Bitcoin: Economy of the Eternal Now

De Oude Beurs, Antwerp, Belgium (Urbex photo of the ruins of the world's first modern stock exchange, Antwerp).

In May, I chatted with Chris Ellis, aka ChrisJ of Feathercoin, about how cryptocurrencies could change global economics and society (see my earlier related post here). What follows today is not exactly an interview, but reflections on some of the things we discussed. We talked mainly about Bitcoin. But one senses that it is Ellis's work on Feathercoin - an altcoin established on 16 April 2013 and originally developed by Peter Bushnell at Brasenose College, Oxford - that brings Ellis to some of Bitcoin's biggest questions, and indeed, to some of the biggest questions surrounding all cryptos.

For Ellis, an economy is a system of how we define ourselves in relation to time. In a June 2014 interview, he noted Mike Maloney's remark that the ultimate form of money is time, the ultimate irreversible transaction.

Bitcoin is above all a technology of its blockchain, a time-stamped ledger either of economic transactions, or of interactions in Bitcoin's non-currency applications. According to Ellis, Bitcoin is really "a great big unstoppable clock." And that means that Bitcoin represents a watershed moment, the start of a change in how we understand time technologically, economically, socially and culturally.

Computer-generated sculptures honour Michelangelo's unfinished works in The Sculpture Factory, Quayola’s exhibition at the MU Gallery in Eindhoven, Netherlands (October 2013-January 2014). Image Source: The Creators Project.

Debt and inflation are the prices we pay to live on borrowed time. The economy that currently exists is an economy that borrows against the future. It depends on an idea of conspicuous consumption running back to Thorstein Veblen. This model involves believing in a collective dream, signified by spending borrowed money to fulfill a social expectation of a future life we are schooled to want and achieve. A glance at economic trade news confirms that mainstream financial analysts and experts are merely biding their time for a return of consumer confidence, for a restoration of a grand fantasy of prosperity, built on actions not yet done, lives not yet lived, accomplishments not yet achieved - and corresponding compensations not yet earned. Ellis remarked, "our current economy [attempts to] brute-force a future into reality, based on what we don't have yet ... you're subjected to the whole world of future liabilities."

That means that developed countries currently depend on a cult of the future, on faith in progress, on the ability to make dreams real. That is not always a bad thing! Western philosophical, scientific and economic systems support this mentality. They describe rational expectations of the future, given what we know to be true in the past and present. This attitude is arguably the source of the entire liberal political tradition through the concept of progress.

But subjecting citizens to a whole world of future liabilities is risky. The crash in 2008 initiated a growing gap between rich and poor, and between unreality and reality. The regulated economy ensures illusory stability, predictability and false manifestations of wealth, leveraged against the future. The real economy, accounting for all factors, is a very different thing from the regulated economy, which only acknowledges desired parts of the economic picture. When confidence in the illusion dissolves, an apparatus of political and social control is necessary to keep the system grinding forward in a way that we want it to: it must follow an artificially-propelled arrow of progress, with growth and profit moving ever upwards (well, moving upwards 80 per cent of the time, until another crash hits). The recession jarred that pre-engineered momentum; it dismantled the future many were promised, marketed in mass culture and the popular entertainment industries. The Great Recession told us: no matter how many tales you were told, the future of your dreams will never arrive. The crisis marked a moment, so to speak, of atheism about the future.

Time-orientation dictates the temper of whole societies. Today, most fixate on the future, although there are still obscure communities which focus on the past. Bitcoin marks a shift in the temporal orientation of collective mentalities from the future to the present. As a currency, Bitcoin forces people to live within their means. This is because Bitcoin will only allow transactions with what you actually have in the moment. Bitcoins might be sold and traded from peer to peer, but you can't do anything with your Bitcoins - or other cryptocurrenecies - unless your earlier transactions are already confirmed. You can only trade what is actually in your digital wallet.

Although Bitcoin creates an economy of the present, that has not stopped some financial traders from trying to bend the new technology to mimic fiat money's futures instruments; traders expect Bitcoin to be regulated so that they can establish a fully-fledged Bitcoin derivatives market. However, a Bloomberg report confirms that these enterpreneurs are encountering problems; the feat can't be accomplished without regulations:

Even as regulators and investors struggle to grasp Bitcoin’s many uses -- including investment vehicle, payment-processing system and money-laundering tool -- they are now confronted with the additional complexities of an emerging derivatives market where entrepreneurs say current rules don’t apply. ...

Patrick Murck, the general counsel for the Bitcoin Foundation, an advocacy group for the currency, said the rules will vary with the services offered. 

“Financial services that use the Bitcoin protocol can and often do fall into existing regulatory categories,” Murck said in an e-mail. “Some uses of the protocol may fairly be considered trading in derivatives and regulated by the CFTC, while others likely will not.”...

The CFTC could argue that Bitcoin is a commodity under U.S. law and subject to the agency’s rules against manipulation and fraud, according to Salman Banaei, Washington-based senior counsel at Norton Rose Fulbright law firm. He said the agency, which regulates derivatives tied to interest rates and commodities like oil and wheat, would have “clearer” jurisdiction over futures, swaps and options linked to Bitcoin. 

“For example, a Bitcoin futures exchange in the United States, or a foreign exchange offering ‘direct access’ to its trading engine to U.S. customers would generally have to register with the CFTC,” said Banaei, who last year left the CFTC, where he helped write regulations. ...

Jaron Lukasiewicz, chief executive of Coinsetter LLC, a New York-based Bitcoin exchange, said that his company has suspended plans to offer derivatives due to the uncertainty around the CFTC’s intentions, plus the expense of maintaining a derivatives-broker license. ...

Among the firms offering Bitcoin derivatives is Predictious.com, which lets users bet on various events, such as the price of Bitcoin against the U.S. dollar. 

[Predictious creator Flavien] Charlon said he doubted that the CFTC could prevent customers in the U.S. from using Predictious, since the online “wallets” used to hold Bitcoin aren’t attached to a specific country, and because many customers use Internet browsers that obscure their location. 

The Bitcoin derivatives market Icbit.se took shape in 2011 when Alex Bragin and another Russian put together a website that now offers Bitcoin futures. Clients can borrow as much as five times their own capital for leveraged investments, and Bragin intends to create an options market as well.

Ellis dismisses the viability of these financial instruments by pointing to the way in which betting against the future impoverishes the human character of the economy:

The fact is the only reason we ended up with these high frequency trading platforms with derivatives of derivatives is because the technology amplified what it was these financiers were trying to achieve: making money out of having money minus the human interaction and sociability.

... [I]t's not about looking back at 18th Century Osaka and saying "how old it was back then" and "if only they had advanced technology then they would have known what to do with a forward contract". It's more like:

"Look at how the people in 18th Century Osaka are responding to needs within the community" and "What is the infinite is? What is true for them that is true for us?"

It's about acknowledging that the past has not finished happening. Every single action that ever took place is still happening, the people that existed still exist and are still responding to universal needs that impact on us as much as on them. Just because we don't have direct access to those events doesn't mean they aren't safely locked away.

Back then if you lived in a village you knew everybody. Say you were a farmer and you didn't know whether you could take a risk on the weather this season and so didn't want to sow your crop. Enter the speculator. Someone local with a reputation, has disposable income and understands your business. He says:

"Hey we all share the the proceeds of your labour. I will agree to buy your rice at an agreed price and time in the future."

Thus de-risking the farmer's position in the market. And if the weather turned against him the contract had provisions in place for what to do in such an event. Many times debts would be written off with nobody needing to fall out and often they would be carried over in to future seasons.

But why bother with all that if you can just offload your risk to a lot of faceless foreigners? Build computerised systems instead and that way you can just make money out of having money in a sterile market and hope that you don't live long enough to see the consequences?

Introduction to Cryptography of Bitcoin, Explained. Video Source: Youtube.
See my earlier posts on cryptography, here and here.

What does it mean to build (surrender to) an economy oriented toward the eternal now? Ellis seeks other human and temporal dimensions of Bitcoin economics. Most obviously, cryptocurrencies are products of applied cryptography. Blockchains record encrypted, coded transactions. These transactions are NSA-targeted but probably NSA-impregnable (see rumours and conspiracy theories about this, here, here, here and here).

Introduction to Digital Currency; a complex but telling MOOC on mining, by UNIC fellow Andreas Antonopoulos (16 June 2014). Video Source: Youtube.

Ellis also observed that the way Bitcoin is mined - its encrypted transactions are continuously cracked by computers solving mathematical algorithms - constitutes a predictable system which deals with that which we don't understand.

I suggested that mining cryptos is akin to Michelangelo's comment about sculpting marble. The statue lies hidden inside the raw stone. By continuously chipping away, the sculptor 'sees' the inner figure which gradually comes to light, as though it had always slept there. The artist's exact words were: "In every block of marble I see a statue as plain as though it stood before me, shaped and perfect in attitude and action. I have only to hew away the rough walls that imprison the lovely apparition to reveal it to the other eyes as mine see it." The very creation of Bitcoin involves a process that hovers right on the boundary line between the known and unknown.

Unlike the current inflationary economic system, which insists on forcing the unknown future into the realm of present reality, thereby twisting its nature, Bitcoin mining engages with an encrypted unknown that is currently impossible to crack in its totality. Mining pushes into the future from the present. It offers a limited ongoing engagement with the future through a series of mining actions, moving forward into the future, one transaction at a time, always verified.

To build an economy around the eternal now has vast implications. It demands a philosophical shift. Chris and I both noted Buddhist and Taoist practices which focus on the present. Consider the current vogue celebrating the word mindfulness, which derives from a Buddhist practice of grounding one's consciousness on the now. I asked him: is it any coincidence that at the moment when China is about to dominate the world's economy, the philosophical and spiritual systems which most accurately address our existential circumstances in relation to technology happen to be Asian ones?

Ellis mentioned the I Ching. The I Ching's teachings provide a soothing undercurrent against the clamour of the Web's dominant, ego-centric and future-centric memes. I Ching divination involves random number generation. And lo and behold, Bitcoin's cryptography rests on random number generation.

Move beyond the geocentric consciousness. Image Source: Crystalinks.

Chris also referred to Copernicus, as though, with Bitcoin, we are on the verge of moving from a geocentric to heliocentric perspective. Does Bitcoin alone constitute that shift in understanding? Possibly, although more likely cryptocurrencies, along with other areas of research and development - at CERN, in biotech, in genetics - we are moving toward one larger Millennial Heliocentric Moment from different fields, paths and angles. This could be an as-yet-unknown discovery that transforms how we think about everything in relation to time. That would be appropriate, because the new Millennium is an ardently heretical, neo-Gnostic age, in which we are all converging on the next level of awareness.

See my post, The Chronal Economy (2011).
See all my posts on Cryptocurrencies.
See all my Interviews.