Cryptocurrencies are not libertarian. To be sure, aspects of cryptocurrencies, and the blockchain technology on which they are built, resonate profoundly with the libertarian ideal, but the resonance of one’s soul with an idea does not engender the resonance of theory with reality.
When I wrote my essay, “Cryptocurrencies are not Libertarian” (I’m not very good with names), I made three arguments:
- While the value of a cryptocurrency, and its issuance, are not controlled by the state, this is not dissimilar to how ‘traditional,’ currencies already work. The value of floating currencies is already determined by markets, while issuance is partly the result of fiat money mechanisms. Furthermore, this infrastructure minimises the role of any individual.
- Cryptocurrencies are not as anonymous as cash, for any transaction is recoded on a publicly viewable ledger. Further, the benefit of anonymity in terms of data protection and preserving freedom of choice are better achieved by the existence of a legislative body that can exercise power over bad actors and protect individuals. As such, anonymity is a false prophet telling a bad story.
- Where anonymity may be valuable is in protecting those who are performing illegal acts, or acts deemed damaging to authority. Yet, in such scenarios, cryptocurrencies serve only as tools to facilitate activities, and the real libertarian debate is around the prohibiting of activities. We should not conflate cryptocurrencies as tools with the political question of the legal authority of states.
I maintain cryptocurrencies are not libertarian. But the belief, which I might call myth, that they are is not only dangerous insofar as it captures the minds of those of a particular political persuasion in the same way gold does doomsday preppers. More subtle dangers exist; dangers which, to be sure, exist whenever new technology grabs hold of enough people’s imaginations. The danger is appropriation.
Reading Evgeny Morozov’s The Net Delusion, one could be mistaken for thinking the whole point of the book is to attack the foreign policies of (Bill and Hillary) Clinton, Bush and Obama. At times a slog, the premise of the book is rather simple: the power of the internet could be utilised by the bad guys as much as it could by the good.
For Morozov, the West’s reliance on the idea that the internet would supercharge the voices of dissidents and freedom fighters is folly, and almost predictably so. Dictators and totalitarian governments possess the raw force and infrastructure to assert their authority on the ground and invest in building up their authority online. While journalists and activists are given a platform to share their ideas, and while this surely annoys those they are attacking, the impact can be minimised – if not eliminated – by an army of bots, entertainment content and surveillance strategies. While the internet gives everyone a platform to speak, it is still hard and soft power which determines who is heard.
Might cryptocurrencies suffer the same, appropriated fate? I think so.
Now, the possibility of cryptocurrencies becoming dominated by states, totalitarian or otherwise, is not enough to support the claim cryptocurrencies are not libertarian. Equally, and by the same logic, the possibility of cryptocurrencies, either presently or sometime in the future, being libertarian is not enough to argue that they are. The internet, on paper, is a wonderful tool for the liberation of oppressed peoples, and for some it will be. But every opportunity to liberate is another opportunity to oppress, and oftentimes this is the case.
Cryptocurrencies may be – relaxing some arguments – a tool for liberation from various economic systems (if this is the argument you want to make, I will not stop you. My comment here is still, however, rather critical. Most people who make this argument seek only to re-forge the present economic system, rather than engaging in the more interesting question of how the technology can radically design the way we do things), but they may also be tools for the crystallisation of economic systems.
We do not know what will happen, because – as many in the cryptocurrency community are wont to tell disparagers – the technology is so new and dynamic. But let’s take a lesson from the internet, and indulge some fortune telling.
In my essay, “A Modest Proposal for aNew Social Media,” (again, I’m bad with names, and not being self-referential, apparently) I argued the future of social media will be one that integrates cryptocurrencies. This was to be a solution to an agency problem arising from the semi-unilateral harvesting and profiting off of data (semi-unilateral because a) it is necessary to provide data to use the site, and thus consent becomes a dubious thing, and b) your individual data appears meaningless when combined with millions of others’, but it is the uniqueness which gives the data value).
The idea was as follows: the social media site has a cryptocurrency, and each user receives a small payment in this cryptocurrency for engaging in content with the platform, such as liking a post, commenting, status updating, and providing basic personal information. The site would have basic currency sinks to regulate the economy of the coin (like selling personalised emojis, banners etc.), but would also have a shop where users could buy discount codes used for real-world purchases. For the provider of these codes, they would receive invaluable user data; the social media site would receive a share of the transaction when the code is used; and the user would receive payment for the ‘sale,’ of their data. (For the record, I think this would be a cynical way of fixing social media and our relationship with data, but I also believe this is a very doable and – somewhat lamentably – appealing idea to both regulators and Silicon Valley bosses)
Is this a realistic prediction of the future of cryptocurrencies? I am confident when I say this prediction will be inaccurate in several areas; there will be a revenue stream missing from the concept, or a transaction stage, or something inane like that. But is this prediction wholly unlikely? I think not.
We already know, for example, Facebook is planning to launch a cryptocurrency, possibly as early as this year. Amazon already has a token of sorts with Amazon Coins, and for sites like YouTube a cryptocurrency payments system could be an effective way of encouraging content creators without relying on advertisement revenue. Services such as Uber and AirBnB could surely leverage the advantages of cryptocurrencies too, and for many investors in the technology, this is very much something they hope will happen. But for libertarians, is any of this good?
Metallurgy or Alchemy?
In Adam Smith’s the Wealth of Nations, the process of coinage is discussed a lot. It’s an important discussion, because for Smith – whose book concerns wealth – knowing what money is, where it comes from and why it means anything are vital questions. Many libertarians like cryptocurrencies because they don’t come from a central bank or government; the price is determined by the market, of which they are a part; and the supply is limited to the amount that has been ‘mined,’ at any one time. Ultimately, when considering libertarian ideas as a nexus of power, no single authority has absolute control over a cryptocurrency.
Of course, ‘traditional,’ money used to have a similar laisse faire approach. When coinage was as much about weight and purity of metal as it was about the ability to transact with it, anyone with a sufficient quantity of silver or gold could produce their own money, and this would be essentially as valuable and useful as money produced by a central authority. And they did.
The economic problem – or benefit, if you are of the libertarian persuasion – with this, of course, is power. The person that owns a lot of gold has a tremendous amount of power over the state apparatus, and if many gold-owners get together, they can completely diminish the power of the state. For the state, it is better to use its authority to outlaw the private manufacturing of money and purchase raw materials for coinage. In effect, the state assumes the monopoly of coin minting, and all the economic power that comes with it. (For the gold-owners, it should be said, they benefit too, by – for example – having a state apparatus that guarantees the value of the money in their pockets and saves them the effort of turning all their gold into coins, before convincing others their coins are worth using as currency. In effect, the state can make markets through its perceived legitimacy which individuals cannot – again, this is a key reason why cryptocurrencies aren’t all that libertarian)
Importantly, what’s being described above is the process of monopoly formation that can arise in any unregulated market. The emphasis on money, rather than any other, ‘good,’ is that money is present in every market. The authority to issue money, therefore, extends to the authority to enable the formation of markets in other areas.
The word corpocracy is often the reserve of science-fiction writers. It refers to a system of government where a person’s rights and liberties are a function of their wealth and ownership; rather than one person, one vote, it’s one share, one vote. The natural rise of companies to supranational size invokes, at least for me, imbues thoughts of corpocracy. Likewise, Leigh Phillips and Michael Rozworski’s book the People’s Republic of Walmart emphasises how modern corporations now rival states in terms of power and resources (and, they argue, this undermines the free market idea that centrally planned economies cannot work).
Quite what the libertarian view on corpocracy is unknown to me – modern libertarianism often seems more about doing what one likes but presently cannot do than it is about critiquing whole systems of power which its anarchist cousin does excellently. My gut instinct, though, would be opposition; the rule one share, one vote, necessarily deprives those with no shares of any right to vote, which is wholly non-libertarian. Maybe we mandate everyone has a single, unsaleable share, but isn’t the mandate of unsalability itself non-libertarian? Quickly, one ends up walking around in circles, so let’s return to cryptocurrencies.
The hypothetical social media site has a monopoly on their cryptocurrency, and by extension determines the value of all data, and all things in their marketplace. Imagine if we decide 1 like is worth 1 unit of our cryptocurrency. Why? Who says our likes are worth that much? And if so, why is sharing something worth, say, 2 units, or a comment worth 3? And why is the discount code I so desperately want worth 1,000?
Facebook will never pay users in pounds or dollars for their likes and shares, because that places the value of the data they want into a medium they do not control, and it is control that is the true value of the cryptocurrency, and indeed, of money generally. Similarly, Facebook will never allow you to sell your tokens for real-world money, for that would imply an exchange value and produce the same problem. They may, however, allow you to buy their token for real-world money (this may also imply an exchange price, but here Facebook controls the supply of the token; previously they do not) or trade your token for other tokens, say Amazon’s token. Such partnerships seem likely, firstly as a way of avoiding anti-trust laws, and secondly as a way of leveraging advantage: Facebook doesn’t know anything about the logistics which would be involved in a storefront, just as Amazon doesn’t know anything about social media; together they would be an extremely powerful online entity. (For the record, in my original essay, I specify some user-specific algorithm would be used to determine the value of a given person’s like, so that they could only ‘game,’ the system in a way that is beneficial to the site. For example, if I like 100 things, the value of my like falls, but it falls less if I have 1,000 friends rather than 10, and so on)
Do cryptocurrencies lead corpocracy? That question has two answers. As above, the future of cryptocurrencies is undetermined, but the myth of cryptocurrencies being libertarian and transformative may lead to us blindly allowing the appropriation of cryptocurrencies in ways that are wholly non-libertarian. This doesn’t have to happen, but early signs suggest it is.
The second answer is no, but corpocracy does necessarily require control of the means of exchange. The one share, one vote definitional slogan can be extended to a great many other things, including rights, and when the power of a share is elevated so much, it seems natural that shares become the means of exchange. In the sci-fi corpocracy, shares are essentially cryptocurrencies, but cryptocurrencies go one step beyond shares. Shares represent ownership, and so for shares to be used as a means of exchange, owners must necessarily reduce their ownership to supply liquidity. Cryptocurrencies, with no ties to ownership, demand no such thing from shareholders.
My fear of writing a dystopian nightmare
For a corpocracy to genuinely form, monopolies must be allowed to form, and a means of co-opting the means of exchange must exist. I do not believe corpocracy is our future, but just as democracy moves through shades of freedom, so too will corpocracy move through shades of reality (if not capitalism).
A problem with economic ideas is they often become characters in stories; capitalism is the tentacular plague that seeks to dominate people’s lives; OR communism is the tentacular plague that also seeks to dominate people’s lives. Neither capitalism nor communism are conspiratorial characters, and likewise, the motives of the powerful in any society are not quite so explicit as we might imagine them to be from a distance. The rise of corpocracy will not be a conspiracy to undermine democratic liberty and entrench the abstract concept of power in fewer and fewer hands; but corpocracy does highlight the ever-present tension between capitalism (or perhaps scarcity) and democracy.
For those invested in cryptocurrency (literally and ideologically), there is not enough criticality of what the technology will evolve into. Instead, there is simply the belief that evolution is always good. Equally, I think, for those who disparage cryptocurrencies, too often too few people ask the question, “but what if what I think doesn’t matter?” Cryptocurrencies, like the internet, and like many transformative technologies, will reveal societal tension which will demand a deft hand to navigate. The myth of libertarianism will leave this role vacated and old authorities will appropriate the benefits of the technology for their own means, just as the myth of liberation left many dissidents out in the cold while totalitarians appropriated the internet for their own advantage.
The point of this piece isn’t to attack cryptocurrencies, or the people involved with them, nor is it – as the subtitle suggests – to write a dystopian nightmare. Really, it’s to ask a question: if cryptocurrencies aren’t libertarian, what are they?