So: me and bitcoin, you already knew I disliked it, right?
(Let's discriminate between Blockchain and Bitcoin for a moment. Blockchain: a cryptographically secured distributed database, useful for numerous purposes. Bitcoin: a particularly pernicious cryptocurrency implemented using blockchain.) What makes Bitcoin (hereafter BTC) pernicious in the first instance is the mining process, in combination with the hard upper limit on the number of BTC: it becomes increasingly computationally expensive over time. Per this article, Bitcoin mining is now consuming 30.23 TWh of electricity per year, or rather more electricity than Ireland; it's outrageously more energy-intensive than the Visa or Mastercard networks, all in the name of delivering a decentralized currency rather than one with individual choke-points. (Here's a semi-log plot of relative mining difficulty over time.) Credit card and banking settlement is vulnerable to government pressure, so it's no surprise that BTC is a libertarian shibboleth. (Per a demographic survey of BTC users compiled by a UCL researcher and no longer on the web, the typical BTC user in 2013 was a 32 year old male libertarian.)
Times change, and so, I think, do the people behind the ongoing BTC commodity bubble. (Which is still inflating because around 30% of BTC remain to be mined, so conditions of artificial scarcity and a commodity bubble coincide). Last night I tweeted an intemperate opinion—that's about all twitter is good for, plus the odd bon mot and cat jpeg—that we need to ban Bitcoin because it's fucking our carbon emissions. It's up to 0.12% of global energy consumption and rising rapidly: the implication is that it has the potential to outstrip more useful and productive computational uses of energy (like, oh, kitten jpegs) and to rival other major power-hogging industries without providing anything we actually need. And boy did I get some interesting random replies!
As viral tweets go, this one didn't get retweeted a whole lot—only about 200 times. (My all time record is over 5000 rts.) It attracted a lot of replies from folks who don't follow me and I've never heard of, all of them really contemptuous/insulting (as is often the case on twitter: thick skin recommended). Obviously, a lot of folks with BTC wallets are kind of attached to them and dislike the idea of losing them. What I wasn't expecting was the alt-right/neo-Nazi connection. Bitcoin isn't just popular among libertarians, it's popular among folks with green frog/Kek user icons and anti-semitic views. ("Are you a Jew?" asked one egg.)
One possible explanation, which looks quite reasonable as a first approximation, is that the US libertarian fringe has been assimilated by the neo-Nazis. After all, once you take one red pill, why not take another, and another, until you overdose on the bloody things? Alternatively, Bitcoin boosters are using the same twitter-based astroturf techniques as the alt-right to shout down anyone who publicly qustions or threatens their investment. But I didn't see the wave of obvious bots I'd have expected if the second explanation was correct: it looked to me far more like an angry human mob, with added political extremism on top.
Now, I'd like to remind you about an at-first-sight unrelated historical phenomenon: the collapse of the Papiermark in 1923 in the Weimar Republic, and the subsequent Beer Hall Putsch. The Nazis failed to take over at that time; the German economy was stabilized and the global economy in general wasn't as fragile as it would later become during the Great Depression. But the 1919-23 hyperinflation was a major driver for the initial rise of the Nazi party. Hitler's mass support wasn't motivated solely by his anti-semitism and revanchist imperialism: it was made all about the money supply. (In the 1929-33 period, mainstream politicians were discredited by the wave of mass unemployment triggered by withdrawal of US bank loans, and Brüning's policy of deflation. When nobody has any money to buy bread, and the bakers have no money to buy grain, but the bank mortgage on the bakery isn't getting any smaller, bad shit ensues.)
It's fairly clear now that since 2007/08 we're living in the dying days of the former neoliberal system. With disruption and collapse spreading throughout the developed world, the systematized recipe known as the Washington Consensus is being applied not only to client states but back home in the heartlands of the USA, UK, and EU members (where it's sold to the economically illiterate as "austerity"). It's also being used as cover for disaster capitalism, the systematic looting of public assets and social capital for the enrichment of small groups. Meanwhile, weaponized media (both social media and mass media owned by the oligarchs) is used to channel the sense of grievance felt by the immiserated population into acceptable directions, via slogans like "taking back control" or "make America Great again". Directions such as resentment towards immigrants, get-rich-quick schemes such as cryptocurrency bubbles or goldbuggery, and ritualized abusive denunciation of anyone who questions these attempts to divert attention away from the real problem—the way we're being conditioned for exploitation by our self-proclaimed masters.
So I now have two follow-on questions about BTC.
Firstly, what if BTC's supporters are right? That is: if BTC delivers what its supporters promise, then how will the oligarchs react? A working distributed cryptocurrency model is inimical to the interests of billionaire monopolists who want to get rich by imposing rent-seeking practices on the immobilized peasantry (ahem: I mean us ordinary folks). They won't go quietly, there will be a crack-down, and we may be seeing the first signs of the shape it will take in China (which is banning bitcoin excchanges). Distributed systems, contra received wisdom, can be banned: you just have to be sufficiently ruthless. (You criminalize possession, then enforce by imposing deep packet inspection at the network backbone level, apply criminal penalties for being caught selling goods or services in return for the currency, and make it impossible to run a legitimiate business taking BTC in payment.) If you can marginalize BTC so that it is only useful for child pornography, ransomware, and illegal narcotics, it's no longer a threat to the mainstream economy. So I see one possible outcome of cryptocurrencies threatening the existing banking system as being to hasten the shuttering of the open internet. (Not that the oligarchs have any great love for the open internet in the first place: we get rowdy and organize. They're a lot happier with it being a non-neutral channel for sedative YouTube videos and, er, kitten jpegs. Discussion fora, blogs, and activists not wanted on board.)
A second problem: if, as I think, BTC doesn't deliver, then the bubble will eventually burst. I called it a long time ago: and although BTC continues to follow an overall upward trend (there have been, ahem, fluctuations that would have ben recognized as a full-on collapse in any conventional currency) we're going to run out of new BTC to mine sooner or later. At that point, the incentive for mining (a process essential for reconciling the public ledgers) will disappear and the currency will ... will what? The people most heavily invested in it will do their best to patch it up and keep it going, because what BTC most resembles (to my eye, and that of Jamie Dimon, CEO of JP Morgan Chase) is a distributed Ponzi scheme. But when a Ponzi scheme blows out, it's the people at the bottom who lose.
The longer BTC persists, the worse the eventual blowout—and the more angry people there are going to be. Angry people who are currently being recruited and radicalized by neo-Nazis.