Showing posts with label Bitcoin. Show all posts
Showing posts with label Bitcoin. Show all posts

Tuesday, 12 January 2016

Peer-to-Peer Review: The State of Academic Bitcoin Research 2015

PEER-REVIEW
I've updated my epic BITCOIN ACADEMIC PAPER DATABASE by adding over 280 new papers that were published in 2015. You can download it, and I've also included a link to a separate Google doc where you can make suggestions for papers that might have been missed.

If you'd like to read about how I've built the database and the sources I've used, check out my piece about it from last year. Don't expect it to be perfect - there are omissions and the citations are not always error-free - but it's a pretty comprehensive start for anyone looking to embark on furthering the state of knowledge on Bitcoin, cryptocurrency and blockchain more generally.

The quality of papers is... um... variable and obviously I haven't had a chance to actually read most of them (as there are now over 550 in total), so don't be surprised if some are not as 'academic' or robust as you might like. That said, the quality of papers has - in general - improved over the last year. For the record, the basic definition of 'academic' in this context is: showing signs of a systematic research and analysis process that extends beyond just ranting, idle speculation or marketing. Note, though, that this does not narrow it to bland positivist (social) science. High quality and high effort philosophical, 'non-scientific' and even partisan political explorations are considered valid.

AIN'T THAT THE TRUTH

Main themes

As expected, there is still tonnes of technical geekery on the Bitcoin protocol, its flaws, bugs and possible improvements. These are the papers with titles like "Threshold-optimal DSA/ECDSA signatures and an application to Bitcoin wallet security". There is, however, a noticeable uptick in papers that go beyond the technical protocol and into other - still technical, but more political - areas like regulations, taxation and legal frameworks for Bitcoin. This is a natural result of the fact that while the initial interest in Bitcoin concerned the nature of the system, the subsequent usage of bitcoin tokens in the real world opens up practical concerns like 'should it be subject to VAT?'

In the background there is a still a steady stream of papers on questions of Bitcoin economics, the markets, price discovery, and drivers of its perceived value. The philosophy, anthropology, geography, and political dynamics of Bitcoin remain very underrepresented, but there are a nevertheless some great papers in that line (see below for examples).

More papers in big prestige journals



There are definitely a greater number of pieces coming out in some top peer-reviewed journals. These are not necessarily the most interesting papers (and I don't necessarily believe that top journals carry the best research), but it shows the increasing legitimacy of Bitcoin as a mainstream research topic. Examples include:
I've also included the individual chapters from The Handbook of Digital Currency: Bitcoin, Innovation, Financial Instruments, and Big Data. It seems to be a pretty high quality collection of peer-reviewed papers, but it does cost a lot.

Niche papers on niche topics in niche journals


Beyond the explorations of standard Bitcoin themes (the prices, the regulations, the code) there are also some interesting niche research areas coming out. For example:

The 'grey literature' and student theses

There are a lot of self-published research pieces, working papers and research reports from obscure institutes (sometimes this is called 'grey literature'). I am not an academic snob who scoffs at such papers, so take a look at the various SSRN and independent papers out there. There are also a lot more long student thesis papers from university graduates. For example, it's worth taking a look at:

Blockchain 2.0: Fork the database?

There are some cool papers starting to come out on Blockchain 2.0 or distributed database technology. For example, check out:
That said, it has occurred to me that an academic paper database on the topic of 'Bitcoin' might not really capture the topic of 'Blockchain', so I may consider starting a different database for papers that focus exclusively on non-Bitcoin blockchain systems. Or someone else can make that...

Hope you enjoy & please do donate!

Bear in mind that I update this database as a piece of service to the Bitcoin community and broader academic community, and I don't get paid, so please do consider making a small donation to either my Bitcoin address, or via Paypal. Really hope you find the database useful!




Friday, 27 March 2015

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



This essay of mine was originally published in Kings Review and is republished here under Creative Commons licence


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 “Bitcoin is an apolitical protocol which renders central banks redundant and allows us to mutually contract with each other freely…” 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, “It is subject to abuse and fraud!”, without admitting that relative to the existing payments and banking system – with its routine, legitimised, large-scale social injustice committed by transnational banking behemoths – 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 – which can be lauded or talked down – 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 Bitcoin’s 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 ‘Africa’, with the imagined African person in the imagined African village, using Bitcoin to escape corruption in their country. As a person from ‘Africa’ 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 – which has a distinct libertarian bias – 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 – which starts from a defensive, individualistic perspective and then justifies it with an appeal to a secondary benefit that apparently accrues to everyone else – 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.

Deflation—in a crude sense—means 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 protects’you 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 ‘inflating money away’. 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.


Mid article message! Grab a pirated version of me book The Heretic's Guide to Global Finance: Hacking the Future of Money here


Tech critique 2: Tools of empowerment are most easily appropriated by the already-empowered

THE WORLD AIN'T FLAT: IT'S SPIKEY

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 ‘don’t tell me what to do’, and ‘just leave me alone’.

The problem, though, is that Bitcoin finds itself in a de facto unequal world, and it just so happens that “don’t tell me what to do” and “just leave me alone” are, perhaps co-incidentally, the same things that powerful people—like  the freedom-loving Koch Brothers—say 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 it—whether that is explicit or implicit—is  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 “I have access, so everyone else obviously does too”, and “nobody is stopping you using it, therefore it is free”. 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 News’ New World Order video, where a guy blames the world’s 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

TECHNOLOGICAL AMBIGUITY

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 Bitcoin’s 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.



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Tech critique 4: The Techno-Leviathan

NEUTRAL TECHNOLOGY?

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 ‘people can abuse technology’, or ‘there is unequal access to technology’ 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 content—government propaganda, Fox News, or a National Geographic documentary—but 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 it’s 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. 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 we’re nowhere close to that situation.

Back to the chessboard: The geo(electric) politics of a cashless future

PLEASE KEEP YOUR ID CARD ON YOU AT ALL TIMES

So let’s take a step back now, and zoom out to a bird’s-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 rhetoric—conservative libertarian, left-wing anarchist, or otherwise—of 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 Bitcoin’s 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 supply—that the payment system is supposed to move around—is 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 “I’ve got nothing to hide, and contactless payment is so convenient”. 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 alone—like that feeling of sitting alone in a bath, at peace with all your vulnerabilities—in 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.



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Tuesday, 30 December 2014

Peer-to-Peer Review: The State of Academic Bitcoin Research 2014

PHILOSORAPTOR'S RESEARCH, SOON APPEARING IN ECONOMETRICA JOURNAL

Please note: An updated Peer-to-Peer Review 2015 is now available

I decided to build a rather large database of academic research on Bitcoin. If you'd like to see it, click on the link. It's a Google Doc, and it allows you to comment if you think there is something I've missed. You can also download it as an Excel spreadsheet. It includes academic, and quasi-academic, research papers, journal articles and theses related to Bitcoin.

Admittedly, the definition of 'academic' or 'quasi-academic' is pretty loose. It can include peer-reviewed papers that appear in major journals, to working papers released from university departments and think tanks, to a thesis of a PhD student, to independent research from people with clear expertise.

I built this list because I myself like to write quasi-academic articles on Bitcoin, and have been trying to find good quality analysis of cryptocurrency, frustrated by the huge amounts of spurious opinion churned in the media, and self-promoting rants by opportunists and ideologues.

How I built it: Lots of searching

To build this list, I spent about four days going through different academic search engines. Many of these search facilities found the same papers, but each also tended to find some unique articles that the others didn't. The sites include:
  • JSTOR (here)
  • ScienceDirect (here)
  • IngentaConnect (here)
  • Microsoft Academic Search (here)
  • SpringerLink (here)
  • SSRN (here)
  • Taylor & Francis (here)
  • Google Scholar (here) (including year-by-year search from 2008)
  • Wiley Online Library (here)
  • Directory of Open Access Journals (here)
  • DiVA-portal (here)
  • Econpapers (here)
  • ArXiv (here)
  • IDEAS (here)
  • Oxford Journals (here)
  • Cambridge Journals (here)

Open access vs. closed: A bit of both


A lot of the papers in the list are open access, which means you can get them as PDFs or HTML files. Unfortunately though, the top journals tend to be behind corporate-controlled paywalls and require university subscriptions or money to get in. That said, if a paper is closed access, search for it online and you'll often find earlier PDF versions of it floating about, because the authors often publish draft versions or working papers in open access formats before getting them accepted into closed journals.


Language: English

I'm not one of those people who is oblivious to the fact that research exists outside the English language, and I know that it's quite possible that some of the most cutting edge Bitcoin research could be going on in a Chinese university or in a Greek think-tank. Unfortunately I don't speak those languages, so be aware that these are only English language papers.


Quantity of research: Reasonable

A LOT, BUT NOT THAT MUCH

Bitcoin literature is very new. The first paper - Satoshi Nakamoto's paper - came out only in 2008. I could find almost no academic research from 2009 and 2010, and only a trickle in 2011. It's only in 2012 that we start to find a decent amount emerging in the record. It's really in 2013 though, that the big research starts to come. 2014 has by far the most research, and it's in this year that peer-reviewed academic journal articles start to come out.

Bear in mind that peer-review processes for big journals can take years, so it's little surprise that there are so few cryptocurrency articles out in the really big-hitter journals. My prediction for 2015 though, is that there will be a big flood of research, and a significant batch of peer-reviewed journal articles. Good research takes a while to do, especially in the social sciences.


Quality of research: Hmm... 


Quality to some extent is in the eye of the beholder, but I'll be honest - there is a fair amount of crap research out there. For example, I've found 'academic' analyses of Bitcoin from people that work in big universities, that still hold onto archaic beliefs about money emerging from barter. There are also a lot of PDF documents floating about with academic-sounding titles, written by people with academic sounding affiliations, but you never really know how good they are, or if they're written by some enthusiastic second-year students who don't really know what they're talking about.

Peer-reviewed journals obviously demand a certain degree of quality, but being published in a big journal doesn't necessarily mean an article is groundbreaking. It just means you managed to pitch it right, and get past a panel of peers who might have the same biases as you. For example, it's widely suspected that the peer-review process in the big economics journals systematically excludes economic theories that don't follow neo-classical interpretations of markets. To be accepted into the hallowed halls of such journals, one must cow down and play the game, and couch everything in the apolitical language of mathematical equations and spurious models. Needless to say, some of the most interesting economics research is not found in the big prestige economics journals.

So, it's best to treat this list as an initial starting point to launch into papers, and to make your own decisions about how interesting they are.


Research themes: The tech, the law, the economics... the humans

There are a number of themes coming out in the research
  1. Firstly, there is a huge amount of technical stuff about the cryptography, computer science, security and systems design. Computer science researchers have clearly enjoyed the chance to get involved in this cutting-edge area. The only problem with this though, is that the quantity of this research drowns out a lot of the equally important social sciences research, and tends to present Bitcoin as a technological issue, rather than a profoundly human phenomenon
  2. Secondly, there is a sub-strand of the tech-related research that focuses on how to change Bitcoin, or create a variant of it, or point out some failing it has. See, for example, this piece on a Bitcoin-based emissions trading model
  3. Thirdly, there is a pretty big strand of research on the regulatory status, tax status, and legal status of Bitcoin. This is clearly driven by the need to reach some clarity on these questions so that people know how to practically proceed in the short-term. There is also a nascent strand of accounting research - check out, for example, this new piece
  4. Fourthly, there is a growing field of economic analyses of Bitcoin, mostly coming from pretty mainstream economics, or from Austrian-style libertarian economics. Like most economics, the attempt is to create models, or to analyse incentive structures, and they will tend to call people 'agents', rather than, well, 'people'. See, for example, this piece coming out in the prestigious Journal of Economic Perspectives
  5. Then, finally, there is an emergent trickle of social sciences research on actual humans, including the sociology, anthropology, politics and even ethics of the system. This research remains hugely underrepresented though, which is ironic, because it's by far the most important area of research

Areas that need more attention: Humans

There are a number of areas, in my opinion, that need deeper research and analysis. 
  • Bitcoin as money: There are surprisingly few real discussions about the monetary theory embedded in the Bitcoin code, or how it might function as money. The papers on 'the economics of Bitcoin' don't address it deeply enough (but then again, economics has always been pretty shite at money analysis). I'd love to see more deep analyses of the nature of decentralised electronic money, and the social dynamics of such money
  • Despite the huge amounts of focus on the technology of Bitcoin, there is still very little critical reflection on the technological politics of Bitcoin, or critical studies of decentralised algorithm-based systems. My piece on the Politics of the Bitcoin Blockchain sketches out areas that need more focus
  • Ethnographic studies of Bitcoin: There are a few surveys of Bitcoin users, and some interesting attempts to use social media to analyse users, but there are few true ethnographic studies 
  • The geographical dynamics of Bitcoin: Bitcoin is often spoken of as a global currency, but in reality most of the writing about it comes from Americans and Europeans, and many of them sitting in cities. I'd love to see true studies on, for example, whether someone in rural Zimbabwe would actually use cryptocurrency (given that most of my family is from rural Zimbabwe this is not just a throwaway question)

25 interesting looking papers to peruse

I haven't had a chance to read all of these, but here are some really interesting looking articles that are probably not going to get as much attention as they should. 
  1. “When perhaps the real problem is money itself!”: the practical materiality of Bitcoin (here): Written by the economic anthropologist Bill Maurer and his collaborators Lana Swartz and Taylor Nelms
  2. "BitCoin meets Google Trends and Wikipedia: Quantifying the relationship between phenomena of the Internet era" (here)
  3. "Virtual Currency, Tangible Return: Portfolio Diversification with Bitcoins" (here): One for  the investment portfolio analysts
  4. "Nowcasting the Bitcoin Market with Twitter Signals" (here)
  5. "The digital traces of bubbles: feedback cycles between socio-economic signals in the Bitcoin economy" (here)
  6. "Who Uses Bitcoin? An exploration of the Bitcoin community" (here)
  7. "Is Bitcoin a Decentralized Currency?" (here)
  8. "Testing the Efficient Market Hypothesis on Bitcoin Exchanges" (here)
  9. "Alderney: gambling, Bitcoin and the art of unorthodoxy" (here): From the Island Studies Journal, ha ha
  10. "Coining Bitcoin's 'legal bits': Examining the regulatory framework for Bitcoin and virtual currencies" (here)
  11. "Bitcoin and the legitimacy crisis of money" (here), coming out in the Cambridge Journal of Economics, from Beat Weber. Beat is critical of Bitcoin, and it's worth checking out his other piece in the Journal of Peer Production here
  12. "Do the Rich Get Richer? An Empirical Analysis of the Bitcoin Transaction Network" (here)
  13. "The (A)Political Economy of Bitcoin" (here) - this one is from Greek commons-based economy advocates from the P2P Lab
  14. "Bitcoin: a regulatory nightmare to a libertarian dream" (here), from P2P law expert Primavera de Filippi
  15. "Internet architecture and the layers principle: a conceptual framework for regulating Bitcoin"(here), from a Google employee
  16. "Characteristics of Bitcoin Users: An Analysis of Google Search Data" (here)
  17. "The politics of cryptography: Bitcoin and the ordering machines" (here): This is from Quinn Du Pont, who is doing intriguing work on cryptography political philosophy
  18. "The paradoxes of distributed trust: Peer-to-peer architecture and user confidence in Bitcoin"(here)
  19. "Synthetic commodity money" (here) - this one is in the Journal of Financial Stability, but free versions are floating around on the internet
  20. "The Economics of Bitcoin and Similar Private Digital Currencies" (here) - this one is in the Journal of Financial Stability, but free versions are floating around on the internet
  21. "The Ethics of Payments: Paper, Plastic, or Bitcoin?" (here): In the big-hitter Journal of Business Ethics
  22. "Are Bitcoin Users Less Sociable? An Analysis of Users’ Language and Social Connections on Twitter" (here): A very intriguing paper, which suggests that 'Bitcoin followers are less likely to mention family, friends, religion, sex, and emotion related words in their tweets and have significantly less social connection to other users on the site'
  23. "How Did Dread Pirate Roberts Acquire and Protect his Bitcoin Wealth?" (here): Everyone likes a pirate story
  24. "Do libertarians dream of electric coins? The material embeddedness of Bitcoin" (here): Great title, and out in a pretty innovative Scandinavian journal
  25. I'll let you decide what number 25 is: Perhaps a paper that you'd like to write?

Enjoy, comment, and please share

Thanks for reading this. If you see any mistakes in the list, or have any suggestions and additions you'd like me to make, please do comment, either here or on the Google Doc. I get sent an email every time that happens so I'll definitely see them. I'll update this list periodically as new pieces come out. Finally, please do share this with people who might find it useful - I spent a fair amount of effort creating this, so I want it to be as useful as possible.


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    Tuesday, 12 August 2014

    Much soul, very emotion: Why I buy into the cult of Dogecoin



    Please note: This piece was originally commissioned by the magazine MCD, and will be appearing in French in their December edition.


    I use Dogecoin because I’m emotionally drawn to the dog. Unlike the distant, fossil-like Queen on the Pound banknote, the Shiba Inu is at once transcendent and approachable, self-contained but cuddly, looking into my eyes with a sideways glance, as if it just noticed me and is wondering whether I want to play or be left alone. It’s not an aggressive dog, or for that matter, a bouncy dog trying to lick me. It has self-directed, quirky soul, and it’s almost impossible to imagine this dog being an asshole.

    Some people in the crypto-currency community have written Dogecoin off as a joke, or even a scam.  Maybe it’s both, but does this matter? All currency in the final analysis is really a scam, and the real question is which of those scams we want to agree to. I for one would rather pledge allegiance to a mystical pooch than to worship the image of a redundant monarch.

    Indeed, Dogecoin, to me, is the best of all of the so-called ‘alt-coins’, the alternative crypto-currencies that have emerged as offshoots from the original Bitcoin source-code. Here is why.

    Money isn’t ‘rational’


    Run this question through your brain: Why did people invent pottery?

    The response from many people is ‘because it must have been useful to store food and water’, an answer which chimes well with our prevailing rationalistic world view. Nevertheless, not only is the assumption that pottery was explicitly ‘invented’ problematic, but evidence suggests that it was originally used to create abstract religious figurines. The details of such archaeological debates don't matter here - what matters is to realise that we often have an automatic bias towards thinking about history in terms of what we're used to in the present.

    Why do I bring this up? I do so because there is a similar problem among many economists who attempt to peddle ahistorical narratives about ‘why people invented money’. Their story normally involves people ‘rationally’ designing money as an alternative to ‘barter’. There is very little immediately rational about exchanging real goods for pieces of paper or shiny bits of metal though. Sure, once the social convention of monetary exchange is set up, it’s useful, but the imagined process in which bakers and butchers ‘invent’ money to deal with the awkwardness of exchanging meat for sourdough loaves is an attempt to reverse-engineer history from the perspective of present dogma.

    Money is not an object that can be invented. It is a social convention that has to be culturally constructed. The use of monetary tokens only appears rational once we’re party to a collective agreement (or delusion) to imbue those tokens with value, and that collective agreement needs to be constantly maintained.

    State power, local trust, meta-national mysticism and labour



    In the case of our normal fiat currency, the collective agreement is given strength by the psychological (and real) force of official authorities. Most of our fiat currency is created by commercial banks, but derives much of its ‘reality’ from state endorsement of its legal status.

    In the absence of a state championing a currency, you need other factors to induce collective acceptance. For example, a very small community might be able to create and maintain a local currency backed by nothing but the preexisting communal trust network, woven together from mutual friendships, ties of honour and anxiety at facing exclusion from the social group.

    To create belief in a non-national currency that is not located in a small community though, is especially hard. Bitcoin provides a fascinating case study of the process. When it first started, Bitcoin commanded almost no value. It had one crucial feature though. At its heart was a mysterious, almost immaterial figure called Satoshi Nakomoto, a focal point for a community to rally around.

    The mystique of Satoshi was vital, imbuing what was otherwise a clever but cold piece of cryptography with a soul that people could believe in. Satoshi was the holy ghost in the machine, and the act of mining resembled a ritualistic quest to build on the blockchain started by the ghost. It’s through this process that the imagined value of Bitcoin came to life, and started taking on a reality.

    By contrast, imagine if a well-known person, like Stephen Hawking, invented Bitcoin. It would be devoid of all mystery, resembling a science project or a corporate product, rather than an underground movement. The specifics of Stephen’s personality would replace the cryptic symbol that the Satoshi figure once stood for, and what would you have left? A clever piece of cryptography, and a somewhat banal act of using up energy in running computers.

    That said, there is something about the pointless nature of randomly churning algorithms through a computer that is psychologically powerful. If you want to imagine that something essentially ephemeral is a useful commodity, it helps if you expend labour in creating it, because labour implies scarcity (you only need to work for things that are scarce), and scarcity implies a potential for an exchange value (if something is abundant there is no need to exchange anything for it).

    The computing power (‘labour’) put into the Bitcoin network does not create value in itself, but is a further psychological backer to Bitcoin tokens’ imagined value. If they weren’t valuable we wouldn’t exert all this labour would we, and because we exert this labour they must be valuable, right?

    The emergent myth of Bitcoin’s rationality

    'WE WOULDN'T BUILD IT IF IT WASN'T VALUABLE... RIGHT?'
    Interestingly, as the ritualistic process of mining has become increasingly competitive, and the commercialisation of Bitcoin has steamed ahead, new narratives have formed to explain why Bitcoin tokens ‘rationally’ have value.

    Chief among these is the idea, touted by the Bitcoin foundation itself, that bitcoins have value ‘because they are useful’. It is part of a broader trend among the Bitcoin elite to rewrite history and claim, in hindsight, that the value of Bitcoin was always self-apparent, and that early adopters were just getting involved due to rational future expectations of increasing societal recognition of Bitcoin’s use value as a secure means of exchange.

    In this formulation, Bitcoin tokens derive their value by being part of a potentially useful system, the value of each bitcoin reflecting the aggregate market assessment of how useful it is to have a secure means of exchange. It’s kind of like arguing that containers on train carriages derive the entirety of their value from the usefulness of the rail network. The implicit narrative is this: Hey, these things are useful as transmitters of value for exchange, so let’s compete over them, and in so doing create their market value, which can now be used for exchange.

    Circular no? There may be a glimmer of truth in it, but it’s mostly an attempt to describe the essentially emotional and social process of currency creation with the language of cold individual rationality.

    Tin-man currencies ain’t got no heart

    This thinking has subsequently influenced the way that a lot of alternative crypto-coins have attempted to market themselves. Rather than embracing their own absurdity, many alt-coins have marketed their efficiency, their security, or their application to some specialist use case, as if the usefulness and competitiveness of the design was the most important aspect of why a person accepts a currency.


    The crypto-conference has thus become the realm of ‘serious people’ discussing ‘serious business’, not wishy-washing mysticism and emotion. They appeal to rational functionality, rather than inspiring people to use them. They are techno-fetishistic. A guy with a PowerPoint presentation calmly explains the business case for why his crypto-currency is valuable because it uses a state-of-the-art turbo hashing system, but for fuck’s sake, tell me why I should BELIEVE in it!

    It’s true that this strategy has worked to some extent for some alt-coins like Lightcoin, Quarkcoin and Peercoin, which have gained some popularity based on design, but think about this question: Why do you use British Pounds or Yen? The answer to that is never, ‘because they’re well designed’, and neither is it ‘because I rationally see how useful it is for me to have a medium of exchange’, and neither is it ‘because I’m intimidated by the state and they force me to use it’.

    Our answer is mostly just ‘because everyone else seems to use it and I was taught to use it’. We are born into currencies just like we are born into languages, and we learn to use them in a social context. If you want to convince a person to accept ephemeral electronic records as a currency, you need a story for people to hold on to. You need heart.

    Dogecoin is a cult, and that’s how it should be


    Which brings us to Dogecoin. I can believe in Dogecoin because it gives me something to believe in. It’s a direct appeal to irrationality, a direct appeal to transcend the banal world of individual utility calculation and submit to something hilariously absurd. It is, above all, a cult, and that is infinitely more attractive than any cold appeal to robust design.

    It is the peaceful, playful gaze of the Doge itself that is the mystical foundation of the currency. It doesn’t matter who invented it, because Dogecoin is not experienced as a narcissistic project of a particular person, and it’s the symbol itself that is the leader. The Doge is a figure without ego, with cross-cultural, cross-gender, and yes, even cross-species appeal. We can all get something from the gaze of the Shibu.

    This is reflected in the resultant community that has emerged around Dogecoin, people who refer to themselves as ‘shibes’ and give each other gifts of Doge. While the Bitcoin subreddit has turned into a moshpit of aggressive trolling, Dogecoin forums feel inclusive and accepting, cohering around a surreal world of esoteric slogans and acts of goodwill.


    In closing then, a word on design. If there has ever been any clever design in Dogecoin, it’s been in the way the core members have focused on creating a culture from the bottom-up, rather than fetishising currency creation as a technical solution to be marketed from above. The Dogecoin community has grown rapidly in response to community acts that establish a reason to believe in the currency, such as the sponsorship of underdogs like the Jamaican bobsleigh team, and oddball stunts like backing a Nascar racer. 

    These are things you can sit in a pub and laugh about, outside conference halls, and that makes all the difference.


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    Tuesday, 3 June 2014

    Visions of a techno-leviathan: The politics of the Bitcoin blockchain



    (Please note that I originally wrote this essay for E-International Relations, and I have republished it here on a Creative Commons licence. If you wish to republish this piece, please respect E-IR's republishing guidelines)


    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 Foundation of 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 regulation.

    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.

    Copyright authorities, for example, record people’s claims to having produced a unique work at a unique date and authoritatively stamp it for them. Such centralised ‘timestamping’ more generally is called ‘notarisation’. One non-monetary function for a Bitcoin-style blockchain could thus be to replace the privately controlled ledger of the notary with a public ledger that people can record claims on. This is precisely what Proof of Existence and Originstamp are working on.

    And what about domain name system (DNS) registries that record web addresses? When you type in a URL like www.e-ir.info, the browser first steers you to aDNS registry like Afilias, which maintains a private database of URLs alongside information on which IP address to send you to. One can, however, use a blockchain to create a decentralised registry of domain name ownership, which is what Namecoin is doing. Theoretically, this process could be used to record share ownership, land ownership, or ownership in general (see, for example, Mastercoin’s projects).

    The biggest information intermediaries, though, are often hidden in plain sight. What is Facebook? Isn’t it just a company that you send information to, which is then stored in their database and subsequently displayed to you and your friends? You log in with your password (proving your identity), and then can alter that database by sending them further messages (‘I’d like to delete that photo’). Likewise with Twitter, Dropbox, and countless other web services.

    Unlike the original internet, which was largely used for transmission of static content, we experience sites like Facebook as interactive playgrounds where we can use programmes installed in some far away computer. In the process of such interactivity, we give groups like Facebook huge amounts of information. Indeed, they set themselves up as information honeytraps in order to create a profit-making platform where advertisers can sell you things based on the information. This simultaneously creates a large information repository for authorities like the NSA to browse. This interaction of corporate power and state power is inextricably tied to the profitable nature of centrally held data.

    But what if you could create interactive web services that did not revolve around single information intermediaries like Facebook? That is precisely what groups like Ethereum are working towards. Where Bitcoin is a way to record simple transaction information on a decentralised ledger, Ethereum wants to create a ‘decentralised computational engine’. This is a system for running programmes, or executing contracts, on a blockchain held in play via a distributed network of computers rather than Mark Zuckerberg’s data centres.

    It all starts to sounds quite sci-fi, but organisations like Ethereum are leading the charge on building ‘Decentralised Autonomous Organisations’, hardcoded entities that people can interact with, but that nobody in particular controls. I send information to this entity, triggering the code and setting in motion further actions. As Bitshares describes it, such an organisation “has a business plan encoded in open source software that executes automatically in an entirely transparent and trustworthy manner.”


    The political vision 2.0


    By removing a central point of control, decentralised systems based on code – whether they exist to move Bitcoin tokens around, store files, or build contracts – resemble self-contained robots. Mark Zuckerberg of Facebook or Jamie Dimon of JP Morgan Chase are human faces behind the digital interface of the services they run. They can overtly manipulate, or bow in to pressure to censor. A decentralised currency or a decentralised version of Twitter seems immune from such manipulation.

    It is this that gives rise to a narrative of empowerment and, indeed, at first sight this offers an exhilarating vision of self-contained outposts of freedom within a world otherwise dominated by large corruptible institutions. At many cryptocurrency meet-ups, there is an excitable mix of techno-babble infused with social claims. The blockchain can record contracts between free individuals, and if enforcement mechanisms can be coded in to create self-enforcing ‘smart contracts’, we have a system for building encoded law that bypasses states.

    Bitcoin and other blockchain technologies, though, are empowering right now precisely because they are underdogs. They introduce diversity into the existing system and thereby expand our range of tools. In the minds of hardcore proponents, though, blockchain technologies are more than this. They are a replacement system, superior to existing institutions in every possible way. When amplified to this extreme, though, the apparently utopian project can begin to take on a dystopian, conservative hue.


    Binary politics


    When asked about why Bitcoin is superior to other currencies, proponents often point to its ‘trustless‘ nature. No trust needs be placed in fallible ‘governments and corporations’. Rather, a self-sustaining system can be created by individuals following a set of rules that are set apart from human frailties or intervention. Such a system is assumed to be fairer by allowing people to win out against those powers who can abuse rules.

    The vision thus is not one of bands of people getting together into mutualistic self-help groups. Rather, it is one of individuals acting as autonomous agents, operating via the hardcoded rules with other autonomous agents, thereby avoiding those who seek to harm their interests.

    Note the underlying dim view of human nature. While anarchist philosophers often imagine alternative governance systems based on mutualistic community foundations, the ‘empowerment’ here does not stem from building community ties. Rather it is imagined to come from retreating from trust and taking refuge in a defensive individualism mediated via mathematical contractual law.

    It carries a certain disdain for human imperfection, particularly the imperfection of those in power, but by implication the imperfection of everyone in society. We need to be protected from ourselves by vesting power in lines of code that execute automatically. If only we can lift currency away from manipulation from the Federal Reserve. If only we can lift Wikipedia away from the corruptible Wikimedia Foundation.

    Activists traditionally revel in hot-blooded asymmetric battles of interest (such as that between StrikeDebt! and the banks), implicitly holding an underlying faith in the redeemability of human-run institutions. The Bitcoin community, on the other hand, often seems attracted to a detached anti-politics, one in which action is reduced to the binary options of Buy In or Buy Out of the coded alternative. It echoes consumer notions of the world, where one ‘expresses’ oneself not via debate or negotiation, but by choosing one product over another. We’re leaving Earth for Mars. Join if you want.

    It all forms an odd, tense amalgam between visions of exuberant risk-taking freedom and visions of risk-averse anti-social paranoia. This ambiguity is not unique to cryptocurrency (see, for example, this excellent parody of the trustless society), but in the case of Bitcoin, it is perhaps best exemplified by the narrative offered by Cody Wilson in Dark Wallet’s crowdfunding video. “Bitcoin is what they fear it is, a way to leave… to make a choice. There’s a system approaching perfection, just in time for our disappearance, so, let there be dark”.


    The myth of political ‘exit’

    'SEE YOU LATER'

    But where exactly is this perfect system Wilson is disappearing to?

    Back in the days of roving bands of nomadic people, the political option of ‘exit’ was a reality. If a ruler was oppressive, you could actually pack up and take to the desert in a caravan. The bizarre thing about the concept of ‘exit to the internet’ is that the internet is a technology premised on massive state and corporate investment in physical infrastructure, fibre optic cables laid under seabeds, mass production of computers from low-wage workers in the East, and mass affluence in Western nations. If you are in the position to be having dreams of technological escape, you are probably not in a position to be exiting mainstream society. You are mainstream society.

    Don’t get me wrong. Wilson is a subtle and interesting thinker, and it is undoubtedly unfair to suggest that he really believes that one can escape the power dynamics of the messy real world by finding salvation in a kind of internet Matrix. What he is really trying to do is to invoke one side of the crypto-anarchist mantra of ‘privacy for the weak, but transparency for the powerful’.

    That is a healthy radical impulse, but the conservative element kicks in when the assumption is made that somehow privacy alone is what enables social empowerment. That is when it turns into an individualistic ‘just leave me alone’ impulse fixated with negative liberty. Despite the rugged frontier appeal of the concept, the presumption that empowerment simply means being left alone to pursue your individual interests is essentially an ideology of the already-empowered, not the vulnerable.

    This is the same tension you find in the closely related cypherpunk movement. It is often pitched as a radical empowerment movement, but as Richard Boase notes, it is “a world full of acronyms and codes, impenetrable to all but the most cynical, distrustful, and political of minds.” Indeed, crypto-geekery offers nothing like an escape from power dynamics. One merely escapes to a different set of rules, not one controlled by ‘politicians’, but one in the hands of programmers and those in control of computing power.

    It is only when we think in these terms that we start to see Bitcoin not as a realm ‘lacking the rules imposed by the state’, but as a realm imposing its own rules. It offers a form of protection, but guarantees nothing like ‘empowerment’ or ‘escape’.


    Techno-Leviathan

    'COME INTO MY ARMS, CONTRACT TO ME'

    Technology often seems silent and inert, a world of ‘apolitical’ objects. We are thus prone to being blind to the power dynamics built into our use of it. For example, isn’t email just a useful tool? Actually, it is highly questionable whether one can ‘choose’ whether to use email or not. Sure, I can choose between Gmail or Hotmail, but email’s widespread uptake creates network effects that mean opting out becomes less of an option over time. This is where the concept of becoming ‘enslaved to technology’ emerges from. If you do not buy into it, you will be marginalised, and that is political.

    This is important. While individual instances of blockchain technology can clearly be useful, as a class of technologies designed to mediate human affairs, they contain a latent potential for encouraging technocracy. When disassociated from the programmers who design them, trustless blockchains floating above human affairs contains the specter of rule by algorithms. It is a vision (probably accidently) captured by Ethereum’s Joseph Lubin when he says “There will be ways to manipulate people to make bad decisions, but there won’t be ways to manipulate the system itself”.

    Interestingly, it is a similar abstraction to that made by Hobbes. In his Leviathan, self-regarding people realise that it is in their interests to exchange part of their freedom for security of self and property, and thereby enter into a contract with a Sovereign, a deified personage that sets out societal rules of engagement. The definition of this Sovereign has been softened over time – along with the fiction that you actually contract to it – but it underpins modern expectations that the government should guarantee property rights.

    Conservative libertarians hold tight to the belief that, if only hard property rights and clear contracting rules are put in place, optimal systems spontaneously emerge. They are not actually that far from Hobbes in this regard, but their irritation with Hobbes’ vision is that it relies on politicians who, being actual people, do not act like a detached contractual Sovereign should, but rather attempt to meddle, make things better, or steal. Don’t decentralised blockchains offer the ultimate prospect of protected property rights with clear rules, but without the political interference?

    This is essentially the vision of the internet techno-leviathan, a deified crypto-sovereign whose rules we can contract to. The rules being contracted to are a series of algorithms, step by step procedures for calculations which can only be overridden with great difficulty. Perhaps, at the outset, this represents, à la Rousseau, the general will of those who take part in the contractual network, but the key point is that if you get locked into a contract on that system, there is no breaking out of it.

    This, of course, appeals to those who believe that powerful institutions operate primarily by breaching property rights and contracts. Who really believes that though? For much of modern history, the key issue with powerful institutions has not been their willingness to break contracts. It has been their willingness to use seemingly unbreakable contracts to exert power. Contracts, in essence, resemble algorithms, coded expressions of what outcomes should happen under different circumstances. On average, they are written by technocrats and, on average, they reflect the interests of elite classes.

    That is why liberation movements always seek to break contracts set in place by old regimes, whether it be peasant movements refusing to honour debt contracts to landlords, or the DRC challenging legacy mining concessions held by multinational companies, or SMEs contesting the terms of swap contracts written by Barclays lawyers. Political liberation is as much about contesting contracts as it is about enforcing them.


    Building the techno-political vision 3.0


    The point I am trying to make is that you do not escape the world of big corporates and big government by wishing for a trustless set of technologies that collectively resemble a technocratic crypto-sovereign. Rather, you use technology as a tool within ongoing political battles, and you maintain an ongoing critical outlook towards it. The concept of the decentralised blockchain is powerful. The cold, distrustful edge of cypherpunk, though, is only empowering when it is firmly in the service of creative warm-blooded human communities situated in the physical world of dirt and grime.

    Perhaps this means de-emphasising the focus on how blockchains can be used to store digital assets or property, and focusing rather on those without assets. For example, think of the potential of blockchain voting systems that groups like Restart Democracy are experimenting with. Centralised vote-counting authorities are notorious sources of political anxiety in fragile countries. What if the ledger recording the votes cast was held by a decentralised network of citizens, with voters having a means to anonymously transmit votes to be stored on a publicly viewable database?

    We do not want a future society free from people we have to trust, or one in which the most we can hope for is privacy. Rather, we want a world in which technology is used to dilute the power of those systems that cause us to doubt trust relationships. Screw escaping to Mars.



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