mfioretti: money* + bitcoin*

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  1. Yaroufakis agrees that there are numerous design flaws with the currency. Not least, he adds, “the fact that there are no controls, no democratic checks and balances of a bit issue and no way of back-stopping financial transactions by means of some kind of insurance policy for those that get defrauded.” Yet his central criticism focuses upon what he refers to as “the fantasy of apolitical money.”

    To Varoufakis, money is inherently political. The decisions regarding whether money is produced or not, how it is distributed and who receives it, all have significant political consequences, benefiting certain social groups over others. Bitcoin’s central design feature, that it is not governed by a central bank or decision-making authority, means that responsibility for its distribution is forfeited. This can have profound social and political implications in times of crisis.

    To understand what Varoufakis means by the political nature of money, consider how governments respond to financial crises. When a major financial crisis occurs, it is usually caused by the failure of widespread and interconnected debts. Once these debts fail, what happens is that a large part of the money supply effectively disappears. With this money gone, governments have a choice whether to replace it or not. Choosing not to replace it through the creation of new money (inflation) becomes a political decision with political repercussions. As Varoufakis suggests, “effectively you are choosing to shift the burden of a crisis onto the debtors and usually the weakest and poorest of debtors. So effectively you are redistributing power and wealth against the weaker members of society.”

    If the decision is made to replenish the money supply, like it was in 2008 through Quantitative Easing (QE), then how this money is channeled through the economy will also influence the political economy. In Varoufakis’ opinion, QE was engineered in a way to benefit large corporations.
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  2. Nobody has created the cryptocurrency we actually need just yet.

    You see, Satoshi understood the first part of the maxim, the power to print money. What he missed was the power to distribute that money.

    The second part is actually the most crucial part of the puzzle. Missing it created a critical flaw in the Bitcoin ecosystem. Instead of distributing the money far and wide, it traded central bankers for an un-elected group of miners.

    These miners play havoc with the system, holding back much needed software upgrades like SegWit for years and threatening pointless hard forks in order to drive down the price with FUD and scoop up more coins at a depressed price.

    But what if there was a different way?

    What if you could design a system that would completely alter the economic landscape of the world forever?

    The key is how you distribute the money at the moment of creation.

    And the first group to recognize this opportunity and put it into action will change the world.

    The problem with all of the plans before now, from UBI to socialism (high taxes on the rich to spread the wealth across the game) is that to redistribute the money after it’s already been distributed is nearly impossible. The people with that money rightfully resist its redistribution. And as Margret Thatcher said “The trouble with Socialism is that eventually you run out of other people’s money.”

    But what if the money is NOT already distributed?

    What if we don’t have to take it from anyone at all?
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  3. In Norway, the Norwegian bank DNB has taken the lead. And since politicians in general are trained to do as financial capitalism bids, we can say with almost total certainty that legislation banning cash will be passed. If cash payment is banned by law, we will no longer have money. Or rather: we will no longer have any control over our own money. Whether we’ll be able to use them or not, will be decided by the banks and the authorities. We can no longer withdraw money from the bank and hide them under the mattress, even if the banks should introduce a five percent negative interest rate. And if the authorities decide that a certain person should be blocked from their account, they cannot buy as much as a bus ticket or a piece of bread. The totalitarian society on steroids.

    This neo-fascism, or this post-democratic society – or whatever we should name this nightmare – is matched by the draconic legislations against so-called “fake news” and the introduction of public-private censorship bodies. As noted before, a militarization of opinion formers worthy that of a dictatorship, is taking place. And it is happening without the slightest protest from those who supposedly support the freedom of the press and free speech.
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  4. Bitcoin believers–and I’ve come to number myself among them– believe that, one way or another, it will usher in a new era of frictionless commerce and programmable money. Bitcoin true believers think it will ultimately do to Wall Street what the Internet did to fax machines, while also decentralizing much of the Internet. Bitcoin extremists believe it will replace “fiat currency” like the US dollar or the euro (in the Bitcoin world, “fiat” is a four-letter word) and bring on the Libertarian Rapture. If those are the stakes, then obviously we want competition.

    What you may not realize is that we’re already close to a fairly critical decision point.
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  5. it looks to me like the developers of Bitcoin were thinking like this: “Mining system + deflationary architecture = we’re rich!!!”

    However, none of these get-rich dreams are likely to materialize. Since the system’s architecture is set in the unchanging software, and we are looking at only a few years rather than several centuries as the time frame for the rapid exponential decrease in new bitcoin additions, sophisticated investors can all see the pre-determined and rapidly approaching deflationary future of Bitcoin, and will price that into their decisions now. Their incentive is to buy in the immediate term, accumulate some bitcoins, watch closely as they appreciate, and then dump them on suckers at the first sign of the broad market realization of the inevitability of the deflationary stage. There might be a few volatile swings before the final collapse hits for good, but eventually the speculative demand for bitcoin will evaporate, there will be a massive selloff, the deflation will reverse into a brief hyperinflationary spasm … and then pfffft.
    Tags: , , by M. Fioretti (2014-12-05)
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  6. Bitcoin sometimes appears akin to an illegal immigrant, trying to decide whether to seek out a rebellious existence in the black-market economy, or whether to don the slick clothes of the Silicon Valley establishment. The latter position – involving publicly accepting regulation and tax whilst privately lobbying against it – is obviously more acceptable and familiar to authorities.

    to many onlookers Bitcoin is just a passing curiosity, a damp squib that will eventually suffer an ignoble death by media boredom. It is a mistake to believe that, though. The core innovation of Bitcoin is not going away, and it is deeper than currency.

    What has been introduced to the world is a method to create decentralised peer-validated time-stamped ledgers. That is a fancy way of saying it is a method for bypassing the use of centralised officials in recording stuff. Such officials are pervasive in society, from a bank that records electronic transactions between me and my landlord, to patent officers that record the date of new innovations, to parliamentary registers noting the passing of new legislative acts.

    commercial banks collectively act as a cartel controlling the recording of transaction data, and it is via this process that they keep score of ‘how much money’ we have. To create a secure electronic currency system that does not rely on these banks thus requires three interacting elements. Firstly, one needs to replace the private databases that are controlled by them. Secondly, one needs to provide a way for people to change the information on that database (‘move money around’). Thirdly, one needs to convince people that the units being moved around are worth something.

    To solve the first element, Bitcoin provides a public database, or ledger, that is referred to reverently as the blockchain. There is a way for people to submit information for recording in the ledger, but once it gets recorded, it cannot be edited in hindsight. If you’ve heard about bitcoin ‘mining’ (using ‘hashing algorithms’), that is what that is all about. A scattered collective of mercenary clerks essentially hire their computers out to collectively maintain the ledger, baking (or weaving) transaction records into it.

    Within the Bitcoin system, a set of powerful central intermediaries (the cartel of commercial banks, connected together via the central bank, underwritten by government), gets replaced with a more diffuse network intermediary, apparently controlled by no-one in particular.

    What is Facebook? Isn’t it just a company that you send information to, which is then stored in their database and subsequently displayed to you and your friends? You log in with your password (proving your identity), and then can alter that database by sending them further messages (‘I’d like to delete that photo’). Likewise with Twitter, Dropbox, and countless other web services.

    we give groups like Facebook huge amounts of information. Indeed, they set themselves up as information honeytraps in order to create a profit-making platform where advertisers can sell you things based on the information. This simultaneously creates a large information repository for authorities like the NSA to browse. This interaction of corporate power and state power is inextricably tied to the profitable nature of centrally held data.

    The blockchain can record contracts between free individuals, and if enforcement mechanisms can be coded in to create self-enforcing ‘smart contracts’, we have a system for building encoded law that bypasses states.

    Bitcoin and other blockchain technologies, though, are empowering right now precisely because they are underdogs. They introduce diversity into the existing system and thereby expand our range of tools. In the minds of hardcore proponents, though, blockchain technologies are more than this. They are a replacement system, superior to existing institutions in every possible way. When amplified to this extreme, though, the apparently utopian project can begin to take on a dystopian, conservative hue.

    the ‘empowerment’ here does not stem from building community ties. Rather it is imagined to come from retreating from trust and taking refuge in a defensive individualism mediated via mathematical contractual law.

    The myth of political ‘exit’

    Back in the days of roving bands of nomadic people, the political option of ‘exit’ was a reality. If a ruler was oppressive, you could actually pack up and take to the desert in a caravan.

    but The bizarre thing about the concept of ‘exit to the internet’ is that the internet is a technology premised on massive state and corporate investment in physical infrastructure, fibre optic cables laid under seabeds, mass production of computers from low-wage workers in the East, and mass affluence in Western nations. If you are in the position to be having dreams of technological escape, you are probably not in a position to be exiting mainstream society. You are mainstream society.

    What he is really trying to do is to invoke one side of the crypto-anarchist mantra of ‘privacy for the weak, but transparency for the powerful’.

    That is a healthy radical impulse, but the conservative element kicks in when the assumption is made that somehow privacy alone is what enables social empowerment. That is when it turns into an individualistic ‘just leave me alone’ impulse fixated with negative liberty. Despite the rugged frontier appeal of the concept, the presumption that empowerment simply means being left alone to pursue your individual interests is essentially an ideology of the already-empowered, not the vulnerable.

    It is only when we think in these terms that we start to see Bitcoin not as a realm ‘lacking the rules imposed by the state’, but as a realm imposing its own rules. It offers a form of protection, but guarantees nothing like ‘empowerment’ or ‘escape’.

    Technology often seems silent and inert, a world of ‘apolitical’ objects. We are thus prone to being blind to the power dynamics built into our use of it.

    This is where the concept of becoming ‘enslaved to technology’ emerges from. If you do not buy into it, you will be marginalised, and thatis political.

    This is important. While individual instances of blockchain technology can clearly be useful, as a class of technologies designed to mediate human affairs, they contain a latent potential for encouraging technocracy. When disassociated from the programmers who design them, trustless blockchains floating above human affairs contains the specter of rule by algorithms. It is a vision (probably accidently) captured by Ethereum’s Joseph Lubin when he says “There will be ways to manipulate people to make bad decisions, but there won’t be ways to manipulate the system itself”.

    Don’t decentralised blockchains offer the ultimate prospect of protected property rights with clear rules, but without the political interference?

    This is essentially the vision of the internet techno-leviathan, a deified crypto-sovereign whose rules we can contract to. The rules being contracted to are a series of algorithms, step by step procedures for calculations which can only be overridden with great difficulty. Perhaps, at the outset, this represents, à la Rousseau, the general will of those who take part in the contractual network, but the key point is that if you get locked into a contract on that system, there is no breaking out of it.

    Contracts, in essence, resemble algorithms, coded expressions of what outcomes should happen under different circumstances. On average, they are written by technocrats and, on average, they reflect the interests of elite classes.

    The point I am trying to make is that you do not escape the world of big corporates and big government by wishing for a trustless set of technologies that collectively resemble a technocratic crypto-sovereign. Rather, you use technology as a tool within ongoing political battles, and you maintain an ongoing critical outlook towards it. The concept of the decentralised blockchain is powerful. The cold, distrustful edge of cypherpunk, though, is only empowering when it is firmly in the service of creative warm-blooded human communities situated in the physical world of dirt and grime.

    Perhaps this means de-emphasising the focus on how blockchains can be used to store digital assets or property, and focusing rather on those without assets. For example, think of the potential of blockchain voting systems that groups like Restart Democracy are experimenting with. Centralised vote-counting authorities are notorious sources of political anxiety in fragile countries. What if the ledger recording the votes cast was held by a decentralised network of citizens, with voters having a means to anonymously transmit votes to be stored on a publicly viewable database?

    We do not want a future society free from people we have to trust, or one in which the most we can hope for is privacy. Rather, we want a world in which technology is used to dilute the power of those systems that cause us to doubt trust relationships. Screw escaping to Mars.
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  7. As the currency-commodity-technology’s true character comes to light, however, at least one finance expert feels it is set to drop to as low as $10 by the middle of this year.

    Bitcoin began 2013 at $13 a coin, only to ring in 2014 around $800 with worldwide fascination driving the 60-times gain. But according to Boston University Finance Professor Mark Williams the price has really been driven by an influential few. Just 47 people own 29% of all outstanding Bitcoins; 930 own 50%. Another 10,000 folks bring the total owned by the largest coin holders to roughly 75%, leaving a sliver to be split among about 1 million small-change Bitcoiners.
    Tags: , , , by M. Fioretti (2014-09-09)
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  8. the principle of automation that lies behind crypto-currencies like Bitcoin hides a great risk: by explicitly rejecting the need for trust among the community of users as a fundamental feature of its technological design (a distributed public ledger called the “blockchain”), Bitcoin threatens to remove the last residues of our social bonds from the money-form, thus transforming it into the ultimate agent of separation. Precisely because it is decentralized and non-local, Bitcoin cannot operate on the basis of a trust principle as local currencies do. Instead, it is designed on the basis of the same Randian principle that animates bankster culture: fidite nemeni, trust no one! Now that we have been so thoroughly abandoned by God, finance and the state, an anonymous army of cyber-libertarians proposes a new icon to worship: cryptography. And so our faith becomes displaced into the sophisticated source code behind the new forms of digital money.

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

    At its core is its novel payments technology — the distributed public ledger — which could just as easily be used to process payments denominated in US dollars, or British pounds, or Japanese yen as in bitcoins. So how does bitcoin’s answer to the fourth question any money must answer measure up against the historical alternatives?

    The oldest of those is cash: coins and notes that represent credit balances and transfer them from person to person when passed from hand to hand. It is in fact a very ingenious technology when one thinks about it. Settlement is instantaneous. There is the risk of counterfeiting, of course — but no need to refer to any centralized records. And the ledger recording society’s network of credit and debt at any point in time is genuinely virtual: it consists simply in the physical distribution of the information-bearing tokens. Coinage, you see, was the original internet of things.
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  10. Studies from Princeton and Cornell found that current rules governing the mining of bitcoins leave room for cheats or encourage behavior that could destabilize the currency. Such changes could be difficult to implement, given the fact Bitcoin — by design — lacks any central authority." The main problem discovered is that transaction fees do not provide enough incentive to continue operating as "miner" after there are no more bitcoins left to be mined.
    Tags: , by M. Fioretti (2014-03-25)
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