The Blockchain for Leftists
The following is based on an excerpt from my much longer and more complete essay “Microfinance and the re-exploitation of women”. The full-length version includes citations for all references.
By providing a way to pool assets, cooperative savings and loan organizations (such as credit unions) increase the money supply and make investments in large projects possible within cash-poor communities. But what about the stalled economies of communities full of people willing to work with, buy from, and sell to each other but who don’t even have the spare cash to put in a small savings account? It is not unusual for people living in neighborhoods left in the wake of capitalist crises and villages at the forefront of neoliberal primitive accumulation to be reduced to this economic absurdity: the ability to work and the necessity to eat, but separated from the capital and consumer goods markets for lack of money. The commercial microfinance solution is to capitalize on the misfortune: import finance capital from global markets and export profits from the work of borrowers.
A more cooperative approach is to create a mutual credit society backed not by deposits but by the labour of its members: a way to buy goods in exchange for the promise to perform some work. One popular scheme of labour-backed local currency in the age of neoliberal capitalism, called Local Exchange and Trading System (LETS), developed in Vancouver, British Colombia, during the stagflation and widespread unemployment of the 1980s. A LETS exchange provides a directory of goods and services offered and wanted. Members agree on a price which is credited to the seller and debited from the buyer in the LETS ledger, in effect providing interest-free credit and thereby allowing people who are otherwise unemployed or have no money to produce for and buy from each other.
As Peter North, an ethnographer of LETS communities in the United Kingdom, has explained, “In a LETS, currency is unlimited; there are neither credit limits, debt charges, nor disciplinary methods of forcing people to work.” North has explored the degree to which alternative currencies have and can potentially act as “micropolitical” resistance to capitalism. Writing from the position that the Marxist critique of utopianism cannot be assumed a priori such that he expresses hope in bottom-up markets as a possible path away from capitalism, he quotes an anarchist member of the Manchester LETS:
The great thing about LETS is that you can start to live life outside capitalism, outside mainstream work or on the dole. Being unemployed is very soul-destroying and isolating, but LETS gives you a way to be part of a wider group and sell your skills so unemployment doesn’t grind you down.
As with personal computers, which make systems like LETS practical, the internet has introduced new tools for administering and federating mutual credit. One adaptation of LETS to the internet is the Ripple payment system which uses a web-of-trust to allow users to establish decentralized interest-free credit lines amongst themselves. Ripple was directly inspired by the Vancouver LETS scene, but it has since re-branded and shifted its focus to connecting commercial banks with its transaction protocol and to its Bitcoin-inspired cryptocurrency (XRP).
Bitcoin itself differs from mutual credit ledgers like LETS in important ways. Instead of being a unit of accounting freely created as needed, Bitcoin, aptly named, is a commodity that must be purchased or computed (“mined”) before it can be used as money. Furthermore, Bitcoin so far has proven more popular among speculators as a store of value than among traders as a general-purpose medium of exchange. As a result, the Bitcoin economy has tended to mirror the inequalities and concentration of wealth in the mainstream economy. The enthusiasm surrounding Bitcoin and other cryptocurrency technologies is also often fueled by a market fundamentalism at odds with socialism. Still, the Bitcoin-led explosion in electronic currencies and its underlying blockchain technology have introduced new fields of opportunity and experimentation in egalitarian and libertarian economics:
The psuedo-anonymous nature of transactions, and the difficulty of controlling the public blockchain ledger by a central authority, make cryptocurrencies attractive to individuals and communities wishing to escape state surveillance, repression, and monopoly. Blockchain applications lend themselves to Tim May’s vision of Crypto Anarchism whereby individuals can free themselves and form society outside of the control of the state by cryptographic means. One leftist Bitcoin user has expressed their enthusiasm in these rather utopian but sympathetic terms:
We now have the tools to create a world-wide global revolution where there no more Gods or Masters of the economic system. We can allow for our peer-to-peer relationships via the internet to become a new paradigm for social, economic, and political organization. No longer do we have to believe in the false divisions of nationality, obey the repugnant laws of states that keep us oppressed and impoverished, nor tolerate governmental theft via law, or the exploration by capitalist allowed by their laws. Through forging a new economy that is built on top of non-state based currencies, we can create a new way forward free from the hands of both statist and capitalist, and their desire to exploit others for their own gains. […]
By pulling money into the digital realm outside of the hands of states or bankers, we can create a new system of economic exchange and money that does not need the violence of the state, or the exploitation of capitalist.
Bitcoin itself functions as a gigantic public ledger of transactions which provides less privacy than traditional cash. But some cryptocurrencies, such as Monero (XMR), are designed to provide much more anonymity.
In November 2017, The New Inquiry magazine launched Bail Bloc, a project to mine Monero to raise money for the Bronx Freedom Fund (providing bail for low-income detainees in New York) and Immigrant Bail Fund (providing bail for detainees in immigrant detention centers). As of May 2018 the project has mined over 44 XMR (over $7,000 USD) which they claim is enough to post bail for 12 people. The project organizers admit the cryptocurrency route is a bit of a gimmick (“This is as much about catapulting a radical criticism of bail into the public imagination as it is about raising bail funds via cryptocurrency”), a tactic of public engagement they call “rhetorical software”.
Bitcoin is inherently (and intentionally) deflationary in the long run (supposing demand remains constant): the rate at which new coin is mined becomes increasingly slower as it approaches a predefined maximum. Because deflation incentivizes hoarding and prospecting, some alternative cryptocurrencies have experimented with inflationary designs (for example by removing the upper-limit on the number of coins issued). At the extreme are projects like Freicoin (FRC), one of several cryptocurrency projects born during the Occupy Wall Street protests, which dissuades hoarding by implementing a demurrage fee so that all coins lose approximately 5% of their value per year. The perishable currency of Freicoin is influenced by the Freigeld (“free money”) of the German economist (and Proudhonian anarchist) Silvio Gesell.
Environmental and democratic money
The Bitcoin network reaches consensus about its distributed ledger by means of an energy-expensive proof-of-work algorithm which has raised concerns regarding environmental degradation and the speed of transaction verification. Many alternative cryptocurrencies have experimented with more efficient algorithms and alternative incentives for mining nodes. One of the most unconventional solutions is that used by FairCoin (FAIR). Rather than being fully decentralized, Faircoin relies on designated validation nodes which take turns creating and validating blocks in the blockchain, an inexpensive process involving no mining or mindless number crunching. But perhaps the most interesting thing about FairCoin is that it has been adopted as the currency for the FairCoop project, an umbrella for several cooperative economic initiatives. FairCoop’s initial stock of FairCoins was donated by Enric “Robin Banks” Duran, an activist who took commercial and personal loans from dozens of Spanish banks totaling €492,000, and used them to fund various anticapitalist projects with no intention of making any payments.
The blockchain technology underlying Bitcoin is capable of being used as more than a mere ledger for cryptocurrency; other potential applications include a generic consensus-based distributed database or a platform for self-executing ‘smart’ contracts which can facilitate all kinds of trades and transactions. One experimental group which hopes to harness the blockchain for the cause of liberty is the Finnish Robin Hood Asset Management Cooperative, an “activist hedge fund” founded by critical-theory-reading artists, is structured as a cooperative, invests its members' contributions in major US stock exchanges (according to a trend-finding algorithm they have developed and named “Parasite”), and earmarks a portion of any profit to fund community projects. Robin Hood, described by one of its founders as a “counter-investment cooperative of the precariat,” accepts Bitcoin contributions and maintains its membership database using the Ethereum blockchain platform. In the words of Brett Scott, author of The Heretics Guide to Global Finance (2013), “The Dada artist Marcel Duchamp took a urinal and called it Fountain. Robin Hood takes a hedge fund and calls it a liberator of precarious workers.”
Cryptocurrency-enabled micropayments and the durability of decentralized storage systems can combine to preserve journalism from corporate agendas and state censorship. An early attempt is Popula, a cooperative, reader-supported publishing platform which stores articles in the Ethereum blockchain:
by archiving Popula on the Ethereum blockchain, we’ll ensure that our work can never be altered, censored or destroyed, at least not while the Ethereum blockchain exists. Civilization rests on our ability to preserve history as it really happened, not as various powerful interests would prefer us to see it.
The examples above all see in blockchain technology the possibility for more free and equal social institutions. But they are also all very small-scale experiments, emphasizing the ‘micro’ in North’s “micropolitical resistance to capitalism” — more like socialist thought experiments than actual movements.
Other cryptocurrency projects, such as Virgil Bucks, a “digital/analog hybrid currency system,” aim to be truly revolutionary in nature. Designed by Twitter influencer and former AOL keyword moderator Virgil Texas, it is projected that Virgil Bucks will help to eradicate poverty by 2015. Furthermore, as detailed in the white paper,
the currency is fully convertible with time, fulfilling Marx’s prediction that in the future people will be able to buy immortality through investing their labor-hours in a revolutionary cryptocurrency.