Using Blockchain to Free Socialism and Capitalism from Government Interference

Imagine a world in which entrepreneurs compete using predominately Bitcoin, while central bank digital currency (CBDC) tokens help fund social programs and provide an opportunity for those who would typically fall through the cracks of society. Blockchain technology and the tokens built on top of them have the potential to unleash modern socialism, given that the majority of the global population now has access to hardware that can connect individuals to their States in ways that would have been impossible even just 10 years ago. The phone you own can mine, validate, participate in airdrops, collect bounties, and stake tokens, all with minimal disruption to the primary functions of the phone. Bitcoin specifically emancipates society from States themselves, playing the role of the hardest money known to man. An economy can be stable only when the ratio of easy money (i.e., CBDCs, regular fiat) to hard money (i.e., Bitcoin, Gold) is kept relatively constant. When the ratio deviates from the norm, markets act to push it back.

Hard Money vs. Easy Money

Hard money refers to a commonly accepted Store of Value whose supply is strictly limited in that production of the currency requires effort; examples include Gold or Bitcoin. Currently, the global economy is in a perilous state, not because of Capitalism per se but because when the dollar went off the Gold Standard, public sentiment became the only factor limiting the production of money. In this system, money is backed by debt. This means that if the American people want more cars and houses and are willing to take on that debt, then States could increase the money supply because they are confident the public will pick up the tab down the road: get stuff now, pay later. For many years, this worked incredibly well for America because the dollar became the world reserve currency. Therefore, anyone needing to buy oil or many other goods most likely would use US dollars, keeping demand for the dollar high despite the fact that America was producing less and importing more. By keeping interest rates artificially low, governments can nudge people to:

i) spend, not save money to INCREASE GDP and

ii) invest/speculate in the stock market for a RISING STOCK MARKET.

So, everybody is happy, and America is all the richer for it, right? Well, no… because eventually, the trade deficit catches up to you, and the only solution is to lower interest rates further and drop banking regulations to allow more (unqualified) people to take out loans. When that fails, the answer is to have the central banks buy government bonds.

In this case, the easy money is fiat (i.e., USD), but it could just as easily be a token like Dogecoin, whose money supply is inflationary by default/design. For example, let’s say some state/local actor controls the entire supply of DOGE and distributes it according to people’s contributions in helping grow the DOGE community. If the coin was exchangeable for goods and services within the community, and if individuals were able to pay at least a portion of their taxes with that coin, then you would have a currency that could be useful for ensuring that everyone’s basic needs are met, regardless of whether you’re capable of working or not.

That being said, this form of payment will not be desired by those who had the courage to put their own hard wealth on the line to start a business. Once a business can be selective over the money it accepts, it will not want to be paid in a token that does not retain its value over time. It is understandable that once a company or entrepreneur has ‘earned’ an amount of capital, they do not want its value controlled by the whims of individuals. They also certainly want to be able to shelter that wealth from any imminent global financial calamities. Capitalists put their money to work when they see an opportunity to create wealth and save money when there currently is no such opportunity. Because of this, they earn interest from those willing to take chances on new ideas. The fact that the supply of hard money is limited is precisely what gives people the confidence that it is safe to save and wait for a REAL opportunity for wealth creation. Now there is a possibility that allowing individuals such sovereignty over earned wealth could stifle economic growth, but at the same time, it seems reasonable to create disincentives to rampant speculation to reduce the probability of price bubbles.

The only way to accomplish this is to provide mechanisms to protect savers.

Gone are the days when prices were established at the point where supply meets demand. Such a number can be a good measure of value ONLY IF the number is measured in a stable Unit of Account. The price action (i.e., volatility) we see today with Bitcoin is less a function of Bitcoin’s value and more a calling into question the value of US dollars as a stable Unit of Account. Bitcoin provides censorship-resistant money and demonstrably predictable currency issuance to a financial world reeling from the uncertainty of where to allocate capital. The world desperately needs a Store of Value it can trust that is free from the arm of the State to keep the State operating honestly with its easy money issuance. The new fiat issued by States in the form of CBDCs will help lubricate markets in times of global downturn (when few want to spend) and can help individuals earn a living who otherwise wouldn’t have the skills needed to command earning Bitcoin.

Aspects of Communism and Other Political Structures

In general, some aspects of blockchain technology reflect capitalist ideals, while others reflect communist ones. On the surface, communism and Bitcoin appear to be complete opposites. Communism is centralized, planned, statist, and totalitarian. Cryptocurrency, by contrast, is decentralized, emancipatory, and open-source. However, with further evaluation, there appears to be a non-combative ground between the two, where both can flourish while remaining mostly independent of each other. We can operate and compete in a cut-throat capitalist society with no income taxes because the Unit of Account is Bitcoin while still belonging to any number of communities we need to satisfy ourselves (i.e., socialist, religious, special interest groups). Taxes will be extracted at the community level and used to help grow those communities that best serve the people.

When thinking about socialism, people often equate it with communism. This is incorrect, and we make a point to distinguish between the two to avoid confusion between common beliefs about communism and what Karl Marx actually espoused (much of which aligns with libertarianism!). Only when we understand precisely in what way Marxism opposes Capitalism can we shed the term ‘socialism’ from our lexicon. Until then, understand that ‘socialism’ acts as a sort of middle ground between completely free-market capitalism and completely oppressive communism.

Doubt as you may, Karl Marx viewed communism as a safeguard for freedom. He sought a radical revolution that would overturn the state, much like Martin Luther did with the church in the 16th century. Both Marx and Friedrich Engels saw that the culture upon which a healthy and fair society can grow must be seeded with free individuals. Early on, the Marxists were united with collectivist anarchists in the International Workingmen’s Association (1864) in their struggle for the collectivization of property and overthrow of the state. Where the two groups disagreed was that Marx believed that the destatization of society had to be accompanied by another protocol or organization; otherwise, history would merely repeat itself. If this new order was left without a structural hierarchy in place, the model preferred by the anarchists, Marx believed private forces would confiscate public common property and rise to become an even more destructive kind of state: a system for the few at the expense of the many.

Marx was skeptical that the market alone could replace the government. He needed a catalyst that could force the “market to remain a market” and keep it honest and without interference from outsiders or bad actors. In its first form, landowners created states to protect their private property. Individuals could rely on the state to help facilitate the advancement of self-interest, and the state could act to control and deter competition, provided that individuals followed the rule of law. If he were alive today, Marx would side with libertarians in freeing markets from political control. It’s telling that both Marxism and Libertarianism fail essentially from the same contradiction. Though both groups want individuals to be free from political control, both advocate for councils of elites that exert control over those people.

Now, let’s tie this back to the technology behind Bitcoin. Rather than having to rely on individuals, the blockchain uses a system in which each participating individual helps to form consensus around the state of accounts and the protocol itself. By placing its decision-making in the hands of individuals in a trustless and decentralized way, Bitcoin, the first blockchain with the largest network, has the potential to become the missing piece of a capitalist/socialist superstructure. Bitcoin solved the problem first enunciated by Norbert Wiener back in the 1940s. He imagined that information technology could replace much government bureaucracy, but he was not sure exactly how that would happen. With systems such as this, society can now find equilibrium through recursive market-driven feedback loops run from a network of computers spread around the world.

Bitcoin also meets the requirements outlined by Louis Althusser for structural Marxism to be viable. For Althusser, Marxism describes a socio-economic system with multiple ways to onboard, no center, no command, and numerous interacting subsystems capable of independently functioning and breaking down without destroying the whole system. Further, Bitcoin addresses what Hayek identified as having doomed Soviet success — a lack of market information on the fair price of commodities. Under capitalism, prices are discovered naturally. Individuals are motivated to charge less for a good if they can produce it at a cheaper cost since by doing so, you make it more difficult for your competition to survive.[JM1]

Aspects of Computer Science and E-currencies

The Bitcoin blockchain contributes to the long-term development of information technology and collective intelligence as well. This is similar to how Stewart Brand understood computers as advanced communication tools earlier than most when others saw them merely as glorified calculators.

The advancement of computers and the Internet had an equalizing effect on society by providing e-commerce opportunities, remote jobs, and communications tools that give a voice to marginalized sectors of society. Simultaneously, the Internet enriched banks, the military-industrial complex, multinational telecommunications companies, retail corporations and even created new societal controls. It created a sharing economy, delivering free labor to cognitive capitalism. The Internet’s early decentralization eventually evolved into a re-centralization as massive media companies and cable providers took control of communication. Bitcoin and blockchain technology seek to decentralize it again, providing an equalizing opportunity for startups entering the ground floor of the then-nascent technology. While Fortune 500 companies waited to use blockchains until they saw ground-breaking success, startups saw it as the future of finance and flooded to its decentralized servers. Crypto.com, the wallet website; Bitpay, the payment processor; Elliptic, the blockchain analytics provider; and Xapo, the integrated currencies wallet, all joined the Bitcoin ecosystem relatively quickly.

What drew companies and whole communities to Bitcoin and its blockchain?

At its core, Bitcoin is a political, economic, and financial technology all in one. Before blockchains, you had to choose between consensus or decentralization. You could have anarchy or societal control. Consensus required a central body to control and validate community members. Objectivity required a trusted third party, but that third party could become corrupted and misuse consensus to their own advantage. Bitcoin is a protocol for generating consensus in a decentralized way. Miners commit resources to solve puzzles in order to receive token rewards and the privilege of updating the state of the global ledger. What keeps the miners from updating the ledger honestly is that it is very expensive to lie; miners can have their token rewards taken away if ‘caught,’ and they’ll have spent plenty of money and energy trying to produce work that, at the very least, appears to be honest. With the economic incentives calibrated just right, Bitcoin makes it possible for people who do not know each other spread around the world to agree upon all account balances without relying on any particular individual. Such a system frees businesses from capital restraints and from depending on credit card companies and other payment processors. It also has the potential to cut out banks and open up incredible financial services to individuals without a bank account. Finally, we have freedom from all and for all. The capitalist and the socialist can work together to mine the same coin, each towards their respective ends.

In a democratic republic or democracy, leftist groups typically call for increased equity. The blockchain enables exactly that and creates an environment for equality of opportunity sought by the government. By abolishing the central banks and state, blockchain technology becomes the purest realization of the Marxist ideal. Typically, entering requires risk and the financial means to weather losses in the beginning. However, under certain conditions, individuals could enter a token reward community with minimal upfront monetary cost and be paid with bounties (i.e., contributing code) and the staking of airdropped coins (i.e., participating in governance). Essentially, membership into a community entitles one to partake in a compensated democracy. While a market typically qualifies as elitarian — both elitist and egalitarian — the blockchain provides an option in which users do not need to be forced into any one particular community or another. Instead, the individual is free to opt-in to as many or as few as they see fit. This global political organization minimizes fragility.

The upside of this political organization is an empowered, stateless, self-governing robust society that imbues its communities and its citizens with the type of positive freedom of which Amartya Sen writes: a system in which everyone takes part and enjoys respect. Our free society becomes a conglomeration of one unified capitalistic Bitcoin-centric community and many satellite crypto token socialist communities, each with varying degrees of interaction/exchange between themselves and Bitcoin. The world can respect that there are many ways individuals can choose to express themselves; some activities will be remunerated with Bitcoin, but many will not. It is important that those who cannot earn Bitcoin, for whatever reason, are still able to satisfy their basic living needs with the dignity of having earned something for their contribution to society, whether appreciated by capitalism or not.

While Marxists can see the blockchain as an opportunity to institute a community that does away with capitalism altogether, Satoshi created Bitcoin in response to the 2008 banking crisis to protect individuals from wealth redistribution and confiscation. In spite of this, the underlying technology behind Bitcoin — a cryptographically secure and decentralized ledger of accounts — is precisely the piece Marx was missing to keep the political system he envisioned honest, i.e., free from a ruling party controlling capital flows. Now workers can be paid directly and in proportion to the work, they contribute to the system. In effect, this would be socialism with property rights, though those rights could never be as unassailable as under capitalism. Marx’s law of value is then satisfied by Bitcoin — where value must equal accumulated work, in this case, the work done by the computers employed to secure the network. In actuality, given that the blockchain is a public ledger accessible to anyone, it aggregates information that can then be more easily processed by humans, thereby contributing to the accumulated intelligence of society. From that perspective, a surplus-value is created. As overall wealth increases, collective intelligence also increases. This eventually increases global wealth.

Bitcoin has been proven to protect capitalism and help it escape the grasp of state regulations. It has helped people worldwide cryptographically secure their capital and shelter individuals from the devastating effects of runaway inflation. With Bitcoin, users are their own bank and become economically sovereign in that they do not need to trust a third party to validate and release their holdings. Most importantly, for those in countries hampered by rampant inflation, wealth under Bitcoin is denominated in a store of value with a fixed monetary supply schedule. However, since it is still in its price discovery phase as a nascent technology, the speculative value of that capital has grown considerably over the last ten years relative to $USD. This trend is likely to continue at least until state-issued money maintains a steady rate of issuance.

Cryptocurrencies allow us to optimize the relationship between money and activity by enabling users to convert information and energy into capital directly. These token communities that reward member contributions without capital outlay amount to ontological socialism. Alternatively, the capital risks assumed by entrepreneurs with Bitcoin ensure a strong arena for capitalism. Blockchain technology provides the opportunity for equity (i.e., things) and equality (i.e., process) to be distributed and set as fairly as natural law could dictate, enabling both capitalism and socialism to thrive under one free and open society.