I realize that this will probably annoy people, but I am going to say it: bitcoin, in and of itself, has no intrinsic value. If we want to look at bitcoin from a programmatic standpoint, it’s a means of tracking how much of a finite quantity of stuff (in this case, bitcoins) exists (and how to create more of it, I suppose), and facilitating its transfer from one party to another. In this regard, bitcoin is a protocol; it’s an API. This is why we have folks like Larry Page saying bitcoin is analogous to TCP/IP. This is also why we have things like votecoin and proof-of-burn appearing.
The bottom line here with bitcoin is that the sky is really kind of the limit right now, where we sit. I spend mostly all day talking to people about bitcoin, looking at the market, writing software to work within the bitcoin ecosystem. And while I have ideas for where things will go, I ultimately don’t even really know where we will be in a year. I certainly cannot describe where things will be in five or ten years.
One thing seems certain, however. Cryptocurrency, whether it is bitcoin, or some other currency, is something that is here to stay, and we had better be prepared for new and wacky things to come along. Or try to. Because things are going to change very, very fast.
I want to tell you what has been keeping me awake, while other people work on the more tangible applications (votecoin being one). For about a month I have been working on automating bitcoin trades with software. I’m using nodejs (although any language could be used), and my goal has simply been “make a percent or two, divest, and wait a day.” This limits my exposure to the vacillations of the market. In theory, anyways.
I had called this approach “medium greed” compared to the “greed is good” approach mentioned in e.g., Wall Street that are subsequently near-canonized in investment literature. Instead, this software could be given a more nuanced, broader approach. This requires a little bit more care-and-feeding (vs some of the advertised unattended bitcoin-powered money-making machines that are rumored to be out there), and ultimately could lead to a much higher day-to-day revenue stream, so I am unsure the term “medium greed” is accurate anymore.
Recently, more than one person has come to me, with details I can’t divulge publicly, about this concept of “programmable money.” The term itself I borrow from Andreas Antonopoulos, but the idea has been kicking around for a while and seems to be a generic term lots of people are using. eBay has a patent for something suspiciously-named, but which doesn’t really fit where I am going.
Charlie Stross has some pretty clear, public, and well-explained views on bitcoin, some of which I incidentally agree with him on (he’s a science fiction author, and engineer, and perl programmer, so of course I like the man a lot). He puts a sinister-but-comical shine on the idea of programmable money, married to the idea of corporate personhood, in his book, Accelerando. A couple relevant quotes (cue dramatic music and snazzy transitions to sciencey-fictiony wide shots):
Radical new economic theories are focusing around bandwidth, speed-of-light transmission time, and the implications of CETI, communication with extraterrestrial intelligence. Cosmologists and quants collaborate on bizarre relativistically telescoped financial instruments. Space (which lets you store information) and structure (which lets you process it) acquire value while dumb mass – like gold – loses it. The degenerate cores of the traditional stock markets are in “free fall, the old smokestack microprocessor and biotech/nanotech industries crumbling before the onslaught of matter replicators and self-modifying ideas. The inheritors look set to be a new wave of barbarian communicators, who mortgage their future for a millennium against the chance of a gift from a visiting alien intelligence. Microsoft, once the US Steel of the silicon age, quietly fades into liquidation.
Sadeq is a slightly built man, with close-cropped black hair and a perpetually tired expression: Unlike the orphanage crew he has a ship to himself. The ship started out as an Iranian knock off of a Shenzhou-B capsule, with a Chinese type 921 space-station module tacked onto its tail; but the clunky, 1960s look-alike – a glittering aluminum dragonfly mating with a Coke can – has a weirdly contoured M2P2 pod strapped to its nose. The M2P2 pod is a plasma sail, built in orbit by one of Daewoo’s wake shield facilities. It dragged Sadeq and his cramped space station out to Jupiter in just four months, surfing on the solar breeze. His presence may be a triumph for the umma, but he feels acutely alone out here: When he turns his compact observatory’s mirrors in the direction of the Sanger, he is struck by its size and purposeful appearance. Sanger’s superior size speaks of the efficiency of the Western financial instruments, semiautonomous investment trusts with variable business-cycle accounting protocols that make possible the development of commercial space exploration. The Prophet, peace be unto him, may have condemned usury; but it might well have given him pause to see these engines of capital formation demonstrate their power above the Great Red Spot.
High in orbit around Amalthea, complex financial instruments breed and conjugate. Developed for the express purpose of facilitating trade with the alien intelligences believed to have been detected eight years earlier by SETI, they function equally well as fiscal gatekeepers for space colonies. The Sanger’s bank accounts in California and Cuba are looking acceptable – since entering Jupiter space, the orphanage has staked a claim on roughly a hundred gigatons of random rocks and a moon that’s just small enough to creep in under the International Astronomical Union’s definition of a sovereign planetary body. The borg are working hard, leading their eager teams of child stakeholders in their plans to build the industrial metastructures necessary to support mining helium-three from Jupiter. They’re so focused that they spend much of their time being themselves, not bothering to run Bob, the shared identity that gives them their messianic drive.
This idea of goliath conglomerations of assets and logic in many ways resembles object-oriented programming. The difference here is that in software development, when we write object-oriented code, we are the ones writing code. As a developer, I can pass an object along to another developer, and with polymorphism, these objects can all interoperate via common interfaces, despite their having different backgrounds, language bases, architectures, or even vintage.
What is missing from this is the logic that allows them to interoperate mostly without oversight from people.
For the moment, software that writes software is rudimentary (but it exists, and is getting better). So I may write software that makes reasonably okay trades, and can do so in various markets, whether cryptocurrencies, or in FOREX, and so on, via these sorts of standardized interfaces.
But I still have to write that code. Let’s envision a trading program that has simplified, standardized interfaces to a market, or to many markets, and has some derivative of genetic programming that allows it to test new strategies for making profits within defined parameters (that is to say, don’t explicitly tell it to KILL ALL HUMANS – this is in fact a real concern, and there is a lot of real hand-wringing and publishing on the subject), tell it to “make reasonable profits”, and to keep refining its technique.
Well, that sounds pleasant, right? If somebody were around that had such a piece of software, I’d be interested in buying shares in it. In fact, let’s make a business out of this; let’s write software with a simple charter: make money, using arbitrage and abject volatility in financial markets to gain a certain amount of profit per day. So far, this is legal.
For extra credit, though, we can buy commodities or other assets and use them as leverage to further increase volatility in our favor. An example of this would be buying and holding a huge amount of a needed resource to drive its price up. That is probably less-legal, and certainly less-ethical, but there are probably ways to do this, too (without giving too much away, Ian McDonald approached this pretty plausibly recently in his Dervish House).
In fact, an example can be seen in the idea of proof-of-burn: if someone holds a mammoth quantity of bitcoin, and wants to drive the price up, a sure way to do this is to dramatically reduce the amount of bitcoins in circulation. Would they gain more than 25% in value on their remaining 80% by burning 20% of their holdings?
A friend points out to me, “but that’s bad for the market!” Yeah. But this is the way bitcoin operates. It’s designed to allow this sort of manipulation and to be transparent. Again, people should think of bitcoin as a protocol, an API, for keeping track of how many bitcoins there are, and where they are. It is almost incidental that this system itself can be tied to “real-world” assets.
But where does this sort of morally questionable idea lead? Could it be possible to form a corporation based upon ownership of software and assets (does this sound familiar?) and bind the corporate leadership in some sort of overt fealty to these software directives, which are agreed-upon by the (perhaps initial) shareholders?
Does this sound so crazy? It’s ultimately transparent; we all understand what went into the soup, we can taste it as we go along, but the software-assets-people-corporation take on a life of their own, and indeed are granted “personhood” in some fashion.
I think, unfortunately, that this is without question an inevitability. With programmable currency, and digital economies being based upon cryptocurrency API’s, and digital economies tying themselves to physical assets (whether labor – I take my salary in bitcoin – or food or Maseratis), there is simply no way to prevent this from happening. Perhaps worse still, is that there is almost no way to regulate it, either. Which, I would point out, is also by design. If bitcoin itself becomes “too regulated,” consumers of cryptocurrencies who desire a no-or-low-fee transaction system, who desire an API in which nobody is looking over their shoulder, a new cryptocurrency will emerge, because the framework is there.
Consider TCP/IP again. “The Internet,” as we know it today, is obviously not the wild west it was in the 80’s and even 90’s. So how have people “gotten around” this “problem?” In response, pervasive encryption, Tor, and new networks and meshes (as an aside, I am more than a little unnerved that this is yet another concept that has been discussed, with stunning accuracy, in science fiction) appear, even operating systems which defy regulation and surveillance.
What separates this from the science fiction nightmare scenario of sentient corporations is that we grant personhood to corporations, corporations can have huge chunks of software, but we cannot bequeath a corporation to itself. That is, there’s always a person in there, “somewhere,” and ostensibly, that person has rights that the software or corporation does not (this is possibly debatable).
We seem to, for the moment, be a long way off from money-as-being that runs off and disassembles Jupiter for nebulous reasons. But the rest of that stuff? It seems to be here today, already, and what is limiting its appearance is the lack of greed and ambition of those in the marketplace.