www.nettime.org
Nettime mailing list archives

<nettime> Why we need Bitcoin despite its flaws
Brett Scott on Thu, 2 Apr 2015 00:43:02 +0200 (CEST)


[Date Prev] [Date Next] [Thread Prev] [Thread Next] [Date Index] [Thread Index]

<nettime> Why we need Bitcoin despite its flaws


   http://suitpossum.blogspot.co.uk/2015/03/bitcoin-power-dynamics.html

   This hit the front page of Reddit recently - offers a view on why
   radicals might still need to take Bitcoin seriously

   Cheers,  {AT} suitpossum



   -----------

A dark knight is better than no knight at all: Why we need Bitcoin despite
its flaws

By Brett Scott


   A Knight on a chessboard can be looked at from two different
   perspectives. Firstly, we can zoom in and analyse it in absolute terms
   as a closed system. What is the shape of the Knight? What capabilities
   does it have? What kind of language does it use to describe itself?

   Secondly, we can zoom out and analyse it in relative terms, like
   looking at a Knight in relation to the arrangement of Bishops, Pawns
   and Rooks on a chessboard, seeing it as but one element of a broader
   interactive system.

   Likewise, Bitcoin, and other cryptocurrencies, can be seen from two
   broad perspectives. We can immerse ourselves in the code, in the
   Bitcoin community and in its rhetoric, and analyse whether these
   internal dynamics are positive or not. Or we can ignore the
   particularities of the code, the self-proclaimed goals of the
   proponents, and instead analyse Bitcoin and its connection to the rest
   of the monetary system, financial sector and broader societal
   institutions.

   I use this chessboard analogy with caution. The world is not actually a
   game played by different institutions with fixed characteristics like
   chess pieces. The analogy is useful, though, as a tool to help one see
   that the peculiar characteristics internal to say, a knight, really
   have to be perceived in light of the context that the knight finds
   itself in. Bitcoin does not exist in a vacuum, and as such its
   attributes can only express themselves within the constraints set by
   others on a broader metaphorical board.

   This is important because it affects the way we either praise or
   critique Bitcoin. Members of the Bitcoin community sometimes describe
   the workings of the cryptocurrency as if they imagined it on a
   chessboard with no other pieces, or perhaps on a chessboard made up
   entirely of knights. For example, despite the fact that Bitcoin has
   made almost no dent in central banking, someone might claim âBitcoin is
   an apolitical protocol which renders central banks redundant and allows
   us to mutually contract with each other freelyâ¦â The statement is
   prefigurative, a normative vision of an imagined future reality rather
   than a description of an actual current reality.

   Similarly, critiques of Bitcoin might fight against this vision, or
   attack Bitcoin in isolation without thinking about its context. They
   might claim, âIt is subject to abuse and fraud!â, without admitting
   that relative to the existing payments and banking system â with its
   routine, legitimised, large-scale social injustice committed by
   transnational banking behemoths â the abuses are tiny.

   It is only by zooming in and out, and considering the interplay between
   these absolute and relative perspectives that we can start to detect
   the complex power dynamics within Bitcoin. Like a country, it has
   internal power dynamics â which can be lauded or talked down â but also
   finds itself within a broader geopolitical situation, in which the
   domestic dynamics are less important. In this article, I will first
   sketch the internal narrative of Bitcoin empowerment, then offer four
   lines of critique, and then go back and suggest why, despite the
   critique, we should be glad Bitcoin exists.





   WHAT THE KNIGHT SAYS ABOUT ITSELF: THE NARRATIVE OF PERSONAL
   EMPOWERMENT

   If you spend time at a Bitcoin event, you will hear a lot of claims
   being made concerning Bitcoinâs potential to create personal
   empowerment. These imagined benefits often include:

     * Bitcoin as defence of privacy: The (semi-)anonymous nature of the
       transactions protects people from the prying eyes of authorities,
       bypassing oppressive state surveillance and corporations
     * Bitcoin as protector against monetary abuse: In contrast to a
       central bank that can inflate away hard-earned savings, the
       hard-coded money supply protects people through promoting deflation
     * Bitcoin as agent of creativity, excitement and self-determination:
       There is a certain exhilaration and even fun in using a new,
       experimental technology, especially when they are frowned upon by
       the existing (state and corporate) status quo. People often search
       for spaces of rebellion, and the option to challenge existing
       conventions in a spirit of self-determination
     * Bitcoin as agent of mental expansion and open-mindedness: We have
       long passively accepted monetary monopolies. Bitcoin has opened up
       the horizon to multiple currency systems. Furthermore, the
       underlying blockchain technology can be used for other,
       non-monetary purposes
     * Bitcoin as a less costly way to transact: The current commercial
       bank payments system extracts rent from people in many ways.
       Bitcoin allows us to bypass that, achieving cheaper transactions
     * Bitcoin as creator of financial inclusion: Bitcoin offers a
       lifeline to people in countries with unstable banking systems and
       corrupt governments, allowing them to escape an otherwise
       compromised system

   We have to take these claims seriously. For example, we do indeed value
   privacy. It allows us to do things that powerful interest groups might
   critique, and historically this is a very important driver of
   progressive change. Indeed, as books like The Misfit Economy point out,
   activities in the grey area between deviance and normality are often
   sources of innovation. A similar principle is even found in ecological
   design frameworks like permaculture, where value is not only placed in
   cultivated systems, but also in the chaotic creativity that exists on
   the unregulated margins.



   On the other hand, each of these claims can be tested and subjected to
   further scrutiny. For example, is privacy really a form of empowerment
   by itself? Sure, it might be an element of a broader programme to give
   people breathing room to act independently, but privacy is equally used
   as a tool of elites to avoid accountability.



   And what about this story of financial inclusion? Sure, maybe Bitcoin
   might offer a new means to create cheap remittance systems. On the
   other hand, there is something tiresome about the way that Western tech
   optimists constantly invoke the mythical land of âAfricaâ, with the
   imagined African person in the imagined African village, using Bitcoin
   to escape corruption in their country. As a person from âAfricaâ who
   has also had experience with international development, it is easy to
   see this technology-centric narrative is both patronising and, to be
   frank, delusional.





   TECH CRITIQUE 1: INDIVIDUAL EMPOWERMENT, OR COLLECTIVE EMPOWERMENT?

   But, even if we take these claims at face value, and assume Bitcoin
   does have the potential to create personal empowerment, a second
   question remains: Does this necessarily translate into broader social
   empowerment?



   Within the Bitcoin community â which has a distinct libertarian bias â
   there often seems to be the assumption that personal empowerment is
   roughly the same thing as broader social empowerment. There is bias
   towards believing that if a tool allows a person to protect themselves
   individually, it must also be positive at a collective level.



   To illustrate this point using a different example, consider a basic
   pro-gun narrative you might encounter: this rifle can be used to
   protect me, and therefore it is a protector of rights, and thus a tool
   for broader social empowerment.



   This approach â which starts from a defensive, individualistic
   perspective and then justifies it with an appeal to a secondary benefit
   that apparently accrues to everyone else â can be contrasted to
   arguments looking at the societal perspective first. In the case of
   rifles, we could also start from an assertion that collectively, gun
   violence harms society, and proceed from there to conclude that
   individual gun use should be restricted.



   This problematic dynamic can be seen in the Bitcoin claim about
   deflation as a form of protection. While it is true that from the
   perspective of an individual person, deflation appears to empower them
   (in that the money-claims they hold miraculously become worth more
   relative to goods), deflation at a societal level can just mean that
   those who hold savings, or who hold (i.e. own) debt instruments,
   benefit relative to those who do not (and owe debts to others). Both
   inflation and deflation represent different forms of wealth transfer,
   and there is nothing intrinsically empowering or disempowering about
   either of them. It really just depends on who you are.



   Deflationâin a crude senseâmeans work someone did (abstractly
   represented in a money claim) will be valued more than work they get
   back from someone else later (claimed with that money). Inflation means
   work they did will be valued less than work they get back from someone
   else.



   Thus, as economist Beat Weber points out, the idea that deflation
   protectsâyou is what might be called an Uncle Scrooge perspective, in
   that it most appeals to people with monetary savings who are concerned
   about the state âinflating money awayâ. It is the conservative impulse
   of a creditor, or perhaps like that of a squirrel hoarding apparently
   scarce claims to nuts, a situation that may leave the individual
   squirrel empowered, but that collectively locks squirreldom into a
   destructive game.



   The important point here, though, is not to prove whether inflation or
   deflation is preferable. It is rather to point out that it is not
   obvious that deflation is somehow better than inflation, and anybody
   who presents it as such is clearly taking a very partial view. Indeed,
   stop for a moment and think about what deflation means from an
   intergenerational perspective. While right now, Bitcoin inequality is
   justified in terms of early adopters being rewarded relative to late
   adopters, this later would turn into a battle between current
   generations who hold the limited currency, versus yet unborn
   generations who will be forced to earn it (or buy it) from them by
   providing services far in excess of what was required to originally
   obtain the currency.





   TECH CRITIQUE 2: TOOLS OF EMPOWERMENT ARE MOST EASILY APPROPRIATED BY
   THE ALREADY EMPOWERED



   The individualistic bias sometimes found in the Bitcoin community can
   prioritise awareness of individual benefits over collective benefits.
   Empowerment, in turn, is often seen to stem from the individual not
   being interfered with, encapsulated in slogans like âdonât tell me what
   to doâ, and âjust leave me aloneâ.



   The problem, though, is that Bitcoin finds itself in a de facto unequal
   world, and it just so happens that âdonât tell me what to doâ and âjust
   leave me aloneâ are, perhaps co-incidentally, the same things that
   powerful peopleâlike  the freedom-loving Koch Brothersâsay to prevent
   forms of monitoring or regulation of their giant secretive global
   businesses that impact upon the lives of many people with less economic
   clout. We have reasonable grounds to be sceptical about this.



   You do not have to be a conspiracy theorist to realise that the people
   with the most ability to exploit Bitcoin (to start new companies, to
   get access to investment capital to develop the technology) also happen
   to be the same people who already are doing pretty well in society.
   Thus, even if the technology itself might have positive principles,
   access to itâwhether that is explicit or implicitâis  unequal.



   We see this issue cropping up in gender critiques of Bitcoin, analysis
   of Bitcoin inequality, and critiques of the cult of meritocratic
   technocracy, the fact that programmers are not just your average Joe
   but a particular technological priesthood wielding a language that many
   do not understand. Indeed, the Bitcoin community, just like the
   mainstream finance community, has arguably developed its own
   exclusionary language and culture.



   Analysing power and privilege like this is not rocket science. It
   operates on a few lines, such as 1) gender 2) race and ethnicity 3) age
   4) socio-economic situation and education levels and 5) position in the
   geopolitical system. So, lo and behold, a middle-aged upper-class
   university-educated man from America tends to wield much greater power,
   have much greater access to goods and services, and perceive the world
   as much flatter, than, say, a young impoverished woman from Nepal.
   Their ability to enthusiastically adopt an otherwise neutral technology
   is likewise, much greater.



   Certainly, some Bitcoin proponents can get very irritated when you draw
   attention to the subtle inequalities. It is like they perceive it as an
   irrelevant point, like the person is thinking âI have access, so
   everyone else obviously does tooâ, and ânobody is stopping you using
   it, therefore it is freeâ. They prefer to imagine that the only barrier
   to a utopian world comes in the form of external and unnatural
   aggressors like the government, corporate cronies and central banks.
   They themselves form no part of such a power structure.



   Thus we find Silicon Valley tech entrepreneurs brimming with optimistic
   expectations of disruption and future success, proclaiming the word of
   blockchain rebellion as a universal tool of empowerment for all,
   contrasting themselves to the parasitic Wall Street banker. The
   critical observer, though, might just take a step back, and conclude
   that this is really just one group of elites fighting another group of
   elites for control of the ramparts of power, both invoking the
   interests of Average Joe in the process.



   At a recent Bitcoin meetup, Vinay Gupta of Ethereum referred to a
   brilliant video that encapsulated this very point. It was Juice Rap
   Newsâ New World Order video, where a guy blames the worldâs problems on
   a nefarious New World Order. He is subsequently shown that the NWO is a
   mental construct he uses as a tool to cast himself in the role of an
   underdog, to justify his own position of power within a greater system
   that he refuses to acknowledge.



   It is an authentically disturbing line of critique, and one to take
   seriously. Despite the rhetoric of empowerment and rebellion, there is
   too often an inability of those articulating that rhetoric to
   comprehend their own position in a system. Their vision of Bitcoin as a
   neutral apolitical technology to be used by people to bring liberation
   to the world is not a reflection of reality. It is a reflection of the
   fact that they wield enough power to fail to perceive the inbuilt
   barriers to its usage.





   TECH CRITIQUE 3: EVEN IF ACCESS IS EQUAL, TECHNOLOGY CAN BE ABUSED BY
   PEOPLE



   Perhaps the most well-established line of technological critique is the
   simple observation that technology can be abused: You can use this axe
   to chop firewood, but you can also use it to cut my head off. This is
   clearly a different line of critique to saying that access to axes, or
   encouragement to use axes, or education on axe use, is unequal.



   Bitcoin, like many other technologies, can be overtly abused by people.
   This is something that keeps cropping up in the news, with stories of
   various forms of fraud, scams and hacks within the Bitcoin ecosystem.
   These scams, furthermore, are most likely to hit people who are already
   in a disempowered situation, such as those who are in debt and who are
   desperate for a quick way out.



   The volatile and speculative nature of Bitcoin trading, like that of
   financial day trading, online poker, lotteries, and win-a-car
   competitions, can be twisted into a story of empowering escape from
   economic reality. This can also have a parasitic class element to it,
   as venture capitalists and technological elites push get-rich-quick
   narratives to the working man in the pub, claiming to be on the same
   side.



   Of course, merely pointing out that a technology can be abused is not
   that interesting. Your cash can be robbed from your wallet, but we do
   not use this fact as an argument for banning the institution of
   banknotes.



   A more compelling subsection of this critique is not so much concerned
   with current abuse of the technology. Rather, it concerns the
   increasing control certain individuals have over it, and how this in
   turn opens up the scope for large-scale future exploitation. For
   example, we might consider the growing power of mining pools, which
   increasingly have a domineering position within the network.



   These Bitcoin corporations are emerging because there are centralising
   tendencies internal to Bitcoinâs design. Miners are rewarded with new
   bitcoins for processing transactions and securing the network, but
   because the issuance of new bitcoins occurs at a fixed rate, regardless
   of how many people are mining, the more miners there are on the network
   the less the individual miner is likely to get. This means that to
   compete the individual miner must either obtain increasingly powerful
   computers, or band together with others to create collective
   corporations with enough processing power to compete. Unlike in some
   industries, there are no advantages to being a small nimble operation.
   Sheer brute force is really the only competitive edge, and that
   requires access to capital.



   Where does this lead us? The future of Bitcoin could be one of passive
   users relying on huge mining pools, essentially corporate players, to
   run the network. Such an outcome would leave it not that far at all
   from our current bank-centred payments system.



   TECH CRITIQUE 4: THE TECHNO-LEVIATHAN



   The three aforementioned critiques add up to a simple conclusion: there
   is unequal access to a technology that can also be abused by those who
   use it, and that may fail to deliver the collective benefits that some
   claim it would. People are used to such observations about technology.
   It is like pointing out that a pen can be used to write inspiring
   masterpieces as well as hate speech, in a society where only some
   people can read and write.



   But what about the power dynamics built into the technology itself?
   What about the way the act of writing with a pen makes you think? This
   line of technological critique is not nearly as familiar as the normal
   âpeople can abuse technologyâ, or âthere is unequal access to
   technologyâ lines. This is the idea that the technology, in itself and
   regardless of other people, is not neutral. It is the kind of critique
   associated with people like Marshall McCluhan. A technology like a TV
   might show different contentâgovernment propaganda, Fox News, or a
   National Geographic documentaryâbut conceals an invisible power dynamic
   that is there regardless of the content. The fact that you are
   passively sitting there giving it energy. Are you aware of the
   attention that you have deferred to the machine?



   I want to challenge the notion, pervasive in some parts of the Bitcoin
   community, that technology itself is apolitical, and itâs with this in
   mind that I came up with the concept of the Techno-Leviathan,
   originally sketched out in my article Visions of a Techno-Leviathan:
   The Politics of the Bitcoin Blockchain
   (http://www.e-ir.info/2014/06/01/visions-of-a-techno-leviathan-the-p
   olitics-of-the-bitcoin-blockchain/). The essence of the concept is
   this: technological infrastructures do not offer an escape from
   government, they just offer another, competing, governance system with
   its own power dynamics. You can decide to view rule by algorithms as a
   positive or negative thing, but the point is to recognise the power
   that is being given to the apparently neutral technology.



   One way to conceptualise this is to think of mirrors. Can you see a
   mirror? Sure, you can see an image in a mirror, but try see the mirror
   itself. It is almost invisible behind the projected image. Likewise,
   people see all sorts of visions in the blockchain, visions of human
   freedom and epic escape, but they struggle to see the thing it is
   reflected in, and that thing is the internet monarch, the
   Techno-Leviathan. It is like reflective glass. And, like Narcissus, you
   should be careful about falling in love with the reflection in the
   mirror, because it obscures the fact that it is then the mirror itself
   that controls you.



   Perhaps this is unnecessarily dramatic. A concept like the
   Techno-Leviathan is, mostly, derived by an internal reading of Bitcoin,
   in an imagined world where no other system exists. Yes, indeed, if
   blockchain technologies were to become pervasive, then this
   Techno-Leviathan would emerge. But, the reality of the world right now
   is that weâre nowhere close to that situation.





   BACK TO THE CHESSBOARD: THE GEO(ELECTRIC) POLITICS OF A CASHLESS FUTURE



   So letâs take a step back now, and zoom out to a birdâs-eye view of the
   chessboard. While the critically minded individual might take pleasure
   in deconstructing the narrative put out by the Knight on the
   chessboard, remember that the cryptocurrency remains a very small part
   of an overall system that is much more destructive.



   The reality of our current world is that regardless of the
   rhetoricâconservative libertarian, left-wing anarchist, or otherwiseâof
   the Bitcoin community, the mainstream financial sector is infinitely
   more powerful, much bigger, and has much more political clout. In fact,
   there is not even yet a real financial system that exists for Bitcoin.
   There are no banks for it, or official systems of lending, or real
   negotiable financial instruments denominated in it.



   From this perspective, we do not actually have to care about whether or
   not Bitcoinâs hardcoded monetary policy is positive or not, or whether
   the evangelists are full of nonsense. From a strategic meta-level
   perspective, we might merely see Bitcoin as a potential future
   counterpower to the existing, and much more powerful, bank payment
   system. It does not necessarily matter if that counterpower happens to
   have some internal negative characteristics. What is important is that
   it is a counterpower.



   This is especially important in the context of a growing move to a
   cashless society. The payments space is currently gurgling with
   excitement about contactless technology and micropayments, the
   increasing ability to use cards to pay for almost everything. Companies
   like Paypal, Stripe, Square and Venmo have the gloss of disruptive
   innovation, but all the start-ups and technological advances are built
   on one foundation: The commercial banks that act in concert with credit
   card networks like Mastercard and Visa.



   Regardless of which efficient payments provider you use, whether it is
   ApplePay or Google, in the end they all rely on the same commercial
   banking payments infrastructure. And that is because the entire
   electronic money supplyâthat the payment system is supposed to move
   aroundâis created by commercial banks and does not exist without them.



   If that comes as a surprise, it is worth noting that not one unit of
   electronic currency that you use comes from the central bank. Indeed,
   the only government money we directly use are coins and banknotes,
   otherwise known as central bank notes. An imagined cashless future, in
   which we move away from use of such notes, is basically one where all
   transactions must occur via commercial banks, who in turn deal with
   each other via the central bank.



   And this means that every single one of your transactions becomes a
   potential  piece of data to be monitored, incrementally building up a
   database of your personal characteristics so vast that even Facebook
   would be jealous (actually, have you considered why Facebook is trying
   to get into the payments game?). And with the correct big data
   methodologies to make sense of it, such data becomes hot property.



   Some might react to this with indifference, saying âIâve got nothing to
   hide, and contactless payment is so convenientâ. Those who express
   doubt about cashless society are cast as either Luddites or criminals,
   trying to remain in the backward shadows.



   This narrative needs to be countered. I am not a privacy fetishist, but
   I do know that it is essential for the sense of mental freedom it gives
   us. Without the occasionally ability to be invisible, society takes on
   the feeling of a panopticon, and that itself breeds distrust. You need
   the ability to feel aloneâlike that feeling of sitting alone in a bath,
   at peace with all your vulnerabilitiesâin order to value the presence
   of others.



   A very small amount of our overall transaction volume is currently
   undertaken with coins, but coins are important precisely because they
   give us that little passageway of flexibility and anonymity. They give
   the ability to flick a tip and a smile to a busker as we pass them in
   the street, a personal gesture that is unmediated and unverified and
   unmonitored.



   In a potential future world where such physical tokens disappear, I
   want Bitcoin to exist. I want something that feels roughly like
   electronic cash, something that can exist as a marginal counterpower
   outside the walled gardens of mainstream payments.



   And like coins, I expect Bitcoin will never become a dominant payment
   system. I expect it will, at most, account for 1 per cent of
   transactions. But that is fine. 1 per cent privacy is going to be a
   lifeline in any future world of 99 per cent bank surveillance.





   Brett Scott /  {AT} suitpossum
   LinkedIn / Blog / Book
   0044 (0)79 8243 7769

#  distributed via <nettime>: no commercial use without permission
#  <nettime>  is a moderated mailing list for net criticism,
#  collaborative text filtering and cultural politics of the nets
#  more info: http://mx.kein.org/mailman/listinfo/nettime-l
#  archive: http://www.nettime.org contact: nettime {AT} kein.org