The Future of Bitcoin and The Blockchain!
BITCOIN IS NOT SO MUCH a single software program as it is software written using a model called the blockchain that is can be used to build other very similar programs (related cryptocurrencies like Litecoin, Dogecoin, and so on), but also less similar ones. The cryptographically enabled distributed ledger, and the blockchain used to implement it, advocates insist, have wide application outside of their current uses.[1] We hear (not infrequently) that the blockchain is as revolutionary today as were “personal computers in 1975, the internet in 1993” (Andreessen 2014). Networks built on such technologies are formally decentralized, we are told, in a way that the current internet is not, and thus allow a new range of services and opacity to oversight (and therefore legal as well as unlawful surveillance). Of course, in many ways “centralized” and “decentralized” are metaphors, and also adjectives that can apply to many different parts of systems. Facebook, for example, might be seen as decentralized because it is made up of its millions of users, spread out all over the planet; as centralized, because one company collects all of the data from those users; as decentralized, because all that data is not housed in a single geographic location, but on servers all over the world; as centralized, because those locations are nevertheless tightly held together via software and hardware; and on and on. The valorization of “decentralization” as a good in itself too often obscures as much as it reveals (Galloway 2014; Golumbia 2012), and there are any number of ways in which, despite its technically decentralized nature, Bitcoin functions as a centralized and concentrated locus of financial power (see, e.g., Wile 2013).
Advocates are right that it is difficult to grasp the potential uses of such networks without seeing them in action, but on the surface they seem structured around promises that appeal to and reinforce rightist political ideologies. These are almost exclusively ideologies that are broadly libertarian in character. They follow Friedrich Hayek and his disciple Jimmy Wales in believing that markets (see Mirowski 2014, 82–83), not formal political structures, are the only valid means for power to be wielded, and that “the good will out” if we impose competitive market structures over parts of society, like the issuance of money, that governments have claimed as part of their domain. Despite their frequent invocation of “democratization,” such efforts are profoundly antidemocratic, insisting that the introduction of devices and software by a self-identified technocratic elite trumps duly enacted laws and law enforcement mechanisms, and that a kind of market—a market in adoption of such services—is the exclusive method society should use to judge the provision of these services. The most fervent advocates of such strategies are open in their rejection of democratic governance: “‘We see this as part of the total sublation of the state,’ said Cody Wilson . . . who gained fame earlier this year when he published online the blueprints to a pistol that could be manufactured with a 3D printer. ‘I know I sound like some kind of weird Jehovah’s Witness, but we’ve only just begun. We admit that we are ideologues’” (Feuer 2013).[2] There was a time when it might have been relatively difficult to imagine a software platform that had more power as a politics than in its practical applications; it also used to be hard to imagine right-wing extremists like Cody Wilson being quoted as authoritative about anything in our nation’s leading newspapers. It is an index of Bitcoin’s power as ideology (and of the power of that ideology itself) that today such statements pass without much notice, and it is no less an index of the threat such technologies, and even more so, the ideologies they embody, pose to democracy itself.[3] It is a threat the advocates of such technologies themselves frequently advertise, and it is this feature of cryptocurrencies and blockchain technologies that all non-rightist political thinkers need to take seriously.
Part of what makes Bitcoin such an intriguing cultural phenomenon is that while its proponents are firmly convinced of its success, they have serious difficulty agreeing about what that success would be. On the one hand, because Bitcoin is supposed to replace the currencies of corrupt central banks, success means widespread adoption of Bitcoin. But “widespread adoption” inherently includes adoption by the very bankers, financiers, and politicians some Bitcoin enthusiasts loathe so much, and therefore signs of widespread adoption are taken as unfortunate corruptions of the Bitcoin ideal. In another register, Bitcoin is supposed to “end the nation-state,” or at least the nation-state’s “tyranny” over money, goals toward which its widespread adoption is supposed to lead; so as Bitcoin does in fact become more widely adopted, but with virtually no impact on either the nation-state or reserve banking, it is seen as a disappointing failure. The dream of Bitcoin ubiquity is one of total social transformation, in the direction of extreme anarcho-capitalism. Therefore it is possible to suggest both that Bitcoin will succeed and is succeeding, and that yet this success will not satisfy the demands of the most fervent Bitcoin advocates (for such contradictory assertions see, e.g., both Ito 2016; and Redman 2016; for the difficulty of defining “success” in Bitcoin, see both Hearn 2016; and the discussion of it in the various Bitcoin communities). Bitcoin as ideology will go on to find itself even more extreme instantiations, which may or may not manifest its overt political goals. Regardless of whether Bitcoin realizes these goals, its primary social function is to spread these ideas and give them more widespread legitimacy than John Birch Society pamphlets ever did.
Pushed to its limit, Bitcoin revels in contradictions that only committed ideologues could think reasonable. Jeffrey Tucker—an avowed anarcho-capitalist, “Chief Liberty Officer and founder of Liberty.me,” and right-wing Heartland Institute policy adviser—is one of the most strident promoters of cyberlibertarian ideology and of Bitcoin and blockchain technology. Tucker’s use of the language of “peer-to-peer” and “sharing” (in particular Tucker 2015a) along with his relentless disparagement of democratic governance should give all non-right-wing digital enthusiasts pause. Bitcoin and its associated exchanges and services have been thoroughly implicated in scams and manipulation of every sort (for just a partial list through the end of 2014 see “List of Bitcoin Heists”). In part this stems from the deliberate design of Bitcoin to prevent legal regulation. It also tells us a lot about the way people behave when they believe they are outside or above the rule of law, especially when money is involved. In a bizarre piece called “A Theory of the Scam” (Tucker 2015b), Tucker explains away these scams and thefts, which on most non-extremist accounts emerge directly from Bitcoin’s hostility toward legal regulation, advising his readers, “Never think that the presence of rackets in an industry discredits that industry.”
Tucker notes, not without some basis in fact, that enormous industries and world-transforming technologies like the printing press and railroads were rife with scams in their early days, although he fails to demonstrate that these histories truly are parallel with what we see today with Bitcoin. Tucker’s philosophical argument is even more remarkable: “Why are scam artists so attracted to Bitcoin? The answer is actually flattering. Scam artists are the evil cousins of genuine entrepreneurs. They are alert to new opportunities. They are attracted to ventures that are popular among the smart set. They are profoundly aware of what people imagine to be the next big thing. Where there is opportunity and the prospect of high profits, there are scammers. Their interest in Bitcoin, then, is actually a bullish sign. I would be more worried about this market if scam artists were not interested in it.” All one has to do is to consider the extensive history of “technologies” and products that were nothing but scams—to say nothing of the many products that have developed without much of a history of scamming at all—to see how self-serving this argument is. If the presence of scams is an indication of the health of a given product or technology, then cold fusion, patent medicine, unregulated mutual funds (the kind that were shut down in the midst of the financial crises of the 1920s and 1930s), and penny stocks should all be excellent candidates for safe and successful investment.
Tucker’s argument, while it may be an especially pointed and telling version, is one that we find repeatedly in Bitcoin advocacy. Despite the fact that, compared with other technologies, other currencies, and other forms of payment, Bitcoin’s resistance to legal oversight makes it ripe for misuse and abuse of all sorts, its advocates portray that resistance as the most important kind of “freedom,” in no small part because they benefit from blurring the lines between legal and illegal, scam and legitimate transaction, and because they are committed to a highly attenuated and specific notion of “freedom.” The whole point of the enterprise, as with most of the efforts promoted by libertarians and anarcho-capitalists, is to enable a wide range of extractive and exploitative business practices, and thus to increase the power of corporations and capital outside the scope of any attempts by democratic polities to constrain them.
Among the most suggestive of the proposed alternate uses for the blockchain is in the creation of what advocates variously refer to as a “Decentralized Autonomous Organization” (DAO) or “Decentralized Autonomous Corporation” (DAC). One early promoter of what he calls “Bitcoin as platform” describes them this way: “Bitcoin is the first prototype of a real decentralized autonomous corporation (DAC), where the Bitcoin holders are the equity shareholders of Bitcoin Inc. Stan Larimer, president of Invictus Innovations, defines a DAC as follows: ‘Distributed Autonomous Corporations (DAC) run without any human involvement under the control of an incorruptible set of business rules. (That’s why they must be distributed and autonomous.) These rules are implemented as publicly auditable open source software distributed across the computers of their stakeholders’” (Duivestein 2015). At some level this appears reasonable, but it turns out to be anything but clear exactly what DACs or DAOs are supposed to be or do. One of the simplest illustrations has to do with what advocates call “smart contracts”: “A smart contract is the simplest form of decentralized automation, and is most easily and accurately defined as follows: a smart contract is a mechanism involving digital assets and two or more parties, where some or all of the parties put assets in and assets are automatically redistributed among those parties according to a formula based on certain data that is not known at the time the contract is initiated” (Buterin 2014). The point is that the contract, once agreed to by both parties, fulfills itself when the conditions have been met, without the parties needing to take additional action. The contract is “decentralized” (it does not exist in any one specific location) and “autonomous” (it works on its own without the intervention of other agents).
Advocates for DAOs, DACs and their offshoots spend a great deal of time, unsurprisingly, on describing the technology that might allow these structures to come into being. But as with Bitcoin itself, it is hard not to see—that is, if one is looking for it—the extremist assumptions on which the notions of DAOs and DACs and their ilk are built. One of the main proponents of DAOs and DACs is Vitalik Buterin, author of the passage about “smart contracts” above, “a Canadian college dropout and Bitcoin enthusiast” (Schneider 2014), cofounder of Bitcoin Magazine, and a recipient of one of the US$100,000 Thiel Fellowships funded by the eponymous right-wing technology entrepreneur and PayPal founder Peter Thiel (Rizzo 2014a)—fellowships that specifically promote the rejection of higher education, in a manner harmonious with the rejection by Thiel and others on the right wing of public goods (Lind 2014). Buterin is a cofounder of Ethereum, the best-known project to generalize blockchain technology into applications that go beyond currency-like systems.
Buterin (2014) describes DAOs “and their subclass, DACs,” as the “holy grail” of decentralized applications. A DAO “is an entity that lives on the internet and exists autonomously, but also heavily relies on hiring individuals to perform certain tasks that the automaton itself cannot do.” While a DAO is “not an artificial intelligence,” it “makes decisions for itself.” A DAO has “internal capital . . . [it] contains some kind of internal property that is valuable in some way, and it has the ability to use that property as a mechanism for rewarding certain activities.” Exactly what these DAOs will do or could do remains fuzzy, but it is hard not to notice that the representation most frequently picked by DAO advocates for what a real DAO would look like is the “Daemon” process described by science fiction author and IT consultant Daniel Suarez in his novels Daemon (2006) and Freedom™ (2010). In Suarez’s books, the “Daemon” is a set of autonomous algorithms designed by a genius-level software developer and set to begin running when he dies. The “Daemon” that is thereby unleashed, while not itself possessing any sort of will or desire, carries out a complex series of conditional orders that ultimately result in a complete global revolution: it resembles, though it is not, an “evil genius” bent on global power, one who centralizes and concentrates power in itself and in those it deems to be worthy subordinates (many people in the world of the novels think that some living person or group of persons is behind the “Daemon’s” actions, although readers know that this is not the case). Despite the revolution having some positive aspects, it is hard to read these books and see Suarez as having any goal other than to show the malevolent intent and dangerous potential of such autonomous and uncontrollable algorithms with capital. Yet blockchain promoters take the books as portraying a desirable outcome and frequently invoke the Daemon as the thing they are attempting to build (see, e.g., “Decentralized Autonomous Corporation”; Duivestein 2015; Swan 2015, 17), without noting the apocalyptic character of Suarez’s novel.
The close tie between capital and the ideas of DAOs and DACs shows the remarkable way in which, despite the rhetoric of revolution and “democratization,” what these structures offer is an even further intensification of the power of capital to escape legal and democratic oversight. The terminological play at work in the DAO and DAC names already discloses something of the built-in and highly questionable assumptions on which the projects themselves are based: that loci of concentrated power are currently “centralized” and not “autonomous,” so that what is needed are their opposites. Yet it is hard to see how a dispassionate observer of contemporary political economy could agree with such an assessment: to the contrary, many of the most serious economic and political problems today emerge just from the ability of concentrations of capital, usually under the name of “corporations,” to act in a remarkably decentralized and autonomous fashion. One might say without exaggeration that the last thing the world needs is the granting to capital of even more power, independent of democratic oversight, than it has already taken for itself.
Bitcoin enthusiasts have an uncanny ability to interpret every event as an indicator of the inevitable “success” of the cryptocurrency. When Bitcoin’s value relative to world currencies goes up, enthusiasts celebrate; when it goes down, it is a mark of a coming stability that augurs success as a store of value, despite there being historical precedent only contrary to this development. Regulation that enables Bitcoin trade means the currency is being taken seriously; regulation that restricts trade means that governments are failing and the “new” Bitcoin economy is rising to replace it. This pattern itself is one of the strongest indicators of Bitcoin’s ideological power, which is reflected no less in the structure of the blockchain itself as it is in the discourse that surrounds it.
Paradoxically, then, the fact that venture capitalists are reputed to have invested widely in companies focused in some way or another on Bitcoin is a sign of both mainstream adoption and the destruction of the “mainstream.” At this point it is certainly absolutely possible that many retailers may come to accept Bitcoin as a medium of exchange, and major retailers like Amazon, Target, and Dell already accept it at least to some extent. Yet such success disappoints at some level, because simply having one more option among many others to pay for things seems anything but revolutionary. Further, the inherent fluctuations in value and the costs involved with exchanging Bitcoin for other, more widely accepted exchange instruments end up mitigating some of Bitcoin’s purported strengths. Exchange fees typically mirror the middleman transaction fees Bitcoin enthusiasts dislike so much (Kroeger and Sarkar 2016), and the reversibility of credit card and some bank transactions is for most users a feature rather than a bug. In general, to most users, other systems of exchange have benefits Bitcoin explicitly rejects, and the more Bitcoin enthusiasts realize how important these benefits are, the less revolutionary and transformational it appears. So the likelihood of widespread use appears in somewhat inverse proportion to its “revolutionary” potential: the more widely used it is, the less it seems to mean.
Yet this should not defuse concerns about Bitcoin’s potential (and that of the blockchain), both as platform and as politics. In fact, it’s not clear which is more worrisome. As objects of discourse, Bitcoin and the blockchain do a remarkable job of reinforcing the view that the entire global history of political thought and action needs to be jettisoned, or, even worse, that it has already been jettisoned through the introduction of any number of digital technologies. Thus, in the introduction to a bizarrely earnest and destructive volume called From Bitcoin to Burning Man and Beyond (Clippinger and Bollier 2014), the editors, one of whom is a research scientist at MIT, write, “Enlightenment ideals of democratic rule seem to have run their course. A continuous flow of scientific findings are undermining many foundational claims about human rationality and perfectibility while exponential technological changes and exploding global demographics overwhelm the capacity of democratic institutions to rule effectively, and ultimately, their very legitimacy” (x). Such abrupt dismissals of hundreds of years of thought, work, and lives follows directly from cyberlibertarian thought and extremist reinterpretations of political institutions: “What once required the authority of a central bank or a sovereign authority can now be achieved through open, distributed crypto-algorithms. National borders, traditional legal regimes, and human intervention are increasingly moot” (xi). Like most ideological formations, these sentiments are highly resistant to being proven false by facts. Thus, when Bitcoin faced a technical issue over the size of the blocks that make up the blockchain, a problem that could eventually result in the entire blockchain becoming unstable or too slow to process transactions, a fight broke out about the possible shift to a new version (in open source software development terms, a “fork”) of the software. In the course of the fight a rift was revealed between the two individuals with full access to the Bitcoin code, who developed and supported the fork, and others who opposed it (Bustillos 2015). These are problems of governance, authority, and centralization, and rather than a decentralized, super-democratic, and distributed governance mechanism revealing its efficacy, even Bitcoin’s own governance structures displayed exactly the autocracy, infighting, bad faith, and centralization that the blockchain is often said to have magically dissolved.
Few attitudes typify the paradoxical cyberlibertarian mind-set of Bitcoin promoters (and many others) more than do those of “Sanjuro,” the alias of the person who created a Bitcoin “assassination market” (Greenberg 2013). Sanjuro believes that by incentivizing people to kill politicians, he will destroy “all governments, everywhere.” This anarchic apocalypse “will change the world for the better,” producing “a world without wars, dragnet Panopticon-style surveillance, nuclear weapons, armies, repression, money manipulation, and limits to trade.” Only someone so blinkered by their ideological tunnel vision could look at world history and imagine that murdering the representatives of democratically elected governments and thus putting the governments themselves out of existence would do anything but make every one of these problems immeasurably worse than they already are. Yet this, in the end, is the extreme rightist—anarcho-capitalist, winner-take-all, even neo-feudalist—political vision too many of those in the Bitcoin (along with other cryptocurrency) and blockchain communities, whatever they believe their political orientation to be, are working actively to bring about. This is not to say that Bitcoin and the blockchain can never be used for non-rightist purposes, and even less that everyone in the blockchain communities is on the right. Yet it is hard to see how this minority can resist the political values that are very literally coded into the software itself. Recent events have shown repeatedly that we discount the power of engineers and/or ideologues to realize their political visions through software design at our peril. What is required to combat that power is not more wars between algorithmic platforms and individuals who see themselves as above politics, but a reassertion of the political power that the blockchain is specifically constructed to dismantle.