The Faketoshi Circus: Even Bitcoin Cannot Escape Monetary Policy

Michael J. Casey is Chairman of the Advisory Board of CoinDesk and Senior Advisor for Blockchain Research at MIT’s Digital Currency Initiative.

The following article originally appeared in CoinDesk Weekly, a specially curated newsletter that is delivered exclusively to our subscribers every Sunday.

In case you missed it, a new self-proclaimed Satoshi Nakamoto came out of the woods last week, this one with a “proof” based on numerology and an obsession with BCCI, the scandalous bank that collapsed in 1991.

The widely exposed “reveal” of Bilal Khalid aka James Caan – Khalid officially changed his name to that of the American actor – followed a series of equally absurd developments in a Florida trial against the other “Faketoshi”, Craig S. Wright. This included a handwritten note to the judge in which another person, a Debo Jürgen Etienne Guido, also claimed to be the secret progenitor of Bitcoin.

Sane minds in the crypto community remind us that this is all a sideline, that these competing claims to creating Bitcoin ultimately do nothing to its value proposition.

Still, the question arises: why does this keep happening? Why are the scammers appearing so quickly? What about the crypto community that is attracting a parade of false prophets?

Let’s move on to the question: why does crypto in general create so much drama? Bitter feuds over software forks; relentless conspiracy theories; Disputes between maximalists, altcoiners, nocoiners and shitcoiners; competing social media memes; Characters “armies”; Twitter trolls; Scammers of all kinds – it’s the crypto circus, and many of us secretly love it, at least in cans.

But why? How did a technology that emerged from the most math-driven, nerdy, and precision-obsessed areas of computer science lead to Mexican telenovela-like twists of the plot?

Other open source tech communities also generate their fair share of drama, of course. (Enter “Linux community” in a Google search and it will automatically complete “Linux community toxic”.) The leaderless structure of open source projects means that there is no central authority or bundled profit-making policy or the management of external messages there.

Still, the crypto soap opera takes things to another level of madness. Why?

Learn from ancient history

My attempt at explanation begins with the fact that, in contrast to other technologies, this is basically about money.

“Money has historically been a political process, a process by which people or states or some type of entity consolidates authority over others,” says Bill Maurer, dean of social sciences at the University of California, Irvine, an anthropologist who specializes in the Has studied culture and history of money and adds:

“So you have this big paradox with something like Bitcoin, where the idea is that no person or authority should be in control … the truth and the desire to be in control.”

The unfortunate reality is that decentralized, blockchain-based monetary systems limit political or entrepreneurial influences on these systems, but this limitation only exists in the chain. There is no way to stop the power games – politics – that arise when someone tries to upgrade or branch off the software, or when different coins compete for users. There is no escaping monetary policy; it doesn’t go away just because there is no government in charge of monetary policy.

Powerful people have always forced their ideas about money on others in order to increase their wealth and dominance.

Maurer notes that the emergence of gold and silver as dominant currencies in antiquity can be traced back to the fact that wealthy elites had previously acquired status objects made of precious metals. As they consolidated their power over government and laws, they made these metals the standard of currency.

Bitcoin has its equivalents from these ancient elites. Large mining companies, early adopters / investors, and core developers all have an over-the-top interest in funding. The same applies to the “whales” of Bitcoin Cash, Bitcoin SV, Ether and other cryptocurrencies.

That’s not to say that the crypto elites don’t deserve rewards for getting into the game early or helping to develop and secure a brilliant new form of money. Also, the power they wield – all in a system that actively forbids anyone from mining, owning, or contributing code to Bitcoin – can be equated with that of governments using military might and legal threats to gain access control their money.

I just raise it to point out that these influential actors are both incentivized and financially capable of aggressively advancing and promoting their positions.

Believers will believe

These competing, funded voices compete for the minds of users, which means that they appeal to people’s passions and emotions.

It is inevitable. You can be as nerdy and aloof as the most witty cryptographer, but if you want your favorite currency to grow enough to become money, you have to get involved in cultural production. You want a common history of belonging to develop around them that is widely accepted for your currency to be widely distributed and used.

Of course, your currency must also have intrinsic properties – scarcity, fungibility, portability, durability and divisibility, for example, are common to both gold and bitcoin. But they are not enough on their own. For something to become money, it takes faith.

Here we enter the realm of myth and storytelling, the foundations on which the most powerful systems of human organization are built – nations, religions, brands, and most importantly, money.

Think of the importance attached to the unknown identity of the Bitcoin founder. Not only did it deny critics a purpose of blaming a get-rich-quick program; it gave the Bitcoin community its genesis myth. That, in turn, has fueled the poses about Bitcoin Cash and Wright’s Bitcoin SV, the latter’s name blatantly alluding to the prophetic notion of “Satoshi’s vision”.

But here’s the thing: “Believers” are vulnerable to manipulation. (Just look at how the powerful religious communities have done their dirty work over the centuries, from priests and mullahs instigating “ethnic cleansing” to America’s television evangelists fleeing their congregations.) Unfortunately The ever-expanding communities interested in cryptocurrencies are similarly vulnerable – for example the thousands who have been fooled into BitConnect.

And in a situation where there is limited expertise in how cryptocurrency complexes work, those vulnerabilities are heightened for the many who do not fully understand the technology.

“Since it’s supposed to be about the code and the math and not everyone understands the code and the math, people take advantage of that to sell you whatever they want to sell,” says Maurer. “People are desperate to have a firmer foundation for their faith. So it’s easier to fall in love with someone who offers them that. “

I am not saying that the “trust in code” mantra is not useful when applied to the decentralized management of monetary policy or the payment system of a cryptocurrency. But it is naive to believe that the human networks that congregate around this technology are somehow immune to the mistakes of humanity itself. Worse, it is this belief that makes it possible for the scammers.

So if we want to break free of the faketoshis, snake oil sellers, and the general cultural chaos of crypto, it is up to us humans, not the code or the programmers themselves, to find ways to mitigate these bugs. Human governance is important.

Alternatively, we could just leave things as they are. Sit back, grab some popcorn. Enjoy the circus.

Mask image via Shutterstock

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