Ever since the mysterious figure known as Satoshi Nakamoto created bitcoin during the 2008 financial crisis, cryptocurrencies have only multiplied. Today there are thousands of them in circulation with intergalactic names like: Libra, Ethereum, Stellar, Auroracoin. Although they differ in branding, almost all share a common fantasy: to remove the circulation of money from the hands of politicians and bypass the financial institutions which govern the movement of money on Earth. But recently it has become clear that cryptocurrencies can not escape any of these.
Indeed, the freedom-loving dream of the earliest supporters of cryptocurrencies began to die just as cryptocurrencies began to become a norm. Stablecoins are closely linked to the value of real money, as the US Federal Reserve is developing its digital currency. The Bank for International Solutions has expressed its support for central banks for the first time. These developments have cut off the idea of a money that is not controlled by any state. Even the recognition of bitcoin as the official currency by the state of El Salvador has been severely criticized because it is forcing citizens to accept cryptocurrencies and violating their right to vote.
Despite the futuristic branding of cryptocurrencies, the story of its intellectual origins is more mundane. The idea of a money not controlled by states first came up in the debates that were taking place over a common European currency. While the Maastricht Treaty in 1992 paved the way for the founding of the euro in 1999, it was not the only currency model on the table at the time. A lesser-known idea, proposed by German economist Herbet Giersch in 1975, imagined a parallel currency called Europe, which would circulate and compete with other national currencies rather than replace them. Together with other economists of the neoliberal Mont Pelerin Society, Giersch thought that what he called “currency competition” would gradually divert people from lira, franc or drachma.
Giersch student Roland Vaubel, who would help found the Alternative fur Deutschland (AfD) party 4 decades later, was drafted to explore the idea by the European Commission itself. Already, in 1976 Friedrich Hajek, who was in constant contact with Giersch and Vaubel, published two pamphlets through the Institute of Economic Affairs. Hajek’s essays on “the possibility of choosing the currency” and others on the “denationalization of money,” became gems for those who wanted to bring uncontrolled money into existence.
However as soon as it became clear that the euro stood above Europe, libertarians began to look for other spaces for experimentation. In the second half of 1990-2000, the Internet seemed to provide the space needed to transcend national sovereignty and territorial territories. In 1996, Internet activist John Perry Barlow claimed that “the legal concepts of property, expression, identity, movement and context,” do not apply online. Some libertarians went further than Barlow and pragmatically concluded that old property laws might be even safer in cyberspace, where users could evade governments and taxes. In 1998, the number two Hayek Prize awarded by the Mont Pellerin Society predicted that the Internet would undermine the monopoly of money circulation by governments and allow people to choose between private money providers.
This vision of money out of state control was captured in the 1997 Libertarian Manifesto written by James Dale Davidson and Times editor William Rees-Mogg (father of Conservative MP Jacob Rees-Mogg). The book “The Sovereign Individual: How to Survive and Prosper in the Fall of the Welfare State” predicted that the Internet would denationalize money. According to the book, people would no longer use a government-approved coin but rather an intangible currency called “cybercash” that the authors described as encrypted in sequences of simple multi-digit numbers. According to them, Cybercash would bring “Hayek’s mink into existence.”
Their book was very popular with only a limited number of San Francisco capitalists. The young Peter Thiel driven by the vision of Davidson and Rees-Mogg for a state-controlled digital currency began in 1999 when he launched PayPal and brought the prophecy closer to reality. Thiel’s company was just the beginning of what would later become a wide spread of various digital currencies. But in recent months, a more earthly future for cryptocurrencies has come into focus. The first problem that was identified in the bitcoin model used by most cryptocurrencies is ironically a consequence of its success. Solving equations to buy new bitcoin, a process known as mining, requires large volumes of hardware to often overheat and consume large amounts of energy. Calculations put bitcoin energy consumption equal to Sweden and Malaysia.
As these mines multiply, their operations begin to expand to overload their countries’ power grids. Iran halted bitcoin mining last month after causing blackouts and even shutting down a nuclear reactor. Many provinces in China, one of the world’s largest producers of bitcoin, also stopped digging by pushing many diggers to move their hardware across the ocean to Canada and states like South Dakota and Texas in the US.
China’s fight against cryptocurrencies has also extended to their holding and trading, maneuvers that shrink the value of Bitcoin. South Korea blocked tens of millions of dollars in cryptocurrencies from wealthy citizens during an investigation into tax evasion. Earlier this month the U.S. Department of Justice managed to track down and recover most of the bitcoins paid to a group of hackers who attacked the Colonial Pipeline with ransomware. Coin that is not traced, leaves traces.
Connected to Earth with wires, cryptocurrencies will likely continue to live as an addition to state currencies rather than as a way to escape state control. Most of those who entered the world of cryptocurrencies in late 2017, were pushed more by seeing them as opportunities to make money with a speculative asset than bringing Hayek’s vision to life. The future of cryptocurrencies today seems less like a techno-utopian dream or libertarian fantasy and more like submission to what it was created to overthrow: the state monopoly on the circulation of money. / PCWorld Albanian
