Is Bitcoin ringing in a new reformation?
Portrait of Martin Luther. Picture of thierry ehrmann via flickr.com. License: Creative Commons
A report by a Dutch investment firm called Bitcoin a second reformation. The author compares the circumstances and events at that time with Bitcoin. The exciting historical analysis raises an interesting question: Is Bitcoin really big enough to compare to one of the most important events in Western history? Or is the thesis somewhat inflated? And what does she say about the future of Bitcoin – and the world as a whole –
Sometimes it is said that Bitcoin is as big as the Internet. Or as big as the invention of paper money a few hundred years ago. Or like the innovation of stock trading. All this is huge – but is it big enough too?
It goes to Tuur Demeester all this is too small. Demeester is a longtime Bitcoin investor who helps investors invest in cryptocurrency with Adamant Capital. In a new report he compares Bitcoin with the Reformation, that great world historical event in the early . Century, which marked the transition from the Middle Ages to the modern era and was mentally historically the basis of modern capitalism. Bigger is hardly possible.
He has, Demeester reports, already drawn parallels between Bitcoin and the early oil industry, the wars of the search engines and the markets for domain names, but “I had the feeling that I would not succeed, the It was not until he became involved with the Protestant Reformation that “I had the feeling that I had found a template that went far enough.” Powerful words – but how does Demeester justify this comparison?
He first tries to build parallelism by looking at the foundations or conditions of the Reformation:
Controlled to heaven and blatantly enriched by the indulgence. Indeed, the anger over the Catholic Church's spiritual monopoly and its increasingly ruthless exploitation was a major reason why Martin Luther's theses could receive such a punch. Many German princes, to put it bluntly, were pissed off that a corrupt clique around the Holy See was claiming to have a significant influence on German politics.
This was above all the printing press, which drastically reduced the costs of publishing a book. Added to this was the double-entry bookkeeping that accelerated international trade. This technical revolution became the basis of a cultural and social revolution. Especially without the printing press, it would never have been possible to spread the new Christian doctrine. Their principle that believers should refer to the Bible alone would not have been realistic without the printing of the book, and without this technology Luther's Bible translation would have been much less significant. The volume of trade increased, new factories were established, the business flourished, the division of labor became finer-meshed, and technical innovations brought it to market earlier. This new class no longer fit into the medieval social fabric and was therefore spiritually open to taking up an actual spiritual revolution and using it as an opportunity to improve its social position.
Fourth Demeester calls “credible strategies for defense and escape.” Here he focuses on the Netherlands, who had renounced during this time by a long-lasting revolution of Spain. For their defense, they had used their expertise in hydrotechnical engineering, such as flooding the fields to stop advancing armies. If the initially rather weak Protestant territories had not been sufficiently defensive enough to oppose the militarily dominant Catholic powers, the Reformation would hardly have survived. If you look to Austria, where the early Lutherans were brutally suppressed, you realize how important this point is.
But I think Tuur Demeester mentions some excellent and striking examples. He then presents you with current analogies:
Bretton Woods Agreement ( and often to the detriment of the population, such as when savings are destroyed by inflation. Just as the Roman Church, by virtue of its spiritual monopoly, appropriated a secular power far into the north of Europe, the dollar monopoly becomes the instrument to exert political pressure far beyond the borders of the United States.
The technical innovations of the . and 16. Century is facing the digital revolution. Its basis is advances in telecommunications technology, computer technology and data storage; she creates new tools like open source software, cryptography and social media. That this technological change is taking place and that it has an impact on society is undeniable. The influences can be felt everywhere, whether in commerce, the informational sovereignty of the individual or political decision-making. Whether they have already initiated a kind of reformation, or whether this is yet to happen, is difficult to assess from the bubble of the present.
From about This comparison lags somewhat, as the Millennials, unlike the merchants of the early modern period, are not a new socio-economic class, but merely another mental-cultural milieu that is imposed on an existing class.
In fact, cryptography can be called a digital fortress, an instrument that rebalances forces by making it difficult for the ruling powers to control information and block communication. Furthermore, cryptography-enabled anonymity serves as a shield that allows dissidents and revolutionaries to escape persecution by the state.
The society of that time was changing, and today it is the same. At that time there were social foundations for a Reformation, perhaps they exist today too, and the time is ripe for technical, social and economic bridging. To what extent this is especially true for the present, and not most of the last decades years applies – and to what extent this refers specifically to Bitcoin – but remains just as open, as if one can not replace the current categories mentioned also
Is not it a bit of a caprice if Demeester takes the Millennials as a new class? Would not it make more sense to list programmers and digital tech entrepreneurs here in general? And is cryptography really the ultimate tool for resistance?
While Demeester's analysis remains reasonably sound to date and does not overstrain its scope of application, in the following section he goes into rather thin ice.
doctrines at Bitcoin and Luther
First, Demeester compares the doctrines then and now. They had, so the author, “the essence of rebellion” reproduced. These were calls for “unity and conviction” that are also seen today. So the Protestant believers have sat on sola fide, “only faith alone”. They have called for the ceremoniality and ritualization of the Catholic Church to be abandoned and for faith and scripture to be placed in their places.
Today – more accurately: in Bitcoin space – there is a strong belief in “Vires in Numbers”, which is the strength of numbers without which a Bitcoin wallet makes no sense. Mathematics replaces human error, and instead of trusting, you verify the blockchain. Finally, the HODL ideology expresses the desire to keep your money and keep it independent of volatility. The saying “not your keys, not your bitcoins” expresses a deep distrust of stakeholders.
So far we have some parallels. There are foundations for a revolution, and many Bitcoins take the cryptocurrency and associated ideological content seriously, with a belief that borders on the religious. It should not be a coincidence that in a survey on the religion of our readers “Bitcoin” was one of the leading answers. These are exciting parallels, but I'm not sure if Demeester does not suggest too much here. After all, it is all about money, while the Reformation was the struggle for the immortal soul of man. Can you really drive this comparison so far?
The Finance of the Reformation – and what that says about Bitcoin
The methodological basis becomes very fragile, but afterwards. Demeester picks out some of the characteristics of the financial industry during the Reformation, to draw parallels to where Bitcoin can go. This seems to me a questionable approach, but is still very interesting.
No doubt that was . and 16. An era of financial breakthroughs, the Netherlands played a key role in this. As overseas colonial trade intensified, so did the need for capital to finance merchant shipping and the safe deposit of precious metals, which were then exchanged for more mobile bills.
Demeester describes the high security of the Amsterdam Wisselbank, a gold and silver custodian that kept the precious metals right on the marketplace. It was supposed to play a huge role in overseas trade, as it enjoyed the undeniable confidence of citizens, councilors, and trading companies for an impressively long time. Bitcoin, explains Demeester, is a product of a cultural aversion to third parties that keep money, and serves to minimize the risk of theft and loss. What the Wisselbank in the . Century created Bitcoin with Multisig addresses and other, Smart Contract-based solutions to safely store Bitcoins. Therefore, storing assets – and issuing derivatives based on well-held bitcoins – may be a key business.
Luther and Zwingli discuss at the Augsburg religious talks. While Luther did not want to touch the secular order, Zwingli wanted to bring about a political change with the spiritual as well. Picture of HEN-Magonza via flickr.com. License: Creative Commons
To stay at the . To deal with the risks of overseas trading in the 19th century, new financial products were needed. Thus, “sea loans” were formed, which were accompanied by a high return, but only paid out when a ship landed safely at the port of destination. Later, investors were also able to participate in the proceeds of a seafaring through the “Kommenda”. These two financial products first replaced the maritime insurance, which was founded a little later in Italy and spread from there to all over Europe. These insurance products demanded more and more trust – a trader could sink his own ship instead of undertaking a complicated journey – which is why the rates fluctuated depending on trustworthiness and culture.
Bitcoin insurances, Demeester concludes, are still in development today. There are some proto-insurances, such as miners and depositaries, but these usually only cover parts of the wallets. Also, the risks of volatility or regulation tend to be uninsured. Demeester therefore believes that insurance companies will have a bright future at Bitcoin – without, however, going into more detail about which trades are covered by the insurance. In the Netherlands of the Reformations, these were the great trade journeys that, to an unprecedented extent, went to the other end of the world to introduce goods to Europe that were previously extremely rare, if they were known at all. What is the equivalent? If you only take stock exchanges, the cat bites itself in the tail.
Furthermore, early . In the 16th century, six smaller Dutch trading companies merged into the East India Trading Company, merging their gold deposit and merchant fleet. Then they released the first non-governmental stock, which became a traveling success in Amsterdam and brought investors good profits. This gave the new trading companies a previously unthinkable liquidity of deposited collateral. Similarly, Demeester says, are the Bitcoin holders who save their coins and bring about a strong concentration of these digital assets. The author expects that lending other assets with deposited Bitcoiners as well as derivatives based on frozen Bitcoins will become an important market.
Bitcoin, Demeester concludes, can usher in a new reformation that has the potential to replace the current international financial system.
More than just technology and finance
Methodically his report is of course shaky. The very factors that Demeester uses to compare the current situation around Bitcoin with the Reformation appear somewhat arbitrary. But while such parallelism is still reasonably legitimate, the derivation of future from past market developments violates an important historical-scientific imperative – the past may perhaps explain the present, but it can not predict the future. Especially if this is based on a shaky comparison.
But the theory is extremely exciting, and Tuur Demeester's prediction that issuing bills and other papers based on deposited bitcoins could become a key business is anything but implausible. Such a thing is quite conceivable and could make a lot of sense; Bitcoin, the foundation of all assets, sits on multi-walled wallets in the safest safes in the world, while serving as cover for many other financial products. We already see a similar trend at Ethereum, where more and more ethers are locked up in smart contracts to become the basis of loans, stablecoins and derivatives.
Bitcoin is not just a technology – such as the Internet or broadcasting – and not just a financial product – like stocks or derivatives – but a very broad technical-social-economic field that brings together almost all of today's big business trends , Therefore, a comparison with an event like the Reformation is quite appropriate. Unfortunately, Demeester's own thesis is not quite full, focusing on the financial economy – which is often less connected with the Reformation itself, but with overseas shipping and technologically-driven economic growth – rather than looking at the universality of the event.
If Bitcoin is a new Reformation – what are its contents? Will the comments on “Hodl” and “Not your keys, not your coins” do justice to such a comparison? From the point of view of intellectual history, the Reformation was extremely complicated. Out of mundane questions – such as whether the faithful literally take the flesh of Christ at the sacrament or just a symbol of it – long-standing debates over everything that has been rolled over thousands of pages of books, and even triggered wars.
There were no less complicated political connections during the Reformation. The opposition to the Emperor, for example, led the Saxon princes to support Luther, while he himself was spiritually revolutionary, but remained politically conservative, which made it possible for him to obtain the support of so many princes. Only this allowed the Lutheran Reformation to assert itself, and only its successes made it possible for politically more radical Protestant movements – the Zwinglians in Switzerland or the Calvinists in the Netherlands – to prevail. However, especially radical movements – like the sectarian Anabaptists of Münster – failed because of their own radicalism.
Such observations contain a great deal of questions that should be asked and answered when considering whether Bitcoin and the Reformation are comparable. What is the interaction of the service monopolist with other power centers? How does Bitcoin work on it? What is the legitimacy of Bitcoin – and which splinter groups are there? Could one compare the transparent Bitcoin with the Lutherans, but the anonymous Monero with the Calvinists? And is the Bitcoin movement just sharpening and radicalizing its profile? What changes in mindset does Bitcoin initiate to which new social models can cryptocurrency lead? And threatens a war for crypto, as there were wars for the Reformation?
Such ideas are not found in the report by Demeester. However, this does not change the fact that it is an exciting and profound essay that conveys many suggestions and also makes a plausible prediction, despite the methodological weaknesses, about what the future trends in the Bitcoin economy will be.