The Significance of Bitcoin Legal Tender. (That You Might Have Missed)
El Salvador has officially recognised Bitcoin as legal tender, and if you aren’t very familiar with history, you may not notice the historical significance of this, let me explain…
Legal tender has been of primary importance ever since the first human civilisations, heres why;
A civilisation requires human capital, or labour in order to establish itself, Rome wasn’t built in a day, but to build a civilisation also requires vast amounts of collaboration amongst its citizens,
For example if we only ever were to work on our own problems, build our own houses etc, then there would be no colosseum, no community buildings, no companies and in the end, no civilisation. All of those things require people who would otherwise have little invested interest, to work together and build them.
We now have a clash of incentives, everybody collectively wants a civilisation but we need a way to allocate human capital, ideally in a fair and just way.
If you look back at history, the methods for this are primarily two-fold;
- Slavery; the bourgeoisie take a selection of lower class citizens and force them to work, and if they don’t work, they are killed or punished. This method has been used globally for thousands of years by almost every civilisation ever to exist, and works very well if you don’t have a soul, but unfortunately most people are good people, and we collectively decided that this was not okay.
- Trade / labour tokens; provide your citizens with tokens that represent labour, if I do 2 hours of work for my neighbour, he is then indebted (2 hours worth of labour coins) to me , and once paid, I am then free to spend those coins to get somebody else to provide me with 2 hours of work, so on and so forth.
Now, obviously trade and labour tokens are the better solution, less people die, more people are born, more total human capital to allocate, higher quality work is done, and you end up with a civilisation worth living in.
But these labour tokens, more commonly referred to as money, need to be collectively agreed on by every member of society, so that we have less disputes and the government knows what to tax and debase.
So, during history, the government of a given nation decides what their desired labour tokens are, and puts it in law.
This way, if you do any labour for anyone, and they offer to pay you back with those labour tokens, you are legally obliged to accept, and you will no longer be able to raise a dispute that a debt has not been paid off.
Once the government decides what their labour tokens are, be it cows, or gold, or copper, or in todays case, special government issued paper with some cool graphics of dead presidents on it, then it is considered by that nation to be what’s called ‘legal tender’.
And governments take legal tender very seriously, because it’s how they get their funding.
For instance in ancient Rome, the method for currency debasement (lowering the value of their currency for citizens, while acquiring the shaved value for use by the government) was done through the literal shaving of the edges of the peoples gold coins, to melt down and make new coins to fund wars and military expansion.
The same debasement happens today, except instead of clipping the edges from gold coins, we print new money for the government to use, increasing the supply and subsequently reducing the value of citizens savings, but only after the government has spent the newly ‘printed’ money.
However, in ancient Rome, if you were to counterfeit coins, or refuse to accept their legal tender as payment for debt, the lex Cornelia testamentaria nummaria, enacted around 81. BCE, stated that the punishment for such crimes were as follows;
“THOSE WHO COUNTERFEIT GOLD OR SILVER MONEY, ADULTERATE, WASH, CAST, CUT, CORRUPT OR INTRUDE A VICE INTO GOLD OR SILVER COINS, OR REFUSE A MONEY STAMPED WITH THE FACE OF THE EMPEROR UNLESS IT IS A FAKE ONE: IF THEY ARE OF THE ELITE THEY SHALL BE EXILED TO AN ISLAND, IF THEY ARE OF LOW CLASS THEY SHALL BE CONDEMNED TO THE MINES OR THE CROSS. SLAVES SHALL BE PUNISHED CAPITALLY AFTER THE DEED…”
So I think it’s safe to say that legal tender is of immense importance, and the adoption of Bitcoin into this category on behalf of El Salvador is unprecedented.
This is why the situation in El Salvador is so important, for an entire nation to decide that Bitcoin constitutes legal tender is mind boggling, and I personally was not expecting to see this happen for at least another 5 years.
I hope this helped to add some historical context around why everybody is talking about El Salvador, and why the Bitcoin community is so ecstatic about this news.
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