Pablo R Velasco. Metaphilosophy. Volume 48, Issue 5, October 2017.
Money Ontologies
Investigations that focus on the material or “commodity” dimensions of money are not new, nor is the emergence of electronic money (de Jong, Tkacz, and Velasco Gonzalez 2015), but the popularity of bitcoin invigorated the question of materiality, and how money (or electronic money) is defined in relation to its materiality. Should we, for example, think about money by the way it allegedly works, by the institutions that deal with it, or by what it represents?
A recent book on the nature of money from a philosophical perspective dedicates a chapter to its metaphysical qualities, observed after the appearance of electronic money. Inspired by the work of Georg Simmel and John Searle, Mark Coeckelbergh (2015) develops the idea that contemporary money and trade are detached from the physical world, and accordingly this affords a moral distance. While I shall not address the main “moral detachment” argument, his reading is relevant because Coeckelbergh questions traditional and contemporary metaphysics of money and highlights the problematic of defining money (and virtual money) within a material framework or purely as an informational object.
Coeckelbergh distinguishes, and partly rejects, three money ontologies: money as object, money as information, and money as social institution. First, “object ontology” understands money as a thing (and electronic money instances, like bitcoin, as “virtual things”). Reality within this ontology is composed of things, entities, or objects. Objects related to money in the past were easily identifiable, and according to Coeckelbergh money could be categorized then as a material thing. However, the introduction of debt in instances like paper money already dematerializes it and complicates its categorization. It still retains materiality, but, Coeckelbergh argues, it is not only material. Further reflection on the nature of money shows that money does not have a clear ontological status, even at the earliest stages of its development. Thus, for Coeckelbergh the materiality of money does not provide sufficient explanation of its ontological status.
Second, moneys “information ontology” derives from the work of Luciano Floridi. For Floridi, the world in our age is increasingly understood as information. What he calls the “infosphere” would eventually acquire the status of being (Floridi 2013). Understanding money primordially as information has the advantage of avoiding other forms of categorization, which allows focusing on new relations between what appear to us as diverse elements, regardless of their material or immaterial form. This pan-informational position has the obvious disadvantage of being fairly normative, however, considering that a priori excludes any non-informational view or element. Coeckelbergh concludes that Floridis relational model does not consider social relations, unless they are framed in informational terms, and thus cannot account for the subjective and social realms that also take part in the configuration of an ontology of money.
In contrast, Searle (2006) proposes that “social intentionality,” a collective acceptance of non-physical realities, is what provides a special status to otherwise problematic entities—that is, the observer-independent status of money goes beyond the physical piece of paper associated with it, due to the general agreement that it counts as a valuable something else. Following Searle, Coeckelbergh argues that the non-physicality of electronic or virtual money is not relevant. The advantage of Searles position is that it introduces the social into the question of the ontology of money. However, a strong division between objective and subjective realities endures, according to Coeckelbergh, and only adds a social level of abstraction to an “objective” reality. Searle presumes a division between the “natural” and the “social,” and thus maintains a dualistic ontology (Coeckelbergh 2015, 99).
Cockelbergh ultimately proposes to understand money in its relational nature and through an epistemological prism: What can we know of money? How its subjects and objects are mutually constituted? In this scenario, actors like central banks play a role in the definition of money but are unable to offer a complete definition of money by themselves. Even if it is true that one institution as big as the state provides legitimacy to it, the “nature” of money is established by many other major institutions—like the World Bank—and “minor” institutions. The existence of bitcoin as some sort of currency would otherwise be impossible, considering that it does not require any sort of state entity (Coeckelbergh 2015, 105).
Sybille Kramer also discusses the material composition of money and its relation with the state. She reads money as a medium, not as a symbol or a social institution. For her, money acts as the abstraction of ownership that can be transmitted. Money is a medium between people, and it belongs to a category different from that of other goods, as its value is detached from any materiality; it “embodies the disembodiment of value, it desubstantializes values. It is the objectification of an abstraction” (Kramer 2015, 113). The idea of an objectified placeholder of value can be applied, following Kramer, to a symbolic value (such as the value of a commodity). However, the body that holds (by desubstantiation) the immaterial property must nevertheless be validated by a central entity. The very fact that people are unable to produce or consume money, according to Kramer, without a central institution that validates its otherwise abstract value shows the “otherness” of money in relation to other goods.
Ledger Politics
The model of fractional reserve banking is a refined version of ledger technology. State and bank-enabled ledgers are technical devices with political qualities. Not only are they used politically, they have political affordances themselves. In a seminal work, Langdon Winner argues against the usual idea that it is peoples use of technology, and not technology itself, that is political. He understands “politics” as arrangements of power and authority in human associations that include the design and use of technological devices: “Rather than insist that we immediately reduce everything to the interplay of social forces, it suggests that we pay attention to the characteristics of technical objects and the meaning of those characteristics” (Winner 1980, 123). The ledger acting in the fractional reserve banking and other facets of contemporary finances embodies a specific form of authority
Winner distinguishes two ways, inherent and non-inherent, in which an object can have political properties. In the former, the systems require a certain kind of political relationships that “are strongly, perhaps unavoidably, linked to a particular institutionalized pattern of power and authority. Here, the initial choice about whether or not to adopt something is decisive in regard to its consequences” (Winner 1980, 134). This kind of relation is deliberately designed or strongly compatible with a certain ideology. In the latter case, the device design can also be easily adopted by a certain pattern of power or authority, or establish a new one. This political relationship is circumstantial, however, as it can be subjected to change, depending on the different practical uses of the artefact. Therefore, it does not require the maintenance of determined social conditions. Winners main example is the low bridges on Long Island in New York, built by Robert Moses, which were designed in such a way that public transport buses cannot use the roads that pass under them. The argument is based on Mosess alleged discomfort with users of public transit (mostly poor people) reaching his public parks. The main argument of Winner is that it is necessary to look at both the use and the design of technological devices to observe their political qualities. Artefacts like an atomic bomb, a factory, or even a ship (according to Plato) are, for instance, designed to be ruled in a hierarchical, authoritarian, and centralized manner. Regardless of whether the process of decision making around the properness of this kind of machine can be sorted out democratically, the technical operation, like the triggering of the object, requires the expression of hierarchical authority
Non-blockchain ledgers fuelling the fractional reserve banking model are a technology with inherent, in Winners sense, political properties. Classical works of Max Weber, Joseph Schumpeter, and Werner Sombart have argued that double-entry bookkeeping as technique is related to the emergence of capitalism and that ledgers contributed to the emergence of a “rational world view” (Carruthers and Espeland 1991, 33). Most recent works on the history of accounting argue that the original late medieval ledgers where used more to maximize profit than to trace the flow of capital (Yamey 1949; Winjum 1970). Both uses, profit maximization and scientific analysis of flow for planned investment, sustain the current economic model.
Centralization is the inherent operative environment of double booking in this model. Its functionality requires the maintenance of a particular set of social conditions. Much like the boat that cant be democratically manoeuvred for practical reasons, ledgers are centralized by central and commercial banks as authoritarian entities in charge of preventing counterfeiting. While it is possible to think of working ledger technology without the involvement of banks or states, as in a small family business, its overwhelming use in the form of fractional reserve banking in our modern economy shows how highly compatible it is with the particular social form of the large-scale centralized organization. The capacity to validate insertions and changes to the books must be limited in order to avoid unauthorized movements like double expenses. Trust cant be democratized, as it is provided not by the system itself but by the managers. Thus, techno-social assemblages based on trusted management and centralized control are inherent in pre-blockchain ledger technology. Management of the large-scale ledgers that run the governable part of our economy happen to reside in central and commercial banks that co-evolved alongside ledger technology.
The political design of the current economy provides the state and banks with the control of the ledger and the power to reconstitute credit money in other financial instruments, like shares or derivatives. Brett Scott (2015) states that in the current economy, banks are merely entities controlling the recordings of transactional data. Meaning that the privileged position of the state in the current structure of power is linked to recording as a means of control. Scott proposes to replace the databases of banks and find a way for people to control them. For him the blockchain is already a solution to the first problem. Cryptography used in the system completes the operation by providing personal, but anonymous, transactions. In this scenario, the state enacts power in what has been called “extensive politics”: power expresses itself in a normative framework, and thus it can be exercised by one entity over another (Lash 2007). An example of this is the persecution of an alternative currency when it is declared partially legal, without any use-value recognized for state affairs, and the state and commercial banks are the exclusive authorities for its production, as with the tumin in Mexico. In Britain, famous alternative currencies like those of the Transition Towns—the Lewes, Stroud, Brixton, and Brighton pounds— are considered retail vouchers with legal status but with regional restrictions. These alternative currencies can be freely used within a particular region and can even be used to pay taxes to the local city council: the Bristol pound has a potential reach of one million people, within the city of Bristol (“Bristol Pound-Scheme Rules for Individual Members and Trader Members” 2016). However, they are lacking in regulation in comparison to currency issued by the central bank— pound sterling—which is the only permitted legal tender, and thus the user “has good defence in law” (Naqvi and Southgate 2013) if sued for non-payment of a debt to be paid in sterling.
The (a) ownership of the production of cash, especially of credit money, and the (b) control of the registry allow the execution of “hard power,” that is, the capacity to affect others to obtain a desired outcome (Nye 2009). Both the risky use of credit by banks and their bailout by governments after the global economic crisis of 2008, which directly affected masses of people, are political examples of the power to control the registry and production, respectively. Aside from exemplary cases like the citizens of Iceland, the majority of the population had no chance to affect the evolution of the crisis or the outcome of the bailout. The control of the registry and production of the global credit systems and the technology that supports them allowed banks and governments to exercise power, via decision-making management of public money, over a majority of people.
If money is a political design of power from the state and banks, what is the political design of bitcoin money? Blockchain technology shifts exactly these two points, production and registry. Theoretically, it distributes both the monopoly of production and the central validation of the registry. I argue next that changes in these characteristics modify more how power is enacted within ledger systems than the notion of money as it currently works. A closer look at the instrumentality performed by these changes shows that new political forms emerge from the works of the digital device, by it setting its own logics and generating a particular form of exploitation.
Blockchain Ontologies
Blockchains are a relatively recent object in the world. Although different experiments were developed before, bitcoin money, which became public at the end of 2008, was the first of its kind. Even though the technology is now almost a decade old, it became popular gradually, then rose rapidly in 2013. While there is now a large body of popular commentary, theoretical, social, and philosophical research on this specific technology is still scarce.
One notable exception is the work of Ole Bjerg (2016), who aims to provide a philosophical approach to bitcoins particular ontology. Even though his work explicitly uses bitcoin only as a resource to reflect on the nature of money, his comparison traces quite an accurate outline of it. Bjergs antithetical approach stresses the qualities bitcoin retains from other forms of money, while at the same time dissociating it from those very forms. The bewildering end product is a digital currency that retains gold-standard quality without being gold, is fiat without the necessity of the state, and can be classified as credit, but without debt involved.
First, in such a currency the “gold without gold” quality would be based on the commodity theory originating from the seminal work of Adam Smith, who drafted a speculative history of money. In it, barter was a primordial form that eventually evolved into money by using tokens (metals) as a means of exchange (Smith and Skinner 1999). Bjerg recognizes the historical inaccuracies of the commodity theory, which neither account for the role of a sovereign power in producing money as currency nor convincingly explain the role of debt (Graeber 2012). It acts as the standard against which all other commodities are priced. Close to Kr€amers reading of the commodity, Bjergs view identifies gold as that which symbolizes other commodities, and its relevance is due to its de-substantiated transmission properties. Gold acts as a standard not thanks to its use-value properties (as it is not a particularly useful metal) but thanks to its capacity to structure the symbolic system of money by being a “priceless” standard.
Second, digital money is “money without a state.” The state is the producer of an object designated as money and is the regulator, at least to a certain degree, of its rules of exchange. A second function of the state would be to demand that very same object as payment for services, thus controlling and stimulating circulation by being partly in charge of the supply and demand of money. Following Slavoj Zizek, Bjerg argues that the state is the placeholder of the big “Other.” The demand of payments is expressed as desire for money. When this desire is inherited by private agents, the Other is not associated with the state but is the desire of the economic subject. Bjerg argues that bitcoin does not require trust in a central authority, relying only on the trust that it would be accepted by a community, and is therefore post-fiat money, where the “Other” does not exist. Bjergs argument does not, however, explain why, after the alleged disappearance of the state or any form of centralized institution in the process of production and circulation of money, bitcoin should still qualify as fiat money. The tumin in Mexico and the Bristol pound are examples of community trust-based currencies that work partly outside state control but are still not considered fiat.
Finally, “credit without debt” understands money as a claim for payment. Credit money does not need to become cash to circulate or even to be considered payment. Bjerg follows the idea that our contemporary economy is a combination of fiat and credit (Ryan-Collins, Greenham, and Werner 2014). The production of money in the form of credit is a standardized way for commercial banks to create new money. What is known as fractional reserve banking allows commercial banks to lend money to consumers, while keeping only a small percentage of it as a reserve. The amount of fiat money in the form of cash that circulates in the economy is “insignificant” (Jessop 2015) compared to the credit in circulation: it is estimated that fiat money accounts for less than 3 percent of the economy, while credit accounts for almost all of the remaining 97 percent (Ryan-Collins, Greenham, and Werner 2014). Bjerg observes that this system functions as an ideology: the bank offers each customer the possibility of withdrawing his or her savings in cash at any moment, even though most of this money is borrowed. It would be impossible to offer this possibility to all customers, but, Bjerg argues, by maintaining this “fantasy,” this ideology regulates the chance of this scenario happening. The vast majority of payments are effectively made not by repositioning fiat from one place to another but by updating the ledgers containing those credits. Unlike credit money, new bitcoins “created in the zone of indistinction between official government and private banking enterprising” (Bjerg 2016, 26) come into circulation without debt, while the system still functions as a bank-independent ledger. Bjergs reading of bitcoin poses the right kind of questions for developing an ontology of bitcoin as electronic money and offers great insights into the question of the nature of money itself.
In bitcoin, there is an evident lack of a material object, and, like any other money token, it is fitted to represent the value of other commodities, though these are non-specific qualities. Yet the absence of authority is unique. The disappearance of the state (the Other) from the money milieu, or of any central authority for that matter, is exceptional. I argue next that this disappearance is illusory, and that the Other is displaced to the production process itself.
By considering its instrumental operation as the key element that underpins the attributes of money, I shall offer a specific ontology for the bitcoin blockchain, in the same way that “old” ledger technology underpins debt money. Relying on Winners work on the politics of design, I show how the digital object of blockchain technology is strongly compatible both with centralized and distributed social and political relationships, but without requiring one or the other. I stress, however, that the capability for control of trust is what is politically inherent to its unique design.
Blockchain Politics
The co-occurrence of both Bjergs singular reading and the symbolic functions of bitcoin as a money-related entity makes Coeckelberghs proposal of “mixed categories” relevant. When dealing with the issues of the “object ontology,” Coeckelberg proposes to deal with the categorization problem of “mixed” categories: “Things can belong to different categories at the same time … their ontological status is mixed or multiple” (2015, 94). Although he recognizes the limitation of this “mixed ontology” (which sprouts from object-centred and dualistic thought), the convenience of such non-deterministic ontology becomes clear when applied to the blockchain. For it is as much a digital financial token, an infrastructure, a digital object, and, as I shall argue, an entity that is both human-made and computer-made. A fluid ontology suits an object that is heavily material when is produced with the tangible electric and electronic needs of the mining industry; embodies a deeply symbolic value on market exchanges; is a formal abstraction of an alphanumeric series at a textual level; and is the infrastructure where it unfolds itself, as argued by Maurer, Nelms, and Swartz (2013). In the same way that code is as much a mode of thought as it is a platform for the enactment of its own use and consumption (Parikka 2014), or that infrastructures are both things and relations between things (Larkin 2013), the blockchain performs diverse ontological roles.
Considering this multiplicity of readings, I propose an ontology of the blockchain derived from the political qualities embedded in its sui generis function: the logical performance of a technically trusted, distributed ledger. It is crucial to distinguish that the organizational model of blockchains can be distributed while having different degrees of centralization. On the one hand, bitcoin is an example of a distributed instance that gets centralized in relation to the amount of computer power. A hypothetical cluster of computationally powerful machines would effectively regulate the behaviour of the network, regardless of the number of less powerful machines. Given its open protocol and software, this scenario is unlikely though not impossible. On the other hand, the same distributed technology can be implemented in private blockchains, in which a defined institution or group can control and modify the basic rules of behaviour. An example of this is Linq, a private Nasdaq blockchain, aiming to provide private securities transactions (“Nasdaq Linq Enables First-Ever Private Securities Issuance Documented with Blockchain Technology [NASDAQ:NDAQ]” 2016). Like other private blockchains, the shareholders of the system are limited and deliberately selected. The system design of a distributed ledger remains, but the centralization differs on each blockchain.
While traditional ledgers are inherently centralized, blockchains are only “compatible” with centralization: “A given kind of technology is strongly compatible with but does not strictly require, social and political relationships of a particular stripe” (Winner 1980, 130). The distributed ledger of the blockchain does not require centralization any more than decentralization, at least for the technical system to fulfil the basic necessity of genuinely updating the books. Blockchain technology, however, remains strongly compatible with centralized systems, and thus it is being implemented privately by different institutions, especially in the financial technology sector. On the other hand, a hypothetical blockchain made of all the worlds population, evenly distributed, would not be instrumentally different. Blockchains are thus equally compatible with centralized or decentralized systems, but all blockchains require social and political relationships where the control of trust is displaced from institutional production and recording to computational production and recording.
What is being distributed is the control of trust, the confidence that no matter how extended the universe of shareholders, all recorded statements are valid. This consistency has the caveat of being computer-made. When digressing on the best way to address the ontological status of money, Coeckelbergh distinguishes between humanmade and computer-made objects, “or algorithm-made, robot made, etc.” (2015, 94). This distinction becomes handy for understanding the novelty of blockchains. Even if the code for the software and the basic rules of the protocol are human-made, on a blockchain the tokens themselves (such as bitcoins, ether, and so on) are produced exclusively by computation. What is more, the production of the tokens is folded with the checking for transaction consistency, or what is commonly called “mining.” This is the big breakthrough of bitcoin, and all blockchain systems inherit this basic but crucial operational characteristic. The primordial finding of bitcoins anonymous designer was to solve the Byzantine Generals problem (Lamport, Shostak, and Pease 1982), which requires an algorithmic implementation for secure communication and common agreement among unreliable peers (Nakamoto 2008). The solution of the blockchain demands solving a hard computational puzzle in order to validate aggregated communications, so that forging a message would require redoing the whole chain of messages. This computational puzzle involves the use of a random number in the process. Because every attempt to find a solution requires a new random variable, the problem must be solved by trial and error, hence the necessity of arduous computational resources. Mining effectively solves the Byzantine Generals problem, by generating a computer-made operational version of trust. This computer-made operation is at the core of blockchain technology. In order to emphasize the difference between human-made and computer-made, I shall digress briefly to discuss a recent commercial implementation of the computer-made.
“No Mans Sky” is a recent space-exploration game that exploits computer-made virtual worlds. While it is not the first game to use “procedurally generated” elements, the game made this technique the basis and banner for its launch. Most elements in the game—star systems order, flora, fauna, behavioural patterns, and so forth—are computer-generated. By giving the game a set of simple rules and variables, the computer generates every possible combination of them. The result is the overwhelming possibility of exploring eighteen quintillion planets. The creators advertise the factual impossibility of the task as one of the highlights of the game: “If a new planet was discovered every second after the game comes out, it would take 584 billion years to visit every one just for a second” (Hiranand 2015). Outsourcing design labour to the computer allows the production of large amounts of content with the use of random combinations of individual elements. These elements are human-made, but their factual combinations are generated by the computer. The combination of randomness and computer-made operations results in unpredictable outcomes, even for the developers.
What “No Mans Sky” and blockchain share, among other things, is the predominance of the computer-made element for their operations. In the case of the blockchain, shared trust is displaced from institutions and a diverse array of social interactions to the instrumental operation of mining. Specifically, it is the controlled distribution of truth that makes blockchains unique. As detailed in James Benigers seminal work The Control Revolution (1986), the industrial revolution generated a crisis of control when communication technologies, and information processes, lagged behind the fast developments of energy technologies and their applications. The current economy of information is seen, then, as a reaction to the accelerated improvements of manufacturing and transportation of the nineteenth century, what Beniger calls the “societal control revolution” of the nineteenth and twentieth centuries. Blockchains make possible a mode of control that performs even among distributed, fluid, pseudo-anonymous, and apparently non-authoritarian social schemes. They provide a type of control of communications tuned to the pace of decentralized arrangements. Like truth, authority too is folded into the performance of the efficient system.
Authority in these kinds of control systems does not have to be embodied in an outside agent. Winner quotes Friedrich Engelss brief essay “On Authority” as providing an example of an imaginary arrangement that does not require a pilot but nonetheless is characterized for being an authoritarian system. In this hypothetical instance, land and instruments of labour have become collective, and control is apparently decentralized; however, Engels warns that authority—within a cotton mill—would pass from a few capitalists to the “authority of the steam,” which is the timed operational work necessary to keep the mill running. Engels adds, “The automatic machinery of a big factory is much more despotic than the small capitalists who employ workers ever have been” (Engels 1978, 731). In this kind of control system, intentionality can be ignored, since authority is embedded in the device not as an addendum but as a main property. Engelss example is relevant because it states that the rules for timed labour are set by the workers in the cotton mill but that once they are put into action, the machinery takes over, leaving no space for autonomy. The same can be applied to the human-made rules that design blockchains, which are surpassed once the system is operational.
Conclusion
I have undertaken here an ontological inquiry towards the current notion of money as legal tender. I argued that the current economical model of production based on the fractional reserve banking system demands that the question on the current nature of money takes into account the politics involved in its production and control through centralized registries. I then turned the question to blockchain-generated digital assets, such as bitcoin. I acknowledged Bjergs attempt to dissect the ontology of such digital objects, and I expanded the research on the subject by observing the notions of production and control of registry through the lens of blockchains distinctive technical performance. Considering that the ownership of production and control of the blockchain as registry are computer-made, I argued that political ontology of the blockchain is the embeddedness of authority through computermade control of trust in an actively fluid environment. Particular meanings of control, trust, and authority are folded into the instrumental operation of production and recording of the distributed ledger. The political forms described cannot be entirely defined by traditional actors, such as the state, a group of developers, or the market. They require the development of mixed ontologies and the questioning of not only how political frameworks produce technological devices but also how technological devices produce politics.