the verge of collapse. Both are poised to become the new reserves of post-crash cash.

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to  Silk Road  (website | 2011–2014)

Bitcoin embodies the best and the worst of the web. The digital currency takes aim at banks and financial middlemen, falling in line with techno-utopian ideas about how decentralized, open-source versions of real-world institutions can erode established hierarchies, protect individual rights and promote unprecedented democratic access to knowledge and power. Bitcoin’s other “selling” point, however, is that it’s fairly untraceable, which makes it ideal for those who exploit the internet’s lack of central authority to skirt or break the law through hacking, piracy and engaging in gray- and black-market transactions on the so-called dark web. The most famous black market on the dark web was the now-defunct Silk Road, a hidden site used primarily for anonymous drug trafficking. In 2013, Silk Road’s founder and alleged kingpin, Ross Ulbricht (a.k.a. Dread Pirate Roberts), was arrested in the science fiction section of a San Francisco library, where he was logged in to the site as an administrator. The FBI discovered and seized $28.5 million worth of bitcoins—profits from Silk Road—as evidence. Perhaps Ulbricht can take comfort in the knowledge that his legal team probably wouldn’t have accepted Bitcoin anyhow.

to  Mining Bitcoins

There’s no mint for printing bitcoins. Such a lack would normally pose a problem for any currency—even a digital one—since you need to have enough in circulation for it to be useful. But Bitcoin’s “founder,” Satoshi Nakamoto, solved this problem in his 2008 paper “Bitcoin: A Peer-to-Peer Electronic Cash System,” which outlined a plan for the world’s first decentralized digital currency. Nakamoto, almost certainly a pseudonym for the individual (or group) who authored Bitcoin’s open-source software, proposed the money be “mined” by users on the network, who would lend their energies and their computing power to verifying digital signatures and recording Bitcoin transactions. These transactions would then be added to a public ledger stored in a distributed database and existing in a maze of nodes across the network. For their accounting efforts, these miners are rewarded with small Bitcoin wallets, an act that boosts the currency system with infusions of new electronic cash and provides a chain of verifiable financial data to ensure that people can’t double-spend their digital dollars. Some compare this peer-to-peer financial institution to a cooperative; others, however, view its multilevel production as something more like a Ponzi scheme.


Satoshi Nakamoto’s paper introducing Bitcoin was published on October 31, 2008, six weeks after the economic crash that marked the nadir of the 2007–2008 global financial crisis triggered by the failing subprime mortgage market. Along with stocks and housing, the U.S. dollar plummeted, prompting many to believe the greenback’s days were numbered. Panicked financial pundits dubbed it the beginning of The End of the Monetary System as We Know It, or TEOTMSAWKI (based on the survivalist acronym TEOTWAWKI, for The End of the World as We Know It). It’s such a cumbersome and ridiculous word, it almost had to catch on.

TEOTMSAWKI preppers advise liquidating currency-based assets into alternatives—usually precious metals—that will likely retain their value after the ultimate crash. Some back Bitcoin despite its notorious volatility (three nosedives in five years). Why? Even with its bubbles, the bitcoin still outperforms the Argentine peso, the Russian ruble and the Venezuelan bolivar, three distressed currencies some say are harbingers of TEOTMSAWKI. Although a large contingent of naysayers argue that Bitcoin isn’t even a valid currency, digital cash hoarders disagree. To them, this is indeed the end of the monetary system as we know it. And they feel fine.

Silk Road  (website | 2011–2014)
to  Swiss Banking

Switzerland instituted bank secrecy laws in 1934 to provide a safe haven for the assets of desperate fugitives from Nazi Germany. But it didn’t take long for crime syndicates, tax-evading corporations and terrorist organizations—anyone with reason to hide money from authorities—to see Swiss banks were the perfect accessory to a crime. Post-9/11, Switzerland has been under immense pressure to lift the veil on its clients’ accounts so law enforcement can investigate potential crimes more effectively. In 2014 Switzerland announced bank secrecy was on the way out, marking the end of the country’s tenure as the world’s most accepted money launderer. Some criminal financing had already migrated to the deep web, shadowy cyberalleys hidden from search engines, through which anonymous account holders can trade bitcoins for illegal goods and services. Silk Road was the most well-known of these virtual black markets before it was shuttered in 2013, when its libertarian founder, Ross Ulbricht, was charged with conspiracy to traffic in narcotics and other crimes. Despite some web evangelists’ concerns that government surveillance of the deep web violates rights and freedoms, Ulbricht was found guilty—perhaps demonstrating a fine line between libertarianism and criminality.

Swiss Banking
to  Gold

Switzerland’s financial system hasn’t attracted admirers merely for its bank secrecy laws; the country is also famous for its extraordinarily stable Swiss franc, an inflation-resistant currency that, until recently, had 40 percent of its value backed with gold reserves. In 2000, however, a referendum vote decided the country should release itself from the gold standard. The Swiss National Bank began to sell off its gold at the rate of about one ton per day, every day, for five years, and repeated a similar process from 2007 to 2008. Save Our Swiss Gold, a populist movement that emerged in 2013, targeted the sell-off and proposed the Swiss government return to a law that would guarantee a more modest 20 percent of Switzerland’s holdings be in gold. Supporters argued that the fiat (i.e., government-regulated) currency system was fundamentally flawed and that the only way to shore up the Swiss franc—and protect citizens’ life savings—was for gold to back it. Another referendum was called, but the citizen movement failed to persuade the population that Switzerland should reinvest in the precious metal, proving what every third grader knows: Paper still beats rock.


Unlike paper currency, gold is durable—a precious metal that symbolizes inherent and lasting value. Over the years, the term gold standard has come to connote a promise of superiority or a reliable benchmark; it stems from the once-common practice of insuring the value of a currency by backing it with a fixed amount of gold stashed away in reserve. Despite the term’s having come to signify security, many economists believe the actual gold standard was terrible for the economy and likely a major contributing factor to the severity and length of the Great Depression. But this hasn’t stopped some pundits from calling for a return to the gold standard, arguing that the Federal Reserve’s currently unanchored monetary policy will spur inflation, currency devaluation and, ultimately, The End of the Monetary System as We Know It (i.e., TEOTMSAWKI). To prepare for the coming disaster, of course, these thinkers suggest we invest in gold. Those who think bullion is overvalued as a result of hyped-up, sky-is-falling speculation, however, believe precious-metal enthusiasts are actually hoarding fool’s gold.

to  Mining Bitcoins

The idea of “mining” bitcoins refers to the data mining performed by the many pools of users who verify transactions and digital signatures for Bitcoin’s public ledger. On a metaphorical level, however, the term mining anchors Bitcoin in the physical world by making it seem as if electronic cash results from an extraction process rather than being conjured out of thin air. Despite Bitcoin’s volatility and virtuality, quite a few speculators have gotten involved in the mining process, with some prospectors working their computers so hard that the Bitcoin “gold rush” has come to have a real-world environmental impact: Mining bitcoins costs a total of about 1,000 megawatt hours of electricity per day, with all the attendant drawbacks of potential mercury contamination from burning coal to fuel power plants. Bitcoin miners could mitigate the damage by using more eco-friendly computing equipment, but, as with the gold prospectors who fail to contain the mercury released in the gold-smelting process, being environmentally responsible is often the last priority. Given the ecological cost of virtual prospecting, mining bitcoins has more in common with the traditional gold rush than its inventors would likely ever have guessed.