Bitcoin is Venice: Difference between revisions

{{a|book review|{{image|bitcoin is venice|jpg|}}}}This is a massive, magnificent, learned, contrarian work and, like that other massive, magnificent, learned contrarian work {{author|David Graeber}}’s {{br|Debt: The First 5,000 Years}}, few practitioners in modern financial services would not benefit from reading it, just for the challenge it presents.

Like any communal activity in which there are things to be gained and lost — i.e., ''any'' communal activity — “[[financial services]]” is a [[paradigm]]: an intellectual structure with its own rules, hierarchies, defeat devices and articles of faith, usually encrusted in so much obscurant detail 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 truly learned can know.  

This is an evolutionary design feature of any [[power structure]]. It is in equal parts benign and malign: without ''some'' commitment to the cause — some unconditional faith in the wisdom of elders — no paradigm can take to the air in the first place. But once it does, the higher it flies and the more it ''[[scale|scales]]'' — and the more there is for those with [[skin in the game]] to ''lose'' — the more ossified and moribund it will become.

You must, therefore, either get so close to the [[weeds]] that you can scarcely see beyond them — and, weeds being nourishing, there is little incentive to look — or you don’t, in which case you never earn the intellectual capital needed to mount a challenge. It is at some stage a Catch-22. Paradigms endure because anyone with enough internal gravitas to pick them apart has too much invested not to keep them together.  

[[Power structure]]s therefore progressively prefer form over substance, it being assumed that, over time, the substance has been proven out by the very success of the paradigm. This is a circularity, but not a vicious one.

Now this is not to say contrarians cannot be popular or correct — [[Gerd Gigerenzer|Gigerenzer]], [[Nassim Nicholas Taleb|Taleb]], [[Benoit Mandelbrot|Mandelbrot]], [[Kathleen Stock|Stock]], [[James C. Scott|Scott]], [[Jane Jacobs|Jacobs]], [[Rory Sutherland|Sutherland]] and others ply a healthy trade preaching damningly about the absurdities of our institutions, which blithely carry on regardless.

Well, they do until real-world facts intrude: once it is clear an intellectual construct not only ''should'' not work [[Paradigm failure|but ''does'' not]], the paradigm goes into a crisis from which it might not recover, and a wholesale redrawing of the landscape is on the cards.  

But even then, [[paradigm|paradigms]] have a habit of shapeshifting, reframing around their fringes and boxing on. You cannot defeat a power structure with a purely theoretical argument. You can ignore clever arguments until they punch you in the mouth.

That is not to say we shouldn’t listen to the theoretical arguments of outsiders like Graeber and Farrington. They can in their way shape and direct the way even experts think about the world.

[[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-schooled industry insider who would not tear it all to the ground, but would rather “make finance great again” by restoring capitalism to its Venetian apex — but in another sense he ''is'', because his means of doing so would be with [[bitcoin]], and by destroying what he sees as the “strip mining” version of capitalism yielded by fiat currency. As a grand vision, that is pretty anarchic: more so even than than Graeber’s.  

Farrington cautions against excessively theoretical approaches which he says have got us to where we are — this may be an attempt to disarm the elders as aforesaid — but there is some irony, for his own defence of Bitcoin is intensely theoretical. 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, despite FTX’s collapse and CZ’s prosecution, BTC is surging back toward historical highs. This is the proof of the pudding: you can’t, as 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 continue to do so.

 

This is capital in its platonic essence: a midichlorian life force. You know, like the ''force''.

 

This is quite a different thing to a fiat currency. As Farrington describes it, fiat currency implies [[indebtedness]]. It therefore implies banks as a necessary agency for creating indebtedness. It centralises everything and makes everyone dependent on the [[power structure]] that is [[fractional reserve banking]]. It ''compels'' “trust”, whether you like it or not.  

By contrast the bitcoin ethos is, of course, not to ''trust'' trust — not ''compulsory'' trust, anyway — and to decentralise and disintermediate where possible to remove any need for voluntary trust. A permissionless decentralised ledger functions well without trust. That is its basic use-case. That is the problem it solves.

This view of bitcoin as a [[non-fungible token]] for capital is, I think, fundamental to getting a purchase on where bitcoin maximalists are coming from.

Bitcoin is ''capital'', then, not currency, and therefore holds its value wherever it is. It does not depend for its viability or validity upon the implied violence of central banks, banks and intermediators.

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?''