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The Politics of Bitcoin: Software as Right-Wing Extremism (Forerunners: Ideas First) Paperback – September 26, 2016
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"Golumbia, in his small but important way, is helping wake us to the falsity of our perceived neutrality."—One Flew East
"This book is a very readable and valuable monograph which combines sound historical research with insightful analysis. All concerned citizens should read this book, which is an essential resource for understanding the true stakes of current technological hyperbole."—Newsclick
"Golumbia a le mérite de s’attaquer à des idées qui ne sont pas suffisamment remises en question dans les communautés de la cryptomonnaie et des technologies de chaînes concertées. J’en recommande fortement la lecture à quiconque s’interroge sur les impacts de ces technologies sur nos sociétés."—D’un bloc à l’autre
About the Author
David Golumbia teaches in the English department and the Media, Art, and Text PhD program at Virginia Commonwealth University.
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The general thrust of his critique aligns with my own experience with some of those who are pursuing Bitcoin and other blockchain ventures - though, from what I can tell, the preponderance of those folks entered early and it is thus hard to determine whether their slant is due to a genuine extreme (and in my opinion utopian and myopic) "anti-state" political view or is just “good old fashioned” greed and self-interest, blind to its deleterious effects on others. Regardless, there is a bizarre skew that occurs in some parts of the community that reminds me of talking with folks in the 90s who (still!) believed that the Communist Manifesto really did paint a practical blueprint for a more fair and equitable society; rather than just remaining a valid and useful critique of some of the dangers inherent in capitalist systems. There’s this bizarre idea that technology will somehow remove human solipsism and many other foibles miraculously - much as Communists believed that the system would lead to a revolution in human nature. It might be more accurate to say that both just ignore the potential for negative patterns latent in humanity while simultaneously lumping all such manifestations under some boogeyman - the Fed / Government in the case of Bitcoin; and “capitalists / the bourgeoisie” in the case of Communism.
I’m deliberately comparing an extreme rightwing view with an extreme leftwing one to highlight the extremism common to both. Reading the original Bitcoin whitepaper what strikes one in 2017 is the obvious utopian fallacies that the author did not foresee. (I could be more cynical and imagine that he deliberately misled folks, but I see no reason not to offer the full benefit of doubt on that point.) There are plenty of examples. One is the idea of facilitating micropayments. Given that Bitcoin transaction fees are now at about $5.00 a pop, one either needs to redefine “micro” or realize that the author got this wrong. And it’s not hard to see why. Indeed it seems by design and will only get worse over time. Some claim this (the rising transaction costs) is merely a technical issue and has a technical solution. So far, the preponderance of evidence is that this is not the case. Rather it is a pure supply & demand economic issue and even if technology widens the supply, the likelihood that there will be oversupply is effectively nil for two reasons. First is that the potential demand is much larger than the current demand and will rise to meet the added supply (much like the demand for freeway lanes in LA) and second is that the miners have a say and evidence suggests they won’t “vote” against their own self-interest (by installing software that will overly undercut their income) and thus we’ll continue to see a capped supply.
And that’s a good segue into what to me is the main weakness of Mr. Golumbia’s writing: his apparent unfamiliarity with the underlying technology even in the broad strokes of it. He also seems to miss the reason blockchain has value due to a lack of technical understanding of … banking in this case. While her rightly criticizes those who insist that technical proficiency is a prerequisite for having an informed opinion or, worse, is the access “token” for entrance into the conversation. he seems to simultaneously overlook the benefit such an understanding would bring to his reasoning, and that part is unfortunately. There are times when his lack of familiarity even with the terms - he refers to blockchain as a software “model”; it isn’t, it is a data structure (and a not-so-recent one, I might add, dating to the heyday of work in asymmetric cryptography in the 70s and 80s) - is a disservice. In fairness to the tech gatekeepers who may have dismissed him out of hand, this would be like showing up at a medical conference and talking about the spleen’s role in pumping blood, or the lung’s primary role in regulating hormones. No one would take such a person’s medical views too seriously - and rightly so. (And, notwithstanding that organs have multiple functions and things are interconnected in the body; when one speaks in terms of organs on the functional level we are usually talking about their primary functions, so unless the newcomer has some really astounding medical/technical observations, they’d simply be seen as talking out of their … hat, in this case and mostly dismissed.)
The start of Chapter 6 is a travesty of ignorance and garbled referents. Given that his topic rests on a software implementation this is egregious. Made worse because the basic concepts are readily understood by anyone willing to put in a brief effort or find a competent friend/mentor to teach them (yes, I’m available if you can’t find one). This Chapter reads more like someone determined to stay on their high-horse in the face of obviously not knowing what he’s talking about. It’s sad and the piece as a result would be better with that chapter removed - and potentially better still if he had the curiosity to learn a bit about the topic before offering such sweeping opinions.
Separately, much of what he addresses in the start of this chapter is mere hype. The fact that he takes hype at face value shows a deep naivète about much of entrepreneurial culture. News flash: there’s lots of hype in the world of startups, some small amount of which actually plays out. Blockchain technologies are not particularly new or different in that regard.
In another digression, Golumbia uses a lot of words arguing about whether or not Bitcoin is a currency using its canonical definition. He becomes guilty of the very thing that he is criticizing and finally becomes blind to hearing the part of the blockchain booster’s critiques that has merit: long-term deficit financing of government functions, and hence of government-backed currencies, is an issue that has not been robustly addressed and most likely will require an inflationary period to bring those deficits down. Rather he squabbles about contradictions in whether it is fair to term Bitcoin a currency or something else. To this day (9 years after its launch) different jurisdictions view Bitcoin differently with some treating it as property - and hence gains in its value are taxable - while others treat is as a currency and others have yet to decide. Also, to put the requirements of a stable currency on a spontaneously emergent “coin” seems premature and hence unfair, time will tell if it indeed serves that purpose in some industries and some locations. It also misses a valid concern of some government-backed currencies (notably the US Dollar), even if that concern doesn’t rise to the level of full-fledged critique that many of the extremist blockchain boosters imagine.
That said, I won’t probe that angle further, as his main thrust about the contradictions in the arguments of the blockchain boosters is largely correct in my view and points to a line of thought that remains worrisome and leaves one wondering whether those who hold it are disingenuous or simply have a vastly different set of experiences and interpretation of events, or interests not aligned with the vast majority of people who parrot those views who are in turn being duped.
So, back to tech for a moment. Before getting to blockchain, it’s worth talking about ledgers. Old fashioned ones. May your inner accountant rejoice. A ledger records transactions. One can make a good argument that this is a bank’s root or core function. While banks perform many services and functions, the root of them all is recording what was done - whether a deposit, a loan, a withdrawal, etc. To keep track of those one needs a reliable ledger. We “trust” bank’s ledgers for a number of reasons but probably the most potent one is that banking has a natural network effect - if a bank were to cheat on its ledger other banks would soon stop doing business with that bank and it would go out of business. Plus, cheating is illegal and banking being regulated and their books being audited, one hopes this would be quickly caught and the perpetrators jailed (hey, I’m an idealist). But, at the end of the day, the bank keeps an (accurate) ledger and also tells you the state of a subset of that ledger. You can check it yourself - your portion of the ledger - that’s what the bank statement helps you do, along with your receipts or (in old days) your checkbook’s ledger. Of course you “trust” the bank has a single set of books and those books “balance” - that is, you choose to deal with a reputable and legitimate bank. Again, this is effectively enforced by network effects and solid regulations. To hear some blockchain enthusiasts tell it, this system that works incredibly well is about to implode and relies on this scary concept called “trust.” But the foundational function is record keeping. Most banks use transactionally secure (localized) databases to perform this function, but some are looking to use blockchain technology as an adjunct in areas of business where that approach makes more sense.
Similarly nations keep ledgers. Despite what some rightwing conspiracy theory fanatics claim, the US government doesn’t simply mint money at will - it keeps a ledger and that ledger needs to balance. Hence the subject of debt ceilings that routinely comes before the Congress and the fact that the Treasury needs to issue bonds to raise funds - and keep track of those in, you guessed it, a ledger.
In short: accurately keeping a ledger is essential to banking and to the financial function of organizations small and big, including governments. One function of an accountant is to ensure the ledger’s entries accurately reflect the organization’s financial transactions. And the role of an auditor is to check the accountant’s work and (ideally) verify that it is accurate and correct.
Being central to financial transactions, it is reasonable to ask: what role might a public, decentralized, globally readable and writeable ledger play in the world of finance? In particular, what would happen if "[a] mechanism exists to make payments over a communications channel without a trusted party"? A system like, say, the Bitcoin blockchain?
Here’s the thing about the Bitcoin blockchain. It’s a ledger. It is public. Anyone may write to it (paying a nominal and steadily growing fee). Anyone can validate it (for free not counting the cost of running the computer to do the checks). And anyone can read from it. And due to the cleverness of how mining was incorporated into it, the Bitcoin blockchain allows for “trustless” operation so long as at least 50% of the nodes are being honest. Bitcoin’s blockchain includes an inherent asymmetry: it is very easy to validate a block (your handheld has enough compute power to do this), but it is, by design, very hard to create a valid new block. Thus anyone can almost immediately check a block - and spot a fraudulent one - but it takes a lot of work to create a valid block and creating those is incentivized by the system (its what mints new Bitcoins) so that miners are paid to be honest participants and computationally disincentivized to cheat (because they’d be found out and their block rejected - a lot of wasted work). This is indeed very clever. And useful. Notably in areas where good financial systems are not reliable - in other words useful in places that don’t function economically as well as the US or other advanced economies. It is useful in possibly lowering the cost of transactions that are already public - land deeds comes to mind as an example. It is useful in transacting between financial institutions.
And here I’l stop. For the third thing that I found undermined Mr. Golumbia’s booklet was his penchant to prognosticate. It seems a vanity of historians and many who would offer incisive social critiques. But in this case I think the critique stands on its own - combined perhaps with information about the obvious: how well many of our existing systems do work - they can be improved upon, but the sky isn’t falling. Let’s see what the future shall bring. And let’s build systems that help discourage abuses. Those systems are technical and legal/social/political both.
This book is a very readable and valuable monograph which combines sound historical research with insightful analysis. The issues discussed go far beyond Bitcoin and are directly related to broader Internet governance issues.
It is revealing to cite a previous comment posted on the Amazon web site for the book: “This article is a statist critique of Bitcoin and its ideological (anti-statist or libertarian) background. Which would be fine, except the author does not realize that statism is also an ideology, and thus does not understand the anti-statist position either.”
The author of that comment appears to equate the two ideologies, without taking into account the fact that state institutions are very real, and pervasive, and have been so for millennia, whereas the anti-statist ideology is a utopia that has rarely been implemented on any significant scale.
In fact, the private companies that are touted by right wing libertarians as the ultimate arbiters of most everything are thoroughly hierarchical, autocratic, top-down, organizations that embody the antithesis of anarchism and individual freedom.
As the book says, proponents of the demise of the state want the state when it suits them, namely to protect private property, intellectual property, etc., but not when it does not suit them, namely to protect users, consumers, and workers . This is corporate violence, which, if it continues unchecked, will surely be worse than the state violence decried by right-wing libertarians.
Thus all concerned citizens should read this book, which is an essential resource for understanding the true stakes of current technological hyperbole.
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