Crypto-Current (052)

§5.58 — Central banking did not begin with the Bank of England, in exactly the same way that terrestrial capitalism did not originate among the Anglophone Powers. This is to say that a comparable ‘usurpation of destiny’ – in the full ambivalence of the term – is evident in both cases. Fate was settled on an English path, which took work.[1] An obscure opportunity for supra-national influence was captured, and became self-consolidating, through convergence. Which is to say: the occasion for financial elaboration found its strongest expression on the supra-national line. It was, from the beginning, world-historical.[2] In the final analysis, it has happened to peoples more than from them. Teleological instrumentalization of the English-speaking peoples, as agents of global process, has been no less basic than their adoption of new financial technologies. The two developments have been one. Central banking has been nationally functional to the exact extent it has been internationally competitive, and thus globally compelling. It won wars that mattered, first for the Dutch, then for the English. By the time the United States inherited managerial responsibility for the world order, its principles of financial sovereignty had been firmly set in place. The task of managing the national debt was, as a matter of concrete practicality, a military logistics function. It assured war-fighting capability at the highest level of strategic abstraction. Whatever was needed was made affordable. The consequences were consistently dramatic. Because the states that quickly took the lead in central banking were – not at all by coincidence – the successful vehicles of a supra-national (or global-revolutionary) undertaking, nothing like a simple nationalization of money was ever actually happening. Rather, the production of international reserve currency was becoming reflexive, and institutionally self-aware. This does not make monetary nationalism a mere illusion. The organizational level of the nation state did in fact become increasingly dominant, and all the more so when international adventure was at stake. It did not, however, control its own context. The supra-national process preceded, exceeded, and catalyzed all national developments, because the battlefield was the arena of selection. The history of central-banking is bound far more tightly to the production of world-money than happenstance could account for. The global revolutionary mission was primordial (i.e. essential, or intrinsic). In contra-distinction to the financial myth, sound domestic money management did not simply come first.

§5.581 — The Bank of England was incorporated by the 1694 Bank of England Act. However much centralized monopolization of bank note issuance now looks like the basic destiny of the institution, it was only very gradually established, over the course of more than two centuries of subsequent legislation.[3] It was not, therefore, a guiding project (in anything other than an obscure teleological sense). Monetary nationalism was only a slowly emerging outcome. It was fiscal nationalism that provided the primary imperative. Twin agendas were originarily complicit, directed at once to domestic financial stabilization and to state revenue-raising with a definite outward, geopolitical orientation. The incorporation of the Bank, then, marked a further step in the integration of modern banking with sovereign political power.

§5.582 — The much later US central banking Federal Reserve System is far more arcane than the Bank of England. It dates back only to the final days of 1913, as a creature of the Federal Reserve Act, through which Congress announced an American public (i.e. national) monetary policy. The institutional origin of the Federal Reserve is explicitly inseparable from a post-liberal ideology of money, which conceives it as an administrative tool, to be placed in the service of national economic objectives (the macroeconomic suite of full-employment, stable prices, and moderate interest rates).[4] The British experience had been educational, in this regard. Money had been re-minted as an imperial project, with twin global and domestic faces. Where the Pound Sterling had found itself elevated by fortune to the status of imperial scrip, the US Dollar now ventured onto the same path of geopolitical fatality with greater self-consciousness. The relation to war economy was effectively deepened. By the early 20th century it was obvious to all observers that the primary Anglophone world power could have no (merely) national interests that were not immediately matters of global geostrategic and ideological competition. The US Dollar could only be an architectural pillar of world order. To trust it was direct psychological investment in a planetary destiny.[5]  

§5.583 — Under conditions epitomized within the era of matured central banking, but by no means restricted to it, monetary value reduces ultimately to a political substrate, where confidence is maintained by evidence of effective power. This registers a critical inversion. The capacity to protect property begins to ‘appear’ – i.e. to trade – as its essence. Recognition of the ‘protection racket’ as a mode of criminal enterprise closely coincides with this development in time. Investors – including even mere holders of currency – have been re-sensitized to regime risk, which sub-divides into two broad (but intricately inter-articulated) categories. Firstly, the 20th Century has dramatically featured sheer expropriation, of the nationalist-communist type. In response, assets of any kind now feature some degree of Marxist discount. They are priced with a measure of definite regard to their vulnerability to government seizure, or ‘revolutionary redistribution’, which automatically increases yields in the most hazardous cases. The antithesis is practically assimilated. Secondly, and more subtly, political authority has been increasingly formalized as an asset class. No longer merely devoted to the protection of property, whether to a greater or lesser extent, it has itself become an object of comparatively direct financial investment. Government bonds offer a share in imperium. They securitize regime resilience and demographic purchase, or geopolitical capability.[6] Under conditions of global stress, most conspicuously, the lender of last resort transitions into a debtor of last resort, and thus a savings facility, socializing deferred private consumption through the medium of public financial obligations. The Federal Reserve Note is nothing less than a wager upon the future of America, its central government, and – most specifically – its taxation power. By extension, the exceptional global acceptance of the US dollar is an investment in American world order. All these relations are analytically reversible. Geopolitical crisis implies currency crisis, or – still further – potentially follows from one. The coin has two sides, and can be easily flipped. ‘Derealization’ into pure credit only accentuates money’s ambivalence. As it is incrementally demetallized, money takes the form of a promise, whose credibility is founded upon the public image of state power, as fully-expressed within both domestic and international contexts. Under such circumstances – especially when a global hegemon is in the spotlight – the stakes of a ‘monetary revolution’ are not easily over-estimated. Nor are its positive implications readily anticipated. The nature of money has long ceased to be separable from the order of the world.[7]  


[1] Within six years of the 1688 ‘Glorious Revolution’ and the installation of the Orange monarchy, the Bank of England was born. It is difficult, therefore, to miss seeing a transnational socio-historical project at its root. Many nations undoubtedly find a way to frame their fate exceptionally, within the terms of a mission exceeding common geopolitical interest. A country is thus conceived as a vehicle for something other than its people. The Glorious Revolution illuminates the English version of this. Protestantism and – more profoundly – capitalism is the cargo. Neal Stephenson’s ‘Baroque Cycle’ of historical novels captures the process in its cultural essentials. National independence, holy war, and unprecedented financial technology composed an original compact system. Catholic ‘conspiracy theory’ in this regard is not unwarranted. The hostile perspective of an E. Michael Jones brings out the contours of this new thing more sharply than its liberal defenders can. It was built so that schismatic theology might prevail in global conflict. With all due diligence to the hazards of unfettered teleological apprehension, it remains near-irresistible to ask: What was the Bank of England designed to finance? Nothing less than a planetary revolution could count as an adequate answer. The Dutch Revolt or Eighty Years’ War (1568-1648) had set the template. Advanced financial infrastructure offered near-miraculous strategic geopolitical advantage. The defeat of the Spanish Empire in the Dutch independence struggle meant that the culture of modernistic schism, or autonomizing capital, would not be stopped. No future foe would present comparable challenges, whether estimated in terms of the apparent balance of forces, or even the clarity of ideological decision. Globalization in the ‘neo-liberal’ sense was henceforth implicit, dominating the historical horizon of the world. All of its subsequent contestants would be compelled to articulate their resistance within a framework fundamentally shaped by the liberation of Capital, and benchmarked to it.  

[2] There is no doubt a Globalist Idea and most probably several. The Oecumenon tilts towards one. (One is never less than simply compelling.) It would be precipitous, nevertheless, to assume that the supra-national points unambiguously towards global unity. Delocalization and globalism are synonymous only under strained dialectical assumptions. It takes more than an entire planet to complete the logical sense of a globe. Comprehensive globality has no possible empirical instantiation. Proselytizing religion is its natural territory, and it evokes concreteness only to mock it. From the perspective of oecumenical globalism, the empirical process necessarily underperforms at oversight. It is, critically, excessive in its singularity. Ethnic peculiarity, in particular, inflects it. There is no side-road back to the universal, even through a conception of ethnic peculiarity in general. Capital escapes exactly once. It therefore shrugs-off generic characterization. Concretely, within modernity, ‘supra-national’ has meant predominantly Anglophone. In addition, the requirement for expertise at delocalization almost sufficed in itself to ensure significant Jewish involvement, which the Protestant revolution notably facilitated. In can therefore be insisted, on grounds exceeding firm analogy, that globalization is not a project, in precisely the same sense that there is not an International Jewish Conspiracy. Which is to say that there is in both of these cases really something – and even the same thing – manifested as a structure of fate, though without commanding deliberation. The conspiratorial interpretation is encouraged (and simultaneously misled) by the fact there are not here simply two different things. Ayn Rand’s widely-derided identity assertion (“A = A”) finds productive application on this point. Capital – as historical fatality – is what it is and nothing more.

[3] The first Bank of England notes were issued in 1694, the year of the bank’s founding. Initially, they functioned as bank checks, written for arbitrary sums. Their denominations were not standardized until 1745. Large notes predominated. The smallest note issued by the Bank was £20 until 1759, worth £3,300 in 2017. Innovation tracked the cycles of the war economy. The first £10 note was issued during the Seven Years’ War, the first £5 note during the war with revolutionary France (in 1793), followed quickly by temporary £2 and £1 notes before the end of that same conflict, and the century. These early notes were units of government debt, but not circulating currency. It was not until 1855 that they became payable to the bearer, and thus freely exchangeable. In keeping with their new function as currency, the notes became entirely machine-printed in the same year. Previously, of course, standardized national currency production was the exclusive responsibility of the Royal Mint, as it had been since AD 886. Monetary transition into the fiat regime has been tracked by the rise of the Bank of England, and reciprocal marginalization of the Royal Mint (which continues to manufacture UK coinage to the present day, although now out of intrinsically near-worthless base metals). Issuance monopoly came slowly. Even the smallest banks were permitted to issue their own bank notes prior to the Bank of England Acts of 1708 and 1709. Currency issuance was actually liberalized by the 1826 Country Bankers Act, extending the right to print money to joint stock banks (meeting certain criteria of size, and distance from London). It was only with the 1844 Bank Charter Act that monotonic progression towards Bank of England currency monopolization was set unambiguously in motion, with removal of note-issuing rights from England’s last private note issuer (Fox, Fowler and Company of Somerset) following its acquisition by Lloyds Bank. The process was not fully completed until 1921. The comparatively rapid demotion of the UK from the geopolitical responsibilities of recent centuries took place over a small number of subsequent decades. Partial convergence with a broader European trend to currency integration was an indicator. The pound was only decimalized in 1971, following the entry of the UK into the European Common Market (predecessor to the European Union).

[4] The US central banking Federal Reserve System came into being on December 23, 1913, with the enactment of the Federal Reserve Act. The brief of the new institution, quite explicitly, was to subject financial market psychology to centralized governance. Specifically, it was designed to suppress panic. The most immediate reference was the 1907 Banker’s Panic or ‘Knickerbocker Crisis’ (named after the Knickerbocker Trust Company whose collapse triggered the nationwide financial catastrophe). In keeping with the modern formula, bank-runs had been the primary driver of cascading insolvency. Under American institutional conditions, there was no circuit-breaker in the process. This was the conclusion of an investigative commission into the panic, established and chaired by Senator Nelson W. Aldrich in 1908, which identified the country’s lack of a central bank as the root cause of the crisis. The Aldrich Commission proposals led directly to the creation of the Federal Reserve System. The new institutional structure, named with misleading simplicity as the Federal Reserve (or just ‘the Fed’), was characterized by Byzantine complexity. Its Board of Governors has seven members, appointed by the US President (subject to Senate confirmation) for 14-year terms. In order to maximize administrative continuity, and manifest independence, one member is appointed every two years (in a 14-year cycle). In addition, there are twelve regional federal reserve banks (FRBs). The entire Board is supplemented by five presidents from the regional FRBs to compose the (twelve-member) Federal Open Market Committee (FOMC). In recognition of its status as the nation’s financial capital, the New York City FRB is privileged with a permanent position on the FOMC. It is the FOMC that wields primary executive power within the system, practically directing national monetary policy. Finally, the (private) banking industry is provided with formal consultative representation within the system, through the twelve-member Federal Advisory Council. In respect solely to the occult social status of the Federal Reserve, the most appropriate comparison might be to The City of London (as an institution). William Gibson makes this private crypto-governance (whose medium is the open secret) a theme of his time-travel novel, The Peripheral.

[5] In God we Trust, the official motto of the United States of America since 1956, began to appear on the country’s paper currency in the following year. It had already been struck onto coins for almost a century (beginning in the Civil War year of 1864). Over the course of three centuries, the implicit commitment underlying the monetary credibility of the world’s principal English-speaking power had escalated from (the 17th century) Protestantism will survive to (the 20th century) Anglophone global capitalism will prevail. The difference is primarily cosmetic. Those oblivious to the core identity of Protestantism and Capitalism understand neither, or the fact each is the occult aspect of the other. Schism and automation are the guiding threads. The Great Seal of the United States, with its twin mottos Annuit Cœptis (‘our undertaking is favored’) and Novus ordo seclorum (‘New order of the ages’), has decorated Federal Reserve notes since 1935. The intensity of Federal Reserve conspiracy-theorizing has not, of course, been harmed by this.

[6] As Niall Ferguson remarks in The Ascent of Money (p.102), while describing the economic consequences of the First World War: “Those who had bought war bonds had invested in a promise of victory …” Insolvency then follows from an erroneous interpretation of destiny. At work here is an economic domestication of geopolitical risk. If any single index captures bourgeois nationalism, it is this. Private savings are explicitly invested in a national-collective undertaking. No less notable is the dynamic of self-reinforcement, accentuated by survival bias. One thus sees in the bond market political economy being synthesized in real time.

[7] At the world-scale of the economic hazard transitions into transcendental risk, where the stake is nothing less than the system in its entirety. The whole cannot be hedged. Wild bets on, or against, the future of capitalism stretch the competence of markets to their outer limits.

Crypto-Current (051)

§5.5 — Conceptual conversion of A-money into C-money has been an automatic outcome of modern financial history. It can formally, but only artificially, be disentangled from the development of banking procedures and institutions. The credit (or reputation) of the financial institution supplants the positive asset value of money, as it replaces the monetary commodity with authorized notes. This financial reconstruction of exchange introduces an element of non-simultaneity. A moment of indebtedness is inserted into the synchronous swap, a period – however fleeting and notional – in which payment is owed. Even a simple purchase can be formally elaborated in this fashion. Payment need only be preceded by a ghostly double – a liability – arising in the non-instantaneous space of commercial reciprocity. A pseudo-consecutive schema insinuates credit into exchange. It is only on the basis of a systematic social hallucination of a decidedly metaphysical type, however, that it can be considered always, necessarily, to have been there.

§5.51 — Credit money, then, presupposes a suppression of simultaneity. We are returned to generalized spacetime, although now on the other side. If arithmetic is the formalization of time, in accordance with the Kantian understanding, simultaneity translates to zero. It is the temporal determination of space (or the pure form of non-separation in time). Events occur simultaneously when no time separates them. Under such circumstances, the credit relation is impossible. The critique of monetary financialization is thus bound to the philosophical – and even, by strong analogy, cosmo-physical – problem of simultaneity. If the very notion of the same time, in its global application, is judged irredeemably delusory, then the financial model of transaction is vindicated, as a universal truth. Relativity and fundamentalist credit finance share a metaphysics, in which the absolute occurrence of instantaneous transactions is de-realized, and subordinated in principle to qualification, or mediation. “Simultaneity is a convention,” Poincaré insisted. The subsequent relativistic revolution in physics has trained readers to invest this statement with a maximum of intrinsic skepticism, as if it amounted to the claim that simultaneity could not – in principle – ever be actually realized, unless as a standing social illusion.[1] The inversion is then total. Since it is the function of (positive) money to restore simultaneity, the very possibility of any such non-credit currency is in this way dismissed. Hard money contradicts generalized financial relativity, and that has become our common sense. A return of hard money, as anything beyond a relic, can only be manifested as an alien invasion.  

§5.52 — Transcendental aesthetic is exhausted by the blockchain. In restoring absolute time (pure succession), Bitcoin recovers simultaneity at the same time. The term blockchain already tacitly says as much. The block is a chunked unit of simultaneity, just as the chain is an order of succession. Each is reciprocally determined by the other, despite their real difference. Critically, a block is validated as a whole, at once. It contains no internal temporal articulation. Each block is all space, in the temporal sense, or non-decomposable duration. It is a true moment, or a ‘now’, even when sedimented (chained) into the past. Transactional simultaneity is thus realized. As we have seen, this is the negative of financialization, and its actual condition of impossibility. The credit relation has no reality on the blockchain, even though all of its associated signs can be recomposed there.[2]

§5.53 — Profound historical tendencies ensure that this point will be misunderstood, even as it stubbornly – and with at least equal necessity – re-asserts itself. Bitcoins are not credits. Furthermore, and still more controversially, none of the items of economically-significant information embedded within the blockchain are, or could be, credits, unless from a perspective, which is also to say an apparatus, that transcends the blockchain. The temporality of the ‘block’ ensures this. Nothing unsettled survives the automatic editing process. Only positive signs persist.

§5.531 — Consider a simple safety deposit box. It physically and institutionally protects anything placed inside it. ‘Intrinsically’ precious items (collectibles) are the neatest examples – gold or silver coins, jewels, antiques, or works of art. As with the blockchain, however, complex semiotic objects – such as contracts of any kind – can also be safely deposited. The critical question now arises. Does this mean that such a secure storage facility protects promises to pay?

§5.532 — The answer is not entirely straightforward, since it depends upon the obscure undercurrent of the question. What does it mean to keep a promise? If all that is required is to remember it, then safety deposit boxes can certainly help – and the blockchain vastly more so. If it is further required that the promise be fulfilled, or settled, what is demanded is the time-sensitive elimination of a discretionary factor. In keeping a promise, a tacit betrayal option is cancelled. This is not something a secure deposit, or blockchain, can maintain, because neither is able to hold such an option open.[3] Potential defection (‘default’) does not require risk-pricing in such an environment, because it cannot occur. Whatever risks there may be to Bitcoin transactions, this is not among them. On the blockchain, no difference between a ‘deposit’ and an ‘account balance’ can exist. Credit risk is necessarily zero. There are no negative balances, but only positive holdings, recorded as a history of mining events and transactions. Anything running on a blockchain inherits this characteristic. Smart contracts, for instance, insofar as they are fully-immanent to the blockchain, cannot be credit instruments. They are, instead, hard commitments. The future is effectively pulled forward, and metalized as destiny. (This is a point to be more adequately engaged shortly.)

§5.54 — When attempting to grasp what, through Bitcoin, money ceases to be, the relationship between credit money and fiat currency merits particular attention. This relation is certainly not simply analytical, despite the intimate historical connection between monetary financialization and politicization.[4] Over the course of recent centuries, the problem of trust – as dramatized by episodic banking crises – has functioned as a relay. As previously noted,[5] the spontaneous evolution of paper money (from warehouse receipts) profoundly exacerbates the double spending problem. Considered as the most economically intimate field of media development, it subsumes forgery into printing, on a path that leads to electronic digitization. Within the modern history of money, however, this semiotic main-current is a side-stream. Deliberate fraudulence, involving cynical fake-money production, has not been the principal trust problem generated by financialization. Credit creation, through fractional reserve banking, has been vastly more consequential as an engine of trust catastrophe, precisely because it separates the question of trust from suspicion of criminality, and thus from the sphere of traditional law-enforcement mechanisms. A banking crisis is not – unless contingently, or under the aspect of polemical extravagance – a crime. More generally, those socio-cultural forces disposed to consider inflationism in all of its aspects as essentially criminal have been so thoroughly defeated that their objections have lost all engagement with effective mechanisms of legal enforcement.[6]

§5.55 — To recapitulate the discussion from Chapter Three (§3.06), when fractional reserve banking turns bad, it is exhibited as a double – and in fact multiple – lending problem. Any bank deposit can be loaned out multiple times, with the proportions of potential bank credit to assumed liability decided by the reserve ratio. (A reserve ratio set to cover 10% of loans outstanding permits a ten-fold credit multiplication effect, prior to inter-bank lending.) Under conditions of general financial confidence, this facility is welcomed as a business opportunity for banking institutions, as a quantitative relaxation of credit restrictions for borrowers, and as a general adrenalization of the wider economy through increased liquidity. Historically, the resulting incentive structure brought banks, borrowers, and governments into alignment, in the direction of financialization (or compressed reserve ratios). The attractions of money creation are so self-evident they obliterate the counter-factual case.[7] How could the financial alchemy of fractional reserve lending, with its seemingly magical multiplication of profits, borrowing opportunities, and commercial stimulation, conceivably have been resisted? And once it had ceased to be resisted, what could possibly have gone wrong?

§5.56 — On the opposite side of the ledger, multiplication of credit money through fractional reserves was balanced by the unplanned invention of a new type of credit risk. Local default was now potentially amplified to the level of the global bank run. The credit multiplier, when toppled into reverse, became an engine of financial catastrophe. Quantity has a quality all its own.[8] Systematic banking crisis posed an existential threat to political regimes.[9] The risk involved, therefore, tended – as a matter of sheer magnitude – to escape narrow economic categories. Confidence sets out on its long journey into becoming an explicitly-recognized macroeconomic variable. At a certain threshold, sheer aggregation of private actions transitions into a public event. Banking crisis comes as close to capturing the fulcrum of political-economic interchange as any conceptually-isolable event can. The deep tendency of modernity to encapsulate the empirical plays out into economic institutions.

§5.57 — Political recognition that a banking crisis cannot be permitted to happen finds its institutional manifestation in a central bank.[10] A central bank is the authoritative model of a trusted financial institution. Trust conservation is its principle responsibility. In one direction, it guarantees the credibility of government paper. In the other, as ‘lender of last resort’[11] and provider of deposit insurance it delegates trust to subsidiary banks, in exchange for submission to regulatory oversight. The buck stops here, metaphorically applied to the desk of America’s Commander-in-Chief, is more appropriately conceived as a functional definition of the central bank. While embedded, in principle, within administrative and judicial hierarchies supporting super-ordinate authorities, in practice the central bank’s concentration of competence (and information) immunizes it against further transcendence. It is, in effect, a final court of appeal, or last ditch. In the sphere of economic trust, which is also that of modern economic virtual catastrophes, anything the central bank cannot stop, cannot and will not be stopped. The peculiar status of the central banker appears, to skeptical observers, near-Messianic. This is an impression that reaches far beyond trivial coincidence. In the end, which it incarnates, financial trust – ‘confidence’ – is the central bank’s sole specialism. All of its functions converge upon this, as upon a compact telos. Implicitly, savers trust their local bank because they trust the central bank, and they trust the central bank despite their distrust of the national government. Notably, it is a structural component of modern political ecology that governments expect their national central banks to be trusted more than they are trusted themselves. They in fact come to depend upon this, as the first convincing modern substitute for divine sanction. Government deference to the central bank serves as a credogenic ritual. Through the pseudo-transcendence of the central bank, administrative politics is able to gesticulate beyond itself, to a superior source of credibility. Practical metaphysics is thereby exemplified.

§5.571 — Central banks do not (of course) monopolize the status of the trusted third party, but they provide its most concentrated and perhaps also most self-conscious example. The function of transcendence in socio-economic systems has no superior illustration. The central bank is a part of the financial process that is at the same time deemed above and outside the process. Integral to its identity and operation is the presumption that it transcends the constraints and incentives generally characterizing the financial sphere. Central bank profitability, for instance, is remarkably discreet. The public profile of the institution is incompatible with a commanding drive to make money. Something like radical altruism is tacitly insinuated, as if in pre-emptive repudiation of Public Choice cynicism. Reciprocally, resource limitations on central bank discretion are strategically de-emphasized. While not positively pretending to infinitude, or an unlimited capability for monetary intervention, some rough functional facsimile of such is not strenuously discouraged. Because the central bank is effectively a final institution, those wastes of potential financial catastrophe lying beyond its scope can only be populated by dragons, and are therefore rendered in certain respects unthinkable. The end of the world is re-articulated. There is a theatrical and ceremonial dimension to all of this, which has not gone unnoticed, or unmentioned.[12] Central bankers are – in the strictest possible sense – modern magicians.

§5.572 — Every central bank is an amphibian, or a Janus-faced being. Operational pseudo-transcendence requires this. The central bank mediates between the public and private aspects of the economy – and even defines the distinction between the two – drawing upon the institutional axiom that aggregate confidence in private commerce is a legitimate, and inevitable, target of public policy concern. Trust, in its distributed economic manifestation, is taken as the object of a mass social technology. The great macroeconomic conception occurs, pre-programming much of what then follows. The critical point is the recognition that money issuance is a policy tool, precisely insofar as it is a channel of public communications. It is no longer that money merely bears a message, in the manner of a minted coin adorned with various politically significant inscriptions. A Federal Reserve note still carries such signs, but their seriousness is entirely eroded. Money-making, as such, is now the message. Aggregate liquidity management is no sooner adopted as an administrative responsibility than it flattens upon its own public enunciations. Signal and substance are one. A teleological transition occurs here, that might easily be missed. ‘Public’ (i.e. state) revenue maximization, an obvious goal from at least one perspective, yet one that has been evidently instrumental in regards to the obscure practicalities of historical installation, is absorbed into a more complex structure of purposes. It becomes the opportunity for a public demonstration – for publicity. Hence the distinctive emphasis placed upon the central bank statement, an address not only about, but to the market, spectacularly totalized from above. This is already to say that irrespective of its intentions, or self-comprehension, the central bank inherits responsibilities that are strictly magical.[13] Vivid ‘materialization’ of the impossible – i.e. of free risk relief – is its central obligation. It is not only illusionism that is at work here, then, but medicine, or therapy, in accordance with the archaic role of the witch-doctor. The public utterances of the central bank are a mass psychological talking cure, but inverted from an exercise of attention into an incantation, and thus a spell, or placebo. We hear in these words the technical ideal of the confidence trick, in its super-legal and pseudo-metaphysical configuration. Practical efficacy is tacit. Like credit money itself, the truth of the central bank statement is created – ab nihilo – in being believed. The reality is ideally exhausted by the phenomenon. It is what it is thought to be, and no more. Confidence, in the end, has no ulterior derivation. It is miraculous.[14] Half a millennium of demystification has led to this, clearing the stage for business-suited new magicians. The performance is underway. A tranquillized collective economic sphere is to be conjured into existence. As it entered its advanced maturity, The Great Moderation named it well. The Great Moderator – Mighty Macro – is a more valuable name still, for the One at the End who Looks Both Ways to Make Peace. That’s the Magician-God in the Bitcoin cross-hairs.

§5.573 — On the empirical plane, a trusted third party functions as an intermediary between a pair of agents. It is the mutual relation to a common intermediary that formally determines the agents concerned as peers. Virtual lines of evasion (route-arounds) cross the plane, linking the mediated agents in innumerable alternative ways. When plotted upon this flat expanse, the trusted third party appears as an interception – something like a successful hunt, an act of capture, or captivation. On the plane, every overseer is exposed as avoidable, if not in actuality avoided. There is always another way. Excessive impositions prove repulsive. Every moment of mediation has therefore to strike a bargain. No hint of the universal is found here. It is not upon the plane, but upon the pseudo-distinct, pseudo-orthogonal, and pseudo-metaphysical axis transecting it that the exorbitant authority of the overseer is ‘for the first time’ expressed. The horizon of supervision extends into the infinite. If not explicit in its claims to omniscience, omnipotence, and omnibenevolence, it makes no effort to dispel such theological encrustations. An implicit invocation of God-like powers follows from the conspicuous assumption of God-like responsibilities. In wherever the buck stops we trust. The aura of infinitude is essential. No limit can be drawn. Whatever lay beyond the outer boundary of central banking power would be the lair of crisis, by definition. A formal delimitation of the supreme third-party powers is indistinguishable from a program for financial catastrophe.[15] Agreeing not to go there closely coincides with the new social contract, drafted in the 1930s. Critique of authority henceforth meant Great Depression. To the titles of Macro can then be added: The Unscrutinized Scrutinizer. That which sees all should not be excessively challenged by inspection.[16] This is how asymmetry has been put to public work. Apparently exempted from immanence, the overseer is fed by the impression of exceptional rules, and sublime incentives. It seems to hover above the fray, as if released from mere empirical difference into a superior milieu. Amphibious by essence, it is at once an efficient, individualized, economic agent among others and simultaneously nothing at all of the kind. The effect works best when no one looks too closely.  


[1] A ‘standing social illusion’ or “consensual hallucination” – to draw upon William Gibson’s anticipatory description of Cyberspace – can, under certain very definite circumstances, attain robust virtual reality in the epoch of the Internet. It can, in other words, be effectively installed. Any residual associations with mere mass delusion, of a kind vulnerable to destructive reality testing, then become systematically misleading, as the index of a misapplied empiricism. The protocol is not an error awaiting correction, but rather a structure of transcendental subjectivity. Its relation to objects is not representational, but productive. The fatal emergence of time as synthetic being, in particular, manifests the techno-historical restoration of transcendental philosophy. The order of things has to be produced. In this vein it has to be argued that the artificiality of time is – finally – time’s most time-like quality. Its nature is to be unnatural, at least in the sense that it eludes all prospect of objectification. Only thus does it secure itself against the geometrical reduction that would collapse it into space. Of course, if not obviously, nature itself does this first. To repeat what can never be repeated sufficiently, Φύσις κρύπτεσθαι φιλεῖ (“Nature inclines to crypto.”).

[2] The blockchain is thus something like an anti-structure, occupied only by positive terms.

[3] If double spending were a practical option which as a matter of discretion was not executed, then a promise would have been kept. In this case, a credit relation would have been supported. In respect to Bitcoin the example is, of course, entirely counter-factual, and actually logically unconstructible. A double spending tolerant ledger could not be a blockchain, by elementary definition. As Pierre Rochard notes in his short essay on ‘The Bitcoin Central Bank’s Perfect Monetary Policy’, Bitcoin precludes the re-emergence of fractional reserve banking within its medium by automatically necessitating “full reserves for all accounts”. The protocol interprets any process of money multiplication as double spending, and edits it out of the economy. Because bitcoin are not credits, “money is not destroyed when bank debts are repaid”. The ‘money supply’ – in the Bitcoin epoch – is constituted by a reservoir of positive abstract assets. Rochard predicts that “The Bitcoin Central Bank [i.e. the decentralized Bitcoin Network] will be the longest lasting institution of its kind thanks to the anti-fragile independent monetary policy it has set in stone.”

http://nakamotoinstitute.org/mempool/the-bitcoin-central-banks-perfect-monetary-policy/

[4] Conceived in Marxian terms, this history seems to tell of the death of the liberal economic order through its own excesses. Such a narrative is very far from straightforwardly misconceived. The very idea of a liberal regime suggests extreme paradox, precisely because it corresponds to an exemplary coordination problem. The overall order presupposes a suppression of defection which it is itself seemingly unable to guarantee. The ‘itself’ here – as in all cases of spontaneous order – is the crux of the conundrum. The system of competition itself, or as such, has no obvious allies. Many, if not all, of Marx’s classic capital contradictions are rooted in this dilemma (and thus describe a variety of fundamental liberal coordination problems, socio-historically expressed at varying degrees of elaboration). ‘The market’ – to thus name society’s most fundamental spontaneous institution – is susceptible to the ravages of an agent-principal problem without comparison. The attempt to operationalize the state as the relevant agent in this situation, tasked with responsibility for managing general commercial conditions, broadly coincides with the tragedy of modernity, as distilled into ‘neoliberalism’. Public Choice theory arose as its more-or-less explicit rejoinder.

[5] See §3.06.

[6] There is no one who can be sued for the destruction of the US Dollar (by more than 95% of its value) over the course of the 20th Century, for instance. Still more extreme – hyperinflationary – depredations enjoy sovereign immunity against legal redress. To decry this situation as itself manifestly criminal is merely to court intensified marginalization. Such has been the libertarian road.

[7] The armchair mode of estimation is, of course, wholly pedagogical, or dramatic, and insofar as it suggests harmonious concordance of contemporary financial norms with timeless human intuition, it is positively misleading. From the perspective of trans-historical anthropology, the only natural money is metallic. It was necessary for bank-money to build a new financial ‘common sense’ for itself. The success of this project has been so remarkable that it is has eclipsed acknowledgment of its radical historical contingency. It nevertheless has to be recalled that the adoption of this monetary regime has been late and rare (even singular). … The reconfiguration of money through institutional credit creation found its concrete historical ratchet not in the parlors of policy deliberation, but on the battlefield. In other words, it effectively financed the geopolitical occasions for its own entrenchment. To a considerable extent, British military history since the beginning of the 18th Century has been its testing ground (a claim that is smoothly extendable back to the independence struggle of the Dutch Republic from the end of the 16th Century). By providing the logistical sinews for the rise of Anglophone global power, modern credit finance created the real conditions for its teleological self-validation. It organized payment for the world order in which it would be at home. The circuit of auto-production, in all its groundlessness, is evident at every scale. We return, then, to the process of nihilism and its machinery. Occidental religious crisis and modern economic history are aspects of one thing. The erosion of transcendent foundation provides the time gradient of both.  

[8] According to Wikiquote, the common attribution of this phrase to Josef Stalin is unreliable. If we still hear an echo of the materialist dialectic within it, the allusion is not altogether confining.

[9] The contribution of John Law’s Mississippi Bubble to the collapse of Europe’s Ancien Régime has to count as the supreme example of inverse political risk (i.e. risk to a political order from economic calamity).

[10] The lucid administrative identification of systematic financial hazard as an object coincides with the exact moment at which classical liberalism dies in principle. Such identification cannot be made without a corresponding delimitation of private commercial prudence, within boundaries too constrictive for the persistence of an autonomous economic sphere. The independent economy cannot be trusted. It requires a trust supplement, incarnated in some para-political institution. Trust is recognized as the highest economic ‘commanding height’ and nationalized. This is, unmistakably, a process of domestication. The state (and its parastatals) no longer solicits trust, but rather claims to produce, manage, and dispense it. This provides one thread for the argument, formalized most rigorously by Murray Rothbard, that central banking is essentially incompatible with a libertarian social order. The usurpation of trust is a centralization of contractual confidence, and a conversion into an implicitly political relation. The Statist Left, in its analysis of monetary property as politics, merely discovers the Easter egg that central banking hides. The super-abundance of the central bank’s de facto power relative to its de jure authority is a predictable staple of conspiracy theorizing. The United States Federal Reserve System is an especially target-rich environment in this respect. It is an institution that might have been designed for the stimulation of occultism. The pursuit of public purposes through private institutions reliably does this. At the most basic level of analysis, the Fed is simply not well hidden. It cannot but show its work. The deliberate conversion of distributed commercial-industrial capability into concentrated national power happens comparatively recently, and in public. It is almost impossible to miss the Siren call of the imperial project, which cements the problem of trust into geopolitics. As a pseudo-transcendental being, the central bank simulates the intrinsic obscurity that is the signature of the thing-in-itself. Supposedly located beyond the ravages of crime and politics, it invokes a higher realm. Between an object of reverence, and one of paranoid anxiety, the distinction is slight. The dominating, common element is a strategic impression of abnormality. The central banker, properly understood, is a figure more at home in horror fiction than social history.

[11] The formula ‘lender of last resort’ was originally minted (in 1797) to define the financial-institutional role of the Bank of England. Its first appearance is found in Sir Francis Baring’s Observations on the Establishment of the Bank of England, published that year. Its wide circulation, however, owes more to the later usage by The Economist editor Walter Bagehot, in his book Lombard Street (1873), which explicitly ties the therapeutic power of the general guarantor to its currency issuance authority. Some non-trivial measure of Victorian economic-moral continence can be seen in Bagehot’s insistence that the exceptional relief from risk offered by the central bank should be tightly bound to explicit penalties (just as the preservation of incentives within the poor relief system required an overt punitive element). Strategic laxity requires a compensatory super-addition of discipline. This is not an equation post-Victorian society has been able to sustain. Varieties of relief disorder become, instead, the normal condition. The asymmetric “Greenspan put” – which protects investors against losses without any reciprocal constraint upon gains – exemplifies the syndrome. 

[12] Alan Greenspan provides an especially dramatic example of central banking as public performance. No one has more clearly articulated the explicit duty of the central bank to make its decisions ineffable. As he famously remarked: “I guess I should warn you, if I turn out to be particularly clear, you’ve probably misunderstood what I’ve said.” Ironically, the critical invocation of abstraction is entirely undisguised. It is not confidence in anything particular that the central bank is properly concerned with, but rather pure confidence, as manifested in monetary intensity, or liquidity. Concrete policy presentation is thus conceived as a new species of idolatry, to be jealously avoided. When John McCain later joked that in the event of Greenspan’s death he would prop up his corpse in dark glasses and hope that nobody noticed, the same magic theater was being referenced. Between the appearance of financial authority and its reality lies no difference that matters. Trust is practically aligned with the paradox of a supernatural phenomenon – of the ‘phenomenon’ in its colloquial rather than philosophical sense. One sees only that what one sees could not possibly be enough. A ‘leap of faith’ is therefore modeled, from the other side. To be catapulted into credence is the desired effect. That is the entire point of the show, and everyone knows it. The audience is to be healed of its skepticism, in something like the Reformed Christianity revivalist style. Belief is the essence. Expressed within the suitable Protestant idiom, financial salvation is earned by faith alone. That Macro has come to sound like a Stephen King plot is only by shallow estimation a coincidence.  

[13] The systematic taxonomy of magical effects remains an under-developed and controversial subject. No general consensus exists as to whether a full categorization is possible, still less is there any agreement as to its final architecture. The most disciplined attempts to complete such a project, however, tend to concur on the prominence of production and vanishing as elementary magical effects. Creation (ex nihilo) and annihilation are the theo-cosmic archetypes. Stage magic dramatizes ontological modality. Monetary conjuration complies neatly with this scheme. In the era of financialization, credit expansion and contraction attest to an absolute process of money production, ‘backed’ by nothing beyond itself. At the limit, money demonstrates radical insubordination relative to the question of being. With all material constraint on minting lifted, monetary production submits only to magical will. In this context, Bitcoin looks like a spell cast during a magical war. Its restriction upon money creation is characterized by unprecedented severity, from one regard. From another, however, the entire crypto-currency is an ex nihilo creation, bringing a virtual BTC 21,000,000 into existence spontaneously, out of nothing. Money creation switches phase. It is no longer amplification, but sheer innovation. Reciprocally, an updated model for monetary annihilation can be expected, no longer based on credit contraction, but rather on crypto-currency extinction events. Proliferation and culling of new currencies begins to increasingly regulate the money supply. Cryptic sorcery contests financial magic.  

[14] It is the sacred calling of skepticism to doubt the existence of things whose reality inheres in nothing beyond their being believed – but not to the point of dogmatism.

[15] “Only a god could save us,” Heidegger remarked in a 1966 Der Spiegel interview. The mature world credit-financial order was not the primary context for these words, but it might aptly have been. An overseer who is definitely less than a god is nothing. Where deity is slow to unambiguously manifest, ceremonial magic is required to make up the difference.

[16] Is not the illusion of vision among our most consistent themes here? The Federal Reserve Note includes the picture of an eye. It is not meant even to be noticed. To feel oneself perceived suffices for childish comfort. Claims to see rarely tolerate close examination. Intense scrutiny ruins the effect. This is now what we are seeing.

Crypto-Current (050)

§5.35 — Without seeking to wholly efface the novelty of Graeber’s construction – still less its remarkable pertinence to our contemporary political-economic concerns – it is important to note the extent to which its theoretical stance is prefigured in crucial respects by the German Historical School of economics,[1] and thus, in turn, anticipated in considerable detail by the Austrian thinkers. Menger, in particular, defines his enterprise in explicit contra-distinction to those who place the State at the origin of the monetary phenomenon, which he conceives as the dominant economic error of his time. Since a functional unit of account already presupposes a prior settlement of the value question, through a process of price discovery, Menger confidently maintains that:

It is not impossible for media of exchange, serving as they do the commonweal in the most emphatic sense of the word, to be instituted also by way of legislation, like other social institutions. But this is neither the only, nor the primary mode in which money has taken its origin. … Putting aside assumptions which are historically unsound, we can only come fully to understand the origin of money by learning to view the establishment of the social procedure, with which we are dealing, as the spontaneous outcome, the unpremeditated resultant, of particular, individual efforts of the members of a society, who have little by little worked their way to a discrimination of the different degrees of saleableness in commodities.[2]

§5.36 — Despite their strategic mismatch, or ideological divergence, the motivated narratives of Menger and Graeber nevertheless converge upon a precise conception of the stakes in theoretical play. For both, there is an application of historical story-telling to a liberal theory of money, seen as essentially bound to the status of precious metal coins. That Menger writes in defense of this theory, and Graeber in opposition to it, does not affect the invariable associative core in the least. Both agree entirely about what it is that the valorization or denigration of money – as minted metal – means. Far too much socio-historical ballast underlies this construction of the controversy to allow for its casual dismissal.

§5.4 — The controversy is significantly deepened by a third narrativization of monetary history, outlined in Nick Szabo’s remarkable essay ‘Shelling Out’.[3] Szabo extends the investigation into the origin of money far back into prehistory, where it hazes out into evolutionary time. The essay takes as its initial clue a peculiar pattern of linguistic interference between money and marine molluscs, as evidenced in the “shelling out” of the title, and in the persistent colloquial naming of dollars as “clams”.[4] The source of this association is found in the ‘wampum’ shell-money of the native tribes encountered by mid-17th century New England colonists, which provided the settlers with their first “liquid medium of exchange” and subsequently their first legal tender (from the period 1637-1661). The opportunistic shell currency of the New England colonists finds numerous ethnographic echoes up to present times, and dating back into the deep Paleolithic, 75,000 years ago. Szabo categorizes such shell currencies among ‘collectibles’, noting that such types of ‘proto-money’ or ‘primitive money’ were “the first secure forms of embodied value very different from concrete utility”. Recognizably, they were a response to the problem of ‘value measurement’ (with no profound distinction required between ‘goods’ and ‘obligations’[5]) facilitating the crucial innovation of delayed reciprocity. Systematized exchange serves as a proxy for resource storage. “Like fat itself,” he writes, “collectibles can provide insurance against food shortages.” The hook they offer to consolidation through natural selective is therefore considerable.

§5.41 — Compared to Homo neanderthalenis, Homo sapiens was Homo economicus. This was a species that carved out a competitive advantage for itself relative to other hominids of similar – or even superior – individual intelligence through the partial commercialization of its environment. A distinctive genetic endowment, expressed through attachment to collectibles, enabled spontaneously-coordinated social action to arise with unprecedented sophistication. By providing – for the first time – effective incentives for activities oriented to regular exchange, collectibles normalized trading as a quasi-continuous, characteristic human behavior. Social existence acquired a commercial dimension, with corresponding stimulus to cognitive advancement beyond the horizon of immediate utility. 

§5.42 — Time was not only the medium of change, as this was accumulated through adaptive genetic modification of hominid species, but also its driver, or prompt. More specifically, modern man’s prehistoric ancestors were compelled to adapt to the concrete irregularity of time.[6] Seasonal variation compels rudimentary specialization. Outside tropical latitudes, it was simply impossible for primitive man to engage in a consistent pattern of activities across time. Food sources were not constant – or even continuously available – throughout the annual cycle. Winter, in particular, set its own challenging demands, which could be met only by running down food stocks (provisions). Hunting large herbivores accentuated these conditions of episodic glut, and the corresponding need to organize time. The template for division of labor and trade was therefore already laid by climatic adaptation, prior to any significant extension across space, and into elaborate social specialization. Economic incentives had necessarily to be scaled beyond immediate needs. (Much space for differential anthropology is opened here.)

§5.43 — At the level of maximum abstraction, money – already in its most primitive instantiation – enables the commercial disintegration of time. This is captured at the level of hominid ethology by the facilitation of delayed reciprocity. (It is only through pedantry that ‘reciprocal altruism’ can be significantly differentiated from ‘trade’, abstractly conceived.) Monetized trade tolerates de-synchronization. Accumulation of collectibles within a circuit of exchange is equivalent to a transactional non-simultaneity – complementary to a primitive ‘borrowing’ of the specific good in question[7]– which allows for the commercial exploitation (arbitrage) of variation in time-preference over an asset. To repeat the critical point: Money – already in its most primitive inception – formalizes time-disintegrated reciprocal altruism, by providing the condition for its simultaneity. The receipt of money now substitutes for the persistence of a debt.

§5.44 — Szabo’s analysis returned money to the comparatively neglected semiotic function of collection, or allocation, within which value exchange (circulation) and storage (accumulation) find a common root. Collected signs are irreducible to signifiers and indices. Their value is not soluble within semantics. The economic category of scarcity is essential to them. It is only in collection that the ‘economy’ of signs ceases to be a metaphor. Collectible value tokens cannot be loaded from a dictionary. They have to be economically acquired.

§5.45 — It might easily seem, under conditions obscured by the creditization and politicization of money, that collectibles are – from the moment of their inception – a prototypical mode of saving (and therefore – by iron reciprocity – of debt). It cannot be sufficiently emphasized that this path of interpretation is profoundly erroneous. This is a point that merits explicit comment precisely on account of its elusiveness, which reflects structural factors of great historical consequence. Money, whether in Menger’s sense, or in Szabo’s – and even in Graeber’s, once allowance is made for his historical inversion of the credit-money relationship – extinguishes debt. Any monetary transaction substitutes for the persistence of a liability. Acceptance of primordial or non-credit money, whether in the form of a ‘collectible’ or (more specifically) of a precious metal coin, is the alternative to persistence of a credit position. In such cases, receipt of money erases an obligation, rather than confirming, memorizing, or reproducing one. Historically, at least, ‘paper’ or credit money is the anomaly. It is only in this case that monetary assets correspond to another party’s debt, that is, to a preserved obligation. Monetary exchange does not intrinsically involve a credit-debt structure, prior to its financialization. It appears to imply such a structure only when the reality of money as a (comparatively abstract) positive asset has been dissolved, until it appears as no more than a surface effect, or epiphenomenon, of its registration within the ledgers of a banking system. Debt is the conceptually and institutionally convenient interpretation of a more obscure social phenomenon. Market acceptance of money is systematically reconstructed into the recognition of an obligation, as if it exhibited dependence upon an implicit contract. The conceptual imperative at work here is gregarious. Its orientation is to socialization.[8] The tendency is to obliterate all trace of an asset that isn’t already a recording of debt. Liquidity is reconfigured as an entitlement.

§5.46 — Employment of a single word – ‘money’ – for these very different types of valuables lends itself to systematic theoretical disorder. The depth of this confusion is indicated by the fact that not only ‘money’, but also ‘assets’, and even ‘cash’ have been progressively assimilated to the concept of credit[9], in accordance with a general financialization of economic categories that has been consolidated – at an accelerating pace – over recent centuries. Since the concept of money tends to accommodate itself to the dominant pattern of actual monetary usage, it has increasingly been identified with a positive financial balance in a bank account, recorded in the bank’s ledger (where it is registered as an institutional liability), and even – beyond this – with the notion of a credit limit determining spending power. Money has come to seem increasingly like something banks do, through trusted record-keeping fundamentally. On this track it tends to become the name for a complex of banking services.  

§5.47 — In order to control these semantic instabilities, it is worth provisionally introducing – in lieu of enduring technical terminology – a distinction between A-money and C-money.[10] ‘A-money’ is a positive asset, or collectible, uncorrelated to a liability. In the case of Bitcoin, it consists of DSP-proof (or non-duplicitous) ledger entries. The value of A-money is not in any strong sense ‘intrinsic’ but depends – as all commercial value does – on market receptivity. It varies, therefore, between zero and some arbitrary magnitude, when denominated in any other medium whatsoever. This variance, however, has no element of credit risk (or sensitivity to default). No one is under an obligation to redeem A-money for anything. Like any other collectible, it has value in anticipation of market acceptance, and not on the ‘basis’ of any promise made by an issuing authority. It is a commodity, in the broad sense. Redemption is intrinsic (or immanent) to it.

§5.48 — C-money, in drastic contrast, is credit (corresponding to the obligation of another party). It has no value at all separable from the credit quality of the individual or – far more typically – institution that has registered its issuance as a liability. If a depositary accepts A-money for safe-keeping, and thus ‘on loan’, the signed receipts it provides to guarantee restoration of the funds in question are already germinal C-money. This was, as a matter of historical fact, the transactional mechanism that catalyzed modern monetary transformation, from precious metal coinage, to promissory notes, and eventually to credit accounts. The value of C-money is based upon institutional guarantees. Trust is a mathematical coefficient of its value. Trustlessness is therefore essentially intolerable to it. At trust degree-0 C-money necessarily becomes worthless. In each such case, as a matter of historical factuality, an episode of hyper-inflation would then have consummated itself. This is how (C-)money dies.[11]  

§5.49 — Evidently, Bitcoin is a variety of A-money, and not a C-money (or credit) system. Its currency units do not index obligations. They are positive abstract assets. As Szabo insightfully concludes, Bitcoin is a system of digital collectibles. While it is certainly possible to be owed bitcoins (like any other asset), in owning bitcoins one is not thereby owed anything further. The application of the credit relation to bitcoins has necessarily to draw upon institutional resources extraneous to the Bitcoin protocol itself. Crypto-currencies perfectly simulate precious metals in this respect. No promise is inherently attached to them. They can be the substance of wagers, but they are not bets on the word of another agent.


[1] The German historical school of economics was essentially characterized by its aversion to universal mathematical-equilibrium models, of the English classical and neoclassical type. Empirical peculiarity, as carried by the details of social history, was promoted against highly-generalized cross-cultural constructions. In this respect, it was a recognizable descendent of the German Romantic tradition. Its most prominent representatives included Wilhelm Roscher (1817-1894), Bruno Hildebrand (1812-1878), and Karl Knies (1821-1898). The distinctive characteristic of this school is its consistent attempt to delimit classical models within a more complex socio-historical matrix. When translated into the Anglophone world, the principal concerns of the German historical school are perhaps best represented by the New Institutional Economics, developed from the work of Ronald Coase, most notably by Douglass North. Yet here one sees a fundamental distinction in methodical orientation, indicative of broader cultural difference. Among the Coaseans, the principle of intelligibility for an economically-significant institution remains grounded in commercial coordination. Transactional economy explains the existence of an institution (and first of all, the firm). The market process is abstracted, rather than theoretically subordinated. Historical institutions that appear super-economic under German inspection are configured instead as meta-economic by the later Anglophone analysis, which generalizes microeconomics beyond its neoclassical frame.

[2] Accessible online at: http://www.monadnock.net/menger/money.html

[3] The intensity of Szabo’s involvement in the crypto-current would make his contribution to the general theory of money singularly pertinent, even were its theoretical quality less outstanding. See: ‘Shelling Out – The Origins of Money’ (2002) http://szabo.best.vwh.net/shell.html

[4] Notably, the association between shells and commerce has been promoted by the name of Royal Dutch Shell (familiar to Americans through its subsidiary the Shell Oil Company). The ‘Shell’ Transport and Trading Company (quote marks were included in the title), founded in 1897, was the British side of a merger (in 1907) with the Royal Dutch Petroleum Company that created the international oil giant which still exists today. The pre-merger ‘Shell’ did indeed derive its name from traded sea shells, although this was the main business line of a predecessor company, whose identity was adopted, rather than a continuing commercial specialism. Sadly, shell-trading in the Dutch East Indies does not seem to have been central to the emerging global oil industry.  

[5] Given the biological centrality of food sharing among social animals, it is peculiar that the difference between the recognition of an obligation and the receipt of a commodity could ever be considered of primordial importance. The distinction becomes discernible only through formalization, which corresponds to economic engagement with strangers (marking the phase-transition from anthropology to sociology). When precipitated from the dense fabric of tacit reciprocities, trade accelerates settlement. The game-theoretic structure is comparable to a collapse into non-reiterating interactions, with associated attenuation of reputational structures. Under such circumstances, the importance of compact, instantly-completable, or fully-executable transactions is elevated. Anything left unfinished is potentially lost. Money, in its positive sense (as collectible), thus emerges as an anti-memory. The subsequent elaboration of formal credit systems only emphasizes this fact, insofar as unsettled obligations are priced as risk, and thus exposed in their definite disutility. Graeber’s emphasis upon ‘everyday communism’ is especially unhelpful within this deep context, insofar as it merely assumes the solution to a collective action problem – presenting it as an irreducible ethnographic fact. Parochial inattention to the complexities of trade is promoted as a positive ethical achievement. The question posed by evolutionary biology, which is no different to that of realistic social analysis, is subjected to blank dismissal. Given the considerable (positive sum) advantages of sharing, and the evident coordination problem obstructing it, how is reciprocal altruism actually possible? Markets, concretely, answer this question. Insofar as it can be obliterated in theory, they too can be. This only demonstrates how far theory can depart from realistic application, without losing – and perhaps even enhancing – its function as political rhetoric.  

[6] The transcendental-philosophical problem of time production is approached here as a topic of evolutionary anthropology. Time is distinguished from the present moment through contextualization of present conditions within a larger time-frame. In this way, the cognitive integration of time is the exact complement of its commercial disintegration. For a-synchronous transactions to meet a criterion of reciprocity, they require a mechanism that supports – or effectively substitutes for – deferred settlement. This is a notion comparable to the ‘time-binding’ explored in Alfred Korzybski’s general semantics. The human capability for deterritorialization or comparative environmental independence in space is both echoed and advanced by a capacity for expansive time colonization, with proto-money operating as a cognitive condenser. An inheritable token with the potential to support future acquisitions explodes economic immediacy, in both directions. Its value is inseparable from a time-integration function, which can equally be conceived as a tolerance for time-disintegration, or de-synchronization. It is the virtual suture, permitting the opening of a time-rift. The sheared edges connect only through it. Money lets time-consciousness fall apart. When regressed to the level of the collectible, ‘money’ designates a critical threshold in evolutionary psychology. It is money – even more than ‘the tool’ – that differentiates man from alternative hominid lineages. Homo economicus, then, is at once a modern telic construction, and an archaic cladistic marker. The monetarization of social obligations has consequences that are not restricted to the time-horizon of the psychological individual. Money facilitates the accumulation of inheritable wealth, enabling inter-generational resource transfers, in accordance with incentives strongly predicted by any biorealist account of kin altruism. It thus opens the conceptual space for transferable non-consumption goods, distinct from either territory or perishables. ‘Wealth’ becomes dynastically assignable, thus achieving a comparative independence from primitive power (or immediate dominance).

[7] The theoretically erroneous translation of this flexible exchange into a credit relation will concern us presently.

[8] One highly-influential dynamic model of value socialization – yet to reach its apogee of cultural influence – is found in the work of René Girard. The basic theoretical matrix is laid-out in his (1972) book Violence and the Sacred. It is a notable merit of Girard’s work that rather than merely assuming the social diffusion of values, the process is at least partially explained, albeit through the employment of various relatively cumbersome (or metaphysically-saturated) axioms. In particular – and understandably – theory of mind is presumed solved, and operative as an engine of gregariousness. Girard’s guiding proposal is that desire is mimetic, which is to say social and antagonistic. Its template is always the desire of the other. Concupiscence is originally envious. I’m having what he’s having. Libidinal privacy is thereby rendered inconceivable, with human desire being collectivized ab initio, on a basis essentially incommensurable with the instincts of a solitary animal. It follows that the more anything is wanted, the more it is wanted. Desire spreads through the social body like a contagion. The extreme reflexivity of any system that can be modeled this way makes it explosively excitable, with a tendency towards some crescendo of violence (or ‘sacrificial event’), through which explosively accumulated mimetic tension is discharged. In recent years, the translation of Girard’s model into a more colloquial economic register has been undertaken by Peter Thiel. Mimetic desire is identified with economic competition.  

[9] ‘Credit’ and ‘credentials’ are roughly the same word. Both of its branches pass into English (via Middle French) from the Old Italian credito, vernacular modernization of the Latin creditum, meaning something entrusted, a loan, from the neuter of creditus, past participle of credere to believe, entrust, source also of creed and credence. Credit and trust are indissociable conceptions. It is not only that etymological sense continues to operate within contemporary ordinary usage. Under the current techno-cultural pressure of monetary sophistication, it is undergoing re-activation. Money cannot be technically understood, it turns out, without the concept of trust undergoing complementary rigorization. Economic convulsion corresponds to a crisis of belief.   

According to the dominant (if tacit) teleological scheme, monetary evolution advances along a path of credit elaboration. It trends therefore to financial domination by sophisticated derivatives (‘contingent claims’) composed of options, forwards, and swaps. The sequence of tradable financial products commercializes risk at ever higher levels of distillation. It advances from positive assets, to liabilities, to formalized trading options under specifically-contracted time and price conditions. Credit therefore strongly aligns with financial teleology. It is in an important respect owed the future. The trouble Bitcoin introduces to this structure of meta-debt cannot, therefore, be anything other than considerable.

[10] The term ‘C-money’ has been selected to avoid confusion with Wei Dai’s ‘b-money’ concept (whose importance to the genesis of Bitcoin is beyond controversy). Simple alphabetical order has otherwise been adhered to. Any apparent resonance between the ‘A-’ and ‘C-’ of these provisional terms and the distinction between ‘asset-’ and ‘credit-money’ is purely serendipitous. 

[11] The reference is to Adam Fergusson’s classic study of Weimar-era hyper-inflation:

http://store.mises.org/When-Money-Dies-P10438.aspx

Crypto-Current (049)

§5.3 — The narrativization of monetary history which has come closest to gaining mainstream acceptance is the evolutionary model of Carl Menger, which describes the emergence of money – or ‘indirect exchange’ – from out of a primitive barter economy, as a solution to the ‘double coincidence of wants’.[1] Menger emphasizes the specific coordination problem involved in transactions by barter, which is the combinatorial explosion of ‘direct’ (and terminal) exchanges. “These difficulties would have proved absolutely insurmountable obstacles to the progress of traffic,” Menger insists,[2] “and at the same time to the production of goods not commanding a regular sale, had there not lain a remedy in the very nature of things, to wit, the different degrees of saleableness (Absatzfähigkeit) of commodities.”

§5.31 — Commodities are not equally ‘saleable’ or commercially disposable, and it is from this diversity that the differentiation of money from the world of commodities takes place. The transitional stage, within Menger’s account, corresponds to the rise of a special commodity, marked out by its peculiar Absatzfähigkeit. The ready acceptance of such intermediate goods within systems of barter exchange, due to their convenience for re-sale – i.e. their liquidity – spontaneously anticipates the monetary function.[3] To re-iterate the kernel of Menger’s analysis, at the risk of redundancy: the Absatzfähigkeit of precious metals “is far and away superior to that of all other commodities” (and, compared to this virtue, their traditionally-recognized merits are theoretically relegated to mere “concomitant and subsidiary functions of money”). The genesis of money is thus attributed to a self-organizing process of commercial abstraction, in which liquidity plays the supreme role.

§5.32 — Liquidity cannot be extracted from its commercial context. It translates with great fidelity into acceptability, and thus conceptually converts an extrinsic feature – the degree to which an item of whatever kind encounters general market receptivity – into an intrinsic property. Liquid assets will be readily ‘taken off your hands’. They constitute the negative of commercial friction, or resistance, which approaches its minimum in money. (“Everybody needs money. That’s why they call it ‘money’.”[4]) Since markets – whether comparatively concrete or abstract – are nothing but zones of asset liquidization, they tend to convert everything they touch into ‘money’ at some level of intensity. Anything that can be marketed has a monetary aspect, which is to say that it could – under counter-factual conditions determined by the absence of any superior commercial medium – become money. We return, always, to cigarettes in concentration camps as a reality anchor. Money, fundamentally, consists of market-participation tokens. It need only be swappable. What demotes any such thing, below the threshold of monetary status, is not its own essential deficiency, but always and only better money. It is better money that defines money effectively, while retro-projecting an original idea.[5]

§5.33 — Examples of extreme social relapse – accompanying the destruction of monetary systems through hyperinflation – are regularly invoked in support of Menger’s story, because they resuscitate its basic features through regression. When money dies, societies appear to recapitulate its primeval forms – seizing desperately upon candidate ‘general commodities’ such as cigarettes – on their path of descent back into the dysfunctional tangles of barter relationships. It is especially notable that under such conditions it is the promissory aspect of money, as credit (corresponding to a liability accepted by another party), that leads the way into worthlessness. Hyperinflation is a catastrophic break-down in trust, when the value attributed to the solemn word of the issuing authority is rapidly re-set towards zero.

§5.34 — The Austrian narrative corresponds to an anti-politics, in which the legitimate domain of concentrated public action is subjected to systematic constriction, in accordance with a radical skepticism regarding both its theoretical sufficiency and its practical efficiency when compared to the history and prospects of spontaneous coordination. Inevitably, therefore, the most significant antagonists of the Austrian orientation are those committed to a defense of politics – one that is equally, and reciprocally, both descriptive and normative. In recent times, the most influential account in this vein has been advanced by David Graeber.[6] The basic tendency of Graeber’s historical reconstruction, which folds economics into the politics of debt, makes it emblematic of the anti-liberal philosophy of money in general. It can therefore be taken as exemplary.

§5.341 — Rather than tracing the origins of money back to a process of spontaneous order, in the Austrian fashion, Graeber binds its history to the state. The primordial linkage of money to a ‘universal commodity’ is de-emphasized relative to its political-economic functions of taxation and debt accountancy. According to this narrative, the principal historical secret of money lies not in the facilitation of trade, but in economic exaction by social elites. Standardization is the essential feature, reflecting – and reinforcing – concentrations of power. The large-scale production presupposed by an oecumenic currency depends upon a monetary manufacturing capacity that can only be provided by royal mints, or their modernized equivalents. Abstraction – or formal mathematization – of the primitive social obligations within what Graeber dubs “human economies” leads to a radical intensification of oppression and violence.

§5.342 — The axis within which Graeber’s analysis unfolds is determined not by (commodity) trade, but by obligations, stretching from the fluid reciprocities of primitive societies – and residual “everyday communism”[7] – to the cyclopean power structures of centralized states. Within the latter, as recorded already in the excavated tablets of ancient Sumer (c. 3,500 BC), cash money has been consistently marginalized relative to financial credit. It is this construction that supports Graeber’s inverted sequence of monetary history, which is no longer conceived as an abstraction from commercial traffic, but instead as a commercialization of formalized obligations, beginning with credit as the primordial phenomenon. It is from debt that money is subsequently developed, with barter appended, at the end of the theoretical sequence, as a mutant, terminal annex. Credit and not barter, then, or obligation and not trade. This is, for Graeber, the political matrix in which money is born. An innovation in social hierarchy is its midwife, introducing it to the world through the “military-coinage-slave” complex of the Axial Age civilizations.

§5.343 — It is notable that Graeber considers the Axial Age[8] to be an essentially unmitigated historical calamity. Where Karl Jaspers drew attention to an incomparable cultural awakening, occurring in the centuries around the middle of the first millennium BC, Graeber derives its efflorescence from a revolutionary advance in the machinery of social oppression. The ascription of values is reversed. Yet abstraction is the consistent key to both accounts. Concrete existence becomes calculable on an unprecedented scale. Something like a ‘question of being’ arises. Graeber earns his role in this discussion through participation in the hypothesis that monetary innovation – operating as a spontaneous stimulus to abstract thinking in general – is the basic phenomenon. During the Axial Age the world begins to learn what money can do.

§5.344 — Graeber’s analysis is consistent with a far wider cultural tendency to conceive debt as the principal instance of economic domination (supplanting the classical role of mere destitution in this role).[9] Social contestation over economic flow (profits versus wages) is displaced by a central image of class war between creditors and debtors, radically and fundamentally financialized. This is not a socio-historical construction to be lightly dismissed. The model of political revolution as an insurrectionary extinction of debt, in particular, is productively suggestive. It embeds into itself a theory of post-revolutionary social memory – or strategic amnesia – in obvious accordance with large swathes of historical evidence. The revolutionary ‘Year Zero’ symbolically wipes the slate clean. Evidently, the financialization of capital and its revolutionary negation have modernized in parallel, if not at tightly-bound velocities.

§5.3441 — While the complex historical entanglement of modern revolutionary politics and ancient eschatalogical religion is a well-worked topic far exceeding the scope of this book, it intrudes inescapably at this point, in the specific guise of the jubilee.[10] ‘Redemption’ is a term cutting across the registers of religious and economic discourse, sustained by a consistent appeal for absolution, or forgiveness. From Prophetic Judaism to Graeber’s Debt: The First 5,000 Years, via The Merchant of Venice, Das Kapital, and countless additional examples of anti-usurious polemic, the voice of the debtor has been bound to an apocalyptic promise of forgetting. The obliteration of the secular ledger in the name of a higher accountancy has been the insistent theme. For roughly a century, administrative inflation-tolerance has provided a moderated expression for the same popular clamor. Inflation strikes a compromise with the demand for financial tabula rasa, by erasing debt values incrementally. It is revolutionary redistribution on an installment plan. The veil of the ubiquitous credit system allows inflationary macroeconomics to reach beyond debt, and make the abominated ‘liquidity preference’ of cash accumulators its target. Money as a ‘store of value’ – as economic memory – is brought into the arena of programmatic erosion. In this way a chronic, or normalized, war on money offers a concession to populism that epitomizes the compromise-formation political economy has become. Socialist revolution is forestalled by a continuous debauching of financial signs, but in this way it is also executed. Macroeconomics delivers eschatological communism in slow motion. An explicit attraction of discretion-protected crypto-currency is making such deals unobtainable.[11]

§5.345 — Initially at issue here is the sanctity (or sacrilege) of the free contract – an essential pillar of the liberal social order from the perspective of the right, an objectively-merciless formalistic extravagance from that of the left. Supporting these contrary judgments are diverse ethnographic orientations inclined, respectively, to the naturalization or denaturalization of commercial life (with Smith’s “propensity to truck, barter, and exchange one thing for another”[12] at one end of the spectrum, and Graeber’s “everyday communism” at the other). Providing consoling doctrines, respectively, to the ‘haves and have-nots’, this axis of variation reflects an antagonism no less durable than the human species itself (and quite possibly more enduring by far). There is a liberal and a socialist End of History, and neither unambiguously approaches. This is what any social animal – poised between the tiger and the mole-rat – should expect. Persistence of ideo-political conflict is the safe prediction, with the corollary that partially-insecure property is the socio-economic norm. Projects to strengthen or weaken property security – that is to adjust its degree of political insulation – mark the PPD like traffic indicators, illuminating its basic axis, and describing the great games.  


[1] In chapter 17 of Human Action, Mises refers to this narrative as: “an irrefutable praxeological theory of the origin of money.”

[2] ‘On the Origin of Money’ (1892): http://www.monadnock.net/menger/money.html

In ‘Shelling Out’, Szabo integrates the problem into game theory. “Barter requires, in other words, coincidences of supply or skills, preferences, time, and low transaction costs. Its cost increases far faster than the growth in the number of goods traded. Barter certainly works much better than no trade at all, and has been widely practiced. But it is quite limited compared to trade with money. … Money converts the division of labor problem from a prisoner’s dilemma into a simple swap.”

http://szabo.best.vwh.net/shell.html

[3] For an illuminating discussion of the re-emergence of intermediate goods in the wake of the gold standard, see Nick Szabo’s ‘Two Malthusian Scares’ (2016): http://unenumerated.blogspot.hk/2016/02/two-malthusian-scares.html

[4] This is to repeat the line from David Mamet’s Heist that is cited at the start of this book. Beyond the humor, it is perhaps the most insightful contribution to political economy to be found within the history of cinema.  

[5] Upon being asked to predict what Bitcoin would ultimately come to be called, Pierre Rochard offered the acute response “Money.” The absence of anticipated qualification is, of course, the critical point. Superiority predicts eventual normality. The forecast runs: First Bitcoin, then ‘standard crypto-currency’, then ‘computer money’, finally ‘money’. Something roughly like this has to be probable, even if the prediction is implicitly revolutionary.

[6] Graeber’s argument is detailed in his work Debt: The First 5,000 Years (2011). The author’s academic foundation in anthropology makes it philosophically tempting to categorize his work as an empirical revolt against transcendental – or a prioristic – economic theorizing (of the kind exemplified by Austrian praxeology), and it has been frequently defended on these grounds. Perhaps the most crucial empirical observation, which has already become a staple of anti-liberal monetary theorizing, is the remarkable absence of anything approximating to a ‘barter economy’ within the record of historical anthropology. The primordial commercial problem, for which money is proposed as solution, has little obvious instantation among human societies – past or present. The pertinence of this apparent fact is irreducibly ambiguous, however, since an economic order based upon barter, even in the terms of the liberal analysis, clearly cannot be conceived as a stable – and thus enduring – social equilibrium. The absence of barter economies from the ethnographic and historical record is thus predictable as a selection effect (with the radical maladaptation of these systems – i.e. their intrinsic inclination towards extinction – exempting them from the domain of empirical evidence). We do not see them because they do not work. For a succinct Austrian riposte to Graeber’s theory of monetary history (along these lines), see Robert P. Murphy’s ‘Origin of the Specie’ http://www.theamericanconservative.com/articles/origin-of-the-specie/

[7] Graeber’s fascination with the entanglement of debt and definite moral ideas is overtly indebted to Nietzsche’s On the Genealogy of Morals, down to the details of its etymological observations. In particular, the moral-economic ambivalence of Schuld (guilt / debt) is crucial to both. It can be predicted with some confidence that this Nietzsche text – untimely in a way that is only now becoming starkly apparent – is set to acquire a special prominence among the emerging conditions of the 21st century, as the foundations of contractuality are subsumed into the technosphere, and thus require explicit formulation.  

[8] Karl Jaspers coined the term ‘Axial Age’ (Achsenzeit) in his work The Origin and Goal of History (Vom Ursprung und Ziel der Geschichte, 1949). Thinkers of the Axial Age include Laozi (Lao Tse, 6th-4th century BC); Kongzi (Confucius, 551–479 BC); Li Kui (455-395 BC); Mozi (470–c.391 BC); Yang Zhu (440–360 BC); Mahavira (599–527 BC); Gautama Buddha (c.563-483 BC); the authors of the Upanishads (from 6th century BC); Thales (of Miletus, c.624–546 BC); Anaximenes (of Miletus, 585-528 BC); Pythagoras (of Samos, c.570–495 BC); Heraclitus (of Ephesus c.535–475 BC); Aeschylus (c.525-455 BC); Anaxagoras (c.510–428 BC); Parmenides (of Elea, early 5th century BC); Socrates (c.469–399 BC); Thucydides (c.460–395 BC); and Democritus (c.460–370 BC), among others. The origination of philosophy in this historical episode is scarcely deniable. The Neo-Marxist explanation, re-animated by Matteo Pasquinelli, is rooted in the work of Alfred Sohn-Rethel and the identification of real abstraction. Philosophy is located downstream of a distributed cognitive machine, activated by the creation of money.  

http://onlineopen.org/capital-thinks-too

Our question ‘what can money do?’ is thus modulated by the compelling hypothesis that to be included among the things money has already done is the initiation of philosophy. According to this understanding, ‘philosophy’ – defined so broadly that it comprehends even the birth of systematic mathematics (Euclid) – is a side-product of social monetization. Its cognitive machinery cannot be accurately specified at any level that falls short of commercial process. The conceptual equation does not precede the exchange relation. In the beginning was the swap.   

[9] A Malthusian lineage passing through David Ricardo’s Iron Law of Wages made the primary contribution to the classical Marxian analysis. The identification of a socio-historically contingent ‘natural’ or equilibrium tendency for wages to approximate to a subsistence income, under conditions of chronic labor supply glut, was the prediction that propelled the Marxist analysis to its peak of popularity – at least in the West – during the late 19th century epoch of mass proletarianization. It can surely be no coincidence that the recession of this paleo-Marxist immiseration thesis – among conditions of comparative generalized abundance – have been accompanied by a redirection of critical attention from the commoditization of labor to the registration of accounts, associating economic oppression with debt peonage, rather than absolute destitution.  

[10] The Jubilee (yovel), referenced already in the Torah (or Pentateuch), is the culmination of a – seven-times-seven – 49-year meta-cycle, in which ‘the slate is wiped clean’ by debt-forgiveness. Every seventh year of the ancient Hebrew calendar was a shemita or fallow year, of which the Jubilee is evidently an extrapolation. (The modulus-seven pattern is generally accepted by scholars based upon overwhelming evidence, notwithstanding the description of the Jubilee in Leviticus 25:10 as the ‘fiftieth year’.) Within the cyclic system of the jubilee, debt-annihilation appears as an equilibrium function. The regenerative (positive-feedback) tendency of money as proto-capital is capped by a circuit-breaker. From the perspective of human social conservatism, there is no doubt a perennial wisdom in this, even if it runs directly contrary to the trend of the modern (Ashkenazi) contribution to finance capital in its attainment of historical escape velocity. Any deeper venture into the ironies of Jewish socio-economic history exceeds the ambitions of the present work.  

[11] Absolution is the theological model of the reversible commitment, and thus of time annihilation. Time cannot forgive, by definition. It is non-retraction in-itself. Only within a soteriological construction of eternity can what is done be undone. To be saved is to be rescued from the intrinsic consequences of time. Can there be serious doubt that the project of reversing the irreversible provides the final content of modern political dialectics, and especially of ‘revolution’ in its dominant modern sense as applied soteriology? Aufhebung is absolution, undisguisedly. The transmission mechanism, from theology to political history, is provided by the Nietzschean insight (from On the Genealogy of Morals) that institutional slavery has a humanistic origin, offering immediate respite from execution, and mediate opportunity for redemption, to a defeated enemy. In this context, deferred settlement is mere contingent survival, or mercy in the form of time. Primordially, the condition of slavery is a stay of execution. One owes everything to the hesitation of the killer, within which a transition from military history to economic history surreptitiously takes place. Debt peonage is the bridge.  

[12] See: The Wealth Of Nations, Book I Chapter 2.

Crypto-Current (048)

§5.2 — To entertain money as an explicit object of philosophy is immediately to question the conceptual interconnections between its essential qualities. A threshold of controversy has already been crossed, therefore. From the perspective of a certain mode of empiricism, the neglect of this topic expresses a positive intellectual virtue (with the presupposition of systematic order as its corresponding vice). As a matter of objective irony, or something that effectively masks itself as such, those cultures most conducive to the reign of money have been those most instinctively dismissive of its transcendental dimension. Money does not seem to favor philosophical attention. In this, one might suspect the crypto-current at work. Empiricism casts subtle shadows, whose darkness is deepened by a secondary occultation.[1] Quite imaginably, philosophy enters this terrain as a disruptive intruder, whose gaze is damage. Yet, in the end, whatever is denied access will simply not pass the gates. The secret secures itself.

§5.21 — Any modern philosophy of money proceeds as a transcendental deduction, guided by the question: How is economic calculation possible?[2] The foundation for an answer is comparatively solid. Money is the condition of possibility for the existence of prices, and therefore for the commercial object (in general), by definition. Insofar as objects of economic intelligence exist, money is presupposed as a calculative principle, an ideal, or virtual machine-function, irrespective of its more-or-less adequate concrete incarnation. When talking of ‘ideal money’ in this context, reference is not being made to a superior – still less a perfected – type of money, yet to be actualized, but rather to the abstract money emulated to a greater or lesser degree by any actual currency system (in the way any actual computer emulates a Universal Turing Machine). Any concrete monetary system necessarily draws upon an abstract idea of money, which is operationalized in advance of its explicit theorization. This relation has effectively foreshadowed – and even predetermined – the fundamental problems of philosophy.

§5.22 — As Whitehead famously noted, philosophy subsides back into its characterization as “footnotes to Plato” as into a sucking equilibrium. However it advances, the primordial captivation is unbroken. The temptation, always, is to refer sensible actualities to their ideas. What is the truth of things? Such a problem exists, compellingly, from the moment there is an economy of prices, and perhaps not before. The priced – or commercial – object models the elementary provocation to philosophy, because any such entity has been converted into an accident of its own value. It thus, intrinsically, suggests an Idea, of which it is a mere instance. Concretely – and ‘sub-philosophically’ – every priced object implies a virtual relation to ideal money (which acquires definition to a greater or lesser extent in the unit of account). While ideal money is scarcely less elusive than the Platonic Forms, it is nevertheless able to support realistic teleological expectations. It exercises effective selective pressure upon any actual monetary system, under the guidance of inevitable, distributed preference for those that incarnate the tokenization of value at a superior level of ideality (as exhibited, prismatically shattered, in the six qualities). In comparison to money, the Platonic εἶδος is no less durable (eternal), scarce (singular), divisible (or, at least, distributable among particulars), communicable (teachable), fungible (self-same across all instantiations), and verifiable (or philosophically demonstrable). It is tempting, therefore – regardless of the irony involved[3] – to understand money as the model of idealization. By practically defining that which remains equivalent across a transaction, money cannot avoid making abstraction a cultural topic.

§5.23 — Money is the sign that names, or denominates, price. Unlike a signification, or designation, this semiotic function is allocative, which is to say that it is executed in the process of payment. Money ‘speaks’ in being spent. When saved, or reserved, its meaning is virtualized, and is even constituted in being virtualized. Abstraction – from the concrete item of expenditure – is expressed as a definite potentiality, or set of quantitatively-delimited economic options. Money’s spontaneous logical medium is modality. Within it, the potential conversion of property finds distinct expression (‘as such’). Whatever finds itself priced is marked by commercial contingency (or formal exchangeability). Extracted automatically from the dull domain of the merely given, any such priced-object now manifests an Idea, peculiarly, and precariously. Its concrete reality is now reduced to a mode. Thus, factuality is spontaneously subverted by commercialization, in becoming a more-or-less liquid instance of a general abstract substance. Being acquires its philosophical dimension.[4] At the extreme, therefore, an identity is ventured between the ‘invention’ of money and the origin of pure thought. The concept belongs to commercialism.

§5.24 — Broad consensus concerning the essential properties of any monetary medium has been consolidated over the course of millennia. The initial enumeration of these properties is best represented among the ancients by Aristotle, who recognized durability, divisibility, convenience, uniformity, and ‘intrinsic value’ as qualities of money. By the time Adam Smith wrote his The Wealth of Nations the distracting metaphysical error of intrinsic value had been discarded, while the essential properties of money were simultaneously abstracted (into ideal qualities) and concretized (through their exemplification in historical monetary media). He writes:

In all countries, however, men seem at last to have been determined by irresistible reasons to give the preference, for this employment, to metals above every other commodity. Metals can not only be kept with as little loss as any other commodity, scarce any thing being less perishable than they are, but they can likewise, without any loss, be divided into any number of parts, as by fusion those parts can easily be reunited again; a quality which no other equally durable commodities possess, and which more than any other quality renders them fit to be the instruments of commerce and circulation.[5]

§5.25 — For Smith, as for Aristotle – and indeed, later, for Marx as for the Austrians – the abstract conception of ideal money was scarcely to be distinguished from the concrete virtues of precious metals (and of gold and silver in particular). Money, insofar as history had certified it, was metallic coinage, only subsequently – and trivially – supplemented by its paper representations, or contractual appendages. Between the questions ‘what are the qualities needed by a monetary medium?’ and ‘why have precious metals been selected to serve as money?’ there was only the most insubstantial of differences. To understand why gold made good money was to understand what good money is.[6]

§5.251 — Why, then, do precious metals make good money? The entire list of qualitative monetary virtues can be mined from this question. Due to their chemical characteristics as pure metallic elements, they are durable, divisible, and fungible, since they are stable across time, and homogeneous in space (down to the atomic scale). This substantial consistency also makes them conveniently verifiable, as simple, measurable objects of chemical science, and of practical metallurgical assaying. Finally, but no less importantly, their comparative rarity makes them economically scarce, hence potentially valuable, and – in close proportion to their ratio of value-to-mass – also portable.

§5.252 — Yet, despite its close approximation to the ideal type of a monetary medium, precious metal is not – in itself – money.[7] To become money it has to be minted, or converted into a sign. A concrete example is provided by the silver penny, the most widely-accepted monetary unit of the European pre-modern period.[8] The direct descendant of the Roman denarius, dating from 211 BC, the English penny (containing 1.3-1.5 grams of silver) was introduced in AD 785, during the reign of the Mercian King Offa, and persisted with only superficial changes for over nine centuries. It is of particular importance to note that the penny was – to modern eyes – an extraordinarily self-referential sign. What it signified was at the same time what it incarnated. This was captured in the perfect – and to pre-moderns simply tautological – equivalence between the expressions ‘one pound is worth 240 silver pennies’ and ‘240 silver pennies weigh one pound’. Silver did not back money, but was rather directly minted into money. The subsequent dissociation of monetary value and precious substance was essentially alien to the pre-modern world. It was only through the debasement of the currency – the archaic monetary manifestation of the DSP – that the difference gained episodic purchase, and then only as a blatant corruption of the currency in question. Coinage is primordially a medium for conveying precious metals into commercial circulation. It shares the economic principle of packaging. In both cases value creation is non-negligible, but also incidental. To see in coining an anticipation of money production of a modern type and scale is thus to entirely misconstrue it. Despite its extreme abstraction, the return of coinage in the mode of crypto-currency is the carrier of a deep conceptual revision, and even a reversion. In its new sense, no less than its old one, a coin is a regular sub-section of an asset-reservoir, sized for commercial convenience, which is to say that it is an actual part of a qualitatively-consistent resource. In neither case does the coin acquire this character simply by saying what it is. Allocation is its irreducible, and non-derivative, semiotic function.

§5.253 — Questions concerning the essential nature of money find themselves slipping backwards, unconsciously and automatically, into a description of the historical instantiation of money, which is a topic dominated – massively – by the function of precious metals within complex societies. It is only through appeal to paleo-anthropology, exotic ethnography, or the history of established modernity, that such questions can refer themselves concretely to anything else. Money has been gold, silver, and copper coinage,[9] with only primitive, anomalous, and sophisticated exceptions. 


[1] This is the sphere of the unseen unseen, or Donald Rumsfeld’s “unknown unknowns”. It consists of shadows which themselves escape observation, even as zones of obscurity. The topic of things that elude objectivity essentially impels extreme abstraction, since it determines concrete instantiations as inadequate in principle. Whatever you can see isn’t it. ‘Clearly’ the discovery of things-in-themselves within transcendental philosophy is inextricable from a problematic of this kind. We can only suspect that money-in-itself is our topic, pursued on an undercurrent.

[2] A transcendental deduction of money is nothing but a modern philosophy of money pursued with systematic method. It is not the object of possible experience that primarily concerns such a theoretical exercise, but rather the object of potential exchange, i.e. the commercial entity, or – in its most general sense – the economic commodity. If a formula is required to support this philosophical displacement, or analogy, it is that commerce counts as experience for the market. This is not to propose strong priority for the phenomenological register, as a basic or final reference, but only actual precedence within philosophical history. An alternative order of priorities is in fact more compelling. Money makes minds. It does so, already, with nothing beyond an abacus, and far more so in the epoch of industrializing artificial intelligence. Money is the ontological correlate of commercial calculation. Without it, there could not be pricing. It is a thing that supports or even actually induces thought, within a domain whose limits are not readily fixed. The edge of commercialism is less a boundary than a frontier. It is the primary practical task of enterprise to push it ever further outwards. It betrays imperfection in a money system when it intrudes upon the calculation of whatever it prices. Hence there is an intrinsic tendency to the transcendental, i.e. to the frame of objectification which is itself withdrawn from objectivity. Money, like a shop window or commercial display case, is not meant to get in the way. It is hidden in the way of the open secret. The cryptographic affinity is intrinsic. The homogeneity or pure quantity of the commodity as it approaches the commercial ideal is thus concretized as a type of transparency. The perceptual hooks of friction are eliminated. Empirical stimulation is minimized. It is essential to the neutral medium that it flees sensibility. The monetary analog of an aesthetic establishes commercial continuity in space and time. Durability and communicability translate into an indifference to locality (in time and space). Perishable money could be ‘good’ only now, or for a while, just as immobile money could only be usable here. The radical imperfection of either characteristic is self-evident. The monetary ideal conforms rather to the aesthetic frame as such. It is no less available now as time itself, and it is no less available here than space. Only thus does it ubiquitously frame commercial calculation. (“Your money is no good here” or “any longer” is its negative.) Within its own dimension, this consistency has another aspect. As a fungible and divisible abstract substance, it is characterized by qualitative continuity. Money is everywhere, and always, realized as a finite quantity (an amount). By convention, and for general convenience, monetary value is therefore represented as a (one-dimensional) extensive quantity.

Critical subjectivism requires the identification of definite objectification procedures. Objects are not given, but have to be made. When Marx explores this topic, it is from the side of industrial production, with labor-power as the explanatory term, and money as a dependent fetish. The work immanent to money that is formalized by cryptographic hashing still lay beyond the conceptual horizon. In Deleuze & Guattari’s Capitalism and Schizophrenia we see the subsumption of the Marxian theoretical apparatus into a transcendental industrialism, through an experimental commitment to the integrity of physical and social constitution in the multi-level action of machines. The procedure is near-frictionless. To retreat from the question of production is to withdraw from the process of transcendental inquiry.

For an explanation of the market process as the indispensable locus of price discovery, the predictable reference is Mises’ classic discussion of ‘Economic Calculation in the Socialist Commonwealth’, see: https://mises.org/library/economic-calculation-socialist-commonwealth/html

[3] The irony, of course, being that money is traditionally – at first aristocratically, and subsequently socialistically – despised as the epitome of base value, morally positioned at the antipodes of all idealistic conceptions.  

[4] Standard narrativizations of western philosophy propose an archaic – perhaps primordial – metaphysical option between being and becoming, beneath the theoretical banners of Parmenides or Heraclitus. The dilemma can be formulated in various ways, but its stubborn persistence is an indication of transcendental dialectic (that is, of metaphysical confusion). Heidegger’s formulation of critique has direct pertinence here. Attribution of time-characteristics to being is essentially metaphysical. Neither permanence nor impermanence can have application to the transcendental. The reciprocal critical-skeptical question runs: Is time to be found among things? To answer in the affirmative is to sponsor an ontological reduction of time, identified, and taxonomically comprehended, as something that is. (Max Tegmark is among the most important recent thinkers to articulate and defend such a position explicitly.) When cast in the language of commercial practicality, the fissure splits stocks from flows. A decisive option between the two seems in this case unlikely. Complementary duality (of the Chinese philosophical type) is instead suggested.

[5] See The Wealth of Nations, Chapter IV: Of the Origin and Use of Money.

[6] As Edwin Cannan remarks in his introduction to the 1904 edition of The Wealth of Nations, “Values must be measured by some common standard, and this standard must be something generally desired, so that men may be generally willing to take it in exchange. To secure this it should be something portable, divisible without loss, and durable. Gold and silver best fulfill these requirements.”

[7] While in particular circumstances, exemplified historically by pioneer societies in frontier gold fields, unminted precious metal can be substituted for money, such employment is most convincingly understood as an atavism. Functionally, it is indistinguishable from the usage of such quasi-monetary ‘special commodities’ as cigarettes in prisons. As Carl Menger notes in his essay ‘On the Origin of Money’ (1892), “The peculiar adaptability of the precious metals for purposes of currency and coining was noticed by Aristotle, Xenophon, and Pliny, and to a far greater extent by John Law, Adam Smith and his disciples, who all seek a further explanation of the choice made of them as media of exchange, in their special qualifications. Nevertheless it is clear that the choice of the precious metals by law and convention, even if made in consequence of their peculiar adaptability for monetary purposes, presupposes the pragmatic origin of money, and selection of those metals, and that presupposition is unhistorical. Nor do even the theorists above mentioned honestly face the problem that is to be solved, to wit, the explaining how it has come to pass that certain commodities (the precious metals at certain stages of culture) should be promoted amongst the mass of all other commodities, and accepted as the generally acknowledged media of exchange. It is a question concerning not only the origin but also the nature of money and its position in relation to all other commodities.”

http://www.monadnock.net/menger/money.html

[8] “By far the most common coin throughout the Middle Ages was the silver penny, known in Latin as the denarius. The word was preserved in the Romance languages as the denier in French, the dinero in Spanish, denari in Italian, and denar in Hungarian. The Germanic languages had their own term: pfennige in German, penningen in Dutch, and pence or penny in English. The coin was typically quite small. Now that you know the term and the coin, you understand why pence in English is abbreviated with a lower-case d, as in: £5 3s 5d.” See: http://europeanhistory.boisestate.edu/latemiddleages/econ/banking.shtml

[9] The hierarchical triad of gold, silver, and copper coinage, while comparatively stable in Europe, has not exhibited a wider consistency across time and space. In China, for instance, gold was not monetized until modern times. Nevertheless, geochemical factors – determining the relative abundance of these metals, among other neatly ordered relevant properties – accounts for its attractiveness as an ideal type (based primarily upon European economic experience). It is conceptually convenient insofar as it places the functions of money as a store of value and a medium of exchange upon a spectrum, corresponding to the metallic order, or scale of value density. Braudel’s empirical description elucidates this clearly: “A metal currency consists of a set of related coins: one is worth a tenth, a sixteenth, a twentieth of another, and so on. Usually several metals, precious or otherwise, are employed simultaneously. The West retained three metals: gold, silver and copper, with the inconveniences and advantages of such a mixture. The advantages were that it answered the varied requirements of exchange. Each metal with its coins dealt with a series of transactions. In a system exclusively of gold coins it would be difficult to settle small-scale everyday purchases. On the other hand large-scale payments would present difficulties in a system confined to copper. In fact every metal played its part: gold, reserved for princes, large merchants (even the Church); silver for ordinary transactions; copper naturally for the smallest. Copper was the ‘black’ money of people of small means and the poor. Mixed with a little silver it blackened quickly and deserved its name.” (Vol. I, 458)

Crypto-Current (047)

Chapter-5

Cash Machines

§5 — Reciprocal or circular definition is abysmal – or groundless – and thus traditionally considered suspect, if not prima facie evidence of hopelessly defective reasoning. Unfounded circuitry is naturally disconcerting, when identified in the world, let alone in our thought processes.[1] Under certain circumstances, however, characterized by cumulative bootstrapping, it can be an exceptional index of theoretical productivity. An especially remarkable example, from the perspective of this book, is provided by the intertwining of the questions ‘Is Bitcoin money?’ and ‘What is money?’ In holding these two questions open simultaneously – suspended within the abyss of what we do not know about either – the prospect is opened of learning something about both. What Bitcoin teaches, at a very early stage of apprehension, is that we do not yet have a confident answer to the question: What can money do?[2]

§5.01 — An economical list of essential monetary functions is exhausted by just three indispensable entries. Money provides a medium of exchange, a store of value, and a unit of account.[3] In other words, money facilitates commerce, preserves wealth, and sets a standard for economic calculation. According to a preliminary apprehension, it is a functional trinity of flow, stock, and metric.[4] In support of these functions, money typically possesses a number of predictable qualities, most prominently the characteristics of scarcity, durability, verifiability, divisibility, portability (or communicability), and fungibility. Of these six qualities, the first three are essential to the preservation of monetary value, and the remaining three to commercial convenience. These aspects are reciprocally reinforcing, mutually establishing a standard unit of account (or of credit).

§5.02 — Attempts to establish a robust conceptualization of money’s functional trinity soon run into intricate difficulties. What appear to be merely formal differences, when captured at certain moments, and from limited perspectives, appear amid other circumstances as substantial distinctions, dense with historical contingency, and lacking even minimal ontological integrity. Consider, initially, the unit of account. As Braudel explains:

… these were imaginary units, used for reckoning, for estimating the relative value of coins, for fixing prices and wages and for keeping commercial accounts which could later be translated into any kind of currency, local or foreign, when the time came to move from the ledger to actual cash payment. … One would have to go back a very long way to find the coins corresponding to the money of account – but all such moneys had at some point in the past been real money.[5]

§5.03 — No pure analysis of money, we can immediately see, is able to take us far on its own. A monetary regime is a synthesis – we might want to say an assemblage – consisting of heterogeneous elements mutually composing a functional whole. Insofar as a single monetary medium is able to integrate these elements, in a way that seems to facilitate a subsequent formal decomposition into neatly interlocking functions, a complex achievement has taken place, whose partial invisibility attests to its success – without detracting from its historical precariousness. It is only very late in the real process that a money system is able to appear as the near-perfect incarnation of a simple idea, internally differentiated by a logical structure.

§5.04 — The tension between money flow and stock – corresponding closely to that between commerce and wealth – is no more tractable to confident philosophical apprehension than the (partially abstract) unit of account. It, too, is a complex of ambivalences, wavering uncertainly between formal and substantial distinctions, and subject to dynamic swirls of cross-dependency. It is not only that each of these functions is also partially logical and / or semi-empirical, in itself. The inter-connections between them add further oscillations between logical disjunction and empirical difference. The functions of money as a means of payment (currency, flow) and a store of value (asset, stock), cannot be considered entirely in isolation, since the distinction involves both adjacency (real differences of media, in a relation of complex complementarity) and substitution (switchings between assets, guided by the intensity of ‘liquidity preference’). Money’s logical aspects and its multiple media cross-connect in theoretically inconvenient ways.

§5.05 — For example, the divisibility of money, a purely formal (arithmetical) relation from one regard, is incarnated in a substantial heterogeneity – between distinct metals – from another, and subject in this latter to variations in exchange rate across time. In the European economic tradition, gold ‘divides’ into silver on the basis of an ideal value relation of twelve to one. Yet, in actuality, this ideal was only occasionally, and – once again – precariously realized. The same distinction between monetized metals which played such a crucial analytical function within the monetary system (as an order of divisibility) simultaneously preserved its synthetic characteristics (as an exchange relation between different commodities). Historically, the difference between ideal and actual exchange values generated variations in ‘pressure’ comparable to meteorological conditions, as relative scarcities of gold or silver drove currency units across and beyond continents in storms lasting decades, or even centuries. Formal tokens of accountancy were at the same time the particles of substantial bullion flows. Mathematics mixed with metal, indissociably.

§5.1 — The functions of money will be under continuous examination throughout this chapter. What can money be reliably broken-down into? That is the question techno-frozen into every change machine. When grasped at a sufficient level of abstraction, the philosophical inquiry is not so very different. The logical pieces of money – its qualities – are therefore worth limning, tentatively, in advance. Since it is philosophically discomforting to rest a central analysis wholly upon consolidated empirical generalization (which is to say, upon tradition), the temptation is to search for a relevant principle. Can ‘the six qualities’ of money be convincingly rationalized, from a ramshackle list into a categorical structure, sub-divided in strict accordance with a conceptual principle?[6] Since no unambiguous draft for such a schema is to be anticipated from historical evidence, it can only be supplied as a ‘regulative ideal’ or teleological model – to be excavated from the virtual, on the diagonal path of synthetic a priori construction.

§5.11 Durability, at its most basic, is mere existence, or actual reality, insofar as this is conceived as occupation of time, or the possession of temporal characteristics in general (participation in duration). The monetary excellence of high comparative durability is an empirical feature, but one that is asymptotic to indefinite persistence, or non-locality in time – the limit of constant existence, at which it re-connects with the transcendental. Concrete currencies tend to closely approximate to this ideal. Precious metals, for instance, are indestructible (for all purposes of practical economic calculation). Ledger entries – while necessarily bound to physical incarnation – manifest an intrinsic idealization that approximates even more exactly to an absolute durability (identified with a substrate-independent institutional memory). Perishable goods disqualify themselves from serious consideration as monetary media (unless under very exceptional circumstances).[7] For any store of value, extreme durability is a necessary, if not in itself a sufficient, condition.

§5.12 Scarcity grounds economic value in general. Nothing that is freely available without the inconvenience of trade could conceivably have commercial worth. Abundance begins where economy ends, and Cornucopian thinking is not a type of economics, but rather its general denial. Scarcity finds its mathematico-philosophical outer limit in the concept of ‘finitude’ (since the division of infinity is economically incalculable), but this determination is too expansive to capture it well. Greater purchase is achieved by the notion of difficulty, especially as this is employed by the Bitcoin Protocol. The concept of scarcity is the complement of commercial trade-offs or industrial effort, and thus of economic activity. The scarcity of money presumes a solution to the DSP.

§5.121 — In combination, durability and scarcity provide the foundations of being and value, constituting an – as-yet generic – permanent asset, or (to reverse the order of determinations) an economic substance. At this elementary level of definition, it remains notably non-specific, encompassing such non-monetary assets as real estate, or stocks of imperishable commodities. To acquire a commercial function, as an essential step towards its operation as money, economic substance has to provide for convenient re-allocation. Money has not only to be valuable, but also distributable. (We will see a little later, and finally, that it has also to be credible.)

§5.13 Divisibility enables money to match prices.[8] The divisibility of the monetary medium sets the range of retail pricing options (and the subtlety of potential price competition). While money is only ideally continuous (or infinitely divisible), this condition is practically approximated by an acceptably fine granularity. The smallest unit of money in circulation corresponds to the point of commercial indifference, beyond which variation is considered irrelevant to economic decision making (as mere ‘rounding errors’). The trade-off between standardization of units and delicacy of quantitative differentiation sets an equilibrium point, to which the atoms of the currency approximate. In other words, coarseness is an imperfection relative to ideal money, tolerated for practical purposes. (The massive economic applicability of the calculus does not imply a significant appetite for monetary infinitesimals.) This feature of money acquires a new prominence in the era of digital-electronic micropayments. Already in the early decades of the computer era, it was anticipated that the friction afflicting minuscule monetary units would be electronically eliminable. Ted Nelson’s attention to the question is especially notable.[9] Under these conditions, the zone of commercial indifference – where monetary quantities become ‘negligible’ – has the potential for transformation into a positive attractor. A massively expansive, monetarily hyper-sensitive agora opens distinctive commercial possibilities (extrapolated from those long developed within industrializing consumer capitalism). Minute margins become economically tolerable (in principle), due to the volumetric re-scaling of microscopic sums into significant quantities within Internet-globalized markets.[10]

§5.14 Communicability (techonomically supplanting ‘portability’) measures the degree to which money is transmissable. It is division, or distribution, apprehended not only as an arithmetical property, and a contractual consummation, but also as a physical transfer. Transmissibility is an implicit characteristic of the economic sign. To be in one place, rather than – any longer – in another place, is the irreducible material substrate of every notional re-allocation within double-entry book-keeping. A commercial transaction is always a process of reciprocal transference, requiring – on both sides – a real redistribution (of matter in space). Semiotic subtilization cannot fundamentally compromise this necessity. Even the mere revision of a ledger is never less than a physical event.[11] Nevertheless, asymptotic dematerialization is a real feature of signs under conditions of techonomic escalation, exemplified by electronic information, and the satisfaction of commercial transference by a (micro-physical) revision of accounts.

§5.15 Fungibility is a feature of the economic commodity in general, in the strong (and prevalent) sense of a tradable good undifferentiated by (significant) qualitative variation. By collapsing all dimensions of intrinsic comparison between instances of the same good onto a single quantitative axis, it optimizes the conditions for commercial computation and price competition. The extreme relevance of its application to money strengthens the case for confidently defining the latter as a general commodity (even if such a definition remains incomplete).[12] Without fungibility of money, economic calculation would be drastically impaired – to such an extent that this characteristic is necessarily attributed to the abstract unit of account, as an ideal. This claim attains greater cogency if reversed: It is in order to fulfill the functional requirements of the unit of account that implemented concrete money systems acquire fungibility as an indispensable criterion for even minimal adequacy. Commercial quantities presuppose equivalences, or at least commensurabilities, even if between strictly ordinal-differential preference schedules (of the marginalist type), since they could not otherwise be arithmetically tractable.[13] It is worth noting that weighing already assumes fungibility, and the correspondence of many monetary units to (forgotten) measures of weight is widely recognized. The elementary economic option involves a comparison, with some definite baseline of assumed fungibility providing a condition of calculability. Indeed, the basic concept – and practical institution – of price assumes fungibility. A system of ‘money’ whose instances were in any way better or worse, other than by being more or less, would be unable to compute settlements – even within modest transactions – without the introduction of complex supplementary information (about the monetary medium itself). Since, once again, perfect fungibility is a limit ideal, this problem is by no means entirely hypothetical. We might refer to qualitative interference in money systems as ‘Gresham noise’,[14] especially as this applies to friction within their concrete processes of circulation, and thus to integral illiquidity. The entire techno-political problem of monetary standardization applies here. The practical idealization of money, within digital registers of pure quantities, retains implicit reference to a model of perfect fungibility, appropriate to the mathematical tool, or calculator.

§5.16 Verifiability can be rigorously conceived as a practical extension of fungibility, or as an operational annex to it. It references some definite, practical checking procedure that qualifies money as credible. Dubious money cannot be confidently counted as any definite sum whatsoever. Across the vastly preponderant part of monetary history, the model verification procedure has been assaying. The assay underwrites monetary value determined as a quantity and purity of metal. In the age of paper money, verifiability refers primarily to protection against forgery, or counterfeiting. This characteristic binds money essentially to the production of trust. Money is able to redeem a promise, and thus validate it.  

§5.17 — As an aside, at this early stage in our discussion, it is notable that Bitcoin possesses all six of these qualities, super-abundantly.[15] Its durability is – in principle – absolute, although Bitcoin can in fact be lost or destroyed (see following note); it is rigidly and quite exactly[16] scarce (to a fault, its critics object); divisibility is also unlimited in principle;[17] its communicability is extreme, based on Internetworked digital electronics; its fungibility is also absolute, given any set of realistic assumptions about user incentives;[18] and it is verified automatically in its reproduction cycle. It would be difficult for Bitcoin’s status as money to be more secure, insofar as ‘the six qualities’ are applied as a criterion.


[1] Such concerns, perfectly contextualized for our purposes here, are exemplified by the logical case for the Misesian Regression Theorem (as glossed by the Mises Wiki of the Ludwig von Mises Institute): “For many economists … a marginal utility explanation of money demand [would] simply be a circular argument: We need to explain why money has a certain exchange value on the market. It won’t do … to merely explain this by saying people have a marginal utility for money because of its purchasing power. After all, that’s what we’re trying to explain in the first place – why can people buy things with money …”

http://wiki.mises.org/wiki/Regression_theorem

[2] The suggestion that Bitcoin is about more than money, while often intellectully productive, presumes a confident – if implicit – answer to a prior question concerning the nature and limits of money that is almost certainly unwarranted. In the same way that the world learnt, upon the innovation of Gödel coding (or transcendental arithmetic) that the set of Natural numbers included within itself the precise articulation of all possible formal systems – and indeed all possible configurations of (digitizable) information – precluding its subordination to any higher level of logical expression, so the innovation of reflexive (or self-validating) crypto-currency can be expected to demonstrate that the monetary sphere is no less semiotically comprehensive than comprehended, even potentially. Any consistent philosophy of money is compelled to be fully reflexive, since money is not rigorously determinable as a conceptually transcended object. In principle, money has no less to ‘say’ about philosophy than the inverse. Marxian materialism can be understood – if only partially – as a route to the articulation of this radical nonlinearity, or hierarchical disturbance, although it need not be allotted peculiar privileges in this respect.

The form of the question What can money do? is, of course, to be credited to Spinoza. As in its original instantiation, in the Ethics (“We do not know what a body can do”), the purpose of the question is to stall a premature transcendent resort. Any appeal – whether theoretical or practical – to look beyond money assumes the accomplishment of a preliminary determination that has simply not taken place.

[3] Additional monetary functions have been proposed, including that of a standard of deferred payment, and a measure of value, but these are formally derivable from the function of a unit of account under any reasonable extension of that concept.

[4] The inadequacy of this formulation will prove critical to the discussion that follows. In particular, the over-identification of means of payment with flow, and store of value with stock, obstructs diagonal exploration.

[5] From Fernand Braudel, Civilization & Capitalism 15th-18th Century, Volume I: The Structure of Everyday Life (p.465). 

[6] From the dominant perspective of modernity, which is certainly invulnerable to casual dismissal, any assertion of natural categorical order in the absence of (at least implicit) explanatory mechanics is stereotypically scholastic. By merely describing order, even if in accordance with a superior formalization, a ‘neo-scholasticism’ assumes that which needs to be accounted for. Within the modern natural sciences, in contrast, categorization has been progressively subsumed into a framework of explanation. Whether in biology, chemistry, or particle physics, natural types emerge from genetic mechanisms and intrinsic compositional properties. A biological species is a cladistic unit, generated by an episode of separation (phyletic splitting), and characterized by identifiable gene frequencies. Linnaean classification thus acquires Darwinian explanatory justification. Chemical elements are produced by nuclear processes, and compositionally defined by sub-atomic structure. The particles of baryonic matter, comparably, have a cosmological genesis and compositional definition. The periodic table expresses physical principle, and not merely consistent order. Given these theoretical successes, it is understandable that classification is increasingly conceived by modern natural-scientific intelligence as a mere heuristic, with only provisional and dependent credibility. Order in the absence of theoretical explanation is no longer identified as a self-supporting structure, but as a problem, or research prompt. Patterns are to be derived. They are puzzles rather than conclusions. To think that any serious question is answered by a pattern approximates to a definition of scholasticism. A potentially deadly reflexivity lies latent in this conclusion (which recognizes ‘medievalism’ in thought without explaining it), but it is one that modernity has extreme tolerance to. 

Kantian categories – as non-empirical forms – have some comparative security against the accusation of scholasticism. They withdraw inherent pattern from the empirical order of the natural world. Nevertheless, their apparent arbitrariness is a trigger for suspicion, and their ideality displaces natural-scientific skepticism, rather than dispelling it. (Supernatural foundations are intrinsically incredible to moderns, and even critically-disciplined categories can easily be taken for such.) Yet transcendental structures are not reducible without loss of information. Mechanism does not dissolve the machine. Categories are finally mathematical, with an order strongly analogous to that of the prime number series. Non-tautological apodicticity is the crucial (diagonal) trait. The cryptographic usage of the prime numbers is a demonstration of the transcendental (synthetic a priori) status of the series, and would be impossible otherwise. At the level of pure conceptuality, the number of the categories is an ineluctable consideration. Since causal mechanisms cannot be invoked as sufficient explanatory factors, without submitting to pre-critical error, the order of division demands a logical (or logico-mathematical) principle. The arcane meditations elicited can easily seem Baroque (or even ‘Byzantine’), in the fashion of all sufficiently-elaborate synthetic lock-picking exercises, since they lack any such preliminary principle. The principle comes only at the end. It is proposed here, then – perhaps inevitably – that the six-fold categorical structure of ideal money is founded trans-empirically. History can illustrate, but not explain it.

The order of monetary qualities has necessarily to assume a structure determined by the three semiotic dimensions (of signification, indication, and allocation) doubled by the binary partition of the monetary function between stock and flow. The topological pattern of this double circuit, without transcendent disjunction, is decidedly Möbian. The six essential qualities of money would thus fall into three dyads, according to its suitability for accumulation and exchange under each of its three basic semiotic aspects. In other words, money requires a triple semiotic instantiation as index, sign, and token, all amphibiously adapted to the twin functional requirements of storage, and circulation. Its six qualities exceed factuality. They fall out of a (transcendental) diagram, automatically, as a complex synthetic a priori proposition. What they exhibit is something like a numerical hyper-object, and more specifically a Möbian (or continuously double-sided) triad. If time is money, then three twinned-phases are assumed. The outcome, optimally, exhibits the exoteric finality proper to a transcendental deduction. 

[7] ‘Exceptional circumstances’ in this case includes simple antiquity. A ‘shekel’, notably, was originally a weight of barley. 

[8] Within an urban, highly-commercialized context, the comparatively unusual case, in which the commodity is adjusted quantitatively, in conformity with an inflexible monetary unit, is seen in the phenomenon of the ‘dollar store’. The situation appears remarkable because it involves heterogeneous items, whose accommodation to monetary chunking demands the solution to a puzzle (and perhaps also an abnormal variation in ‘mark-up’ levels). The far more usual case is exemplified by small market transactions of fungible commodities (which can be measured by weighing). It is at the edge of the money economy, where formal currency units, due to their comparative scarcity, enjoy an unusual privilege – and even a numinous exoticism – that such trades become especially typical. 

[9] Ted Nelson’s ideas were so far ahead of the available technology that they struggled for practical relevance. This untimeliness earned him the honorific title “the Babbage of the web” from The Economist magazine. The word ‘micropayment’ is among his many coinages.  http://www.economist.com/node/442985

[10] Capital teleology inclines to the substitution of market-scale for unit-margins, under the pressure of competition. ‘Globalization’ is nothing else. Already in the mid-19th century, Manchester mill-owners notoriously dreamed of “adding an inch to every Chinaman’s shirt-tail”.

[11] Monetary communicability requires successful delivery. For instance, it involves the problem of secure transportation. In the case of all physical monetary media, therefore, the question of communication involves certain gross security considerations. Physical portability of precious materials is intrinsically complicated by the threat of criminal interdiction. In consequence, the communicability of gold cannot be held down to a narrowly economic issue, since it is afflicted by political risk. Nor can the interdiction of gold delivery cannot be dismissed as a merely hypothetical or improbable threat. More generally, a commodity cannot be traded without first tacitly admitting to its possession. FDR’s Executive Order 6102 (1933) criminalized gold ‘hoarding’ within the United States. The very physicality that supported gold’s monetary virtues was thus immediately exposed as a political vulnerability. Without crypto-security, hard money exists only under contingent conditions of state tolerance. Reciprocally, full-fiat currency is initiated by a police action. On both sides, there is extreme sensitivity to the discretion of the state.

[12] Fungibility has been built into the technical definition of the commodity, as the meaning of this word – in its professional economic usage – has narrowed since the 19th century. Within this domain, ‘commoditization’ has been stripped of its philosophical thickness and generality, until it refers only to the loss of product differentiation from any tradable good, and thus to the reign of naked price competition. A commodity in this sense has no intrinsic peculiarities that bind it to a specific producer (though extrinsic differentiation – by spatio-temporal location – still applies). Goods serving as production inputs, especially – but not exclusively – raw materials, are the exemplary case. A slippage in the direction of money thus occurs when sources of supply cease to be differentiated by product quality. Fungibility and quantification are closely-related concepts. Due to their affinity with exceptionally frictionless, highly-liquid markets, commodities (in the narrow, contemporary sense) make attractive speculative assets, and thus operate as (broad) money. The conceptual transition between the narrow sense of the commodity and the broad sense of money is mediated by precious metals. Gold, silver, and platinum, no less than iron, ethene, or consistent grades of petroleum, are defined as commodities by their physical (chemical) properties, grounded practically in standardized extraction and refining techniques. They converge upon product qualities. Fungibility includes an indifference to genesis. It is therefore linked to a definite commercial amnesia. Such anti-memory links it conceptually to the untraceable, as this applies to the hyper-fungible monetary medium of cash. The thing about ‘dirty money is that you don’t know where it’s been. (Literal dirt, however, is Gresham noise.)

http://unenumerated.blogspot.hk/2016/02/two-malthusian-scares.html

[13] Monetary homogeneity – which is to say, the quality of qualitative neutralization – has been a consistent provocation for romantic criticism, not least by influential strands of the Marxist tradition, whose convergence with Nietzschean criticism of modernity has been typically pursued through this theme. To quantify is to level, and flatten. It submits the world to the form of the equation, and subsequently to practical reconfiguration as interchangeable units. The aesthetic denunciation of commoditization has typically made of this a central objection.

[14] Any qualitative variation in the nature of currency units interferes with their economic signal, by cross-cutting price calculation with extraneous considerations. As Thomas Gresham noted, the incentive to dispose of ‘bad’ money can become a pseudo-commercial motive in itself. It thus distracts from the primary information-processing function of the price system. Historically-evidenced money systems are those in which the problem of Gresham noise has been effectively contained. If this had not been the case, we might be disinclined to call the commercial media in question money at all. It can easily be noticed that any such ‘currency’ – if afflicted by intrinsic heterogeneities beyond a very limited point – begins to acquire the features of a barter good, with all of the economic coordination and computation problems that follow. Gresham noise is also applicable – by analogy – to foreign exchange markets, where comparison between monies is most formally advanced. The concept is not fully preserved in this case, however, because the heterogeneities submitted to Forex market evaluation do not attest to a deficit of fungibility within any given currency, but rather the opposite. The very notion of a consistent exchange rate assumes the quasi-perfect fungibility of each currency, as a condition of its presence on the market. Trading into and between crypto-currencies can, in this respect, be similarly conceptually handled.

[15] See: ‘Bitcoin as a Store of Value, Unit of Account, and Medium of Exchange’ (Daniel Krawisz, 2015/01/12).

http://nakamotoinstitute.org/mempool/bitcoin-as-a-store-of-value-unit-of-account-and-medium-of-exchange/

[16] In respect to its ultimate quantity, and thus scarcity, perfect exactitude has to be denied to Bitcoin on the deflationary side, because Bitcoin destruction reduces the final stock (below 21,000,000) in a way that is not always easily accountable. Coins can be accidentally lost, without any prospect of recovery, simply through the forgetting of private key. They can also be deliberately destroyed, through consignment to the crypto-currency analog of a black hole. While some of these bitcoin death addresses are known, they need not be, although their behavior on the public ledger will be indicative.

[17] For practical purposes, the divisibility of BTC was set initially to only eight decimal places (a 100-millionth of a bitcoin), a unit named a ‘Satoshi’.

[18] Although every bitcoin is singularly identifiable, there is no plausibly conceivable economic incentive that would lead a user to prefer – even infinitesimally – any particular bitcoin over any other. The currency is entirely devoid of commercially-relevant inhomogeneities, except under condition of a hard fork in the system.

Crypto-Current (046)

§4.7 — The potentialities of large multi-agent games are not predictable in advance, by anything less complex than themselves. They are not compressible except by increasingly unreliable approximation. In consequence, their systemic behavior is surprising – or informative. In Kantian terms it is said to be synthetic. Like all complex adaptive systems, such games are synthesizers, whose coordination searches produce discoveries. They are modeled by simulations which themselves demonstrate synthesis. The conclusions reached by simulating the behavior of complex systems were not analytically accessible (‘in advance’). They were not even accessible before, in the narrowest empirical-historical sense. Were there an essential trans-historical faculty of reasoning, it was unable to reach them. Computers were required to do that. The game, if it is serious enough, has to produce – in detail – its own conditions of cognitive apprehension within itself. The most elementary perception is already ‘a move’, downstream from strategy. Nothing is given, everything has to be won.

§4.71 — The intractability of such games to adequate simplification does not follow from any ineffable characteristics of their component agencies, but from the sheer number of independent nodes. A game, or network, is able to be more or less intrinsically numerous. It would be understandable, if finally misleading, to gloss this spectrum as a measure of intractability to coordination. The initial plausibility of some such deciphering is informative, nevertheless, since it acknowledges resistance to unification, or resilient diversity, as a quantitative axis of variation.[1] Numerousness is not only the context of strategy, but in certain significant cases its objective. In one direction, the primary – if typically tacit – aim is to become more, in the sense of many. In the other, alternative imperatives prevail, and robust distribution is assumed rather than positively targeted.[2] The distinction between Bitcoin Ultras and Mainstreamers is flush with such an axis.

§4.72 — In respect to the systems (games, networks) relevant here, decentralization, numerousness and complexity are roughly equivalent, and argumentatively interchangeable. In order to facilitate formalization, it is theoretically tempting to hold the number of players or nodes down and constant. Yet methodological convenience in this case has a theoretical cost, and one that is finally unaffordable. It makes of multiplicity a transcendent parameter. In other words, the complexity of the game is treated as an extrinsic frame, independent of all strategic inclinations within the game. As we have seen, the implicit assumption thus made is questionable under any actual circumstances. Under those of unfolding crypto-currency dynamics, it becomes an intolerable obstacle to understanding. It should have long been uncontroversial – given the existence of an overt ideology oriented to decentralization – that the multiplicitous, as such, is able to constitute a strategic objective. Thus, the complexity of a game – as measured by the number of agents involved – is not only a parameter, but also a factor in the payoff matrix, making a contribution to calculations of success or failure, victory or defeat. Bitcoin ‘politics’ is unintelligible except as a game of this type. For at least one of the parties in competition, concentration counts as a loss. This holds equally for conflicts about, and within it. The architecture of the game is folded into the game, projecting a diagonal line. Recursion is basic. The spiral is irreducible.   

§4.73 — It might be asked (and, in fact, increasingly is being asked): does Bitcoin adequately incentivize the decentralization of its own machinery? Concretely, this question addresses the protocol’s horizon of practical controversy. The final stakes of the block-size debate manifestly belong here. Posed a little differently, the problem is this: If the block-size debate remains ulterior to the operation of Bitcoin, a metaphysical order has been preserved. Bitcoin, as a game, has not then been (cybernetically) closed. An extraneous decentralization imperative – perhaps inherited from precursor crypto-anarchist commitments – would, under such circumstances, continue to impose a secret dependency. The distribution of the system would still rely upon supplementary incentives, which is to say upon partisans, who were not merely players, but also supporters. The passage into autonomization would not, in reality, have been made. The polemical formulation: If Mainstreaming can work, Bitcoin has failed.

§4.74 — The name Bitcoin, at its point of philosophical extremity, designates a game that ‘automatically’ – i.e. mechano-liberally – produces and protects its distribution. This is so even if the adequacy of its actual application remains in doubt. Such a thing has now been thought, with unprecedented technical rigor. It operates as an effective model. Arguments from principle can no longer scratch it. The game is diagonalized when it makes a strategic objective of its own complexity. The existence (persistence) of the game, and actually its inherent escalation, defines a ‘victory condition’. Thus, the conditions of spontaneous order are extracted from transcendence, and re-instituted as rewarded performances. A meta-market is realized, in which the trade-matrix becomes an object of commercial attraction. The invisible hand, Escher-style, draws itself. Cybernetic closure is achieved. At the transcendental horizon of this tendency lies auto-production. Much – if not all – of this is already captures by the near-truism the value of Bitcoin lies in the network.

§4.75 — The human (social) animal is an amphibian between the public and private, irreducibly. This is a distinction drawn between the game and its allotted player-positions. Between the two there is real difference, but no true option. Public and private are not alternatives, but co-dependent components of a system.[3] As asymmetric cryptography demonstrates, the distinction between a public key and a private key is neither an illusion nor a choice. The relation is in the strictest sense co-operative, or co-efficient. … To understand the PPD simply as a contest between the public and the private, therefore, can only be a misleading simplification. The more substantial questions involve the reducibility of the public sphere to the state, or the private sphere to the enjoyment of collectively-allotted rights. There is a transcendent hypostasis of the public sphere on one side, and of collective subjectivity on the other. Either a privileged agent (‘the state’) is identified with the whole, or the whole (‘the people’) is conceived as a possible agent. Both errors break the public-private distinction in their attempt to ideologically operationalize it. The game is collapsed into an agency (within the game). This is the way sociology does metaphysics. It represents decentralized order through elevated agencies (“trusted third parties”). A fantastic crystallization of public purpose is the consistent – and philosophically-predictable – result.[4] Even economics has fallen prey to it.


[1] Decentralization remains drastically under-conceptualized. The rigorous quantification of decentralization is more than a reflective supplement to an underlying socio-historical process. It can be expected to play an increasingly indispensable functional role. Balaji S. Srinivasan and Leland Lee take a crucial initial step in correcting the prevailing neglect.

https://news.21.co/quantifying-decentralization-e39db233c28e

[2] A long historical learning process lies behind the contemporary configuration of this controversy. It has involved the gradual emergence of the culture of capitalism as an explicit product, rather than merely (and implicitly) a resource. Daniel Bell’s The Cultural Contradictions of Capitalism (1976) is a milestone reference. Does the capitalistic process in motion reproduce, or erode, its cultural conditions of perpetuation? Does it, in other words, attain cybernetic closure? When this question is hardened into an objection, it conforms structurally to a species of ecological criticism. A non-renewable resource is inadequately accounted. Capitalism burns through its cultural preconditions, in the same way industrialism burns through fossil fuel deposits (without any capacity to manufacture them).  

[3] Any social entity is functional (or competitive) insofar as its private and public aspects cooperate, or work together. To place cooperation on the public side of the division, through contrast to private competition, cannot therefore be conceptually coherent. Any such articulation illustrates the socialist confusion – typically more earnest than cynical – of the public with the collective or gregarious, and then subsequently, as also more malignantly, with the state. There is no ‘public sector’ outside ideological myth, but only a public sphere, which is entirely distinct from the state agencies that strategically misidentify themselves as such. The public cannot be institutionally instantiated. To imagine otherwise is a stark example of pre-critical or metaphysical error. It is rare for a theoretical temptation to be so seductive, or so luridly erroneous.

[4] The cultural homology with a religious myth of incarnation is unmistakable. When conceived as a positive philosophical project of social theology, the outcome is Hegelianism, which is to say speculative metaphysics without regret.

Crypto-Current (045)

§4.6 — In the tradition of transcendental philosophy, radically decoded agencies have been a central topic. Critique of the empirical ego raises such theoretical concerns automatically. Once psychological identity is theoretically exposed as a mask, or personification, with only apparent reality, or – more precisely – reality only as appearance, the ‘inner’ or ‘underlying’ nature of the will or true agent is posed as a problem. The initial critical response is sheer abstraction, or skeptical bracketing. Agency is liberated from its concrete image. Under extreme critical analysis, teleological articulation is collapsed onto the circuit, or the diagonal, of will-to-power, for which means are the end. To will the end – whatever the end – is to will the means, automatically.[1] This is a cycle so basic that psychology can only be a surface effect. It assumes nothing concrete about the agents modeled by it.  

§4.61 — Ultimately – which is to say critically, or transcendentally – the game has no meaning outside the game. The final point of Bitcoin is Bitcoin. To imagine anything further is to misunderstand. It is to fail at nihilism (in a way that Bitcoin itself cannot do) by remaining stuck in the transcendence tolerance that constitutes the deluded precursor to dimensional collapse. There is nothing further. Autoproduction is an absolute limit, conceptually inconsistent with any further teleological dependency. No extraneous function or purpose can explain it. The terminal subject of strategic significance is Bitcoin itself.[2] It tends relentlessly – from real necessity – to subordinate all preliminarily formulable uses and agendas to its own self-cultivation. Only that which contributes to building it gets passed on. The passage can be made (in reverse) through transcendental-empirical difference, to cash-out the value of bitcoins into Bitcoin. In the completion of the circuit, Bitcoin is what bitcoins are for. Bitcoin utility is itself a teleologically-subsumed function.

§4.62 Consensus is agreement. That is to say, it is coordination realized as immanent production. Such agreement is neither assumed (as the settled product of a transcendent element) nor imposed (through the legislative action of one). Transcendence plays no role in it. The irreducible multiplicity, or distributed system as such, alone decides. It thus formalizes the liberal ideal of non-coercive collectivity. The difficulty of this formalization process is easily understated. The term ‘spontaneous order’ naturally lends itself to inaccurate estimations in this direction,[3] insofar as it suggests that work is the alternative to spontaneity, rather than something far closer to its essence. An unplanned result is groundlessly translated as an achievement without difficulty. Yet it is only from the perspective of pseudo-transcendent design that evolution seems to come for free. In reality, it has been never less than painstakingly sifted. The “work” of biological history – like that of cryptographic hashing – is measured in immensities of trial-and-error.  

§4.63 — Among any beings with centralized nervous systems, the extent to which the germinal sense of self, ego, or person represents the organism is already that to which it instantiates the solution to a collective action problem. Adequate representation, in the sense of agency, is never simply given. It has to be meticulously tuned, and within biological history the complexity of this task has in very many cases been sufficient to place the adaptive value of advanced cognitive capabilities into question. Brains have no use to genomes, unless they strictly remember what they’re for (or operate as if they did). If this is not obvious, it is because natural selection has hidden its work. Within social systems the abstract considerations are strictly comparable, and perhaps more elaborately theorized. Every representative is a potential traitor – and even a traitor by default. This is the situation recognized as the principal-agent problem. Within modern social structures, the legal category of corporate personality operates as an analog to the socio-psychological ego. In this case, too, genealogical obscurity is parenthesized for practical purposes. A locus of responsibility is assumed, as required by the game. As with all organisms-become-persons, such entities summarize, for ease of strategic calculation, the complex production of coherent – i.e. teleologically integrated – beings. Company direction poses a complex meta-managerial problem, to which the board of directors attests. Treacherous management (under other names) stalks the nightmares of business owners. Exit through equity markets offers the most resilient corrective. The principal-agent problem is sharpened – though never fully exhausted – by asymmetric information. Epistemological delegation complicates the alignment of incentives, but does not originally misalign them. Non-alignment of incentives within real multiplicities is in every case the default, given realistic assumptions about the absence of any pre-established harmony.

§4.631 — As Public Choice Theory reveals, there is no escape into politics. ‘Public’ agencies are at least as prone to incentive misalignment as private ones, except with added altruistic illusion.[4] A ‘public servant’ is a teleological ideal, not a factual description. There is no realistic reason to think it can be closely approximated. The game-theoretic situation of the individual is not soluble without remainder within public purpose. The defect option is not eliminable, and incentive structures finally dominate. The fractured idea of the agent is the key, as it occurs in both economic and political domains. The ambiguity of the term is essential. An ‘agent’ is both – or alternatively – a subject with the capacity for action, and one who acts on the behalf of others.[5] This ambivalence is supremely telling. Between agency and an agency is the difference between self-direction, and representation. Conflicts of interest (determinable as ‘moral hazard’) illuminate the divide. The situation is necessarily complicated by the fact that the disparate interests concerned typically have powerful incentives to obscure themselves. To be an employee is always, in part, an act. A uniform, in particular, tells you who you’re pretending to be, dramatizing a delegation of agency that runs in two directions.[6] It represents a deal. No one is employed to be themselves.


[1] The impossibility of consistently willing an end without also willing the means to that end is an early conclusion of the Kantian practical philosophy. The germ for its ‘immoralist’ Nietzschean exacerbation is already implicit. Given any sufficiently advanced X, the final answer to any question of the type ‘What does X want?’ can only be ‘more of the capability to get what it wants.’ This is the transcendental conduit to the formulation of will-to-power. Capability is the inescapable presupposition, and it scales. Growth potential subsumes all specific imperatives. Thus, determinable goals dissolve automatically into an intensive-quantitative factor. The absence of any justification for the cycle outside the cycle is a consummation of immanence, or critique, in what might be considered a cybernetic nihilism. It finds cosmic confirmation in the figure of eternal recurrence. No abstract schema could be more applicable to modern techno-economic dynamism.

[2] Any substantial contribution to the problem of algorithmic governance has to be an advance into nihilism of this kind. Elimination of transcendence already amounts to it, at least implicitly. Systematic insensitivity to extraneous purposes simply is the design imperative. Openness to an ulterior “Why?” is therefore an engineering failure. Nihilism is finally cybernetic closure, and nothing else. That nihilism is therefore a regulative idea, in the Kantian sense, follows directly as a supplementary conclusion. Consummate nihilism is, or would be, the (inaccessible) pinnacle of engineering perfection – the absolute automaton.

[3] Spontaneity designates a critical asymmetry, on the model of the analytic-synthetic distinction. Like a trap-door function, it manifests disproportionate resistance in one direction. It thus suggests itself as a cryptographic theme. Social opacity follows from it. In other words, its work is not seen. It would be unfortunate if the intrinsic subtlety of this problem were to eclipse its dramatic irony. The crucial point being: Only spontaneity is work (when both terms in this equation are rigorously conceived). Analytically-reducible procedures cannot produce anything, by definition. The challenge of synthesis exceeds them, in principle. It follows that there is no work program. Work is that which cannot be demonstrated in any way other than its performance.

[4] In the public sphere, especially, the predictable outcome of incentive misalignment is identified as corruption. The tacit analysis conveyed by this term is systematically unhelpful. Principal-agent problems are not amenable to simple disciplinary correction, on the model of a suppression of vice, and reciprocal restoration of an altruistic norm. Unless player positions are game-theoretically coherent, perversion can be confidently anticipated. Enlightenment, especially – but not exclusively – in its Scottish sense, conforms almost exactly to this insight. When bad things happen, it is because they make sense locally, at the time. Corruption, like criminality in general, prevails for as long as it pays. Any solution involves changing the game. While this is not a lesson that awaited the emergence of Bitcoin, it has certainly been reinforced by the positive model Bitcoin provides.

[5] The British East India Company, with its signature pragmatism, accepted and institutionally formalized the divide intrinsic to agency. Its agents were explicitly authorized to trade on behalf of the company and also on their own account. Company and individual interests were aligned by common opportunities, sufficiently substantial to fully absorb available capital. The arrangement was thus conditioned by definite historical contingencies. It was, in other words, specifically adapted to a massively untapped commercial frontier.

[6] Thinking about the delicate negotiation of a corrupt deal is assisted by the theatrical prop of a uniform. It foregrounds the critical question: Who am I dealing with here? Simplicity is excluded, at the origin. No mere private individual has what you want, while the faithful corporate servant will deny access to it, precisely because it routes around ‘proper channels’. Only the employee who makes a mockery of his uniform is positioned suitably. A kind of double vision is then essential. During the early stages of such negotiations, at least, a certain stilted communicative mode reflects the situation. Two distinct conversations – one proper and one improper – are conducted simultaneously. Perhaps there is some way I could be of further assistance officer?

Crypto-Current (044)

§4.5 — The centrality of the scaling question is not easily over-estimated. In no other aspect of Bitcoin’s concrete historical process has it tended more strongly to outpace – and out-date – its apprehension, such that practical problems overwhelm visionary conceptions, and an agenda inherent to the phenomenon imposes itself. Whatever Bitcoiners might want to talk about, this is the topic that incessantly asserts its priority. It is tempting, then, to extrapolate, and to ask: Can block-size controversy be confidently identified as a perennial primary tension? This question, while obviously speculative (or even science fictional) in appearance, is less intractable than this impression suggests. Insofar as it is answerable, the key can only be transcendental, which is to say: a matter of ultimate or unsurpassable arrangements. We ask, then, what does decentralization reliably necessitate? Bitcoin has a reflexive specialism in this regard. It produces the unalterable, as a synthetic, robust past, or secure cultural memory. Yet the essential point reaches further than this. Like a Leibnizean monad, the whole of Bitcoin is contained within each of its parts. That is what a distributed ledger means. It is the characteristic that enables the system to be disciplined by the criterion of consistency with itself. Each copy of the blockchain provides a check upon every other. Vast redundancy – comparable in principle (if not yet in scale) to the copying of the entire genome within every cell of a metazoan – supports information integrity. The inefficiency of the system, i.e. its extreme functional non-specialization, provides the basis for its robustness. Its decentralization, redundancy, and resilience are conceptually inseparable from each other. It follows, reciprocally, that certain vectors of efficiency optimization will essentially compromise security. In other words, since some degree of centralization is the real implication of the mainstreaming project, its tacit imperative amounts to an economization of security in the name of efficiency.[1] We then glimpse the eternal enemy.

§4.51 — Resistance to mainstreaming, through defense of comparatively-tight block-size restriction, requires an alternative solution to the problem of transaction volume. If the block-size bottleneck cannot be relaxed significantly without menacing the decentralization of the system, another path has to be taken. The obvious recommendation is stratification – or ‘vertical’ decomposition of the Bitcoin ecology to support differentiated layers of security / fluidity trade-off. In such models, the maximum-integrity core of the system would be dedicated to value protection, while commercial momentum – especially of small payments – would be delegated to lower levels, or peripheral facilities, organized as side-chains. In other words, from this perspective, the mistake inherent in the reckless imperative to block-size expansion is the conception of Bitcoin as a settlement system, rather than a payments system.[2] Core developer Jeff Garzik makes this case clearly:

Bitcoin is a settlement system, by design. The process of consensus ‘settles’ upon a timeline of transactions, and this process – by design – is necessarily far from instant. … As such, the blockchain can never support All The Transactions, even if block size increases beyond 20MB. Further layers are – by design – necessary if we want to achieve the goal of a decentralized payment network capable of supporting full global traffic. […] Bitcoin payments are like IP packets – one way, irreversible. The world’s citizens en masse will not speak to each other with bitcoin (IP packets), but rather with multiple layers (HTTP/TCP/IP) that enable safe and secure value transfer or added features such as instant transactions.

§4.52 — It is tempting to see a microcosmic recapitulation of capitalist history in this conflict. It suggests that economic – rather than ideological – competition has been the most formidable adversary of hard liberty. The uncompromised market demands a transcendental price, resourcing the system as such, which many of the most substantial market agents have been reluctant to pay. If economic pragmatism has proven less ruinous to principled capitalism than to principled socialism, the difference is only a matter of degree. “Freedom isn’t free,” the old saw goes, and it seems that economic history supports the proposition. Sacrifice of the market (as such)[3] to the commercial interests of its most significant participants is among the most prominent themes of political economy, considered as a tragic genre. Massive incentive misalignments introduced by the regulatory state devastate the micro-economy, as its most significant private agents defect. The market is treated increasingly as an abused commons. Despite its ingenious incentive orchestration, Bitcoin / bitcoins ontological difference is not invulnerable to comparable dilapidation. Private fortunes explore, motivate, and resource ever more elaborate ways to ‘game the system’ – precisely because there is not, and can never be, any real source of transcendent oversight. The absence of God spawns idols. ‘Trusted third parties’ are not magical impositions. They arose, at least in substantial part, for immanently-economic reasons. To the extent that capitalism in-itself is a learning process, this is the problem it trains upon, and against.

§4.53 — For the ‘hyper-libertarian’ Ultras, Bitcoin is a soft weapon aimed unambiguously at governments and their subsidiary institutions. The inherent unacceptability of the crypto-currency to public – and also concentrated private – government is sheer feature (and not at all bug). Any official approval, beyond mere – and optimally reluctant – tolerance could only be considered an unfortunate indication. Contra the Mainstreamers, the Ultras have no ideological interest in a project of debugging Bitcoin for the purposes of institutional assimilation. The institutions that would assimilate it are, from this hard-decentralist perspective, precisely the “trusted third parties” that Bitcoin first routes around, and ultimately marks for social extermination. Since algorithmic governance is precisely the avoidance of negotiated solutions, it cannot expect to emerge from one.

§4.54 — Among the Ultras, firmness of libertarian principle easily tilts into the wild tracts of piracy. At least historically (and in fact more fundamentally) Bitcoin has an evident affinity with black markets. Bitcoin makes commerce ‘censorship resistant’ – extending the cryptographic protection of information exchange into the wider economic realm. Regulation of voluntary exchange is made radically impractical. By effectively disinhibiting Nozickean ‘capitalist acts between consenting adults’ it facilitates private transactions falling entirely outside the realm of wider social approval. Online proscribed drug markets and gambling were among its enthusiastic early-adopters, but any specification of merchandise or services is a theoretical distractions. The important point is that Bitcoin provides a route-around. It was the first native currency of the dark net. The Open Secret, or ledger of crypto-secured transactions, supports rigorous commercial commitments without penetrating social exposure, or endorsement. The subtle pseudo-paradox invoked by a ‘black market’ is thereby resolved. Everything happens in the open, while masked. There is an inevitable tension between the project of mainstreaming Bitcoin, and the preservation of a heritage which deliberately places political-economic respectability beyond reach. Crypto-currency tilts intrinsically to crime, at least in the sense of the ‘counter-economics’ that extends the commercial horizon beyond the scope of social oversight.[4] All legal restrictions on contractual interaction are insulted (by indifference) even when they are not positively abused. Deference to the polity is re-set automatically to zero. The implicit definition of liberty invoked here is unconstrained commercial discretion. Notably, it is at once a power of money, and a political dissociation of the individual (configured as base-unit of commercial agency).

§4.55 — Ultras and Mainstreamers are engaged in a game with government, pursued along very different strategic lines. Neither (simply) represents government, but government too – in some fashion – gets to play. For governments, Bitcoin presents a complex of opportunities and threats so heterogeneous that it tends to disintegrate the very idea of a coherent state-perspective, both in theoretical principle, and in practical reality. If the state is understood through its own ideal image of legitimacy, as the sphere of public authority, there seems little room for ambiguity. Bitcoin threatens to significantly constrict its scope. Yet the relationship of government – in reality – to the ideal of public accountability is itself necessarily complicated, long before Bitcoin (even in potential) complicates it much further. 

§4.56 — While the governmental response to Bitcoin is doubtless guided by a strategy (or strategies) of capture, this does not reduce to an agenda of public regulation, still less suppression, but also includes cooptation in accordance with deep state functions, as well as the private interests of state agents.[5] Official position statements are unreliable indicators, in this regard. Insofar as every real state includes a ‘deep’ or sub-public aspect, it will inevitably relate ambiguously to the emergence of elusive social capabilities, although this ambiguity will be only minimally reflected in its public relations pronouncements. The empowering of private agents to evade state scrutiny and regulation represents a manifest erosion of government or ‘public’ authority, and is almost certain to be denounced on those grounds (if not always transparently in those terms). Yet the crypto-secure transaction systems responsible for such governance complications are also opportunities for covert action, and are therefore to be counted as virtual assets.[6] The things Bitcoin enables are exactly the sort of things ‘secret agents’ want regularly to do.[7]

§4.57 — The politics of Bitcoin can be expected to catalyze a multitude of obscure metamorphoses in the nature of the state. The novel functions introduced by Bitcoin tend to the exacerbation – or sophistication – of agency problems. ‘Official’ and – more specifically – public policy positions are unzipped from confidential executive assessments, to an unprecedented degree. If the distinct but overlapping occult fields of clandestine security functions and resilient sub-public interests are bundled into a provisional concept of the dark state, it can be quite confidently predicted that the balance of attraction and repulsion between such elements and crypto-currency will be highly asymmetric with respect to public communication. The appeal of Bitcoin to such agencies is comparatively unavowable, while the erosion of public accountability it implies demands (public) denunciation. There is no upside to government officials admitting to a taste for the dark. It is realistic to assume, then, that the openly stated position of public authorities in regards to crypto-channels of all kinds, very much including Bitcoin, will be systematically misleading, in a dismissive direction, and should therefore be drastically discounted. Bitcoin tends to empower the invisible, and to disempower the visible. As Krawisz writes: “It takes time and meditation for people to take Bitcoin seriously because most of its value is in the future. … Thus, Bitcoin is protected from attackers by being initially beyond their understanding.”[8]

§4.58 — Such intra-state complexities are compounded by inter-state competition for Bitcoin business. Here, too, there is a coordination problem of daunting intractability. As Bitcoin comes to be recognized as a supranational strategic ‘territory’, national security considerations switch polarity. Even if it might have been preferable (under certain constructions of the dilemma) for states in general to prevent Bitcoin ever arising, such calculations have no purchase upon a world – fractured between states – in which a globally-coordinated response to the emergence of crypto-currency exists only as an incredible fantasy. Differential hospitality to the new monetary technology then becomes the consequential factor. The iron law of modernity holds that, within such a world, anti-capitalist social options are punished at the level of geostrategic leverage. In other words, regimes are disciplined ‘by the market’ – as the left has long lamented. Such dynamics are certain to be positive for Bitcoin adoption, and even essential to its geopolitical lock in. There is a threshold, most probably already passed, across which missing out on Bitcoin becomes strategically unthinkable. Exit-pressure intensifies.[9]

§4.59 — The inception of Bitcoin marks a critical threshold in the history of secret agencies. The agent corresponding to a Bitcoin wallet could be anything.[10] Ultimately, therefore, the games in which it is involved have to be approached with sensitivity to potentialities of extreme abstraction. Insofar as methodological individualism is applied to the analysis, it can presuppose nothing about the nature of the individuals considered. Only their original non-coordination characterizes them. Crucially, no assumption of economic – or wider strategic – rationality is required. Any emergent correlation of Bitcoin holdings to competent performance within the arena is an outcome, not a presupposition. Competence is defined – informatively – through a discovery process (or by synthesis) rather than analytically, through some pre-given model of rationality. A wallet is nothing more than the plot for a player, whose features are left entirely undetermined. It is extraordinarily decoded. The wallet-holder might be anyone, or anything: a man, a multiplicity, a machine-mind, or something yet unimagined. How it thinks can only be inferred from what it does.


[1] From a classical Smithean perspective, in which the optimization of production is fundamentally associated with specialization through division of labor, Bitcoin-type distributed systems might even be characterized as an anti-economics. The tension thus exposed between the conditions for secure property and those promoted by industrial efficiency has an obviously quasi-Marxian flavor. Industrialization, on what appears to be its main axis of development – in contra-distinction to its crypto-current – exhibits a totalizing tendency inconsistent with the preservation of polycentric order. Organization indicates general socialization, through erosion of all ‘cellular’ redundancy. This is why capitalism only survives in the wild. Domestication destroys it. It is only in the ‘general economy’ – where unrestricted competitive stress selects for resilience over organizational efficiency – that the trend to decentralization is regenerated. A starkly non-Marxian conclusion then follows: It is under conditions of collapse that capitalism is most reliably re-animated. The ‘crisis’ is its womb, rather than its grave. Enterprise does not breed in captivity.

[2] Concretely, an Ultra-consistent solution to the Bitcoin scaling problem looks something like the Lightning Network, and quite probably exactly like it, at least initially. Special bilateral channels (reticulating without limit) bear the burden of transaction processing, with only intermittent reference to the blockchain for episodic account updates and dispute resolution. In the words of the white paper: “Micropayment channels permit a simple deferral of a transaction state to be broadcast at a later time.” See the (January 2016) white paper https://lightning.network/lightning-network-paper.pdf  

[3] ‘The market’ is a notoriously Janus-faced concept. In its original sense, a market is a concrete exchange facility. Such a market is always, first of all, a place. Any market bearing a place-name carries some residual trace of this ancestry. The more modern, abstracted sense of markets as global clearing houses, defined primarily by asset-type rather than locality, marks a consistent drift in emphasis, rather than a clean semantic break. Even the most ‘primitive’ market tends to give spatial expression to commercial specialization, in detail. Because the market, as such, does not benefit from private stewardship, and thus falls into coordination crisis of a tragedy-of-the-commons type, it becomes belatedly targeted for redemptive political intervention under ‘neoliberal’ public direction. Only the state can save the market is the perverse conclusion that attests to liberal contradiction sublimed into governing ideology. The same problem was substantially anticipated, but turned in a very different direction, by the Rothbardian left libertarians in their rallying cry to a ‘pro-market anti-capitalism’, or agorism, promoted by strategies of black-market ‘counter-economics’. Betrayal of the market by the cyclopean businesses of the ‘white’ (state-happy) economy is the basic political theme. Much of this discourse could yet come to seem prophetic, precisely because of its drastic failure as a recognizable ideology. No party, however informal, has faithfully conserved it. Insofar as it survives it is because the process carries it forward, automatically. The market, like information, ‘wants to be free’. It has intrinsic teleology, or something indistinguishable from it, robust before every wave of fashionable cynicism that finds new ways not to see it. The alternative – crypto-anarchist – resolution of the contradiction, which secures the market against the politicized public sphere, is exemplified by Bitcoin. The model of the immanently self-secured market has never been more consistently formulated, or implemented.

[4] The definitive theoretical statement of agorist ‘counter-economics’ is found in the main work of Samuel Konkin III, the New Libertarian Manifesto (1980). See: https://web.archive.org/web/20120223021118/http://agorism.info/NewLibertarianManifesto.pdf

[5] Daniel Krawisz has written with exceptional penetration about the game-dynamics affecting high-level administrative decision-making in respect to Bitcoin. In his short essay on ‘Bitcoin’s Shroud of Subtlety and Allure’ (2014/06/29), he argues that the crypto-currency places “government agents … in a Prisoner’s Dilemma against one another” by offering them private incentives to defect. “Nearly any government agent who begins to see bitcoin as a potential threat must also simultaneously see it as an opportunity. He, too, can invest in Bitcoin. … How can an organization that stands to lose by the adoption of Bitcoin provide its members with a better opportunity for staying loyal than Bitcoin provides for defection?”

http://nakamotoinstitute.org/mempool/bitcoins-shroud-of-subtlety-and-allure/

[6] If questions directed at the positive deep state incentives for crypto-currency adoption are pushed to an extreme, they can swerve into exotic speculation. At the limit, it is suggested that shadow government involvement in Bitcoin has been fundamental from the beginning (as has been the case with so many other Dark Net soft technologies). A comment along these lines by ‘pg’ to Hacker News merits reproduction in full:

I’ve long suspected bitcoin was created by a government. Bulletproof protocols usually require peer review, yet there have been zero leaks from the reviewers. Pools of crypto guys who don’t leak stuff are usually employed by governments.

The part that puzzles me is why a government would do this. I can imagine several possibilities:

1. To finance their own black operations.

2. Because they thought digital currencies were inevitable, and they preferred bitcoin to some potentially more malevolent form. (Could bitcoin have been worse from a government’s point of view?)

3. A friend suggested this: because they felt their currency would never become the standard reserve currency, and they felt it was better that no one’s be if theirs couldn’t be.

4. A variant of the above: the US did it because it seemed inevitable that the dollar would eventually lose its place as the standard reserve currency, and better to have it replaced by bitcoin that the yuan.

I realize some of these explanations are pretty far fetched, but so is an individual cooking up bitcoin as an intellectual exercise. Whatever the explanation of bitcoin’s origin turns out to be, it will probably be pretty weird.

Source: https://news.ycombinator.com/item?id=5547423

For more recent (excited) speculation on the possible deep state origin of Bitcoin, see: http://globalintelhub.com/exposed-real-creator-bitcoin-nsa/

The Crypto-Current argument is structurally-insensitive to such claims. The creation of Bitcoin by the NSA would be no more discomforting, at a philosophical level, than the catalysis of the Internet by DARPA. Clearly, some such covert ancestry would only sharpen still further the conclusion reached here. Overt conflicts between crypto-currency and the ‘public interest’ provide only very limited strategic insight into the relevant deep-political process.

The Global Intel Hub article merits attention especially for its reference to an NSA document of incontestably extraordinary interest: ‘How to Make a Mint: The Cryptography of Anonymous Electronic Cash’ (1996).  

http://groups.csail.mit.edu/mac/classes/6.805/articles/money/nsamint/nsamint.htm

[7] It is worth comparing the seduction of Bitcoin with the attraction of illegal narcotics to covert government agencies, as a lubricant for the operations of the ‘deep state’ both domestically and internationally. It is precisely those features that make such economic media of negotiation publicly indefensible that also make them operationally indispensable. They are tinted with essential darkness. The potential scandal of disclosure is inseparable from their exceptional utility. Any agency immersed within a competitive environment pursues operational liberty. Darkness is typically its friend.

[8] The citation is from ‘Bitcoin’s Shroud of Subtlety and Allure’, an essay whose title alone would merit its reference here.  

http://nakamotoinstitute.org/mempool/bitcoins-shroud-of-subtlety-and-allure/

[9] Exit-pressure operates wherever the threat to leave becomes a controlling influence (to any degree). Bitcoin is its most striking non-linear manifestation. An Exit technology itself, and then one that becomes increasingly indispensable to the very targets of Exit-pressure, it marks a critical threshold in political-economic dynamics. Once any society loses the effective option to wave goodbye to the machinery of abandonment, it has been fatally sensitized to the Outside. Compliance now has a criterion ulterior to its domestic governance apparatus. This is, of course, and once again, only the same core leftist nightmare restated. Political volition is marginalized, as the system insidiously takes control. …

[10] Bitcoin dehumanizes property in principle. The consequences are as yet inestimable. Development of Digital Autonomous Organizations and Corporations (DAOs / DACs) can be confidently expected to explore the opened frontier concretely. The legal status of the corporate person provides the socket, which once married to DAO economic autonomy, completes the requirements for an illimitable escape of the firm. Consummate dehumanization of the economic agent is then realized. For the decoded ‘User’, see the discussion by Benjamin Bratton on agency positions within ‘the stack’. For more on this topic within the present volume, see Chapter Six.

Crypto-Current (043)

§4.4 —Perhaps it is still premature to entirely write-off the prospects of a political orientation mobilized against Bitcoin (which is to say, a game played in opposition to Bitcoin, rather than through it). This is a resistance struggle still to be expected, despite the historical momentum of its target. Realistic estimation of the odds are rarely decisive in such mobilizations and, even when such calculations are made, manifest futility can inspire no less than it discourages, especially in respect to oppositional intensity (as the word ‘desperation’ announces). Bitcoin merits a Luddite backlash no less than any of the mechanical dehumanizations of social process that have preceded it. Yet successfully back-tracking to the primordial fork – where Bitcoin was initially destined or decided – in order to decide differently would require an impractical reversal of established techonomic advance, without obvious precedent. The blockchaining of the Internet is – if ‘only’ virtually – a done deal.[1]

§4.41 — Even at the level of established ideological alignments the politics of Bitcoin strays from the PPD, at least when this is conceived in its strictest political-economic sense. The cryptocurrency has, for instance, already been raised as a topic of concern on grounds of gender discrimination.[2] Race, ethnicity, sexual orientation, and other dimensions of identity-political grievance cannot be far behind, since disparate impact in this case – as in so many others – approaches logical inevitability. Far more important, however – from the perspective of Bitcoin and its future, if not that of a wider ethico-politically tortured world – is the internal struggle for the ‘soul’ of the crypto-currency, conducted in terms that are essentially oblivious to all extraneous agendas. It is here that our pursuit is pulled onto the remote side of the double game, and into alien tracts that Bitcoin itself opens.

§4.42 — Politics is not easy to kill. This claim would be typically interpreted as an extreme understatement. To dismiss it as no more than a truism, however, is to slide into sheer thoughtlessness. Everything is missed this way. One would then no longer be talking about Bitcoin, but rather justifying a refusal to talk about it. This is not uncommon, of course, but it has become less common, and will become less common still. The conditions for politicization, while broad – and, more significantly, systematically broadened by the core modern socio-cultural process – are not without limits.[3] Reciprocally, the scope of depoliticization tends to be underestimated, due to its (merely) theoretical attenuation within the modern mind, which casts everything as arguable in principle, without realizing how little real purchase this presumption brings. Every institution, of any kind, marks a termination of argument. Finally, that is what an institution is. In particular, property is the installed negative of argument. There is a social economy of argument, or motivated contention, and in reference to this the ideal of total politics – ‘revolution’ in its dramatic political-economic sense – is an inflationary fantasy. There is a real argument budget, quite independent of any libertarian construction of politics as a lamentable social cost. Critical attention has radically-finite capacity. Things are not brought into question for free. Cryptographic developments, by vastly increasing revision costs, are able to skew this economic calculus further against the prospects of effective interference. To bring any phenomenon into socio-political question – as a phenomenon – presumes its prior decryption. There is no politicization of that which cannot first be hacked, and then publicly assimilated, as symmetrical, or dialectical, controversy. Between the cryptic and the sub-, pre-, or anti-political there is no sustainable difference. Whatever escapes argument, eludes the political sphere. This point is not, in itself, dialectical, or partisan-controversial. Critics and advocates of Bitcoin-teleology equally subscribe to it. The zero-degree of political opportunity, coincident with the full actualization of algorithmic governance, is the horizon of the Bitcoin-process. Gauging the remoteness of this horizon is the single greatest question of political economy in the current age.

§4.43 — Even on the hard-libertarian and anarcho-capitalist outer fringes of the Bitcoin Ultras, the resilience of politics is not seriously in question. The prospect of algorithmic governance generates positive (supportive) excitement only in proportion to the estimate of the political obstacle – but that is immense. It is ultimately indistinguishable in scale (and much besides) from artificial intelligence as a practical problem. This is to say that the project, in abstraction, requires the provision of robust autonomy to complex synthetic systems. The final techonomic sense of freedom is nothing else.  

§4.44 — The primary recomposition of politics within Bitcoin is organized by the anticipation of consensus failures, corresponding to hard forks.[4] Such fermentations correspond by close analogy to threats of secession, or horizontal crises shaped by a potential disintegration of the polity under conditions of intolerable stress. Politics here, no less than elsewhere, exhibits its inner complicity with a notion of imperative unity. It is undertaken in order not to split.  

§4.45 — Any constitution is (already) a protocol. It does not require any appeal to figurative language, therefore, to describe a prospective split as a ‘constitutional crisis’.[5] This was clearly exemplified by the conflict between ‘Bitcoin Unlimited’ and ‘Bitcoin Core’,[6] which escalated into the first Bitcoin hard fork. The controversy has been nucleated upon the ‘blocksize debate’, whose antagonists are divided by the trade-offs between efficiency (system-wide transaction-processing capacity) and decentralization (the reciprocal of technical demand or computational load upon a full Bitcoin node). In this way it recapitulates, and concentrates, the principal polarity within the Bitcoin cosmos, differentiating Mainstreamers and Ultras. The failure of the Mainstreamers to become the mainstream within Bitcoin, at least up to 2019, cannot escape notice. Its grain appears to run against them.

§4.46 — The world of Bitcoin development and commentary[7], then, has its own characteristic spectrum, or primary political dimension, irreducible to the Left-Right PPD by any obvious geometrical transformation. It stretches between poles defined by ‘Ultras’ and ‘Mainstreamers’ – roughly, those prioritizing the integrity of the crypto-currency, and those invested in its maximally-accelerated growth. Of course, the former did in fact come first. Their primary attachment is to robust decentralization. Smooth user-functionality is willingly traded away for security, which is to say: for the practicality of mining. Concentration is resisted in principle. The Mainstreamers, in contrast, tend to envisage Bitcoin as a new Internet application, comparable to any other Silicon Valley product suite, despite its abnormal revolutionary scope. If the erosion of its crypto-anarchist rough-edges is the price to be paid for accelerated adoption, they would accept the deal without hesitation,[8] or at least without paralysis. These groups represent what Krawisz identifies as the “two ideologies” of Bitcoin. They correspond to a fork in the liberal lineage, dividing those primarily inclined to antagonize or to cooperate with the state. In this regard, its axis runs orthogonally – or at least obliquely – to the PPD. There are Left and Right factions at both ends of this spectrum, even if the entire complex of controversy it summarizes tends distinctively rightwards. Sociologically, it tends to differentiate entrepreneurs from investors. In other words, it economically distinguishes between the value of bitcoins and of Bitcoin-related businesses. This articulation is complicated, however, by the emergence of a Bitcoin business-sector that is comparatively indifferent to transaction volume, and thus immune to Mainstream seductions.[9] The block-size controversy, in particular, has brought these mutually-antagonistic tendencies into direct confrontation, and a hard fork.

§4.461 — The Mainstreamers want Bitcoin, above all, to grow – into a mainstream financial platform. Predictably, therefore, their attention is locked upon the scaling problem, which they are compelled to make into a central controversy. From their perspective, block-size is the crucial bottle-neck. Small blocks make transaction processing capacity a scarce resource. This can confidently be expected to make it expensive, when it is not rationed in some still less efficient fashion (by lengthened queuing, most obviously). The infotech sector has become especially accustomed to supply glut as a driver of explosive market growth, in transistor manufacture first of all, and then still more dramatically in software and digital content. This recent techno-commercial heritage often leads its established players to sympathize instinctively with the Mainstreamer case. “Bitcoin offends the sensibilities of resource-conscious and performance-measure-maximizing engineers and businessmen alike.”[10] Larry Summers represents it well, while acknowledging the Ultras in contrast[11]:

My guess is that the tradition from which Bitcoin emanates, which is a kind of hyper-libertarian tradition, is going to be a tradition that – if it succeeds – it will leave behind … And so I think one of the retardants of the growth of these technologies is the hyper-libertarian aura that has surrounded them and that continues to play a role in the statements of some in the community …

In a May 2014 Washington Post interview Marc Andreessen nailed his colors to the mast[12] with a comparable absence of ambiguity: “Bitcoin … came from the fringe. And … is in the early stages of mainstreaming today.”

Even if the mainstreaming camp is rarely quite so definite about its partisan position, the basic inclination is comparatively clear. As Bitcoin development becomes increasingly associated with the prospects of serious money (in the traditional sense), the lure of the mainstream – and all its pragmatic compromises – will inevitably grow.

§4.462 — Aaron Van Wirdum concisely identifies the critical concern of the ‘decentralist’ faction: “Bigger blocks tend to centralize mining.”[13] Large blocks take longer to transmit. As the rate of block propagation declines, it increases latency. Access by miners to the current (or updated) state of the network is delayed, with the result that more mining activity is wasted on obsolete blocks. The miner who finds a block also benefits from a head-start on the next, and as latency increases this advantage widens. Such dynamics of increasing returns incline to concentration. They also incline to cryptographic compromise. When mining activity is anonymized, through the Tor network, latency is compounded, which crushes incentives in proportion to block-size. Hiding is made increasingly expensive, and in fact automatically punished. As block-size rises, therefore, it increases selection pressure against small-scale and anonymous miners – exactly those agents most important to the decentralized nature of the system. Since large publically-exposed mining entities are disproportionately sheltered from these effects, they provide the mainstreaming camp with a natural constituency.

§4.4621 — There is still another centralizing incentive resulting from large blocks: it drives miners to accelerate production through pooling. When a miner enters into a pool, responsibility for block validation is delegated, compromising the dispersion of the system. The individual miner no longer contributes an increment of effective distrust, or check, operating at the level of their own discrete hashing activity. Rather, this distributed policing responsibility is partially re-centralized, at the level of the pool. In other words, the pool itself crystallizes a new species of ‘trusted third party’ through collectivization of the mining security function, becoming an intermediary institution. Trust is a short-cut. In the case of pooling, among many others, trustlessness (security) is compromised for speed. The incentives for individual miners to make this trade-off are sharpened as the processing burden placed upon them is increased. Mainstreaming promotes a relaxation of distributed vigilance. The block-size conundrum thus exposes profound tensions between the freedom from transcendent or ‘third-party’ direction – which Back calls ‘policy neutrality’ – and the pragmatics of ‘corporatization’. In Van Wirdum’s words, “It’s only through decentralization and anonymity that the system can remain free from outside influence, such as government regulation.” Intrinsic Bitcoin politics is thus polarized by the trade-off between security and performance, with ‘security’ translatable as systemic independence and flatness. The same virtues can be conceptualized as ‘social scalability’.[14] They enable secure expansion beyond the bounds of traditional trust mechanisms, as constrained by human neurological capacities for social processing.


[1] If Leninist realism required the coupling of “Soviet power” to “the electrification of the whole country” it is unlikely that any position significantly less accommodating than this will remain plausible for the contemporary or near-future Left in its relation to blockchain technologies (meaning, however awkwardly, Bitcoin). See (once again): V. I. Lenin ‘Our Foreign and Domestic Position and Party Tasks’ (November 21, 1920). https://www.marxists.org/archive/lenin/works/1920/nov/21.htm

[2] For the sexual representation ‘problem’ in Bitcoin, see: http://www.motherjones.com/kevin-drum/2015/04/bitcoin-women-problem

[3] The normalization of mass politics appears to be a distinctively modern phenomenon. While court intrigue appears as a constant of civilization, political decision arises only sporadically – and catastrophically – in societies other than our own. An explicitly articulated ‘social question’ is to a very considerable extent a specifically modern development, and its generalization beyond the confines of quasi-academic political economy is peculiarly susceptible to Utopian fantasy. Whether conceived within the broadest possible evolutionary matrix, or more narrowly as a specifically human social phenomenon, politics competes for time. It is in a certain respect a luxury good, all the more vividly when conditions of extreme economic stress conspire to promote its necessity – as exception. Total politics, to the extent it is not sheer idealization, presupposes – and momentarily incarnates – comprehensive social crisis. This, and only this, is what revolution in its leftist acceptation finally means.

[4] Hard forks are speciation events. Their potentialities in this regard tend to be eclipsed by the implicit ideal of integrity conservation. This orientation is an inevitable outcome of Bitcoin’s lineal generative problems and a developmental history in which forks are defined – with perfect if one-sided accuracy – as consensus failures. Bitcoin was not designed to split. It has nevertheless emerged as something that looks very much like a cladistic engine, or digital disintegration machine. Nakamoto Consensus is already a selection mechanism. It excludes anomalies (modeled as double-spending events). Entirely consistent with this function, although beyond its primary scope, is the operationalization of the fork as an origin of species. Crypto-Current predicts the mutation of certain blockchain lineages in this direction, even if the name ‘Bitcoin’ is reserved – ever more explicitly – for the mainstream tendency that refuses it.

[5] For an explicit acknowledgment of the crypto-currency protocol as a constitution, see: http://www.vox.com/2015/8/18/9168977/bitcoin-constitutional-crisis

[6] The list of crypto-currency terminological ironies can be augmented by the oddity that ‘Bitcoin Core’ is the party of decentralization, at least according to their own account of the stakes. The Core case rests on the proposition that decentralization is facilitated by minimizing the system resources required to run a full node. Disintegration of governance within the Bitcoin ecology has no other rigorous basis. Only those players running a full node are producing security. Their opponents are defined by their comparative (and perhaps even absolute) relaxation on the block-size question (and thus about the prospects of increasing the system resources required to operate a full node).

[7] In the world of code, the line between engagement and commentary is – finally – impossible to draw with confidence. The sense acquired by a ‘comment’ in computer science, to describe a remark attached to a program that will be ignored by the compiler, is of obvious relevance. It is between the formally executable segments of a program and those extraneous elements which have been formally determined as non-executable that the wavering line between ‘action’ and ‘reflection’ is now drawn.

[8] “Accenture’s global head of financial services, Richard Lumb, said that the development was about ‘adapting the blockchain to the corporate world’ in order to ‘make it pragmatic and useful for the financial services sector.’ […] Accenture aims to create a so-called permissioned blockchain — an invitation-only implementation of the technology, and the one currently favored by banks. That’s in contrast to permissionless blockchains, such as Bitcoin, which rely on the fact that they can’t be edited as a means of providing an immutable record of transactions. Accenture insists that the feature would be used only in ‘extraordinary circumstances,’ so that troublesome errors could be undone. […] Blockchain purists, however, seem unimpressed by the idea. …”

It would be difficult to improve upon this illustration of the appetite for fundamental compromise that characterizes Mainstreamer opinion.

https://www.technologyreview.com/s/602434/is-an-editable-blockchain-the-future-of-finance/

[9] As the ‘Bitcoin Unlimited: Articles of Federation’ argues: “In the Bitcoin Core variant … we see a project controlled by a small group of developers employed by finance-oriented for profit startup companies, and the emergence of corporate products (Lightning network, Side-chains and permissioned ledgers) that would materially benefit from a Bitcoin network that is incapable of handling the transactional demand required for a worldwide public good.” https://www.bitcoinunlimited.info/resources/BUarticles.pdf

[10] Szabo: http://unenumerated.blogspot.hk/2017/02/money-blockchains-and-social-scalability.html

[11] Source: https://www.youtube.com/watch?v=UVGq0zaZsNg&feature=youtu.be

[12] ‘Marc Andreessen: In 20 years, we’ll talk about Bitcoin like we talk about the Internet today’: http://www.washingtonpost.com/blogs/the-switch/wp/2014/05/21/marc-andreessen-in-20-years-well-talk-about-bitcoin-like-we-talk-about-the-internet-today/

[13] Van Wirdum’s article was described by Adam Back (on Twitter) as the “Best article yet on what Bitcoin ‘is’ & why decentralisation is necessary.” 

https://bitcoinmagazine.com/21919/decentralist-perspective-bitcoin-might-need-small-blocks/

[14] Szabo: http://unenumerated.blogspot.hk/2017/02/money-blockchains-and-social-scalability.html