By Geert Lovink and Patrice Riemens

Let’s leave Bitcoin behind and look at a whole host of other, alternate currency models alleging to complete, replace, supersede or simply exist alongside Bitcoin.

Call them whatever you want (‘digital cash’, ‘crypto-currencies’,  etc. – we will give a description/definition of sorts later on), what unites them is the they all want to depart from the current monetary and financial
system, partially or wholesale. As we wrote before about Bitcoin, alternate currency models express foremost a desire ‘for something different’, and generally in anticipation of fearful things to come, ranging to endless stagnation to total collapse. And as most desires do when they come to the open and start to mobilize social forces, they tend to overlook disturbing realities, while focusing on the low lying fruits they believe to be within reach. As this usually goes with a longing to withdraw from the political realm these schemes irremediably condemn themselves to be either localized or focalized. With other words, they cannot scale up to the requirements of large and complex societies. As Yanis Varoufakis rightly noted “There can be no de-politicised currency capable of ‘powering’ an advanced, industrial society.” [1] It is not enough to counter this argument with the ?small is beautiful? phrase – unless, of course, one calls for a total overhaul of (or withdrawal from) the current social set-up towards ‘back to the land’ and generalised
‘de-growth’.

On the other hand, given the advances in technology, it seems safe to assume that future money and payment systems will be largely, if not exclusively digital. This is in fact already the case , but not in the way
envisaged by proponents of alternate models, who want to keep things in their own hands, not those of banks or other big ticket institutions.  But ‘big ticket’ institutions, while remaining wary of such an evolution, think along the same lines. In their view, Bitcoin, and other (crypto-)currency models are just daring frontrunners, the tech will mature, new brands will emerge, and the networked immaterial will
universally prevail, in money as in many other domains. For them, since they are reluctant to participate in its development, it is mostly about not missing the boat. But for the fact that they share – with considerably
less enthusiasm – the same expectations about ‘the future of money’ as the libertarian crowd, we can leave them here for the moment.
With the ‘digerati’, however, the mantra comes with the usual shot of hi-octane techno-optimism:  theirs is the assumption that we will be able before soon to make swift and next to cost-free payments on the global
level, even if that is not tomorrow. We will also most likely face a welcome, if tricky embarrassment of choices of instruments to do so – with the associated range of risks.

We question the soundness of the techno-libertarian consensus
The transition from a hybrid, if by now largely digital payment system as we know today, to one which is completely and exclusively digital, is not at all unproblematic. On the technical side, there exist a large number of IT-related issues and potential glitches, which remain largely unacknowledged until exposed by various mishaps, only to be trivialized, or simply ignored. But even more importantly, it has also consequences going far beyond money, concerning our whole social order. Advocates and supporters of digital solutions are unable, or unwilling, to discuss this, since  the evolution towards totally networked, ‘virtual’ systems appears so natural, evident, and anyway, inexorable.

This comes together with some remarkable disingenuousness. The reason why crypto-currencies are so popular among libertarians of various hues is that it ‘liberates’ money from the state (other constituencies, critical of the libertarian approach, blend this perspective with their own brand of ideology or idealism). Apparently, libertarians are loath to admit that this ‘liberation’ has already happened when the financial system was, for all practical purposes, privatised in the seventies of the last century. A complete digitalization of currency is merely a _technical_  aspect of this trend. Their gripe is mostly directed at not being those who benefit from it, but the bank(st)ers and other corporates.

Before delving deeper into the matter, we need to clear a widespread misunderstanding, recently pinpointed again by Saskia Sassen: “Finance is not about Money” [2]. Was it only because the numbers are totally staggering, and are plainly not connected to the ‘real economy’. Or, with other words, the financial system has delinked itself completely from money as generally understood and used in day-to-day life by the general public, while at the same time maintaining with it a one-sided, predatory relationship which forms the basis of its undeserved, and by now, shaky, legitimacy.

Thus, feeling that their money has been taken hostage by finance [3], the various brands of believers in crypto-currencies have well understood that the way the financial system has evolved over the past thirty years carries the risk of a very large scale confiscation of monetary assets – it might even have this as its ultimate – albeit ‘by default’ – purpose. According to crypto-currencies advocates and developers this threat can be countered by their distributed, algorithmic models providing full-proof security against external interference and seizure. This line of reasoning may be technically credible (and it might not even be that, but we leave this discussion to geeks) but is politically, socially, and economically very naive.

Yet all the same, folks, “lasciate ogni speranza”: the current financial system has more or less reached the fulness its zombie stage, entered into many years ago, and this will only become more manifest in the (very?) near future.  We believe that a complete overhaul of the monetary system is at hand and that it will not assume the shape of an orderly reform but of a brutal overhaul. It is already underway by (yet) tiny bits and pieces – ask Greeks or Cypriots – and Argentines before, and now again.

Trust, Value, and all what goes with it.
This brings us back to square one of any discussion about ‘money’:  the notions of trust and of value, and of their counterpart: responsibility, accountability, liability.

As far as trust and value are concerned, they maintain a very complicated, complex relationship. The complexity starts with the fact that both term overlap to a considerable extent, and, for our purpose, are both more often than not, each other’s outcome – but in which order ? [4]. In terms of money, it is problematic and unclear whether value is the cause (i.e. the mover) of trust or its consequence. And vice-versa. All this may appear arcane, but is fundamental to understanding the role of money as we know it, and hence also of the opportunities and limits of alternatives to money as we know it.

Seen solely in terms of money, trust and value overlap, but not entirely, so let us first look at those part that do not overlap. For trust this is mainly about the definition stage, and the split between the different forms of money-related trust. Discussing Bitcoin in Part One, we distinguished between ‘contract trust’, which, in the West, is the basis of formal financial relations, and ‘distributed trust’ the algo-based alternative system propounded by Bitcoin – and all other digital crypto-currency systems.  There is however, a possibly far more important alternative to ‘contract trust’,  based on ex-ante verification, and thus on distrust by default, which is common both to our contracts (and contracts enforcement-)-based fiduciary systems, and to its algorithm-based so-called opposites. Let’s call it ‘community trust’, which is based on post-facto enforcement, and hence trust understood as however socially constructed, security. This has been, and still often is, the standard business practice in the East, with a remarkably low occurrence of fiduciary delinquency. It is important to keep this in mind when looking at the non-libertarian alternative (digital, crypto-) currency schemes, was it only because they are usually part and parcel of alternative economic models – and because of what we just mentioned, actually fail to be really alternative.

The self-determined, or trust-independent, part of value, on the other hand hinges in its entirety on a subjective assessment ‘once the deal is done’. With other words, there is no such thing as intrinsic value. Since money is primarily about exchange and transfer, that is, movement, we can look at that part with relative ease when discussing various alternative monetary schemes. We will then observe that for many, ‘done deals’ money is relatively irrelevant and may represent no – or even negative – net worth – as is the case of so-called ‘demurrage’ currencies. This will open the discussion on whether considering alternative currencies as parallel resolution instruments rather than as tokens of, well, value.
The overlap between trust and value is of course the more interesting part
of the argument.

Trust vs. proof
Most, if not all, advocates of crypto currencies maintain that ‘human’ trust can be effectively – and efficiently – traded for cryptographic proof. Satoshi was most eloquent about this: “an electronic transaction that does not rely on trust … (but should be) based instead on cryptographic proof”. In (t)his view, social interaction is seen as an obstacle which should routed around. The human element is the weakest link in the chain that should be eliminated as much as possible. Unfortunately, this ‘scientific evidence’ does not seem to apply to the programmers themselves. Both the coders, miners and exchange owners appear to be exempted from this rule. Or, to put it differently: that part of human interaction that, in the end, cannot be eliminated, turns out to be paramount. This typically constitutes the ontological blindspot of all techno-solutionism.

The unemployed algo army of fin-tech programmers, now on the move because of the hedge fund failures, will, rather sooner than later, invade the digital currency field. A classic instance of ‘a solution in search of a problem’, in this case, a non-working fix for something has not yet been perceived as broken (because it is not).

In the very near future we see a battle for supremacy between proof-based crypto currencies and trust-based digital currencies, aka (digital) fiat money. This in parallel with the distinction between alternative and complementary money models. And in this ‘competitive market of ideas’ the algo army will no doubt make loud claims that their proof-of-work based model is the only valid approach.

Notes:
[1] Or a post-industrial society for that matter. Yanis Varoufakis (2013), “Bitcoin and the dangerous fantasy of a-political money” (blogpost). See also his later rejoinder on many comments.
[2] Keynote speech at the MoneyLab Conference, Amsterdam, 2014
See also: MoneyLab conference report
[3] One should always remember that ‘money’ (coins, notes) are legal tender, but bank deposits are not, and that their protection is moot – and above a certain sum (typically one lakh EUR/GBP/USD) non-existent.
[4] a running joke from the glorious era of French intellectualism was that Nizan and Sartre, in their students days at the Ecole Normale Superieure, vied with each other in deconstructing the difference between ‘the notion of concept’ and ‘the concept of notion’. ‘Trust’ and ‘value’ make good candidates for such a game. The same applies by the way and pari passu, for the terms ‘complicated’ and ‘complex’. Suffice here to quote a French political geographer who stated that “le monde était déjà compliqué, maintenant il est devenu complexe”.