Friday, 07 August 2020

Crypto means cryptotheology

Cryptocurrencies are a religion as much as they are a technology. They almost have to be, given their adherents’ gargantuan ambition of fundamentally changing how the world works.
This means they attract charlatans, lunatics, frauds, and false prophets, and furious battles are waged over doctrinal hairspliitting; but it also means they inspire intransigent beliefs which can, and do, unify many thousands of wildly different people across continents and time zones.

This occurred to me while I was rereading Gibbon’s Decline and Fall, as one does, and in particular its depictions of the early days of the Christian faith:

But whatever difference of opinion might subsist between the Orthodox [church], the Ebionites, and the Gnostics, concerning the divinity or the obligation of the Mosaic law, they were all equally animated by the same exclusive zeal; and by the same abhorrence for idolatry ..,. the established religions of Paganism were seen by the primitive Christians in a much more odious and formidable light. It was the universal sentiment both of the church and of heretics, that the daemons were the authors, the patrons, and the objects of idolatry.

For Orthodox church, Ebionites, and Gnostics, you can read perhaps, “Bitcoin maximalists”, “Blockchain not bitcoin,” and “Ethereum maximalists.” They disagree bitterly, but one view they all share is a disdain verging and frequently exceeding contempt for fiat currencies, untokenized assets, and most other aspects of money and finance as they are currently constructed. Instead they share a deep belief in the superiority, and inevitable supremacy, very different world.

The superstitious observances of public or private rites were carelessly practised, from education and habit, by the followers of the established religion. But as often as they occurred, they afforded the Christians an opportunity of declaring and confirming their zealous opposition. By these frequent protestations their attachment to the faith was continually fortified; and in proportion to the increase of zeal, they combated with the more ardor and success in the holy war, which they had undertaken against the empire of the demons.

I think few will disagree that, similarly, many cryptocurrency devotees seek out and seize every “opportunity of declaring and confirming their zealous opposition” to government money, central banks, rival maximalists, and other features of the monetary, financial, and/or centralized status quo.

The careless Polytheist, assailed by new and unexpected terrors, against which neither his priests nor his philosophers could afford him any certain protection, was very frequently terrified and subdued by the menace of eternal tortures. His fears might assist the progress of his faith and reason; and if he could once persuade himself to suspect that the Christian religion might possibly be true, it became an easy task to convince him that it was the safest and most prudent party that he could possibly embrace.

Similarly I don’t think it’s controversial to note that prophecies of the hyperinflation and collapse of national currencies, the downfall of central banks and fractional reserve banking in general, etc., are not unheard of among some of the … edgier … cryptocurrency people. One might even refer to the notion of “preaching the gospel” of deflationary, censorship-resistant cryptocurrency, sometimes in the hopes of scaring everyone who hears this doomsaying into buying some Bitcoin as a hedge.

Of course the religious parallels do not end with Gibbon. Cryptocurrencies were given to us not by a known, living, breathing, flawed human being, but by a pseudonymous verging-on-mythical quasi-demigod. (Cf eg “Satoshi’s Vision.”) Mythically speaking, that’s easily analogized to Prometheus granting humanity fire, or Moses bringing the stone tablets down from Mount Sinai. They have real and false prophets. There’s even a “Bitcoin Jesus.” And all promise a better world tomorrow, while demanding sacrifices and inconveniences today.

My tongue is obviously in cheek here — but I’m not entirely unserious. Of course all money is ultimately backed by faith (cf “full faith and credit.”) But this is I think unquestionably more true of cryptocurrencies, especially because, a decade on from their creation, they have failed — so far! — to transform the world to a degree anything like their proclaimed potential.

Bitcoin itself is apparently going from strength to strength, as can be seen in its increasing dominance of total cryptocurrency market capitalization, but it’s still beyond tiny compared to the rest of the financial world. Its total trading volume as I write this is roughly ~$15 billion per day, which admittedly sounds like a lot, but compared to the $5.1 trillion a day for the forex market as a whole, it’s roughly one-quarter of one percent.

More importantly, Bitcoin continues to technically iterate (although I’ve grown skeptical about Lightning, which it seems to me will always suffer from all the end-user inconveniences of prepaid credit cards, with few balancing advantages) and has hovered near or above $10,000 in value for months now. But the uncertainties and investigations regarding Tether remain a threatening cloud on its horizon.

As for other cryptocurrencies, though — well, these are complex times.

Ethereum, the best-known and perhaps most interesting, has gone from a wave of DAO excitement shortly after its launch, which faltered, to a wave of ICO madness and “fat protocol” DApps (decentralized applications), which also faltered, to the latest wave and watchword, “DeFi” aka decentralized finance. This essentially aims to reinvent all of Wall Street and the City of London on the blockchain(s), in the long term.

Meanwhile, the technical underpinnings that would allow Ethereum to scale to Wall Street size, known as “Ethereum 2.0,” remain more notional than real. I’m a big fan of Ethereum (my own pet crypto project is built on it) and I don’t think DeFi is doomed to failure … but under the circumstances I can understand skepticism creeping in among those who are not true believers.

There are plenty of other technically interesting cryptocurrency initiatives: from privacy coins such as ZCash, Monero, and Grin, to the use of Tezos by Brazil’s fifth largest bank for security tokens (again, DeFi), to the growth and stabilization of Cosmos’s “internet of blockchains,” to Blockstack’s total-app-installs graph beginning to look a little more exponential than linear, albeit with still-tiny y-axis numbers.

However, I think it’s also fair to say that now that cryptocurrencies are no longer new, unknown, and fascinating, interest among both individuals and enterprises who are not true believers has waned considerably. The cultural whiplash one experiences when transitioning from a conference full of people convinced they are building a new technology that will transform the fundamental order of the world, to outsiders (even technical outsiders) remarking “oh, is that still a thing?” is increasingly sharp.

That was probably true of the Christians after they ceased to be new and interesting, though, and in the end the Christians conquered the most powerful empire in the world from within. I am definitely not prophesying the same outcome here. I continue to think cryptocurrencies will remain a financial alternative, albeit a very significant and important one, used only by a few percent of people.

But I am saying that seeming increasingly distant from the external consensus reality, being driven by intransigent and sometimes bewildering faith as much as rational analysis, and ongoing associations with a cloud of crazy scandal and hangers-on snake-oil salespeople — all of which would be catastrophic signs for, say, a traditional new startup — can actually be indicators of the strength, not weakness, of a strange new religion. Something to bear in mind as we move into the second decade of cryptocurrencies.

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