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Bitcoin mining. (Photo: Marko. CC BY 2.0)Bitcoin and its underlying technology, blockchain, have become synonymous with hype among technologists. It was therefore not entirely surprising to read in a recent book published by Polity Press that “Bitcoin is Marx’s dream come true”. Yet there is something unusual about this statement.
Since its emergence over a decade ago, Bitcoin has been largely ignored by the left. By allowing internet users to transact outside the purview of regulatory bodies, Bitcoin has quickly established itself as an icon for right-wing libertarians for whom it represents the technological basis for truly “free” markets.
Furthermore, most of the experimentation with blockchain technology has taken place in the financial sector, where innovations such as “smart contracts” are conceived as a way to automate various administrative processes. As a result, there has been a trend among scholars and leftist activists to reject the blockchain.
Over the past couple of years, however, there has been a growing interest in technology among socialist groups calling for the left to take technology seriously. A recent publication that seeks to amplify this call is that of Mark Alizart Cryptocomunism.
Blockchain technology, to give a basic definition, is a shared database in which the responsibility for recording and verifying data is shared across a network of independent nodes. This differentiates it from normal databases which usually run on a central server and / or a central authority.
For this to work, however, it is necessary to reach consensus between those independent nodes. They must be able to agree which data bits are valid and which are not. This is the part of the technology that makes it political, Alizart argues. By providing a new and secure way for each participating node to review and accept data, blockchain technology is inherently democratic.
Seize the means of monetary production
On this basis Alizart makes two statements in his book. First, while he agrees with libertarians that blockchain provides a means to undermine and circumvent authority, he argues that it also provides a basis for building new types of institutions outside of capitalism: collective ownership that facilitate the administrative needs of communities.
Secondly, Alizart points out that experiments with socialism have so far, like capitalism, produced organizations that govern the economy without democratic participation and limited responsibility. Blockchain, Alizart says, presents a way out of this democratic deficit by allowing communities to build their own collectively managed monetary institutions that issue currency. He therefore asks the left to use the blockchain to “seize the means of monetary production”.
Alizart’s arguments are compelling and full of insights into what a digitized post-capitalist society might look like. However, for what is essentially a communist manifesto for the twenty-first century, there is a surprising lack of materialist analysis. This is significant because blockchain technology is actually built on destructive and profit-seeking competition.
Extraction for profit
On most blockchain networks including Bitcoin, instead of processing information on a central server, thousands of hardware operators called “miners” compete with each other to process information. They do this in hopes of receiving a reward in cryptocurrency units such as Bitcoin. To maximize their chances of receiving this reward and making a profit they need to put as much computing power into the network as possible.
This is why Bitcoin alone uses the same amount of energy per year as entire countries. Furthermore, this competitive feature in the Bitcoin network has led to enormous concentrations of power among the groups that own the most efficient hardware. These aspects of the blockchain, as well as the work involved in mining, are not addressed by Alizart and it should be made clear that socialists should think carefully before embracing Bitcoin. Likewise, there is an absence of real-world examples to show the potential of the blockchain that Alizart so strongly supports. But these criticisms don’t necessarily refute his arguments about blockchain more generally, and real-world examples exist.
A report released recently by the EU Science Hub collected various projects that are trying to harness the potential of blockchain technology for the public good. Blockchains, here articulated as “digital ledger technologies”, are being developed across Europe as community-managed infrastructures addressing issues of privacy, decentralization, data ownership and local currency. Examples include an open source platform that allows users to control their own called data Holochain; an infrastructure to facilitate more transparent, fair and reliable global supply chains Origintrail; and a decentralized platform for archiving and sharing energy data relating to consumption and production called Pylon. Either way, blockchain technology is being reinvented and redesigned to serve the public good in ways that address the energy consumption and ownership issues that plague Bitcoin.
So should the left worry about the blockchain? Yanis Varoufakis addressed this question in a recent blog post titled “Why Bitcoin is not an ally of the socialists”. Varoufakis said that under current conditions Bitcoin cannot be used as a tool to transcend capitalism, but said that “something like Bitcoin will characterize monetary systems in a future world devoid of private banks and equity markets”. What this innovation can look like and how significant it could be are questions that can only be answered through design and development experiments. If the development of the blockchain is left to libertarians and financial capitalists, it will obviously continue along its current paths. But these are not the only possible paths. To ensure such alternative pathways thrive, the left must take blockchain seriously.
Thomas Redshaw is Professor of Digital Society at the University of Salford
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