Crypto-Current (071)

§5.8734 — The earliest alt-coins were Bitcoin project forks (or ‘source code forks’).[1] With the open-source Bitcoin protocol – and its mutant descendants – available as hereditary material, they introduced variations to optimize different parameters, by changing the balance of trade-offs between features such as transaction speed, pseudonymity, resilience, and trustlessness. In this way tokens could be flavored to different preferences, in a process of niche exploration. Within this context, Bitcoin’s very substantial market dominance tends to vindicate the pattern of optimization locked into its protocol. Alternatives are comparatively unattractive. …

§5.87341 — Alt-coins, then, attend Bitcoin. They are part of what Bitcoin has brought about. In keeping with this, alt-coins have promoted themselves, typically, as ‘Bitcoin 2.0’ developments of the crypto space. This can mean supplementing Bitcoin, by directing blockchain-based token systems at a variety of specialized functions, and traits. It can also mean deepening the stack, by layering applications upon the Bitcoin blockchain infrastructure. Between Bitcoin and alt-coins, then, there is general – and often strong – complementarity. That synergy exceeds competition is also the market verdict. Price movements of Bitcoin and alt-coins are positively correlated. They share a fate.[2]

§5.8735 — From the mid-second decade of the new millennium, the complexity of the alt-coin ecology had grown to exceed any convenient oversight. There were already far too many coins, doing too many different things, in too many different ways, to allow accurate summary. Nothing beyond suggestive – though non-random – sampling is realistic here. Due to their remarkable diversity, Namecoin, Ripple, and Ethereum, examined briefly in series, are able to provide a rough sketch map of the alt-coin territories.

[1] A ‘project fork’ is a mutant copy. Source code is repeated, with variation. It thus tends to produce lineages analogous to those resulting from biological evolution. Abstract Darwinian dynamics are then to be expected from it. Forks of any kind are speciation events.

[2] Alt-coins are the worst way to hedge against Bitcoin.

Crypto-Current (070)

§5.8733 — What have we seen so far? The most striking phenomenon has been a massive – and surely unprecedented – proliferation of monetary tokens. Alt-coins began to appear within a few years of the mining of Bitcoin’s Genesis Block (03/01/2009).[1] Namecoin and Litecoin arrived in 2011, Peercoin in 2012. The year 2013 saw the release of Dogecoin, Gridcoin, Nxt, Primecoin, and Ripple. That July, Mastercoin[2] – conceived as a supplementary protocol layer supported by and enhancing Bitcoin – held the first token sale (or Initial Coin Offering). Exponential growth continued into 2014, as Auroracoin, Dash, MazaCoin, Monero, NEM, NEO, PotCoin, Stellar, Titcoin, Verge, and Vertcoin, among others, deepened and broadened the product stream. Ethereum was introduced – and forked – in 2015. Tether appeared in the same year. Seven years into the crypto epoch, then, alt-coins had established themselves as a conspicuous part of the emerging monetary landscape. In the final years of the decade, the upward curve of the alt-coin economy would sharpen still further. 

§5.87331 — While many alt-coins are of questionable value – and not occasionally outright scams – the flood of varied crypto tokens promoted an economic innovation of scarcely deniable importance: the ICO. An ICO – or initial coin offering – raises start-up funding through money creation. The absolute sums involved remain quite limited when compared with more conventional methods of business funding, but the trend lines have been remarkable. The socio-economic originality of the ICO is yet more remarkable.

§5.873311 — ICO revenues amounted to less than US$80 million in 2016. On a monthly basis, they peaked in September, at a little over US$21 million. The take-off year was 2017, which saw a thirty-fold increase. During the second quarter of that year, they were more than doubling each month (the pattern broke in July).[3] Over the whole year ICOs generated revenues worth over US$2.4 billion. The peak was reached – once again – in September, when US$537 million was raised. The month of June 2018 saw an extraordinary US$4.17 billion reaped by ICOs, almost entirely for EOS,[4] contributing over two-thirds of the year’s total US$6.21 billion. Between spring 2016 and fall 2017, total alt-coin market cap rose from slightly under US$26 billion to over US$409 billion.

§5.873312 — An ICO is pure seigniorage. It thus restores to businesses an economic function which had been entirely alienated to the state. Unlike an IPO – the Initial Public Offering of a private company – an ICO executes a currency exchange, of a special kind.[5] The targeted (‘offered’) coin is characterized by its elevated virtuality. It has not yet, or actually, been in circulation prior to the ICO. Its value is thus discounted for risk, and for viscosity. This asymmetry on the actual-virtual axis – which is to say, in time – does the work of the ICO. Through it, the coin-releasing venture acquires actuality, bringing itself forward. Understandably, then, the ICO has been understood as an incremental advance in the formalization of an essential capitalistic function. Resourcing enterprise, through credit and then stock markets, was always an actualization mechanism. The difference lies in ever more overt and thoroughgoing monetization. Making money and making a currency communicate across a condensing continuum. Generalization of the ICO suggests eventual fusion. The end-game is for every economic project to be denominated in its own terms. At such a point, financing and currency proliferation fully converge. A new and distinct monetary epoch would not only have been initiated, but accomplished.

[1] A selective list and brief description of alt-coins is provided in the apparatus. Since over a thousand alt-coins had already been released by spring 2018, an exhaustive treatment is entirely infeasible.

[2] Mastercoin was subsequently renamed Omni.

[3] Source:

For month-by-month 2016-2018 aggregate ICO revenue numbers, see:

[4] EOS entered the crypto space with its EOSIO blockchain protocol, as a platform for smart contracts and decentralized applications. It competes most obviously with Ethereum. The coin peaked in May 2018, with a market cap of US$15.5 billion. Almost 90% of this value had been lost by the end of the year. … The EOS.IO white paper can be found at:

[5] The difference between an IPO and an ICO is not simply qualitative. Shares, too, are money, though at a comparatively low level of intensity. (More precisely, but still vaguely, they are included in Mn where n is undetermined but > 4.)

Crypto-Current (069)

§5.873 — The Bitcoin event is a monetary Cambrian Explosion.[1] Its signature, in certain regards, is diversity. The ‘coin’ – in its new sense – is a generic term, to reflect this. The multiplicity of ‘coins’ is less a matter of amounts than of types. The re-minting of the term responds to an extraordinary proliferation in the species of comparatively cash-like money.

§5.8731 — Two basic families of alt-coins are initially distinguishable. The first consists of schismatic products from the Bitcoin main chain, generated by hard forks, in cladistic order. Bitcoin Cash (BCH) and Bitcoin SV (BSV) are the relevant lineages. Both of these coins are among the top ten cryptocurrencies by market capitalization. The second family, unified only by its contrast to the first, is far larger and more variegated, consisting of coins without Bitcoin ancestry. A number of taxonomic approaches to the principled sub-division of this alt-coin family already exist.[2]

§5.8732 — Within cryptocurrency circles, alt-coins as such are profoundly controversial. Among Bitcoin maximalists they are considered a pestilence.[3] Their existence is interpreted as a pathological side-effect of Bitcoin’s emergence, and a distraction from its inevitable ascent to currency monopoly. On the other side of the ledger, strains of principled currency pluralism undoubtedly exist, even if heavily outnumbered by more opportunistic varieties of alt-coin promotion. Even if a plausible argument can be made for monetary natural monopoly, currency competition is not without a case.

§5.87321 — In respect to alt-coins, discursive controversy is not a tribunal of special importance. The market delivers a superior verdict on cryptocurrencies, with commentary – at most – as an annex. This verdict is currently mixed. The first point of note is that Bitcoin’s market capitalization considerably exceeds that of all other cryptocurrencies combined.[4] In mid-2019 it was almost eight times that of Ethereum (ETH, the second ranked) and well over thirteen times that of Ripple (XRP, the third). Bitcoin, then, is evidently not merely one cryptocurrency among others. On the other hand – if not quite equally – alt-coins are nowhere close to being nothing. The latter fact is quite possibly a leading clue. That is to say, there are reasons to suspect, in regard to alt-coins, that we haven’t seen anything yet.

[1] The analogy is close enough to function as a technical description rather than a figure of speech.

[2] The classification of alt-coins initiated by Wikipedia is almost certain to prove influential, and perhaps even decisive. It grounds the most fundamental level of taxonomic order in the variation between types of consensus mechanism. Proof of work cryptocurrencies, the largest phylum (including Bitcoin and its descendents, among many others), is then sub-divided by cost-function language (SHA-256, Ethash, Scrypt, Equihash, CryptoNote, X11, Lyra2, or other).

[3] A stance against alt-coins is implicit within the term Bitcoin Maximalism. Several essential ingredients of the monetary ideology make this claim uncontroversial. Bitcoin Maximalism includes at least the following commitments: (1) Any currency tends towards natural monopoly; (2) Bitcoin, as the best currency, is especially prone to exhibit this; (3) cluttering a currency with specialized traits or characteristics has no robust value, and; (4) inhibiting the ascent of Bitcoin to global monetary supremacy lacks strategic justification. Other than Bitcoin, there are only ‘shit-coins’ – in the argot of those most committed to the former’s absolute monetary sovereignty.

[4] Cryptocurrency price movements are not only notoriously volatile, they are also highly correlated. On empirical grounds, then, or by precedent, market capitalization ratios between coins can be expected to exhibit greater stability than their absolute values. Yet this hypothesis is not perfectly neutral. Bitcoin maximalists implicitly anticipate an era of price divergence, produced by a mix of ‘hyperbitcoinization’ and alt-coin extinction. Neither of these trends was yet evident in late 2019. While no truly reciprocal expectation is likely – based on assumptions of general alt-coin advance relative to Bitcoin – it would be surprising if specific alt-coins had no ‘maximalist’ advocates. The prediction of short-term price convergence – to eventual cross-over – built into such a position is, likewise, currently undemonstrated.

A list of the top hundred coins by market capitalization can be found here:

Crypto-Current (068)

§5.87 — Bitcoin opens a new monetary epoch, beyond Macro. Macro persists, henceforth, as a stubborn archaism. The macroeconomic monetary types (M0…MΩ) are undergoing replacement – immediate in principle and incremental in practice – by cryptocurrency coinages. Bitcoin does not restart this displaced series at M0, but somewhere in the middle, characterized by intermediate liquidity. In the direction of superior liquidity, experiments are oriented to lowering transactional friction, and increasing scale. Money is narrowed insofar as it becomes more conveniently cash-like, though with lower quality as a store of value. These phases of the spectrum are inhabited by stablecoins, large block-sizes, and dedicated payment protocols. In the other, broader direction, of higher viscosity, the orientation is towards monetary scope, which is to say ever wider asset classes, and – most significantly – smart contracts. In these – much vaster – phases of the spectrum, blockchain development can seem to be almost entirely disconnected from money production, involving ‘coins’ no less exotic than the particles of high-energy physics. It is worth briefly examining each of these ranges in turn, to glimpse what money is becoming.

§5.871 Narrowing our attention, in the monetary sense, is re-visiting the block-size debate.[1] In this regard, as more generally, scalability is the avatar of liquidity. The Mainstreamers seek, as rapidly as possible, to take Bitcoin towards M0. They interpret strictly constrained block-sizes as an obstruction to this development. Failing in their attempt to overcome Ultra resistance and direct Bitcoin down the monetary spectrum, the Mainstreamer agenda found its vehicle in a hard fork, which split off Bitcoin Cash (BCH) in 2017. The subsequent market verdict tends to strongly vindicate the Ultra position.[2]

§5.8711 — An alternative to block-size relaxation is tiering. Rather than shifting the Bitcoin blockchain down the monetary spectrum (through block-size relaxation), or splitting the chain, tiering supplements the chain with a dedicated payment facility. Payment processing takes place predominantly off-chain. The block-chain is invoked only as an arbitrator, securing transactions virtually. This is analogous to the way potential legal remedy secures contracts.[3] This is the approach taken by Lightning Network, and supported by the BIP141 SegWit soft fork.[4] It is – at a minimum – indicative of the direction in which the scaling of Bitcoin will proceed. Smart contracts, such as those anchoring Lightning Network transactions to the Bitcoin block-chain, are the essential building blocks.

§5.872 Broadening attention enters far more extensive and variegated monetary territories. Once the threshold into cryptocurrency is crossed, the computerization of money quickly proves irreducible to moving money between computers. Rather, money as such becomes demonstrably computational. This is to say, computational capability is increasingly subsumed into money. A new world of intelligent assets gradually emerges.

§5.8721 — The tendency of cryptocurrency development, no less than that of the Macro regime it incrementally displaces, is to liquidate all firm distinction between contracts and currency transactions (or currency as such). This is demonstrated by prevailing usage of the ‘-coin’ suffix, which references an origin in decentralized digital currency, but applies to the entire commercium of trustless, P2P deal-making. Anything that can be firmly committed to provides the potential content for a blockchained X-coin system. Reciprocally, definite commitments, in general, acquire explicit monetary characteristics.

§5.87211 — The implicit content of any commercial transaction is exposed to formalization and technical modification as a smart contract. Conditionalities are spelt out specifically, and practically, in software. Terms become code. A smart contract is defined by Szabo as “a set of promises, specified in digital form, including protocols within which the parties perform on these promises”. They are digital upgrades of evolved formal relationships which have been ‘techno-hardened’ in a double sense. Firstly, their formalization has been bound to – and incarnated within – the operations of specific physical mechanisms (Szabo’s list of precursor technologies includes vending machines, POS terminals, and bank payment clearing systems). Secondly, and relatedly, they pose a technological obstacle to breach of contract. They are comparatively mechanized, and trustless. In game theoretical terms, they do not offer a defect option – or opportunity to ‘cheat’ – but rather preclude it originarily. They are complex hard commitments. Any settlement negotiations have been concluded a priori. The guiding principle, as he argues, is that “the formalizations of our relationships – especially contracts – provide[s] the blueprint for ideal security.”[5]

§5.87212 — Szabo differentiates reactive from proactive approaches to security. The distinction separates those systems that involve punishment and restitution from those that obviate them. The former are far more closely bound to the intervention of ‘trusted third parties’. It is the latter category that converges with the smart contract. Smart contracts are intrinsically resistant to violation. Vending machines are an illustrative prototype. The historical progression leads “from a crude security system to a reified contract” whose terms are substantially self-policing. Since anything which can be the object of a business deal can be – in principle – covered by a smart contract, the field under consideration is no smaller than that of property in general. It shares the same horizon, in other words, with money at its maximally illiquid extension.

§5.87213 — The potential of smart contracts to facilitate criminal activities has understandably triggered some concern.[6] In particular, it provides the capabilities required for the long-dreaded ‘assassination market’ anticipated by Jim Bell in the mid-‘90s.[7] A ‘contract’ could – with remarkable smoothness – take on the sense this term bears within the organized criminal underworld, among others. The privatization of justice can look rough. This too is not only something money could do, but potentially part of something that money is.

[1] See §4.45-4.51

[2] The splitting of Bitcoin Cash (BCH) from Bitcoin (BTC) maps very neatly onto the money spectrum. The cryptocurrencies were divided by a hard fork, which occurred on August 1, 2017. Bitcoin Cash blocks were increased in size to 8MB (from Bitcoin’s 1MB). In mid-2019, Bitcoin Cash was trading at a value less than a thirtieth of Bitcoin’s. A technical potential for superior liquidity realizes neither liquidity nor scale without broadly-based market endorsement. A subsequent hard fork, on November 16, 2018, divided Bitcoin Cash from Bitcoin SV (BSV), with ‘SV’ standing for Satoshi Vision. Cryptocurrency investors have yet to be persuaded. The market cap of Bitcoin SV settled at roughly half that of Bitcoin Cash.   

[3] “Transactions can be made off-chain with confidence of on-blockchain enforceability. This is similar to how one makes many legal contracts with others, but one does not go to court every time a contract is made.”

[4] Securing Lightning Network transactions required an upgrade to the Bitcoin protocol. Specifically, the integrity of the new off-chain layer required a correction to ‘transaction malleability’ on Layer-1. This was effected by the Segregated Witness (SegWit) soft fork (BIP 141), activated on August 24, 2017. SegWit adjusts the way signatures are registered on the blockchain. The Lightning Network is built out of bidirectional payment channels, which reticulate in an open-ended system. The integration of two nodes into a channel establishes a smart contract. Opening a channel requires a ‘funding transaction’ which is registered on the blockchain, but subsequent payments remain off-chain, unless a dispute arises, or until the channel is closed. The Layer-2 system is thus anchored on the blockchain, as arbiter, but one only rarely invoked. The security of the main Bitcoin blockchain is leveraged economically. Since late spring 2018, the network has been growing exponentially from a low base, with a doubling period of roughly five months. It is envisaged as a complete decentralized substitute for the banking system, connecting all financial agencies down to the level of individuals – and even below – as nodes.  

Joseph Poon and Thaddeus Dryja published the Lightning white paper in 2016. It can be found online at:

[5] See:

[6] See for example:

[7] The concept is outlined in Bell’s short, incandescently brilliant, and almost peerlessly ‘edgy’ essay ‘Assassination Politics’. … The upsetting features of assassination politics flow without exception from the full-spectrum subsumption of social coercion into the market. State monopolization of violence is subverted by a distributed auction. …

Crypto-Current (067)

§5.863 — The final ingredient in the suite of soft technological advances that are drawn together in the initiation of cryptocurrency simultaneously resolves the Byzantine coordination conundrum and secures monetary tokens against duplicitous proliferation. It thus integrates the seemingly disparate challenges of decentralization and deflation. To repeat the point with reverse emphasis, it protects a decentralized monetary system against the twin threats of coalescence (into the enemy ‘city’) and inflationary devaluation. It has, in both aspects, to fully substitute for the function of pseudo-transcendent trusted authority. This requires a production of immanent or intrinsic credibility. The computer science solution was found in proof-of-work.

§5.8631 — Proof-of-work dates back to the final years of the last millennium. The critical step was taken by Adam Back[1] in his proposed ‘counter-measure’ to the exploding Internet spam problem.[2] Proof-of-work credentials could be used to indicate the seriousness – or non-frivolity – of a message. By demonstrating that trouble has been taken, they recommend attention. In the case of the Byzantine generals, they separate committed communications from glib deceptions, without recourse to extrinsic validation. In the case of monetary accounting, they preclude cheap forgeries, and thus eliminate every normal incentive to forge.

§5.86311 — Back quickly realized that proof-of-work credentials (or cost tokens) were intrinsically money-like. “We use the term mint for the cost-function because of the analogy between creating cost tokens and minting physical money,” he notes.[3] They were both earned, and valuable. In fact, all six of the essential monetary qualities could be attributed to them. This insight was formalized – as hashcash – in 1997.[4] Back described hashcash as a ‘denial-of-service counter-measure’, although its potential applications were far wider.

§5.8632 — A cost-function is time-like, or asymmetric. It has the synthetic a priori characteristic, essential to cryptography, of being difficult to discover but easy to check. Back states that it “should be efficiently verifiable, but parameterisably expensive to compute.” The combination defines (valid) work. Concretely, work measures applied computational power. It has the game-theoretic meaning of commitment. While deterministic cost-functions are possible, those adopted by hashcash and subsequently Bitcoin are probabilistic, producing tokens based on the performance tested set by particularly arduous (trial-and-error) exercises, precluding short-cuts.[5]

§5.86321 — Among the practical concepts introduced into monetary history by proof-of-work, perhaps the most important is difficulty. Several points are worth noting explicitly. Firstly, the asymmetry in the difficulty of production relative to checking is so massive that the latter is treated as of negligible difficulty. This comparatively informal side-concept then contributes precision to the idea of convenience. Secondly, and of greater technical consequence, difficulty – while probabilistic – can be exactly quantified. In this second critical asymmetry, the problems posed as proof-of-work tests are fully understood even while completely unsolved. They can not only be finely determined, but also set, and adjusted. This makes difficulty a technical variable. In cryptocurrency, it substitutes for all macroeconomic controls.

§5.86322 — Hashcash catalyzed a theoretical breakthrough in cryptocurrency-oriented computer science during the final years of the last century. Most notable were two sophisticated proposals published in 1998, Wei Dai’s B-Money and Nick Szabo’s Bit Gold. Both were conceived as decentralized money systems based on a proof-of-work function. Compared to Bitcoin, neither proposal was fully realized.[6] Neither, in any case, was implemented. Proof-of-work had, however, securely established itself in principle as the foundation upon which money would come to rest.

[1] In a 2002 retrospective on hashcash, Adam Back refers to earlier work by Dwork and Naor who had already “proposed a CPU pricing function for the application of combating junk email.”

Dwork, Cynthia and Naor, Moni Naor, ‘Pricing via processing or combating junk mail’, Proceedings of Crypto (1992).

Dwork and Naor:

[2] ‘Spam’ is used here in an expansive sense. It encompasses the primary explicit object of Back’s concern, which is the Sybil attack. A Sybil attack ‘spams’ online identities, rather than advertising messages, in order to overwhelm systems with voting procedures (which would include pre-proof-of-work consensus mechanisms). The term ‘Sybil attack’ is much younger than spam. It seems to have been coined in 2002 (or earlier) by Microsoft researcher Brian Zill. The term took its name from the book Sybil, a case study in dissociative identity disorder.

[3] For this and subsequent Back quotes, see:

[4] Of the critical computer science components required for the Bitcoin protocol, proof-of-work was the latest to become available. Cryptocurrency predecessors B-money (Wei Dai) and Bit Gold (Nick Szabo) were both formulated in 1998, less than two years after hashcash was introduced. That Bitcoin did not arrive for another decade might, then, be considered a puzzle of interest. It suggests, at least, that momentum in software development is easily over-estimated. It is also possible that the PC hardware and Internet infrastructure conditions for Bitcoin ignition were not earlier in place. Perhaps an accelerated arrival of Bitcoin, even if conceptually mature, would have been practically premature. Additionally, regarding supportive conditions, the socio-cultural context of the 2008 financial crisis and resultant mass disillusionment with central bank monetary competence is suggestive. In the final years of the new millennium’s first decade, the case for an escape from macroeconomically-managed money made itself. It awaited only cogent formulation.

[5] “The hashcash CPU cost-function computes a token which can be used as a proof-of-work,” Back explains. This cost-function “is based on finding partial hash collisions on the all 0 bits k-bit string 0k,” as would also be adopted later by Bitcoin.

[6] B-Money remained dependent upon third parties for dispute resolution, while Bit Gold did not employ proof-of-work for Byzantine consensus (but only as generator of value) leaving it vulnerable to Sybil attacks. It is difficult to note these deficiencies without recognizing the economical genius of the Bitcoin synthesis. With Bitcoin it was for the first time shown what proof-of-work could do.

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. 

Crypto-Current (065)

§5.8613 — As differences accumulate in a decentralized database, it tends naturally to divergence. No authoritative tribunal exists in which to resolve disagreements. Not only is trustlessness the default, but the space for malicious deception is not easily limitable. Since contracts are agreements, a decentralized system without trusted third parties is a challenging place to do business of any kind. Those special – if typically momentary – contracts which are monetary transactions are no less profoundly problematized than any other. More specifically, insoluble controversies over their unique execution would generate double spending problems, which no money system could tolerate. Without an effective consensus mechanism, the basic compatibility of commerce with radical decentralization is plausibly questionable.

§5.86131 — The general solution space for dissensus and double-spending problems in decentralized systems has been explored under the name of Byzantine fault-tolerance (BFT).[1] This measures the resilience of a network in respect to the operation of treacherous nodes. ‘Byzantine’ references the Byzantine Generals Problem, which was conceptually formulated in the late 1970s, although the name itself is a few years more recent.[2] The Byzantine Generals Problem belongs to a larger class of ‘Generals Problems’ in computer science, all of which address questions of coordination between independent networked modules or agencies, especially when complicated by trustless communication. The joint work of Leslie Lamport, Robert Shostak, and Marshall Pease is the crucial reference.[3]  

§5.86132 — When apprehended teleologically, which is to say given Bitcoin, the Byzantine Generals Problem and Proof-of-work fit together like lock and key. Current discussion thus tends to scramble the two together, with the term ‘Byzantine Fault Tolerance’ serving as something close to a synonym for proof-of-work validation. Satoshi Nakamoto’s engagement with the Byzantine Generals Problem inaugurates the genre.[4] The consequence is an obscured synthesis. Something is brought together by Bitcoin Byzantine Fault-Tolerance whose original geneses were quite distinct.

§5.86133 — The central concern of Lamport, Shostak, and Pease is to determine the cost of reliability in insecure systems. Since fault-tolerance – in their estimation – is attained only through redundancy, it has a price determined by the measure of necessary message duplication. The message validation algorithm they propose requires that at least two-thirds of the communicating nodes are trustworthy (without – of course – knowing in advance which ones). No appeal is made to proof-of-work credentials, or in general to any kind of intrinsic message credibility.[5]

§5.86134 — Beyond their function as a technical designation, the Byzantine Generals mark the emergence of a rare modern myth. They plot an assault upon a city, under conditions that typify the ‘nomad war-machine’ in its philosophical acceptance – that is, dominance of external relations.[6] Having no interiority, the attackers have no default information security. Their domain is trustless, and primordially disunited. Integration is never given, but only strategically produced, as a precarious synthesis. It is this condition that the word ‘Byzantine’ is hijacked for, irrespective of the historical incongruity involved. The attack is – strictly – a critique. We have then, in the Byzantine Generals Problem, the mythical image of an assault upon centralization, unity, and interiority, staged from the Outside. Computer science, and later a far wider audience, is drawn into dramatic sympathy with this attack, and its ‘Byzantine’ heroes. In tackling the problem, or watching it tackled, we root for the unnamed city to fall.

[1] See §4.08+

[2] The Byzantine Generals Problem was immediately preceded  According to a comment appended to the 1982 article, the ‘generals’ confronted by this archetypal network coordination problem were Chinese, and then Albanian, before finally being identified – for reasons of diplomacy – as Byzantine.


[3] See in particular Lamport, Leslie; Shostak, Robert; and Pease, Marshall; ‘Reaching Agreement in the Presence of Faults’ (April 1980) and

‘The Byzantine Generals Problem’ (1982).

[4] See §4.08

[5] Some qualification of this claim might be suggested by the fact that in their 1982 paper, Lamport, Shostak, and Pease entertain the possibility that secure digital signatures could contribute to Byzantine solutions.

[6] “As for the war machine in itself, it seems to be irreducible to the State apparatus, to be outside its sovereignty and prior to its law: it comes from elsewhere.” (Deleuze & Guattari, A Thousand Plateaus, p.352)

Crypto-Current (064)

§5.8612 — Decentralization of the ledger requires massive multiplication, and thus an effective method of compression. Only in this way does it become tractable to distributed, modestly-sized nodes. The crucial computer science innovation in this regard is the Merkle Tree. The capabilities drawn upon date back over a decade before linked timestamping, with Ralph Merkle’s original hash tree patent was granted in 1979.[1]

§5.86121 — Hashes are economizations.[2] They reduce the cost of checking, by securely summarizing units of data, and therefore cheapen the process of verification. Any radically decentralized (open fully-peer-to-peer) network is necessarily trustless, since it connects strangers in the absence of validating authorities. Consisting of both massively redundant distributed databases and numerous untrusted nodes, checking is at once especially inconvenienced, and especially necessary.

§5.86122 — As their name suggests, Merkle Trees map an order of proliferation, typically – though not necessarily – modeled by successive bifurcation. Their function, however, is the precise inverse of tree-like exponential growth. A Merkle Tree works towards its roots, in increments of convergence. As users proceed down the tree, hashes of network content are bundled, recursively, into ever more comprehensive groups. The ‘root’ or (confusingly) ‘top hash’ over-hashes the entire tree. It thus serves as a concise compendium for the entire network, against which the hash of any file (or block) can be conveniently checked. Recursive hashing – hashes of hashes of (ever more) hashes – is the principle of the ‘tree’.

§5.86122 — Cryptographic hashing has a peculiarly intimate[3] relationship with cryptocurrency, and thus with money as such in its emergent characteristics. This is in part, and primarily, because the hash is the privileged semiotic of singularity – to the extent that ‘hash collision’ is calamitous for it. Hashing therefore tends to affinity with the allocative or economic sign.

[1] Ralph Merkle’s hash-tree patent (US4309569A) is titled a “Method of providing digital signatures”. Its abstract (in full) runs: “The invention comprises a method of providing a digital signature for purposes of authentication of a message, which utilizes an authentication tree function of a one-way function of a secret number.” The description that follows expands upon its potential applications. “The present invention has been described with respect to authentication of signatures. However, its use is not limited to signatures. It may be used to authenticate a piece of information in a list of information, or one item in a list of items.”

The patent can be accessed online at:

[2] See §2.31

[3] See §3.422-4

Crypto-Current (063)

§5.8611 — Even before timestamps were conceptually, and then practically, linked, a timestamp was already a ‘trusted timestamp’ if it was anything. Verifiable dating of digital documents poses a problem closely analogous to that of digital money, brought to a point of criticality by the ease of perfect replication. In both cases, initial solutions involved procedures of formal vouching by trusted third parties. For timestamps, the role of supervised banks is taken by Time Stamping Authorities (TSAs).[1] Public Key Cryptography is employed to render time-stamps indelible – resistant to modification by anyone accessing the document in question, including its creator.

§5.86111 — Linked timestamping draws primarily on work by Haber and Stornetta, dating back to the beginning of the 1990s.[2] This work was directed towards secure notarization, which is to say the verification – within a digital environment – of a document’s historical existence, with special reference to questions of priority. A facility of this kind has obvious relevance to legal documents, such as contracts and intellectual property claims. Linking timestamps adds dynamic to the procedure, by extending it to digital entities undergoing successive modification, such as changing inventories, and accounts. At each (discrete) stage of transformation, an additional timestamp is signed, or (in later versions) hashed, constituting a chain, pointing into an increasingly edit-resistant past. Each timestamp in the chain envelops the preceding series. It thus establishes public order, or absolute succession, in which the past is uncontroversial, and secure. As Satoshi Nakamoto notes in the Bitcoin paper, “Each timestamp includes the previous timestamp in its hash, forming a chain, with each additional timestamp reinforcing the ones before it.”

§5.86112 — A series of linked timestamps is already, at least in embryo (or larva), a ‘block-chain’. The stamps operate as irreducible moments, whose order is settled (immanently) by embedding. Their time is sheer order, without cardinality. Any timestamping system nevertheless inherits a time-keeping procedure, amounting to a fully-functional calendar, whose granulated ‘dates’ it competently codes. Unix time is the most widely applied system of this kind. Bitcoin adopts it.[3]

§5.86113 — Taking timestamping into trustlessness was a development that had to await Bitcoin.[4] While linked timestamping provides the basic architecture for secure (edit-resistant) ledgers, their robust decentralization depends upon additional cryptographic advances, supporting validation, compression, and consensus.  

[1] As the Internet Society remarks in 2001, in proposing the RFC 3161 Internet X.509 Public Key Infrastructure Time-Stamp Protocol: “In order to associate a datum with a particular point in time, a Time Stamp Authority (TSA) may need to be used. This Trusted Third Party provides a ‘proof-of-existence’ for this particular datum at an instant in time.”


[2] See: Haber, S. and Stornetta, W.S. ‘How to time-stamp a digital document’ (1991)

[3] Unix time counts forwards, in seconds, from 00:00:00, January 1, 1970, (a Thursday). It ignores leap seconds, treating the length of each day as 86,400 seconds. It therefore gradually drifts from Universal Time.

When encoded in 32-bit format this time system reaches (Y2K-type) crisis on January 19, 2038. This poses no direct threat to Bitcoin, which employs a fully future-competent 64-bit Unix time code.

[4] See (for e.g.): Bela Gipp, Norman Meuschke, and André Gernandt, ‘Decentralized Trusted Timestamping using the Crypto Currency Bitcoin’ (National Institute of Informatics Tokyo, Japan, 2015)

Crypto-Current (062)

§5.861 — The early 1990s saw the conceptual innovation of robust (or ‘append-only’) data-structures capable of providing secure ledgers. Such structures introduce a gradient. They make data-bases sedimentary, and time-like.[1] The past is protected against revision, as a type of artificial, hard or ideal memory. Irrevocable commitments were thus digitally supportable. Since backing out of an executed deal is the typical mode of double-spending, a capability for the hardening of commitments has special relevance to the implementation of cryptocurrency. Indeed, its importance is such that there is a tendency among much Bitcoin commentary to reduce the innovation to ‘the blockchain’ which is itself then summarized as a distributed, revision-resistant ledger. Remaining within the Narayanan and Clark schema, the technological lineages leading to the emergence of such decentralized chronotypic databases are themselves susceptible to further triadic classification. Specifically, they assemble advances in the fields of linked time-stamping, Merkle trees, and byzantine fault tolerance.

[1] Narayanan and Clark capture the philosophical essentials well. “In a simplified version of Haber and Stornetta’s proposal, documents are constantly being created and broadcast. The creator of each document asserts a time of creation and signs the document, its timestamp, and the previously broadcast document. This previous document has signed its own predecessor, so the documents form a long chain with pointers backwards in time. An outside user cannot alter a timestamped message since it is signed by the creator, and the creator cannot alter the message without also altering the entire chain of messages that follows. Thus, if you are given a single item in the chain by a trusted source (e.g., another user or a specialized timestamping service), the entire chain up to that point is locked in, immutable, and temporally ordered.”