Why Care About Bitcoin? Here's One Philosopher's Take

Peter Wolfendale is one of the deep thinkers of the social media age. He sees crypto as a new social and monetary force.

May 2, 2021 at 11:00 a.m. UTC
Updated Sep 14, 2021 at 12:49 p.m. UTC

Peter Wolfendale is a philosopher based at Newcastle University in the United Kingdom. His interests range from metaethics to artificial intelligence. He was a founding voice in one of the truly original branches of thought that found expression on the internet, left-accelerationism, as well as a pioneering figure in the blogosphere. Suffice it to say, if it’s on the cutting edge, Wolfendale has thoughts about it. 

CoinDesk reached out to Wolfendale for an interview about Bitcoin to ask why it’s a tool for emancipation, how it reproduces existing forms of prejudice and what it might mean for the future of capitalism. Here is what he had to say:

How does your interest in philosophy intersect with Bitcoin?

For the better part of the last decade, my work has been driven by the idea that philosophy of mind and philosophy of artificial intelligence are essentially the same thing: To understand what it would be to create systems that are generally intelligent and practically autonomous in the way we are is essentially to understand what we are ourselves. 

This intellectual journey convinced me that philosophy of computer science isn't a niche subfield, but a lens through which the others need to be understood. Not only are individual human beings already computational, but so are the social, political and economic systems that we’ve built for and out of ourselves.

It’s impossible not to be awed by the ambition of the cryptocurrency community: to reinvent money for the age of planetary-scale, distributed computation. It’s also impossible to deny that it’s made a lot of concrete progress in a short space of time. But my job is to see if they're guided by the right abstract questions about money and similar social institutions, and to tentatively suggest some better ones.

What are the most exciting things happening in crypto?

Some people are excited by crypto as a source of ROI (return on investment). Others are excited by it as a way of designing and implementing new sorts of social organization. These aren’t mutually exclusive, and a lot of people are motivated by both. But there’s an understandable tendency to overestimate how compatible they are, and the resulting hype can push the ecosystem in questionable directions. 

The obvious example here is NFTs (non-fungible tokens), which are really interesting from a technological perspective, but are caught up in exactly the wrong sort of excitement. They’re a direct demonstration that scarcity is a precarious substitute for use-value. The really exciting things are better ways to handle anonymity, decentralization and coordination. From a feature perspective, that means the spread of zero-knowledge proofs, systems optimized for dapps and multi-chain interoperability, and mature proof-of-stake protocols with on-chain governance.

You've said in the past that bitcoin is more or less recreating existing monetary phenomena – from banks to bank fraud. Is there a way to develop an alternative monetary framework that doesn't repeat errors or make things worse? 

People often say that money does three jobs: a medium of exchange, a store of value and a unit of account. Bitcoin started out as a decentralized medium of exchange, but it’s not really very good at that. Instead, it’s become popular as a store of value: not so much digital gold coins as a distributed Fort Knox. 

This is predicated on the belief that at some point it’ll become stable enough relative to other assets to function as a unit of account. The problem here is that it’s less about bitcoin being good at this job, than a self-fulfilling prophecy driven by network effects.

Money also quantifies privilege. It gives you access to a certain share of the output of the whole system of production, a share you earn by having a stake in that system. These aren’t the only sorts of privileges that can be quantified. If you acquire shares in a company, you don’t just get dividends, you get votes. 

In liberal, democratic states, political control and economic activity are nominally separate, but your stake in the system as a whole gets you a non-transferable token you can spend in elections to rebalance its overhead (e.g., taxes and spending). A major reason this model is decaying is that monetary sovereignty is less and less able to manage this balance. 

See also: Opinion – Why Bitcoin Needs Philosophy

How and why are matters of extreme controversy. But it’s clear to me that any improved social contract, liberal or post-liberal, will need to rethink the relationship between currency, geography and accounting. Precious metals, printing presses and TBTF (too big to fail) banks aren’t going to cut it.

You've said "scarcity is a blunt instrument with which to build financial infrastructure." Considering the current macroeconomic landscape of easy money and low rates, what is the alternative?

The scarcity we should be interested in isn’t in the money supply, but in the output of the economy: the goods and services we consume. Are we more interested in conserving our share of this output than in the quantity, quality and sustainability of that output as a whole? 

The banking ecosystem is responsible for securing value in the physical and social infrastructure that lets us live our lives. It’s pretty obvious to many of us that it’s no longer doing this job well. It’s progressively geared towards creating opportunities for rent extraction and minimizing risk for protected classes of investors. There’s no real trust in these institutions, even if we’ve no choice but to rely on them. 

Money is power and power has a nasty tendency to ratchet itself

If DeFi (decentralized finance) wants to be better, it needs to do more than guarantee our share of the pie will remain stable as the pie slowly rots over time.

There’s not one simple trick for doing this. But here are two lines of thought riffing on existing organizational forms: 

  • We should encourage unmediated supply-demand negotiation in which consumers invest directly in products/services (i.e. crowdfunding).
  • Where it must be mediated by institutions that generate lines of credit by minting tokens, we should develop more fine-grained ways to check their lending decisions than forking or divestment (like switching from a bank to a credit union).

Tokens are more versatile than legacy units of account, and we should use them to build more decentralized and transparent successors to the fractional reserve model.

Is bitcoin actually a tool for reducing inequality?

Not as far as I can see. Any currency system which is optimized to fight inflation and act as a store of value is going to preserve and heighten inequalities in the long run. And this is before we talk about relative energy costs and related environmental externalities.

At the end of the day, money is power, and power has a nasty tendency to ratchet itself unless it’s checked in some way. Decentralization isn’t a sufficient check all on its own.

You've been critical of some aspects of the bitcoin worldview, which requires a high degree of individual responsibility. This is perhaps best exemplified by the phrase "be your own bank." What are the issues of switching responsibility for personal wealth from banks to individuals, or of trust minimization across the web?

The problem is that most people can’t be their own banks. One aspect of this is technical competence, which can be mitigated by better software and cultural change. The other is physical protection and insurance. Though cryptography and software verification can seriously narrow down the range of possible attack vectors on your assets, they can’t eliminate them entirely. Anonymity helps, but only so much. We’re social creatures, after all.

The old adage that crypto is a playground for market-oriented libertarians has been challenged by the recent bout of conservative corporations (like insurers) and Wall Street giants buying up bitcoin. How will this trend play out? Will there be room for cypherpunks in 10 years?

Honestly, it’s hard to say. But the two types of excitement I talked about earlier are going to increasingly pull apart, and this is going to feed into a much wider debate about cypher-politics. Current arguments are split between three camps: 1) the market is good, and big business can be trusted with your data (cypher-capitalists); 2) big business can’t be trusted with your data, but big government can be (cypher-liberals and cypher-tankies); and 3) neither of them can be trusted with your data, and it’s up to you to find the tools needed to protect your own privacy (cypherpunks).

I think what may be missing is a model of government that, rather than protecting your privacy by monopolizing your data, protects your privacy by providing the tools and infrastructure for you to do so yourself (cypher-socialism). For example, keeping track of your own purchasing history and media selections and running recommendation algorithms yourself, rather than depending on Amazon or Spotify.

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