Karl Marx and the intrinsic value of Bitcoin
1. A perspective from an inflationary abyss
For someone who lives in Argentina, the recent global discussions about the high inflation rates emerging from the global health crisis seem to be part of the usual landscape. Indeed, is not breaking news for Argentina to hear about high inflation this year, even more, in any period of recent history. The data in this regard are quite clear: Argentina has not grown in any of the last ten years, accumulated an inflation rate of 1500% and increased its number of poor people from 26% to 45%. But the problem is not confined to the technical aspect. After all, Goethe stated with special clarity that “All theory is gray, dear friend, and green is the golden tree of life”. In recent times, the COVID-19 exacerbated the existing miseries, the debt crisis pushed away the possibility of recovery and the agreement with the IMF for 57 billion dollars was not reflected in absolutely nothing. That money is simply no longer in the picture. Instead, what is there is the result of this disastrous combo. Inflation exacerbates pauperization and misery inhabits the streets as in a sort of gloomy literary resurrection of Dickens’ work.
The minimum monthly wage for formal workers is $150, while the minimum pension is $125. The workers thus work for 7 dollars a day, which translates into something around 0.9 dollars an hour. Although the above data speak of the minimum values, mention is made of registered workers, that is, there is no official information on those workers who are in a relationship of informality. In this case, salaries are most of the time above minimum wages, but, at the same time, they are below them, turning the fact of work into a gear of the logic of survival.
But a curious and sad lesson emerges from the mentioned above: inflation does not have a merely technical reflection; it translates into social desperation when it worsens. When you buy something in Argentina, its price may vary in two days, sometimes in one, but it certainly will vary in twenty or thirty days. Work becomes sterile since it cannot be preserved since the economic compensation for the present effort does not survive the immediacy of the future. This is the fundamental breakdown of the currency: its capacity to be a store of value. However the social consequence is discouragement and frustration, reluctance and despair, the myth of Sisyphus on the concrete level. What should be a motive to exercise a horizon of expectations and the realization of a better life in the becoming, turns into a pointless exercise a little more every day.
The first time I bought Bitcoin at the dawn of quarantine, what I had never experienced in my life happened: the effort of the past had been valued in time. It was a strange sensation (I estimate that it was quite common in other geographical areas with a better macroeconomic order), almost magical. In Argentina, by provisions of the State, it is not possible for people to take shelter in dollars (only 200 per month), forcing them to visit informal channels where the price of the dollar is 80% more expensive. In this case, Bitcoin is a solution to a fundamental problem: valuing social work overtime, claiming the dignity of those who work and transforming the order of the possible. At first, it was me and my cousin, then my friends, my parents and people I knew. Originally there were no places to buy or sell crypto in person, then there was one store, then two, and now, in my city, there are already three. Adoption is taking giant steps. Restrictions from the State cannot contradict the natural tendency of all social behavior: the search for greater welfare. But having experienced firsthand the severe problems of inflation, I still do not understand how there are opinions that question the value of Bitcoin.
2. Law of value. The classical theoretical inquiry
It has been said in recent months that Bitcoin “has no intrinsic value” and that it “produces nothing”. A statement, of course, with little (or no) theoretical rigidity, but which is reproduced with greater regularity than one would expect -after more than one hundred and fifty years of discussion about value-. Far from the revived individualizing discourse of the eighteenth century that makes the most abject abstraction its main virtue, we must emphasize a historical and material cleavage that accounts for the complexities inherent in all social phenomena.
The problem lies in recognizing that Bitcoin possesses a value that is explicable from Karl Marx’s law of objective labor-value and that Bitcoin possesses a use-value that is expressed in an in crescendo circuit of characteristics resulting from its intrinsic nature. Such substance is explicable by a distinctive aspect that lies at the core, namely the Proof-of-Work (PoW) protocol. It is no virtuous discovery to suggest that Marx holds that it is precisely the labor time socially necessary to produce a use-value that determines its magnitude of value. This is an argument that can be found empirically in the circuit of life of capitalist society, but which Marx also makes easily demonstrable at the level of exemplification: “Diamonds rarely surface in the earth’s crust, and hence finding them takes, on average, a great deal of labor time”. An exemplification which, in turn, shows its theoretical rigidity in a reductio ad absurdum: “And if with little work it were possible to transform coal into diamonds, these could be worth less than bricks”.
But the property of value cannot be acquired if it has no relation to use that which has no utility cannot contain value. And utility, which is the direct correspondence of the use value of the thing, has a two-faced determination. This determination has to do with the relational nature of social interaction with the world, that is, it arises from the very relationship between the historical condition of the social and the inherent properties of things. That the diamond is appreciated must correspond to an appreciation that is, first, historical but also objective: the appreciation of the hardness, for example, of the diamond can only be appreciated in the diamond and not outside of it. But although the use value lies intrinsically in the thing, only the utility determined by the social makes possible the valuation of this objective property. The relational aspect is mentioned because to believe in a subordination of the objective to the subjective would be to fall into a winding path of sterile inferences. Beyond the valuation that billions of people may subjectively have about a bottle of water (to give an example X), it is an objective reality -and therefore empirical- that the same bottle of water cannot hold dozens of people and fly at 800km/h as a Boeing 737–700 does.
But the above is, once again, not an exemplary discovery. In the case of Bitcoin, it is Satoshi Nakamoto himself who, in the discussion of the thermodynamic consequences of the Proof-of-Work, suggests the relationship between social labor investment and value:
“It’s the same situation as gold and gold mining. The marginal cost of gold mining tends to stay near the price of gold. Gold mining is a waste, but that waste is far less than the utility of having gold available as a medium of exchange.
I think the case will be the same for Bitcoin. The utility of the exchanges made possible by Bitcoin will far exceed the cost of electricity used. Therefore, not having Bitcoin would be the net waste”
From the above, Satoshi realized that this investment of energy was directly related to the value and that, in turn, the use value of Bitcoin would encourage greater investment in obtaining it. In fact, the protocol has a greater virtue, guided by the proportional difficulty: “To compensate for increasing hardware speed and varying interest in running nodes over time, the proof-of-work difficulty is determined by a moving average targeting an average number of blocks per hour. If they’re generated too fast, the difficulty increases”. The virtue lies precisely in the fact that the use-value incentivizes greater investments of work overtime, a situation that, in turn, transforms its use-value. If we suggest that one of the inherent characteristics of the use value of Bitcoin is to be a store of value, we can say this because it is Proof-of-Work, insofar as the blockchain has a security granted by the investment of work, that is, a security made possible by the nature of the protocol: “Once the CPU effort has been expended to make it satisfy the proof-of-work, the block cannot be changed without redoing the work. As later blocks are chained after it, the work to change the block would include redoing all the blocks after it.” But the problem does not end there as the in crescendo circuit of use value and labor invested begins, namely, the more labor invested the greater the security and, the greater the security, the greater the attractiveness as a store of value (which will generate incentives to invest more labor).
3. Proof-Of-Work and value generation
But the investment of labor in Proof-Of-Work has a particular nature, namely, guided by a dual determination: it is an investment of dead (past) labor -as capital-, and computational autonomous labor. By this we mean that it goes through two sequential and differentiated stages in time, which give rise to the realization of past value and the production of new value, a linkage that implies a qualitative change with the production of traditional value. Computational work has a diametrically different substance from social work, inasmuch as it is carried out in a sphere that is closed to the intrusion of social dynamics and the respective derivations that are extracted from such dynamics. It is not a change in the form of productivity, but, more profoundly, it is a transformation at the qualitative level. While the Industrial Revolution entailed a severe transformation in the rhythms of productivity and, therefore, of surplus value extraction, it was no more than a quantitative metamorphosis of production. The Jenny spinning machine accelerated the rhythms of production, but not the qualitative dynamics of production.
The case of computational labor is naturally different, because it does not catalyze the transformative capacity of the social agent, but lies embedded in another language of production, alien to any dimension of social life, intangible and, above all, irreproducible by the species. A work that can only be carried out in the very matrix of the digital but that realizes its value as use value within the framework of the concrete. Once the production that makes it possible has been consummated, computational labor becomes independent of its previous form, it ceases to be the consolidation of past labor to, in a new character, produce value. Value marked, in short, by a productivity that has two concise limits, on the one hand, from the existing productive forces derived from the historical conjuncture and, on the other, from the variable protocol’s difficulties.
The problems occurring in Argentina trigger theoretical concerns about the value of Bitcoin. Here the value of use is oriented, mainly, as a store of value, leaving relegated to the background discussions that are like sea foam: transaction cost, speed, whether it reaches 100k this year (if not), etc. A country where 6 out of 10 children are poor, urgently needs to put an end to inflation and the loss of value. The problem does not confine there, but it certainly contributes. Beyond the explicit desire, it will be a matter of time whether these pages will be invalidated or not. I hope to see another reality in the streets, neighborhoods, cities. Landscapes that we have not seen as Argentines, but that we certainly deserve.
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btc: bc1qzqlgjha0afdxwh9jlaugc4khqmlws7nkdfrswq
M.
