Thursday, 9 August 2018

Cryptocurrencies are not Libertarian


Beyond all those discussions which confuse or concern the financier and bemuse or excite the speculator, the prevalence of opinion that cryptocurrencies are a vehicle for the libertarian’s dream seems to be a point of great consensus. However, I contend, with little abstraction beyond ordinary observation and the same liberal thinking that should be familiar to my adversaries on this account, that the belief that cryptocurrencies are libertarian is in fact a myth; the victim of a miasma of technological optimism and general ignorance that accompanies any assessment of that which is new and unknown.

My arguments, and the structure of this piece, follow in what I believe to be the most logical order. I will begin by addressing the most common point of contention: that cryptocurrencies, being decentralised and anonymised, embody and facilitate libertarian values significantly more than traditional currencies might. I dispel this first argument by pointing to the benefits of cash.

This, of course, invokes retort in lieu of financialization and an increasingly cashless society. In such a world, I confess, there may be benefits to cryptocurrency; but only insofar as anonymity is concerned, and not as regards centralisation. Here, I argue, the general ledger system of cryptocurrency is simply a parallel of online paper trails which may be generated via online financial systems and offers little new to the individual. Further, I contend, the lack of transparency that may be associated with the creator of a cryptocurrency, compared with levels of transparency that may be found in a company or a government, serves as a further libertarian deficiency of cryptocurrency.

Finally, I address the silver bullet that is anonymity. Whilst I will not attempt to refute the claims of anonymity in this piece, I will argue that the libertarian’s placing of importance on the matter of anonymity demonstrate their misplaced concerns, with the regulation and legality of that which any currency might purchase, rather than the currency itself, being the correct target for libertarian efforts.

It is my sincere hope that the logical progression of my arguments might be ascertained from the above; certainly, it is my hope that by the end of this piece, irrespective of one’s opinion on the validity of my arguments, the process of these arguments’ development is clear.

Groupthink on Value

The state is the easiest enemy of the libertarian to identify. This, of course, is a simplification – if not an error – with entities such as the state being used to supplement more abstract ideas in layperson discussions. Yet, with the state more often than not cast as the enemy in libertarian discussions, it is the term I use here.

The libertarian benefit of cryptocurrency in the first degree is that the value and the issuance of units of value – namely the cryptocurrency – are not controlled and regulated by the state or similar financial institutions such as a central bank. Insofar as the things I have read and the discussions I have had, I have been left wondering why such a feature is exactly a benefit of cryptocurrency from the perspective of the libertarian; yet, given some thought, I propose two ideas.

The first is that a cryptocurrency not produced by the state, but rather legitimised via individual consent, may insofar as the philosophy of human value is concerned, better reflect the value of a given individual. Let me explain: irrespective of any labour theory of value, if the return to the worker in terms of a wage is denominated in a currency whose value is only acknowledged and guaranteed by the state, then the worker may feel like their value added due to their labour is detached from themselves. If the end product of labour is owned by the capitalist, and the return to worker is only valuable pending the approval of some entity other than the worker, what immediate role might the worker be said to have beyond being that of a puppet whose strings past from one set of hands to another?

The contention we might make in defence of the libertarian nature of cryptocurrency is that no entity such as the state or the central bank exists to give value to the cryptocurrency. Rather, the value of the cryptocurrency is determined – besides the costs of producing the currency – solely by the attributing of value by the holders of the currency. Our hypothetical worker, in a world where they may choose in what currency they received their wage, may be said to exhibit more liberty over their labour as it is their advocation of the value of the currency – much as they might advocate the value of their labour by pointing out the quality of their work – which gives the currency value.

The second, though only subtly different, argument that I suggest is that a cryptocurrency represents a choice on the part of the individual, rather than an imposition. In whatever country a citizen lives in, baring the rare exception, we citizens have never been consulted on what currency should be commonly used. We have not been asked what the currency should be called, what assets might back it, at what rate it should be exchangeable with another currency, and for what it should be exchanged and by who. This list is not exhaustive. Like a great many things that come to form the state – what we oft call institutions – we are born into them, with little individual power to really change them. Insofar as this might frustrate the libertarian, cryptocurrency perhaps offers a solution, if only for a small part of a larger structure, as they can choose almost all aspects of a cryptocurrency. An individual can be the creator, the central banker, the account manager, the publicist, etc. of a cryptocurrency, and regain some of that liberty that, if we are honest, was dubiously lost in the first place.

Yet I lament to say these supposed benefits offer little more than a perception of enhanced liberty, and, in actuality, demonstrate little difference between crypto- and traditional currencies. My primary point of refute on both charges is that the mechanism by which the state deems a currency to be valuable is identical – practically speaking – to how an individual deems a cryptocurrency valuable.

The question of what a state is is beyond the scope of this piece; it is sufficient enough here to say a state is an identity which a large enough number of people subscribe to such that – if this identity were to be challenged – the constituent parts could defend in one way or another their advocacy for that identity. The provision of defence is necessary for this point, for it is what we might call the weight or the clout of a state which allows the value of a currency to become accepted and maintained despite the objections of any given individual. Indeed, we need not consider a state, but simply two individuals, to understand this concept. The value that the owner of an item assigns to that item can be any value they choose. Yet if they desire to convert that item into another item of the same value, they must find other individuals who are in possession of the desired item, but who also acknowledge the value of the owned item.

In other words, whilst the individual might desire and – in isolation – be able to prescribe a value to themselves, their work and their possessions, it is only through the acknowledgement of value in such things by others that gives those items any semblance of objective value.

In both benefits, whilst an individual may feel a sense of liberty from choosing to use a cryptocurrency over another unit of value, there is no legitimate claim to the individual giving it value. Instead, the individual must rely on others to recognise the value of the cryptocurrency in much the same way a state gains the legitimacy to guarantee a currency. I dismiss any arguments of subjective value: should an individual be able to survive based on their subjective valuation of things alone, then there is logically no need for a cryptocurrency, and thus no benefit to be gained, as that individual is already master of all that which they require, and may – it is hoped – always be able to strike a deal with oneself on the price of a good.

If these are the only benefits, insofar as libertarianism is concerned, that can be gained from the decentralised structure of cryptocurrency, then I must conclude presently that cryptocurrencies offer no libertarian benefit as they, as with traditional units of value, demand the acceptance of value from others. One might, I concede, gain benefit from the feeling of choice that cryptocurrencies allow – ignoring the lack of markets where cryptocurrencies may actually be used – yet I contend that few individuals would find such feelings satisfying when faced with the reality of a valueless asset.

Considerations of cash, credit and consent

We shall return to arguments of state and decentralisation. It is now I would like to turn -  having established the commonality of traditional currency and cryptocurrency in terms of value – to a discussion of anonymity and cash. This argument, I believe, is a very simply one.

Whilst I cannot deny the anonymous nature of cryptocurrency, I feel compelled to defend traditional currencies against the claims of the libertarian that traditional currencies may not be similar. Let us make one thing clear; insofar as there is any substance on the matter, my decision to enter a store and purchase an item with cash preserves my anonymity. Should such a purchase be performed on credit, this statement is disputable, yet I will address such a dispute shortly.

First, however, it might be argued that my statement is false as there are repercussions to my purchasing an item with cash that do in fact infringe my anonymity. Is it not the case, it might be supposed, that my anonymity is tarnished by those who see me entering the store; by the shop workers who facilitate my purchase; by the cameras that capture my image and store it for as long as interested parties desire? I cannot deny these activities as being necessary for any purchase to occur; but let us think rationally.

The concern over cameras, for example, is an issue of liberty, but it is not one that concerns the means by which I purchase an item. For the libertarian to take aim at the cash in my pocket, rather than the surveillance utilised by others, is to mark such a person as senseless in their priorities. Of course, there remain others who might identify me in the process of purchase; who might destroy my anonymity. To this point, I feel compelled to express sympathy to any person who imagines this to genuinely be a problem worthy of concern. Is not the alternative – again, irrespective of the currency used – to be a hermit, to hide away in self-imposed isolation such that some mystical notion of anonymity might be preserved? Is it not a foolish admittance of desperate anti-social behaviour to argue the witness of others threatens one’s anonymity, and thus strengthens the libertarian claims of cryptocurrency? I think so.

What might strengthen these claims, I do admit, is if such a purchase is done on credit. Before all else, it is necessary to explain why such a method may infringe my anonymity. To this point, I offer a discussion of consent. By virtue of it being necessary, I consent to the shop worker participating in any purchase I make from the store; further, in keeping with the values of individual liberty which any reasonable person will accept, I accept the reality of others seeing me when I make me way to and from the store; and I consent, as part of my obligations to purchasing an item from a store, to be photographed and recorded doing so. Even if questions of consent regarding these issues may still be raised, for the sake of our present discussion, let us allow for my consent on these things to be given actively and unquestionably.

To what activities do I consent to my credit card company doing with my purchase information? Let us be sensible: I consent to their handling of my money, requiring access to my financial information and knowledge of with whom I am transacting; I consent to their sending me billing information so that I might pay the costs of the service, and as such I consent to their having my address and again access to my purchasing information; and, by the act of being a customer, I consent to whatever fees are associated with their service.

I do not necessarily consent to a stranger, an individual at the credit card company, looking at, analysing or wantonly distributing my purchase information. Further, I do not consent to the company holding my data forever. These are valid points, and in establishing the boundaries of consent in any transaction, we might begin to see how cryptocurrency purchases may diminish the opportunity for our consent to be violated – for our liberty to be preserved. It stands to reason, therefore, that any libertarian benefit of cryptocurrencies must improve on the weaknesses of credit cards by – in my simple analysis – keeping my data private, even from the eyes of those who handle the data, and by keeping no record of my purchase, or at least a record which I control.

Those who are familiar with blockchain technology must acknowledge, either partly or wholly, that cryptocurrencies do neither. Let us consider the latter point first. Blockchain technology records the transactions between parties of a particular cryptocurrency in an online, distributed ledger. It is not possible, and would certainly undermine the innovative thinking behind blockchain, if a transaction could be removed off the blockchain. Whilst my credit card purchase might eventually be deleted off the company’s system or diminished within a literal paper trail of historic transactions, the blockchain ledger remains. One might argue the anonymity of a posting to the blockchain invalidates this point – indeed, at this time I have no rebuttal which I would dare to call strong – but one also cannot deny this is a weak defence of the spirit of libertarianism, predicated only on the infallibility of online anonymity.

The spirit is weakened in another regard: the blockchain is publicly visible. This is a necessary part of maintaining the sanctity on blockchain transactions, one that promotes transparency and which I applaud. Yet, when compared to my credit card transaction which could only be seen by those who had access to such data at the company, the spirit of anonymity, or the spirit of individual privacy, seems to me so much more publicly exposed by cryptocurrencies than alternative technological methods. In actuality, this claim might be dubious; but in actuality, again, one must surely see that the two methods are more similar than they are alien. If one is a panacea to a libertarian crisis, then is the libertarian not twice cured? If one is not, surely the libertarian is still sick?

But, allow me to interject one final point before moving on. I have offered the state as the enemy of the libertarian, though I have done so acknowledging this is an over simplification. As such, let us now complicate it: are not the issues of consumer rights regarding credit cards, of data access and distribution and security and so on, are those concerns not countered by state legislation? Legislation which, less we forget, does not necessarily exist with cryptocurrencies. From the simplified perspective of libertarianism, I agree this makes cryptocurrencies more libertarian; but even the famed liberal John Stuart Mill, and a great many critics thereafter, acknowledge that some legislation and regulation may actually preserve and enhance liberty! Such laws as govern the treatment of consumers and their data give me confidence to use credit cards, allowing me – through such use – to exercise my liberty. It is not my contention, but it should not go unsaid, that concerns regarding the security of cryptocurrencies may infringe a person’s capacity to exercise their liberty.  Such a thought requires addressing by those advocates of this whole libertarian affair.

Returning to question of state

The above is perhaps a preamble as to what I would like to discuss now. Partly as an aside, but yet I hope soon obvious, is mention of the irony that so much surrounding cryptocurrency seems to be applicable to that old adage of two sides to every (bit)coin. We have seen it above, to various degrees, be it the similarities in value mechanisms between traditional and cryptocurrencies, or – as I would contend – the false positive claims of greater liberty through reduced regulation.

These debates, these positives and negatives and the ensuing tug of war for argumentative dominance are not surprising when we consider that questions of liberty are messy, if for no other reason than perspectives bend and break, switch and grow, and what one might consider perfectly acceptable, another considers abhorrent, and so on. Nothing is new here, though I remind the reader the state most often is the subject of many disparaging remarks in these debates. I speculate, if I might for a moment, that this is because – almost ironically – the state is the great unifier; the omnipresent other of which we all know intimately, and yet inevitable feel detached from. Perhaps, I suggest, even those individuals who find great strife with one another may unite against the state should it attempt to deny the warring peoples their strife.

Above, I offered the state a reprieve. I now offer it another. A strong, positive argument for the proliferation of cryptocurrency is improved transparency. Ignoring the distant laughs of tax authorities and criminal enterprises, the blockchain does seem – at least theoretically – to promote transparency of exchanges even if the exchangers remain anonymous. Compared to the great behemoths of the state, of central banks and the financial industry more widely, we should acknowledge the beauty of the blockchain idea.

It is necessary, however, before proceeding, to clarify why the question of transparency is crucial to the libertarian debate. First, liberty insofar as the natural sciences allow, and its denial, requires someone to deny said liberty. One can deny their own liberty but may just as easily reclaim it; it is only through the interaction with others that a person’s liberty may become diminished. Secondly, I would argue that any interaction with another in some way reduces a person’s liberty, be it through violence or obstacle or the then-established prejudices of another, the initiation and continuation of a dynamic with another reduces a person’s liberty (it may, of course, enhance their liberty. My point should focus more on a person’s changing sense of liberties; where one door opens, another may close. That person is not necessarily worse off than they were previously, but they are changed, and insofar as they don’t want to be changed, as they desire to return to a time without the bonds of this connection, they are left stranded. More, of course, could be said of this issue, but it is not the intention of this piece to do so). This though, is not necessarily a matter of moral repugnance. If the reader will recall, I may consent to the restriction of my liberties to assume various benefits from compliance, or to adhere to my own beliefs. Considering all these things, it follows that the entity which seeks to deny us of liberty must be sufficiently transparent for us to consent or reject the entity. This notion, loosely, is an abstraction of the Rawls’ (1971) publicity principle, an idea previously considered by Kant.

Now we may return to cryptocurrency. Cryptocurrency, it appears to me, solves the transparency problem by claiming to remove the second party – the party that is necessary to deprive a person of their liberty. Supposing this is the case, it is easy to see why many would call cryptocurrency a libertarian tool. Similarly, considering the bureaucracy of state – indeed, the very existence of the state! – those same individuals will surely argue that centralised institutions are abhorrently opaque, and thus fail a test such as the publicity principle.

I have demonstrated above, in regard to data security, evidence of this flawed thinking. I now offer my retort to this accusation directly. To do so, I ask a simple question: how might one be anonymous, and yet transparent? For all the rhetoric that may surround the state or private banking institutions, let us not forget we know who they are. I can, should my dissatisfaction become so great, change my bank, vote out my representatives, or indeed move to a different country entirely. I can write letters to CEOs and politicians whom I am disgruntled with; I can hold protests and write essays exclaiming my frustrations; I can, if I want, even challenge directly the positions of those individuals with whom I am so irate.

It is an insufficient argument to say that the state or a bank is too large to surely know which specific individual it is that is violating my liberty at that moment, for such a grievance may be handled in a manner that is sufficient simply by knowing the party or the bank with whom this individual is associated. Can I do the same with cryptocurrency? I cannot.

Whilst I can access the blockchain and perhaps see evidence of market manipulation, I cannot see which person or organisation is behind it. Whilst I can know exactly how much of a particular cryptocurrency has been mined, I cannot petition more to be realised, as I might be able to petition a central bank to increase the money supply. Note the difference: I need not know the person who operates the printing presses at the Bank of England for my concerns to be discharged at the bank generally; but given the nature of cryptocurrencies, my screams may echo into the aether. This is liberty, but only nominally. This is transparency, but only technically.

This argument is perhaps the beginning of my attack on the claims of anonymity, but I would rather consider it a defence of the merits of the state, of which I would hope any wise libertarian would acknowledge there are. If this argument feels detached from the rest of this piece, that is unfortunate, but perhaps inevitable. Let us turn, therefore, back to the claims of anonymity once more.

The correct target

In my introduction, I described anonymity as the silver bullet of cryptocurrency, a feature which serves a purpose and fulfils a promise of the technology that no rival has come close to dislodging. The promise of anonymity, insofar as the libertarian is concerned, is panacea, for it offers the chance for the individual to do whatever they like and not suffer the consequences of these actions. It is now, therefore, that we must address criminal activity.

Let me be clear here: it is not the purpose of this piece to levy a moral judgement on such activity beyond that which all civil society must surely agree is repugnant. As short commentary on this matter, I see no point in debating the content of this piece with that person so fanciful of the doctrine of libertarianism that they might permiss those activities that bring harm to others. This is not a clear line, as any scholar of the harm principle will know; but I take solace in the belief that at the extremes the colours are less grey. It is the person whose colour is much distinguishable from grey, and much the opposite of the average person’s, to whom I address my repugnance.

The anonymity of cryptocurrency enables individuals to purchase a whole range of illegal products and services online. By doing so, these individuals seem to circumvent the laws of society and insofar as libertarianism advocates the liberty of all people, this feature of cryptocurrency certainly seems initially to be libertarian. There will be, of course, those libertarians that do not support this argument; those who argue we should be granted maximum liberty within the confines of the law, law which exists for a valid reason. I recognise this perspective, despite having never myself met a libertarian who did not advocate some adjustment of the law in one way or another, and for this I am glad. Just as those who might permit repugnant acts in the name of libertarianism ignore the wider debate of what should and should not be legal, so too do those that only challenge liberty within the confines of the law, and do not push for debate – all be it from the opposite direction to their counterparts.

At present, I feel I am offering a reasonable defence for the libertarian nature of cryptocurrency as it allows individuals to interpret the grey areas of legality safely – by which I mean anonymously – which I will not deny may have benefits. But this, I contend, is actually a great weakness of cryptocurrency as a libertarian tool, and the impetus for the invalidation of anonymity as a worthwhile feature.

Remember the cameras. The anonymity of cryptocurrency is only necessary when pertaining to the purchase of illegal items because such items are illegal. If those items were legal, the narrative reverts to the isolated hermit terrified of the world, less common sense be allowed to take over. Anonymity as a feature is a result of the illegality of some items that may be purchased. As such, I suggest it is not libertarian to tout cryptocurrency as a libertarian tool; the liberal activity is actually the debate surrounding the legality or illegality of those items being purchased. Recall our discussion on the merits of cash; my purchasing from a store may just as well have been a purchase of illegal substances. Should I be caught, justice – rightly or wrongly – will be levied not on the means by which I purchased those substances, but on the act of purchase and possession of those substances.

It is thus the debate about the illegality of the substances that is relevant to the libertarian and should be the target of their efforts. Cryptocurrency, beyond the benefit recognised above, merely serves as a substitutable method amongst many others, and should not in und itself be considered the focus of libertarian attention.

But there is a further point to be had. The great defence of cryptocurrencies as being anonymous and thus libertarian crumbles when we realise that anonymity is only relevant when it comes to the purchase of illegal items, and in all other cases, be it the charge of transparency or of value, anonymity is perhaps harmful to the libertarian cause. Of course, I do not seek to belittle the debate; I simply charge libertarians with identifying the wrong area of debate – not the currency, but the item for purchase.

Let us debate the illegality of various things but let us simultaneously relegate cryptocurrencies to the realm of simple units of value. Let us not place anonymity on a pedestal, for anonymity – when necessary – may be found in all currencies and is only necessary in almost all circumstances when they facilitate the purchasing of illegal items. Anonymity is not a feature that should be touted and, insofar as questions of liberty are concerned, anonymity offers little practical benefit.

Concluding remarks

It is easy I believe to take the remarks I have presented here and see an author wholly opposed to cryptocurrencies. I am not. But, with an arrogance I fear has pervaded this piece, I charged some readers with ignorance at the start of this piece. I am surely ignorant also.

However, on this matter I stake a defence. Cryptocurrencies are not libertarian. This does not mean they detract from the libertarian cause, and it does not mean I am opposed to them outright. On the contrary, throughout this piece I have argued the features of cryptocurrencies often mimic that of regular units of value – a strategy I would contend may facilitate the widespread adoption of the technology.

But in far too many discussions I have heard this rhetoric repeated: cryptocurrencies have many libertarian advantages over traditional units of value. I hope I have conveyed to you why this is false:

  1. As a means of value being determined, multiple people must agree on a value; as such, the individual is not free to set the value;
  2. Cash is insofar as it practically matters as anonymous as a cryptocurrency;
  3. Where credit is concerned, blockchain creates a record of transaction that – at least in spirit – fails to differentiate cryptocurrencies and credit;
  4. Anonymity shrouds cryptocurrencies in shadows, making adherence to the publicity principle difficult and diminishing the individual’s power of objection;
  5. Anonymity is only necessary for the purchase of illegal items, with such items being the true centre of any libertarian debate, rather than the means of purchase

In writing this piece, other ideas came to mind. But I feel, in one form or another, any objections that I presently have the power to predict may sufficiently find redress in the content of this piece.

If I may repeat myself once more: I am surely ignorant also. There is not a semblance of belief in my mind that I have the vision to imagine the future of this technology, nor the cognitive power to predict all the nuances attached. I only levy this one charge, based on the content of this piece: cryptocurrencies are not libertarian.

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