Czech History Shows Need For Bitcoin – Bitcoin Magazine
This is an opinion editorial by Thomas Turek, a Czech native and economics student based in Prague. A version of this article was originally published on Substack.
Author’s Note: This topic is close to my heart. As a Czech, the damage that socialism inflicted on our society is one of a great wound that spans generations. Czechoslovakia, from 1948 to 1989, was transformed from a thriving democracy in the heart of Europe to a country of fear-driven citizens and economic stagnation. I hope that this article can enlighten the reader’s knowledge of our history, as well as how digitally distributed ledgers like Bitcoin can act as a defense of individual privacy and finance.
Almost 70 years ago, in 1953, a demonstration against failed monetary policy began in Pilsen, Czechoslovakia, the first of many that would come to symbolize Czech resistance to the communist regime.
History is full of events from around the world such as the Pilsen Rebellion. However, if a similar situation were to occur today, would the outcome be the same? Are we still as vulnerable to dictatorship as we were 70 years ago?
With the introduction of the internet, a dictatorship’s control over society may not be as easy as it once was. The 21st century is the first time in human history when each of us has a way to protect ourselves from totalitarianism and become custodians of our own money, all in our own pockets – with Bitcoin.
Building socialist finance
When the Communists, under Klement Gottwald and supported by Joseph Stalin, launched a coup d’etat against the Czechoslovak government in 1948, a massive series of economic, social and political changes took hold in the nation. The democratic traditions of Czech politics and society were dismantled, purges occurred across the country, and a Soviet-style dictatorship was installed.
Citizens’ freedom of expression was restricted, media censorship was enacted, economic reforms (such as the compulsory seizure of property and collectivization of agriculture) were dictated letter by letter by the party.
Inflation climbed to an astounding 20% by my estimates. Consumer goods, especially food, were in short supply. When general strikes began to organize across the country, the Communist Party of Czechoslovakia did not hesitate to continue. Although officially denied to the public, the next step in the destructive creation of the utopia was a complete devaluation of the national currency.
Antonín Zápotocký, then president of Czechoslovakia, would famously state: “Our currency is fixed and there will be no currency reform, these are all rumors spread by class enemies.” This was untrue.
The reforms were announced on 31 May 1953 at 22:00 – punishing savings but also deeply hurting workers. All savings were devalued at a ratio of 50 to one and all wages at a ratio of five to one. Work quotas for workers increased.
This means that if I were, for example, a worker at the nearby Skoda factory in Pilsen, with 10,000 Czech crowns (CZK) in savings and an hourly wage of 50 CZK, overnight I would see my savings devalue to just 2% of the original value (200 CZK) and my salary would have decreased by 80%.
It was a turning point for many, who saw this as the last straw of totalitarianism – the government had instituted total control over their lives, and now they rightly felt robbed.
Thunder is heard in Pilsen
The following morning, 1 June, a massive general strike of 20,000 people was planned. Ironically, these dissidents were not what the party considered bourgeois capitalists, but ordinary workers, upon whom the regime sought to model itself.
Demonstrators began marching towards the center and eventually a riot began – barricades were built in the streets and symbols of communism were torn down by workers. Slogans, chants and posters demanded an end to totalitarian single-party rule in Czechoslovakia.
The Communist Party leadership was furious. It denounced these citizens as “agents of imperialism” who started violence in Pilsen, and it deployed the Czechoslovak army, the People’s Militia and the secret police to immediately suppress the uprising. Tanks and soldiers quickly overwhelmed the city – 220 people were injured and 650 arrested.
Elsewhere in the country, workers followed, an estimated total of 360,000 workers in
Czechoslovakia would strike against the regime that week.
What says a lot about this story of Pilsen is the reflection it casts on human nature. The workers had their civil liberties taken away, their rights, they worked harder and got less every day, but it was when the state violated their core economic freedoms that they rebelled.
So how can such a crisis be averted in the future? How can humans protect their stored value against tyranny in a meaningful way, if at all? Well, first we need to discuss what value actually is.
What exactly is value?
The textbook’s definition of value is: “The respect that something is held to deserve; the meaning, value, or utility of something.”
However, value is a far more abstract concept than just monetary value, or utility value. Looking at the history of value, and how it has been stored, unfolds a fascinating history and evolution of money, one that culminates in what is probably the most sophisticated store of value humanity has constructed to date: Bitcoin.
When our ancestors started making jewelery from shells and stones 100,000 years ago, it was perhaps the first time that values were created and stored by us. Jewelry looks nice, you can carry it with you, it doesn’t break easily or expire, maybe you can even exchange it for some food later?
The Egyptians discovered gold around 2450 BC. Gold, in terms of its properties, is really great as a store of value, even better than jewelry, and our ancestors quickly realized this.
I can move gold around with me, I can break it up into smaller pieces, it’s durable, looks nice and most importantly, it’s small – unlike the jewelry I’ve been carrying around, there’s only so much gold on the whole the planet. We as a species admire it, and we derive value from scarcity. This is why gold and other metals began to be widely adopted as currency around the world.
But to be honest with you, gold also has its problems. It’s heavy and not too portable, if I have a lot of it, I have to store it somewhere or with someone (where it can be stolen), the government can take it from me, it’s not so easy to share, it can be mixed with other metals and diluted, and actually it’s not that rare: we can mine more here on Earth, and there’s plenty of it in space.
As humanity digitizes every aspect of society, money has been no exception. That’s why, when we fast forward roughly 4,500 years from the first discovery of gold, we reach 2022 – Bitcoin’s 13th year of existence. As a decentralized, censorship-resistant, non-custodial, portable, divisible, durable, hard-to-confiscate and limited form of money, it ticks the box for a good store of value.
Bitcoin is a relatively new invention. With the first “genesis” block mined in 2009, widespread public knowledge of what Bitcoin actually is and its true power has yet to take place. It is still seen as a speculative asset by many, loved by some and hated by almost every grandfather in America.
I can’t send gold easily to people, but I can send bitcoin at the speed of light in any divisible amount. My gold can be stolen, but my bitcoin is cryptographically secure. The government can confiscate my gold, but it can’t take my bitcoin on the blockchain. Gold has an annual inflation rate of about 1.5%, while bitcoin is truly limited, limited to 21,000,000 to be in digital existence. I can cross international borders with millions of dollars worth of bitcoin in my pocket without anyone batting an eye – try doing that with millions of dollars worth of gold bars, the TSA probably won’t be too happy.
Perhaps more important are the applications that can run on top of blockchains like Bitcoins — does gold allow you to borrow and lend it in seconds internationally? Or create groups of people who can work together in decentralized governance structures? I do not think so.
If for some reason in the future I have to send monetary value to Elon Musk on Mars (if he gets there, I’m rooting for you, Elon!) I can’t do it with gold. Martians may not find value in US dollars or Euros, but bitcoin is bitcoin, and we have yet to realize it, but this is a very powerful piece of technology compared to past historical assets that we have stored value with as a species.
Bitcoin in 1953?
Economics and politics are connected.
Communism, for example, is as much an economic theory as it is a political ideology. The same applies to free societies – without free money there cannot be a free society.
Freedom, as an abstract concept, is often described in terms of the individual’s rights to speech, movement or a fair trial, and while these social and political components of freedom are widely understood and important, what is not is the component of free money.
Historically, we have observed a pattern of totalitarian dictatorships that control currency as much as other components of freedom, as in Czechoslovakia. The digital age has made this even more complicated. In our century, we stand at a crossroads: use the digital information age to enhance freedom or to enhance totalitarianism. Engineer and innovate us into greater freedom, or into digital surveillance and slavery, repeating the mistakes of the last century.
With the internet, free social media have defended citizens’ speech against dictatorship, as in Hong Kong. It is free money, like bitcoin, that will ensure that totalitarianism’s control over currency is never allowed to happen again. That’s why regimes like China are so keen to ban it and control it, but they can’t, no matter how hard they seem to be trying.
As the world moves to a more decentralized political and economic system, for the first time in history each individual has a cryptographic shield to protect against totalitarianism. A bank in their own pocket.
We take democracy and freedom for granted in the West, but billions globally live life in dictatorship every day. More than one billion do not have access to banking services or reliable financial infrastructure. Billions more will be victims in the future, and they are set up to fail. Bitcoin is a financial and digital solution.
Had Bitcoin existed in Pilsen in 1953, an entire nation’s savings and wages could have been protected from the hands of totalitarianism. So is the power of computer science and economics when combined. Citizens of the regime would have had a passive way of resisting and protecting themselves from the failures of socialist finance.
As loudly as they had shouted, as loudly as they had built their barricades in the streets, as hard as they had fought the army, nothing would have been more effective than bypassing socialism altogether. How? Through economics, through freedom and through Bitcoin. This is precisely why the dictators of the 21st century are afraid of it.
This is a guest post by Thomas Turek. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
