CryptoCurrency and the End of Capitalism (Part 1/2)

The technological ingenuity of the blockchain is a development that should not be underestimated. Using this ingenuity, cryptocurrencies provide an economic system that is untethered from a centralized banking ledger. The system’s primary genius comes from the large-scale communal recording and verification process of economic transactions (bitcoin mining). No trust is required in a central apparatus to verify trades. Even though the ledger system, which records who owns what, is decentralized and public, it requires zero faith that individual actors will not tamper with the ledger. The only way to alter this system outside of its intended structure (e.g., the only way to enshrine fake transactions in the communal ledger which benefit you) is to provide more processing power than a majority of the miners.

The “truth” of the blockchain is enshrined and policed in production. It is unlike any monetary system seen before it. In a certain sense, we can think of its significance as similar to the microwave. The microwave allows for something that has not been done before in all human history: to cook food from the inside-out using electromagnetic radiation. When one explains the microwave in this way, which is empirically correct, it makes this technological innovation seem far more significant than what it truly is. In reality, cooking has not been “revolutionized” through the microwave because it is the same mundane process as before, just slightly easier as a result of technological development.

When describing something like bitcoin — making important note of its decentralized verification structure, its inability to be controlled by governments, etc. — one may immediately imagine it is as revolutionary, altering the very fabric of society for the better. Surely this is what its creators had imagined it would do. This is especially clear given that the individual or team that developed bitcoin did so under a pseudonym. Fear of unleashing a technology into the world which would threaten the stability of governments and their economic policies is not something any intelligent programmer would take lightly. Some might have imagined, and some likely still do, that the development of the world’s first decentralized currency is revolutionary in the sense that it will destroy the top-down authoritarian structures of the capitalist market. Instead, we have come to find out that cryptocurrency is just like the microwave.

I make the argument that bitcoin, and other market innovations, cannot “disrupt” top-down capitalist economic structures for many reasons, firstly anthropological: It appears as if the common sense bourgeois position that markets are a product of human nature, and subsequently can and have existed in non-hierarchical societies, cannot be reasonably verified by historical evidence. To quote anthropologist David Graeber:

“In that common-sense view, the State and the Market tower above all else as diametrically opposed principles. Historical reality reveals, however, that they were born together and have always been intertwined.” -David Graeber, Debt: The First 5000 Years.

It turns out, historically speaking, that markets only occur alongside the invention of the state and did not exist before this pivotal movement (or moments) in human history.

Lewis Henry Morgan’s descriptions of the Six Nations of the Iroquois, among others, were widely published-and they made clear that the main economic institution among the Iroquois nations were longhouses where most goods were stockpiled and then allocated by women’s councils, and no one ever traded arrowheads for slabs of meat. Economists simply ignored this information.” Graeber, Debt: The First 5000 Years.

There is no mystical “state of nature” in which humans freely trade with each other through barter and crude currency systems as the primary means of resource distribution. In early hunter-gatherer societies, we can note that, as Graeber demonstrated, resources are allocated and distributed based upon the needs of the collective society. Markets, and economic transactions, as the primary mode of societal resource distribution emerge only after the violent process of dispossession and accumulation of social surplus which happens alongside the historical emergence of the state.

It is relatively easy to infer from this basic anthropological position that markets are predicated upon states. Of course, this is unless one argues that the state allows for markets to be created but may “wither away” and still allow for market relations in a decentralized system. It seems fitting that blockchain technology would be a beneficial resource to make this reality possible. It is too bad that it isn’t possible. The primary reason a market is not possible without a state, which is confirmed by the anthropological evidence, relates to the necessary monopoly on violence connected to private property. It turns out that market-based economic transactions contain the incentive to screw over the person (or entity) that one is trading with. This does not lend well to cooperation if there is no entity that oversees these transactions and ensures they do not escalate towards violence.

When Hobbes remarks that the “state of nature” is “solitary, poor, nasty, brutish, and short,” he would have been correct about this assessment assuming that humans only interacted with each other within this “state of nature” through economic transactions. The trading that does happen in these early societies (e.g., societies that Hobbes would argue are closest to the state of nature) are generally between strangers and play out similarly to how Hobbes described the state of nature. The social rituals around them often include either anger/violence or social mechanisms to undercut the inevitable anger and violence that may come from the realization that one has gotten the bad end of a deal. From Graeber’s example of the Nambikwara of Brazil:

“If an individual wants an object he extols it by saying how fine it is. If a man values an object and wants much in exchange for it, instead of saying that it is very valuable he says that it is no good, thus showing his desire to keep it. “This axe is no good, it is very old, it is very dull,” he will say, referring to his axe which the other wants. This argument is carried on in an angry tone of voice until a settlement is reached. When agreement has been reached each snatches the object out of the other’s hand. If a man has bartered a necklace, instead of taking it off and handing it over, the other person must take it off with a show of force. Disputes, often leading to fights, occur when one party is a little premature and snatches the object before the other has finished arguing.”

We can see that the only manifestations of a market system in early anarchistic societies (that is, societies without a state) is “carried out between people who might otherwise be enemies and hover[s] about an inch away from outright warfare — and… if one side later decide[s] they had been taken advantage of, it c[an] very easily lead to actual wars.”

Contrary to Hobbes’ view, this “state of nature” where there is a constant threat of others stealing one’s personal property because there is no government to mediate personal differences, is only noticed in the market transactions that are few and far between within early communal societies. The image of the barbarous chaos of a pre-state, pre-government society (or lack of society for Hobbes) in which my personal property may be arbitrarily taken by the strongest and most physically capable whenever they deem it desirable to them would logically lead to the development of the state to mediate our differences and protect the weak from the strong. Hobbes is correct that this would be an entirely irrational way to live. If it was “human nature” to organize ourselves as he described, then the development of the state would be logical. This is why societies that have existed without a state primarily distributed goods based upon the collective group’s needs and desires, not upon trade and barter.

While bitcoin’s decentralized autonomous ledger system may sneak some power away from centralized financial systems, blockchain could not hope to predicate an anarcho-capitalist society. The ledgers which keep track of economic transactions within a blockchain may appear to be rhizomatic (that is, they maybe be predicated on a “mass root” system of non-hierarchical connections that must all be severed for the organism to die). Yet, these connections are also ironically predicated upon a state to enforce their validity. Let’s imagine that in a cryptocurrency based anarcho-capitalist utopia, I buy a pair of shoes through bitcoin, and the seller steals them back after our economic transaction is verified. Without a state to intervene and enforce the property relations enshrined in the ledger, I am fresh out of luck.

In this example, blockchain technology’s decentralized nature actually makes the state’s job of enforcing property relations (which are recorded in the communal blockchain ledger) even more difficult. The state would have no capacity to meaningfully alter the ledger itself in this situation. In a certain left accelerationist sense, the potential domination of blockchain-based currencies is a good thing. It weakens the state’s capacity to oversee and monitor economic transactions and moves us further towards a market system that is truly “solitary, poor, nasty, brutish, and short.”

The primary process of recording which is essential to the capitalist society is the recording of capital itself. As Keynes correctly identified (and Daniel W. Smith excellently explicated), the capitalist social formation is fundamentally structured on the question of “codes, flows and stocks.” (1) Who owns what? (2) Who trades what to who? And (3) who verifies this? Are the three primary questions the capitalist society is contingent upon. If it is unable to continue to answer these, then it is destroyed. Blockchain based currencies answer these questions in an entirely unique way compared to traditional monetary systems. The inscription of capital is a communal process which cannot be disrupted by attacks on the central mechanisms of recording. The truth of the transaction is enshrined in production, it cannot be altered if the state or other important actors deem certain transactions as unfavourable.

One way of conceptualizing this phenomenon, following the Deleuzo-Guattarian concepts of “rhizomatic” and “arborescent” structures, is the ebb and flow between deterritorialization and reterritorialization within a politico-economic system dominated by capital. Capital critiques and breaks down pre-existing social formations for the sake of the further generation of capital — one can think of women gaining a modicum of rights as a result of their integration into the workforce as an example of this; the destruction of some element of pre-capitalist social formations for the sake of more available workers to generate capital. One can conceptualize the elements of blockchain currencies which operate entirely independently of the state apparatus, e.g., their public decentralized ledger systems, as being deterritorializations which then have an even increasingly more difficult time safely being reterritorialized. It is in this sense that Marx did not even understand how correct he was when he stated that “all that is solid melts into air.”

While this tendency within capitalism generates the capacity for lines of flight outside of the system, any deterritorialization done by capital itself cannot hope to lead towards lines of flight. These capitalist deterritorialization cannot allow for the possibility of a movement outside of capitalism. Within Schizoanalytic Cartographies, Guattari explicates how rhizomatic structures that attempt to form based purely on the deterritorial capacities of capital will necessarily reterritorialize into arborescent, top-down authoritarian structures.

“The history of capitalist subjectivity appears to me to be inseparable from a double tension, which pulls it in opposite directions: towards a deterritorialization expelling it from its ‘native lands’ — of the orders of childhood, filiation, life situation, professional guarantee, ethiconational identity…and towards an existential reterritorialization that is strictly imbricated with the functionality of the system as a whole.”

Any semblance of a rhizome produced for the sake of capital, which works to critique the pre-capitalist top-down arborescent structures, will necessarily be re-integrated into the system to help strengthen it, will necessarily be rendered arborescent. When one analyzes something like a cryptocurrency and notes its decentralized nature, one must importantly analyze this structure on a three dimensional, as opposed to two dimensional, plane, noting that while certain elements of this relationship appear rhizomatic they are in fact necessarily connected to an arborescent structure which comes from above.

(thank you to https://twitter.com/schizoidvisions for the drawing)

The communal, decentralized ledger system that bitcoin revolves around is also contingent on the centralized use of violence for the sake of the enforcement of that ledger system (private property) or it would mean nothing. The state follows the ledger system and the ledger system only works so long as the state protects it.

Capital constantly works to critique itself, to “revolutionize” against itself, and in many cases even does so faster than the left can critique it. This is not towards the end of capitalism, of course, but its further acceleration. One can note the business jargon of “disruption” as a by-product of this. The capitalist is constantly fighting against themself to destroy potentially obsolete markets and provide to consumers new value-networks that can accrue more profit, more surplus extraction, more value. As Nick Land writes:

“Capital revolutionizes harder, deeper, and faster than “the Revolution”. Its lack of attachment to itself exceeds anything the left has been able to consistently match. Capital’s scandalous immortality is derived solely from its inventiveness in ways to kill itself.”

We must not allow capital to kill itself. We must be the ones who kill capital. It must bleed to death under our knives. The left must understand the immanent tendency of capital towards self-criticism lest our critique of capital be a critique of a system that no longer exists except for in the writings of long-dead philosophers. One of the primary achievements of the left in the 20th century was the further entrenchment and spread of capital. In a certain sense, we have been much better allies to capital than capital has been to itself. If the further acceleration of capital may allow for the system to destabilize — if there may be a blockchain-based world economy where the management and inscription of capital is public, decentralized, and unregulated — then the left must pounce on this new world. We must do so instead of either (1) clinging to the old world, with the perceived certainties of state capitalist leftist projects or (2) simply critiquing the old world, which begins to disappear not because of the left’s might, but because of the might of capital itself.