Pathfinders: More Tales from the Crypto (2023)

The Pathfinders Column from the January 2023 issue of the Socialist Standard

In autumn last year youthful fintech whizzkid Sam Bankman-Fried, proprietor of FTX, one the hottest crypto-exchange companies in the world, was boasting about pouring billions of dollars, yes billions, into the Democrat war chest to fight the 2024 US presidential election. Then his chips got fried in ‘one of the largest corporate collapses in history, including the implosion of Enron in 2001’ (nyti.ms/3FhREgH). FTX stock value went from billions to nothing in the blink of an eye. Hundreds of thousands of customers lost their money. The aftershock hit other crypto exchanges like Swyftx and Bybit who immediately laid off nearly half their staff (bit.ly/3haWNiR). And all this followed a gigantic crypto market crash in May after South Korean firm Terra-Luna went down, resulting in two thirds of global crypto value – about $2 trillion – being wiped out including for market ‘bluechips’ like Bitcoin and Ethereum. Though the currencies were virtual, the disaster was real enough. 20 people reportedly committed suicide and South Korean police were ordered to patrol known suicide bridges in Seoul to stop more people jumping.

To borrow a crypto phrase, the worldwide trade in crypto ‘went to the moon’ in 2021-2, with $275bn traded daily in over 16,000 currencies on more than 400 exchanges and platforms (tmsnrt.rs/3Br1oEi). Non-fungible tokens (NFTs), crypto art tradables considered a nerdy joke a year before, ballooned into a $40bn global market, not far off the $50bn value of the total fine-art market (Bloomberg, 6 January, 2022). How did all this happen? Essentially it’s Tulipmania or the South Sea Bubble, based on ‘next sucker’ logic, where people invest in ‘assets’ on the assumption that they will be able to sell on to the next sucker at a higher price. Forget the original rationale of crypto as digital money alternative, that was never very practical anyway and is now irrelevant. Forget the silly notion that speculator commodities ought to have some intrinsic value. That matters not one jot. One of them, Dogecoin, was created by software engineers as a joke solely to poke fun at Elon Musk, but was subsequently endorsed by Musk and wound up becoming the world’s fourth-largest crypto, valued at $80bn. The runaway momentum behind this global Ponzi scheme is not real wealth, but that it can make some people fortunes. Until, one day, it doesn’t.

The May 2022 crash should have been to crypto what the R101 was to hydrogen airships, but market disasters never dent the faith of the capitalist faithful. And crypto traders have a vested interest in not letting crypto die. Instead they’re desperate to keep promoting it in order to draw in the next consignment of gullible buyers, so they’re not left holding the bag in their own multi-level marketing trap. Meanwhile governments have been slow to regulate this crazy casino despite it being a gift to money laundering, smash-and-grab hackers, ransomware and organised crime. Indeed even the politicians have got pound signs in their eyeballs. In December the UK government introduced a set of gloves-off banking deregulation measures including a ‘nod to developing the UK as a centre for crypto assets’ (bbc.in/3FEJfph ).

But crypto advocates aren’t just about the money, they are ideologically motivated, hailing crypto as the future of money and even the future of the internet. While real revolutionaries ask the big question, what if we abolished capitalist trading and money entirely, crypto fans obsess over the pseudo-radical question, what if we have a money system that’s not mediated through any centralised state agency, and what if we roll that peer-to-peer architecture out to other centrally controlled systems like the web. They are essentially techno-libertarians, in love with the screw-you-Jack premise and get-rich-quick promise of capitalism, but with a deep-seated animus against the state regulatory apparatus that normally goes with it. They want football without the referee, the Wild West without the sheriff, trusting in invisible Adam Smith woo-woo to make it all work. Now they also want Web3, a decentralised blockchain version of the web which supposedly frees it from the power of the Big 4, Facebook, Apple, Google and Amazon, who reap the benefits from user-generated content while cutting the artists and creators out of the revenue stream. The fact that the Silicon Valley venture capitalists behind the Big 4 are the same ones now backing Web3 should be a big clue that the technology might be decentralised but the power certainly won’t be. If anything it will be the opposite, as Web3, just like the crypto casino, is based on using blockchain tokens. As web blogger Molly White points out, in a podcast series by Financial Times journalist Jemima Kelly, ‘When there’s a token involved, there is a speculative financial component’, to which Kelly adds ‘Web3 isn’t really about making the internet any fairer, or less easy to exploit by fatcat Silicon Valley investors, it’s… about introducing yet another layer of financialisation to the web’ (apple.co/3HyRhB8). None of this apparently matters to crypto ideologues with their warped notion of freedom. To them, the blockchain has become a fetishistic emancipatory totem.

To recap, the blockchain is simply a ledger system distributed across multiple computers that records digital transactions. All participants have a copy of this ledger, making it theoretically (though not actually) impossible to alter afterwards. The point of this is to prevent double accounting without relying on some central checking mechanism. What use is this in capitalism, a system entirely built around centralised hierarchical control? Many would say none at all, given that the technology is currently grotesquely inefficient in terms of energy use, requiring at least eight orders of magnitude more energy than a standard centralised alternative (bit.ly/2Kew9QE). Might it be useful in socialism, perhaps as a way to reduce the load on central administrative hubs involved in production and distribution? It’s possible, because the heavy power consumption involved is mainly caused by the current need for crushing layers of encryption, hash functions, public-private keys and all the rest of the paraphernalia of capitalist secrecy. Socialism, being a trust-based sharing cooperative, wouldn’t need any of that. Even then, blockchains might still be seen as overpowered, over-engineered and overcomplicated in a society that may set more store by keeping it simple, stupid.

Paddy Shannon

Cooking the Books: Monopoly money (2019)

The Cooking the Books column from the August 2019 issue of the Socialist Standard

In June Mark Zuckerberg announced that in 2020 Facebook would launch its own ‘digital currency’. Since Facebook is the F in the GAFA group of US technology corporations that are widely criticised for harvesting private information for profit and/or not paying enough tax (the others are Google, Apple and Amazon), suspicions, not to say conspiracy theories, immediately arose that there must be some ulterior motive, one beyond making more money that is. Even Ed Conway, Sky News Economics Editor, had an article in the Times (21 June) headlined ‘Facebook currency will help it rule the world. Mark Zuckerberg’s new move is designed to make his company more powerful than any country’.

Is there anything in this? Or is it just sensationalism or the usual left-wing practice of selecting particular capitalist corporations or groups of capitalists to blame for things rather than the capitalist system as such or even the far-right delusion that the Jews are out to rule the world?

What is being proposed is an international payments system based on blockchain technology. This is a technology that allows any transaction to be both uniquely digitalised and unable to be tampered with. It was the basis of the Bitcoin scheme devised by the so-called crypto-anarchists. But the Libra, as the Facebook money is to be called (the same as the l in the old l.s.d.), will be different from Bitcoin in several key respects.

First, it will not be that decentralised but run by a central board on which other corporations, such as Paypal, Visa and Mastercard, participating in it will be represented alongside Facebook.

Second, it will be linked to a bundle of state currencies (dollar, euro, yen, sterling, etc) so that, unlike Bitcoin, its value can be stabilised so it can be used as a means of payment.

Third, it won’t be secret. Secrecy is not built-in to blockchain technology but was something added by the crypto-anarchists for Bitcoin to avoid states knowing who the payers and payees were.

Fourth, it will be profit-making. The corporations participating in it are aiming to make a profit out of the fees charged to users.

Those using the service – in theory all of the 2.3 billion Facebook users – will be able to open an account in Libra by converting their state currency into it and using this to pay for goods and services in any part of the world (except China where Facebook is banned). It is rather surprising that the banks themselves have not come forward with such a system. They may well be forced to now. Even the state central banks might have to,

That this is a bid by Zuckerberg to become the ruler of the world is complete nonsense of course. For that, he would have to control armed force, which he doesn’t. And his scheme will be subject to the control of states. They are bound to introduce regulations to stop Facebook money being used for currency speculation, money laundering and other dodgy dealings, just as they have done with Paypal and the others and would love to do with Bitcoin.

Ellen Brown, the US anti-banker theorist, has suggested (‘Facebook May Pose A Greater Danger Than Wall Street,’ Truthdig, 25 June) that what should happen is that the international payments system be run as a public service by ‘democratised’ central banks. That’s to miss the problem. It, too, would be a colossal waste of information technology that could be more usefully employed, in a needs-oriented world, in organising the logistics of ensuring that everyone on Earth had access to what they needed when they needed it – without payment.

Pathfinders: A Rattle of Blockchains (2017)

The Pathfinders Column from the December 2017 issue of the Socialist Standard

"Blockchains could change our world as much over the next two decades as the internet has over the last two" -  source: zdnet.com - https://tinyurl.com/mp372v5

The thing about revolutions is that it's not always obvious when you're in one. They only reveal themselves in hindsight. Now some are saying there's a new revolution on the horizon that will be as huge as the internet. They claim it will change capitalism, see banks disappear, even abolish global poverty. When we last mentioned this development (Pathfinders, October 2015) investment in it stood at around $360 million. Today it's close to $2 billion, and this may be only the trickle before the torrent (ft.com - tinyurl.com/yb5zpdeh).

This is the world of the blockchain, and it has implications for socialists too. To understand it though, it's worth understanding something about networks.

Computer networks have in the past followed a centralised model where clients are individual computers communicating via a central server. This client-server structure dates from the early days when computers were the size of basements and operated via 'dumb' terminals capable only of basic input and screen display. Even when terminals got smarter and became PCs, this structure was inherited, and many businesses still use server systems today.

But there are problems with cost and scalability. The network can only be as big and as multitasking as the server can handle. The bigger the network, the bigger the server, the bigger the costs, and the bigger the risks of catastrophic breakdown if something goes wrong. And while the server does the heavy lifting, today's smart PCs are still behaving essentially like dumb terminals.

Consider for a moment an obvious analogy with the state, and centralised state institutions, or any centralised organisational structure. If one applies a top-down exploded view, every hierarchy looks like this. Such client-server structures are historical legacies which remain universal in the capitalist mindset, yet many of the same problems of cost, scalability and risk apply. In addition, these structures are monolithic and unadaptable, and despite massive social and educational advances, smart workers are still required to behave essentially like dumb terminals.

In computing, a new kind of structure, the peer-to-peer (P2P) network, harnesses the power of modern PCs by taking the central server out of the equation. Instead files or bits of files are held on multiple distributed computers, or nodes, and can be disseminated directly to any other node independently of other network operations. Having multiple nodes means parallel processing with no bottlenecks, and it's harder to break, because if a node fails alternative routes exist. P2P is therefore faster, cheaper, more scalable and more robust than client-server systems. But is it more error-prone?

In P2P file-sharing networks, multiple copies of the same data are an advantage. But P2P is now running crypto-currencies like Bitcoin, increasingly popular because unlike bank-mediated digital money the transactions are untrackable. Clearly, multiple copies of the same money cannot be allowed (the so-called 'double-spend' problem), so with no central control or validation, and in an anonymous public network where trust cannot be assumed, what prevents Bitcoin inflating and collapsing in chaos?

Enter the blockchain. Strictly speaking, 'blockchain' is the specific Bitcoin application of a thing called Distributed Ledger Technology (DLT), but as Hoover came to mean 'vacuum cleaner', blockchain is now being used to describe any DLT application.

When you make a Bitcoin transaction, the details are distributed across the entire network. To be sure the transaction is unique (ie not a 'double spend') it must be validated. To do this, the system triggers a competition in which freelance 'miners', acting somewhat like accountants, race to validate the transaction in return for a diminishing new-issue Bitcoin payment, which also helps to grow the currency at a controlled rate. Once validated, the transaction is then written into an encrypted public ledger as a permanent record or 'block'. This block is linked to previous blocks and in turn becomes the anchor or link to the next created block, forming an unbroken chain. Any subsequent attempt to tamper with an individual block disturbs the whole chain and results in a network-wide alert. 51 percent of the network, acting in concert, is enough to prevent interference. In plain terms, you can't buy product X on Wednesday and then pretend you didn't buy it on Thursday, at least not unless a network majority allows you to. System integrity is thus maintained, not by central state or bank control but by what could be called a distributed democracy. Barring a direct and unprecedented hack of the block-creating code itself, it's hard to see a weak point in the system. The strong point is that it offers to cut out all the financial middlemen in capitalist commerce. Business gains would be spectacular, which is why investors are throwing money at this.

DLT can in theory be applied to any field where data validation, transparency and integrity are important. Think big and local government, supply lines, transport systems, food quality and provenance, voting procedures, carbon trading, maybe even accreditation of news stories to prevent fake news.

The truth is, nobody is really sure what it can do, and this has provoked some reckless hyperbole. For example, the claim about abolishing global poverty is patently ridiculous. As tends to happen with emergent technologies, DLT is at the centre of a hype storm while still barely developed and little understood even by its investors. Aside from Bitcoin, no blockchain system has progressed beyond pilots and beta tests, although there are more than 400 start-ups. Small wonder some pundits are now saying that it has already reached the peak of expectations and is about to freefall into the 'trough of disillusionment' with its investment bubble bursting.

Yet there remain implications for socialists. DLT suggests a mechanism for a dynamic and decentralised model of socialist democracy and production which avoids the 'double-give' problem in distribution while offering a flexibility and adaptability not associated with traditional centre-periphery structures. More immediately, it could change how workers today understand the word 'organisation'. In the same way that a future subscription-based capitalism could alter mindsets over the need for money (Pathfinders, October), DLT shows how you can decouple regulatory oversight from centralised authority. If you don't need a state to ensure that things work properly, but can utilise the 'power of crowds', then an important prop in capitalist ideology is kicked away. Leaders and centralised elite structures engender cronyism, corruption and monolithic thinking yet many workers remain wedded to the supposed need for them, convinced that anything else would result in chaos. DLT may make them think again by showing them the power and flexibility of distributed democracy in action, and not just in socialist theory.

PJS

Pathfinders: Robots of the World - You Have Nothing to Lose But Your Blockchains (2015)

The Pathfinders Column from the October 2015 issue of the Socialist Standard

The bosses own the means of production – that's what makes them bosses. So what will happen when the means of production own themselves? Er, come again? Yes, we are talking about automated intelligent production and distribution systems, managing themselves, recycling their income back into their own maintenance programmes, entirely without human agency. You call a cab, the cab turns up and it takes you (yes, it's driverless) where you want to go, debits your online account, and uses that income to buy its next 10 gallons of fuel and pay its automated garage cleaning and servicing subscription.

This is the world of the blockchain, an automated self-management security system which has been crucial so far to the success of Bitcoins (New Scientist, 12 September). By keeping track of every single transaction within the Bitcoin economy, the blockchain is able to prevent anyone conjuring up new 'money' out of nothing (as banks are alleged to do by currency cranks), thus avoiding financial melt-down. Cynics would point to the very large thefts of Bitcoins which have in the past almost sunk the system, but blaming the blockchain for what criminals do would be like blaming the bank for sponsoring bank robbers. Now new applications are being developed to apply blockchains to other fields of endeavour, with the utopian idea that ultimately the bosses will be abolished and the world will run itself.

Except that it's not the bosses – the owners - who will be abolished, only their managers. Sitting above the entire global production factory of human-termites overseen by machine-gangers and cyber-foremen will be that same class of obscenely-privileged fat fucks which already exists today, only with even more wealth and even less to do to keep it.

There's been much paranoia recently about the dangers of runaway AI and breathless speculation about Terminator-like scenarios where the robots take over and kill us all. Much of this was caused by Professor Stephen Hawking who seems overly fond of giving the greedy press tasty soundbites in the manner of Dad's Army's lugubrious Private Frazer grunting 'We're all doomed'. But robots would only do what we told them to do, and it seems hard to imagine why we'd build ones that didn't. Even if out of sheer laziness we built ones that made all our decisions for us (like politicians?), it seems equally hard to see what possible motive they might have in wanting to kill us off, unless we unintentionally designed them with the psychopathic tendencies of an average multinational corporation. What's much more likely is that we are the ones who are dooming ourselves by behaving like the very robots we're so afraid of. From this perspective, devising a way to lock ourselves permanently into a future of automated robotic slavery, where the real robots are us and not the machines, seems quite a plausible way forward for capitalism. Let's see, what does 'robot' mean again? Oh yeah, that's right. 'Worker.'

Sex and a cigarette

But if we're putting robots out of jobs by doing the jobs ourselves, does that make the robots redundant? Apparently it's not game over for them while they can still resort to the oldest game. There is a burgeoning industry in sex robot design and manufacture. Some prototypes are in development and some primitive models, costing around £5,000 each, are already reaching the market, though more as a proof of principle than in the expectation of any serious sales.

It may sound like science fiction, but this has been looming for years. Henrik Christensen of the European Robotics Research Network announced to a surprised Sunday Times reporter in June 2006 that 'people are going to be having sex with robots within five years' (source: Wikipedia). As it turned out this was a somewhat premature ejaculation on his part, but nonetheless things have moved on to the point where now two academics are calling for the banning of sex robots (BBC News, 15 September).

The argument boils down to a fear that the machines will objectify women, which is to say further objectify women. Underneath this rather vague claim lurks a darker implication, that the ability to do vile and unspeakable things to a robot will foreshadow a desire to do those things to real women. This idea, not unfamiliar from video game debates, is further sensationalised by the inclusion of children in the argument. Since no known child sex robots are under development, the obvious intention is to bury rational debate under a mountain of moral outrage.

What are the real grounds for such fears? Would users of these devices be more or less likely to see women or children in a dehumanised way? Might it make no difference, or indeed might it go the other way, with women and children finding themselves freed from potential sexual predators and thus enjoying greater net safety in society?

It's impossible to say because the robots don't exist yet. In the circumstances, demanding a ban seems perverse, and it's hard not to suspect a moral 'Yuk' factor at work, trumping every other consideration. Such people don't care what the facts are, and don't care about millions of lonely inadequate men and women who might benefit, they just know that sex robots are 'wrong'.

An oddly parallel argument is raging right now over e-cigarettes. The British Medical Association and the World Health Organisation have come out against them, arguing that there is no good evidence that they result in reduction or cessation of cigarette smoking (and conversely may even encourage it). Following their lead, many countries and organisations are banning them from public places, and all sorts of restrictions on sales are being imposed. On the other side, the 'vapers' are furious at what they see as victimisation. They are trying to give up the demon weed, as they see it, by using something incontestably less dangerous than tobacco, and instead of lending support the BMA and others are absurdly trying to create difficulties for them. There is no good evidence of benefit in the case of coffee, or chocolate, or weekends in Cornwall. Society doesn't and shouldn't automatically ban things on the basis of some dubious 'precautionary principle'. If it did that we'd never have climbed out of the trees in the first place.

Has the BMA overstepped its authority? Vapers, at least those with a sense of social responsibility, are not demanding the right to vape in public places if it's going to annoy other people. But equally they feel affronted at being the subject of a ban imposed without any substantive evidence of harm. People are not banned from wearing suffocatingly bad perfume despite its known harm to asthmatics. People are not banned from Tube trains if they have excessive BO. People are not banned from farting in lifts. Or from driving diesel cars. The BMA's position seems to be that, regardless of the facts, smoking or vaping is just 'wrong'.

A society that bans things first and ask questions later, or perhaps never, is not a society aiming to encourage open-mindedness in its citizens and in its debates. For socialists, the prospects for rational debate about socialism thereby diminish, and that's something that should have everyone fuming.

PJS