The metaphysical meaning of Bitcoin and Blockchain, if there is any…

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Who hasn’t read it: Bitcoin and Blockchain will revolutionize the world and our economy. But is it pathetic to believe that Bitcoin and Blockchain are going to change the world? The developments we see around Bitcoin and Blockchain are more capitalism in hyper drive than creating an alternative for it. But do we need a revolution or a change and what do we mean with change? Do we need to change the system in a political, economic, social and / or financial way? And if so, are Bitcoin and the Blockchain change agents or can we just forget about them, skip them and drag them to the waste bin on our desktop? Let’s have a look at three writers Pinker, Diamond and Harrari to see if there is such a thing as the metaphysical meaning of Bitcoin and Blockchain.

Steven Pinker
According to Steven Pinker we don’t need to change. Scientific rational thinking has lifted many people out of their miserable life and created a prosperity never seen before in history. In his book “Enlightenment Now” he mutters for 450 pages about the fruits of Western scientific thinking and pleas to put the pedal to the metal in order to lift many more people out of poverty and starvation. In the last 300 years many diseases have been overcome, inequality has decreased and life expectation has never been as high as today. Armed conflicts are at an all-time low and although the news makes you believe otherwise, terrorism is declining fast. Of course some people can be qualified as victims of the system, like slaves in the 17th century, sweatshop workers in Bangladesh or the Mechanical Turk workers of Amazon but they are still better off than European peasants in the Middle Ages. It is also no problem that our production method ruins the planet. Scientific thinking is a very powerful driver and will also solve our environmental challenges.

Jared Diamond
However that single small issue, ruining the planet, is a very good reason why we need to change the system we have. Exhausting the available natural resources caused many ancient civilization to collapse. Jared Diamond describes some depressing cases in his book Collapse. In biology the collapse of species happens more often and is part of the survival of the fittest. One specie adopts very successfully to its environment and therefore reproduces very well. As a result the total number of individuals increases and puts pressure on the available food resources causing a bad diet that leads to starvation and extinction if the specie fails to adapt. A famous example in biology is the success and failure of the Saber-toothed tiger, Smilodon (Diego for the Ice Age fans). Specialized in hunting down large herbivores, the Saber-toothed tiger became extinct when their preys were all eaten and had failed to reproduce and the Smilodon failed to adopt his diet to smaller preys. Technological developments and change of behavior (by scientific thinking) has made it possible for humans to get more and more out of their natural resources. Something that was not very common in the past as shown by the Black Death that killed 30 till 60% of the European population in 14th century. The big difference with the examples in Diamonds book and the situation today is that we live in a worldwide civilization and not in some isolated empire on a continent disconnected from the rest of the world. Technology helped us to adapt and get more and more out of our natural resources to improve our standard of living. In this process we shifted from local systems to one global system where everything is connected. Climate change seems to indicate that we reached our borders with the current way of organizing our society. So change is might be a good idea.

Yuval Noah Harari
Harari claims that this process of technology and successful adaption of homo sapience is a result of the ability to create stories. These stories are capable of mobilizing large groups of people to corporate for a common goal and achieve greater goods than would have been possible when they would have stayed organized along their biological capabilities. For instance a single person can know and interact efficiently with 50 till 100 people. To build a pyramid you need thousands of them. A general believe in a story like you are a slave so you are doomed to lift giant rocks or we are building the tomb for the after life of the god that rules us, people can organize thousands of people to work together. These stories can be everything: a religion, a political movement or a marketing campaign. Other animals cannot construct these stories. And therefore they are not capable of creating organizations that build pyramids, go to war conquer to control other species or convince each other to wear Gucci bags. The most successful story so far has been liberalism. Liberalism brought us where we are now. A bit similar to what Pinker claims but Harrari zooms in on the dark side of the development and sees that we need to change because the environmental issues and developments in technology like AI, gene technology and quantum computing might overrun us by destroying our life environment or creating super humans. We need a new story to survive as a specie.

In short technology, the way we are organized, our natural resources and the stories we tell each other are drivers of our system but also capable of changing our system. So back to the Bitcoin and Blockchain.

Note: the definition of capitalism used in this article is: an economic system based on private ownership of the means of production and profit promoting free trade and economic growth

Capitalism in hyper drive

Most people got to know about the Bitcoin through its price fluctuations in the last quarter of 2017 and early 2018. The dream of getting rich in a very short period by trading bitcoins created a gold rush with some winners and many losers. Not only the price fluctuations but also the many ICO’s (Initial Coin Offering), good and bad caught a lot of attention. ICO’s are or were a good alternative for IPO’s (Initial Public Offering) but the scandals outnumbered the successful and honest projects, at least in the news.
Nowadays the exchange rate of Bitcoin swings on the rumors whether or not traditional financial parties will further incorporate the Bitcoin in their portfolios. Trading futures already made the Bitcoin subject to price manipulations. The price of Bitcoin moves in the opposite direction you expect from an idea initially developed as an alternative for our current financial system. Any news suggested that Bitcoin will be more embraced by the traditional financial institutes sends the price up while news that these plans are delayed initiate a downward trend (As in Q4 of 2018). An excellent situation to trade futures (especially when you are the one that determines whether to incorporate bitcoin or not) but hardly a sign of change and more a proof that the Bitcoin and Blockchain is moving towards a instrument to optimize instead of change our current economic operating system.

A system that, if we strip our economic model to the bare bone, is very simple. You produce a product or service and somebody else consumes it. Money is used to trade, produce or buy products to consume, often as a loan. This economic system has been around for ages and has been one of the driving forces of our society and is an unique capability of humans. Animals gather food, eat, sleep and repeat, no production and trading of food. And as Pinker argues this system really kicked off during the Enlightenment and has been accelerating at an ever faster pace. But it was not only the economy, also politics changed since the Enlightenment from city states to nation states to probably big continental political blocks in the (near) future. To find out whether Bitcoin and Blockchain can play a vital role in changing our economic and political system let’s dig a bi deeper.

Western society explained in a few sentences

Our economic system cannot be separated from our political system. After all, freedom and peace proved to be very good for trade and economic growth. So explaining the metaphysical meaning of Bitcoin and Blockchain cannot without explaining some principles in Western Society. As I tried to keep this article short, excuse me for bluntly explaining it in a few sentences. Libraries full are written on this subject so there is enough material to dig deeper if you want.

Note: I deliberately speak of western society and not about Russia, China ,Africa and South America. In these area, Bitcoin and Blockchain may have a total different impacts as these areas developed differently and therefore have different social and economic structures.

1] Western democratic nation are sovereign states meaning the government of a state is the absolute and final authority with the monopoly on violence within that state / territory.

2] The government structure is based on the principle of the separation of powers into three branches, legislature, executive, judiciary, which are independent powers and areas of responsibility to prevent that one branch gets complete control over the state. This is called the Trias Politica.

3] Welfare is generated by the capitalist system of private ownership and free trade that lifted the majority of the people out of miserable life circumstance. It resulted in an extreme form of consumerism nowadays. Any crisis is fought by trying to stimulate production and consuming to keep this system running.

4] Money is the lubricant of this system. Any currency that is accepted for paying taxes is a legal currency.

5] Through history banks played an important role in providing states and private owners capital to fulfill their needs and goals by which the banks slowly occupied a prominent position in the heart of the system.

6] By now national problems are overshadowed by global problems effecting all nations. National companies became global companies including the banks. However, politics and money, like taxes, stayed local because the electorate is bound to a nation.

7] The system that lifted millions of people out of misery cannibalizes and poisons natural resources possibly resulting in big natural disasters that will put people back into the misery they just came from and thereby threatening the welfare of states and the current system that s more or less political stable.

8] The banks invented a system based on debts (often mortgages) to generate more capital. They bundled these debts that would be paid off over thirty years in packages and sold these to investors to get the money straight away. They used that money to create more debts which they packed and sold again. This worked as long as the debts would be paid but with bad debts (without an underlying commodity) you drag the system down. A bit like hashing hashes, when one hash changes, the whole chain is broken: good to know, hard to repair. This among others crashed the system in 2008 and until now the source of the problems haven’t been solved.

How bluntly can it get? And right now some of you might start to wonder what is this article all about. It jumps from capitalism to Bitcoin to environmental issues to Blockchain to the Trias Politica as a giant red kangaroo on steroids mixed with acid. Well at this moment the systems acts a bit like this kangaroo. We are living in a capitalistic society where consumption is the basic driver for growth (and environmental problems) and banks are in the middle of every transaction for governments, companies, and individuals. These banks have caused the last serious economic crisis by creating enormous debts by the way they traded bad mortgages (here is your acid). Now, ten years later these debts are even bigger (here is your steroid) and it seems that the root cause of the bank crisis isn’t taken away and it is feared for a new crisis will hit soon and hard. However in the mean time Bitcoin and Blockchain appeared on the scene.

Bitcoin

As a result of the financial crisis in 2008, Bitcoin was invented. And Bitcoin is

an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party

So basically money as lubricant of the system that is controlled by banks now can be controlled by cryptographic proof instead of trust and political decisions. The source code is open source so everybody can see how it works and contribute. Bitcoin gives governments an alternative for banks and individuals and alternative for banks and governments.

For individuals the Bitcoin is a judiciary branch. What? Yes it is, in some kind of way. There is an alternative for the currency that is issued by a state. If you loose trust in your state’s currency, you exchange it for Bitcoins. This is easy, it is digital(unlike gold) and global. Therefore it can become a tool to judge the actions and policies of governments, not only for the very few but for everybody. Besides there is no third party that controls it (peer to peer technology) and can stop or forbid the transactions (bye bye customs). So in essence it is a new independent player in politics. A force to reckon with when inflation or hyper inflation hits the fan or even far before.

For governments the Bitcoin shows an alternative way to control finances without the banking industry. Until now there was no alternative for banks. Now there is, so banks don’t have to be saved any more. How? Theoretically speaking, as soon as a crisis like the one in 2008 starts. Nothing can stop a government to release an in-house electronic coin and accept it as a means to pay tax. And tax is needed to keep the government structures and the economy alive, banks not anymore. Instead of putting billions to support a bank, the coin can be distributed among the people. The possibility to do this can have a self-regulating effect on banks. However the first experiment in this field, the Petro in Venezuela, is complete failure but the first plane flight lasted 59 seconds and was 250 meters and look at them now.

All above is highly speculative and Bitcoin is still young but it is the first time that there is a digital alternative for currencies and gold. A digital store of value, so no bags with gold bars to transport your wealth when you are on the run for a collapsing system.
However the Bitcoin is ambiguous. On the one hand it gives people the power to move away from governments, on the other hand it gives governments another system to control currency. Bitcoin operates in the heart of our political and economic system and can be a change agent.

Blockchain

Let’s zoom in on the Blockchain. Without Bitcoin Blockchain is just another technology. A powerful technology but just a technology. And whether it’s a supply chain, a distributed ledger or any other part or combination of Blockchain technology, it is just what it is: technology. And this technology will mainly be used to optimize the capitalistic production model that optimizes an old outdated business model. And here the environmental stuff comes in.
Capitalism is based on the relation between consumer and producer. And by now we know that there is more that matters except this one-sided relationship. What is good for the relation between consumer and producer can be bad for others. If a producer dumps toxic waste in a river to lower the price for a product, it’s good for the relation with his consumer. However, the result of this dumping can be bad for the swimmer that just swam downstream, the cows that drank the river’s water and the fish in the river that ended up on the BBQ. So by now we know it is not only about producing but also about cleaning up and the impact of the product on other consumers that haven’t bought the product. Cigarettes are a good example of a honest priced product. You know smoking is bad for your health and the people around you. But if you really want to smoke, you have to contribute heavenly by tax to the costs society has to make to take care of you when you get sick. The relationship between consumer and producer has to be extended. Blockchain may make production chains more transparent but it will not change the system. The Blockchain technology in itself will not change the system, it will only optimize it and hopefully for the better.

Sign of the times

So the metaphysical meaning of Blockchain is not one of change but one of optimizing our current economic model, if you can call that metaphysical. So people who are saying that Blockchain is so much bigger than Bitcoin, mean something else. They mean they are going to optimize your processes or clean up your legacy with a technical solution that has some Blockchain technology elements in it. There is nothing wrong with that, but it is just optimizing. Blockchain is used as the magic wand that will vaporize your legacy IT problems.
Bitcoin however, is a different beast. It touches ever aspect of our society: financials, economy, governments, and philosophy to name a few. The last decades the world economy became digital and global with a few dominant players in this field. These players grew in the last two decades and stretch over national borders. In the meantime politics and regulations stayed focused on nations while challenges, changes and problems become increasingly linked to global developments. A global digital currencies, not controlled by a third party, decentralized, open source and transparent just seems to fit seamlessly in these developments.

Back to Pinker, Diamond and Harari. Yes, it is true. In the west we adapted a very high standard of living, peace and equality. Not everything is solved but we are doing quite ok. However we are overstretching our natural resources and nature’s capability to neutralize our waste. But we can solve it, keeping Diamond in mind and creating a new ”Harari” story. Bitcoin is part of that new story. Whether it will bring the change we need, is to foresee. Maybe we need something even more radical. And for radical thoughts it is always nice to look to science fiction and quote Liu Cixin author o the Three-Body Problem: “I’ve always felt that extraterrestrial intelligence will be the greatest source of uncertainty for humanity’s future. […]The appearance of extraterrestrial intelligence will force humanity to confront an Other. […] The appearance of this Other, or mere the knowledge of its existence, will impact our civilization in unpredictable ways” ;o).


The metaphysical meaning of Bitcoin and Blockchain, if there is any… was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.