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<nettime> Geert Lovink & Patrice Riemens: The Bitcoin Experience, Part I
patrice on Mon, 24 Aug 2015 10:33:54 +0200 (CEST)


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<nettime> Geert Lovink & Patrice Riemens: The Bitcoin Experience, Part II


This is the long awaited (? ;-) part II of our Bitcoin Experience
Project, a somewaht dragged-out venture, now rekindled by various
recent episodes in the ongoing Bitcoin saga (or soap), the most recent
one being 'the Fork' - which might also be the end of the serie as
well.

For now, we are still muddling through, our next ideas, besides
'processing' all the notes we gathered for Part III ('forthcoming',
as they call it), our ideas are moving towards writing about an
interesting, if barely noticed (afawk ;-) corollary to Bitcoin: the,
deliberate, demise of cash money.

A 'pre-rejoinder' for those nettimers who've read Nathaniel Popper's
'Digital Gold': we did examine, but haven't written about Silk Road's
role in the evolution of Bitcoin, which the author considers very
important if not paramount. As many, starting with Bitcoin advocates
and believers, we have put the illegal/criminal transactions theme
away, partly as sensationalist, partly as inherent to any anonymous
payment instrument. And we are still unconvinced. There precisely
lie the parallels between Bitcoin and cash - with all its political
consequences.

Cheers for now,
p+5D!



-------------------------------------

In Part Two of our Bitcoin Experience, we leave Bitcoin behind and
look at a whole host of other, alternate currency models alleging to
complete, replace, supersede or simply exist alongside Bitcoin.

Call them whatever you want ('digital cash', 'crypto-currencies',
etc. - we will give a description/definition of sorts later on), what
unites them is the they all want to depart from the current monetary
and financial system, partially or wholesale. As we wrote before about
Bitcoin, alternate currency models express foremost a desire 'for
something different', and generally in anticipation of fearful things
to come, ranging to endless stagnation to total collapse. And as most
desires do when they come to the open and start to mobilize social
forces, they tend to overlook disturbing realities, while focusing on
the low lying fruits they believe to be within reach. As this usually
goes with a longing to withdraw from the political realm these schemes
irremediably condemn themselves to be either localized or focalized.
With other words, they cannot scale up to the requirements of large
and complex societies. As Yanis Varoufakis rightly noted "There can
be no de-politicised currency capable of 'powering' an advanced,
industrial society." [1] It is not enough to counter this argument
with the âsmall is beautifulâ phrase - unless, of course, one
calls for a total overhaul of (or withdrawal from) the current social
set-up towards 'back to the land' and generalised 'de-growth'.

On the other hand, given the advances in technology, it seems safe
to assume that future money and payment systems will be largely, if
not exclusively digital. This is in fact already the case , but not
in the way envisaged by proponents of alternate models, who want to
keep things in their own hands, not those of banks or other big ticket
institutions. But 'big ticket' institutions, while remaining wary of
such an evolution, think along the same lines. In their view, Bitcoin,
and other (crypto-)currency models are just daring frontrunners, the
tech will mature, new brands will emerge, and the networked immaterial
will universally prevail, in money as in many other domains. For them,
since they are reluctant to participate in its development, it is
mostly about not missing the boat. But for the fact that they share -
with considerably less enthusiasm - the same expectations about 'the
future of money' as the libertarian crowd, we can leave them here for
the moment.

With the 'digerati', however, the mantra comes with the usual shot of
hi-octane techno-optimism: theirs is the assumption that we will be
able before soon to make swift and next to cost-free payments on the
global level, even if that is not tomorrow. We will also most likely
face a welcome, if tricky embarrassment of choices of instruments to
do so - with the associated range of risks .

We question the soundness of the techno-libertarian consensus.

The transition from a hybrid, if by now largely digital payment system
as we know today, to one which is completely and exclusively digital,
is not at all unproblematic. On the technical side, there exist a
large number of IT-related issues and potential glitches, which remain
largely unacknowledged until exposed by various mishaps, only to be
trivialized, or simply ignored. But even more importantly, it has
also consequences going far beyond money, concerning our whole social
order. Advocates and supporters of digital solutions are unable,
or unwilling, to discuss this, since the evolution towards totally
networked, 'virtual' systems appears so natural, evident, and anyway,
inexorable.

This comes together with some remarkable disingenuousness. The
reason why crypto-currencies are so popular among libertarians of
various hues is that it 'liberates' money from the state (other
constituencies, critical of the libertarian approach, blend this
perspective with their own brand of ideology or idealism). Apparently,
libertarians are loath to admit that this 'liberation' has already
happened when the financial system was, for all practical purposes,
privatised in the seventies of the last century. A complete
digitalization of currency is merely a _technical_ aspect of this
trend. Their gripe is mostly directed at not being those who benefit
from it, but the bank(st)ers and other corporates.

Before delving deeper into the matter, we need to clear a widespread
misunderstanding, recently pinpointed again by Saskia Sassen: "Finance
is not about Money" [2]. Was it only because the numbers are totally
staggering, and are plainly not connected to the 'real economy'.
Or, with other words, the financial system has delinked itself
completely from money as generally understood and used in day-to-day
life by the general public, while at the same time maintaining with
it a one-sided, predatory relationship which forms the basis of its
undeserved, and by now, shaky, legitimacy.

Thus, feeling that their money has been taken hostage by finance
[3], the various brands of believers in crypto-currencies have well
understood that the way the financial system has evolved over the past
thirty years carries the risk of a very large scale confiscation of
monetary assets - it might even have this as its ultimate - albeit
'by default' - purpose. According to crypto-currencies advocates
and developers this threat can be countered by their distributed,
algorithmic models providing full-proof security against external
interference and seizure. This line of reasoning may be technically
credible (and it might not even be that, but we leave this discussion
to geeks) but is politically, socially, and economically very naive.

Yet all the same, folks, "lasciate ogni speranza": the current
financial system has more or less reached the fulness of its zombie
stage, entered into many years ago, and this will only become more
manifest in the (very?) near future. We believe that a complete
overhaul of the monetary system is at hand and that it will not assume
the shape of an orderly reform but of a brutal overhaul. It is already
underway by (yet) tiny bits and pieces - ask Greeks or Cypriots - and
Argentines before, and now again have experienced.

Trust, Value, and all what goes with it

This brings us back to square one of any discussion about 'money':
the notions of trust and of value, and of their counterpart:
responsibility, accountability, liability.

As far as trust and value are concerned, they maintain a very
complicated, complex relationship. The complexity starts with the fact
that both term overlap to a considerable extent, and, for our purpose,
are both more often than not, each other's outcome - but in which
order ? [4]. In terms of money, it is problematic and unclear whether
value is the cause (i.e. the mover) of trust or its consequence.
And vice-versa. All this may appear arcane, but is fundamental to
understanding the role of money as we know it, and hence also of the
opportunities and limits of alternatives to money as we know it.

Seen solely in terms of money, trust and value overlap, but not
entirely, so let us first look at those part that do not overlap.

For trust this is mainly about the definition stage, and the split
between the different forms of money-related trust. Discussing Bitcoin
in Part One, we distinguished between 'contract trust', which, in the
West, is the basis of formal financial relations, and 'distributed
trust' the algo-based alternative system propounded by Bitcoin -
and all other digital crypto-currency systems. There is however, a
possibly far more important alternative to 'contract trust', based on
ex-ante verification, and thus on distrust by default, which is common
both to our contracts (and contracts enforcement-)-based fiduciary
systems, and to its algorithm-based so-called opposites. Let's call it
'community trust', which is based on post-facto enforcement, and hence
trust understood as, however socially constructed, security. This
has been, and still often is, the standard business practice in the
East, with a remarkably low occurrence of fiduciary delinquency. It
is important to keep this in mind when looking at the non-libertarian
alternative (digital, crypto-) currency schemes, was it only because
they are usually part and parcel of alternative economic models -
and because of what we just mentioned, actually fail to be really
alternative.

The self-determined, or trust-independent, part of value, on the other
hand hinges in its entirety on a subjective assessment 'once the
deal is done'. With other words, there is no such thing as intrinsic
value. Since money is primarily about exchange and transfer, that is,
movement, we can look at that part with relative ease when discussing
various alternative monetary schemes. We will then observe that for
many, 'done deals' money is relatively irrelevant and may represent
no - or even negative - net worth - as is the case of so-called
'demurrage' currencies. This will open the discussion on whether
considering alternative currencies as parallel resolution instruments
rather than as tokens of, well, value.

The overlap between trust and value is of course the more interesting
part of the argument.

Trust vs. proof

Most, if not all, advocates of crypto currencies maintain that
'human' trust can be effectively - and efficiently - traded for
cryptographic proof. Satoshi was most eloquent about this: "an
electronic transaction that does not rely on trust ... (but should
be) based instead on cryptographic proof". In (t)his view, social
interaction is seen as an obstacle which should routed around.
The human element is the weakest link in the chain that should be
eliminated as much as possible. Unfortunately, this 'scientific
evidence' does not seem to apply to the programmers themselves.
Both the coders, miners and exchange owners appear to be exempted
from this rule. Or, to put it differently: that part of human
interaction that, in the end, cannot be eliminated, turns out to be
paramount. This typically constitutes the ontological blindspot of all
techno-solutionism.

The unemployed algo army of fin-tech programmers, now on the move
because of the hedge fund failures, will, rather sooner than later,
invade the digital currency field. A classic instance of 'a solution
in search of a problem', in this case, a non-working fix for something
has not yet been perceived as broken (because it is not).

In the very near future we see a battle for supremacy between
proof-based crypto currencies and trust-based digital currencies, aka
(digital) fiat money. This in parallel with the distinction between
alternative and complementary money models. And in this âcompetitive
market of ideasâ the algo army will no doubt make loud claims
that their proof-of-work, blockchain-based model is the only valid
approach.

------------------------------
Notes

[1] Or a post-industrial society for that matter.
Yanis Varoufakis (2013), "Bitcoin and the dangerous
fantasy of a-political money" (blogpost):
http://yanisvaroufakis.eu/2013/04/22/bitcoin-and-the-dangerous-fantasy
-of-apolitical-money/ See also his later rejoinder on many comments:
http://yanisvaroufakis.eu/2014/02/15/bitcoin-a-flawed-currency-bluepri
nt-with-a-potentially-useful-application-for-the-eurozone/

[2] Keynote speech at the MoneyLab Conference,
Amsterdam, 2014 http://vimeo.com/90207380 See also:
http://networkcultures.org/wp-content/uploads/2014/05/MoneyLab_Confere
nce_Report_2014.pdf

[3] One should always remember that 'money' (coins, notes) are legal
tender, but bank deposits are not, and that their protection is moot -
and above a certain sum (typically one lakh EUR/GBP/USD) non-existent.

[4] a running joke from the glorious era of French intellectualism was
that Nizan and Sartre, in their students days at the Ecole Normale
Superieure, vied with each other in deconstructing the difference
between 'the notion of concept' and 'the concept of notion'. 'Trust'
and 'value' make good candidates for such a game. The same applies by
the way and pari passu, for the terms 'complicated' and 'complex'.
Suffice here to quote a French political geographer who stated
that "le monde Ãtait dÃjà compliquÃ, maintenant il est devenu
complexe".

-----------


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