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Politics Foreign Affairs Culture Fellows Program

Bitcoin and the Rule of the Material

Whether as quietist retreat or gnostic withdrawal, the political allure of cryptocurrencies doesn't seem to stand up to the hard forces of reality.
Bitcoin and the Rule of the Material

A decade ago, I briefly dated a woman who dreamed of ending the nation-state. She popped prosecco first thing in the morning, and smoked two packs a day. More alluring still, she’d built and sold her own “strategic-comms” consultancy that included NATO as a client. Her phone was full of selfies with various Kalashnikov-toting rebels in places like Libya. All this, without a college degree. This girl was cool.

Meanwhile, I was piling up debt to attend a second-tier law school, burdened by the Iranian immigrant’s dreams and filial obligations. One day, “Sarah” (let’s call her) suggested I buy something called a “bitcoin.” It was a sort of internet currency, she explained, that would gain enormous value amid central banks’ insane splurge in response to the financial crisis. More than that, she predicted, this thing would usher a new era of radical decentralization and freedom.

I didn’t buy bitcoin. And for years afterward, I recounted this episode as a prime example of what a financial schmuck I was, and still am. For notwithstanding the current bloodbath in crypto markets, I could’ve struck it bitcoin-rich had I heeded Sarah’s advice (and had I had any real liquidity lying around back then). Yet even then, I could tell that bitcoin wasn’t mainly about profits for Sarah, who had already achieved a significant measure of financial independence.

No, for her, and for other crypto-enthusiasts I’ve gotten to know since, digital currencies are ultimately a political project—or rather, an anti-political project. Crypto-ism is but one expression of the age-old yearning to overcome the concrete limits and inconvenient bonds of obligation in which we find ourselves enmeshed, and sometimes trapped. Crypto is about a flight from the political community and from political responsibility.

The vision Sarah laid out for me went something like this (you have to trust me to give it the most reasonable articulation I can): Government as such tends toward tyranny. The modern nation-state has already amply manifested this tyrannical tendency. Its borders are arbitrary. It wages stupid and bloody wars. And even in liberal-democratic form, it still constricts human freedom. And the chief way it does this is by controlling the medium of exchange: money.

Wouldn’t it be better, then, if each person could choose which political communities he or she wishes to join, without regard for the accident of geography and history? Assuming such a world is desirable, then the best way to bring it about is by lifting the yoke of central banking off the neck of humankind. If there were a medium of exchange not centrally governed by a few Goldman alumni, but by freethinking technologists and investors, entire new “nations” could emerge, free nations, where decision-making about social and economic policy would be radically consensual.

Now, here’s where things got a little fuzzy for me, and I must admit the passage of time hasn’t cleared anything up: How would these new emergent communities interface with actually existing governments, with their parking enforcers and nuclear arsenals, their welfare regimes and agricultural subsidies? Presumably, nation-states won’t just allow themselves to wither away, even if such a thing were desirable (which it isn’t). And what would become of people who were too unsophisticated or illiquid to buy into the radically consensual world?

If Sarah had any sound answers to these problems, they dissipated in the boozy haze of those days. But more recently, I’ve come to (remotely) acquaint myself with one of the crypto world’s leading theorists. Like Sarah, he is super-smart, the type who makes and loses my entire annual salary in a few minutes’ worth of portfolio fluctuations. About once a year, he calls me to make his pitch not as an investment proposition, but a political one.

He gets that I’m a social conservative. And he also gets my skepticism of market liberalism. Indeed, he shares some of my convictions. But he argues that radical decentralization achieved through cryptocurrencies offers a far more realistic path than ordinary local or national politics. The idea, again, is voluntary communities somehow untethered from the centrally controlled medium of exchange. With crypto, the liberal state, he has told me, can’t get to your funds, because the algorithmic blockchain password is impossible to crack.

Or something. Again, let me assume the power of this technology and the value of crypto as an investment: Still, as a political matter, it is never quite clear to me whether these men and women imagine themselves leaving their physical communities and starting new ones where cryptocurrencies form the medium of exchange, or whether the idea is that they would stay where they are but increasingly detach themselves from the dollar, the sterling, etc.

The former option strikes me as just a techno-Benedict Option, as vulnerable as any monastic redoubt to the Waco treatment. The latter option—stay put but unplug—amounts to a pseudo-gnostic gloss on the choice to invest in an unregulated financial asset. There’s also a market for level-54 wizard armor on World of Warcraft, and you may choose to transact in that market and tell yourself you’re building an alternative, stateless world where the medium of exchange isn’t hobbled by the pesky claims of the poor and the weak.

But if the past few years have demonstrated anything, it’s the centrality of material politics, and I mean this quite literally: oil, gas, foodstuffs, tanks, howitzers, housing, these are the things that will make or break political projects in the 21st century, as in the 20th. If smart people in the West are chasing the virtual thrill of assets about as valuable as World of Warcraft items, they, and we, are poised for a rude awakening.

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