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<nettime> Visions of a Techno-Leviathan: The Politics of the Bitcoin Blo
Brett Scott on Wed, 4 Jun 2014 18:25:54 +0200 (CEST)

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<nettime> Visions of a Techno-Leviathan: The Politics of the Bitcoin Blockchain

(/Note: This is a 1000 word exerpt from my recent piece in 
E-International Relations on the politics of the Bitcoin blockchain. 
It's received an interesting mix of reactions from both left-libertarian 
to anarcho-capitalist elements of the cryptocurrency community. The 
original can be found here 
and is published by E-International Relations on a Creative Commons licence. 
Cheers, Brett  {AT} suitpossum)/

*Visions of a Techno-Leviathan: The Politics of the Bitcoin Blockchain*

In Kim Stanley Robinson's epic 1993 sci-fi novel /Red Mars/, a 
pioneering group of scientists establish a colony on Mars. Some imagine 
it as a chance for a new life, run on entirely different principles from 
the chaotic Earth. Over time, though, the illusion is shattered as 
multinational corporations operating under the banner of governments 
move in, viewing Mars as nothing but an extension to business-as-usual.

It is a story that undoubtedly resonates with some members of the 
Bitcoin community. The vision of a free-floating digital cryptocurrency 
economy, divorced from the politics of colossal banks and aggressive 
governments, is under threat. Take, for example, the purists at Dark 
Wallet, accusing the Bitcoin Foundationof selling out to the regulators 
and the likes of the Winklevoss Twins.

Bitcoin sometimes appears akin to an illegal immigrant, trying to decide 
whether to seek out a rebellious existence in the black-market economy, 
or whether to don the slick clothes of the Silicon Valley establishment. 
The latter position -- involving publicly accepting regulation and tax 
whilst privately lobbying against it -- is obviously more acceptable and 
familiar to authorities.

Of course, any new scene is prone to developing internal echo chambers 
that amplify both commonalities and differences. While questions 
regarding Bitcoin's regulatory status lead hyped-up cryptocurrency 
evangelists to engage in intense sectarian debates, to many onlookers 
Bitcoin is just a passing curiosity, a damp squib that will eventually 
suffer an ignoble death by media boredom. It is a mistake to believe 
that, though. The core innovation of Bitcoin is not going away, and it 
is deeper than currency.

What has been introduced to the world is a method to create 
/decentralised peer-validated time-stamped ledgers/. That is a fancy way 
of saying it is a method for bypassing the use of centralised officials 
in recording stuff. Such officials are pervasive in society, from a bank 
that records electronic transactions between me and my landlord, to 
patent officers that record the date of new innovations, to 
parliamentary registers noting the passing of new legislative acts.

The most visible use of this technical accomplishment is in the realm of 
currency, though, so it is worth briefly explaining the basics of 
Bitcoin in order to understand the political visions being unleashed as 
a result of it.

*The technical vision 1.0*
Banks are information intermediaries. Gone are the days of the merchant 
dumping a hoard of physical gold into the vaults for safekeeping. 
Nowadays, if you have '?350 in the bank', it merely means the bank has 
recorded that for you in their data centre, on a database that has your 
account number and a corresponding entry saying '350' next to it. If you 
want to pay someone electronically, you essentially send a message to 
your bank, identifying yourself via a pin or card number, asking them to 
change that entry in their database and to inform the recipient's bank 
to do the same with the recipient's account.

Thus, commercial banks collectively act as a cartel controlling the 
recording of transaction data, and it is via this process that they keep 
score of 'how much money' we have. To create a secure electronic 
currency system that does not rely on these banks thus requires three 
interacting elements. Firstly, one needs to replace the private 
databases that are controlled by them. Secondly, one needs to provide a 
way for people to change the information on that database ('move money 
around'). Thirdly, one needs to convince people that the units being 
moved around are worth something.

To solve the first element, Bitcoin provides a public database, or 
ledger, that is referred to reverently as the /blockchain/. There is a 
way for people to submit information for recording in the ledger, but 
once it gets recorded, it cannot be edited in hindsight. If you've heard 
about bitcoin 'mining' (using 'hashing algorithms'), that is what that 
is all about. A scattered collective of mercenary clerks essentially 
hire their computers out to collectively maintain the ledger, baking (or 
weaving) transaction records into it.

Secondly, Bitcoin has a process for individuals to identify themselves 
in order to submit transactions to those clerks to be recorded on that 
ledger. That is where public-key cryptography comes in. I have a public 
Bitcoin address (somewhat akin to my account number at a bank) and I 
then control that public address with a private key (a bit like I use my 
private pin number to associate myself with my bank account). This is 
what provides anonymity.

The result of these two elements, when put together, is the ability for 
anonymous individuals to record transactions between their bitcoin 
accounts on a database that is held and secured by a decentralised 
network of techno-clerks ('miners'). As for the third element -- 
convincing people that the units being transacted are worth something -- 
that is a more subtle question entirely that I will not address here.

*The political vision 1.0*
Note the immediate political implications. Within the Bitcoin system, a 
set of powerful central intermediaries (the cartel of commercial banks, 
connected together via the central bank, underwritten by government), 
gets replaced with a more diffuse /network intermediary/, apparently 
controlled by no-one in particular.

This generally appeals to people who wish to devolve power away from 
banks by introducing more diversity into the monetary system. Those with 
a left-wing anarchist bent, who perceive the state and banking sector as 
representing the same elite interests, may recognise in it the potential 
for collective direct democratic governance of currency. It has really 
appealed, though, to conservative libertarians who perceive it as a 
commodity-like currency, free from the evils of the central bank and 

The corresponding political reaction from policy-makers and 
establishment types takes three immediate forms. Firstly, there are 
concerns about it being used for money laundering and crime ('Bitcoin is 
the dark side'). Secondly, there are concerns about consumer protection 
('Bitcoin is full of cowboy operators'). Thirdly, there are concerns 
about tax ('this allows people to evade tax').

The general status quo bias of regulators, who fixate on the negative 
potentials of Bitcoin whilst remaining blind to negatives in the current 
system, sets the stage for a political battle. Bitcoin enthusiasts, 
passionate about protecting the niche they have carved out, become prone 
to imagining conspiratorial scenes of threatened banks fretfully 
lobbying the government to ban Bitcoin, or of paranoid politicians 
panicking about the integrity of the national currency...

*The technical vision 2.0*

Outside the media hype around these Bitcoin dramas, though, a deeper 
movement is developing. It focuses not only on Bitcoin's potential to 
disrupt commercial banks, but also on the more general potential for 
decentralised blockchains to disrupt other types of centralised 
information intermediaries...

To continue reading, see 


Brett Scott / LinkedIn <http://uk.linkedin.com/in/brettreginaldscott> / 
Twitter <https://twitter.com/Suitpossum> / G+ 
<https://plus.google.com/113072710534870591381/about?hl=en> / Blog 
<http://www.suitpossum.blogspot.com/>/ Book 
079 8243 7769

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