Bitcoin: The Cryptopolitics of Cryptocurrencies

I’m happy to have a piece up at the Harvard University Press blog, entitled “Bitcoin: The Cryptopolitics of Cryptocurrencies.” It was written as a bit of an introductory piece for readers who don’t know much about Bitcoin and may have heard the news from Mt. Gox this week, so it will probably be old news to people who have read my earlier posts on Bitcoin (Bitcoinsanity 1: The (Ir)relevance of Finance, or, It’s (Not) Different This Time and Bitcoin Will Eat Itself: More Contradictions of (Digital) Libertarianism). Here’s a short excerpt:

“Money” names the instrument in which official transactions in that nation-state are conducted: all other things being equal, US Government bonds have a value in US dollars, and taxes in the US must be paid in dollars. As another economist puts it, “In post-Keynesian monetary theory money is anything that will settle a legal contractual obligation. And by the civil law of contracts, the government determines what settles a legal monetary contractual obligation.” This is the fundamental point, critical to all monetary theory, that Bitcoin advocates seem unable or unwilling to recognize (and admittedly it is what was until now a fairly arcane point of economic theory): the State decides what money is, and no assertion otherwise by individuals or groups can change that—only the law can.

The complete post is available here.

bitcoin

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Glasslinks: Privacy, Glassholes, Panics, & Take-Backs

A colleague asked if I had any links to writings about Google Glass, so I dug around in my files and found quite a few things. I thought they might come in handy for others doing research on the topic. I have even more, but this is overwhelming enough as it is. The final pair makes for some humor.

Creepiness/Reactions to Actual Use

Privacy

General/More Theoretical/Thoughtful

google glass

An arbitrary image of someone wearing Google Glass

Corporate BS

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Paper: “Commercial Trolling: Social Media and the Corporate Deformation of Democracy”

I wrote this essay for a collection that originally said it could handle pieces of this length, but in the end decided not to. It’s a bit long for traditional journals or edited collections, and it’s about some fairly immediate stuff that’s also connected to other work I’ve been writing lately, so I decided simply to post it as-is to this site (and also to SSRN and academia.edu). Yes, pure open access with no intermediaries (though my Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License is technically “not a free culture license”), something I only feel is wise to do because I publish plenty in journals, and the piece is too long for most of the journals where I’d be likely to place it–though of course anyone interested in publishing it is welcome to contact me.

“Commercial Trolling: Social Media and the Corporate Deformation of Democracy”: Abstract
While “trolling” originally named and is today often thought to be the activity of recalcitrant or obstreperous individuals with too much time or their hands or axes to grind about particular issues, a great deal of trolling on today’s social media platforms is crafted not by such individuals but instead by persons (or even computer programs) acting on behalf of (and usually employed by) powerful interests, including corporations, institutions, governments, and lobbying groups, and whose goal is not so much contributing to real exchange of political views, but instead the tilting of the discursive field to make some positions appear reasonable or even popular, and to marginalize other opinions (and those who hold them). Such action is visible in the range of ongoing intrusions by corporate actors into Wikipedia, which is reflected in the elaborate infrastructure the site maintains to police such intrusions, an infrastructure not available to much of the rest of the internet. It is even more obvious in Anti-Global Warming (AGW) discourse, by agents of industry lobbying groups and energy companies, in many locations across the web. Given the ease with which capital can purchase the services of agents to advocate effectively for views that are disfavored by a large portion—at times, such as in the climate change debate, a large majority—of the population, questions are raised about the apparently inherent democratic nature of information distribution on the web, and about what means might be utilized to level the playing field between good-faith contributors to discourse on the one hand, and institutionally-directed contributors on the other.

Full paper available here (and also on SSRN and academia.edu)

commercial powertroller

a commercial salmon trolling boat

Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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Crawling from the Wreckage

I am slowly in the process of resurrecting my site manually from the database that suffered SQL injection and a number of other unspecified attacks over the past few months.

It is imperfect, but this temporary archive page provides links to the site’s existing content through archive.org, as I work on recreating the materials that were here before.

I would say the lesson is to backup your site, but I was in the habit of backing up, and the SQL injection and/or whatever else it was that got in happened quietly enough at first that it looks like the damage was done prior to my knowledge of it, so even the earliest backups are corrupted.

But, you know, code is speech, and therefore can and should be subject to no more oversight or regulation than any other form of speech. Like any other form of speech, code can completely obliterate the words of somebody else’s speech, which is surely what Madison, Locke, Jefferson, and the others had in mind.

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Interview: The ‘Sharing’ Hype

From “The ‘Sharing’ Hype,” an interview published today at In These Times conducted by Rebecca Burns with me, Neal Gorenflo, co-founder and publisher of Shareable Magazine, and the SolidarityNYC collective, which supports the growth of cooperatives in New York City.

“Sharing” can be seen as a form of resistance to the capitalist economy. But the “sharing economy” becomes a way of capitalizing on that resistance. This strikes me as a strong instance of cyberlibertarianism, which is the yoking of far-right ideas about “freedom” and government to an apparently apolitical digital utopianism. The political mushiness of the rhetoric surrounding such projects masks what the leaders of the projects want, which is the extraction of profit from sectors so far insulated from such monetization. The only “freedom” such efforts ultimately serve is the economic freedom of concentrated capital.

Read the complete interview at In These Times.

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Interview: On Hacking, Decentralization, Power, Digital Democracy

A few excerpts from an interview at Dichtung Digital: Journal für Kunst und Kultur digitaler Medien, with questions asked by Roberto Simanowski.

My least favorite digital neologism is “hacker.” The word has so many meanings, and yet it is routinely used as if its meaning was unambiguous. Wikipedia has dozens of pages devoted to the word, and yet many authors, including scholars of the topic, write as if these ambiguities are epiphenomenal or unimportant. Thus the two most common meanings of the word—“someone who breaks into computer systems,” on the one hand, is by far the most widely-understood across society, and “skilled, possibly self-taught, computer user” on the other, is favored to some extent within digital circles—are in certain ways in conflict with each other and in certain ways overlap. They do not need to be seen as “the same word.” Yet so much writing about “hackers” somehow assumes that these meanings (and others) must be examined together because they have been lumped by someone or other under a single label.
Today, “hackers” are bizarrely celebrated as both libertarian and leftist political agitators, “outsiders” who “get the system” better than the rest of us do, and consummate insiders. My view is that this terminological blurring has served to destabilize Left politics, by assimilating a great deal of what would otherwise be resistant political energy to the supposedly “political” cause of hackers, whose politics are at the same time beyond specification and “beyond” Left-Right politics.

….

The Internet was never a bastion of communism, not without a kind of thoroughgoing establishment of foundations which it never had, and certainly not once the restrictions on commercial use were lifted. At some level I think some kind of public accountability for central mechanisms like search is absolutely imperative, though what forms these can take are not at all clear to me, since exposing parts of the search algorithm almost necessarily makes gaming search engines that much easier, and gaming seems to me a significant problem already. Computerization is always going to promote centralization even as it promotes decentralization – often in one and the same motion. Advocates of decentralization are often almost completely blind to this, directly suggesting that single central platforms such as Facebook, Wikipedia, Twitter and Google “decentralize” as if this somehow disables the centralization they so obviously entail.

….

Derrida encourages us to use the term “reason” in place of this more expansive notion of “rationality,” pointing out how frequently in contemporary discourse and across many languages we use the word “reasonable” to mean something different from “rational.” I argue in my book that the regime of computation today encourages the narrow view of rationality – that human reason is all calculation – and that is discourages the broader view, that reason includes other principles and practices in addition to calculation and logic. I believe some versions of “modernity” tilt toward one, and some tilt toward the other. Projects to quantify the social – including Klout scores, the quantified self, and many other aspects of social and predictive media – advertise the notion that calculation is everything. I think we have very serious reasons, even from Enlightenment and modernist thinkers, to believe this is wrong, and that historically, regimes that have bought into this view have typically not been favorable to a politics of egalitarianism and concerns with broad issues of social equality. My hope is that the pendulum is swinging very far toward the calculation pole, but that eventually it will swing back toward the broader view of rationality, recognizing that there are dangers and fallacies inherent in any attempt to thoroughly quantify the social.

The complete interview is available here.

 

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Bitcoinsanity 1: The (Ir)relevance of Finance, or, It’s (Not) Different This Time

One of the many fascinating paradoxes about Bitcoin is that when knowledgeable economists, financial professionals and journalists write about it, because they almost always dispute its transformative power and revolutionary status, their analyses are almost uniformly greeted with shockingly abusive insults. In part this is a demonstration of the anti-democratic anti-expertise tendencies of our digital culture, in which participatory openness is mistaken for insight. The point of participatory openness was not that every opinion becomes equally valid: it was that every person has access to both information and the public sphere so that he or she could participate in an informed discussion.

Instead, under the influence of cyberlibertarianism, we find the exact opposite, in which hard-won expertise is explicitly derided and dismissed as if having attained that expertise is itself a kind of elitism—when, on the contrary, this is one site where “equality of opportunity” does apply. Everyone can learn to program, but you still have to learn it. Everyone can learn architecture, but you still need to go to school, learn the skills, and practice it. Everyone doesn’t just get to be an architect because he or she declares it to be so.

Finance is an extremely complicated subject. Despite apparent surface simplicity, money is one of the most complex and hard-to-comprehend aspects of finance. Money and currency are not the same. Money and commodities are not the same. The relationships of money to economies, of currency values to each other, of currency values to other securities, and so on, are tremendously complex. Monetary theory involves things like M1, M2, and other money supply variables we rarely hear Bitcoin enthusiasts mention at all.

Yet when economists write about Bitcoin and simply evaluate it on the terms in which it’s presented—that is to say, as a currency—the response is almost uniform trolling. What the trolls say is not quite that the economists don’t know how currency works; it’s that they don’t understand the sweet technology behind Bitcoin that makes “how currency works” irrelevant.

The problem is that despite the tenor of the trolling, we have zero evidence that financial theory does not apply to Bitcoin, the same way it applies to every other part of finance. The fact is that the Bitcoin maniacs are so ignorant about the complex world of finance that they truly appear not to know how many of their bare assertions about what makes Bitcoin special—that it’s “scarce” (true of many if not most financial instruments), that it’s “non-rivalrous” (largely false), that it’s not “fiat currency” (only true if you redefine what has always been meant by fiat currency), that it’s not regulated by trading oversight like the SEC (true of a tremendous amount of current securities trading), that it’s technologically advanced (ditto), that because it’s not “fiat currency” it can’t or shouldn’t be taxed (check some of the outraged reddit comments to this tax expert’s calm and rather obvious advice)—apply to many other instruments that already exist and that are not making finance more democratic or breaking apart investment banks, central banks and the nation state itself, although they are making the 1% richer (is that the “revolution” Bitcoin promises? The Winkelvii think so. Should we worker types be crowing about that? Should we assert the counterintuitive proposition that the Winkelvii do not recognize a hot security for what it is—or accept that maybe they do, and maybe those who think Bitcoin is somehow resistant to big banks & big finance are actually wrong?). Bitcoin is much less unique and revolutionary than its proponents suggest, at a financial, not a technological level, and it is clear that those proponents often know very little about the existing instruments to which they claim Bitcoin is an alternative, either technologically or financially, so their assertions are almost entirely ideological in nature.

They even know very little about gold and other precious metals, despite one of the most common refrains in Bitcoin mania being the completely wrong syllogism that “Gold is stable in value because it’s scarce, Bitcoin is scarce, therefore it will be stable in value.” There is no doubt about one prong of this syllogism: precious metals like gold are not stable in value. Don’t believe me? Here’s a chart of silver’s “real” value (along with its ratio compared with gold, making an interesting side-by-side comparison)—that is, silver in terms of how much it will buy you of real commodities like food, as opposed to in its exchange value for currency—over the past 750 years. There’s no argument about this, even among gold bugs. The scarcity of silver has not ensured stable value, no matter what Ron Paul might try to have you believe. Notice, among other interesting facts, that silver has recently spiked in value despite the available amount increasing over time, while the ratio with gold has fluctuated in almost the opposite direction—when, if the “stable commodity” theory was correct, both of them should either have maintained a steady value, or gone slightly down (however, even that “stable commodity” theory fails to account thoroughly for the continued mining of silver and gold).

gold and silver prices

Chart of historical silver prices in relation to gold, 1344-2010. From http://goldsilverworlds.com/15-gold-silver-price-charts-2013/

So, lacking almost any apparent knowledge of finance, Bitcoin maniacs assert in an extremely aggressive fashion that Bitcoin completely revolutionizes… finance. It is a symptom of cyberlibertarianism that such a sentiment can be taken seriously, because this repeal is supposed to come out of the technological knowledge of computer systems possessed by Bitcoin fanatics. You really do need to understand something in detail before you can offer meaningful alternatives, but the relevant domain is not software, or at least not mostly software; it’s finance, securities design, trading, and economics. For a lot of reasons, unregulated instruments (again, meaning here instruments whose trading is not regulated by an oversight body like the SEC; I’m not referring to Central Bank modulation of exchange value at this point, which is what most Bitcoin fans usually seem to take “regulation” to refer to) do not solve any of the problems Bitcoin is said to address, and to the degree such instruments have been thrown at those problems, they only make them worse, because they have no checks against speculation and market manipulation, the main causes of the boom-bust cycles that characterize most financial markets.

Economics is a social science, and I believe, for philosophical reasons not worth going into here, that social sciences don’t have “laws” in the sense that physics does. But they do have observable regularities and probabilities. While it’s often framed as “one of the only iron-clad laws of finance,” what I would instead see as a very reliable regularity is that when people in financial markets claim “it’s different this time,” it almost certainly is not. The less that claim can be rooted in direct comparative data with similar market action, the less seriously the claim can be taken. Bitcoin now has a significant amount of historical data showing that, like almost every other unregulated instrument, it is subject to dramatic boom-and-bust cycles: that would make it the same as nearly every other unregulated trading instrument. Saying economics and finance don’t apply to it, as Bitcoin maniacs must, is the same as saying “it’s different this time.” If you have money to bet—and not that you can place this bet directly, and not that I am giving any investment advice—I would say the safe bet is that it is not different this time. Bitcoin is exactly what it looks like, a crazy, unsecured commodity that will boom-and-bust itself either until its very existence becomes onerous and ridiculous, or until nobody cares anymore. Perhaps if and when nobody cares it will become useful as the stable store of value economists call a “currency.” Until then, it is yet another way for little guys to get played, and, most importantly, will have no beneficial effect on those central economic problems that at least some Bitcoin maniacs claim it solves. If anything, it will make those problems worse, to whatever degree its total market capitalization increases relative to other commodities and currencies.

If you want to address the very real problems in our economic, financial and even monetary systems, it is imperative to understand those systems, and Bitcoinistas show almost no sign of being interested in doing that, substituting instead their superior knowledge of computer systems. You should believe reasoning emerging that way as much as you believe the next get-rich-quick penny stock advertisement (don’t).

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On the Idea of a Feminist Programming Language

Arielle Schlesinger, a student in Technology and Social Change (at an unnamed school) who is working on a thesis about Feminist Programming Languages, has written a couple of blog posts about the topic at HASTAC: Feminism and Programming Languages and A Feminist & A Programmer (Brian Lennon has a thoughtful reaction, “A Feminist Programming Language,” to the sexist backlash against these pieces at his Chronodocket blog). I wrote a somewhat detailed set of comments that I posted on the Feminism and Programming Languages entry, and thought they might be of interest to my readers, though they depend to some extent on the material in the blog posting and the other comments made there.

  1. First, I encourage you to think about what problem a “feminist programming language” is supposed to solve. I think it’s much less clear than the label might suggest. Is the problem that non-feminist PLs produce non-feminist results? I don’t think that’s clear. Is it that non-feminist PLs contribute to an anti-feminist engineering culture? I think that may well be true, but that PLs are a small part of a much larger problem and that PLs in this sense are not an especially apposite site for political action. Is it that a feminist PL might encourage more feminist-friendly computing products? Again, this seems possible, but it’s not clear that the feminist PL would be the most expedient route to creating those products. Is it a way of critiquing the existing paradigms? That’s important–something I engage in actively–but it’s not then necessarily an argument for the adoption of a feminist PL other than as a thought experiment. I think Tara McPherson’s experience with Scalar shows both the attractiveness of such an approach, but also its relative limitations with regard to spurring on or informing politically-resistant or feminist projects. To take a more general example of a scripting language, HTML has not been developed with much feminist input, but it has been used for a wide range of feminist and anti-racist projects, even if those are just putting texts and discussions on the web.
  2. You dip into the literature on feminism and technology, which is absolutely one of the places one should look for discussion of these topics, although I think it’s deeper than the current bibliography suggests. With regard to PLs in particular, I think a big lacuna so far is the discussion of feminist theory in philosophy, particularly with regard to formal logic and mathematics. This has been a thriving topic for a long time, especially in the late 1990s: what would it mean to have a “feminist logic” or a “feminist math”? PLs are more like logic and math than they are like languages (see 4 below), although the voluminous literatures on feminism and language (both philosophical and linguistic) and feminism and writing (ecriture feminin etc.) deserve consultation. I’d particularly recommend Andrea Nye’s Words of Power: A Feminist Reading of the History of Logic (Routledge 1990): http://www.amazon.com/Words-Power-Feminist-Reading-Thinking/dp/0415902002/ref=la_B001H6WH2K_1_1?s=books&ie=UTF8&qid=1387126985&sr=1-1 and essays in Falmagne and Haas, eds., Representing Reason: Feminist Theory and Formal Logic (Rowman & Littlefield, reprint 2002): http://www.amazon.com/Representing-Reason-Feminist-Theory-Formal/dp/B007K56N1S
  3. In The Cultural Logic of Computation (specifically Chapter 9, pages 209-215) I talk a bit about the politics inherent in various approaches to building programming languages, with reference to the cultural politics inherent in the thinking behind Object-Oriented Programming. My goal is not to attack OOP, but point out what kind of thinking goes into and supports them. There I talk briefly about two other paradigms, Subject-Oriented Programming (https://en.wikipedia.org/wiki/Subject-oriented_programming) and Aspect-Oriented programming (https://en.wikipedia.org/wiki/Aspect-oriented_programming), which appear to have been developed in part as reactions to the philosophical/conceptual underpinnings of OOP and which answer some of the challenges you’ve suggested–the “normative subject/object theory” you rightly note feminism has criticized. But it’s vital to note that neither has gained the kind of support that OOP has, even among politically resistant projects, raising questions about what such resistant formalisms are supposed to do. Both do more with relations than does OOP, although to say that OOP excludes relations is not, I think, entirely correct. There is at least one effort to develop Relationship-Oriented Programming: http://www.codeproject.com/Articles/298818/Relationship-Oriented-Programming.
  4. It’s important to assert something here that only seems to creep in occasionally, but which I will stake my life upon: “programming languages” are not “languages,” if by the naked term “language” we mean “human language” (and I’m frankly not sure what else we could mean). The affordances PLs offer, and the use we make of them, are quite different from human languages, and we need quite different analytical tools to approach them.
  5. I mention this in part because of your invocation in comments of the Sapir-Whorf Hypothesis, about which two points.
    1. First, Sapir-Whorf applies to human languages, not PLs, and for a lot of reasons I think it would be hard to make a convincing argument that the hypothesis as it is typically understood would apply to PLs, which is not to say that PLs do not in some sense “constrain the way we see and understand a given problem,” but this kind of constraint is quite different from Sapir-Whorf; among other things, many if not most programmers know several languages and approach problems abstractly first, before deciding which PL to code in.
    2. It’s not really accurate to say that “there is good evidence to support” the Sapir-Whorf hypothesis. The hypothesis itself has been disambiguated into several different versions (often classified as “strong” and “weak”) and it’s not clear that even Whorf believed in the “strong” version, and Sapir may not even have believed in the “weak” version (he said different things at different times in his life). All the evidence that linguists have generated has tended to circle around “weak” versions of the hypothesis, so that, for example, certain aspects of temporal perception, or the degree of completedness of action, may be affected, but in general, larger questions of conceptual structure are not constrained by language. There is a pretty good discussion of this on the Wikipedia page on Sapir-Whorf/linguistic relativity, which even contains a brief (and in my opinion somewhat misleading) note at the end about PLs: see https://en.wikipedia.org/wiki/Sapir-Whorf_Hypothesis.
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Cyberlibertarianism: The Digital Deletion of the Left

I’m very happy to have a piece appear in Jacobin: A Magazine of Culture and Polemic, titled “Cyberlibertarians’ Digital Deletion of the Left” (I’ve given this blog entry my original title, which fits more neatly with the work I’ve been writing recently on cyberlibertarianism. The piece begins by posing a question that I hope most of us on the Left are thinking hard about:

The digital revolution, we are told everywhere today, produces democracy. It gives “power to the people” and dethrones authoritarians; it levels the playing field for distribution of information critical to political engagement; it destabilizes hierarchies, decentralizes what had been centralized, democratizes what was the domain of elites.

Most on the Left would endorse these ends. The widespread availability of tools whose uses are harmonious with leftist goals would, one might think, accompany broad advancement of those goals in some form. Yet the Left today is scattered, nearly toothless in most advanced democracies. If digital communication technology promotes leftist values, why has its spread coincided with such a stark decline in the Left’s political fortunes?

The full piece is available on the Jacobin website. .

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Bitcoin Will Eat Itself: More Contradictions of (Digital) Libertarianism

Bitcoin (BTC), the much in-the-news and up-for-government-discussion cryptocurrency favored by Deep Web drug markets, libertarians, anarchists and would-be assassins everywhere, has been on a tear recently, and as of yesterday has hit an all-time high (albeit briefly) of more than USD $900 mark. It’s not hard to find—in fact it’s difficult to avoid—cyberlibertarians of all stripes celebrating this surge and similar ones in the past as proof of Bitcoin’s importance. While the surge does indicate something, it is beyond remarkable to read celebrations of the surge as if they prove Bitcoin’s feasibility as what it is advertised to be, a currency: because it is only through an incredibly blinkered and uninformed worldview, one typical of the paradoxes found throughout cyberlibertarian discourse, that dramatic surges in the (relative) value of an instrument can be understood this way, since under any conventional economic theory such surges prove not that it is a new government-toppling currency, but to the contrary, that it is nearly useless as a currency. Like so many other parts of cyberlibertarian discourse, Bitcoin’s supposed power is so fully and transparently perched on blatant contradictions that it is shocking to find people taking it seriously, and yet take it seriously they do.

In many ways this is a familiar story about digital arrogance. Engineers imagine that their domain-specific knowledge translates into universal knowledge (“guys [who] are really good at what they do, and [who] think that makes them an expert at everything“); that all problems are engineering problems and that unsolved problems simply indicate that nobody so smart as they are has come along to solve those problems; that domain-specific knowledge is a kind of “elitism” meant to keep out true experts like them. It’s also a story about the permeability of cyberlibertarianism with Tea Party libertarianism, as lurking under the celebration of Bitcoin is an endorsement of Ron Paul-ite conspiratorial intuitions about monetary policy that do not stand up to scrutiny, even, for the most part, from more reputable Right and Libertarian economists (see, for example, criticisms of Bitcoin from an economist at the real (not Paulite) Libertarian Mises Institute: “The Bitcoin Money Myth,”; “Bitcoin: Money of the Future or Old-Fashioned Bubble?“; also see well-known digital investment analyst Henry Blodget making much the same fiscal argument I am advancing here, in “Bitcoin Could Go To $1 Million“). Together, we have the spectacle of rabid cyberlibertarians like Pirate Party leader Rick Falkvinge promoting Bitcoin because it displays exactly those features that disqualify it for its putative use. While Falkvinge may be the most visible and loudest advocate of this contradictory “analysis,” one need only check the comment boards for any article raising critical questions about the economics of Bitcoin to see it being repeated, ad nauseum, and in a typically trolling and dismissive style of any point of view not directly based on grokking the genius of the Bitcoin algorithm (in addition to their ubiquity on Falkvinge’s site, see comments on articles like this one on the Washington Post or this one on Bloomberg or this excellent blog post on Naked Capitalism).

To see this, one need only start at the beginning. Bitcoin is touted as a replacement for “fiat currency.” “Fiat currency” is a buzzword from libertarian economics and especially from Paulites; here are the key bits of the definition from Wikipedia:

Fiat money is money that derives its value from government regulation or law. The term fiat currency is used when the fiat money is used as the main currency of the country. The term derives from the Latin fiat (“let it be done”, “it shall be”)

The Nixon Shock of 1971 ended the direct convertibility of the United States dollar to gold. Since then all reserve currencies have been fiat currencies, including the U.S. dollar and the Euro.

In the simplest terms, one can understand “fiat money” as money without “intrinsic value” (that is, where the currency itself has value in another form; the most typical example is gold). This distinction is actually much harder to make than advocates want us to think; more on this below. As the Wikipedia entry goes on, “while gold- or silver-backed representative money entails the legal requirement that the bank of issue redeem it in fixed weights of gold or silver, fiat money’s value is unrelated to the value of any physical quantity. Even a coin containing valuable metal may be considered fiat currency if its face value is higher than its market value as metal.”

OK: fiat money is “bad” because it has no value other than as money; non-fiat money, also known as “commodity money,” has “intrinsic value.”

Now, what’s supposed to be wrong with fiat money? This is a age-old canard for libertarians; it’s one of the favored talking points of the Paul clan. What it’s supposed to be about is stability of value.

Ron Paul: “if unchecked, the economic and political chaos that comes from currency destruction inevitably leads to tyranny” (Ron Paul, Paper Money and Tyranny, Speech in U.S. House of Representative, September 5, 2003, quoted on http://wiki.mises.org/wiki/Criticism_of_fractional_reserve_banking)

What people supposedly hate about “fiat” currencies is that “central bankers” can manipulate the value of the currency, supposedly unlike asset-backed currencies like gold. The whole point of this is to have a stable currency. A currency whose value does not fluctuate wildly.

But because Bitcoin is completely uncontrolled, it cannot separate its asset from currency functions. That means that when it appears to be deflating, investors (ie “hoarders”) will jump in, as they are doing now. The problem with this is that, in just the way the libertarians scream about, it makes the instrument too volatile to use as a medium of exchange.

This is why most economists warn against deflation in currencies in general. The problem with “fiat currency” is value fluctuation. The most dangerous kind of value fluctuation is the deflationary spiral–it’s usually considered worse, even, than the kind of inflationary spiral experienced in the 1990s & 2000s by the Zimbabwean dollar.

That is, a merchant cannot hold onto their Bitcoins as profit, because they have no guarantee that their profits will be worth the amount they were when they took the profit. The 6 Bitcoins I get for selling a lawnmower today, may (likely will) only buy me a box of cereal tomorrow. This forces people to constantly transfer their Bitcoins into the supposedly-outdated national currencies, which actually underpin Bitcoin, are actually necessary for it, rather than being the old-fashioned predecessors to it.

Which world currency is currently experiencing among the most dramatic deflationary spirals anyone has ever seen? Bitcoin, the “existential threat to the liberal nation state.” Any sane person putting their life’s savings into Bitcoin among all world currencies right now is as foolish as a Dutch person buying tulips bulbs during–well, you know when. That is because the problems with currencies actually aren’t formal, or mechanical, or algorithmic, despite what BTC-heads desperately want to believe. They are social and political problems that can only be solved by political mechanisms. That is why, despite the rhetoric, right now most sovereign currencies are far more stable than Bitcoin will ever or can ever be (since Bitcoin has no mechanism for value control whatsoever, is almost designed to produce deflation, and BTC-heads have an historically-disproven belief that lack of regulation produces stability–when we can see time and time again that lack of regulation produces boom-and-bust cycles of an intensity far greater than the central bank shenanigans BTC-heads loathe so much.) Fine, let’s go back to the Gilded Age–but don’t pretend for a second we had stable currency values back then, asset-backed or otherwise. We had fiscal chaos, ruled by the most concentrated and powerful holders of capital.

Many economists recognize something that appears to have been beyond the inventors and advocates of Bitcoin. Without direct regulatory structures that prevent an instrument from being used an an investment (aka “hoarding”), any instrument (even gold) will be subject to derivation, securitization, and ultimately extreme boom-and-bust cycles that it is actually the purpose of central banks to prevent.

The more Bitcoin fluctuates in value, the less functional it can be as a currency. The less impact it can have on “world governments,” whatever that is supposed to mean. The more Bitcoin “rises in value”—that is, experiences radically deflationary spirals—the more useless it is as currency.

In fact, because the cycles of rapid deflation and inflation provoke constant exchanges of Bitcoin for other stores of value, usually national currencies, Bitcoin can more readily be understood not merely as a commodity, as just one among many other digital commodities, but also as a kind of derivative itself–an option or futures contract related to the value of other instruments and on which investors of all sorts can speculate and, depending on the volume of transactions, even manipulate the market. Given Bitcoin’s foundational anti-regulatory stance, it is almost inconceivable that major players are refraining from such manipulation. Thus the involvement of high-profile players like the Winkelvoss twins, too, cannot be a cause for celebration of Bitcoin’s potential as a currency, but rather demonstrates its utility as a manipulable commodity for typical, existing capital to use to its own ends. In this sense, it becomes a tool for existing power to concentrate itself, rather than a challenge to the existing order.

Few attitudes typify the paradoxical digital libertarian mindset of Bitcoin promoters (and many others) more than those of “Sanjuro,” the alias of the person who created the Bitcoin “assassination market” written up by Andy Greenberg. He believes that by incentivizing people to kill politicians, he will destroy “all governments, everywhere.” This “will change the world for the better,” producing “a world without wars, dragnet panopticon-style surveillance, nuclear weapons, armies, repression, money manipulation, and limits to trade.” While not directly about the revolutionary powers of Bitcoin, the sentiment flows from the same fount of misguided computational “wisdom.” Only someone so blinkered by their ideological tunnel vision could look at world history and imagine that murdering democratic governments out of existence would do anything but make every one of these problems immeasurably worse than they already are.

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