by explicitly rejecting the need for trust among the community of users as a fundamental feature of its technological design (a distributed public ledger called the “blockchain”), Bitcoin threatens to remove the last residues of our social bonds from the money-form, thus transforming it into the ultimate agent of separation. Precisely because it is decentralized and non-local, Bitcoin cannot operate on the basis of a trust principle as local currencies do. Instead, it is designed on the basis of the same Randian principle that animates bankster culture: fidite nemeni, trust no one!

We’re excerpting the review of the MoneyLab conference by Jerome Roos, in two parts. The whole article is well worth reading. This is a landmark conference because for the first time, progressive forces dealt with the redesign of currencies and the financial system.

This is the conference consensus on crypto-currencies and Bitcoin in particular.

Jerome Roos:

” One of the main challenges that alternative currencies face is the question of scale — which in turn has some very important implications for the question of trust. On the one hand, we have a proliferation of local currencies, some already quite deeply rooted in their communities, where ordinary people seek to re-appropriate and re-embed money within a different matrix of common values in order to facilitate the satisfaction of important social needs and desires. These local currencies sometimes hark back towards a somewhat romantic notion of territoriality that seeks to re-ground human relations within the material life-world of really-existing human beings, thereby counterpoising a tangible sense of human sociality to the virtual and abstract realm of credit default swaps and complex derivative contracts that characterize modern finance. One thing these local currencies have in common is that they are all principally based on trust.

It is clear, however, that local currencies will never be able to challenge — let alone replace — globalized finance capital as such. At most, local currencies will develop into significant complementary currencies that can be added to a wide-ranging mix of monetary instruments. If we are to devise some kind of alternative to global capitalism, however, we will have to start thinking either on a much larger territorial scale (i.e., globally) or transcend territoriality altogether by developing non-local currencies (whereby non-locality refers to a concept in quantum physics according to which two objects, separated in space and with no perceivable intermediary between them, can nonetheless stand in direct contact with one another). The latter is the realm of crypto-currencies like Bitcoin: a peer-to-peer digital currency that can put a Kenyan farmer in direct contact with her customers, and an American college student or Wall Street banker in direct contact with their drug dealer, without any intermediation by a bank or state. The peer-to-peer technology behind Bitcoin is quite revolutionary in this respect. What we are witnessing is a very exciting proof of concept: we can actually create money without the need for states or banks!

Cryptography (alone) won’t set us free

But, as Bifo importantly stressed in his talk, the principle of automation that lies behind crypto-currencies like Bitcoin hides a great risk: by explicitly rejecting the need for trust among the community of users as a fundamental feature of its technological design (a distributed public ledger called the “blockchain”), Bitcoin threatens to remove the last residues of our social bonds from the money-form, thus transforming it into the ultimate agent of separation. Precisely because it is decentralized and non-local, Bitcoin cannot operate on the basis of a trust principle as local currencies do. Instead, it is designed on the basis of the same Randian principle that animates bankster culture: fidite nemeni, trust no one! Now that we have been so thoroughly abandoned by God, finance and the state, an anonymous army of cyber-libertarians proposes a new icon to worship: cryptography. And so our faith becomes displaced into the sophisticated source code behind the new forms of digital money.

Money, then, becomes automated. Once programmed and set free, the currency is supposed to live a life of its own. Of course critics can “fork off” from the source code and create their own alternatives, but the principle remains the same: anonymous cryptography replaces trust as the measure of our sociality, thus removing the last-remaining bit of humanity from the equation. Bitcoin therefore does not solve capitalism’s crisis of trust; it merely radicalizes it by insisting that nothing and no one can be trusted — only code. One member on the Bitcoin Talk Forum instructed his fellow enthusiasts thus: “Don’t trust the exchanges, don’t trust online wallet services, don’t trust your anti-virus software, and don’t trust anybody online.” While he was entirely right, it should be clear that this deepened sense of social paranoia is nothing but capitalist schizophrenia on steroids. There is absolutely nothing liberatory about the automation of distrust. A society in which people have completely ceased to trust one another is simply the perfection of Ayn Rand’s egoist dystopia — a nightmarish manifestation of a hyper-individualistic worldview gone haywire.

As my friend Rutger Kaput, a philosopher at Oxford University, pointed out to me after the conference, in times of universal deceit, simply trusting in one another actually becomes a revolutionary act. To be sure, romantic longing for the local communities of old will not derail the inexorable slide into financial dictatorship. But a world without trust is not a world worth living in. As Quinn DuPont convincingly argued in his talk, cryptography may have an important role to play in the struggle against the control state. But if we start fetishizing it, believing it can somehow replace trust as the glue of our social bonds, we will only end up deepening our sense of alienation from our fellow human beings. After all, without trust, what is to become of our sense of common purpose? The fundamental contradiction that Marx observed, between money as the ultimate social bond and the universal agent of separation, will only be further amplified. Bifo was therefore right to argue that, in the automation of distrust through cryptography, neoliberalism finally finds its avatar — its perfected manifestation.

Bitcoin is NOT a revolutionary currency

To this, we must add the observation — rightly repeated at MoneyLab — that, aside from the moral problems that come with its amoral technological design, there is also a crucial issue with Bitcoin’s monetary design, which is essentially conservative in nature. In fact, Satoshi Nakamoto, the mysterious Bitcoin founder, was clearly influenced by orthodox monetary theories and right-libertarian economic ideas, not least those of arch-neoliberal Friedrich Hayek, who was already calling for the “denationalization of money” back in the 1970s. Most importantly, Bitcoin is effectively designed to function like gold: it is created exogenously, through a complex algorithmic process of “mining”, and circulates as a commodity. New coins come into existence at a predetermined rate and with a set cap on the total money supply. This means that, when the amount of users and transactions within the Bitcoin system begin to expand, the money supply won’t be able to keep pace — eventually producing deflation. The fact that Bitcoin are infinitely divisible shows that Nakamoto was acutely aware of this fact and deliberately coded deflation into the system. (Deflation is a decrease in the general price level of goods and services, and was the scourge of the gold standard that destroyed millions of lives during the Great Depression.)

But while ordinary workers suffer from deflation, which aggravates unemployment and puts downward pressure on salaries, it’s actually a boon for the wealthy. After all, if you hold a large amount of savings, the purchasing power of your money appreciates with every day that the general price level falls. This means that deflation incentivizes hoarding by materially rewarding the accumulation of money. With deflation, the rich get richer by doing absolutely nothing. Rather than throwing their money into circulation, as the worker would do when buying her basic necessities or as the “productive” capitalist would do when procuring machinery, raw material and labor power, the hoarder will hold on to his gold or Bitcoins as long as possible. Deflationary monetary regimes like Bitcoin and the gold standard therefore feed into an ever greater concentration of wealth and power. No surprise, then, that Bitcoin features its very own ultra-wealthy elite. As of July 12, 2011, 97% of Bitcoin accounts contained less than 10 bitcoins, while just 78 entities were hoarding over 10,000 each. Stanislas Jourdan asked the right question in response to this data: how would such a highly concentrated and deflationary form of money ever help the Greeks?”