Bitcoin was a clever idea. Idealistic, even. But it isn’t working out quite as its developers imagined. In fact, once all the coin has been mined, bitcoin will simply reinforce the very banking system it was invented to disrupt.

Watching the bitcoin phenomenon is a bit like watching the three-decade decline of the internet from a playspace for the counterculture to one for venture capitalists. We thought the net would break the monopoly of top-down, corporate media. But as business interests took over it has become primarily a delivery system for streaming television to consumers, and consumer data to advertisers. Likewise, bitcoin was intended to break the monopoly of the banking system over central currency and credit. But, in the end, it will turn into just another platform for the big banks to do the same old extraction they always have. Here’s how.

At its core, bitcoin is just an extension of the old PGP, or Pretty Good Privacy encryption protocol. Public and private keys are used to hide and verify the identity of the parties in a transaction. The transaction itself is authenticated by thousands of internet witnesses, who vote for its veracity with all the cycles of their computers and the electricity on which they run. In return for dedicating all that hardware and wattage authenticating transactions and recording them in a ledger known as the Blockchain, they are rewarded with bitcoin. It is their verification activity that mines new bitcoin into existence. And the more bitcoin they have, the more committed they will be to maintaining the integrity of the Blockchain recording their assets.

[Photo: Flickr user Antana]

In essence, bitcoin is money built and maintained by nerds, based on the premise that good nerds will outnumber the bad nerds. Sure, bad actors can dedicate all of their processing power to fake transactions, but they will be outnumbered by those who want the token to work properly.

At its most ambitious, bitcoin is meant to provide an anonymous, decentralized, frictionless, and incorruptible form of transaction–an alternative to the extractive, central, bank-issued currencies now enjoying a virtual monopoly in our economies. Cryptocurrencies aren’t just about increasing efficiency, but taking down an economic elite that has been using its control over currency to maintain its wealth and power.

Central currency is not the only kind of money that ever existed. For many centuries, gold and other precious metals served as money. The problem with gold was that it was so scarce and valuable in its own right, that no one wanted to spend it on daily necessities such as bread or chicken. Gold was hoarded, and really only useful for long-distance trading between the wealthy.

During the Crusades, however, many European communities adopted the more flexible market money systems they had seen used in Moorish territories. Market money was virtually worthless: like a poker chip or IOU that was redeemed for a loaf of bread or dozen eggs at the end of the day. Unlike gold, which was no good for transactions because it was too scarce, market moneys existed only to enable trade, and often expired at the end of the day. They couldn’t be stashed.

But this sort of money was fabulous for trade, which was the whole point of money, anyway. Everybody who had a way of creating value–whether making shoes or growing grain–now had a way of exchanging that value with others. The use of market moneys led to a century or two of wealth creation unlike any we’ve ever seen since. The former peasants of feudalism became the merchant middle class, working just three or four days a week, and exhibiting a level of skeletal growth (a sign of health) larger than at any time in the history o