Bitcoin Is Venice: Fiat Delenda Est

This article is part of a series of adapted excerpts from “Bitcoin Is Venice” by Allen Farrington and Sacha Meyers, which is available for purchase on Bitcoin Magazine’s store now.

You can find the other articles in the series here.

“If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered… I believe that banking institutions are more dangerous to our liberties than standing armies… The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”

–Thomas Jefferson

In extracts six through 11 in this series, from chapter seven of “Bitcoin Is Venice,” we characterized the likely general way in which Bitcoin fixes finance, communications and our relationship with the environment as being that Bitcoin makes access to and control over these capital stocks more decentralized. In extracts 12 through 15, from chapter eight of “Bitcoin Is Venice,” we also detailed successes in more abstract cases of “capital.” The primary effect, in the former was and the latter probably will be, to remove single points of failure and the heightened risk of failure at these points brought about by excessive leverage that wouldn’t exist if it weren’t for distorted flows of knowledge and competence as conveyed in prices, language and culture.

So, as a tangible example following from chapter seven: The Lightning Network performs a similar role to the card networks, but is nearly impossible to meaningfully “attack” as a peer-to-peer network rather than a client/server model, the “servers” of which are a handful of multi-national, multi-centi-billion-dollar companies with data centers, regulators, CEOs and their friends and families… in other words, attack vectors galore. Likewise, Bitcoin creates an incentive to extend “the grid” digitally rather than physically. This obviously introduces a number of fascinating binaries worthy of comparison, but consider one not yet mentioned: known versus anonymous.

A miner can connect to the network while under a waterfall, in a sunlit desert or on a geothermal spring, or anywhere at all they can transport a diesel generator, without anybody anywhere in the world knowing their identity, their location, their hardware… anything besides that they proved their work and that they are entitled to and receive the block subsidy and the transaction fees. Now we have peer-to-peer energy as opposed to the gigantic server of “the grid” and the helpless clients of “pretty much everybody who wants reliable electrical power.”

As an intangible example following from chapter eight, consider that the very prediction just outlined of economic dependence being gradually pared back and eventually removed will in turn remove the primary incentive for everything to be political. The politicization of everything rests on grudging compliance, and people tend to comply out of fear that the resources on which they depend will be withdrawn for insufficient ideological support. If it is possible to live independently of centralized leverage over material well being there is no reason whatsoever to heed unrelenting panic porn and comply with the continued descent into a panopticon of social credit; which is to say, the incessant strip mining of social and cultural capital.

With true self sovereignty and independence, there will be no need for ketman — we can heed Aleksandr Solzhenitsyn’s advice rather than Czesław Miłosz’s, and live no longer by lies. Independent of ever-invasive corruption, we will finally be free to do so; to no longer host an economic, social and cultural cancer, but to carve it out and let it expire. We find a guilty, sadistic pleasure in the realization that those who have the most power over others to lose due to the ripples of Bitcoin’s pressure on political economy are also those so ideologically compromised as to be the very last people to understand Bitcoin itself, if they ever do.

Once the reader grasps the rough mental model here of the obvious benefits of peer-to-peer networks over client/server models, it is not difficult to extrapolate. Nor is it difficult to ensure such extrapolation can be kept realistic rather than utopian simply by accurately referring to Bitcoin’s astonishing and novel technical properties. To repeat Henry Kissinger’s aphorism, “Who controls the food supply controls the people; who controls the energy can control continents; who controls money can control the world.”[i] We are on the cusp of a brave new world in which nobody controls the money, hence the energy, hence the food supply. What happens to control of the people, the continents and the world, remains to be seen.

To keep up the theme of resilience, but to move even further away from the idea of “the sovereign individual,” we would further argue Bitcoin provides less-powerful states with a means to resist and escape predation and exploitation. Probably the most obvious example, and in a sense the one that ultimately underpins the rest as far as money goes, is the important role played in U.S. dollar hegemony by Organization Of The Petroleum Exporting Countries (OPEC) pricing. We assume this is relatively well known and well understood and so offer two completely different flavors of example, both of which have recently been explored in great depth by Alex Gladstein of the Human Rights Foundation.

In his essay “Fighting Monetary Colonialism With Open-Source Code,” and drawing extensively on “Africa’s Last Colonial Currency” by Fanny Pigeaud, Ngongo Sylla and Thomas Fazi, Gladstein investigates the history and ongoing reality of the French colonial CFA franc system. In 15 sub-Saharan African nations, across more than 180 million inhabitants in an area two-thirds the size of India, citizens of countries ranging from Senegal to Gabon use the CFA franc instead of a national currency. The currency — launched at the end of the colonial period in the 1940s — has been gradually debased by more than 99% against the French franc, or what is now the euro. The latest major devaluation was in 1994, when half of the purchasing power of the CFA franc was destroyed in an attempt to boost the competitiveness of CFA nation exports. Since colonial times the French state has used the CFA system to cheaply harvest resources ranging from uranium to tin to lumber from CFA nations at below market prices, often selling finished goods back to those very same CFA nations at above-market prices. The French state has a de facto first right of refusal on exports coming from CFA nations, as well as construction and service contract imports. The CFA nations are prevented from building their stocks of productive capital, and end up exporting raw goods, unable to develop manufacturing bases. This parasitic relationship has helped finance and subsidize the French welfare state over the past seven decades, and has given it a huge captive market for goods that it would have trouble selling elsewhere. Historically, CFA nations had to keep as much as 100%, and only recently 50%, of their reserves in Paris with French banks. CFA nations may have won their independence in the 1960s, but remain financially dependent on France.

Political leaders who threatened to disrupt the CFA system were dispatched with violence, or were left by the French to fend for themselves against violent insurgencies. The economic histories of Burkina Faso, Togo, Guinea and Mali are especially vivid in this regard. Today, the French state is introducing some reforms to some CFA nations, but they are considered surface-level by many observers. Going back decades, the French government has propped up a variety of odious dictators to keep the CFA system in place. With the exception of Senegal, none of the 15 CFA countries have experienced meaningful democratization, and countries like Guinea Bissau, Chad, Niger and Benin remain some of the poorest on earth. Here, the French continue to operate a capital strip mine on par with the most striking colonial operations of the past. And, given President Emmanuel Macron’s plans for French expansion in Africa in coming decades, it is unlikely that the French will agree to a reduction in control in this matter.

What choice do CFA citizens have? They can seek political change through rebellion or revolution, but it is unclear if independent states with their own currencies will fare that much better. Yes, countries like Ghana with independent monetary policies have fared demonstrably better than CFA nations, but Nigeria, with price inflation at 17%, is a low bar for success. Hyperinflation would be a constant and fatal threat to any new currency. At the national level, there simply isn’t much hope for a better currency. And so, many CFA citizens are now opting into Bitcoin. Though their per capita use lags behind Anglophone countries like Ghana and Nigeria, some countries like Togo are now in the top ten in terms of peer-to-peer cryptocurrency volume as noted by Chainalysis’s 2021 Global Crypto Adoption Index, adjusted for population and internet penetration. If the regime won’t change, and the old colonial powers won’t leave, at least citizens can opt for a currency that they control. This is why activists like Farida Nabourema from Togo and Fodé Diop from Senegal call Bitcoin the currency of decolonization.

This hope is echoed by some in Palestine, as well. The Palestinian political struggle is well known throughout their world, but their economic struggle is barely discussed, yet equally severe if not worse in terms of human impact. Gladstein explores this crisis in his essay, “Can Bitcoin Be Palestine’s Currency of Freedom?” in which he reveals how the capital stock of citizens in the West Bank and Gaza Strip has been relentlessly eroded over decades of Israeli colonial policy. After 20 years of Israeli occupation, these trends were clear in 1987, as Sara Roy’s article, “The Gaza Strip: A Case of Economic De-Development,” makes clear, that the Palestinian economy was becoming completely dependent on Israel for jobs and imports, and unable to build up a manufacturing or agrarian base. Over time, farmers and builders in Palestine were priced out by subsidized Israeli goods, and were forced to give up their economic productivity and independence for higher-paying jobs in Israel. Statistics show, for example, despite a rising Palestinian population, a decline in agricultural jobs occurred between the 1960s and 1990s. These trends were amplified after the Paris Protocol of 1994, an overlooked but hugely influential economic document signed by the newly-minted Palestinian Authority, which granted Israel near-total control over the Palestinian economy, made the shekel legal tender in the West Bank and Gaza, gave it control over exports and imports, and discretion over labor policy and remittance flows.

Over the past 25 years, these trends have become even more severe, especially in Gaza, where Israeli (and Egyptian) restrictions after the 2000 Intifada and 2006 electoral victory of Hamas in addition to consistent bombings and embargoes have completely collapsed economic activity. The situation on the ground in Gaza is shocking, with 50% unemployment and virtually all of the productive capital destroyed. Even in the West Bank, individuals have no access to the kind of fintech or investing options that citizens of Israel enjoy, and continue to have to use an effectively foreign and imposed currency while living under the enormous corruption and bureaucratic waste of Fatah and Mahmoud Abbas, a nepotistic and increasingly authoritarian ruler. Some Palestinians are peacefully protesting through the use of Bitcoin, which they view as a way to gain independence from Israel, in the spirit of the first intifada. That late 1980s movement, which was largely successful in making the occupation expensive and costly for Israel (previous to it, Israel had profited from the occupation), was aimed towards achieving self-sovereignty through agriculture and reducing dependency on the Israeli economy. These goals of resistance, however, are impossible if Palestinians still have to use the shekel. With Bitcoin, they have access to a global, digital, sound, open-source, programmable money, in which no party is privileged, nor can interfere.

One could well argue that injustices of international relations prevail all over the world, and even tease that “world peace” is perhaps too grand an aspiration if not an indication of unseriousness on account of being as much a traditional punchline as a serious aim. We do not think this hunch at all diminishes the hope Bitcoin may provide to the people of West Africa and Palestine, but as a final example distinctly above the level of the individual, we would highlight adversarial subdivisions within federal or quasi-federal states. For much the same reasons as may allow the likes of Mali to get out from under the yoke of France, and Palestine from Israel, so too will Catalonia and the Basque Country have an extra-legal means to defy Spain, the regions of the Po Valley to defy Italy, and Texas, Wyoming, and Florida to defy the U.S. federal government, should they choose to exploit it.

The latter seem already to be very much on this path and we do not think it will be long at all before they will be in a financial position to turn down Federal “aid” and hence be unthreatenable when they then decide to extract themselves and their citizens from the hooks of the U.S. federal government. We feel this path is worth highlighting as being of subtle geopolitical importance, and which should not be ignored or brushed aside under the false binary of only “the individual” on the one hand and “the state” on the other. We must ask, which state? After all, states have rivalries, incentives and hierarchies as well and there is no reason to believe that Bitcoin cannot be useful, in remarkably similar ways as already discussed for individuals, based only on relative power and locality.

Moreover, states have rivalries, incentives and hierarchies also with corporations as well as other states — what we might call non-sovereign corporations as opposed to sovereign corporations — presumably under the protection of a sovereign corporation far more powerful than themselves. It is a common trope for environmentalists to bemoan that western corporations engaged in pollution, extraction, etc. are often as powerful or conceivably even more powerful (certainly better capitalized) than the developing economies bearing the brunt of their waste and destruction. The potential for sustainability and self-sufficiency offered by Bitcoin may come to provide a means and a hope for states to extricate themselves from the likes of multinational energy and finance companies which can rightfully be said to operate on a neo-colonial basis: not only strip mining the literal, natural resources of poorer nations and preventing the bootstrapping of their own capital stocks, but imposing alien cultural values on the populace via the leverage of financial control — typically whatever direction the winds of moral fashion happen to be blowing that week in London, New York and Washington D.C.

Furthermore, we expect Bitcoin to reinvigorate pro-democracy movements worldwide for three simple and related reasons. Democracy as an intellectual concept seems to us to be given zealous and therefore unthinking and undue support amongst thinkers of right thoughts in the West, 99% of whom are likely entirely unaware of the serious arguments against their essentially religious view, or frankly have ever even thought about it beyond a form of religious affirmation.

However, we have some hope that inviolably sound money may be a missing piece for the serious pro-democracy camp. A crude characterization of the typical objection is that democracy seemingly inevitably tends towards short-termism in general, and impatient consumption of what has not yet been produced in particular. And, as above, the historically unprecedented power granted along these lines by the mechanics of fiat money makes the temptation to subsume capital stocks under the power of the state simply irresistible. So irresistible, we believe, that this degenerate cultural and political force pulls every otherwise civil dispute into its gravitational orbit. Any and every private disagreement is escalated to the level of politics, meaning everything becomes political; everybody has their pet political cause for which they fight for state preference, and the social fabric by which disputes are resolved and individuals learn responsibility and compromise itself begins to dissolve. Bizarrely, then, the extreme of collectivism itself causes an entwined extreme of individualism somehow even more perverse.

But does it not follow that removing the real root of this problem ought also to remove this temptation? Without a money that has this specific flaw of costless creation and control, but is furthermore designed such that even much milder violations of long-termism and capital formation such as unbacked debt become extremely problematic, might we be in a position to reject toxic collectivism and toxic individualism in one fell swoop, and return to healthy, voluntarist, communitarian balance? We are open to this being a naïve view, but there are further supportive and interrelated reasons to potentially find it compelling.

Second, Bitcoin is fast becoming a single voter issue that is potentially historically unprecedented. “Freedom” is almost never a practical political position in a democracy, no matter its apparent popularity, for two basic reasons: It negates the very purpose of the politician proposing it and hence makes no political sense.[ii] But also, the more uniformly entrenched and accepted are individually bought preferences from the state, the more “freedom” will come to have some minor benefit to everybody but some major cost, also to everybody. Everybody’s major cost will be different, but nonetheless the grounds for opposition will be clear and compelling. It is impossible — arguably dangerous — to try to coordinate an escape from this communal trap because any defector from a mutiny stands to acquire the state preferences of the left-behind mutineers.

Bitcoin, on the other hand, is not a negative issue, but an entirely positive one. It is a civil rights movement that applies to absolutely everybody except those already entrenched in finance and politics, and which effectively bribes them to become and stay a part of it. An individual need not be against a litany of petty infringements too numerous to keep track of or even count. She need only support Bitcoin, which will itself obsolete these infringements. Politicians in democracies will not be able to muddy the waters on a handful of pettily tyrannical positions about which nobody cares in particular — besides, of course, their donors, who care deeply about keeping freedom at bay on those specific issues and no others; if they come out against Bitcoin, they mark themselves as explicitly anti-freedom and will be the object of relentless, global ridicule and attack.

Many will nonetheless try; we suspect the more technologically and mathematically illiterate who not only have not spent time understanding Bitcoin, are not used to spending any time understanding any technology, but who have only ever lived in a degenerate fiat world in which outcomes are dictated by power, consequences for capital and civilization be damned. This is potentially a potent force for freedom, prosperity and human flourishing that mechanically depends on the democratic process.

Christopher Lasch wrote in “The Culture Of Narcissism”:

“Modern bureaucracy has undermined earlier traditions of local action, the revival and extension of which holds out the only hope that a decent society will emerge from the wreckage of capitalism. The inadequacy of solutions dictated from above now forces people to invent solutions from below. Disenchantment with governmental bureaucracies has begun to extend to corporate bureaucracies as well — the real centers of power in contemporary society. In small towns and crowded urban neighborhoods, even in suburbs, men and women have initiated modest experiments in cooperation, designed to defend their rights against the corporations and the state. The “flight from politics,” as it appears to the managerial and political elite, may signify the citizen’s growing unwillingness to take part in the political system as a consumer of prefabricated spectacles. It may signify, in other words, not a retreat from politics at all but the beginnings of a general political revolt.”

Published in 1979, this was certainly premature and possibly overly hopeful and naïve. Lasch possibly foresaw a cyclic rebound from the desolation of narcissism he diagnosed? We cannot know for sure, but, we think it reasonable to ascribe Lasch’s concerns, at least in part, to precisely the breakdown in social and cultural capital we believe has resulted from degenerate fiat capitalism. We think his comments above can be read as an excellent explanation of a pro-freedom and essentially local and distributed democratic momentum building around Bitcoin.

Third and finally, we think, as opposed to the questionable merits of “national democracy” on display around the world, that local democracy might actually just work, if those contributing are properly incentivized; or, as we might think is a more appropriate assessment, if they are no longer improperly disincentivized. It might result in truly effective governance. As Prince Hans-Adam II of Lichtenstein writes in “The State In The Third Millennium,” “Perhaps for the first time, there is the possibility of turning states into peaceful service companies, which will, not only service oligarchs and monarchs, elected or not.”

Knowledge and competence are necessarily local, and we believe it stands to reason that a localized democracy, while not necessarily perfect, will at least be relatively far more likely to embody and reflect these virtues, absent the distortion of signal provided by hierarchies premeditated on previously increasing returns to scale of violence. The combination of more localized, knowledgeable and competent democratic government with a passionate and potentially near-universal pro-freedom single issue constituency, and inviolably sound money which in turn mandates low time preference, we find to be tantalizing.

Richard Sennett teases this very question in “The Culture Of The New Capitalism,” which as a whole could easily be thought of as a demurely caustic critique of the artificial bigness and short-termism of degenerate fiat capitalism, although Sennett himself would surely avoid such brash language. He writes:

“Absurd as it may seem, we might refine the question about economics and politics to this: do people shop for politicians the way they shop at Wal-Mart? That is, has the centralized grip of political organizations grown greater at the expense of local, mediating party politics? Has the merchandising of political leaders come to resemble that of selling soap, as instantly recognizable brands which the political consumer chooses off the shelf?

“If we answer yes to all of the above, the crux of politics becomes marketing, which seems bad for political life. The very idea of democracy requires mediation and face-to-face discussion; it requires deliberation rather than packaging. Following this train of thought, we would observe with dismay that all the seductive tricks of advertising are now deployed to market the personalities and ideas of politicians; more finely, just as advertising seldom makes things difficult for the customer, so the politician makes him or herself easy to buy.”

There is certainly something poetic in the idea that buyable politicians are ultimately a product of the qualities of money itself, and that fixing the money will limit the set of what can in fact be bought.

A low time preference society will make sacrifices for the future, and, having mutually invested in the future, will be more likely to band together to protect this investment. This is practically tautologically valid. In “Governing The Commons,” Elinor Ostrom makes the general point that effectively governed common pool resources tend to respect custom and compromise. In other words, they tend to embody localism, since such governance mechanisms literally cannot scale beyond communities that actually know one another, and whose competence derives from familiarity and experience; what James C. Scott called mētis: practical knowledge as opposed to theoretical.

This idea is likely true at the level even below what we just described as the “social” — perhaps the personal or even psychological. Localities small enough to make for custom and compromise that enabled effective governance of common pool resources will make their constituents feel like they have a more personal connection with the governors and a more meaningful stake in the outcome of effective governance. In “The Breakdown Of Nations,” Leopold Kohr gives an impassioned plea to this end:

“The small state is by nature internally democratic. In it the individual can never be outranked impressively by the power of government whose strength is limited by the smallness of the body from which it is derived. He must recognize the authority of the state, of course, but always as what it is. This is why in a small state he will never be floored by the glamour of government. He is physically too close to forget the purpose of its existence: that it is here to serve him, the individual, and has no other function whatever. The rulers of a small state, if they can be called that, are the citizen’s neighbours. Since he knows them closely, they will never be able to hide themselves in mysterious shrouds under whose cover they might take on the dim and aloof appearance of supermen. Even where government rests in the hands of an absolute prince, the citizen will have no difficulty in asserting his will, if the state is small. Whatever his official designation, he will never be a subject. The gap between him and government is so narrow, and the political forces are in so fluctuating and mobile a balance, that he is always able either to span the gap with a determined leap, or to move through the governmental orbit himself. This is, for instance, the case in San Marino where they choose two consuls every six months with the result that practically every citizen functions at some time during his life as his country’s chief of state. Since the citizen is always strong, governmental power is always weak and can, therefore, easily be wrested from those holding it. And this, too, is an essential requirement of a democracy.”

We think it is reasonable to run Ostrom’s argument in the other direction: In a world of prevalent and undisturbed localism, common pool resources are overwhelmingly likely to be much more effectively governed.[iii] Arguably the most critical aspect of their governance is mindfulness of stocks and flows such that they are at least preserved, and then and only then, grown sustainably for the future. In other words, that they are resilient.

And surely there is a virtuous circle, or ought to be? Surely the presence of well governed common pool resources encourages long-termism, which encourages the appreciation of stocks of wealth rather than their strip mining, which encourages the development of practical skills to nurture such stocks, and the respect and admiration of the practically skilled in the popular imagination? If so, we can only hope that this shift comes at the expense of those respected and admired notionally for mastery of impractically specialized theory, but really, when it comes down to it, for their success at navigating the world of degenerate fiat power, entirely despite possessing any real knowledge or competence. Allan Savory expresses essentially this worry about the current state of governance — who it tends to attract and how they tend to behave — writing in “Holistic Management”:

“Tragically, we are now less aware of our dependence on a well-functioning ecosystem than we were in earlier, less sophisticated, eras. Economists now have more leverage in the U.S. government than the farmers who formed it ever did. Accountants and lawyers serve as the chief advisers to the business world in which some corporations now wield larger budgets and more influence than many national governments. To be the specialists they are, most economists, accountants, and lawyers have considerable training in the narrow confines of their professions but less of an education in the broader sense, with some exceptions — ecological economists being one. As a consequence, most of these specialists exhibit little knowledge of the natural wealth that ultimately sustains nations, the quantity and quality of which is determined by how well our ecosystem functions.”

Let us hope that the functioning of our ecosystem, the knowledge of natural wealth, and an education in the broader sense become valued once again. Or, at least, that their continual devaluation over the degenerate fiat era be allowed to reverse and return to their natural state.

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.”

–Satoshi Nakamoto, “Bitcoin: A Peer-To-Peer Electronic Cash System”

We have done our best to limit ourselves to the study of “capitalism,” and although our treatment has indulged in a variety of disciplines, the core subject matter remains essentially an economic and political phenomenon. Besides the occasional rhetorical flourish, we don’t believe we have strayed too far afield. But the Renaissance is not remembered as something so dry as an “economic and political event.” We collectively conceive of it as a blossoming of literature, philosophy, art and culture. This is what life is really about, or certainly ought to be. The Renaissance was undoubtedly enabled by the nurture, replenishment, and growth of capital, but only as a kind of technical prologue: an introduction to set the stage for the main event.

And so, we hope of Bitcoin. We hope that one day it will go unnoticed as a second Renaissance flourishes all around us. We hope it just works, such that we can all focus on what is more important in life than the plumbing of economic exchange. Ideally, infrastructure would just work, and we would not spend our time analyzing capital, but creating it. This is the real goal; Bitcoin, a tool, is just the first step.

As for the authors, we hope we have at least done a decent job explaining how and why we took that first step. This extract, its chapter, the book — it is all a roundabout of saying:

Fix the money, fix the world.

[i] Having already more or less explicitly identified fiat money with violence, the authors cannot help but notice the uncanny similarity between this observation and the common social media trope that the “deplorables,” grow the food, produce the energy, and the fight wars, of urban “educated” elites — that is, high-modernist, all-decreeing, all-modeling, closed-source-insisting, consent-resisting, censorial client/server types, “educated” primarily in degenerate fiat economics and its various bullshit offshoots.

[ii] “Elect me, and I will do nothing! I might even do less than nothing!” This is actually highly appealing to the authors, so please note we are not dismissing it as a political position, merely remarking that the comical tragedy of hoping for freedom to prevail in contemporary democracy necessarily relies on making this seemingly farcical argument and hence, obviously, consistently fails.

[iii] An excellent example of this would be the likelihood of rapid uptake of state-of-the-art nuclear power by local administrations that has for decades been blocked by centralized politics on entirely spurious grounds that primarily rely on the carrot of corruption and the stick of fear mongering.

This is a guest post by Allen Farrington and Sacha Meyers. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.