Contrary to the noisome marketing of non-technical types, who use the word virtual to refer to something akin to the astral plane, cryptocurrency has not manifested a dephysicalization of capital. Though backups can certainly be made, private keys are still held on individual hard drives, as the Mt. Gox heist painfully reminds so many. Instead of somehow violating physical law, cryptocurrency has enabled the desocialization of capital through the diffusion of responsibility to a large enough population that fiduciary ties no longer need to be personal. It’s impossible to have anything approximating a human relationship with the anonymous swarm of miners that maintain the network. This lack of a relationship is symmetric; the miners have a similarly diffuse relationship to the non-mining users.
There is no historical precedent for this development. Monetary security in all previous eras involved necessary counter-party risk in the form of trustworthy banks, legal jurisdictions, security services, money changers, and so on. Cryptocurrency has now shifted the need for security to something as simple as hiding a single hard drive containing a Bitcoin wallet. The contents of the drive are ambiguous to the naked eye. Such a minuscule device can contain a quantity of resources that previously would have been far more physically obvious to thieves and costly to transport.
So, what are the effects of diffusion of fiduciary ties and compression of treasure hoards? Liquid capital is simultaneously much easier to store and move freely across jurisdictions. It is now possible to place a family’s savings on a hard drive or transmit them across the internet. If that’s still too cumbersome, it’s possible to memorize a seed phrase that can be used to generate the wallet access key, or use a steganographic method such as highlighting in a book. No matter how aggressive the border security service, it’s impossible to exhaustively search electronic devices without slowing the pace of migration to the point that the country is effectively closed off from the outside world.
While state or private internet censorship and surveillance is a threat to cryptocurrency, such measures would only limit network effects in countries affected by such censorship. For a non-hegemonic power, the limit of such censorship’s effectiveness would be to eliminate the utility of the currency only inside that power’s territory. This would not cause the currency protocol to go offline. Rather, it would limit the currency to sneakernet for compressing unwieldy forms of capital to ease the process of smuggling. Of course, the liquidity of capital is limited by the degree of financial surveillance within the state. Simply selling real property and departing with the cash is infeasible if the sale of the property is detected by the local police force, and that same police force or its allies are capable of detaining the seller at the border. No matter how well the currency is hidden—in a hard drive or in banknotes—the sale itself may provide justification for the security services. Whether accomplished through traditional policing or a novel contemporary method like China’s social credit system, the effective prohibition on capital flight is the same.
A hegemonic power like the United States could do far more: substantially more likely than direct protocol censorship is a strategy of indirect censorship via a fungibility attack. In a fungibility attack, a powerful actor in control of enough critical infrastructure like exchanges denies service to any address that interacts directly or indirectly on-chain with some target, “shunning” their addresses. Third parties would thus be strongly incentivized to avoid any financial interaction with the shunned sub-network. The shunned party would be significantly isolated, even financially crippled, despite technically still being on-chain. In fact, this is already happening. Based on informed sources, Palladium can report that Coinbase has used rudimentary and limited fungibility attacks against controversial political groups, by blacklisting their addresses and banning accounts that interact with them. Coinbase did not respond to a request for comment. This technique could easily be scaled to become a full fungibility attack on some subnetwork, if Coinbase or other central infrastructure faced enough political pressure.
The live possibility of a fungibility attack encourages political actors who wish to control blockchain-based financial flows to produce or gain influence over the monopolistic services that can be used in this type of shunning strategy, and to oppose the development and proliferation of privacy technologies that would obscure interactions.
This possibility aside, most countries don’t have the level of soft power to pull off fungibility attacks, and future developments in coin fungibility may obsolete the attack; so in the majority of countries, cryptocurrencies are effectively uncensorable.
This new asocial market also changes the nature of migration itself. Physical wealth compression and evasion of capital controls makes migration with capital much easier. In eras before effective telecommunications systems or non-local administration—for example the British Empire’s ability to maintain a degree of reasonably non-local credit tracking in its colonies before the proliferation of telegraph networks—migrating to a new place, and usually a new social coordination protocol, was equivalent to leaving everything behind that couldn’t be personally carried. The familiar example of the Odyssey illustrates the potential difficulties of trusting even one’s own spouse after heading off to war, a scenario not too different from that of other risky migrations in a pre-global period. It’s possible to imagine a similar narrative concerning the misadventures of a Chinese railroad worker in the American West.
A social coordination protocol is a set of social relations where one’s previous actions can be credibly interpreted, either positively or negatively, and which can be summarized as the balance of one’s social capital. This definition is sufficiently general to account for the variance of capital types. While some types of capital are accepted between multiple communication protocols, even the classic near universality of gold or other shiny rocks would hardly be valuable except as a curiosity to the pre-colonized Inuit, for example, who had no use for it. Obviously, if a type of capital is largely symbolic in nature—educational certification, monetary capital, ethnic or religious status, rank in a specific organization—it must be recognized by a separate coordination protocol to be imported. This need for recognition is partially circumvented by distributed ledgers like the blockchain. While the protocol of a cryptocurrency is the same everywhere, only certain assets can be compressed into a format that the ledger can recognize. Currently, this is mostly limited to the digital equivalent of shiny rocks: cryptocurrency. However, the implications, both of cryptocurrencies, and more complicated forms of digitized transnational symbolic capital, are not to be underestimated.
In the pre-telecommunications period, symbolic assets were fundamentally tied to social position, and the society that interpreted social position was embedded in the geographic location of specific industries. No matter how high the integrity of one’s native coordination protocol, without negotiating directly on one’s own behalf, the immediate concerns of present actors take precedence and crowd out the memory of the departed like the suitors of Penelope. By its abstract nature, a decentralized cryptocurrency protocol is not a society unto itself. Still, it can ease transitions between societies by producing a mutually interpretable medium of exchange between them that does not asymmetrically privilege any party in the transaction. To understand the difficulty of moving capital between separate coordination protocols in a pre-telecommunications context, it is important to remember that the colonization efforts of the European empires and the treasure fleet of the Ming were in effect separate societies. With some exceptions—the British East India Company’s frequent disregard for the Crown’s command and the rebellions in America, Haiti, Gran Colombia, and elsewhere being the most obvious—projects of this class were allied and identified with their mother country, but were required to act autonomously, due to the absence of non-local command and control infrastructure.
Participation in any of these colonial societies was motivated by a trade-off, where the trauma of uprooting from a home context was outweighed by opportunity in a foreign one. Only those with an ownership stake in these expeditions could be expected to move a substantial amount of their capital to the new world, and only those who were physically present in the new world could expect returns within the first few years of settlement. The majority of such returns would come from the ability to extract labor as a de facto king typically enfranchised de jure as a governor by the mother country. None of the commanders were making safe bets, instead choosing the potential fortune and glory of a new conquest over a safer but disappointing life in the home country as a second son, commoner, or otherwise politically inconsequential soul. In the case of the Spanish Empire, perhaps the primary motivation for the non-clerical conquistadors was the acquisition of gold and silver, such that they could buy status in their home coordination protocol of Catholic Iberia.
This detail reveals something critical: the colonial gamble is based on the assumption that it is possible to produce a beachhead as a separate society from both the mother country, and the societies that may already inhabit a territory. The colonist profits by employing the force and capital of the mother country, often as a monopoly acting in the interests of the mother country, and exploiting the natural and human resources of the colonized territory.
A related but distinct pattern to the colonist is found in the economically motivated immigrant, or the security minded refugee, who abandons the mother country for a brighter future in a less oppressive coordination protocol. The incentive may be positive or negative, but it must outweigh the risk of temporary atomization or, at best, a reduction of one’s native social position to familial, ethnic, or religious bonds. The archetypal South Asian cab driver with a PhD. did not immigrate thinking that he was going to be able to use his doctorate in a new context. Rather, the prospect of moving one’s family line into a new coordination protocol with greater upward social mobility is plenty of motivation on its own. Immigrants simply travel along an incentive gradient towards an environment where they may express their will to live under the best terms available.
The central difference between the colonist’s gambit and the immigrant’s gambit is that while the colonist seeks to move from the core of a protocol to the periphery in order to arbitrage a more advantageous position, the immigrant seeks to simply sell labor at a higher price, both in monetary value and in quality of life, typically by moving closer to the core of a given protocol. The colonial moves to the frontier of the empire, the immigrant towards the capital. Only a few nations—the People’s Republic of China most successful among them, although one might also count some types of United States military-industrial service as well—still provide adequate incentives for colonial arbitrage strategies between competing coordination protocols. This is primarily due to the economic and cultural dominance of the post-Cold War Anglosphere. The coordination protocol of the post-Cold War Anglosphere has the common name “globalism.” Globalism is best thought of as an economic implication of pure liberalism, and suggests that the world should be unified within a single common market. Globalist economic policy, if not counterbalanced internally to a given state by a separate religious, cultural, or scientific policy, causes the state to rapidly degenerate into consumerism. Arthur Jensen’s speech from the 1974 film Network explains this quite nicely:
Am I getting through to you, Mr. Beale? You get up on your little twenty-one inch screen and howl about America and democracy. There is no America. There is no democracy. There is only IBM, and ITT, and AT&T, and DuPont, Dow, Union Carbide, and Exxon. Those are the nations of the world today. What do you think the Russians talk about in their councils of state, Karl Marx? They get out their linear programming charts, statistical decision theories, minimax solutions, and compute the price-cost probabilities of their transactions and investments, just like we do. We no longer live in a world of nations and ideologies, Mr. Beale. The world is a collage of corporations, inexorably determined by the immutable bylaws of business. The world is a business, Mr. Beale. It has been since man crawled out of the slime. And our children will live, Mr. Beale, to see that… perfect world… in which there’s no war or famine, oppression or brutality. One vast and ecumenical holding company, for whom all men will work to serve a common profit, in which all men will hold a share of stock. All necessities provided, all anxieties tranquilized, all boredom amused. And I have chosen you, Mr. Beale, to preach this evangel.
While it was understandable for an American to sneer at this sort of thinking, from a more international perspective that had just seen the terrors of 20th century ideological war at closer hand, the stability and boredom of consumerism outclassed the physical and psychic violence that had eaten entire generations. There is certainly a Negative Utilitarian appeal in freedom from war, famine, oppression, and brutality. After all, World War I caused millions of people to die for the entirely abstract and non-materially grounded coordination protocols of nation-states, some of which were less than a century old, in the cases of Italy and Germany. Even the French only existed as a nation-state properly after the levee en masse during the wars of the republic.
Though the economic trend of globalization and the ideologies undergirding it are correctly understood as a shrinking of transaction costs due to developments in transportation and communication technologies, the political and economic effects of these technologies were themselves derivative of the balance of power at the moment of the technology’s introduction. Already industrialized states used oil power and telecommunications far more effectively than states without an industrial base. The British Empire used this industrial asymmetry to great effect up until World War II. The United States exceeded even the British Empire at maintaining a comparative advantage in the second half of the twentieth century. It lacked any meaningful industrial competition after World War II consumed the industrial bases of the other great powers. There was, of course, the partial exception of the Soviet Union, whose sheer enormity had allowed it to survive the war as an independent power despite unprecedented human and material losses. This American position of comparative advantage was maintained, as Japan was—and still is—effectively an American protectorate, and none of the previous globally influential imperial powers of Europe maintained direct control over their colonies. The Commonwealth of former British colonies effectively became part of the Anglo-American alliance. Of the former colonies, only India and China presented potential global powers, and only China became a potential contender to American hegemony after the collapse of the Soviet Union.
Globalization did not flatten the world. The establishment of limited middle classes in various formerly colonized nations represents an absolute gain in quality of life, but not a comparative gain in geopolitical power. One’s national birthright still determines much of one’s lot in life. All that shifted was that those with enough wealth could exit their native position by purchasing access to foreign protocols. One is able to accomplish this either through money, or through the rejection of one’s birth status as anti-globalist by choosing to work for globalist actors—for instance as a military translator in the American-Afghan war, or by selling a story of escape from one of the nations—Iran, North Korea, etc.—that has refused to become globalist. One only has to wander Oxford or Stanford for a few minutes to see the children of foreign plutocrats attending prestigious schools, taking what are in effect the civil service examinations of a foreign power. These kids speak English as a lingua franca, while the natives seek a bit of rent from their lucky first language. One can just as easily walk through an airport library and see the standard ruin porn refugee memoirs.
While access to the globalist protocol can be bought, the diploma or other narrative of integration is a key proof of work for access. Certification as requisite for social mobility in the super-protocol of globalism has had the effect of huge concentrations of social capital spent on the most globally fashionable—and thus least locally adaptable—individual coordination protocols. By that concentration on convergent instrumentality, all other coordination protocols are brain-drained. Rather than flattening the world into a post-national market, globalism simply concentrated coordination into a few imperial pyramid schemes. As an example of this dynamic, in second-tier cities in the Midwest of the United States, the most scholastically inclined individuals migrate to first-tier cities for college, leaving behind their peers. The financial pressure of first-tier cities leads to a desperate migration of some of the collegiate set back to their home states. Some who feel a sense of responsibility to their homeland follow them, but the majority of those who find success in the first-tier cities remain. The rest of the empire is thought of as flyover country. This type of example is minor in comparison to the hypothetical case of a Lagosian who emigrated to Cambridge for university and managed to land a job at Lloyd’s of London, but serves to illustrate that such dynamics exist within “first world” nations, not only in the interplay of “developed” and “underdeveloped” nations.
The rise of the PRC as a modernist one party-state simply increases the number of globally relevant coordination protocols to two, with Russia and Saudi Arabia as partially globalist, partially nationalist hybrid strategies that are contending for internal sovereignty within globalism by crossbreeding economic liberalism with du jure or de facto traditionalist monarchy. While Russia is much more plausibly able to establish a new international coordination protocol than Saudi Arabia, neither of them are strong enough to develop a completely new international coordination protocol, and instead are both attempting to take advantage of the immense fungibility of Anglo-American globalism to buy legitimacy within it in the fire sale of the decline of liberalism.
Globalism’s marketing may actually be realized if a properly decentralized cryptocurrency were to become a dominant reserve currency.
First, the case of formal state-level adoption. If a currency protocol is practiced regardless of geographic location, the use-value of other currencies is diminished. International monetary policy has been a game of dominance and submission from its inception, perhaps most recently attested by the intentional devaluation of the Yuan, or the American strategy of ensuring that the U.S. Dollar would become a global reserve currency at Bretton Woods before eventually abandoning the gold standard under Nixon. With a global currency that cannot be captured by any specific political system, these games are no longer attractive methods of gaining dominance in an international system, empowering the potential of simple generativity over frame control as an effective geopolitical strategy, at least on the margin. Ironically, if the world was actually united by the convergent optionality of a single currency, the means of acquiring that currency would diverge and specialize locally. Economic actors would be substantially incentivized to compete according to comparative local advantage. The world is of course, not flat, but by producing the economic protocol that was pseudo-implemented in the 1990s, the planet’s uneven physical and economic geography may finally become more strategically relevant than the imposition of political geography.
In the case of informal adoption, the main effect is that immigrating does not have to mean starting over from scratch as much as it does now. Thus, people will emigrate with much better timing. The potential annihilation of one’s industries or life is typically sufficient motivation to uproot, but if a cryptocurrency significantly decreases the opportunity costs for liquidation and reinvestment, fewer potential successful immigrants will succumb to the sunk cost fallacy and fall victim to domestic disaster. Less severe signals will trigger an exit. For an extreme example, the initial restriction of Jews from public and professional life in Germany between 1933 and 1936 could trigger mass flight, rather than our own history wherein a substantial population waited to flee until 1938, when the Jewish population’s passports were declared invalid and movement restricted, and it became too late to flee.
Mass adoption of cryptocurrency would produce a return to the pre-modern norm of a sizable nomadic mercantile class, first developed with the use of the gold standard in the epoch of Croesus. However, these nomadic classes will not only include those practicing the profession of the capitalist or caravaneer, but also those who are oriented around skilled labor that has a reasonably large geographic range of utility. One can imagine a guild of itinerant electricians or plumbers stockpiling resources and investing them into a cryptocurrency index fund, wandering from country to country as the work is available. With the cost of reinvestment low, the cost of relocation is also sufficiently low that it will become less necessary for immigrants to permanently put down roots as we saw during the era of Chinatowns and Little Italies, unless they practice trades or are at stages in their life cycle that demand landed behavior.
For these populations of digital nomads to become cultures with a meaningful group identity rather than otherwise uncorrelated user bases of a given software product at worst or youth subcultures at best, they must agree on norms to parent their children. This will require some way to reproduce endogamously, which requires community support both to maintain cultural norms and to identify potential endogamous mates. Without endogamy, these populations will not be able to build cultural capital as a group identity, nor will they be able to build social protocols specialized to their lifestyle. Most likely, a substantial portion of the digital nomad lifestyle will collapse into normal rooted lives at the time of reproduction, where a young person has traveled the world stockpiling financial resources but ultimately fails to have children without at least temporarily renouncing their lifestyle and exiting their subculture.
When interacting with settled populations, traditional nomadic classes have been limited to either labor for hire by a local business, mercantile arbitrage, or aggressive resource extraction. However, given the communication technologies of the 21st century, this hypothetical nomadic class will have access to spatially dissociated economic strategies. The work of a competent stock-marketeer, software engineer, or other professional information-manipulator is dependent on the ability to grasp and analyze an abstraction. Such abilities are impeded by the need to live in specific material and social reality. The most successful versions of this class will likely be the real versions of their present cosplay equivalent: the “digital nomad.” It seems worth mentioning other types of information-manipulator that do not rely on abstraction so much as emotion: con artists.
Given the likely similar lifestyles of both criminal and technically touristic digital nomads, it’s possible that this nomadic class may eventually become hostile to the rooted coordination protocols that seek to limit behavior perceived as parasitic by local residents. This mutual enmity also strangely represents a mutual opportunity, as the net-worth of these digital nomads would not have any necessary visibility or necessary cap. This might lead to rooted coordination protocols possessing a simultaneous desire to attract and sell to them, as well as to avoid them extracting resources from the locality itself. A much less populous version of this type of dynamic has already become rooted in the tourist economies of Southeast Asia, as well as an even less populous version with the advent of the jetset dealmaker in the immediate postwar. An interesting example from the Southeast Asian context is the likely intentional policy by the city government of Bangkok of ensuring that the backpacker nexus of Khao San Road is not connected to the main public transit network of the metropolis. This has led to much of the nomadic Western population that comes to Thailand being comparatively isolated from the locally relevant economic life of the city. Similar implicit or explicit optimization against the imposition of digital nomads who refuse to integrate into local coordination will likely develop in other contexts.
Non-local coordination has been a part of human civilization since the first cultures made physical contact. The difference this time is that code knows no culture other than its own, and it can be just as consistent as physics. The keywords of the C programming language may be derived from English, but the software operates the same everywhere. And with the internet, these tools are sufficiently diffuse that the non-locality has the potential of carving out an equal or perhaps greater position of influence compared to centralization in human civilization. Time will tell, provided these prospects attract anyone other than marketers.