When Bitcoin first came into existence, it was a definitively fringe idea, boosted by libertarians and paranoiacs who had a deep mistrust of the government and generally far-right (even anti-democratic) beliefs about society. Now, Bitcoin – and cryptocurrency in general – has moved from the fringe to the mainstream: Startups that do something with “crypto” have become a hot trend in Silicon Valley, while the number of cryptocurrencies numbers in the thousands. Many on the left and right talk earnestly about the potential for blockchain applications – including its potential for secure voting; meanwhile, big-name websites, including this one, give readers the option of donating their spare processing power to help pay for journalism.
Yet the extent to which cryptocurrency applications have entered mainstream politics belies its right-wing underpinnings. Virginia Commonwealth University Professor David Golumbia, who recently published a book "The Politics of Bitcoin: Software as Right-Wing Extremism," is blowing the whistle on the kinds of far-right ideas and conspiracy theories that not only inspired cryptocurrency's creation, but which are now trafficked, sometimes unknowingly, by many cryptocurrency boosters on both the right and left.
I spoke with Professor Golumbia about the far-right background of Bitcoin and how crypto is helping to normalize some of the more fringe aspects of right-wing thought. This interview has been condensed and edited for print.
In your book, you mentioned that the people who helped create cryptocurrencies had really far-right beliefs about society. I was wondering if you could just talk briefly about the sort of right-wing underpinnings and the people who built it.
Absolutely. There are two overlapping groups of people, most of whom were in Silicon Valley in California in the late 1980s and the early 1990s. One of the main leaders of them was a guy named Timothy May who was an electronic engineer at Intel who became rich through his work and retired with a large pot of money. He formed this thing called “Crypto Anarchy” in the late 1980s, early 1990s, which was basically a mailing list.
There was another guy named Eric Hughes, who became a friend of May's, and he started an email list called Cypherpunk, whose name was modeled off of “Cyberpunk,” which was the name for a kind of science fiction that seemed to anticipate a lot of what was happening with digital technology. Hughes went on to be one of the founders of the Electronic Frontier Foundation. Although there are some subtle differences, “cypherpunk” and “crypto-anarchy” are basically names for the same movement.
The two of them wrote these manifestos that were all about how government was the most evil thing that ever happened and taxation was the most evil thing that ever happened, and Crypto – encryption technology, which they loved – was the new weapon that was going to allow them to tear all this stuff down.
It’s true that there are some leftist anarchists, but these were not leftist anarchists. May himself has turned out to be a pretty racist, sexist, very disturbing guy. They were the center of a certain kind of hacker, radical, extremely aggressive form of thought. Back then, the mailing list was very popular.
A lot of people whose names are known to us now were part of these. One of these mailing list members was Julian Assange. He’s probably the most famous one. Assange was kind of more moderate politically than some of the people who were on the list. You can go back and read their manifestos and they are similar to the Tea Party, really. They hated everything about government, everything about democracy. Timothy May, in particular, in the very earliest versions of these manifestos, talks about the need for some form of cash that is outside of the state system. He thought that developing this would allow them to tear apart the state. He actually thought somehow that cash outside of the system would be so untraceable that the government wouldn't be able to tax it. Government revenue would dry up because everybody would use this alternative form of cash.
That's one of the places where you see an early Bitcoin discourse, a lot of people seem to believe that you couldn't possibly owe taxes in it because it's outside of the state system. You get these great Reddit threads where tax accountants on there who will tell you, “Look, Bitcoin is an asset, you sold it you made a profit. Doesn't matter what asset you sell and make profit on. You owe taxes on it.” It’s like selling a bike, or a painting. The Bitcoin people can’t get their heads around it.
Anyway, Hughes and May and Nick Szabo, and a lot of other people whose names you still see around Bitcoin forums, they crafted version after version of different forms of digital currency. These projects often incorporated the word “gold” into their names, so there was like, “digital gold” and “e-gold.”
They were all pretty lame projects, and of course they all were shut down because they were immediately used by people for illegal activities. Bitcoin is like, iteration 12. I think most people suspect that whoever Satoshi Nakamoto is, he is probably one or more of these people because this is the project they've been working on forever.
I should note that in the book, I'm pretty specific about what I mean by right-wing extremism and very specific conspiracy theories and how those tie into other forms of right-wing thought. Since I wrote the book, actually, you can see how certain people on the right — who were not part of the original group of cryptocurrency advocates – have really taken to cryptocurrency. Now you have actual Nazi groups being in favor of Bitcoin. Weev, one of the biggest Nazi leaders worldwide is into it. There's a great Twitter account that tracks Weev’s Bitcoin wallet, every transaction coming out of it, along with those of some other neo-Nazis. People like Richard Spencer and Stefan Molyneux and other major "alt-right" figures, have gotten deeply into Bitcoin.
The actual connection between the far right and Bitcoin [has], if anything, become clearer and strengthened since I started writing.
When you put it all in context, it is kind of fascinating just how much so many people who consider themselves liberal or even leftist are enamored of Cryptocurrency; it's kind of surprising. I would be very suspicious of it if I went into it knowing all of that.
Most people don't know the history of it, which is completely understandable. When people want to advocate it for their own political projects, then I think they owe themselves to do some more investigation of what's going on. I mean, can Bitcoin be used for leftist projects or for non-far right projects? I guess you can make $10,000 off your trading and go give it to some cause that you believe in. I don't know what that proves.
What inspired you to write this book? Was there like an "ah ha" moment?
Well, part of it was that I worked for about 10 years in the financial technology sector on Wall Street. In order to do that, you really have to teach yourself finance. One thing I learned at that time was that there are all these conspiracy theories that lurk around the edges of finance — many of which have to do with gold and some of which have to do with the Federal Reserve.
When Bitcoin started to get big, I started to notice that the old conspiracy theories that I recognized from Wall Street were starting to show up with alarming regularity in the discussions around Bitcoin. People were taking them seriously in a way that was surprising to me, in the sense that they didn't have that much traction in the technology world or anything before that, and all of a sudden here they were in the mainstream. And the more I dug, the more I found them.
What are some examples of the conspiracy theories that are embedded in the discourse around Bitcoin and cryptocurrency?
I would say there are three that are really interesting, and they're connected. Two of them have to do with gold and the nature of gold, and especially what the gold standard is and the nature of the Federal Reserve.
In the case of the gold standard, there is this very odd conspiratorial belief that anchoring the value of currency to an underlying asset like gold somehow guarantees the price of the currency in a special way that you can't get otherwise. The history of metal standards is fascinating, but you don't have to dig far into that history until you see these competing strands of ordinary criticism of them and back and forth about whether we should have them, and then these conspiracy theories about, "they want to get us off the gold standards, because they want to take all our precious metals away." These have been going on for hundreds of years. Especially in the 19th century the U.S. used to have a dual metal standard, silver and gold. When we moved to the gold standard, it was thought that the Rothschild banking family controlled all the silver and they were somehow moving us off the silver standard because they were all going to get rich. So you had all these anti-British, anti-Jewish conspiracy theories then.
What exactly a metal standard does to a currency is the really fascinating question. It's really complicated. Partially, it has an element of arbitrariness in it, which is exactly what the people think they're getting rid of. At some level, you have to decide gold is going to be worth X, and its value is going to be related to the currency in some kind of multiplier, and that's what's actually gotten us into trouble. For 30 years or something, the U.S. used to just declare what the value of gold was relative to the dollar, and it wasn't really the value that gold traded on the market, so that created all these really insane incentive all over the world. It's just a mess — the gold standard doesn't fix anything.
On Wall Street you see people trying to sell you gold — there's just a constant stream of advertisements for people who are like, "The dollar is about to be devalued. The stocks are about to crash down to nothing. You should buy gold instead because that's where your value is going to be stable." They never tell you, “Here's a chart of the price of gold over time,” which wobbles just about as much as everything else does. It doesn't really do what it says. That’s a broad and interesting conspiracy theory that you see in the cryptocurrency community.
Then there's the Federal Reserve conspiracy theory, which is much more directly an anti-Semitic conspiracy theory — it has to do with central banking, which is a longer story.
There was an element of truth to the idea that at one point in time central bankers were also the people who owned the real banks and might be personally profiting off some of what the central bank was doing as far as monetary and fiscal policy. Those days are long gone. The Federal Reserve is a tightly regulated organization. You cannot be an officer of the Federal Reserve and personally profit in any way from the kinds of moves that the Federal Reserve does. The Federal Reserve does not print money, which is something we read about all the time.
There's a very familiar anti-Semitic trope in there that they're these evil greedy bankers who are manipulating the public in order to make themselves rich. I should be careful because I've been criticized sometimes for this before. I am not saying the Federal Reserve is beyond criticism. Like any other agency, it deserves to be criticized. I'm not in any way saying that its specific policies or those of other central banks are the right ones, but it is not a cabal of evil like “corrupt bankers" who are manipulating all of these world events.
Then the third one, which is in many ways more interesting, is this idea about the nature of inflation. This isn't quite a conspiracy theory so much as a really interesting part of extreme right-wing economic thought that kind of blew over into conspiracy theories. When most economists talk about inflation, what they mean is the prices of goods have gone up — so it's harder to buy a car or whatever because a car costs more money than it used do.
One of the causes of inflation clearly can be “printing more money.” If you start to put a lot of money into the economy, you double the number of dollars, then in general the likelihood is that a dollar will buy half as much as it bought before. That is definitely a way to create inflation. If you really read the economy, that is one way that inflation can happen, but it is not at all the only way that inflation can happen. Inflation happens for all kinds of reasons.
[Right-wing economist] Milton Friedman liked to say that inflation was only caused by printing of dollars, which is just a sort of ideological view that is not connected to reality. Where it turns into a conspiracy theory relative to Bitcoin is that now you see this reinterpretation, where what inflation actually means is the printing of additional [cryptocurrency] tokens, and therefore the price of things is irrelevant to inflation. It’s enough to make one’s mind boggle, but you can observe this belief at play in arguments with Bitcoin people, as I often do.
What happened between January and right now is that the price of Bitcoin went from $20,000 to about $7,000 in U.S. dollar terms. It lost over about two thirds of its value. Depending on how we calculate it, that is something like 300% to 400% inflation, right? What you can buy with a Bitcoin decreased a huge amount. You need a lot more Bitcoins to buy the same thing that you needed to buy. That is, in half a year, Bitcoin inflated by hundreds of percentage points.
But when you get into arguments with Bitcoin fanatics, they will still say, even right now, “Bitcoin is a ‘Store of Value’ unlike the U.S. dollar . . . Bitcoin is safer for your money.” And if you say to them, "What are you talking about, Bitcoin inflated hundreds of percentage points in a time when the U.S. dollar hardly moved at all?" They will say, "What do you mean? Only a few more Bitcoins were mined in that period of time. That's nothing." It’s a misinterpretation of inflation that is mind boggling.
It does connect back to that first thing about gold, because there is this weird idea that money is this very concrete thing that you should be able to understand very quickly and easily. Money is actually incredibly complicated to understand. What is money? How does money work? It is a really tough subject and I'm sympathetic — like, I wish this was simple and I could just point at gold and that I could determine the value of my money, but it just isn't like that.
In your book you talk about the definition of currency and how Bitcoin might not actually qualify as a currency. Can you tell me more about that?
This is part of what is so complicated. Let's say currency is a token of some sort that somebody issued that is usually tied to the value of money.
It makes me think of, like, when you go to play arcade games or skee-ball, and you can't actually put quarters in it, you have to trade your quarters in for tokens or something. The skee-ball token technically is a currency, right?
It is technically currency and it has an equivalent value in money — but the only way we have to perceive money is in terms of national currencies or other currencies. That's part of why it's so hard to get a handle on. It is this abstract thing that it's really difficult to process. From the moderate right all the way to the left, the general accepted definition of money is that it has three functions: the “store of value” function, the “medium of exchange” function and the “unit of account” function.
In general, currency is mostly about the medium of exchange function. The medium of exchange function means you can use this token to buy and sell stuff. That’s what the developers tell you Bitcoin was designed to do; it’s why we call it a “cryptocurrency.” But in reality, this kind of use has not in any way lived up to the advertising.
The unit of account function has to do with the way prices for goods and services are set.
The store of value function [is] the most interesting one with regard to cryptocurrencies. The idea of the store of value is that the token should be relatively stable over time with regards to markets. You should be able to sell some of your goods in May and put your proceeds in money in the bank or under your mattress or whatever, and a year later, you should be able to get relatively close to the same amount. You go back to your pile of stuff that you got, and it should be worth about the same thing that it was worth a year ago. It needs to stay almost identical.
Bitcoin is designed not to do that. In many ways, it is designed to rebuke that as a quality of currency. The Bitcoin people have tried to redefine “store of value” to mean “goes up over time.” That is just absolutely not what store of value means, because it's not storing. Even though going up sounds great, as people like me and a lot of economists have said, something that goes up is also going to go down. There is no such thing as a financial instrument that just goes up. It might look great while it’s going up, but it's not going to look great when it’s going down.
It is very interesting to argue with people over this definition of money because it isn't a prescriptive definition of money — it is a descriptive definition. This is people looking at how currencies and economies have operated over history and then they sort of said, "Okay, these are the three things that everything that functions as money seems to have."
You can't argue with a descriptive definition, unless you're just really playing games with words. We are supposedly “state-loving bankers” when we say, “Look. It can't be money.” They sort of backed away from this money claim in part because Bitcoin is being so little used as a currency and that's the most obvious sort of money-like function and nobody wants to use it for the obvious reason, that it isn’t a good store of value, that you can't keep the proceeds from sales of goods and services in it. You have to swap in and out of it almost instantly. That turns out to be an expensive transaction a lot of the time.
One of the most horrifying things you note in the book is that many Silicon Valley luminaries, Marc Andreessen and others, parrot many of the same far-right language and conspiracy theories that are embedded in the politics of Bitcoin when they talk about Bitcoin. It's like they may not realize that they’re doing it. What is going on here?
I wish I understood this better. I remember Andreessen wrote a piece in The New York Times many years ago, called “Why Bitcoin Matters.” Some of the finance parts were a little more tethered to reality, but there were a few conspiratorial moments. I and a few friends were actually engaged with him on Twitter and we were like, “some of the things you're talking about could only happen if Bitcoin became the only currency in the world and that is clearly not going to happen.” I don't think he recognized the conspiracy aspects of it, necessarily. His partner Balaji Srinivasan, also CTO of one of the largest cryptocurrency exchanges, Coinbase, is more deeply into these conspiracy theories than Andreesen is. [Twitter CEO] Jack Dorsey recently said he thinks cryptocurrency is the wave of the future, and that “the world will ultimately have a single currency,” which to me is a conspiratorial belief.
Let me give the sane explanation for why that is. It's very clear that if you are going to be a financial technology company or even a financial company right now, you have to have a team that is working on blockchain or cryptocurrency in some way or another. That's because consultants and the vice presidents and everybody, they want to know what your blockchain strategy is. This happens with every new technology, development paradigm, and business model. That's somewhat dumb, but it's understandable, and I'm sure that people will come up with some very interesting but non-revolutionary uses for some part of the technology that way. Those people, they needed to work within their own empirical testing environment.
That's fine, but they don't go along with all the crap and stuff where you do see the venture capitalist, some of the technology leaders and some of them . . . Andreessen Horowitz is a company that at some level must pay very close attention to financial systems. They’ve got to understand some of the fundamentals of finance and you really . . . it's hard not to wonder if they're kind of knowingly peddling some of this stuff, knowing that it is really not true. I definitely see that in the Initial Coin Offering world. I think a lot of those products, so to speak, were very, very specifically developed and promoted by people who absolutely knew that this was a quick way to rip off some people, and it would not produce at all what people were expecting it to produce.
One of the chapters in your book deflates some of the myths about blockchain’s potential. It seems like there are some people who may be skeptical about cryptocurrency, but they think blockchain is a cool and interesting idea — you talked specifically about “smart contracts” for instance, meaning digital contracts that use blockchain to enforce contract rules without human intervention.
I think one of your major points was there’s kind of some rhetorical trickery going on in the way people hold up, say, smart contracts as being decentralized or autonomous — meaning, those are buzz words that maybe sound good, but they don't mean that much.
They don't mean that much, and they often prey on some deep and very hard-to-examine beliefs that people have. I mentioned some pretty well-known conspiracy theories, but I started to wonder if when people use the word like “middle man” that isn't at some level a kind of conspiracy theory — I mean, in the context of Bitcoin. They're saying we need to “eliminate the middle man” and it will be this great thing . . . it's probably not true, but it's definitely rallies people to your site because they're like, "Oh, that horrible middle man, we need to get rid of them.” There is at least a hint there of “illegitimate/parasitic profit takers interfering with an otherwise-honest transaction,” which is a classic form of anti-Semitic conspiracy theory.
Certainly there are probably some industries where there are intermediaries who make some money off transactions that is not really necessary, maybe they aren't really adding value to the system. Blockchain, or some other technology, might be able to replace those. I think that's correct. But that is a big step from the sort of political promises that the blockchain boosters make.
Also, the “smart contract” thing is a political idea. I think a lot of it is hinging on words — it was [one of the first people who thought of the idea, long-time crypto enthusiast] Nick Szabo called it a “smart contract.” That makes people think a “smart contract” is the same thing as a contract between human beings, which it’s not.
Of course, Szabo called it that because contracts play a really important role in right-wing political philosophy. It's the only legitimate way of coordinating activities between different people. Without a contract, everything else is invalid in their view.
Legal scholars and people who look at this carefully have looked at what these smart contracts promised, and they aren't really anything like what we ordinarily call contracts. If they were, that would probably be very unappealing.
A lot of the features of blockchain that are supposed to be so great really seem like they would be counter-productive in some kind of contracting system, making it very difficult to update things given the automatic execution. By the way, we have plenty of ways of doing automatic execution already, without smart contracts. Nobody is saying, “Oh my God, this is terrible.” If you buy some shares of stocks from a broker, there's a certain amount of automatic execution of a contract. That could get replaced in some way, I suppose, but with what?
I don't discount that blockchain might do something useful. But I think it can't possibly live up to the hype about what it is supposed to be able to do. The hype is very political and often very destructive.
Though it has right-wing underpinnings, there are a lot of people on the left who see promise in cryptocurrency and blockchain technologies to pursue progressive policy projects. For instance, Berkeley, California is considering developing a cryptocurrency to let people buy municipal bonds; and of course, using blockchain for voting is a commonly mentioned policy goal. What do you make of these?
Let's step back for a minute. I get into arguments with people about this sometimes — the history is absolutely clear about who built this, why they built it, what it was for — ripping the state apart. Given that, is cryptocurrency really going to fix any of our social problems?
There’s this weird need on the part of people who don't share those right-wing politics to try to find something to resuscitate in this project, and even to look away from those politics. It seems so counter-productive to me. We've seen this over and over again. We keep getting these technological promises that are supposed to somehow meet everybody's political needs and they keep not working. People like me and others keep saying, “Will you stop listening to these promises? They're garbage to begin with, unless you share the politics they were built out of.”
The promises are almost more the problem than the actual technology. It's interesting how personally hurt people get when you just say, “Look. These are right-wing nut-cases who want to tear apart the state and who want to tear apart democratic governments, who hate democracy, who hate equality. Why are we even giving them the time of day?”
Now, to go to the specific cases. Again, if you look at any of these spaces like voting, like issuance of municipal resource, bonds and things like that, there are already interesting technological infrastructures in all of these. Whether blockchain might play some kind of role in the revised version of that is an open question to me.
If you look at the actual blockchain voting products, they aren't really “blockchain” the way that the term is usually understood: they are not putting stuff out on some public distributed ledger with people running mining operations. They're using little bits of the hashing and cryptographic technology, because the actual blockchain is so resource intensive. As my friend David Gerard says, the whole point of mining is to prove how much power you can waste, and the more power you can waste, the more resources you get for yourself. It’s just a terrible model for any kind of software.
You want things to be efficient, right? At some level, you don't want to use the most power; you'd like to use the least power. The idea that true blockchain projects out on the Ethereum Blockchain or some version of the Bitcoin Blockchain could be useful for these local or political things seems unlikely to me. You should be asking, what is the problem that you're trying to fix? Rather than the other way around — the blockchain people are often like, “What can I use this for?” That's a terrible question for any technology. The right question is always, “Here's the problem, how do I fix this?” That's how good technology gets built, for the most part.
The voting thing in particular also raises an interesting technical/political question because the people who are behind blockchain love to point out the technical features of the blockchain and talk about them as if they define everything that happens in the world. “You don't need trust anymore.” That's one of their favorite sayings, because the computer nodes on the blockchain don't need to "trust" each other. They just all know that they're telling the truth. But that doesn't tell you anything about the person who is using the software to do something with it.
There has to be an interface between the rest of the world and the blockchain. That interface is sometimes referred to as the “oracle problem” — the more you claim blockchain can do, the bigger that oracle problem becomes. In the voting case, how do you make sure that the person who cast the vote and said they are the person and gets recorded on the blockchain is the person who they say they are? That is an ordinary identification problem. It can't really be solved only with blockchain. At least one of the blockchain voting companies that is working on this thinks that facial recognition technology is the right way to go. You go into the voting booth and they scan your face and then you have immutable ledger of everybody's face who is qualified to vote. That just sounds like a dystopia. Especially when you look at people who actually care about voting technology — they say you really want low-tech things that can't be hacked and in fact, have some paper record. That stuff works great. What is the problem that you think this massive technological solution is going to solve?