Bitcoin is Venice: Difference between revisions

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

For anyone who wants to hold forth on cryptocurrency, for or against — and in financial services, that seems to be everyone — this is an essential text.

This is an evolutionary design feature of any [[power structure]]. (I take it that “power structure”, “paradigm”, and “intellectual construct” are essentially synonyms, describing any self-organising, bounded community of common but esoteric interests). It is in equal parts benign and malign: without ''some'' commitment to the cause — some unconditional faith in the wisdom of elders — no bounded community consensus 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 must necessarily become. We see this time and again, with [[Power structure|power structures]] of all kinds.

You must, therefore, either get so close to the [[weeds]] that you can scarcely see beyond them — and once you do, those weeds being nourishing as they are, there becomes little incentive to ''look'' beyond them — or you don’t, in which case you never earn the intellectual credibility you need for anyone inside the power structure to take your challenge seriously. This is why cross-paradigm arguments are so joyless and draining. They are failures of translation. [[Richard Dawkins]]’ amassed arguments against religion might be scientifically immaculate, but scientific method do not hold within the magisterium of religion. 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''.   

It is, at some level, a Catch-22. Paradigms endure because anyone with enough internal gravitas to pick them apart has too much invested in keeping them together to do so. They therefore progressively prefer form over substance, it being assumed that, over time, the substance has been proven out by the very resilience of the paradigm, and can be taken as a given. All that matters thereafter is [[Form|''form'']]. This is a circularity, but not a vicious one.  

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 damning the absurdities of our institutions — but our institutions blithely carry on, regardless.

Well, they do at least until real-world facts intrude: only once it becomes clear an power structure not only ''should'' not work [[Paradigm failure|but, in practice, ''does'' not]], does that paradigm go into a crisis. In the worst case, the paradigm cannot recover, and a wholesale redrawing of the landscape is on the cards. A new paradigm will be born that accounts for the changed practical facts.  

But before that, [[paradigm|paradigms]] have a habit of shapeshifting, reframing anomalies around their fringes and boxing on. You cannot defeat such a power structure with a purely theoretical argument: you can ignore clever arguments ''until they punch you in the mouth''. In this way Karl Popper’s idea of falsification doesn’t really describe the way science progresses in practice.

That is not to say we shouldn’t listen to the theoretical arguments of outsiders like David Graeber and Allen 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” mentality of the version of capitalism yielded by fiat currency. As a grand vision, that is pretty anarchic: more so, even, than than Graeber’s.

Yet 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 and exegesis of Bitcoin is intensely theoretical, and where it stretches to its potential, charmingly, but hopelessly, utopian. 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, [[Sam Bankman-Fried|Chauncey Gardiner]]’s conviction  and with Binance at least on the defensive, bitcoin is surging back toward historical highs. This 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 continue to do so. This is Farrington’s proposal.

It is certainly 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. ''Compelled'' trust, as David Graeber might say, is ''violent extortion''.

By contrast 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. A [[Permissionless blockchain|permissionless]] decentralised ledger functions well without trust. That is its basic use-case. That is the problem it solves.

==== Bitcoin as capital ====

Bitcoin is ''capital'', then, not currency, at least as we are used to thinking about it. It 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. You can take it out of the system. It does not depend for viability or validity upon the “implied violence” of central banks, investment banks or other rent-extracting intermediaries.  

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 is so pernicious about indentedness is that it is precisely 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 an important distinction here between ''holding'' cash and ''putting it in the bank''.  

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 have to give it away''