Crypto/ Apocalypto

κρύπτω/ ἀποκαλύπτω – Crypto/ Apocalypto. Concealment vs Revelation.

Ponto de Situação Atual em Portugal

In 2017 a designer friend of mine met the mayor of Porto. We brainstormed a local currency to pitch to the municipality, a compelling design project and a way to increase the financial resilience of Porto’s economy, which had been ravaged in the wake of the 2008 Global Financial Crisis. In part, the pitch was motivated by a personal desire to step away from further involvement with global financial platforms. When I started looking for alternatives to banking with the big platforms, I found that - in contrast with other European countries - there were practically no credit unions, financial cooperatives or mutual assistance societies in operation anywhere in Portugal, with Caixa Crédito Agricola Mútuo providing essentially short terms letters of credit to the agricultural sector. What about Portugal’s substantial manufacturing and services industries?

What I did discover was that even the most viable, export-oriented local businesses in Northern Portugal were struggling to obtain funding during the post-crisis downturn. A number of these stricken business owners I knew first hand. As is typical with an industry that has evolved to accentuate the business cycle with a pro-cyclical attitude to risk, when financing was most needed in order to help small businesses meet their working capital requirements in a challenging environment, banks were at their most risk-averse. Capital was withdrawn when it was most needed. With the local economy gasping for breath, oxygen was being sucked from the atmosphere.

A few entrepreneurs floated the idea of creating a bank, quite literally, to help family businesses and small enterprises. Even a casual look at the requirements for obtaining a banking license made it clear that the hurdles were immense. Banco Espirito Santo had recently collapsed in a spectacular implosion of hubris and corruption, leaving the financial sector in Portugal darkened for years by an ash cloud of asset destruction. One result was even greater concentration of the banking sector among fewer consolidated players, and a majority of these ending up in the ownership of foreign groups. Sector dynamics have evolved even further in the direction of making the local economy more, not less fragile, where capital allocation decisions are increasingly predicted on the priorities of stakeholders who have no direct relationship with the people and businesses in Porto. In times of crisis, and arguably even in times of prosperity, the financial system has acted as a ‘negative multiplier’ by effectively withdrawing value generated locally to remunerate holders of capital elsewhere.

Our concept was for payment arrangements in Porto to encourage consumers to purchase goods and services from local businesses that in turn purchase goods and services from local suppliers, or pay their staff at least partly with a local currency. The model was local currencies like the Brixton Pound, Bristol Pound (UK), Basque Basko (Spain), Langenegg Talente (Austria), the Swiss WIR and Berkshares. A parallel currency thereby promotes a "positive multiplier" effect, keeping spending within the local area, strengthening social cohesion and solidarity, creating a cultural marker for city identity, and making the local economy more resilient to external shocks by developing more local enterprise producing more of the things needed locally - food, power, services, everyday things. We called the prototype the Ponto, and had some compelling designs sketched (coinage being something of a calling card for my designer friend). At their best, currencies, whether national or local, can be beautiful statements of identity and ideals. Have you noticed that cryptocurrency designs are entirely devoid of telling iconography or any kind of cultural rootedness? Their logos could be the symbol for a corporate anyco based anywhere peddling generic commodities in a global marketplace.

Ponto de Partida

A parallel currency then is my point of departure when thinking about new currency initiatives, money, and financial innovation. Most discussions of financial innovation I read revolve around digital developments in money and exchange. I believe this is the wrong point of departure, and situates the discussion in the realm of financial markets, that of mediated exchanges, and not in the realm of our everyday lives, where the most meaningful exchanges are not those mediated by markets or technology (or both), but unmediated, human exchanges.

"You don't just go online and use the Berkshare. You go down to Main Street stores, have a conversation with a shopkeeper, hear what it's like to do business in the community," says founder Susan Witt. "It's a conversation. It's the building of citizenship. We're out of that habit."

My main reservation about cryptocurrencies is that while they may be used for an exchange, they are in no meaningful way a conversation between two parties to a transaction. The fully anonymous, frictionless exchanges they facilitate are I believe symptomatic of late stage consumer capitalism, a socioeconomic system that is alienating, and for which alienation serves as an impetus. In other words, cryptocurrencies are designed to accentuate the bad habits that we have developed in our exchanges with one another over the last half century or more, habits that are intertwined with developments in both finance and technology, of which cryptocurrency may be the apotheosis.

What problem is Bitcoin solving?

Fiat money is backed and regulated by the government that issues it. Bitcoin, on the other hand, is powered through a combination of peer-to-peer technology — a network of individuals, much like the volunteer editors who create Wikipedia I suppose — and software-driven cryptography, the science of passing secret information that can only be read by the sender and receiver. This creates a currency backed by code rather than items of physical value, like gold or silver, or by trust in central authorities like the U.S. dollar or Japanese yen.

“What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party,” wrote Bitcoin creator Satoshi Nakamoto, himself an enigma, in a white paper introducing the open-source technology.

Commerce on the Internet has come to rely almost exclusively on financial institutions serving as trusted third parties to process electronic payments….Completely non-reversible transactions are not really possible, since financial institutions cannot avoid mediating disputes…. With the possibility of reversal, the need for trust spreads… A certain percentage of fraud is accepted as unavoidable. These costs and payment uncertainties can be avoided in person by using physical currency, but no mechanism exists to make payments over a communications channel without a trusted party.

In other words Blockchain, and by extension Bitcoin, were digital technologies designed to solve a problem that digital technology created, namely that trust is incredibly hard to enforce in the digital age.

Whenever we exchange value there is an element of trust that manifests itself between the interacting parties. For large scale or distant transactions outside our immediate circle of knowledge or acquaintance, our natural inclination has been to place trust in a higher, more powerful overseeing party. Think of Hobbes’ Leviathan.

We’ve become suspicious of Leviathan and fiat currencies based on trust in a political authority, and often with good reason. Governments have not always distinguished themselves in looking out for the interests of their citizens, and monetary policy is one area this comes into stark relief. Monetary seigniorage is sovereign revenue obtained through routine debt monetization, including expansion of the money supply during GDP growth and meeting yearly inflation targets. Seigniorage can be a convenient source of revenue for a government. By providing the government with increased purchasing power at the expense of public purchasing power, it imposes what is metaphorically known as an inflation tax on the public.

Bitcoin and blockchain not only help to solve for payment uncertainties by reducing transaction fees as a highly liquid digital asset free of counterparty risk. They arguably sidestep the the threat of exploitative monetary policy by issuing government and the traditional financial system. It’s no wonder then that cryptocurrencies have been regarded as a robust alternative to other ‘anti-fiat’ assets, and particularly gold.

Buy Gold Now

One of my most important clients when I worked on Wall Street was the Teachers Retirement System of Texas. A senior portfolio manager and my key contact there is a prominent gold bug. He wrote a book called Buy Gold Now. We’ve had long debates on the virtues of gold as an investment. I have never been entirely convinced, but I would sooner buy gold than cryptocurrency.

Why do we value gold? I’ve always found investors’ attitude to gold bizarre. Chemically, it is uninteresting - it barely reacts with any other element. Yet, of all the 118 elements in the periodic table, gold is the one we humans have always tended to choose to use as currency. It is interesting to ask why. Critically, it is rare, and stable. From an elemental perspective, gold is the most logical choice for a medium of exchange for goods and services. The metal is abundant enough to create coins but rare enough so that not everyone can produce them. Gold doesn't corrode, providing a store of value. Because it is chemically inert, it is durable, but it is also malleable, making it easy to fashion into artefacts that have survived for millennia and which we still marvel at. It is hard to imagine any digital token, fungible or otherwise, which will spellbind observers and users a millennium from now, if it ever did in the first place – but more on artefacts and art in a moment.

It would be inaccurate to say that gold, for all its mesmerising gleam, has no intrinsic value. There are mechanical and scientific applications for which it is uniquely suitable as a conductor or agent. Gold's value as an asset, as opposed to a mineral, is however ultimately a social construct: it is valuable because we all agree it has been and will be in the future.

In our debates with my friend the gold bug, I would keep coming back to a baseline fact: as a social construct, gold is little better than fiat currencies, and with little intrinsic value beyond its considerable aesthetic appeal, gold is little better than actual productive assets. What do I mean by productive assets? The ultimate basis for all productive activity, individual and collective, is arable land, water, clean air and sunlight. You might extend the argument to say that it is the ecosystem, or biodiversity. Sometimes our bear market asset allocation discussions would take a turn for the apocalyptic. Prepper playbook survivalist cliches urge us to accumulate guns and gold, and a bunker in New Zealand. I would keep coming back to the soil in our exchanges in Texas, to the point where I had identified a portfolio of investment securities that would give exposure to the socio-economic facets of our collective future that I had identified as most important, including shares in Black Earth Farming Ltd, which controlled more than 300,000 hectares of arable land in the Black Earth region of Russia and the Ukraine.

For a family of four, you don’t need 300,000 hectares. An estimated 0.75 hectares will do, provided you have access to water supply. In our darker daydreams, Florence and I have sought out plots suitable for homesteading in the foothills of the Swiss Alps.

Apocalypse means revelation

Had I followed my Texas colleague’s advice when I last saw him almost ten years ago, I might have doubled my money by holding gold or gold ETFs. There are complications to holding physical gold, although plenty of firms to help out on this score. In Mayfair and St James in the heart of London the gold bullion merchants look like high end candy stores. Tellingly, they sit among art galleries, luxury goods houses and the offices of London’s highest profile hedge fund managers. Everything is reassuringly expensive, and the neighborhood positively reeks of high net worth.

My investment portfolio would have done even better had I invested in Bitcoin when I last met my gold bug friend. Instead of doubling my money, I might have increased it almost 500-fold.

The current drive in Bitcoin looks like a bid to protect against currency debasement, by means of a measured transfer from gold, which is deemed the weaker anti-fiat asset for the moment.

Gold at least has an intrinsic use as the raw material for self-adornment. Bitcoin has nothing so straightforward to fall back on. Official action might easily limit use of the digital asset if it grew big enough to challenge the government’s monopoly of currency issuance.

For now, Bitcoin fills a demand for a wider array of alternatives to fiat currencies at a time when many are deeply (and perhaps rightly) skeptical of monetary policy. It also promises the kind of intoxicating returns that tech stocks have done. The speculative appeal is undeniable. It’s understandable that there would be wide demand for such an asset.

In retrospect, we are all investment geniuses. Black Earth Farming Ltd as an investment still harkens to an ethic of extraction, of commandeering the public commons for private gain. That is the logic of speculation, financialization, and the commodification or securitization of goods that might otherwise be considered part of our collective wealth. It is an ethic of exploitation.

‘Unlimited wants, scarce resources’. In traditional economic theory, we are obliged to follow the logic of exploitation by unlimited desires confronting limited resources. Scarcity is at the heart of the economic paradigm of our age. This however seems more like an assertion than a proof. It’s not too much of a stretch to argue that scarcity is manufactured, the result of the very exploitation which is posited as necessary in order to solve the ‘problem’ of scarcity.

One natural resource that has become increasingly scarce is trust. Cryptocurrencies ‘solve’ for the scarcity of trust in transactional exchanges by eliminating the need for trust. Doesn’t that simply further institutionalize our predicament, making it an inevitable feature of our exchanges?

The best way to know if you can trust somebody is to trust them

’The blockchain is a system of ensuring trust,’ proponents of cyptocurrency argue. Actually, the blockchain is a system for eliminating trust. Bitcoin is a pure, digital expression of money as fungible, abstract scarcity, where interpersonal trust has been fully engineered out of the picture. By eliminating the need for interpersonal trust, it is the apotheosis of a market mindset in which every individual is left to their own devices, to pursue their own economic self-interest in perfect disregard for anyone else’s. What makes interpersonal trust binding is a recognition of oneself in the other. Cryptocurrency is designed to ensure complete economic solipsism.

The market pretends to be a kaleidoscope of human choice. Classical economic theory holds that the market reflects the sum of choices made by rational individuals, acting in their own self-interest. “The centre of this type of post-Kantian moral philosophy is the notion of the will as the creator of value…. The idea of good remains indefinable and empty so that human choice may fill it” wrote Iris Murdoch, half a century ago.

This is an impoverished conception of good. It is only a short step from this philosophical position to seeing the market as the supreme locus of value. Our moral philosophy, our view of human nature, from Kant through Existentialism to libertarianism and today’s free market orthodoxy demands it.

Analog Backlash

Politicians, journalists, doctors, the medical establishment, industry, tech entrepreneurs - who is to be trusted? In a time of proliferating fake news, media manipulation and corporate or geopolitical misinformation and informational espionage, how can we be sure of the information that purports to reflect the real state of the world? Our digital predicament gets worse every year, and with mass quarantine extending the scope of our digitally mediated lives to almost all school and professional activities, our condition as a captive audience is set to worsen further. What’s the antidote?

Most of the attention is spent on regulating big tech, introducing new online fixes, ‘democratizing’ digital access through the distribution of laptops to schoolchildren and blanket coverage of the earth by satellites beaming 5G planet-wide. The typical fixes are greater vigilance and regulation by authorities on the one hand, or greater surveillance and market penetration on the other. Multi-billion dollar investments in cryptocurrency platforms by operations backed by Elon Musk, Peter Thiel and Marc Andreessen do not deepen my confidence in crypto. On the other hand, neither does the enthusiasm of the World Economic Forum or other quasi-governmental bodies–we have seen often how ‘democratization’ has historically been a smokescreen for resource colonialism.

My hunch is that the true fix will be a profound analog backlash across societies. The more convincing the deepfake, the more I will need to seek out a personal, IRL assurance that social and political actors actually merit my attention and trust. The more censored and infiltrated social media and other online channels become by industry ‘watchdogs’ or ‘foreign agents’, the more inclined I become to seek out print media, written by people I may actually know, at considerable expense and with the bulwarks against cynicism that old fashion media channels might help to provide. Of course, even old school media was prone to tendentious reporting and lies. But nothing like the scale of what we are witnessing today.

This may have the effect of encouraging engagement at a local level - community, neighborhood, city, state, region. At this level, we can actually know at several degrees of separation who the key public actors are, what they stand for and whether they are agents of integrity. It is at this level that our small actions might have a visible effect on actual outcomes that improve our collective situation in however small a way - recycling, community initiatives, social solidarity. Precisely the sort of activities and exchanges that are underpinned by a local currency, for example.

Over business and historical cycles, the pendulum swings between globalization and localization. We have had an extreme form of globalization for decades, and have yet to find viable forms of more local association - something akin perhaps to the city-states of the Renaissance? - which would help deal with some of the very real grievances at the heart of populist movements currently rocking the boat. As an extreme globalizing, technocratic solution to the ‘problem’ of trust, cryptocurrency is an instrument of reaction, serving to reinforce the current paradigm which would treat humans as atomised economic agents, human capital that is directed to wherever market returns are highest.

Cybersecurity is an oxymoron

The only way to use cryptocurrency is digitally. No human interface is required, but a computer or smartphone interface is indispensable. Soon we may have bionic chips that are able to mediate transactions for us without the need for anything so cumbersome or obvious as an ‘external hard drive’. Maybe we are all destined for the singularity, and will soon internalize all of these electronic prosthetics. I doubt it. And anyway, exchanges would remain mediated by technology. Of course coinage and paper money are technologies too. They are not digital technologies though, nor do they require an electronic infrastructure in order to operate.

As I write this, cyber attack have sparked a US effort to keep fuel lines open, and the government has enacted emergency powers after a ransomware strike shut down the Colonial Pipeline system. Cybersecurity is yet another technological solution to a problem that was created by technology. If my wealth is only accessible in a digitally-mediated form, can I ever be safe from having my ‘digitally secure’ wallet at risk of being stolen or compromised? To use cryptocurrency, I need either a ‘hot wallet’ – digital currency is stored in the cloud on a trusted exchange or provider, and accessed through a computer browser, desktop or smartphone app – or a cold wallet – an encrypted portable device much like a thumb drive that allows you to download and carry your bitcoins.

A hot wallet is connected to the internet; a cold wallet is not. But you need a hot wallet to download bitcoins into a portable cold wallet.Transactions don’t contain personal information like a name or credit card number, which eliminates the risk of consumer information being stolen for fraudulent purchases or identity theft. So far so good, but it does not guard against an (increasingly likely?) scenario in which the grid goes down. Or there is a gateway abberration. Your digital money is no good to me as legal tender or even as barter token if your laptop or smartphone has no battery. It may be that Bitcoin is a ‘safe-haven’ asset class. This begs the question, though, safe from what?

A ship in harbor is safe - but that’s not what ships are for

Perhaps the energy grid is secure. We’ve just been through an historic moment in which seemingly the entire world has had to move to co-existing online and avoiding physical contact. For the most part, electrical and digital infrastructure remained intact and uncompromised. This dovetails with the question of cryptocurrency’s energy consumption.

Energy usage is built into the very fabric of the currency. The proofs-of-work that are used to secure the blockchain require energy to create. Since Bitcoin could not rely on any third parties to operate, no third party payment mechanism could be used to pay miners for the energy they spent generating proofs-of-work. A new payment mechanism had to be created, giving rise to the first cryptocurrency — bitcoin.

By paying miners using a currency that is issued and transferred exclusively by the blockchain, Nakamoto provided an incentive to miners to protect the integrity of the chain. If any miners attempt to subvert the integrity of the blockchain by colluding to reverse transactions, then they would also subvert the value of the block reward, throwing away money on the table and threatening their investment in specialized mining computers.

Bitcoin block makers, ‘miners’, collectively calculate over 80 billion SHA-256 hashes per second at a cost of approximately $50,000 per block (the most recent figure I found) using hundreds of millions of dollars worth of bitcoin ‘mining’ computers. It would thus be extremely expensive to reverse a transaction with even one confirmation, ensuring strong security for transactions that are included in a block added to the most difficult valid blockchain.

The logic of escalation is built into Bitcoin. Escalation in computational complexity, and therefore escalation in energy consumption (as ever more complex calculations are required to compute integrity of the chain as its adoption spreads). I agree that discussions of carbon footprint are a red herring. A reductionist focus on carbon capture misses the more immediate and urgent need to ensure biodiversity and ecosystem integrity.

Energy and entropy

Nonetheless, creating and sustaining cryptocurrencies is energy intensive. Every digital coin enterprise vying for investors’ attention is motivated to demonstrate their commitment to renewable energy and reducing their environmental footprint. Of course, minting physical money is also energy intensive. As Bitcoin points out on their site, spending energy to secure and operate a payment system is hardly a waste. Like any other payment service, the use of Bitcoin entails processing costs. Services necessary for the operation of currently widespread monetary systems, such as banks, credit cards, and armored vehicles, also use a lot of energy. Although unlike Bitcoin, their total energy consumption is not transparent and cannot be as easily measured.

It may be precisely this transparency that gives ammunition to cryptocurrency skeptics. When the true energy and resource consumption of many of our daily activities is scrutinized, I expect there’s enough to give us pause for thought, or even alarm. Like corporations, most of us have become externalizing machines. The true cost of our daily choices is borne by the commons, which we have been conditioned to plunder as a matter of course.

There’s a credible argument to say that Bitcoin may actually be conducive to more efficient energy usage. ’If some of that excess electricity – of the wrong kind, in the wrong place, at the wrong time – can be used to mine bitcoin and finance the electricity provider’s operations, isn’t that an efficiency improvement? The global crew of bitcoin miners vacuum the unused, stranded, and wasted energy of the world, providing extra dough for the marginal electricity generator whether renewable or not.’

Our system of collective resource allocation is geared to efficiency. What if efficiency is the ailment and not the cure? By ‘rescuing’ stranded assets, the process of cryptocurrency mining is underwriting the perpetuation of a system that created the stranded assets in the first place. Instead of exploiting excess electricity of the wrong kind, in the wrong place, at the wrong time, the more drastic solution would be to shut that capacity down, to find ways of reducing our consumption of energy, not making it more ‘efficient’ or ‘renewable’.

‘Sustainability' is less than a myth, it is a lie

Digital miners of currency, like every industry engaged in greenwashing themselves into continued growth of their business, seek out more renewable energy. Renewables themselves simply shift the focus from carbon-intensive extraction (fossil fuels), to mineral-intensive extraction (precious metals, lithium). Labelled as more ‘sustainable’ activity, the ultimate results are the same: further environmental degradation and destruction of biodiversity.

Buying and saving Pontos is never going to make a person rich, like gold or Bitcoin might. But that is not the purpose of money in a healthy society. Speculation, whether it is in land, stocks, currency, or art, is a zero sum game by definition, and rooted in the mindset of scarcity, and therefore of resource exploitation.

What would investments, exchanges and currencies that reflect an ethic of restoration look like?

Financial intermediation

As a quintessential P2P technology, Bitcoin has much to commend it. The cryptocurrency uses peer-to-peer technology to operate with no central authority or banks; managing transactions and the issuing of bitcoins is carried out collectively by the network. Bitcoin is open-source; its design is public, nobody owns or controls Bitcoin and everyone can take part.

Some investors are eager to embrace an alternative, decentralized currency — one that is essentially outside the control of regular banks, governing authorities or other third parties, who have lost our trust (and often with good reason). Nonetheless, to purchase Bitcoins on an exchange, generally you first need to link your bank account. So much for obviating the need of third-party financial intermediaries. I’m a fugitive from the finance sector. Anything that helps to disintermediate that industry of speculative dissipation of collective wealth is good news in my book.

Moreover, Bitcoin has been ingeniously designed so that the supply of new coin will reduce over time, and so that price declines will reduce the incentive to spend money on increasing supply. Network effects can also make the currency more useful — the more applications are developed, and the more easily and swiftly it can be used, the more it becomes a viable currency. But it still provides no yield to compare it to other assets. And its continued susceptibility to speculative crashes short-circuits its use as a means of exchange, while ensuring that it continues to be an unreliable store of value.

‘Fuck you’ money

At the peak of the Global Financial Crisis of 2008, I was living with an artist friend of mine in Hackney, London. I was among artists when Lehman Brothers failed. Artists giving shelter to bankers - it was a sign of the times. Although London Fields was less than 15 minutes from the City of London by bike, it was a world away. My commute would feel like interdimensional travel. By day, I would be watching the flickering of red datapoint on Bloomberg screens signaling a total financial collapse. The sky was falling. Day in, day out. In the evenings, I would dine with artist friends, who would look at the actual sky and see Turner cloudscapes or Whistler nocturnes.

Of course they were worried about the state of the markets and the global economy. Yet they were used to living precariously. My work colleagues by contrast were stricken by financial commitments - mortgages, school fees, lifestyles - that were al suddenly beyond their means. In the City, as on Wall Street and in other financial centers, there were spates of suicides. My artist friends were radically free. For all the ‘fuck you money’ of my hedge fund investor clients, it was they who were indentured to the marketplace. The artists’ freedom was like that of radical monks of mediaeval Christianity, whose very lack of material possessions made them a peril to the Church, for which they were ultimately banned.

In 2008, the end of the world was nigh. It was a financial apocalypse, a term with its root in the ancient Greek work for revelation. Technologies like Bitcoin have been adopted in part as a ‘safe haven’ asset, to guard from devaluation and depreciation.

Untopia

Apocalypse has a recurring theme of dinner-party conversations in circles of industry friends and our accomplices – journalists, lobbyists, politicians. These conversations are only partly tongue-in-cheek. Investment banking peers are desperate to ensure their children’s future is not compromised by the volatile practices that sustain our fragile livelihoods in the global economy. Many will do whatever it takes to maintain their unsteady footing in the upper echelons of the global 1%. All the while, that so-far serviceable fiction, the ‘terminal growth assumption’ which underpins the very methodology of assessing asset values in the marketplace, may prove to be an outright delusion, and we know it. Economic growth as our most prized collective goal seems more likely to draw us into terminal decline than some equilibrium state of ‘growth in perpetuity’, as the theoretical cornerstone, the Gordon Growth Model assumes.

Questioning the theories we have all grown up with in the industry creates unease. When not looking at me askance like some hippie refusenik, industry friends ask “What’s the alternative?” The implication of the question is that there is none. On the one hand, we labour in the vain hope of fulfilling the empty utopian promise of greater spoils for everyone. The globalising growth model of late stage capitalism will save us all. Or will it? On the other hand, it seems we only have the all-too vivid dystopia of an apocalyptic future to contemplate. Already, many aspects of our collective present have the look and feel of the end of days.

The end is nigh. The end is always nigh. And so is the beginning. Every moment contains both possibilities. Historic precedent suggests that both utopia and dystopia are less likely outcomes than the messy stumbling that has characterised human history. Call it untopia. Cycles of peace and prosperity alternate with periods of chaos and calamity. We superimpose historic narratives that help us to understand our heritage, or bend it to our agendas. Our storytelling capacity is what has enabled homo sapiens to become the apex species on the planet. The concept of paradigm shifts as coined to explain the structure of scientific revolutions, but it is central to understanding the alternation of rival collective imaginings that we call politics, or economics, or culture. To my mind, for all its supposed futuristic appeal, cryptocurrency is very much the product of the prevailing paradigm.

If it is both necessary and useful, don’t hesitate to make it beautiful

I find it difficult to get invested in cryptocurrency perhaps more for philosophical than functional considerations. Ours is the civilization of the marketplace, in which every thing is given a price, and where the price occludes value rather than revealing it. Bitcoin is a digital token of value that is entirely devoid of meaning. To its champions, that makes it a ‘killer app’. To me, what it kills is precisely what we need more of in our collective lives, a broader conception of good than allowed for by neoclassical economic theory.

‘The market economy as we know it depends on the separability of objects from relationships. That is the nature of money itself: it is pure, abstract value. My dollar is the same as your dollar. It works well to mediate exchange of other dissociated, alienated objects, but when it interfaces with the relational, the unique, and the sacred, it tends to reduce them to itself.’

Economics are not the reason I collected coins. Weight, purity and refinement of their minerals were secondary to me. Standard economic definitions identify the functions of money as a store of value, a medium of exchange, and a unit of account. A functional definition captures none of the alchemical magic money involves, nor the pageantry of coinage. It reflects none of the wonder of divining what it means to have worth.

I collected coins for their beauty, each one hinting at stories of how it came to be, who had carried it and what it had been exchanged for. I would marvel at the superb designs, the skilful positioning of type and ancillary devices within the confines of the planchet, the winged goddesses and mythical beasts. Designs are the innovation that turned bits of metal into currency, imbued them with value, and gave them meaning. It is the symbols inscribed on the face of a coin that describe what it is that we pledge allegiance to.

So I am probably the last person to speak to about the virtues of Bitcoin. Cryptocurrencies are entirely devoid of symbols, cultural association or meaning. They are markers of transactions, but obviate the need for true exchange, of meaningful intercourse.

‘Make something only if it is both necessary and useful; but if it is both necessary and useful, don’t hesitate to make it beautiful.’ I’m very fond of this Shaker dictum, and perhaps I’m a closet Amish at heart. Bitcoin’s necessity is a function of our over-reliance on both the market and technology. It’s usefulness has yet to be demonstrated. The alacrity with which it has been adopted by the Art Market demonstrates, ironically, that considerations of beauty are entirely secondary to its speculative appeal.

Artists as central bankers

Each coin in my collection tells a story. Stories have meaning. And meaning is what it’s all about.

‘The most elementary and hence the least dispensable objective of all serious artistic expression, whether aboriginal or sophisticated, is to make human existence meaningful.’

Picasso would famously mint his own currency, paying for restaurant meals with a sketch on a dinner napkin. Circulation was limited to his social circle. Artists like Damien Hirst have deployed similar minting tactics, though on an altogether grander scale. In 2008, he was the principal bidder for a lot of his own work at auction, so he has come to represent both printing press and marketplace for his own brand of luxury good. Damien Hirst has produced something to the tune of 1500 spot paintings that have sold, in some cases, in the millions. The fact of their ubiquity actually perversely one of the things that makes them more valuable, not less valuable, turning the old supply-and-demand dictum of classical economics on its head.

Big name artists and their factories—for that’s effectively what they are—have become sites of mass production. In this way, artists have arguably become almost like forgers of themselves, an ersatz version of their own original ideas in order to supply this market, so desperately hungry for the big ticket names that will burnish the credentials of this or that private collection. Hirst, single handedly, or with his apprentices, has effectively become something along the lines of central banker, minting his own currency.

Perhaps the brazenness and cynicism are themselves the artistic gesture. His latest venture would suggest as much:

‘It involves 10,000 original works of art on paper, which I call “The Currency”. I made them all five years ago, and they are in a vault but about to come to life through their launch on the blockchain. They also exist as NFTs and a related cryptocurrency. The whole project is an artwork, and anyone who buys “The Currency” will participate in this work, it’s not just about owning it. It is the most exciting project I have ever worked on by far.’

‘The Currency’ is the ultimate illustration of the conflation of art and wealth, value and meaning. Value, or more precisely price, has become meaning. Artistic endeavor becomes entirely self-referential as a marketing exercise for the sale of one’s own production. Such artifacts as are produced derive their value entirely from the intersection of supply and demand in the marketplace. The culture and the marketplace are one. And the cryptocurrency is the perfect cipher for this cultural singularity.

Art as asset class

A painting’s aesthetic value is secondary to its auction price as an ‘alternative asset’, one of many investments in a portfolio. “Art and money have always gone hand in hand,” explains auctioneer extraordinaire Simon de Pury. “It’s very important for good art to be expensive. You only protect things that are valuable. If something has no financial value, people don’t care.”

One feature of our current state of cultural production is that art objects are often produced and then stored. They become stores of value. And that value seems to be rooted in the spectacle - when effectively what you have to sell is an object of cultural value, where the value is societally determined, very much like a branded luxury good or a Veblen good of conspicuous consumption. Only much art produced for the Art Market is designed to be inconspicuous. In fact, it is made in order to be hidden from view, not seen.

It is a curious sort of caring that keeps art hidden from view. Near the abandoned Wall Street trading floor where I once worked stands another altar to our civilisation, Manhattan's first freeport. Now also empty, this facility was designed to hold billions’ worth of art, with museum-grade climate control to conserve works that will never be displayed, and retina scanning upon entry to ensure their inaccessibility. Geneva, Singapore, and Delaware house designated ‘free trade zones’, allowing frictionless artwork within their walls to change hands invisibly, free of tax or any civic obligation. Theoretically traded, these treasures are closer to the hoards of ancient times, buried from view in times of civil strife.

Blockchain innovations in the art world point to further abstraction, financialization and securitization of art-making. An NFT obviates the need for expensive, secure, offshore art storage facilities which help to sidestep the jurisdictional restrictions and fiscal implications faced by ultra-high-net-worth-individuals (a designation that would appear to conflate accumulation with virtue). NFTs are minted electronically to create digital objects of no intrinsic or cultural value, but they are even better suited to speculation than the unregulated art market for being ‘frictionless’, like the cryptocurrencies used to pay for them.

Beeple’s Everydays — The First 5,000 Days NFT sold for ca $70 million at Christie’s. Tellingly, the buyer was the Metapurse fund, a group investing in digital art. Making Beeple one of the priciest artists alive, this record-setting sale was also an advertisement for Metapurse’s own currency token, much the way Hirst’s bidding on his own work underpinned his direct-to-market auction in 2008, at the very height of the financial crisis. The token has not fared so well since, nor is it clear that Everyday’s will have any lasting art historical significance beyond its headline price, although the Art Market has been replete with chatter about how this transaction ‘changes everything’.

Make your interactions with people transformational, not just transactional - Patti Smith

It’s a transaction. The digital artwork at the center of the transaction is entirely secondary to the overarching purpose of the transaction, which is to try to spur people to accept the validity and value of a new currency. Beyond the motivations of a few market participants, it is meaningless. Outside a closed system of reference, it may not even be useful as a store of value or a means of exchange, somewhat like the (only occasionally fungible) fantasy currencies of World of Warcraft and other video gaming loot.

We are wired to seek the sacred and the mysterious–the meaningful–not the highest priced. Capital was once the name we used to refer to the commons, or the common wealth, a collective imagining. Humans have always expressed joy or loss through music, we have ornamented our dwellings and ourselves, marked momentous stages of life - birth, rites of passage, death. Artists assume society’s aesthetic responsibilities - a sacred purpose, even in a secular age, however much the market may insist on its profanation.

Money over the centuries has been more than simply a unit of transactional value, but laden with symbolic and cognitive significance that traditional economics overlooks. Pixels and paper have no practical or intrinsic value in themselves. Capital is a collective imagining. It is through our use of images and symbols that we share and shape a common purpose.

Perhaps these artworld cryptocurrency shenanigans are a spectacular distraction from the true utility of Bitcoin and other P2P monetary technologies. Out of sight, they may be used to enable social inclusion, cheaper remittances, poverty alleviation or any number of worthy collective enterprises that are championed by their promoters as possibilities. I have yet to see any, but to be fair, I have not sought them out. What I see mostly with Bitcoin and crypto are wildly speculative price swings. On the other hand, I do see various local currencies around the world underpinning collective initiatives that to my mind underscore a truer meaning of capital, which is the deployment of society’s wealth.

At heart, that’s why I remain skeptical of cryptocurrencies, beyond the environmental, cybersecurity, and digital considerations.

Ponto de Chegada

We think of ‘Luddite’ as a derogatory term. The Luddites were not, as capitalist apologists for unregulated innovation claim, technophobes. They were artisans – primarily skilled workers in the early-nineteenth-century English textile industry. Faced with the advent of machines operated by low-wages unskilled labor, they turned to productive sabotage. What they objected to was not only the threat to their wages, but also to the production of cheap, inferior goods which would damage the reputation of their trades. In an age of proliferating bullshit jobs, it may be instructive to revisit their bone of contention.

The epidemic has called into question many things, including tenuous and over-extended supply chains that produce some of our most basic needs. It may have prompted us to reflect on the goods and objects that we surround ourselves with. And it’s cast into sharp relief the contours and true ecological cost of our political economy, exposing the vulnerabilities inherent in systems generating and perpetuating extreme inequalities.

Technology in our culture is called upon to do a lot of heavy lifting. For some technophiles, there’s little doubt that it will solve the climate crisis, alleviate global hunger, banish loneliness through connectivity. In short, it’s the miracle cure we’ve all been waiting for. Only what if it is precisely our blind faith in technology that got us into our present fix? Perhaps what we need is not more hi-tech, premised as it is on the extraction of ever-rarer precious metals and the uninterrupted hum of energy-thirsty server farms the world over, but more lo-tech.

Cryptocurrency is simply the latest technological fix to a problem created by technology, our alienation from one another and from the world around us.

“The value of a unit of currency is not the measure of the value of an object, but the measure of one’s trust in other human beings.” - David Graeber, Debt: The First 5,000 Years

Romas Tauras

Porto, June 2021