Crypto-Current (034)

§3.4 — The Bitcoin DSP-solution unshackles (digital) proliferation from duplicity, in the production of replicable singularity. As with every diagonal construction, this outcome is pseudo-paradoxical, since it reformulates an apparent contradiction. From the latent matrix of abundant signs and scarce things, it extracts the scarce sign. Through this procedure, crypto-currency is implemented as critique. It coins a diagonal concept, not as impractical-contemplative ‘theory’, but as working code.

§3.41 — Duplicity – or the DSP – is primarily registered as a monetary problem, in the guise of counterfeit currency, and secondarily as a problem of identity authentication, responding to impersonation. On the Internet, however, another manifestation of the same basic syndrome has been far more prevalent, socially advanced, and technically provocative. The critical driver, on the path to a cryptographic solution to the DSP, has been spam.

§3.42 — ‘Spam’ is narrowly defined as a species of advertising adapted to the conditions of near cost-free electronic communication. Its first large-scale manifestation was ‘unsolicited bulk email’ (UBE), a sub-category of the more general phenomenon of the ‘electronic spam’ which exploits the receptivity of instant messaging systems, newsgroups, mobile phones, social media, blog comments, and online games, among others. While advertising is the principal motivation for this massive duplication of unwanted – and typically only vaguely directed – communications, spam procedures (and supportive technologies) can also be employed for DoS (denial-of-service) attacks, which are designed to overwhelm a specifically-targeted recipient with an inundation of messages. At a sufficiently abstract level of apprehension, no strong boundary of principle differentiates advertising spam from a denial-of-service (DoS) attack, except that the former is generally divergent (one-to-many) and the latter convergent (many-to-one). The residual distinction is motivational. The injury (cost) to the recipient that is an inevitable side effect of spam promotion (‘collateral damage’) is a primary objective for the DoS assailant.

§3.421 — ‘Spam’ – abstractly conceived – spontaneously expresses the consequences of extreme information economy, or radical dematerialization, and is thus emblematic of electro-digital semiotic crisis. It follows the Law of the WORM – write once read many (times) – into a near-costless replication explosion. Unsurprisingly, any recipient of electronic communications is vulnerable to spam harassment, generating a problem that tends to ubiquity. The arms race between spammers and spam filters is recognizable from that characterizing the cross-excitation of infections and immune systems in the biological sphere. Cheap sign contagion is the common syndrome. As the various Turing Test-type defenses attest, any effective obstacle to the automation of spam production increases its cost. The time taken to ‘prove you are human’ adds friction at the point of terminal message delivery, where it cannot be easily eliminated – pre-emptively – by the spammer. Such ad hoc defenses necessarily aim to raise messaging cost, in order to restore the signal of commitment that digitization has erased.

§3.422 — The difference between a solution to the DSP and a spam filter turns out to be somewhere between subtle and non-existent. Both respond to the destructive consequences of semiotic economy – cheap signs – as these climax within networked, digital electronics.* The critical step in this respect was taken by Adam Back in 1997, with hashcash, a proof-of-work based messenger credentials system. As Back describes the innovation: “Hashcash was originally proposed as a mechanism to throttle systematic abuse of un-metered internet resources such as email, and anonymous remailers in May 1997. … The hashcash CPU cost-function computes a token which can be used as a proof-of-work.”**

§3.423 — Rather than offering another piecemeal response to some particular spam problem, Back’s solution looks more like an attempt to fix the Internet, or even more than this. Hashcash tackles the spam problem at its source (cheap signs). Rather than defensively fending off ever more cunning spam intrusions, it enables a positive signal that someone has taken the trouble to communicate this, with the ‘trouble’ being attested by proof-of-work certification. This solution can be seen as a basic filter. It works as an admission pass, rather than a policing operation. The cost of duplicity is raised at the root, which involves the DSP being grasped as the root.

§3.424 — The very name ‘hashcash’ attests to the realization that proof-of-work certification is self-monetizing. Evidence of effort – when this is pre-formatted as a signal of commitment – has intrinsic potential value, independent of its application. A currency is initated automatically, and all that remains is the process of price-discovery. Bitcoin provides a framework within which this process can occur.

§3.43 — However tempting it might be to construe proof-of-work as an algorithmic reprise of the labor theory of value (an LTV 2.0),*** it is not from political economy that Bitcoin derives its sense of ‘work’ – unless by extraordinary circuitousness – but from computer science. The work to be proven, in the validation of a block and associated currency issuance, is performed by a CPU in the course of a mathematical puzzle-solving exercise, and demonstrated through successful execution of a computational task. It is the final measure – beyond which no appeal is possible – of the contribution made by any node to the running of the network. Such work is probabilistic, rather than deterministic. There is no application of computational effort that can strictly guarantee reward. The work required of the miner is persistence in pursuit of a low-probability outcome, through repeated trials. It is both structurally and genetically related to a process of stubborn cryptographic attack – ‘hacking’ in its colloquial, though not traditional, sense – and also to a grueling search for success in a lottery-type game of chance.

§3.431 — Proof-of-work is accomplishment at a test, which can then be employed as a key. In the case of Bitcoin, it simultaneously ‘unlocks’ new bitcoins and casts a ‘vote’ that counts towards the consensual updating of the blockchain. Incentive and service are nondecomposably married. Optimal functionality is achieved by making the content of the test entirely meaningless. It serves as a demonstration of brute force (trial-and-error) computation, inherently resistant to rationalization, and thus irreducibly arduous. It is not a test of cognitive achievement, in any general or sophisticated sense, but solely of computational effort. Its sole ‘significance’ is its difficulty. Despite the obvious risk of anthropomorphism, it might even be described as an ordeal, or – less dramatically – as a trial, unambiguously demonstrating commitment.

§3.432 — Would it not be preferable to have this ‘work’ also (i.e. simultaneously) applied to a problem of intrinsic value?**** In its most positive formulation, this question has been a stimulus to altcoin differentiation. Anything other that mining might do, beside sheer block validation, seems to indicate an unexploited seam of surplus value. Such suggestions are strictly analogous to a recommendation that gold prospecting be bound to valuable activities of some other kind (such as fossil hunting). On the basis of fundamental economic principle, they merit the most vigilant suspicion, since they amount to a deliberate confusion of cost calculations, promoted in the name of a superior – or at least supplementary – utility. Yet however much the costs of mining are strategically muddied – and in fact, in some complex fashion, cross-subsidized – they still need to be unmuddied, to exhibit an economically-intelligible commitment. Mining investment is a signal, which cannot be dissolved into extraneous purposes without destruction of critical information. To whatever extent bitcoin miners are generating bitcoins by accident, is also the degree to which their contribution to Nakomoto Consensus, or block validation, is devalued. The perfect pointlessness of bitcoin generation procedures – for anything other than Bitcoin system consolidation (as remunerated in bitcoins) – is a feature, and not a bug. Cybernetic closure, or self-reference, is its own reward, and it is only as such that it acquires distinctive monetary characteristics. As always within the terrain of auto-production, this is the inescapable abyss, or principle of immanence. The self-propagating circuit has no ground beyond itself, and can only be impaired by the attempt to provide one.

* ‘Spam’ invites a very general definition as the spontaneous expression of digital economics (or near-zero cost communications). The Wikipedia article on email spam makes the point well: “Since the expense of the spam is borne mostly by the recipient, it is effectively postage due advertising.” The Internet Society attributes the term to the celebrated Monty Python comedy sketch depicting the widely-derided tinned meat as “ubiquitous and unavoidable”. Estimates of the cost of email spam vary wildly, with the high-end figures reaching over US$100 million annually, for US businesses alone, by the early years of the 21st century. Global spam volume in 2011 is thought to have exceeded 7 trillion messages. The illusion of costlessness is illustrated starkly by the phenomenon of spam, through the revelation of an unanticipated trade-off. Whatever is free is abused. If an activity with discernible externalities can be pursued without definite commitment, it tends to produce a tragedy of the commons (see Chapter 3). Microscopic private utilities within a zero-cost matrix generate an explosion of informational pollution. Abundance theories, therefore, have special cause to be intellectually disturbed by the phenomenon. Spam is a toxic Cornucopia.

** See: ‘Hashcash – A Denial of Service Counter-Measure’ (2002).

*** Proof-of-work as a foundation for commercial value echoes a theme that has reverberated through the tradition of political economy. It leads, by scarcely-resistible digression – onto an associated track of exceptional historical richness, which is the analysis of value-creation as work, or labor time. From Smith to Marx, this has been a conceptual commitment that closely coincides with classicism in economic theory. Subsequently, the power of the marginalist – and especially Austrian – analysis has tended to entirely overshadow the intellectual labors of the objective value theorists, and even to topple them into derision. Marginalism threw its political-economic precursors into eclipse due to the evident superiority of its transcendental foundations, even if this articulation of its success found no corresponding acceptance within professionalized economic study. From the critical perspective, the objectification of the (subjective) negative utility of effort can only appear metaphysical. Its historical supersession, in this regard, follows predictably from its essential – and rigorously intelligible – error.
It would be unfortunate, nevertheless if a type of Whig-historical triumphalism were to obliterate all understanding of the genuine theoretical insight now entombed with the Labor Theory of Value (or LTV). Most basically, the LTV already incorporates an important critical-subjectivist insight. This can be stated in different ways. Conceived in terms of power, it is the recognition that money does not primarily overcode inanimate resources, but rather represents a distributed system of command (though one rendered inconspicuous by its intrinsic exit-option). Wealth is bound by exchange equivalences to static assets only because it quantifies a capacity to direct activity. It crystallizes compliance. The ‘normal’ economic evolution in the direction of services makes this reality explicit, from the side of consumption. An analogous subjectivization is recognizable in regards to utility (value). Commercial incentives – including those at work in the labor market – can be theoretically systematized as an economization of effort. The value of a possession is the incarnated advantage of no longer having to struggle to obtain it. The critical reversal here is blatant, and crucial. Within the Marxist tradition it is understood as the disillusioning of a fetishization. It is not the thing, but the difficulty of its acquisition, that establishes the foundation of its value. This is an insight, of course, whose foundations were solidly established by the earlier classical economists, Ricardo most notably. The LTV, it can be seen, is a critical relief from naïve objectification, even if it is also – in well-understood respects – a perpetuation of it.
When pursued in detail, however, whether as a matter of economic theory or industrial practicality, fixing the relation between time and work has proved daunting. Quantification of work on the basis of standard time units exhibits an obvious dependency upon chronometric technology. This, in itself, suffices to identify the topic as distinctively modern. Beside comparatively accurate time-measurement, the practice of compensated labor time also requires some adequate degree of work monitoring. It is necessary to know both how much time is spent working, and that this time is spent working. In practice, these requirements have been understood as demands for oversight, regardless of the ideological characteristics of the industrial regime in question. Solutions to the informational problems of work monitoring have been institutionalized within the factory organization of production, integrally, originally, and necessarily. Such systematization of proof-of-work within an anthropological context reaches its most remarkable expression within the methods of Taylorism, which from a theoretical perspective is only an elaborate social hack. The time-and-motion analysis required for ‘scientific management’ is stubbornly intractable to political-economic abstraction (of a kind sufficient for rigorous conversion into monetary quantities), and no practical advance of conceptual significance has occurred subsequently. Immanent proof-of-work, despite its supposed manifestation in the commodity – as exchange value – eluded both ‘bourgeois’ political economy and its socialist critics. The production of measurable (human) labor time has proceeded alongside its theoretical analysis, within a semi-parallel, partially interactive, historical dynamic. This is investigated, within the tradition of Marxist historical sociology, by E.P. Thompson, in his essay on ‘Time, Work-Discipline and Industrial Capitalism’. He is meticulous in noting that “a severe restructuring of working habits” has been practically inseparable from the relevant “changes in the inward notation of time”. That theorization has not proceeded in this case from the inside out, is the critical historical materialist insight. Labor time was a distributed, experimental, piecemeal process, before it was a political-economic conception.
Karl Marx’s maxim for socialist compensation “to each according to his work” achieves an ironic actualization in the Bitcoin reward system. All power to distributed hashing capability!

**** In the words of Nick Szabo: “The secret to Bitcoin’s success is certainly not its computational efficiency or its scalability in the consumption of resources. Specialized Bitcoin hardware is designed by highly paid experts to perform only one particular function – to repetitively solve a very specific and intentionally very expensive kind of computational puzzle. That puzzle is called a proof-of-work, because the sole output of the computation is just a proof that the computer did a costly computation.”
“Very smart, but also very wasteful,” is the way one exemplary critic describes the proof-of-work concept. “All this computer time is burned to no other purpose. It does no useful work – and there is debate about whether it inherently can’t do useful work – and so a lot of money is spent on these lottery tickets. At first, existing computers were used, and the main cost was electricity. Over time, special purpose computers (dedicated processors or ASICs) became the only effective tools for the mining problem, and now the cost of these special processors is the main cost, and electricity the secondary one. … What this means is that the cost of operating Bitcoin is mostly going to the companies selling ASICs, and to a lesser extent the power companies.”
Resonantly: “In mid January 2014, statistics maintained at blockchain.info showed that ongoing support of Bitcoin operations required a continuous hash rate of around 18 million GH/sec. During the course of one day, that much hashing power produced 1.5 trillion trial blocks that were generated and rejected by Bitcoin miners looking for one [of] the magic 144 blocks that would net them $2.2 million USD. Almost all Bitcoin computations do not go towards curing cancer by modeling DNA or to searching for radio signals from E.T.; instead, they are totally wasted computations.”
Crypto-currency pioneer ‘Wei Dai’ is emphatic about the importance of teleological purification to efficient proof-of-work schemes: “The only conditions are that it must be easy to determine how much computing effort it took to solve the problem and the solution must otherwise have no value, either practical or intellectual.” [My emphasis.]

7 thoughts on “Crypto-Current (034)

  1. 1) This puts a new spin on the old saw about virtue being its own reward.

    2) It seems that an analogy could be drawn between DSP/electronic spam and holiness spirals. Will you be tying that in later on?

  2. Correct me if I’m wrong, but isn’t “to each according to his work” specifically the Soviet maxim utilized in the Stalinist period, and isn’t actually a phrasing that appears in Marx’s own writings (though the concept of a lower stage of communism, which is what the maxim alludes to, does)? The case of the tankie bitcoin.

  3. “However tempting it might be to construe proof-of-work as an algorithmic reprise of the labor theory of value (an LTV 2.0),*** it is not from political economy that Bitcoin derives its sense of ‘work’ – unless by extraordinary circuitousness – but from computer science. The work to be proven, in the validation of a block and associated currency issuance, is performed by a CPU in the course of a mathematical puzzle-solving exercise”

    I’ve seen way too many pixels spilled over just such misconstruals. It seems to be surprisingly difficult to maintain the understanding that “work” means different things to a marxist, a physicist, an artist, and a mathematician and that in the context of mathematical puzzles it’s probably the latter that is in play.

  4. Hey, Nick… are you planning on publishing more of your draft online; or, waiting to publish the actual work? If not, when will your book be published: later this year?

    Also in an unrelated thought, came across an essay by Brian Massumi explicating Gilbert Simondon’s notions of reverse causality or how the future invents the present through technique-technicity etc. by way of emergent properties of potentials from the future. Which coincides with your own notions in many ways, although different:

    “Invention is the bringing into present operation of future functions that potentialize the present for an energetic leap into the new. The effect is a product of a recursive causality: an action of the future on the present. This is why Simondon insists that the technical object is not the product of a hylomorphic causality moving from past to future. A technical invention, he says, does not have a historical cause. It has an ‘absolute origin’: an autonomous taking-effect of a futurity, an effective coming into existence that conditions its own potential to be as it comes. Invention is less about cause than it is about self-conditioning emergence.”

    . Gilbert Simondon: Being and Technology (pp. 25-26). Edinburgh University Press. Kindle Edition.

  5. §3.43 >> Yes, but probabilistic guesswork attempts approximate to effort in the abstract, and so blockchain indeed has a doctrine of “fairness”; which is at least the *simulation* of an objective theory of value. Without such an OTV, we are back into Mengerian subjectivism, and by extension Einsteinian relativity (since in neither case can an objective standard be found: it is a negative proof), and, by further extension, a floating exchange rate.

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