I came across a well-written paper last week titled “Cryptoanarchism and Cryptocurrencies” (August 20th 2020). The paper is written by Usman W. Chohan and it is available for download for free. I highly recommend reading it, even if you think you know a lot about the history of cryptocurrencies. I think it’s very important to understand the fundamental philosophy behind cryptocurrencies, where the ideas came from and especially why people came up with those ideas. Specifically, what problems in society they aimed to solve with those ideas.
I noticed that there are still a lot of people who don’t know enough about the origins of cryptocurrencies — even those who currently manage or work on new cryptocurrency projects. I mentioned this before in my post on Bitcoin (2017) as well, where I discussed some of the important problems that Bitcoin and other cryptocurrencies would help us solve. And the danger here is that if you don’t know the fundamental philosophy behind cryptocurrencies and why this concept was invented, you’ll end up making the same mistakes that the inventors — the Cypherpunks — tried to solve in the first place. Where cryptocurrencies were invented to solve problems in society, you’ll instead be helping to keep those problems around and perhaps make them even worse.
Here are some quotes from the paper that I think are especially important:
As an ideological call-to-arms, cryptoanarchism advocates the liberation of the individual in the digital sphere, such that they act of their own volition and associate voluntarily with others, while preserving their right to privacy and autonomy.
The creation of digitally-encrypted cash substitutes was a leading goal among Cypherpunks, and they hoped that individuals could engage digitally in economic life free from state interference, not least in terms of evading the state’s grip through taxation (May 1994:37). The Cyphernomicon noted that “governments will have a hard time collecting taxes,” and “generally coercing folks, when it can’t even tell what continent folks are on!” (May 1994:27).
Laundauer and Goodman also thought that “people must act for themselves rather than appealing to authorities,” (Graham 2018:42), a point repeatedly mentioned in the Cyphernomicon.
Their leading principle was that “strong crypto[graphy] permits unbreakable encryption, unforgeable signatures, untraceable electronic messages, and unlinkable pseudonymous identities,” which ensures that “some transactions and communications can be entered into only voluntarily,” and against which “external force, law, and regulation cannot be applied,” (May 1994). The Cypherpunks framed this as “anarchy,” in the sense of “no outside rulers and laws,” with “voluntary arrangements, backstopped by voluntarily-arranged institutions […], will be the only form of rule – this is ‘crypto anarchy’ (May 1994:52).
Cryptocurrencies empower individuals to create wealth and engage in economic life without supervision of a monetary authority.
Cryptocurrencies offer the freedom from the “tentacles” of international corporations, banks and governments. They offer the freedom to transact and produce in privacy without intervention from authorities.
Bakunin himself insisted that “no state, however democratic […] can ever give the people what they really want, i.e., the free self-organization and administration of their own affairs from the bottom upward, without any interference or violence from above,” (1972: 355).
Meanwhile, Escobar forcefully argues that “in cyberspace and complexity we find a viable model of social life,” which is to be based on “self-organization, non-hierarchy, and complex adaptive behaviour on the part of agents,” (2004:353). Similarly, Ward contends that anarchy “is a function, not of a society’s simplicity and lack of social organisation, but of its complexity and multiplicity of social organizations”, and due to this, cybernetics “throws valuable light on the anarchist conception of complex self-organizing systems” (Ward 1973: 50). In addition, the Cypherpunks asserted that cryptoanarchism “effectively allows people to pick and choose [what] they support, at least in cyberspatial contexts,” (May 1994:54).
Cryptocurrencies empower individuals to create wealth and engage in economic life without supervision of a monetary authority such as a central bank. This empowerment has been part of the appeal to a wider audience, and one that reflects cryptoanarchism, as when the Cypherpunks declared that new systems would “empower people to break the local bonds of their majoritarian normative systems and decide for themselves which laws are moral and which are bullshit,” (May 1994:54).
The freedom aspect can in fact be contextualized in two district ways: a freedom from something, and a freedom to do something. One the one hand, cryptocurrencies offer the freedom from the “tentacles” of international corporations, banks and governments; and on the other, they offer the freedom to transact and produce in privacy without intervention from authorities. This reflects Baldelli’s hope that “in anarchist society there will be positive freedom, freedom as power, but only in association with others, not over or against them,” (1972:82). Yet Hellegren observes a framing of negative freedom in the Cypherpunk community as well, since “members of the Cypherpunk community have actively advanced a negative meaning of crypto and freedom that positions the state as their adversary – an antagonist – in debates about online privacy” (2017:290).
People have seen in cryptocurrencies the promise of liberation from monetary structures which have begun to tear at the seams, as evidenced in the financial crisis of 2008 or in the ongoing coronavirus epidemic, with the rampant stimulus of cheap money, frightening concentrations of wealth, and increasingly stringent money-control regimes. They also see in it what might be called the “centrality of socially accountable science” (Thorpe and Welsh 2008:2), in that technology is being developed and used by the people and for the people. Many yearn for an alternative to this global economic system, a yearning that Ward would analogize as “a seed beneath the snow,” (1982:44). However, although the role of cryptocurrencies as medium of exchange and store of value has grown among users, their truly widespread adoption has yet to materialize.
Widespread adoption may not, however, be too far away. Such popular acceptance, particularly among more and more influential members of the socio-economy, would mirror Kropotkin’s assertion that “only the efforts of thousands of intelligences working on problems can cooperate in the development of the new social system and find solutions for the thousands of local needs” (1927:76). It would also mirror Bakunin’s imploring that “the most influential, the most intelligent, and the most dedicated individuals in each locality” should be persuaded to embrace anarchist principles, for “therein lies our triumph” (Bakunin 1972:196).
In contrast to the above, there are a lot of cryptocurrency projects these days that are centralized and are designed to give more power to the State. Not to mention the central banks around the world that are in the process of issuing their own cryptocurrencies (CBDC). As mentioned in “Cypherpunk, Crypto Anarchy and How Bitcoin Lost the Narrative” (November 24th 2020):
“Independence and autonomy is the ability to act. If we always need third parties and central organisations to resolve disputes, solve our problems and coordinate us then we are doomed as a species. Central authorities are always a magnet for corruption and that will never change. Learn to be self reliant and make things happen.”
Taaki wrote that years ago, but in a March interview with Bitcoin Magazine, he said, “We’re in this very strange place inside of crypto culture where we’re facing significant challenges to the technology, of it being co-opted by external actors, by actors who don’t necessarily have a philosophical vision or goal we originally had in mind.”
The explanation here is simple. The space has been colonized by entrepreneurs motivated not by mission but money.
I warned in my post on Bitcoin and the history of money (2017) that the slavemasters would do everything they could to co-opt Bitcoin and other cryptocurrencies. And they’re not just motivated by money, but more importantly by the power to control and enslave. And this is exactly the problem that the Cypherpunks tried to solve with cryptocurrencies.
Again we see that when you don’t know your history, you are bound to repeat the same mistakes from the past.