What the Wild History of Digital Currency Tells Us About the Future

An interview with Finn Brunton, the author of two books about the cultural history of digital currencies.

AccessTimeIconDec 11, 2019 at 4:30 p.m. UTC
Updated Sep 13, 2021 at 11:48 a.m. UTC

This post is part of CoinDesk's 2019 Year in Review, a collection of 100 op-eds, interviews and takes on the state of blockchain and the world. Finn Brunton is an assistant professor at NYU and the author of Digital Cash: The Unknown History of the Anarchists, Technologists, and Utopians Who Created Cryptocurrency (2019) and Spam: A Shadow History of the Internet (2013).

How does Libra resemble a central bank? What role did the Soviet Union have in the development of credit cards? Why did a desire to live forever drive forward the creation of digital currencies?

These are all questions Finn Brunton is prepared to ask and answer, after a decade-long career as a historian of technology and media. I met the New York University professor in his 7th floor office on Greene St., where we discussed his academic interest: the wild and varied cultural history of digitally-native currencies.

In his latest book, Digital Cash: The Unknown History of the Anarchists, Utopians, and Technologists Who Created Cryptocurrency (Princeton University Press, 2019), Brunton yokes together seemingly heterogenous subcultures and ideas to tell the untold story of cryptocurrency’s emergence.  

“A lot of what we're seeing emerging today is really interesting, not because it's futuristic, but because it's archaic,” Brunton said. “And I don't mean that as a pejorative.” 

Below is a condensed transcript of our conversation. 

How did you first get interested in cryptocurrency?

I was trained as a historian of science and technology, and I wrote a book about the history of spam. In some ways, it showed how the Internet has taken shape. I discovered how the need for advertising made a lot of internet shitty. So much of the malware distribution, the bad content, and the trash that we have to cope with online is because the way to pay for anything, outside of venture capital, became ads.

There was a legacy of people who have tried to come up with alternative ways to pay for stuff online. They tried to come up with other ways of moving money around, whether that be through experimental micro-payments or through all kinds of new platforms. But instead of visionary micro-payments systems, advertising became the basis of financing. I saw bitcoin the way a lot of people saw it at the time, as an interesting technical experiment, or as a fun, hobbyist attempt to solve the problems people have been trying to solve for 20 years. As a historian, I realized I had found a way to approach the subject of digital money. I could follow different groups trying to create exchangeable digital tokens of value.

Were the projects capable of escaping the “shitty Internet,” as you call it?  

I became really obsessed with David Chaum. I would just read his old papers that led to Digicash. It held water. Mathematically, it worked. They had a company. They had funding. They were having meetings with big players. It was all starting to come together, and then it evaporates. You keep finding things like that. One of the really interesting questions the historian can ask is: why did this not happen? 

If we imagine a nightmare version of Facebook's Libra, where a company has complete oversight over your money, they can start setting up all kinds of sweetheart deals. You start wiping out the ability of the market to function.

What are the conditions for cryptocurrency’s success?

The history of the cryptocurrency project can be traced to the 1970s. One key factor was the fear of future surveillance. Both surveillance and the possibility to more directly manipulate transaction data. I wrote about Paul Armor, a computer scientist who worked on and off in the Department of Defense, and at Rand in the 70s, where they asked him to design a next-gen surveillance system, to keep tabs on the Soviet Union and anticipate their moves. His team came up with an electronic payments system. They realized tracking money flows gives you useful information. It means that you have a time-stamped, geocoded record of every time someone pays for something. You have a really fine-grained dossier of everybody's movements and activities, and the transaction data itself. So you know where they are, what they're interested in, what they're like. A lot of the people who are working on the earliest stages of digital cash were preparing for when most of the economy and commerce goes digital, so everyone would be under surveillance and coercion at a level never really seen before. That's the context when we see the need for digital currency [bitcoin] appear. Not just to make things more efficient, but to protect people from the incursions of surveillance and power. 

It seems like people are willing to give up a measure of privacy for the convenience of electronic payments.

Chaum was conscious of throwing off the balance of power between customers and corporations. If a corporation knows how much you're good for, they can price-gouge you beyond the market rate. We’re going to start seeing all kinds of manipulation. If we imagine a nightmare version of Facebook's Libra, where a company has complete oversight over your money, they can start setting up all kinds of sweetheart deals. You start wiping out the ability of the market to function. 

You’re seeing a similar debate with companies attempting to throttle internet speeds.

Yeah, if everyone’s biggest freak out with net neutrality was applied to money, then you start to see the scale of the danger. 

What’s your favorite subculture working on digital cash?

The people working on cryptocurrency at the beginning were also generally working on cryptography, so they knew how easy digital surveillance was and how hard the government was fighting to keep strong cryptography out of the hands of ordinary people. There are other agendas that come into play. American libertarians are both anti-surveillance and interested in new forms of currency. You have two kinds of libertarians. Those with a classic hard money agenda, the von Mises approach, who wanted money marked by a scarce store of value, or digital gold currencies. The other libertarian thread says there should be a proliferation of new forms of money and new kinds of banks that are able to issue money. Then you can let market mechanisms [take over].

It seems a lot of the heat that Libra takes, especially from politicians and regulators in the EU, is because it will compete with national currencies, right? 

Absolutely. The reason central bankers scrutinize things like Libra is because it is a threat to monetary sovereignty. Central bankers are historically fixated on two issues. One the one hand, the maintenance of national sovereignty, prestige, and the trading power of the currency. On the other hand: contagion. They fear that new innovations are going to be unstable and poorly overseen, and people will put a bunch of value into them, and then the experiments will vanish or die, and that will set off chaos in the rest of the economy. 

But Libra isn’t intended as a speculative investment.

Governments react to new currencies from the perspective of maintaining sovereign control of currency as well as from the perspective of disruption to the larger economy. I like to contrast Libra with the ideas presented at Bretton Woods. Keynes’ solution to the problem of the post-war global monetary order was to have banks act as a settlement system for managing the balance of trade between nations. This would keep chaos in one country from affecting other countries. But the person who won out over Keynes was Harry Dexter White, who proposed instead that the U.S. dollar should act as the world's reserve currency. If Keynes argued the agenda of a central bank is to maintain economic stability by keeping everything in equilibrium, avoiding depressions, running mild inflation, White’s argument was that the goal of the central bank should be the maintenance of the power of the nation by making USD the global-reserve system. 

If everyone’s biggest freak out with net neutrality was applied to money, then you start to see the scale of the danger.

There are reportedly ongoing experiments at the Federal Reserve with digital dollars. The Chair of the Federal Reserve in Texas, actually, recently said they're “active looking” at developing a U. S. Dollar-pegged stablecoin. How do you think this fits into current official monetary policy? 

Central banks have a history of being extremely conservative, but also very interested in technological experimentation. At the same time, they're also super super gun-shy about doing anything wrong. There's this wonderful term from David Edgerton, a historian of technology, called “reserve technologies.” It’s that, even if you have a new technology that works well, you tend to keep some of the old ones around. Like the way a house will have electric light, but keep candles in a drawer. You can see that in the technological infrastructure behind banking. With the scale of something like the Federal Reserve, they have to be conservative and careful about financial technologies.

There’s this magnificent history, which I don't think has ever been formally written about, about how the Federal Reserve kept the country functioning after 9/11. When the nerve centers for credit and interbank settlement were suddenly fucked and there was all of this chaos, they told the banks that the credit system would remain functional, that the discount window is open, even if we have drive 18 wheelers around the country filled with checks. 

They had fallback positions for everything. So, if I were to make a prediction about what's going to happen with cryptocurrencies at large, I would pay attention to how they're getting boring. Wherever it departs from the visionary agendas of crypto, large, stable, boring organizations are getting interested in it for interbank settlement or the creation of explicitly stablecoin platforms. 

Based on your historical perspective, how long is it going to take for crypto to get that point? 

The most important vehicles of value for the previous several centuries were bills of exchange, or ledger mechanisms for assigning people part ownership in something. Entire mercantile networks across Europe and the Middle East were sustained on systems of ledgers and contracts that were all about known and irrefutable identities that could be entered. I would not be surprised if the underlying mechanisms for these historical vehicles of value were based on things that function, in some ways, like blockchains. 

In the long term, I’m interested in how we move away from cash and towards the idea of holding things in ledgers as collateral. Our lives will be based around holding our passwords to our wallet that contains our tokens of money that we exchange with each other.


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