Conditions for the possibility of exit
Exit (and the right to exit) is fundamentally important and too-often ignored. But, we should be careful to be clear about to what extent we exit, and how. Many technologies that are promoted as revolutionary tools don’t actually provide the capacity for exit in the way they seem to at first glance. Had the article been called ‘The Conversations that Encryption Killed’, I would not feel the need to respond, but the ‘crypto’ prefix in ‘cryptocurrency’ is misleading and bitcoin-style distributed-public-ledger-based systems are not compatible with anything more than a ‘limited, voice-buttressed exit’.
When we perform a true exit, we have made ourselves no longer subject to the power structure we have exited from. In the politico-social domain, there are several power structures we might want to exit: the domination of the state (i.e., the rule of law), the domination of finance (i.e., dependence upon existing systems of trade for the means of survival), and the domination of old money (i.e., existing debts, and the advantages produced by access to money in the past). Cryptocurrencies do not provide the conditions for the possibility of exit from any of these three power structures, in part because of myopia in both the technical and cultural design of bitcoin and in part because of the fungibility of power.
Cryptocurrencies based on public ledgers do not provide an exit from the rule of law, nor do they provide an effective cover for trade; they are, in fact, more easily traceable than cash. This is because they are not in fact anonymous but pseudonymous — every wallet has a permanent address, and every entity has at least one wallet — and because all pseudonymous transfers are recorded permanently and publicly in the ledger. This sacrifices secrecy in favor of limiting necessary trust.
There is no cryptography-like guarantee on the difficulty of tracing a transaction history: doing so simply takes linear time with respect to the number of global transactions within the period you’re looking for. Laundering of money through third party mixers is rare, because the culture of bitcoin has paranoia as a design philosophy — while laundering could make tracing transactions meaningfully harder, it only does so if it becomes common, and it will only become common if there is some guarantee that mixers won’t run away with your money (precisely the kind of guarantee that can’t be made within the system itself without sacrificing the secrecy it provides). Escrow has become fairly common, but it has exactly the same problem as mixers without providing the functional secrecy (or the ability to be chained) that mixers provide.
Ultimately, using a public-ledger-based cryptocurrency means ‘opening the books’ to literally everyone and making a permanent public record of all your purchases — something that, with only a relatively small amount of information, can be traced to your legal identity. In other words, the only exit from state domination made possible by this kind of cryptocurrency is ‘limited and voice-buttressed’: with careful opsec (a full time job, & one that professionals regularly fail at) you might be able to make it difficult to trace your wallet back to your public persona, but your only real defense is to make yourself an unappealing target by staying within the law most of the time.
This is not, in fact, something shared with all alternative currencies. Physical alternative currencies are often very difficult to trace, and when commodities are used as currencies (like bottles of Tide, baby formula, or lego sets) there’s also plenty of plausible deniability. If you actually want your transactions to remain secret, perform them in laundry detergent, not bitcoin.
It’s hardly surprising that cryptocurrencies will not save us from the domination of finance — they are, after all, currencies. Most boosters of cryptocurrencies don’t see this as a bug. But, to be clear: the use of cryptocurrencies does not even allow us the possibility of escape into an alternate market-universe where goods and services have fair prices without exploitation; even if this was the goal of some set of cryptocurrency users and they were all agreed on it, the fact that this currency can be traded for another kind or for goods produced within the regular (exploitative) capitalist system means that such an exit is limited and voice-buttressed at best: the only way to ensure your economy remains fair is to exile anyone who tries to connect it to the wider world. (This is again not actually true of all trade. The pseudo-economy of reputation is resistant to fungibility within peer groups — someone who tries to use their resources to create a false sense of integrity or trustworthiness is quickly found out and shunned, and this happens without any kind of central planning or formal rules.)
This brings us to the domination of old money. Fungibility is the enemy here, too: whatever debt you might have had before you started doing all your transactions in bitcoin still exists, and whatever wealth you might have had can be traded for bitcoin. You can be asked to repay your debts in bitcoin. Whether or not you were able to afford to go to college determines whether or not you can make bitcoin as much as it did with regard to whether or not you can make dollars.
Furthermore, cryptocurrencies do not even stem further exaggeration of inequity in initial conditions: just as with dollars, those who have plenty of bitcoin have access to more effective ways of increasing their wealth — methods that no amount of merit or hard work can compete with.
Perhaps even more problematic: cryptocurrencies fail, in the same way as fiat currency, to counter the attractive force between wealth and power, whereby the powerful achieve wealth without sacrificing their power and the wealthy achieve power without sacrificing their wealth. The gravitational pull of wealth-power brings in expensive gifts (which can be re-sold or re-gifted or simply used to attract social status), favors (a kind of power which does not need to be paid for and can be turned into money if re-gifted or used for material gain), subservience (a kind of power given out of fear), and the ear of a wider community of the wealthy and powerful.
This is not true of all alternative market systems: potlatches transform wealth into power or social standing while wiping the wealth out (since the lavish gifts given during a potlatch are literally destroyed), while jubilees remove debts without wiping out credits; negative interest lessens the advantages of the already-wealthy, while a negative income tax lessens the disadvantages of the poor.
Cryptocurrency does not represent a functional exit from modern global power structures any moreso than Burning Man does: it merely represents a pantomime of exit, with the aesthetics of radical politics but none of the substance.