Crypto-Current (066)

§5.862 — Under even modest techno-historical scrutiny, cryptocurrency divides within itself, or doubles. Beside the major topic of money-production is revealed a minor (and inward-turned) twin. Cryptocurrency has its own – additional – use for money, which is to say for itself, intrinsic to its possibility. It folds upon itself essentially. While making money – in multiple senses – it also makes of money a new, specific machine-part. There are things it needs doing which will not be done unless rewarded. Thus the initial return on the issuance of money – seigniorage – is allocated by Bitcoin to the maintenance of its own decentralization.[1]

§5.8621 — Only by way of money in its minor sense – i.e. as the mining compensation token – does money in its major sense undergo practical redefinition as an automatically self-sustaining decentralized system. The path of money production is shaped by the protocol in such a way as to spontaneously reinforce those user behaviors the system depends upon. So tightly is this incentive mechanism constructed that all bitcoins originally reward Bitcoin maintenance, while also stripping Bitcoin maintenance of discretion, by integrating it rigorously into the process of mining. There is nothing a bitcoin miner can do to sustain Bitcoin beside mining bitcoins. Sheer industrial effort, alone, is rewarded, and that has been made enough.

§5.8622 — It is particularly important to note that bitcoin mining rewards make no payment for loyalty, as compensation for non-defection. The miner is not in any respect a trusted official. The relation between money and trust has been fundamentally re-ordered. It is rather, now, that the miner makes bitcoins trustworthy through an activity which demands no trust whatsoever. The historical passage, as previously remarked, is from the consumption of trust to its production. §5.8623 — Currency units denominate incentives. There is nothing notably novel in this insight. Making incentive engineering inherent to currency production, however, proved a decisive technological break. Bitcoin initiates the epoch of cryptocurrency, strictly speaking, by structuring its protocol as a game. This is the sense the token now carries. Besides providing money, it directs those behaviors specifically required for its social implementation. The positive cybernetic loop here is conspicuous, and remarkably ingenious. The value of money is made a function of its own operation, as a directive force. The more bitcoins are worth, the more they engender an industry which builds Bitcoin.[2]

[1] It might be asked: Was it not always necessary to pay gold-miners – or at least for gold-mining – as also for work in the mint, or the central bank? Did not money, then, always involve a minor internal digression or auto-productive reflex? What is really new here? Raising this question is potentially informative, since it tends to isolate the cryptocurrency innovation. The incentive system at work in Bitcoin substitutes for monetary authorities. The only forerunner is to be found in primary precious-metal production, in which – crucially – the miner is rewarded immediately and automatically for industrial activity. Neither work contract nor marketing is necessary. Mining, of this kind, produces money. In the case of Bitcoin, all money – without exception – is mined, originating as property of the miner. Bitcoin is not, however, reducible to simulated gold. Bitcoin mining, unlike its concrete precious-metal predecessor, is also, simultaneously, minting, or monetary validation. A functional analog of the assay is built into the mining process, integrally. Its cycle produces trust, rather than drawing upon it. What makes it good money is made part of the way it makes money. This seamless loop is its essential innovation, synonymous with what cryptocurrency means.

[2] In the electronic wholesale markets of Shenzhen, cryptocurrency mining rigs have been added to the range of commodities on offer, alongside such comparatively recent product lines as vaping devices and drones. Here the power of incentives is starkly illustrated. This outcome was – of course – entirely unanticipated by the Bitcoin white-paper, which assumed general purpose personal computers (rather than dedicated ASICs) would be the engines of cryptocurrency mining, perhaps in perpetuity. 

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