Magazine article Artforum International

More Problems More Money: Finn Brunton on Bitcoin

Magazine article Artforum International

More Problems More Money: Finn Brunton on Bitcoin

Article excerpt

BITCOIN IS THE MONETARY VERSION of a gnostic heresy: an alternate financial cosmology full of secret names and evocations, with a masked prophet in the pseudonymous "Satoshi Nakamoto" (whose real identity, whether singular or a collective plural, remains unknown). Arguments in comment threads and discussion boards are bright with millennial fervor for the end of authority based in governmental scripture and the advent of a new fiscal age founded on cryptographic work and the steady roar of cooling fans. "Mining rigs," computers built to do nothing but solve special mathematical problems that hunt for bitcoins--essentially, numbers that are very hard, even for a computer, to calculate--warm up basements and server rooms from Sydney to Nashville. In Hong Kong, "Block Erupter" circuit boards immersed in tanks of coolant eat electricity and generate heat and possible solutions; in Iceland, under the aurora, currents of arctic air prevent meltdowns while the machines work. This is strangeness of a high order.

The contradiction of an immaterial currency built on pricey materiel (custom chips and hardware, massive air conditioners, elaborate security gear) is only one of Bitcoin's paradoxes. It's an exquisitely logical concept and an exuberantly irrational bubble; a futuristic system that hearkens back to the gold standard; a currency where units of money have identities and humans are anonymous; a competitive model with a cooperative core. These paradoxes begin with Bitcoin's solution to the problem of "cryptocurrencies," forms of money that can be spent over digital networks anonymously and untraceably (and untaxably). How do we know that this digital note is worth what it claims to be worth? How do we know that the person spending it can only spend it once? (If your digital money is just a string of bits, why not copy and paste it and spend it as many times as you like?) And how do we know that the person making the digital notes won't make so many that they become worthless?

Nakamoto's answer was first announced on a mailing list for cryptographers on October 31, 2008, in the midst of the unfolding global financial crisis. "His" proposal was Bitcoin, a protocol for the collective verification of transactions. When you send a bitcoin (a string of characters with certain properties) to a payee, the transaction is broadcast out onto the peer-to-peer Bitcoin network, where it is added to a master public ledger. This ledger, the "blockchain," becomes the historical basis for a set of mathematical problems that the computers on the network compete to solve in order to calculate and thereby "discover" newly minted bit-coins--the process called mining. The problems get incrementally harder, which prevents bitcoins from being produced too quickly; the protocol is built to become more demanding over time. There are about twelve million in circulation now, with rates of new production slowing steadily, and only twenty-one million will be produced in total. This deflationary move makes Bitcoin behave anachronistically, like, say, gold, with a fixed supply theoretically stabilizing value without state regulation. (And, like gold, Bitcoin is an extractive industry: Those megawatt hours of electricity for the computers mostly come from great ashy pits of coal. …

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