Tuesday, 30 December 2014

Peer-to-Peer Review: The State of Academic Bitcoin Research 2014


Please note: An updated Peer-to-Peer Review 2015 is now available

I decided to build a rather large database of academic research on Bitcoin. If you'd like to see it, click on the link. It's a Google Doc, and it allows you to comment if you think there is something I've missed. You can also download it as an Excel spreadsheet. It includes academic, and quasi-academic, research papers, journal articles and theses related to Bitcoin.

Admittedly, the definition of 'academic' or 'quasi-academic' is pretty loose. It can include peer-reviewed papers that appear in major journals, to working papers released from university departments and think tanks, to a thesis of a PhD student, to independent research from people with clear expertise.

I built this list because I myself like to write quasi-academic articles on Bitcoin, and have been trying to find good quality analysis of cryptocurrency, frustrated by the huge amounts of spurious opinion churned in the media, and self-promoting rants by opportunists and ideologues.

How I built it: Lots of searching

To build this list, I spent about four days going through different academic search engines. Many of these search facilities found the same papers, but each also tended to find some unique articles that the others didn't. The sites include:
  • JSTOR (here)
  • ScienceDirect (here)
  • IngentaConnect (here)
  • Microsoft Academic Search (here)
  • SpringerLink (here)
  • SSRN (here)
  • Taylor & Francis (here)
  • Google Scholar (here) (including year-by-year search from 2008)
  • Wiley Online Library (here)
  • Directory of Open Access Journals (here)
  • DiVA-portal (here)
  • Econpapers (here)
  • ArXiv (here)
  • IDEAS (here)
  • Oxford Journals (here)
  • Cambridge Journals (here)

Open access vs. closed: A bit of both

A lot of the papers in the list are open access, which means you can get them as PDFs or HTML files. Unfortunately though, the top journals tend to be behind corporate-controlled paywalls and require university subscriptions or money to get in. That said, if a paper is closed access, search for it online and you'll often find earlier PDF versions of it floating about, because the authors often publish draft versions or working papers in open access formats before getting them accepted into closed journals.

Language: English

I'm not one of those people who is oblivious to the fact that research exists outside the English language, and I know that it's quite possible that some of the most cutting edge Bitcoin research could be going on in a Chinese university or in a Greek think-tank. Unfortunately I don't speak those languages, so be aware that these are only English language papers.

Quantity of research: Reasonable


Bitcoin literature is very new. The first paper - Satoshi Nakamoto's paper - came out only in 2008. I could find almost no academic research from 2009 and 2010, and only a trickle in 2011. It's only in 2012 that we start to find a decent amount emerging in the record. It's really in 2013 though, that the big research starts to come. 2014 has by far the most research, and it's in this year that peer-reviewed academic journal articles start to come out.

Bear in mind that peer-review processes for big journals can take years, so it's little surprise that there are so few cryptocurrency articles out in the really big-hitter journals. My prediction for 2015 though, is that there will be a big flood of research, and a significant batch of peer-reviewed journal articles. Good research takes a while to do, especially in the social sciences.

Quality of research: Hmm... 

Quality to some extent is in the eye of the beholder, but I'll be honest - there is a fair amount of crap research out there. For example, I've found 'academic' analyses of Bitcoin from people that work in big universities, that still hold onto archaic beliefs about money emerging from barter. There are also a lot of PDF documents floating about with academic-sounding titles, written by people with academic sounding affiliations, but you never really know how good they are, or if they're written by some enthusiastic second-year students who don't really know what they're talking about.

Peer-reviewed journals obviously demand a certain degree of quality, but being published in a big journal doesn't necessarily mean an article is groundbreaking. It just means you managed to pitch it right, and get past a panel of peers who might have the same biases as you. For example, it's widely suspected that the peer-review process in the big economics journals systematically excludes economic theories that don't follow neo-classical interpretations of markets. To be accepted into the hallowed halls of such journals, one must cow down and play the game, and couch everything in the apolitical language of mathematical equations and spurious models. Needless to say, some of the most interesting economics research is not found in the big prestige economics journals.

So, it's best to treat this list as an initial starting point to launch into papers, and to make your own decisions about how interesting they are.

Research themes: The tech, the law, the economics... the humans

There are a number of themes coming out in the research
  1. Firstly, there is a huge amount of technical stuff about the cryptography, computer science, security and systems design. Computer science researchers have clearly enjoyed the chance to get involved in this cutting-edge area. The only problem with this though, is that the quantity of this research drowns out a lot of the equally important social sciences research, and tends to present Bitcoin as a technological issue, rather than a profoundly human phenomenon
  2. Secondly, there is a sub-strand of the tech-related research that focuses on how to change Bitcoin, or create a variant of it, or point out some failing it has. See, for example, this piece on a Bitcoin-based emissions trading model
  3. Thirdly, there is a pretty big strand of research on the regulatory status, tax status, and legal status of Bitcoin. This is clearly driven by the need to reach some clarity on these questions so that people know how to practically proceed in the short-term. There is also a nascent strand of accounting research - check out, for example, this new piece
  4. Fourthly, there is a growing field of economic analyses of Bitcoin, mostly coming from pretty mainstream economics, or from Austrian-style libertarian economics. Like most economics, the attempt is to create models, or to analyse incentive structures, and they will tend to call people 'agents', rather than, well, 'people'. See, for example, this piece coming out in the prestigious Journal of Economic Perspectives
  5. Then, finally, there is an emergent trickle of social sciences research on actual humans, including the sociology, anthropology, politics and even ethics of the system. This research remains hugely underrepresented though, which is ironic, because it's by far the most important area of research

Areas that need more attention: Humans

There are a number of areas, in my opinion, that need deeper research and analysis. 
  • Bitcoin as money: There are surprisingly few real discussions about the monetary theory embedded in the Bitcoin code, or how it might function as money. The papers on 'the economics of Bitcoin' don't address it deeply enough (but then again, economics has always been pretty shite at money analysis). I'd love to see more deep analyses of the nature of decentralised electronic money, and the social dynamics of such money
  • Despite the huge amounts of focus on the technology of Bitcoin, there is still very little critical reflection on the technological politics of Bitcoin, or critical studies of decentralised algorithm-based systems. My piece on the Politics of the Bitcoin Blockchain sketches out areas that need more focus
  • Ethnographic studies of Bitcoin: There are a few surveys of Bitcoin users, and some interesting attempts to use social media to analyse users, but there are few true ethnographic studies 
  • The geographical dynamics of Bitcoin: Bitcoin is often spoken of as a global currency, but in reality most of the writing about it comes from Americans and Europeans, and many of them sitting in cities. I'd love to see true studies on, for example, whether someone in rural Zimbabwe would actually use cryptocurrency (given that most of my family is from rural Zimbabwe this is not just a throwaway question)

25 interesting looking papers to peruse

I haven't had a chance to read all of these, but here are some really interesting looking articles that are probably not going to get as much attention as they should. 
  1. “When perhaps the real problem is money itself!”: the practical materiality of Bitcoin (here): Written by the economic anthropologist Bill Maurer and his collaborators Lana Swartz and Taylor Nelms
  2. "BitCoin meets Google Trends and Wikipedia: Quantifying the relationship between phenomena of the Internet era" (here)
  3. "Virtual Currency, Tangible Return: Portfolio Diversification with Bitcoins" (here): One for  the investment portfolio analysts
  4. "Nowcasting the Bitcoin Market with Twitter Signals" (here)
  5. "The digital traces of bubbles: feedback cycles between socio-economic signals in the Bitcoin economy" (here)
  6. "Who Uses Bitcoin? An exploration of the Bitcoin community" (here)
  7. "Is Bitcoin a Decentralized Currency?" (here)
  8. "Testing the Efficient Market Hypothesis on Bitcoin Exchanges" (here)
  9. "Alderney: gambling, Bitcoin and the art of unorthodoxy" (here): From the Island Studies Journal, ha ha
  10. "Coining Bitcoin's 'legal bits': Examining the regulatory framework for Bitcoin and virtual currencies" (here)
  11. "Bitcoin and the legitimacy crisis of money" (here), coming out in the Cambridge Journal of Economics, from Beat Weber. Beat is critical of Bitcoin, and it's worth checking out his other piece in the Journal of Peer Production here
  12. "Do the Rich Get Richer? An Empirical Analysis of the Bitcoin Transaction Network" (here)
  13. "The (A)Political Economy of Bitcoin" (here) - this one is from Greek commons-based economy advocates from the P2P Lab
  14. "Bitcoin: a regulatory nightmare to a libertarian dream" (here), from P2P law expert Primavera de Filippi
  15. "Internet architecture and the layers principle: a conceptual framework for regulating Bitcoin"(here), from a Google employee
  16. "Characteristics of Bitcoin Users: An Analysis of Google Search Data" (here)
  17. "The politics of cryptography: Bitcoin and the ordering machines" (here): This is from Quinn Du Pont, who is doing intriguing work on cryptography political philosophy
  18. "The paradoxes of distributed trust: Peer-to-peer architecture and user confidence in Bitcoin"(here)
  19. "Synthetic commodity money" (here) - this one is in the Journal of Financial Stability, but free versions are floating around on the internet
  20. "The Economics of Bitcoin and Similar Private Digital Currencies" (here) - this one is in the Journal of Financial Stability, but free versions are floating around on the internet
  21. "The Ethics of Payments: Paper, Plastic, or Bitcoin?" (here): In the big-hitter Journal of Business Ethics
  22. "Are Bitcoin Users Less Sociable? An Analysis of Users’ Language and Social Connections on Twitter" (here): A very intriguing paper, which suggests that 'Bitcoin followers are less likely to mention family, friends, religion, sex, and emotion related words in their tweets and have significantly less social connection to other users on the site'
  23. "How Did Dread Pirate Roberts Acquire and Protect his Bitcoin Wealth?" (here): Everyone likes a pirate story
  24. "Do libertarians dream of electric coins? The material embeddedness of Bitcoin" (here): Great title, and out in a pretty innovative Scandinavian journal
  25. I'll let you decide what number 25 is: Perhaps a paper that you'd like to write?

Enjoy, comment, and please share

Thanks for reading this. If you see any mistakes in the list, or have any suggestions and additions you'd like me to make, please do comment, either here or on the Google Doc. I get sent an email every time that happens so I'll definitely see them. I'll update this list periodically as new pieces come out. Finally, please do share this with people who might find it useful - I spent a fair amount of effort creating this, so I want it to be as useful as possible.

Lastly: Much energy went into this, so feel free to buy me a beer

This took me at least four days to build and double-check, and it was pretty damn exhausting. If it's useful to you, and helps you in your own research or enlightenment, please do consider supporting me. Here are three things you could do:


    Monday, 20 October 2014

    Bringing the jungle to the city: A techno-shamanic quest to reconnect urban life to ecological reality

    Note: I originally published this in June 2014 Issue of Contributoria. It is republished here under a Creative Commons licence. If you wish to republish, please also attribute the original article

    I once lived in a village on the rural Wild Coast of South Africa. It had a horizon so vast you could almost glimpse the curvature of the earth. There was one computer with a dial-up modem, and it almost never worked. That was just before I moved to London, to work in the steel and concrete of the city’s colossal financial sector. In London, as in many cities, you cannot see the horizon. The average visibility extends perhaps 30 metres in front of you. On the other hand, you are connected to a vast hallucinogenic web of broadband media connection, constantly.

    That is, of course, provided the electricity doesn't go out.

    In London, the electricity doesn't tend to go out. It is hooked into the all-powerful National Grid, a company I used to try sell financial derivatives to. In South Africa though, we experienced the ‘rolling blackouts’ of 2007. I remember how, for hours at a time, the electricity supply was shut off and cities were left in darkness. It was an embarrassing failure for the electricity giant Eskom, but the crisis had a strange silver lining. In the absence of electricity to watch television or browse the internet, people wondered outside, sitting on the front steps of their houses, talking with passers-by, watching the stars that were normally drowned out by the glare of the city.

    It was as if, for a moment, a broader illusion had been turned off with the television sets. The bubble of streetlight security control disappeared, but instead of uneasy discomfort, it brought for some a sense of calm. The speed slowed down. People suddenly realised how much they took for granted.

    Stars and horizons

    In their natural setting, stars and horizons serve to remind you of your context. Seeing them helps to brings home the point that you are on a giant rolling planet, suspended within an enormous galactic system.

    That’s something that doesn’t actually sit well with the implicit ideology of the city. Forget being on a planet. You are in LONDON, a uniquely important place in a uniquely important time, a control tower from which to master destiny and the external elements. Indeed, in the city, horizons and stars are not real things. Rather they are the basis for kitsch inspirational quotes (‘look to the horizon, reach for the stars’), pasted on the cubicle walls of wannabe high-flying young urban professionals, representing abstract places you cannot really reach.

    And herein lies a central tension in the modern global mega-city. It might be a dynamic hub of glamorous entertainment, high-stakes commerce and edgy artistic sophistication, but it is also an engine of alienation, distancing us from the reality of our context, the land where food is grown, the ground in which fossil fuels and metals are dredged from the earth, and the ecological systems that underpin it all. In the city, you are divorced from that broader context, and placed into a different one – an exciting one perhaps – but a disconnected one nevertheless.

    The disturbing possibility therefore, is that urban elites – whether in London, Brussels, Tokyo, Mumbai or New York – wield the greatest political and cultural trendsetting power, and yet may retain the least knowledge of the actual basis of their own survival. Those who do understand such realities – such as copper mine workers in Peru, or oil workers in the Niger Delta – are politically marginalised, and frequently looked down upon as backward objects of pity, or faces on charity aid brochures.

    And urbanisation is not slowing down. So, in an era of hyper-consuming global metropolises, we face a crucial question with deep consequences: How does one live in the city whilst somehow retaining a grip on ecological reality?

    The quest

    This essay is my opening foray into that question. It doesn't quite answer it, but it sets out a map of what conceptual and practical territories need to be covered. I'm then going to use that map over the next few months as I undertake something of a techno-shamanic adventure into the mire of the city as part of collective called Wisdomhackers. There are 26 of us, all immersively exploring different aspects of modern life (which, let’s face it, is often a catchphrase for urban life), coordinated by the ‘Amish Futurist’ and explorer of informal pirate economies, Alexa Clay.

    The collective includes Aina Abiodun, grappling with the implications of techno-utopianism, Anna Stothard, rethinking our relationship with physical objects in a throwaway consumer culture obsessed with change, Antoine Sakho, exploring technology consumption philosophy, Nathan Schneider, working on new social contracts, Lee-Sean Huang, exploring the disembodied experience of ‘knowledge work’, and Brock leMieux, experimenting with digital learning infrastructures.

    In delving into city life and technology, I'm departing somewhat from my normal writings focused on the financial sector. There is a deep link though. The financial sector, after all, is intensely urban, and intensely technological, and I have a suspicion that some of the roots of financial crisis, and broader economic crisis, are inextricably linked to city life itself.

    Exploring urban ambiguity

    Cities are deeply ambiguous, even contradictory places. On the one hand, they can be exuberant crucibles of cosmopolitan culture, liberating one from oppressive social bonds and bigotries, leaving you free to join loose floating groups of like-minded people. If you’re an ostracised gay person in rural Mpumalanga, or an aspiring tech entrepreneur in the Australian outback, or Billy Elliot in a coal-mining town, are you going to stick around? Hell no! You go to Johannesburg, Brisbane, the Royal Ballet School in London. You become a city dweller, just like me.

    And if there is one thing that we know about cities, it’s that they are veritable hives of technology, and the physical host for the ghostly force of innovation. That’s as true today as it was during the Middle Ages, when people from distant small village towns needed to buy their church bells from specialist smiths in London. Cities host economies of agglomeration, and small towns frequently have too few people to support the capital and labour requirements of high tech industries. The same thing can be said about opera. Not enough people to support a big specialist theatre in the Ausi outback. Got to go to Sydney.

    And this indeed is an engine of ‘progress’, if defined in terms of material and cultural output levels. The city churns out new ideas, new music, new sub-cultures, new technology, new everything, all the time.

    On the other hand, cities also churn out an extraordinary amount of bullshit. It crawls with superficial phonies (so despised in Catcher in the Rye), asshole businessmen, aggressive drivers, chancers and purveyors of meaningless fads. Pampered high-life culture meets low-life crime. Blinkered positive-thinking optimism meshes with hard-edged cynicism. And all the time, giant piles of material and cultural waste accumulate, last month's fashion magazines shuttled out of sight into the landfill.

    Part of this dynamic is due to the fact that newness itself starts to feel old after a while, so people become jaded in the city, demanding and hard to please. In a sense, city culture becomes a prisoner of its own success, as once-innovative breakthroughs become stultifying producers of casual boredom. As a South African in London, I arrived wide-eyed and gawking at the incredible underground transportation system. A year later I was bitching about it. Oh my god, it’s five minutes late!

    Cities have also long had a reputation for inspiring self-serving individualistic decadence and moral corruption. I’ve experienced my fair share of it, from the nauseating overpriced cocktail culture of Mayfair, to the self-destructive mindfuck of bankrupt Withnail & I melancholia. I lived with a guy who had such a drug problem that he couldn’t bring himself to buy toilet paper, and started using the pages of an old Stephen King novel to wipe his ass. The shocking thing though, wasn't that he was doing that, but that I didn't care. If you’re in that mode for long enough, it breeds a kind of anarchic disdain for convention, a Down and out in Paris and London haze which is both terrifying and liberating, incredibly deep, or incredibly shallow, depending on who you are.

    There is also a long history of people lamenting these dynamics, from the Book of Revelation reviling the depravation of Babylon, to Rousseau scolding city dwellers ‘depraved by sloth, inactivity, [and] the love of pleasure’, to Utopian Socialists leaving to start intentional communities in the countryside, to Gauguin leaving for Tahiti. Recently, even Micah White of Occupy Wall Street began berating the cadres of urban activists and moved to Nehalem to launch a rural revolution (albeit one less demanding than the rural revolution demanded under Maoism).

    Perhaps urban ambiguity is rooted in the fact that the same loose bonds that can unlock empowering forms of freedom, can simultaneously create disempowering forms of disassociation. Take, for example, early proletarianisation, whereby people disenfranchised from the land drifted into wage labour in cities. The loosening of rural bonds was associated with the emergence of the ‘free’ human labour market, the ability to voluntarily detach oneself from social – and ecological – ties, eerily similar to how a marketised product detaches from those who produce it. The open-minded and expansive search for self is always prone to being twisted into the service of corporate power, taking the commoditised, shallow form of the fun-seeking consumer shopping for identity.

    Urban dynamic 1: Illusions of access in a world of interfaces


    Many things are indeed very shallow in a city. Consider a simple plug socket, a two-dimensional interface discreetly inset within the wall. Somewhere, elsewhere, natural gas from the North Sea is being burned in turbines to produce a generic, seemingly invisible form of all-purpose energy called electricity, which is channelled via the electrical grid and now waits innocently for me at the plug. The wall blocks the outside reality while the plug presents a new one. We might say our experience of energy begins at the plug. Everything that happened before this is blocked out.

    Most interfaces are like this. One part blocks you from something, while another part invites you into something else. In the city we’re faced with a myriad of such interfaces. Consider the supermarket. The simple Tesco aisle is a sanitised interface. It presents us with free-floating consumption items whilst simultaneously blocking awareness of their prior production processes that happened elsewhere. It’s a key institution of modern psychological disconnection, doubling as an exemplar of modern sophistication.

    And what about the ATM? It's an interface into the banking system, a machine of convenience replicating what a human bank teller used to do. They're often placed next to physical bank branches, giving the impression that the money coming out of the wall came from 'inside' the bank. Given that the majority of our money is in fact electronic, ‘stored’ in a bank's datacentre-based IT system, nowhere remotely close to the ATM, this is something of an illusion. And what about my debit card? Is the money in the plastic card, or elsewhere? Maybe you see a taxi displaying an advert for a share-trading account. The account is just an interface into an underlying stockmarket, and the shares there are just interfaces too, channelling returns generated elsewhere.

    But even the seemingly down-to-earth world of physical buildings frequently represents a kind of interface. For all the rhetoric of city freedom, the average person experiences the city as a zone of things that you can see but that you will never actually interact with, a collection of human and physical objects, many of them out of bounds. The streets might be free to all, but the buildings are a series of locks and gates, or rather, paywalls, and differential access to them abounds. I can look at the two-dimensional frontage of the Ritz, but can I experience the three dimensional space beyond the facade?

    You can of course use wealth to unlock these paywalls. Wealth brings a kind of universal freedom of the city access card (albeit, ironically, if you’re very poor, you may be so marginalised that you gain a different sort of freedom to use parts of the city that many people wilfully shut themselves off from, the parallel world of trashcan alleys, shacks and derelict squats, hauntingly captured here by photographer Chris Arnade). For the average person though, the city expresses itself to you as a kind of aspiration, things you maybe one day will get to do.

    This phenomenon applies to human relations too. In the city you’re faced with a constant stream of people you will never meet. Have you heard of the term sonder? It’s a neologism from the Dictionary of Obscure Sorrows, referring to the realisation that every person that passes you by is living a life as intense as your own, but that you’ll never have access to it, with you perhaps appearing “only once, as an extra sipping coffee in the background, as a blur of traffic passing on the highway, as a lighted window at dusk.”

    Urban dynamic 2: FOMO meets YOLO in the buzz of constant surveillance

    The ironic consequence of this is that you’re almost never alone in a city, but are surrounded by people who often don’t offer much in the way of sympathy either. This is part of that hard-edged, bittersweet symphony city vibe that some people get a big kick off, blitzing down the road shoulder-barging people out the way, leaving kind-hearted romantics feeling deeply isolated, wanting to escape to the countryside. Of course, the endless stream of people offer potential for interaction, a tantalizing potential for sex, fun, intellectual debate, and experience. It culminates in the ever-present fear-of-missing-out (FOMO) complex, breathlessly (and tragically) set against the ticking timebomb of the you-only-live-once (YOLO) complex.

    The sense of never being alone is part of the city buzz, but it also doubles as an element of a peculiar urban surveillance complex, joining the interconnected web of visible policing, endless lights, and, if you glance upwards, CCTV cameras, all meshing together to give the subsconscious awareness of always potentially being on someone’s radar. Here’s an experiment: Walk down a city pavement and then make an abrupt stop and stand frozen still. Can you hold it for more than 20 seconds? An invisible force hits you. You feel the weight of people potentially watching you (maybe you can call it the panopticon). Why have you stopped for no reason?

    There are ways to escape the surveillance complex, and at any one moment in central London you’ll find people existing in pockets of unmonitored space, feeling the wild tinge of alone-ness in a toilet cubicle, in old elevators, behind pillars in underground parking lots, in back alleys. We intuitively know where to find these places. One just need imagine where you would go if you were trying to find a place to piss in the city, or to have sex, or basically to do anything slightly illicit.

    Urban dynamic 3: In control of freedom

    But even in the toilet cubicle you are not entirely alone. There are always the attempts to use the physical space to communicate with you, drunken messages plastered on the walls, and then, of course, there is the ADVERTISEMENT on the back of the door. Just like old communist cities were dotted with socialist realist artworks depicting idealised visions of humanity working towards common goals, so the surrealist corporate propaganda urges you to act on the goal of becoming something slightly different to what you are, to give in to vague fears or aspirations (reaching dystopian proportions in the sci-fi imagination of Minority Report).

    Advertising is part of an obvious ongoing attempt to influence thought, to control to some end, but it tends to cloak it within the banner of either freedom, or of security. Under the hedonistic exterior of the Calvin Klein billboard there is clearly some highly-strung anal executive trying to orchestrate a well-oiled campaign. It’s the same with the friendly pleas for civility on the London Underground, or the Mayor’s cycling campaign, or the health and safety warning signs, the traffic lights and rules. They're all reflective of perhaps the deepest ambiguity of a city, that between freedom and control, and between control and its confusingly similar echo, security. Levi's makes me feel secure.

    The perception of power and control as security is a hallmark of ‘mainstream’ status quo thought, constituting what we can call, loosely, hegemony, the way that powerful institutions appear in popular consciousness as reassuringly normal. The police represent security to those in the mainstream, control to those outside, just like the smiling faces of corporate executives appear respectably professional to some, and as exploitative masks of manipulation to others.

    We have a long tradition of critiquing adverts, corporate executives and police violence, isolating the exploitative strands found within the comfortable security. Perhaps the most pervasive control complex of the city though, is the most subtle, and we take it so for granted that it’s almost invisible. If there is one thing that most social classes implicitly agree on, it’s that wilderness is not allowed to flourish in the city. We have developed technologies of control like concrete to resist the chaotic wiles of weeds. We have pest removal companies and poisons to remove pockets of alternative life as they form, and tree surgeons assassinating rogue branches that don’t obey council rules. We might allow carefully tended parks, but wilderness, NO!

    Urban dynamic 4: The echo-chamber of urban elitism

    The silent bulwarks of concrete control tend to get forgotten, or hidden, amidst the loud buzz of urban creativity, and it's in this contradictory setting that a covert cultural agreement emerges. It runs across the political spectrum, and across national boundaries. It is the tacit agreement that the City is where everything important happens, where policies get made, where trends get set. It’s wired into urban mentality, and above all it finds expression in people who consider themselves global jet-setters – the transnational urban elite – and in our favourite technology, the internet.

    The internet, when taken in aggregate, does not reflect ‘the world’. It reflects the relentless content production of large global cities, and the transnational aspirations of transnational urbanites. There are up to 3 billion Google search results for New York. How many for the entire country of Angola? Around 126 million.

    Urbanites have long be criticised for having their feet off the ground, for lacking an earthy connection to the soil, but the sheer scale of this potential disconnection has increased as the sources of distraction have become richer than ever, a commercial media complex interwoven ever more closely into experience, the mobile internet streaming data from urban trendsetters around the world, music videos from San Francisco, stock prices from Hong Kong. This is the distraction complex, pointed out in Guy Debord’s Society of the Spectacle, the basis of Jean Baudrillard’s concept of hyperreality. You can live an entire life in this cultural echo-chamber, surrounded by others doing the same. Base level awareness of things like soil and rain merely distract from more important upper level realities. Who cares about watersheds when we can discuss vinyl, technology, business?

    So let’s talk business then. All business, in the final analysis, comes down to raw human labour (physical or intellectual), which is supported by agriculture and augmented by technology (made with materials dug out of the earth) that's fuelled by energy sources. That's a formula captured in everything from large-scale construction of highways to the simple act of using a photocopier after lunch (labour + food + technology + electricity). The pinnacle of city business though, is finance, the portal for amplifying and steering previously accumulated capital into businesses of the future. The headquarters of global financial institutions are profoundly urban, and it’s in this setting that professionals make daily decisions about financing destructive projects in far-away places. The disconnected mentality of the city feeds into disconnected notions of economic life. Forest destruction is reduced to a series of numeric cash flow projections in excel spreadsheets.

    The quest part 1: Getting behind the interfaces

    So let's imagine it's evening in the city. You close down the spreadsheet, and pull on your suit jacket to head across town to a bar, walking along the controlled space of the pavement, making a pit-stop in a shop to pick up a disassociated pack of cigarettes piped in from some unknown location, petroleum-powered cars blurring past.

    If you were, however, to look down the back alley you pass, or through the sewer grilles under your feet, or behind the billboards, you’d see that there are strange piping systems, ventilation shafts, bundles of wires, mechanical pulleys, delivery docks, waste management systems, storage depots, dirt and grease compounds. The world of interfaces is kept illuminated and co-ordinated via a vast, elaborate network of manual workers who will undertake all the steps necessary to seamlessly deliver a glass of cider down on a table in a Shoreditch bar.

    This is the back-end, the spaces behind the interfaces. These are the only spaces in a city like London that you won’t find adverts.

    It is here then, that I will begin a search for the deeper soul of the city. The first part of my quest over the next few months is to go behind the interfaces. The back end is, for some, a zone of resistance. It is where the urban foxes live. It is where squatters make homes in abandoned old pubs. It is where community gardens are started. It is where graffiti artists practice their craft. It is where weeds grow untended, little outposts of ecological resistance against concrete control. There are wild tomatoes growing on the banks of Thames, if you know where to look.

    It's in this space also that the urban exploration subculture emerges, explorers of abandoned buildings and places you’re not supposed to see. The urban exploration crew is drawn to all that is designed to be out of bounds, which happens to include most key elements of city infrastructure, the underground train systems, the telecommunications towers, the electrical power yards, the warehouse complexes, the sewerage systems, the logistics nodes in the shadows or on the outskirts. They are back-end adventurers, on the one hand rebellious, but perhaps also seeking solace in places that nobody expects to find you in. It's a strand of the underground tradition of psychogeography, the attempt to defy or redefine the hegemonic logic of city spaces.

    If there is one thing that fascinates me in the city, it’s the food system. How the hell does all the food get in? How many kebab shops are there in London and how much meat do they go through in a day, and where does that come from? Where are the warehouses that Tesco uses to restock its imperial army of store fronts? How many steps are there between a fishing boat pulling a tuna out of the ocean and it ending up in a Yo! Sushi outlet in Soho?

    The quest part 2: Bringing the back end to the front end

    The crux of the quest though, is to explore how these vast back end systems, and the ecological systems they drawn upon, can be brought to awareness within the very space that hides them. There are already urban movements that attempt to do this. The urban agriculture movements, for example, try to bring farm life right into the physical space of the city, creating rooftop plantations and city farms. In a more rebellious vein, there are guerilla gardeners seedbombing the stilted rows of public parks and manicured gardens with reckless wildflowers.

    The key question for me though, is what part new high technology can play in all this. We are faced with a dilemma here. Technology historically has been used to cushion us from external realities. The streaming media capabilities of smart-phones have seemingly obvious potential to open our eyes to things, but they've also created an information bubble which appears on a day-to-day basis to mostly dull the senses, not make them alive to unseen realities.

    But it's worth a try, so I will explore different approaches to using such communications technology. Firstly, it is worth looking at abstraction techniques, technologies that take a complex external reality and attempt to make it into something understandable, or present it in the form of an analogy. For example, think of big data visualisation of internet usage, or mapping projects, transforming the global subsidiaries of Goldman Sachs into a digestible form. It's an approach that really attempts to compress the disorientating scale of modern life into bite-sized chunks.

    Secondly, there are humanising techniques, ways of taking something that is currently abstracted or obscured, and showing the story behind it. For example, can we build open data maps of supply chains, populate them with personal stories and data on resource usage, and feed them into augmented reality apps operating within the paradigm of the ‘internet-of-things’? Maybe even Google maps can be used: I’ve used StreetView to virtually drive the back streets of Hong Kong to get a glimpse of Shenzhen where my iPhone is assembled. And can I use the technological interface of the iPhone to breach its own branded façade and see the vast, intricate web of its own production?

    And then there is the mother of all abstract façades, the financial sector, entrenched behind a firewall of political power and technical obfuscation. How might we breach the slick shell of financial instruments to view the gritty real world beneath? Is there a way to read the Financial Times that will make me alive to the deep human and ecological dynamics embedded in cold financial abstractions? Can we take a flat story about stockmarket regulation and see it for what it is, a network of urban politicians interacting with a network of urban businesspeople, battling it out amidst cultural constructions of risk, debt and the perceived potential of ‘assets’ in far flung, probably marginalised, production centres?

    The battle for holistic fusion

    Maybe none of this works without people being willing to adopt a certain critical orientation towards surface appearances. Groups like BankTrack do try to show the human and environmental stories behind major bank deals, but getting those stories into the public domain is tough. How do you bring marginalised voices into the city, to the ears of people who implicitly benefit by remaining ignorant. Out of sight, out of mind.

    It's a crucial battle for holistic fusion. Because, the countryside and the city appear to me like the imagined split between body and mind, physicality and intellectuality, hard labour and innovation. And, in the same way that the artificial distinction between body and mind needs to be fought, the consciousness of the city needs to be fused with the consciousness of all those vast tracts of the earth’s surface that feed into it.

    Read on! Part 2

    To read Part 2 of this quest, please do sign up to Wisdomhackers on the Pigeonhole, where it is being released as part of an awesome group book. The book comes out in weekly installments for the nominal sum of £5, which goes to help us struggling writers. My essay in the new collection is a 7000 word deep dive into the questions raised above, and it's a lot of fun. It includes critical explorations of the technological smart city narrative, cyborgs, LSD and the battle to reinvent political economy in the city

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    Tuesday, 12 August 2014

    Much soul, very emotion: Why I buy into the cult of Dogecoin

    Please note: This piece was originally commissioned by the magazine MCD, and will be appearing in French in their December edition.

    I use Dogecoin because I’m emotionally drawn to the dog. Unlike the distant, fossil-like Queen on the Pound banknote, the Shiba Inu is at once transcendent and approachable, self-contained but cuddly, looking into my eyes with a sideways glance, as if it just noticed me and is wondering whether I want to play or be left alone. It’s not an aggressive dog, or for that matter, a bouncy dog trying to lick me. It has self-directed, quirky soul, and it’s almost impossible to imagine this dog being an asshole.

    Some people in the crypto-currency community have written Dogecoin off as a joke, or even a scam.  Maybe it’s both, but does this matter? All currency in the final analysis is really a scam, and the real question is which of those scams we want to agree to. I for one would rather pledge allegiance to a mystical pooch than to worship the image of a redundant monarch.

    Indeed, Dogecoin, to me, is the best of all of the so-called ‘alt-coins’, the alternative crypto-currencies that have emerged as offshoots from the original Bitcoin source-code. Here is why.

    Money isn’t ‘rational’

    Run this question through your brain: Why did people invent pottery?

    The response from many people is ‘because it must have been useful to store food and water’, an answer which chimes well with our prevailing rationalistic world view. Nevertheless, not only is the assumption that pottery was explicitly ‘invented’ problematic, but evidence suggests that it was originally used to create abstract religious figurines. The details of such archaeological debates don't matter here - what matters is to realise that we often have an automatic bias towards thinking about history in terms of what we're used to in the present.

    Why do I bring this up? I do so because there is a similar problem among many economists who attempt to peddle ahistorical narratives about ‘why people invented money’. Their story normally involves people ‘rationally’ designing money as an alternative to ‘barter’. There is very little immediately rational about exchanging real goods for pieces of paper or shiny bits of metal though. Sure, once the social convention of monetary exchange is set up, it’s useful, but the imagined process in which bakers and butchers ‘invent’ money to deal with the awkwardness of exchanging meat for sourdough loaves is an attempt to reverse-engineer history from the perspective of present dogma.

    Money is not an object that can be invented. It is a social convention that has to be culturally constructed. The use of monetary tokens only appears rational once we’re party to a collective agreement (or delusion) to imbue those tokens with value, and that collective agreement needs to be constantly maintained.

    State power, local trust, meta-national mysticism and labour

    In the case of our normal fiat currency, the collective agreement is given strength by the psychological (and real) force of official authorities. Most of our fiat currency is created by commercial banks, but derives much of its ‘reality’ from state endorsement of its legal status.

    In the absence of a state championing a currency, you need other factors to induce collective acceptance. For example, a very small community might be able to create and maintain a local currency backed by nothing but the preexisting communal trust network, woven together from mutual friendships, ties of honour and anxiety at facing exclusion from the social group.

    To create belief in a non-national currency that is not located in a small community though, is especially hard. Bitcoin provides a fascinating case study of the process. When it first started, Bitcoin commanded almost no value. It had one crucial feature though. At its heart was a mysterious, almost immaterial figure called Satoshi Nakomoto, a focal point for a community to rally around.

    The mystique of Satoshi was vital, imbuing what was otherwise a clever but cold piece of cryptography with a soul that people could believe in. Satoshi was the holy ghost in the machine, and the act of mining resembled a ritualistic quest to build on the blockchain started by the ghost. It’s through this process that the imagined value of Bitcoin came to life, and started taking on a reality.

    By contrast, imagine if a well-known person, like Stephen Hawking, invented Bitcoin. It would be devoid of all mystery, resembling a science project or a corporate product, rather than an underground movement. The specifics of Stephen’s personality would replace the cryptic symbol that the Satoshi figure once stood for, and what would you have left? A clever piece of cryptography, and a somewhat banal act of using up energy in running computers.

    That said, there is something about the pointless nature of randomly churning algorithms through a computer that is psychologically powerful. If you want to imagine that something essentially ephemeral is a useful commodity, it helps if you expend labour in creating it, because labour implies scarcity (you only need to work for things that are scarce), and scarcity implies a potential for an exchange value (if something is abundant there is no need to exchange anything for it).

    The computing power (‘labour’) put into the Bitcoin network does not create value in itself, but is a further psychological backer to Bitcoin tokens’ imagined value. If they weren’t valuable we wouldn’t exert all this labour would we, and because we exert this labour they must be valuable, right?

    The emergent myth of Bitcoin’s rationality

    Interestingly, as the ritualistic process of mining has become increasingly competitive, and the commercialisation of Bitcoin has steamed ahead, new narratives have formed to explain why Bitcoin tokens ‘rationally’ have value.

    Chief among these is the idea, touted by the Bitcoin foundation itself, that bitcoins have value ‘because they are useful’. It is part of a broader trend among the Bitcoin elite to rewrite history and claim, in hindsight, that the value of Bitcoin was always self-apparent, and that early adopters were just getting involved due to rational future expectations of increasing societal recognition of Bitcoin’s use value as a secure means of exchange.

    In this formulation, Bitcoin tokens derive their value by being part of a potentially useful system, the value of each bitcoin reflecting the aggregate market assessment of how useful it is to have a secure means of exchange. It’s kind of like arguing that containers on train carriages derive the entirety of their value from the usefulness of the rail network. The implicit narrative is this: Hey, these things are useful as transmitters of value for exchange, so let’s compete over them, and in so doing create their market value, which can now be used for exchange.

    Circular no? There may be a glimmer of truth in it, but it’s mostly an attempt to describe the essentially emotional and social process of currency creation with the language of cold individual rationality.

    Tin-man currencies ain’t got no heart

    This thinking has subsequently influenced the way that a lot of alternative crypto-coins have attempted to market themselves. Rather than embracing their own absurdity, many alt-coins have marketed their efficiency, their security, or their application to some specialist use case, as if the usefulness and competitiveness of the design was the most important aspect of why a person accepts a currency.

    The crypto-conference has thus become the realm of ‘serious people’ discussing ‘serious business’, not wishy-washing mysticism and emotion. They appeal to rational functionality, rather than inspiring people to use them. They are techno-fetishistic. A guy with a PowerPoint presentation calmly explains the business case for why his crypto-currency is valuable because it uses a state-of-the-art turbo hashing system, but for fuck’s sake, tell me why I should BELIEVE in it!

    It’s true that this strategy has worked to some extent for some alt-coins like Lightcoin, Quarkcoin and Peercoin, which have gained some popularity based on design, but think about this question: Why do you use British Pounds or Yen? The answer to that is never, ‘because they’re well designed’, and neither is it ‘because I rationally see how useful it is for me to have a medium of exchange’, and neither is it ‘because I’m intimidated by the state and they force me to use it’.

    Our answer is mostly just ‘because everyone else seems to use it and I was taught to use it’. We are born into currencies just like we are born into languages, and we learn to use them in a social context. If you want to convince a person to accept ephemeral electronic records as a currency, you need a story for people to hold on to. You need heart.

    Dogecoin is a cult, and that’s how it should be

    Which brings us to Dogecoin. I can believe in Dogecoin because it gives me something to believe in. It’s a direct appeal to irrationality, a direct appeal to transcend the banal world of individual utility calculation and submit to something hilariously absurd. It is, above all, a cult, and that is infinitely more attractive than any cold appeal to robust design.

    It is the peaceful, playful gaze of the Doge itself that is the mystical foundation of the currency. It doesn’t matter who invented it, because Dogecoin is not experienced as a narcissistic project of a particular person, and it’s the symbol itself that is the leader. The Doge is a figure without ego, with cross-cultural, cross-gender, and yes, even cross-species appeal. We can all get something from the gaze of the Shibu.

    This is reflected in the resultant community that has emerged around Dogecoin, people who refer to themselves as ‘shibes’ and give each other gifts of Doge. While the Bitcoin subreddit has turned into a moshpit of aggressive trolling, Dogecoin forums feel inclusive and accepting, cohering around a surreal world of esoteric slogans and acts of goodwill.

    In closing then, a word on design. If there has ever been any clever design in Dogecoin, it’s been in the way the core members have focused on creating a culture from the bottom-up, rather than fetishising currency creation as a technical solution to be marketed from above. The Dogecoin community has grown rapidly in response to community acts that establish a reason to believe in the currency, such as the sponsorship of underdogs like the Jamaican bobsleigh team, and oddball stunts like backing a Nascar racer. 

    These are things you can sit in a pub and laugh about, outside conference halls, and that makes all the difference.

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    Thursday, 17 July 2014

    Breaching the monetary Matrix: Five exercises to help you understand money

    (Note: I originally wrote this article for the July 2014 edition of Contributoria, and it is republished here under the following Creative Commons licence. If you wish to use the article, please attribute the original)

    "Like everyone else you were born into bondage, born into a prison that you cannot smell or taste or touch, a prison for your mind."

    This is a line from The Matrix. Morpheus is explaining to Neo that he’s actually stuck in a nightmare prison-world enslaved to computers. The world is not as you think Neo, but I can set you free, provided you take the red pill.

    In some ways Morpheus resembles one of those single-agenda zealots who goes around telling people that they have a certain secret truth that will liberate them, like the guy who corners you in a pub and says, “Don’t you realise we’re trapped in a corporate prison. The Bilderberg Group owns the world’s governments!”

    Morpheus, however, is also different to the average conspiracy theorist. The key dynamic in The Matrix is that the power structure he’s trying to reveal is invisible in all ways, an immersive totality that transcends the world of identifiable ‘things’. He spins no tales of illuminati hiding in Goldman Sachs, or secret meetings between elites in Swiss cantons.

    The problem with the average conspiracy theorist is that their targets – such as corporations – are too obvious. Corporations may be giant, semi-immortal entities that vaguely resemble autonomous hive-minds bent on cultural hegemony, but they often do it bluntly, pushing cheesy propaganda and brandishing gadgets at us, lobbying politicians, and so on. In the end, there are ways for people to exert influence over them, and they occasionally disintegrate. Corporate power is subtle, but not that subtle.

    If anything in the world actually resembles Morpheus’ conspiracy, I’d say it is money itself. Money is extremely subtle. We think of the monetary system like we think of air, or language – as something that surrounds us and that we take for granted. We are born into a monetary system we cannot smell, or taste, or touch, so obviously normal as to be virtually invisible.

    Indeed, when we’re asked to describe money, we often give fuzzy, imprecise descriptions, despite the fact that we may use it every day. Even those who work in the financial sector, and who spend all their time designing financial instruments like bonds to steer money from one place to another, frequently cannot tell you precisely what money is. Take, for example, the anti-hero of The Wolf of Wall Street, a hotshot broker immersed in money, but who literally has no idea of what it is, and what’s more, is controlled by it like a puppet.

    I find money intensely mysterious, and there are no Matrix-style red pills that can be taken to help one deconstruct it. In August 2013 I published a piece called Riches Beyond Belief in Aeon Magazine, exploring the cultural dynamics of currency. Following that, it occurred to me that it would be useful to develop some more practical exercises and thought experiments to try stimulate thought about particular aspects of the monetary mystery. This article introduces five of those exercises, and I hope that collectively they may help you develop your own ideas. I’ve set them out in a particular order, but you can jump to those that interest you most.

    Exercise No. 1: The web of value

    This first exercise is a warm up, aimed at situating money relative to other goods. Look around you and try locate a few objects in your immediate vicinity. Perhaps you’re sitting at a desk, and there is a decent Casio scientific calculator, a Parker ballpoint pen, a bottle of Jack Daniels, and an A4 note pad. You’ll also need to have one foreign bank note, and one local bank note.

    The challenge, part 1

    Pick two of the objects, for example, the calculator and the Parker pen. Your task is to work out a rough exchange ratio between them. How many pens is the calculator worth?

    You don’t have to work out an exact ratio, but aim to create a band of likely exchange ratios, testing the outer bounds of plausibility. The calculator is not likely to be worth 10 000 pens, for example, but it’s probably likely to be worth more than 1 pen. Perhaps you say the calculator is roughly worth 4-7 pens, depending on the situation and their relative quality.

    You’ll note that you have an intuitive, almost subconscious ability to assess one object relative to another, even if it’s only in very rough terms. What precisely is it about the objects that allows you to make the comparison? Perhaps it’s their perceived utility (‘the calculator can undertake more complex actions that the pen, and it lasts longer’), or perhaps it's the imagined difficulty in creating the objects ourselves (‘the calculator seems to have more complex technology built into it, and is harder to make, requiring more physical or intellectual labour). Perhaps it’s just due to some learned perception of the value (‘Parker is a good ballpoint brand isn’t it?’), or some combination of those factors.

    Now that you’ve established one exchange ratio, add another. How many note pads is your bottle of Jack Daniels worth? You will find that these exchange ratios fluctuate even with yourself, depending on what time of day it is and your mood or situation. That won’t stop you being able to make a rough band though: ‘It’s unlikely that I’ll ever exchange a bottle of Jack Daniels for just one note pad, surely it’s worth at least three, but I’d never exchange 200 note pads for a bottle.’

    Now create a third exchange ratio, perhaps between the ballpoint pen and the notepad. In doing this, you’re building up a rough network of exchange values, and theoretically there should be some coherence between your perceptions. If roughly 4 good quality pens are exchangeable for a decent calculator, and roughly 3 standard notepads are exchangeable for a good quality pen, it is implied that roughly 12 standard notepads are equal to the calculator. Does that seem plausible to you, or do your perceptions of value have some inconsistencies?

    (As a side note, you’ll probably find that your perception of value gets warped by scale, leading to certain inconsistencies. The perceived utility of any object tends to diminish with increased scale, a phenomenon economists call ‘diminishing marginal utility’. For example, you may be able to conceptualise the usefulness that three pens have to you, but it’s probably difficult to conceptualise the usefulness of say, 3000 pens)

    The challenge, part 2

    Let’s now assume you’ve developed a loose latticework, something like a spider’s web, of these object pairs and the exchange ratios between them. Now take a foreign bank note, a currency that you’re not used to using, and try to integrate it into the network. How many pens would you exchange for 50 Turkish Lira?

    Notice something strange? We have some internal intuitive sense that guides us when making a rough comparison between two objects, but there is nothing about a foreign bank note that allows us to make a similar comparison. The truth is that you probably have no idea about how much a Turkish Lira is worth, unless you are from Turkey.

    This is something that tourists frequently experience, holding a strange foreign currency in their hands, having little idea of what it should be exchangeable for. What actually happens when you are a tourist? You learn what the currency is worth by observing others and by experience. You slowly calibrate your sense of its worth by seeing examples of goods priced in it.

    Now, by way of contrast, take a currency you’re familiar with, perhaps the British Pound, and integrate it into the network. You’ll find that you already have a set of pre-established ideas about the exchange ratios between British Pounds and the various goods. Oh, Jack Daniels is worth about £15 isn’t it? A good quality ballpoint pen is worth maybe £8. An A4 notepad is probably around £3. A scientific calculator is maybe £30-40. Take a look at the ratios between these prices. Do they correspond to the ratios you established in the first part of the challenge?


    The point of this is to highlight that the value of modern currency cannot be thought of independently of the economy and people it is connected to. There is nothing about a British Pound in itself that can tell you how many pens it is worth, but once it is installed at the centre of a giant interconnected social network of goods and services, its value gets locked in – at least in part – by that positioning. It becomes like a hub connected to millions of spokes, serving almost as a routing mechanism between them. It cannot exist without them, but also gets much strength from its centrality.

    Consider this statement: ‘If bread is worth £1.50 then I’m certainly not paying £10 for a cup of coffee.’ This emerges not from any comparison between Pounds and the goods, but from a known relationship between bread and coffee, expressed via Pounds. In theory then, whether we start off by pricing coffee as £2.50 or £250 doesn’t matter. The absolute numeric value in itself is arbitrary. What matters is whether that in turn plausibly corresponds to the prices of other goods.

    The tendency to fetishise the numeric value is one reason why some people fall into the trap of thinking that because 1 British Pound is worth 173 Japanese Yen, the Pound must therefore be worth ‘more’ than the Yen. All it really means is that the starting point of measuring goods in the different countries is different, and when you first arrive in a foreign country, you have to learn the dynamics of the measuring system before you can start to measure goods in it. Thus, in much the same way that choosing to measure something in millimetres rather than centimetres will give you a higher number, the shirt you buy in Japan will display a higher numeric price, but relative to other goods in Japan may present a picture very similar to that in the UK.

    Different currencies thus have different baseline price levels. The concept of ‘inflation’ refers to a general change in this baseline, one in which the measurement units become smaller over time, while the ratios between the goods being measured might stay roughly the same. Thus the ratio of £1.50 to £2.50 for bread to coffee becomes £3 to £5 over time. Societies that uphold any currency seem to accept the gradual overall shift as normal, provided it doesn't destabilise the intricate network of relative prices anchored and enmeshed in popular consciousness (most contentious is normally the wage prices that have an unfortunate tendency to stay fixed while overall goods prices rise, leading to worker outrage).

    Exercise No. 2: Treasure Island

    Some people get concerned by the lack of intrinsic value in the fiat currency described above (It’s not backed by anything!) and instead advocate commodity-based currencies, currencies that are supposed to be valuable in themselves. Gold is the traditional candidate for this, so here is a simple thought experiment to shake up some preconceived notions about the shiny metal.

    The setting

    Imagine a large island. It has a sizable population, perhaps 50 000 people, but it’s extremely remote and cut off from any trade or contact with the outside world. There is a rich agricultural system built on fertile volcanic soils. There is a good source of energy in the form of underground coal mines. There are ample building materials in the form of timber to build houses. These resources form the basis for a vibrant island economy.

    It also so happens that once upon a time, a Spanish raider ship full of gold pieces got blown off course and floated for months before being wrecked upon the island, depositing its a huge stash of treasure. A hundred years later and these gold doubloons have come to form the basis of an island monetary system. They circulate in everyday trade, but a sizable percentage is held by a handful of powerful barons who mostly hoard it in hillside bunkers on the central volcanic cone that overlooks the island.

    The scenario

    One day the island is hit by a giant hurricane and a tidal wave. 80 percent of the fertile topsoil is washed away, or else soaked with saline water that crops cannot grow in. The coal mines are flooded too, making them largely inaccessible. The trees are broken by the winds. In short, the basis for vibrant economic production is decimated. People are forced to eke out a rough subsistence foraging, or take to the seas in flimsy rafts hoping to find new lands far away.

    The powerful barons though, still have their fortified bunkers full of gold on top of the hills.

    A question, then. Are the barons still wealthy?


    The point of this exercise is to pinpoint where you think wealth is found in society. It is often claimed that gold is a ‘store’ of wealth. In the aftermath of such a storm though, sitting atop the hill, one wonders in what sense any value is stored in the pieces of inert metal that have no immediate utility to the barons. The barons can try to exchange their gold for things, but given the context, are people really going to give away their few precious useful items for pieces of metal?

    For much of history, gold has not had much obvious utility value like coal or timber or food might. Ironically, it tends to have most value in situations where it is exchangeable, and it is only exchangeable when there is a general surplus of goods that people need to exchange, and a process of mystification in which elites have imbued the metal with a god-like cultural status. This observation was very apparent to the likes of Adam Smith, who, in The Wealth of Nations, noted that:
    ‘the poor inhabitants of Cuba and St. Domingo, when they were first discovered by the Spaniards, used to wear little bits of gold as ornaments in their hair and other parts of their dress. They seemed to value them as we would do any little pebbles of somewhat more than ordinary beauty, and to consider them as just worth the picking up, but not worth the refusing to anybody who asked them. They gave them to their new guests at the first request, without seeming to think that they had made them any very valuable present. They were astonished to observe the rage of the Spaniards to obtain them; and had no notion that there could anywhere be a country in which many people had the disposal of so great a superfluity of food; so scanty always among themselves, that, for a very small quantity of those glittering baubles, they would willingly give as much as might maintain a whole family for many years.’

    In other words, according to Smith, gold is only valuable in a society where there already are large economic resources built up. Outside of that context, it’s a largely useless decorative item.

    Gold thus only ‘stores’ value insofar as it finds itself within a society that upholds a social agreement that it can be exchanged for goods outside of itself that have actual value. In other words, it derives most of its value, or is imbued with value (via a cultural-political process of mystification), from being present in situations where there are large networks of traded useful goods and people who require a medium of exchange. In essence it holds a contingent form of latent or potential exchange value. If the social agreement breaks down, or if the underlying goods disappear, the value of gold largely disappears too, or reverts to its more humble ‘intrinsic’ value of pretty decoration.

    To illustrate this once more, let’s imagine the scenario in reverse. Imagine years later you find yourself stranded on this island, now long since abandoned and desolate. You stumble upon the bunkers of gold in the hills. Should you be happy? Perhaps, but only if you’re able to tap into a larger trade network that exists somewhere outside the island. Otherwise, if you want to re-mystify it, you’d better get to work rebuilding a new vibrant island society so that the gold returns to being a ‘valuable’ medium of exchange.

    Intrinsic value: Utility vs. labour

    Gold fetishists frequently reject what I’ve just said, absolutely convinced that the metal is the ideal form of money because it is scarce whilst having intrinsic value. It sounds superficially plausible, but think about this question: What really happens if something is an intrinsic store of value and is scarce at the same time?

    Let’s say rare earth metals for example. Rare earth metals are very scarce, and they are very useful in modern high tech electronics. Does that make them the ideal candidate for being the ultimate form of money? While it’s true that they hold value, it’s also likely that they would soon disappear out of circulation to be used in the things that we normally use them for, like mobile phone parts. The problem about a scarce commodity that is also very useful is that it generally won’t circulate like a currency because people consume it.

    Gold doesn’t suffer from this problem because historically it’s not actually been that useful, which is why it can sit in vaults for so long without being sold off for industrial usage. Bitcoin is a more recent example of this, a mystified electronic token that you cannot do anything with in itself, thereby making it strangely useful as a potential means of exchange.

    Where gold does differ from fiat currency is in the fact that gold requires labour to create (mining). This does give it a psychological edge in maintaining the appearance of holding value in itself (‘We wouldn’t be mining this if it wasn’t valuable would we?’). Labour implies scarcity, in that you don’t have to work for things that are abundant, and scarcity in turn implies potential for exchange value (sunlight might have infinite use value, but no exchange value because it is everywhere and abundant).

    Fiat currency doesn’t seem to require labour to create, and yet does this matter? You might say ‘the British Pound is backed by nothing’, and yet I’m inclined to say ‘Well, nothing apart a network of 63 million people in a productive economy who will accept it, a powerful state, and a banking system with a huge vested interest in keeping it that way. Is it really ‘weaker’ than gold?’

    Exercise No. 3: Exiled from Main Street

    Here’s a thought-experiment to think about when you’re in a confined space with other people, perhaps your office block. Let’s say it’s a medium-sized building, and you are with 49 other people. For the sake of the thought-experiment, imagine that you have access to a large rooftop space, where there is a rooftop gardening system.

    Now let’s imagine that – for whatever reason – all your wallets are taken away as you enter the building, that the doors are then locked, and that the building is then cut off from the outside world. You find yourselves trapped in the space for several months without any access to money.

    The question, then. Has your wealth disappeared?


    What has effectively happened in this situation is that you’ve been exiled from a broader economy, and placed into a much smaller one, consisting of only 50 people and a small set of resources. You thus find yourself in the very situation that many small-scale communities have found themselves in over the course of history.

    In the isolated space of that building, your wealth does not lie in your bank account. In the context of being in the same boat together, your wealth lies in the potential resources available, and in the collective labour and ingenuity that people can bring to bear in obtaining them. Perhaps some people in the building put effort into creating water tanks to capture rain, while others work on the rooftop farm. Some tend to those who are sick, and some create entertaining acts to lighten the mood and improve wellbeing.

    Collective human labour might be required to get all the resources necessary for the society to survive, but human labour is situated in individual people, and thus informal systems of ‘keeping score’ emerge in such a society. I did the cooking, can you do the washing later? This gets called ‘reciprocity’. It’s the idea that, provided you’re able to, you’ll pull your weight over time. And if you don’t, people will start to get pissed off with you and try to exclude you from the communal resources.

    A healthy system of reciprocity tends to both rely upon and create systems of trust (like the way your local pub landlord might allow you to keep an informal tab based on trusting you). If you so wish, though, you can begin to formalise this reciprocity by explicitly writing down people’s obligations on a collective ledger or list, perhaps a central whiteboard in the building.

    Maybe you can even try to quantify the work done, perhaps in terms of hours. I did 5 hours of work on rooftop farming. I thereby claim credit for 5 hours, and it’s written down on the ledger so everyone knows. In essence, that ledger entry is now a claim on the product of the collective labour of the group. My personal ‘wealth’ may come to lie in the recognition that others in the building will pay to that claim, and in their acknowledgement that I ‘own’ it.

    Now imagine taking that claim to 5 hours of the society’s labour, currently written up on the whiteboard, and writing it down instead on a piece of paper that can be passed around, traded and owned.

    Wait a moment, isn’t that just normal paper currency?

    Exercise No. 4: Cracking the commodity illusion of credit money

    Note what just happened in the exercise above. A ledger entry – essentially a claim backed by a community – was turned into an object by being written down on a piece of paper that can be owned, and subsequently traded. Our ability to imagine that social (or perhaps political) claim as an object that can be owned, and our subsequent ability to exchange it for an actual good, allows us to imagine monetary transactions as if it were akin to exchanging two commodities.

    This imagined physicality of money is perhaps what allows people to believe that it is a ‘store of value’. For something to be a store of value it must be physical right? Even the term ‘money’ sounds physical, a noun used to describe an object, rather than a verb used to describe a process. Here’s an exercise to help destabilise that.

    The challenge, part 1

    Try to become aware of every time you mention the word ‘money’ in conversation, in thought, in emails, and in general.

    Now, try to not use the word ‘money’ for a few days. Instead, every time you’re about to say it, insert into its place a description of its form. For example, when you hand over coins at a store, ask ‘is this enough little pieces of metal?’, and when you’re paying by card, ask ‘do you accept these electrons, travelling through wires?’ You’ll see the cashiers looking at you strangely, because in some sense you’re breaking a taboo by drawing too much attention to the material form of the money.

    The challenge, part 2

    Now move to a description based not on money’s physical manifestation, but rather on what it can achieve. Regardless of your perception of what money is, we know that you can use it to claim goods and services within a certain geographical boundary. You go into a shop, take out a note, and claim a sandwich, and in so doing pass the claim to someone else.

    So try this for a few days. When you see a person driving in a Lamborghini, and you’re about to say ‘that person must have loads of money’, you instead say ‘that person must have loads of claims on goods and services’. When you're borrowing cash from a friend, say, 'hey, do you have some claims on goods and services I can use?' It sounds a bit silly perhaps, but the words are breaking away from the physical form, and instead referencing money to things external to itself. In so doing you are actually pointing out its position in the centre of a socio-economic network.

    Of course, you don’t want to have to say ‘claim on goods and services’ all the time. I rather use the acronym COGAS (‘Claims On Goods And Services’). COGAS-UK is what I use for British Pounds, meaning ‘claims on goods and services within the geographic boundary of the United Kingdom’. It’s a claim I can use to draw on the productive power of the 63 million people who accept it. This might seem like a fairly small action, but naming money differently helps you to become aware of the immense cultural and political system that underpins its value.

    Exercise No. 5: Fractional electronics

    There’s one big elephant that’s left in the room. All the above exercises are aimed at trying to focus in on what money might be to us. This though, is a different question to how money is actually created in modern society. The question ‘how is money created’ is different from the question ‘what is money’, in much in the way that the question ‘how is art created’ is different to ‘what is art’. Monetary reform groups like Positive Money deal with the question of ‘how is money created’ rather than ‘what is it’, and this is a deep political issue. I left this for last because it’s often an issue that distracts people from thinking about the more basic social nature of money, which is required before the creation process can occur.

    This exercise really just involves reflecting on three questions:

    1) What form does the money in your bank account take?

    2) If you were really depositing it into the bank so that they can then lend it out to others, how come it’s still there for you to get?

    3) If the bank suddenly took it away from you, would you have legal recourse against them? (e.g. if you woke up to find that Barclays had eliminated your bank account and the money in it, would you be able to sue them?)


    The money in your bank account is electronic money, which is to say that it is simply a ledger entry stored in the huge datacentres of commercial banks (imagine huge excel spreadsheets recording account numbers and how much is attributable to each one). They could do the same thing in a giant book if they wanted to – and that is what banks used to do – but electronic ledgers are more efficient, a digital equivalent to the clerks who used to carefully write down how much people deposited, and how much was given out to those who the bank granted loans to.

    Now to the second question. Textbooks often claim that banks take deposits and then lend them out to people, but if that were entirely true then your deposits would not be sitting there waiting for you would they? How is it that you can have access to your money when it’s ostensibly being lent out to others?

    This is where we get into the realm of fractional reserve banking, the process whereby commercial banks take the base money created by the central bank (technically called M0, which includes the physical cash you may carry around) and amplify (or multiply) it by extending credit greater than the initial deposits they're given, thereby creating new money that exists nowhere else except as an entry in their accounting system (technically called M1-M3). Indeed, electronic money does not exist outside of the banks’ IT systems, but it is the main form of money we use in society, claims which can be passed around, but that cannot leave the system.

    Sometimes people are bewildered by the notion that ‘commercial banks create money’. It seems to make it sound like they can create it and destroy it at will. If you have money in a Barclays account though, recorded as a data entry in their IT system, they cannot just take it away from you. It might have originally been created via the process of bank lending, but once it’s released as a legal claim into society, it cannot just be destroyed, any more than an artist can suddenly make an artwork disappear once you’ve got it hanging on your wall. There is a legally-backed reality to the money once its created, and this provides a check against complete surreality of the money supply.

    The fundamental nature of the claim that you now own is precisely what we’ve discussed in the earlier sections – a social claim that has value insofar as people will accept it in exchange for goods and services. This would not be any different if the government or god or your neighbour George was creating the money. The politics of fractional reserve banking sometimes get cast as questions about the fundamental nature of money, but to me they are actually questions about whether letting private banks be primary creators of that money is responsible or fair, whether it will eventually undermine faith in currency, and whether it confers on them too much political power.

    Red pill

    You’re in an electronic money world largely existing in the data centres of commercial banks, and held in place by collective consciousness and power. Whether you think there is anything wrong with that is really dependant on your view of reality. If you truly do believe that money is ‘supposed’ to be gold, and if you truly do believe that only gold has ‘intrinsic’ value, then you’re likely to shit yourself at the prospect of modern money. On the other hand, if you like me see money essentially as having always been a strange, somewhat irrational social contract, your mind should rather move to the political and psychological tradeoffs involved in different forms and creators of money, and the economic distribution effects of different variations on the monetary theme.

    Further reading

    I hope these exercises have been useful, even if you don’t agree with my conclusions. If you want to go further down the rabbit hole, here is some potential further reading.

    My piece Riches Beyond Belief in Aeon Magazine was pretty popular and generated a lively discussion. It explores alternative currencies, and what they reveal about normal currency. If you want to look at how Bitcoin interacts with modern money, and the politics around that, check out my piece, Visions of a Techno-Leviathan: The Politics of the Bitcoin Blockchain, which has also been pretty well received.

    For some serious reading, check out David Graeber’s Debt: The First 5000 Years. It's is on its way to becoming a monetary classic. It’s very good at obliterating classical economic myths of barter as the origin of money, and pointing out the deeply intertwined relationship between money, debt, and money-as-debt. Adam Smith is the founder of the outdated myth of barter that Graeber dismantles, but it’s worth delving into Book 1 of the Wealth of Nations to see his ambiguous treatment of gold as money, at once admitting that it’s a construct whilst trying to simultaneously claim that it actually is a bearer of intrinsic labour value. Another classical take comes from Karl Marx, who carries forward some of Adam Smith’s theories of commodity money in Capital (check out Ch.1), but who gets more sophisticated by pinpointing how the money form is locked into a network of other goods, and elevated by them, taking on a certain mystical status.

    From that point monetary theories have abounded, but I'd recommend trying to read anthropologists and psychologists rather than the bland rationalistic explanations of the mainstream economics profession. Above all though, the real red pill takes the form of undertaking your own explorations of money, exploring its orthodox and unorthodox forms, and cracking the deceptive shell that society cloaks it in.

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