Blog Post

Missing Links in the Blockchain

This is the final post in an ongoing series about cryptocurrency, the block chain infrastructure, and the futurities that these emergent technologies could usher in.  The story that I’ve attempted to tell in my last two posts (first, second) has not been an optimistic one.  Following the astronomical rise (and subsequent plateau) in the value of the Bitcoin market since its invention, one is struck by how little impact this “disruptive technology” has had on dominant economic forces.  In spite of all the hyperbolic claims that cryptocurrency could herald “true internet anarchy,” “a popular renaissance of money,” and “banks quivering at the knees,” the vast majority of people have received no benefits whatsoever from these novel currencies and these new marketplaces.  Maybe certain individuals were granted increased access to drugs, weapons, pornography, and other stringently regulated commodities through deep-web markets such as The Silk Road or The Armory, but there is no significant evidence that currencies like Bitcoin have taken even a modicum of power from supranational industries and finance operations.  Inequality, in an unprecedented fashion, still reigns supreme on a global scale.  Rampant inequality is the economic mode of our time, and the struggle against it is of paramount importance.  As I stated in my last post, the popular era of cryptocurrency mining has already come to a close.  If a user wants to cover even the electricity bill for mining cryptocurrency, she will need to invest thousands of dollars in mining hardware.  If any user wants to make money on the Bitcoin market, to use the most popular market as an example, she must compete with multi-million dollar mining operations that mint millions of dollars worth of Bitcoin every month and that soak up a remarkable portion of the available market share.  At the end of the first full year of Bitcoin exchange, 2013, 0.71% of the holders of Bitcoin owned a staggering 55% of the entire market.  That is more hyper-stratified than even the United States’ economy.  Since then, not much has changed--the monetary and technological stakes have simply gotten higher and the market for cryptocurrency has become even more exclusive.  

 

I would like to take a step back and embed cryptocurrency markets in the physical/industrial environment, beginning with the hardware that supports them.  As we have seen through investigative work conducted in the last few years, Foxconn, and all the other hardware suppliers similar to them, make use of fundamentally inhumane labor practices.  They subject their workers to toxic environments, near-constant working hours, and minimal compensation, while stifling laborers’ rights to unionize through coercive managerial tactics and threats of job loss.  Foxconn is Apple’s main supplier, but the story is similar across the realm of new technologies.  In an economic climate where the newest gadget is rendered obsolete within months, these factories around the world must constantly fabricate more advanced technologies for incredibly low prices so that companies like Apple and Microsoft can turn a tidy profit quarter after quarter.  The hardware that cryptocurrency markets require is manufactured in the same way, and this technology becomes ineffective within months, too.  An estimated 50 million tons of E-Waste is produced each year, often containing toxic materials.  This waste is shipped around the world to where land is cheapest and governments have little power to turn industrialized nations’ garbage away.  The people of these areas are forced to take care of massive influxes of toxic waste, lacking the funds or organization to push it “out of sight and out of mind” as the more wealthy nations do.  Small businesses often crop up in these areas, focusing their efforts on salvaging valuable metals from disposed tech products--but the price that the workers pay for moderate amounts of sellable material is dire.  When workers burn off plastic wire coatings to salvage the copper inside, for example, they are exposed to high concentrations of dioxins (one of the most persistent and toxic pollutants known to the scientific corpus).  Much E-Waste is incinerated incorrectly, leading to large-scale global and local pollution with adverse effects on human and ecological health.  Landfills that are constructed rapidly to house all of this waste are often unsafe or incompletely sealed, polluting groundwater stores nearby and negatively affecting human and animal life.  The extremely problematic production and disposal of electronic goods aside, we can now move on to the sale of mining hardware itself.  The hardware required to mine cryptocurrency is sold just like an iPhone or a laptop computer--it is a commodity exchanged in a conventional open market system.  The sensationalism surrounding cryptocurrencies led to a recent proliferation of companies that produce hardware for mining, as well as of companies that produce software to facilitate cryptocurrency exchanges.  Last year, there was even a widespread shortage in graphics cards due to the increasing popularity of mining.  The irony of paying for a “money printing machine” that constantly requires upgrades and expansion (more money), is lost on few.  To restate a point from my last post, Bitcoin's miners now amount to hundreds of times more computing power than the combined output of the world’s top 500 supercomputers.  That amount of processing power requires an obscene (and increasing) amount of hardware, electricity, capital, and human labor (in the maintenance and construction of machines), replete with all the environmental and social costs associated with the production and use of this technology.

 

In short, there’s nothing “disruptive” about any of this.  The hegemony of the global economic elite stays its course, globalized labor exploitation remains entrenched, huge ecological costs are still associated with the production, distribution, and disposal of “mining” products, and the average computer user has witnessed a negligible benefit (if they have derived any benefit at all) from all of these developments.  The ideological “frontierism” of the internet economy continues to strike gold for the few at the expense of the rest.  Maybe that’s because cryptocurrencies aren’t the revolutionary facet of this new technology in the first place.  Even if cryptocurrency markets come and go in the perpetual cycle of boom-and-bust financial speculation, the organizational structure of the blockchain is here to stay.  While cryptocurrencies were immediately co-opted by the already-wealthy, the blockchain that these currencies rest upon has a potential to truly upend conventional socio-technological formations, for better or for worse.  As cryptocurrency devolves into just another fiat currency, the blockchain is being applied to managerial tasks, contractual obligations and titular mechanisms.  Ethereum provides a fascinating model for applying the blockchain in radically new, decentralized ways, and many other “data layer” services are making blockchains and cryptocurrency more accessible for the general public.  I will focus on one hypothetical example of applying the blockchain, that of personal identity, as I feel that it may be the most fruitful for future theoretical debate.  

 

Imagine a world in which a unique cryptographic identity is assigned to each individual, and in which each of these “crypto-IDs” is registered in a massive blockchain ledger.  The ID number could stored on a chip implanted in the skin, or on a flash drive or cell phone.  Losing it, for reasons that I will later explain, would be inconsequential.  To illustrate my point, I will assume (albeit ridiculously) that implementation of this proposed system is perfect.  Everyone has a crypto-ID and is registered in the blockchain of global citizens.  Unlike a social security number, these crypto-IDs would be nearly impossible to copy (as a result of their complexity) and redundancies (identity fraud) would be immediately resolved by a simple back-check with the ledger (which can be accessed by any individual at any time).  These identities would need no inherent national affiliation because there would be no need for a mediating party to corroborate identity--that would all take place in a computerized fashion.  Losing one’s crypto-ID is impossible because the person who steals a crypto-ID also has one of their own, and they cannot use any goods associated with another ID without approval by the owner of the ID stolen, and by the network as a whole.  Double spending of this type (theft) would be eliminated.  While this would open the door for new types of surveillance, as one cannot escape the number that she has been assigned, it may also mitigate “epidermalization of identity,” to paraphrase Fanon, and it may get rid of the “power of opacity” held by social elites.  Off-shore capital holdings, one way in which opacity functions to aid the wealthy, would be impossible in this scheme because redistribution mechanisms (like capital gains taxes) could be implemented outside of national boundaries, within the larger network as a whole.  Fingerprint scanners, face recognition, and all the associated biotechnical modes of identity tracking reduce the individual to biological traits and display a fundamentally human racial and gendered bias as a result.  The crypto-ID would be as irreducible and incalculable as the individual herself, and as infinitely scalable as the number of possible individuals.  When the crypto-ID is associated with items such as a house, a phone, a bank account, or a car, these are now the undisputable property of an individual.  These items can be appended to the crypto-ID, and exchanged securely from person to person (also on a publicly accessible ledger), with no need for third party intermediaries.  Everything from criminal records to pictures of cats could be appended to this crypto-ID, and the fracturation of online and physical identity among a number of services (Facebook, Twitter) and organizations (governments, creditors) would be streamlined into one coherent online identity, that of the crypto-ID.  As I alluded to earlier, progressive taxation and redistribution mechanisms could be actualized within the network, as could democratic endeavors such as voting (mentioned in my first post).  This comes as close to an instantiation of the individual in the realm of the digital as has ever been accomplished--and the errors that will come to pass in this arrangement are as likely to be errors in our conception of individual subjectivity, as they are likely to be elisions in the structure of the network.

 

Obviously there are still glaring flaws in this system.  People who are not registered for this program would be excluded from its benefits, and the tracking of individuals would become much easier (for everyone).  Yet the power asymmetries involved in surveillance would also be altered, as each individual has access to everyone else’s information.  This would be a truly utopian and dystopian future.  Transparency would reign supreme, but power would be distributed differently, yielding transparency a far different function than that which it currently holds.  Nation-states may crumble and, with them, financiers.  The world would become a whole lot more flat, yet the techies who maintain servers would be the gatekeepers of global civil society.  This does nothing to ameliorate the massive ecological damage necessitated by electricity needs and the harvesting of materials for hardware, but it does offer a fascinating thought experiment.  When all crypto-IDs are offered the same levels of protection, the same fail-safes, and the same opportunities for exchange, what would happen to the individuals and communities of the world? How would current power be transmuted? Where would seats of power crop up anew?  Would there even be a need for currency (crypto or otherwise) if peer-to-peer material transactions could take place in this way?  Would there be even more harmful individualistic tendencies and a perpetuation of harmful neo-liberal economic functioning?  Or would there be a reconciliation of global capital with global citizenry?  These are all important possibilities, and ones that we should theorize carefully in the coming years.  I believe that “advances” akin to these are already well on their way.  A global change in the status quo would be welcome, but not if pre-existing hierarchies can simply be reified within the new arrangement of society.  Blockchain society could mean “true anarchy” or it could mean new, more thorough exercises of power by corporate interests (as opposed to governments).  The difference resides in how we, as individuals, grapple with the growing power of the digital in our daily lives.  It rests on how we use the technologies that are always-already a part of societal organizations and how we contemplate them.  It rests on how the ideological spaces of the internet and society are integrated into the physical spaces that compose our shared environment, and vice versa.  The stakes at play are ineffably high.  Thank you for reading!

 
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