1.
” Bitcoin has become synonymous with everything wrong with Silicon Valley: a marriage of dubious technology and questionable economics wrapped up in a crypto-libertarian political agenda that smacks of nerds-do-it-better paternalism. With its influx of finance mercenaries, the Bitcoin community is a grim illustration of greed running roughshod over meaningful progress. Far from a “breakthrough”, Bitcoin is viewed by many technologists as an intellectual sinkhole. A person’s sincere interest in Bitcoin is evidence that they are disconnected from the financial problems most people face while lacking a fundamental understanding of the role and function of central banking. The only thing “profound” about Bitcoin is its community’s near-total obliviousness to reality.”
2.
Working in technology has an element of pioneering, and with new frontiers come those who would prefer to leave civilization behind. But in a time of growing inequality, we need technology that preserves and renews the civilization we already have. The first step in this direction is for technologists to engage with the experiences and struggles of those outside their industry and community. There’s a big, wide, increasingly poor world out there, and it doesn’t need 99% of what Silicon Valley is selling. I’ve enjoyed the thought experiment of Bitcoin as much as the next nerd, but it’s time to dispense with the opportunism and adolescent fantasies of a crypto-powered stateless future and return to the work of building technology and social services that meaningfully and accountably improve our collective quality of life.
Excerpted from Alex Payne:
“While most of the claims around Bitcoin are merely wince-inducing, there is one that deserves particular attention: that Bitcoin is “a way to offer low-cost financial services to people who, because of financial or political constraints, don’t have them today.”
Economic inequality is perhaps the defining issue of our age, as trumpeted by everyone from the TED crowd to the Pope. Our culture is fixated on inequality, and rightly so. From science fiction futures to Woody Allen character sketches, we’re simultaneously alarmed and paralyzingly transfixed by the disappearance of our middle class. A story about young people dying in competition with one another just to continue lives of quiet desperation isn’t radical left-wing journalism, it’s the pop fiction on every teenager’s nightstand and in every cinema right now.
With this backdrop of looming poverty, nobody can reasonably deny that the euphemistically “underbanked” are in desperate need of financial services that empower them to participate fully in the global economy without fear of exploitation. What’s unclear is the role that Bitcoin or a similar cryptocurrency could play in rectifying this dire situation.
The push toward Bitcoin comes largely from the libertarian portion of the technology community who believe that regulation stands in the way of both progress and profit. Unfortunately, this alarmingly magical thinking has little basis in economic reality. The gradual dismantling of much of the US and international financial regulatory safety net is now regarded as a major catalyst for the Great Recession. The “financial or political constraints” many of the underbanked find themselves in are the result of unchecked predatory capitalism, not a symptom of a terminal lack of software.
Silicon Valley has a seemingly endless capacity to mistake social and political problems for technological ones, and Bitcoin is just the latest example of this selective blindness. The underbanked will not be lifted out of poverty by conducting their meager daily business in a cryptocurrency rather than a fiat currency, even if Bitcoin or its ilk manages to reduce marginal transaction costs (at scale and in full regulatory compliance, that is). But then, we should note that Dixon wasn’t talking about lifting anyone out of poverty, just “offer[ing them] low-cost financial services”. Also notable is that both Andreessen and Horowitz supported Mitt Romney’s failed presidential bid, giving us some insight into the likely level of concern for economic inequality around Dixon’s office.
In Bitcoin, the Valley sees another PayPal and the associated fat exit, but ideally without the annoying costs of policing fraud and handling chargebacks this time around. Bankers in New York and London see opportunities for cryptocurrency market-making. International investors see the potential for arbitrage and are taking advantage of cheap electricity, bringing the environmental destruction of real-world mining to the brave new world of digital money.
In other words: Bitcoin represents more of the same short-sighted hypercapitalism that got us into this mess, minus the accountability. No wonder that many of the same culprits are diving eagerly into the mining pool.
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The dominant socio-political ideology of Silicon Valley has failed to deliver sustainable profits to the broader investor class while technological innovation has slowed and jobs have dried up. It’s time for new thinking.
Bitcoin is not without its left-wing supporters, but I think it’s safe to say the currency has mostly proven to be a rallying point for those who see the state and central banks as little more than obstacles to a libertarian techno-utopia, a worldview perhaps best captured in The Californian Ideology. In this sense, Bitcoin is ready-made for a cultural moment when Silicon Valley ideologues are discussing plans for a new opt-in techno-centric society and sliding so far right that a return to monarchy is on their table.
Working in technology has an element of pioneering, and with new frontiers come those who would prefer to leave civilization behind. But in a time of growing inequality, we need technology that preserves and renews the civilization we already have. The first step in this direction is for technologists to engage with the experiences and struggles of those outside their industry and community. There’s a big, wide, increasingly poor world out there, and it doesn’t need 99% of what Silicon Valley is selling.
I’ve enjoyed the thought experiment of Bitcoin as much as the next nerd, but it’s time to dispense with the opportunism and adolescent fantasies of a crypto-powered stateless future and return to the work of building technology and social services that meaningfully and accountably improve our collective quality of life.
Yes, there are a lot of opportunists, profiteers, bandits, venture capitalists out there, and yes, they do see in bitcoin the next and yes, they will develop it in that direction. And of course bitcoin can be used for evil and they want to regulate it to keep us from being anonymous, so they can control the black side without competition.
But there are many others involve who understand its potential, and who are actually building it. And don’t forget its not just bitcoin, but a whole rainbow of other tools and applications that can be built using the same approach of the decentralised ledger.
We’ve hardly scratched the surface of what we could do if we had privacy, if we could issue our own credit and take our own risks. We could abolish interest, we could issue shares and sell bonds, make remittance payments without middlemen. I think its too early to naysay.
Matthew,
What are the potentials? Do they include the following?
> We’ve hardly scratched the surface of what we could do if we had privacy, if we could issue our own credit and take our own risks.
I hope those aren’t the ‘potentials’ you mean, since those are how production in our current systems works (in essence). The innovation of P2P is the opposite of that: radical openness to share risk and reward. It’s transparency, not privacy, which keeps the ne’er-do-well in check. Personal privacy is great, but it’s just that – personal. Economic provisioning, however, is a collective endeavour.
AFAIK, Bitcoin is ‘open’. IOWs, it has the value of offering users exclusive control of their money exchanges/transfers w/out stiff bank charges & manipulation. This individual ‘ownership’ is, & rests on, the security or o/wise of the encryption. How secure is that? I don’t know. Who does, apart from the geeks behind it, & the spooks owned by the banks?
Overtly, Bitcoin is o/wise, at minimum, a healthy step in the right direction. Its transactions will not go thru banks, so will not incur automatic interest charges for these great parasites. I have read that it is used by poor expat Africans to transfer some of their meagre earnings back home. Western Union is not amused; good show!
Other crypto-currencies obviously offer their sectional promoters private benefits, so their wider, social benefits would/will be less, it seems.
Worry not about the intentions of Silicon Valley. Innovators in information technology grasp little or nothing of the broader effects of their techno-revolutions. Since geeks know no history, their futurology is limited & impoverished. They see as little of the results as Gutenberg. He had no idea his removable-type-printing-press would speed the arrival of the Reformation, science & industrial capitalism.
it is precisely the belief in Bitcoin’s “potential” that is so dangerous. One can only believe in its “potential” if one’s understanding of the financial world itself is incredibly narrow. this is the worst feature of cyberlibertarianism: focusing on the solution so exclusively that one forgets to actually identify the problem. I have yet to see an important problem identified by Bitcoin advocates. An inexpensive global electronic payment system is a somewhat important though not transformative need, but that will come along with or without Bitcoin (see: Dwolla, and many others, “outside of the banking system,” a much more complicated issue than our Old Git above suggests, however profound the calumny of many large banks). I have yet to see any compelling analysis by BTCheads of actual real world financial problems that track with any responsible understanding of finance outside the fevered imagination of Ron Paul.
have written about this at http://www.uncomputing.org/?p=307 and http://www.uncomputing.org/?p=237.
Just like economics and finance in general no one really understands Bitcoin and cryptocurrencies and the implications. Those who claim to do are probably more wrong than those who claim to know less.
On top of that, we’re only at the very beginning of this. Bitcoin is just about 5 years old. Bitcoin itself might not survive another 5 years but the cryptocurrency genie is out of the bottle. I think it’s kind of pointless to claim it’s evil, dangerous, wasting energy or a tool for rich people to become richer. We better find ways to turn it into something beautiful that will do good for humanity and with over 2 billion people unable to open a bank account (including millions in the US) it doesn’t require much fantasy for this.
David Golumbia,
do you agree that Bitcoin is of benefit to the ‘po’ folks’ who lack bank accounts, yes? Broader consequences are unknown, but I doubt techies have any useful perspectives. Nor Ron Paul & son, who are followers of the fascistic crackpot, Ayn Rand.
Anarcho-capitalists & libertarian-neocons are detached from reality. There never was nor can be capitalism, w/out a strong, centralized state to curb its self-destructive drives – as competitive sports are impossible w/out referees, laws, & rules. The centralized state & capitalism grew together. Capitalism would have died a puny runt w/out the nurturing & tits of mother state. I am not a Marxist, but at least Marx u/stood capitalism. The above fantasists of the conservative fringe do not.
The triumph of raw money-power over democratic government was a pyrrhic victory for capitalism. It withered away. Corporatism is its decaying corpse.
The more perceptive will have noticed that as globalized capitalism swallowed, absorbed & sidelined nation-state govs, capitalism itself has metastasized into parasitic corporatism. Parasitic, becoz capitalism’s dynamic died as giant multinationals smothered competition. Corporatism is now a global system of rentiers, toll-booths, & loan sharks. Large-scale, risky investment has gone. Therefore, so have the rewards of profit evaporated. Yes indeed, history-aware readers; it’s our old pal feudalism back, as Neo-Feudalism.
Can, could, ‘free’ Bitcoin be the weapon to strike down barriers & let in re-invigorating competition – a re-birth of capitalism? It seems unlikely. Crypto currencies are as safe & free as their encryption, & I can’t see international banking finding Bitcoin’s ‘safeguards’ an intractable problem.
The core problem is not so much ‘regulation’ of the finance superstructure, rather it’s the impossibility of curbing banking’s hegemony. Nation-state govs have lost macro political power to the great banks. ‘Economists’ rarely grasp this, becoz few know their history. The Rothschilds got the point over a century ago. So did Karl Marx. Those with the biggest lumps of money, rule. Hence those with the capital (banks) control the pols – why Marx called his study of 19C capitalism, ‘Kapital’. Proof of this is in the abandonment of most governmental financial regulation over the past 30-odd years. Fraudulent bankers are now above most laws. They ARE the law.
Marx’s prescriptions are no longer relevant, but nor are futile appeals for ‘regulation’ where the political will & means do not exist. That will take a drastic, revolutionary readjustment of political power in our mass democracies. As long as 99% dance to the tunes called by the 1% of bank owners, nothing substantial CAN change.