View source for Bitcoin is Venice

{{a|book review|{{image|Bitcoin is venice|jpg|}}}}====Cryptopia====

{{Drop|T|his is a}} massive, magnificent, learned, contrarian work. Few practitioners in modern financial services would not benefit from reading it, just for the challenge it presents. 

For anyone who wants to hold forth on [[cryptocurrency]], for or against — and in financial services, that seems to be most people — this is an as good a foundational text as you could ask for. It does not pretend to be neutral: this is advocacy: the case ''for'' Bitcoin, put optimistically, and without barely a sideways glance at its many critics. 

There is therefore no discussion of Bitcoin’s relationship with terrorist financing, vice or money laundering nor the pervasive fraud in the cryptocurrency sector. 

As far as [[Bitcoin]] is an ultra-libertarian project, the authors might say it is people, not cryptocurrencies, who finance terrorism — but to take that position to its extreme, why have ''any'' laws (ultra-libertarians would, of course, agree). They might also say that fiat currencies have hardly been much better, and that is certainly true. And nor are cryptocurrencies half as untraceable as would-be subversives would like. (As to this see Andy Greenberg’s excellent {{br|Tracers in the Dark}}.)

But for less ideological types, these are weak objections. To mount no better defence while claiming, explicitly, that “Bitcoin fixes everything”, seems an oversight. 

''Everything''? Well, according to the authors, Bitcoin does the following:

{{gb|Resists and disincentivises violence.<li>
Remediates our criminally oppressive, unsustainable and unjust social order.<li>
Cures the slow-motion collapse of “[[degenerate fiat capitalism]]”.<li>
Prevents markets degenerating into oligopolies.<li>
Optimises the transmission and clearing costs of energy generation.<li>
Fixes flaws in the internet’s fundamental architecture.<li>
Rewards long-term over short-term thinking.<li>
Obviates regulatory incompetence.<li>}}

This is wishful, to say the least, but the authors seem to realise this, and offers up “Bitcoin fixes this” as a rhetorical flourish, somewhere between punctuation, irony and gallows humour.

==== Financial services as a paradigm, and critiques from without ====
=====Paradigms generally=====
{{Drop|L|ike any communal}} activity in which there are things to be gained and lost — that is, ''any'' communal activity — “[[financial services]]” is what [[Thomas Kuhn]] called a “[[paradigm]]”:<ref>{{Br|The Structure of Scientific Revolutions}} (1962).</ref> a community intellectual structure which has developed its own rules, language, hierarchies, defeat devices, articles of faith, and credentialisation process, all of which is encrusted in so much obscurant flummery that it is impossible for non-initiates to get near it without being swatted away on ground of ''detail'' — insufficient grasp of buried, esoteric intellectual constructs that only the learned can understand. And understanding is your ticket to the club.

Defensiveness about core tenets — systems and processes for keeping outsiders out — is an evolutionary design feature of any [[paradigm]].<ref>I take it that “power structure”, “paradigm”, “research programme” and “intellectual construct” and maybe even “corporation” are synonyms describing any self-organising, bounded community of common but esoteric interests. </ref>

Paradigms are in equal parts benign and malign: without ''some'' commitment to the cause — some trust and faith in the wisdom of elders and “[[positivism|what is laid down]]” — no community consensus can take root in the first place. But once it does, the deeper it goes and the more it ''[[scale|scales]]'' — the more entrenched those elders and deposited articles of faith become. 

The more those elders have to ''lose'' — the more [[skin in the game|skin they have in the game]] — the more ossified and moribund the paradigm becomes. We see this time and again, with [[paradigm]]s of all kinds, but in financial services and law in particular.

=====Liminal vagueness=====

A common complaint about the [[paradigm]] concept is its liminal vagueness: where does it start and stop? At what level of abstraction does it operate? How ''local'' is it? 

The best answer is that paradigms are sort of “[[fractal]]” — they operate at ''every'' level of abstraction. Just as an ecosystem is a complex metasystem of interacting subsystems and components, so is a market — however you define it — a complex metasystem of inchoate, indeterminate, undescribable subsystems, all of whom interact with and react to each other. It is necessarily unbounded, non-linear and, literally, [[ineffable]], which is why no supervising power can tame or even predict it, and all those who try eventually fail.

So nebulous, but yet requiring education, indoctrination, [[credentialisation]], so that those who enter either get so overwhelmed by [[weeds]] as to be unable, let alone ''[[inclined]]'', to see beyond them — as nourishing as they are, there is little incentive to ''look'' beyond the weeds — or they won’t, in which case they never earn the intellectual credibility needed to be taken seriously by the elders within. 

The very nebulousness means it is hard to tell how far you have made it into the program, and no-one ever tells you. Eventually, you just ''know''. This serves as its own incentive to lean in harder, of course. Inventivising and rewarding true believers is part of the self-defence mechanism of a robust paradigm.<ref>Any permissionless cryptocurrency has its own set of reinforcement mechanisms rewarding “true believers”. It depends for its success on a class of believers — “hodlers” — who are prepared to exchange freshly-mined currency for “real world value”: without this step no-one would be prepared to devote the necessary resources to mining in the first place. </ref>

But enough about my disappointing career.
=====Transcendent incoherence=====
This is also why “cross-paradigm” arguments are so joyless and draining. They are linguistic failures — translation errors. [[Richard Dawkins]]’ amassed arguments against organised religion — the questions he poses and the answers he gives — might be ''scientifically'' immaculate, but within a religious paradigm they are not even well-formed questions, so the answers Dawkins gives are, to religious, incoherent. We know this because none of them have as yet carried any water. 

The scientific method counts for nought beyond its own “magisterium”. It is no more fruitful to criticise quidditch for its impossible aerodynamics.

The scientist who best understood this was Dawkins’s arch-nemesis, the late [[Stephen Jay Gould]].<ref>See Gould’s spirited attempt at reconciliation, {{Br|Rocks of Ages}}. </ref> ''There is no machine for judging poetry''.  
=====Credentials and investment=====
It is, at some level, a Catch-22: [[paradigm]]s endure because anyone with the internal gravitas to change them has too much invested in keeping them the same. Paradigms strengthen as, progressively, they prefer [[form over substance]], it being assumed that, over time, substance has been proven out by the paradigm’s very resilience — shades here of the [[elephant joke]] — and can be taken for granted.  

Indeed, there is a view that the very point of a paradigm is to relegate matters of substance (intractable, hard) to form (solved, rule-bound). All that matters thereafter is [[Form|''form'']]. This is a circularity, but not a vicious one. 
=====Collapse and revolution=====
Paradigms can go into “crisis” and may collapse, but necessarily ''not from within''. Some exterior impetus is needed to change the landscape so the paradigm’s set of valid questions and answers are no longer as satisfying to those inside the tent as an emerging alternative. 

Kuhn’s magnificent book {{br|The Structure of Scientific Revolutions}} was about this revolutionary process.

==== On paradigms in crisis and being punched in the mouth====
{{Quote|Everyone has a plan until they get punched in the mouth.
:—Mike Tyson}}
{{Drop|T|his is not}} to say contrarians cannot be popular or correct — [[Gerd Gigerenzer|Gigerenzer]], [[Benoit Mandelbrot|Mandelbrot]], [[Kathleen Stock|Stock]], [[David Graeber|Graeber]], [[James C. Scott|Scott]], [[Jane Jacobs|Jacobs]], [[Rory Sutherland|Sutherland]] and others ply a healthy trade damning the manifest absurdities of our institutions — but our institutions blithely carry on, regardless.

Well, at least until real-world facts intrude, they do: only when it becomes clear a paradigm not only ''should'' not work [[Paradigm failure|but, in practice, ''does'' not]], does it go into “crisis”. In the worst case, it cannot recover, and a wholesale redrawing of the intellectual landscape is on the cards: a new paradigm must be born, that accounts for the changed practical facts, with new rules, new elders and a new mandate. 

This is not a simple matter of changing theories and carrying on. It is a deep social disruption — as Kuhn labels it, a ''revolution''. The many officeholders of the old regime have tight bonds, deep connections, and a strong common interest from which they drew their strength. They are highly motivated to preserve as much of the old order as they can, however wanting it may be. 

And there are practical challenges: the undermined institutions may collapse. Education, credentialising, publication and regulatory agencies may have to be rebuilt before the new paradigm is not fully tested. This is a dangerous period: the new structure is supple but not strong, and untested against the range of vicissitudes the old regime had evolved to withstand. But the better-tested the rising programme is, the more comfortable insiders may be about dropping the degenerating programme.

This is the lesson of ''Animal Farm'': the best-laid plans of, well, pigs and sheep gang aft agley and, upon a few meaty slaps to the chops, the new boss begins to ''de''volve into the old one. 
{{Quote|
“Meet the new boss— <br>
Just the same as the old boss.<br>
:—Pete Townsend}}
And that is to presume the old paradigm lays down its arms first. But old [[paradigm|paradigms]], with all those vested interests, have a habit of shapeshifting, reframing anomalies around their fringes and boxing on. You cannot defeat a paradigm with a purely theoretical argument: you must ''punch it in the mouth''. 

In this way, [[Karl Popper]]’s idea of [[falsification]] doesn’t really describe the way science progresses in practice. 

But — ironically — the [[falsification]] [[paradigm]] hangs on, not yet having been punched hard enough in the mouth.

==== Outsiders to financial services ====
{{Drop|S|o we should}} listen to the theoretical arguments of outsiders like [[David Graeber]] and [[Allen Farrington,]] but not be surprised if they don’t carry much water with the leaders of the status quo. They can still, in their way, shape and direct the way even experts think about the world.  If they pose new, valid, unanswered questions — and especially if they ''answer'' them the system will go about assimilating whatever it can.

Cryptocurrency certainly poses new questions: how important they are and how good its answers remain to be seen, but we do know that after more than a decade [[Bitcoin]] is not a spent force: it may not yet have thrown a telling punch, but this is not to say it won’t. [[Allen Farrington]] is clear: soon enough, it will. Not only does it have fifteen years’ history, it is now integrating into the trad-fi system: there are Bitcoin futures contracts and [[exchange-traded fund]]s on conventional venues and stock exchanges. 

[[David Graeber]] was, properly, an outsider: an anarchist anthropologist and one of the leading conceivers of the ''Occupy Wall Street'' movement.<ref>https://novaramedia.com/2021/09/04/david-graebers-real-contribution-to-occupy-wall-street-wasnt-a-phrase-it-was-a-process/</ref> Allen Farrington is, in one sense, not — he is a well-read industry insider. He would not tear it all to the ground, but would rather “make finance great again” by restoring capitalism to its “Venetian apex”. 

In another sense, though, he ''is'', because his means of doing so would be with [[Bitcoin]], and it would involve destroying what he sees as the “strip-mining” mentality of the capitalism yielded by [[fiat currency]].  

As a grand vision, that is pretty anarchic: more so, even, than Graeber’s. 

Yet Farrington cautions against excessively theoretical approaches which, he says, got us to where we are — this may be an attempt to disarm the elders as aforesaid — but it arrives with some irony, for his own defence and exegesis of Bitcoin is ''intensely'' theoretical — to the point of being ideological — and where it stretches to its potential, charmingly, but hopelessly, [[utopia]]n. 

What he has on his side, for now, is Bitcoin’s sustained defiance of the elders of finance who have predicted seventeen of its last two implosions. At the time of writing, after [[FTX]]’s collapse, [[Sam Bankman-Fried|Chauncey Gardiner]]’s conviction and with Binance at least on the defensive, Bitcoin is back at historical highs. This, perhaps is the proof of the pudding: you can’t, as fellow contrarian, but Bitcoin antagonist, [[Nassim Taleb]] would say, “lecture birds how to fly”.

You can, however, supply a plausible account of why, against the odds, they do. 

This is Farrington’s proposal.

===On debt and assets===
{{Quote|“Since Bitcoin is a digital bearer asset and not a debt instrument — ”}}

{{Quote|
{{D|Signified|ˈsɪɡnɪfaɪd|n|}}The meaning or idea  represented by a sign or token, as distinct from the physical form in which it is expressed.}}

{{Drop|F|arrington believes that}} [[Bitcoin]] is an asset, not “just” a [[currency]]. As it has independent existence, it is not “tethered to” or dependent on a bank or a central bank for its existence. It need not, therefore, “degenerate” the way fiat currencies must thanks to central bank monetary policies and, er, [[investment bank]] grift. 

Whereas fiat currency implies [[indebtedness]], [[Bitcoin]] does not. It is pure abstract, tokenised ''capital''. It is the ''inverse'' of fiat currency: to ''actual'' capital what a [[non-fungible token]] is to art — only ''generalised''.  Whereas an [[NFT]] is a token for a ''specific'' cultural artefact, [[Bitcoin]] is a token for ''generalised'' “capital” in the abstract sense of value — a shared community resource, before being transmogrified into any particular form. Bitcoin is ''anticurrency''.

The [[non-fungible token]] panfire, now extinguished, speaks to conceptual confusion between the ''token'' — a ledger entry representing ownership — and the ''[[signified]]'' — the owned artwork itself. This confusion reached its nadir when one NFT owner went so far as to acquire and then destroy the signified artwork, ostensibly with the intention that the artwork’s qualities would be fully and finally commuted to the Blockchain. 

This was, most likely, an expression of irony — in its way an artistic statement about our modern absurdities in its own right — though it is really hard to tell who is joking in the crypto world. You get the sense, in any case, that the proposition “Bitcoin is liberated capital” makes a similar [[category error]]. It is, and can only ever be, a token.

For if this is what Bitcoin had achieved, it indeed would be something wondrous. Alchemical, almost: “capital” as never before experienced: a [[Platonic form|platonic essence]]: a Midichlorian life force. You know, like the ''Force''.

Of course, we have [[financial instrument]]s representing abstract capital already: [[share]]s. They reflect the ''net'' capital of a given undertaking, and take only after all the organisation’s debt is accounted for, so perhaps that is not what the authors have in mind. Perhaps share capital — which, too, is recorded on a digital ledger, only not a distributed one — is too contingent on the grubby, fiat realities of everyday business. Perhaps it is not ''abstract'' enough.

But there is that [[category error]] again. Distributed ledgers are still just ledgers. They may be “smart” but they are not magic.
====Anticurrency====
{{drop|Q|uite aside from}} its technological form, this conceptualisation of Bitcoin as ''capital'' is a very different thing to a [[fiat currency]]. Fiat currency implies [[indebtedness]]. It ''needs'' the intermediation of banks, or at any rate, lenders, to create and discharge that indebtedness. It ''centralises'' everything, and makes everyone dependent on the systemically important institutions of the centre: the [[paradigm]] that is [[fractional reserve banking]]. It ''compels'' “trust” and ''risk'' to inherently levered intermediaries, whether anyone wants it or not.

''Compelled'' trust, as [[David Graeber]] might say, is ''violent extortion''. Because Bitcoin can be a unit of account, and does not imply indebtedness, the argument goes, it is the currency of emancipation.

And the [[Bitcoin]] ethos is, of course, not to ''trust'' trust — not ''compelled'' trust, anyway — and to decentralise and disintermediate where possible to remove any need for even ''voluntary trust''. 

This was the problem a [[Permissionless blockchain|permissionless]] [[decentralised ledger]] was devised to solve: how to construct a financial system that does not rely on trust in a central permissioning authority, or between participants. That is its basic use-case. 

Bitcoin maximalists might not trust their government, but in western economies, for the time being, the majority of tax-paying citizens do — at least with a government there is notionally someone to complain to.

====Trust as feature not bug====
{{Drop|A|nd trust in}} each other is a feature of a community, not a bug. It cannot, and should not,  be solved by [[technology]]. It is ''the'' feature, in fact, on which the whole edifice of civilisation is based. Farrington would have done well to read a bit more Graeber here. Or Adam Smith. 

For its many sceptics, Bitcoin’s unique selling point — its ability to function in a permissionless, trustless ecosystem — is its biggest conceptual flaw. 

''We should not want'' a trustless system''. We should not build for system in which people do not have to trust each other, because of its corollary: if you don’t have to trust, nor must you ''be'' trusted. You do not have to ''behave'' in a trustworthy way. 

Any system designed around defector behaviour will devolve, quickly, into a ''low trust'' system. The surprising finding of [[game theory]] is that high trust systems produce better economic outcomes for everyone than low-trust systems.

Levels of community trust may be historically low, but that is no reason to give up on trust. Quite the contrary: we should be ''incentivising'' trust in the systems we build, not ''deprecating'' it.

[[David Graeber]]’s observation is credible: currency has its antecedents not in [[barter]] between hostile strangers, as Adam Smith supposed, but in ''[[credit]]'' amongst friends: currency would not work between strangers because it is a personal promise of deferred satisfaction, and a hostile stranger should not value the abstract promises, pieces of paper or bits of metal as abstract symbols of trust issued by people ''she does not trust''.<ref>This is a controversial view, and certain economists dismiss it. Notably George Selgin, to whom Farrington defers. Prior remarks about [[paradigm]]s are germane here: economists claim this as their territory, though anthropologists should have just as much to say about it. In any case, Selgin’s rebuttal is peremptory — essentially, “[[Adam Smith]] said currency originated from barter, that’s good enough for me, and the fact that there’s no anthropological evidence for it doesn't prove anything, and in fact may be evidence of [[survivorship bias]].” Or [[confirmation bias]], perhaps. But Graeber’s account has something else going for it that Smith’s does not: it seems intuitively plausible. There is a longer discussion in our [[Debt: The First 5,000 Years|review]] of Graeber’s book. Selgin’s main industry is attacking Graeber’s more ideological conclusions: that all money is institutional violence.
{{quote|
“By claiming that societies could thrive only by means of monetary exchange, Adam Smith is supposed to have given shape to an “economic discourse” according to which all things, including people, are bound to be valued in terms of money, thereby “enabling” slavery and imperialism and…well, the whole capitalist catastrophe.”}} Just because the conclusion does not follow from the premise, it does not stop the premise itself being fair. </ref>

This is a matter almost of literary, and not financial, theory. Of ''shared meaning'': 

In a ''low-trust'' exchange: I hand over my muskets for your blankets. Their ''respective'' meanings ''to each of us'' is obvious, and does not depend on the other’s evaluation. Indeed, it depends on a relative ''divergence'' in meaning: you must value muskets more than blankets, and I must value blankets more than muskets, or we have no deal. This is true of any exchange, trusted or not.<ref>Given how fundamental this dissonance is to any market it is extraordinary how much hostility its premise — there is no objective [[truth]] — generates. This is a JC hobby-horse that will have to wait for another day. </ref>

Now: we can each have our own values of guns and blankets and that is a fine thing. But it is not fine for abstract tokens of value like currencies and gold. The value of those we must agree about. 

In high trust exchanges I can hand over muskets now for blankets later. It I might not need blankets, or whatever it is that you have, and you give me I stead a token reflecting our as yet undischarged trade. We might recognise this is an [[IOU]], banking lawyers would call it a [[promissory note]] but  it is in any case a transferable token of private indebtedness. “I accept that I must deliver a certain value if asked at some point in the future. It does not have a term and does not bear interest, so is a lot like a privately issued currency. Its value no longer references the muskets originally exchanged, but a notional abstract value, and the price at which it changes hands thereafter reflects a discount from that value that expresses the creditworthiness of its issuer.

The difference between a private currency and a public one is really only the person issuing it. 

In any case for any currency to work, ''there must be consensus as to its value''. It must have, you know, ''currency''. 

An abstract token of value is no use between hostile strangers who do not agree on that value — who do not ''trust'' it.
===Bitcoin as metaphor===
{{Drop|[[Bitcoin|B]]|itcoin does ''not''}} fix this. Bitcoin’s viability depends on community consensus in an abstract, metaphorical value. All users must believe something that is, literally, not true, and wilfully suspend of knowledge of what ''is'' true. This is how we use ''[[metaphor]]s'' — they are figurative ''tokens''. 

Just as they must for cash, people must believe in Bitcoin as a ''token'' of value — in Farrington’s view, of [[capital]] — whilst putting aside the manifest fact that a ledger entry in an electronic database has no intrinsic value. 

This is just as true of fiat currency. But here the prevailing [[paradigm]], of which currency plays a fundamental part, makes a difference. Within the “[[degenerate fiat currency]]” [[paradigm]], fiat currency operates as ''a lawful means of discharging debts''. It necessarily has that value. If this feels circular, that’s because it is: the paradigm defines both the question and answer. By transacting in a currency you commit to the metaphor: you give something of intrinsic value away in exchange for something of metaphorical value. You have bound yourself to the mast. You  have made your leap of faith. 

The same might be true of Bitcoin, but only to the extent debts are denominated in Bitcoin. Mostly, Bitcoin is traded not as a currency but as a commodity, for which the debt is denominated in fiat.
===Agency as a sustaining life force===
{{Drop|T|hat a statement}} with no literal truth value can nonetheless hold a metaphorical one is not news. All literature depends on it: we do not struggle to reconcile our understanding of ''Oliver Twist'', or the value we assign to it, with the fact that every word of it is, literally, false.

Fiat currency has, near enough, pulled off the same trick. [[Bitcoin]]ers do not tire of reminding us of this. 

Like all [[metaphor]]s, currencies generate their own momentum. When enough institutions have a vested interest in maintaining the metaphor to further their own interests — if they make enough money out of it — the metaphor will carry on, because too many agents have too much riding on its success for it to fail. 

This is of course, the stuff that bubbles are made of: [[Enron]] was largely built of imaginative metaphors, too. It survived for so long in part because so many of its enablers — law firms, accountants, management consultants, executives, employees, trading counterparties, academics, politicians, [[thought leader]]s, chancers and grifters — stood to gain ''as long as the fiction carried on''. 

You don’t even need to believe the metaphor to profit from it: you just have to believe you can get out ahead of everyone else when it fails. 

Not every wishful [[metaphor]] fails. [[Bitcoin]] has proven resilient so far. It has its own momentum. First it acquired miners then brokers, trading venues, intermediaries, [[futures]] exchanges, [[exchange-traded fund]]s, authorised participants, clearers and market makers. It even has its own ISDA definitions booklet. All of these [[stakeholder]]s stand to prosper as long as ''someone else'' believes the metaphor.

This is another importance of intermediation: these intermediaries take their skim, or earn a crust from the intellectual activity of ''attending to Bitcoin'', just as they once attended to [[Enron]], or tranched [[synthetic credit derivative]]s, or whatever hysteria happens to grip quotidian minds for the time being. Preserving that income compels them to support the metaphorical narrative. 

But for [[Bitcoin]], this is yet another irony in a phenomenon apparently constructed out of them: the very institutions that vouchsafe this metaphor’s  continued viability — a set of incentivised trusted intermediaries — are ''exactly'' the institutions it is explicitly designed to undermine. The whole point of [[Bitcoin]] is to jettison the need for trusted intermediaries. That is the program.

==== Bitcoin as a token capital ====
{{Drop|[[Bitcoin|B]]|itcoin is ''capital''}}, then, not ''currency'', at least not as we are used to thinking about it. [[Bitcoin]] is more like ''gold''.  

Its scarcity is more or less fixed, and it gets progressively harder to extract more of it from the earth. In this way the “mining” [[metaphor]] is correct. It holds its value wherever it is. It does not depend for viability or validity upon the “implied violence” of central banks, nor the indebtedness of investment banks nor the custody and connectivity of other [[Rent-seeking|rent-extracting]] intermediaries. You can take it, sort of, off the grid.  

This view, that Bitcoin is a sort of [[non-fungible token]] for platonic capital is, I think, fundamental to understanding where Bitcoin maximalists are coming from. If we think about Bitcoin as “on-chain gold” rather than on-chain ''cash, we have a closer starting point, though as Farrington argues, a dematerialised electronic communication can do a bunch of really useful things that a lump of metal cannot.

Nevertheless, this is where I part company with Farrington, though it may be one of those “agree to disagree” scenarios. 

Perhaps this is the [[nocoiner]]’s fundamental misapprehension: have we been slating [[Bitcoin]] for lacking qualities it isn’t even ''meant'' to have? If it is not a currency, then criticisms that it isn’t very good at the sort of things currencies are meant to be good at fail, defeated by the simple objection, ''so what?''

Farrington correctly sees a “fiat currency” as necessarily an instrument of [[indebtedness]]: a person who holds it has a promise for value from someone else. He doesn’t say so, but he may regard [[indebtedness]] as, in itself, a form of compulsory trust — trust on pain of enforcement by the state, i.e., ''violence'' — and therefore intrinsically undesirable. 

David Graeber might agree about currency, and monetary indebtedness, but not indebtedness in general. To the contrary, mutual, perpetual, rolling ''non-monetary'' indebtedness is exactly the glue that binds a community together. It creates ''voluntary'' trust. That kind of trust — credit — is fundamental to how any functioning civilisation works. Discharging that sort of indebtedness releases us from our ties and obligations to each other — thereby dissolves the “community of interest”. One of the things that Graeber finds so pernicious about monetary [[indebtedness]] is that it is quantifiable: it sets a precise value for loyalty, and therefore a price at which loyalty may be discharged. The vagueness and irreconcilability of “social” indebtedness makes this a lot harder to do. There is always something on the table. These are the ties that bind.
====Cash as an anti-asset====
{{Drop|C|ash, on this}} view, is a tokenised, accountable unit of ''trust''. That is a glass-half-full way of describing [[monetary indebtedness]] — not financial indebtedness to or from a specific person, as arises under a loan contract, but disembodied, ''abstract'' indebtedness ''in and of itself''. This is quite an odd concept. 

A banknote is, on this view, not an asset, but an ''anti-asset'': something that has a negative value in and of itself, and which, therefore, only generates value ''when you give it away''. I can discharge a private debt I owe by transferring away my public token of indebtedness — cash — to the lender. We can see there that to hold cash, and not use it to acquire capital, discharge debts, or create indebtedness in someone else, is wasteful.

There is an important distinction here between ''holding'' cash physically and ''putting it in the bank''.  

When, and while, you hold cash physically, for all intents and purposes, the money is not available to the financial system. It is disengaged. You have an “indebtedness” to yourself. It cancels out. It is meaningless. Worthless. Valueless. If you are robbed of physical cash it only creates a (negative) value when it is taken away, because it deprives you of the value you could have created by giving it away to someone else, in return for an asset. 

So holding cash in person is a ''non''-investment. It is to ''disengage'' capital from the market. Since the value of capital is a function of the time for which it is productively engaged, a capital instrument you have ''disinvested'' should progressively waste away. So it does. Cash in your wallet, relative to a capital asset in productive use, must depreciate over time. That is the consequence of inflation. It has nothing really to do with central bank policy or fractional reserve banking.

Compare that to cash you put in the bank. This ''is'' invested: with the bank. You have given away your token of abstract indebtedness to the bank in return for ''actual'' private indebtedness for which the bank pays you interest — okay, not ''much'' — as a return for your investment. Prudential regulation obliges the bank to sit on a portion of the cash its customers give it — to keep that cash disengaged, in reserve to manage the demand of those investors who wish to cancel their investments — but that capital reserve, too, will waste away, while the bank must still pay interest on it to customers. This is what bankers mean when they say “capital reserves are expensive”. 

The bank will lend all the cash it can to its borrower customers — giving away these tokens of abstract indebtedness in return for an investment in their ''actual'' private indebtedness. The borrowers, in turn, will want to use that physical cash quickly, because if they don’t, it wastes away, while they pay the bank interest for the privilege of holding cash. 

Nowadays the supply of actual printed money that can waste away in your pocket (economists call this “M1” money stock) is dwindling. Most currency exists electronically on a bank’s ledger, but the difference between the liabilities a bank has to its depositors — a positive number — and the claims for repayment it has against its borrowers — a negative number — represents “under the mattress” cash. A negative energy ''until you give it away.''

But let's not get distracted. That M1 money cash flies around the system, perpetually depreciating as it goes. It is a hot potato — everyone wants to pass it on as quickly as they can, as it weighs on anyone who holds it like a dark energy. The faster it flows, the better the economy performs.

Holders can stick it in the bank or give it away in return for capital — that is, ''invest it'' — in something that will be productive over time in an a way that an inert cash instrument in your pocket will not. 
===Bitcoin as generalised capital===
{{Drop|T|he thing about}} particular capital assets is that they are awkward. They are not to everybody’s taste. They are idiosyncratic; fallible: they take up space, require refrigeration, can rust, go off or out of fashion. They cost money to maintain and store. They can be invisibly encumbered.They are bad things, therefore, to use as a medium of exchange. There will always be friction, cost and doubt. They will always be subject to a ''[[haircut]]''. 

But, despite the conventional (fairy) story of the history of money, money did not come about in the first place as a substitute for the inconvenience of barter.<ref>{{author|David Graeber}}’s book is compelling that this is a fairy story with no grounding in reality.</ref> Currency was ''always'', from the outset, a means of creating [[indebtedness]]. 

This is because [[indebtedness]] is not — in the [[capital strip-mining]] paradigm, at any rate — intrinsically a bad thing.

[[Indebtedness]] ''is'' bad, in the [[Crypto-Venice]] [[paradigm]] for a list of reasons Farrington sets out in detail. If only we could find something that was both an asset ''and'' had the abstract, fungible, transparent, clear nature of a currency — but, critically, ''did not depreciate or imply any form of indebtedness'' — all would be well in our new Crypto-Venice.

But there is a paradox here. A capital ''asset'' derives its value from ''what it is'': its shape, substance, composition, idiosyncrasy, perishability and consumability. On its ''power to transform'': on the change it can make in the real economy.

A non-degenerative “''digital asset''” that weighs nothing, does nothing, has no calorific content, occupies no space; that is good for nothing but merely stands as an independent abstract symbol of those qualities by which we judge the worth of things that ''have'' those qualities — in other words, things that are “capital” — ''is not an asset''. It might ''look'' like one, but only courtesy of a magic trick. It depends on misdirection. It depends on the master magician’s sleight of hand. Its value holds only as long as the illusion. It depends on consensus.

Now, conjured illusions can outlast your solvency, to be sure. We are no less enchanted by magicians now than were the Victorians. But more persistence does not change the fact that they ''are'' conjuring tricks. ''These assets are not real''. Just because a theatre’s patrons emerge into the chill night air happy that they have been well entertained does not change that fact.
===A thought experiment====
{{Drop|W|e can see that}} with the following thought experiment: imagine if ''everyone'' in the market decided to exchange its entire portfolio of traditional capital assets for universal “digital assets” of equivalent value. This could not happen: one vendor can convert its capital asset into digital assets only if another purchaser is prepared to do the opposite trade. ''Someone'' in the market has to stay long capital assets.

Farrington’s argument might be that indebtedness is intrinsically pernicious, but this is a hard argument indeed to make out, and involves tearing down more than just the tenants of “[[degenerate fiat currency]]”. For mutual indebtedness, and intra-community trust is the special quality that lifts human society out of a Hobbesian nightmare.

===Trust versus trustless===
{{Drop|T|he nature of}} indebtedness creates obligations of mutual trust. Trust in a community is a series of continuing, undefined, interlocking, and ''perpetual'' dependencies. Monetising indebtedness has the effect of financialising it, in a bad way.
{{ref}}
{{c|cryptobabble}}