Crypto-Current (050)

§5.35 — Without seeking to wholly efface the novelty of Graeber’s construction – still less its remarkable pertinence to our contemporary political-economic concerns – it is important to note the extent to which its theoretical stance is prefigured in crucial respects by the German Historical School of economics,[1] and thus, in turn, anticipated in considerable detail by the Austrian thinkers. Menger, in particular, defines his enterprise in explicit contra-distinction to those who place the State at the origin of the monetary phenomenon, which he conceives as the dominant economic error of his time. Since a functional unit of account already presupposes a prior settlement of the value question, through a process of price discovery, Menger confidently maintains that:

It is not impossible for media of exchange, serving as they do the commonweal in the most emphatic sense of the word, to be instituted also by way of legislation, like other social institutions. But this is neither the only, nor the primary mode in which money has taken its origin. … Putting aside assumptions which are historically unsound, we can only come fully to understand the origin of money by learning to view the establishment of the social procedure, with which we are dealing, as the spontaneous outcome, the unpremeditated resultant, of particular, individual efforts of the members of a society, who have little by little worked their way to a discrimination of the different degrees of saleableness in commodities.[2]

§5.36 — Despite their strategic mismatch, or ideological divergence, the motivated narratives of Menger and Graeber nevertheless converge upon a precise conception of the stakes in theoretical play. For both, there is an application of historical story-telling to a liberal theory of money, seen as essentially bound to the status of precious metal coins. That Menger writes in defense of this theory, and Graeber in opposition to it, does not affect the invariable associative core in the least. Both agree entirely about what it is that the valorization or denigration of money – as minted metal – means. Far too much socio-historical ballast underlies this construction of the controversy to allow for its casual dismissal.

§5.4 — The controversy is significantly deepened by a third narrativization of monetary history, outlined in Nick Szabo’s remarkable essay ‘Shelling Out’.[3] Szabo extends the investigation into the origin of money far back into prehistory, where it hazes out into evolutionary time. The essay takes as its initial clue a peculiar pattern of linguistic interference between money and marine molluscs, as evidenced in the “shelling out” of the title, and in the persistent colloquial naming of dollars as “clams”.[4] The source of this association is found in the ‘wampum’ shell-money of the native tribes encountered by mid-17th century New England colonists, which provided the settlers with their first “liquid medium of exchange” and subsequently their first legal tender (from the period 1637-1661). The opportunistic shell currency of the New England colonists finds numerous ethnographic echoes up to present times, and dating back into the deep Paleolithic, 75,000 years ago. Szabo categorizes such shell currencies among ‘collectibles’, noting that such types of ‘proto-money’ or ‘primitive money’ were “the first secure forms of embodied value very different from concrete utility”. Recognizably, they were a response to the problem of ‘value measurement’ (with no profound distinction required between ‘goods’ and ‘obligations’[5]) facilitating the crucial innovation of delayed reciprocity. Systematized exchange serves as a proxy for resource storage. “Like fat itself,” he writes, “collectibles can provide insurance against food shortages.” The hook they offer to consolidation through natural selective is therefore considerable.

§5.41 — Compared to Homo neanderthalenis, Homo sapiens was Homo economicus. This was a species that carved out a competitive advantage for itself relative to other hominids of similar – or even superior – individual intelligence through the partial commercialization of its environment. A distinctive genetic endowment, expressed through attachment to collectibles, enabled spontaneously-coordinated social action to arise with unprecedented sophistication. By providing – for the first time – effective incentives for activities oriented to regular exchange, collectibles normalized trading as a quasi-continuous, characteristic human behavior. Social existence acquired a commercial dimension, with corresponding stimulus to cognitive advancement beyond the horizon of immediate utility. 

§5.42 — Time was not only the medium of change, as this was accumulated through adaptive genetic modification of hominid species, but also its driver, or prompt. More specifically, modern man’s prehistoric ancestors were compelled to adapt to the concrete irregularity of time.[6] Seasonal variation compels rudimentary specialization. Outside tropical latitudes, it was simply impossible for primitive man to engage in a consistent pattern of activities across time. Food sources were not constant – or even continuously available – throughout the annual cycle. Winter, in particular, set its own challenging demands, which could be met only by running down food stocks (provisions). Hunting large herbivores accentuated these conditions of episodic glut, and the corresponding need to organize time. The template for division of labor and trade was therefore already laid by climatic adaptation, prior to any significant extension across space, and into elaborate social specialization. Economic incentives had necessarily to be scaled beyond immediate needs. (Much space for differential anthropology is opened here.)

§5.43 — At the level of maximum abstraction, money – already in its most primitive instantiation – enables the commercial disintegration of time. This is captured at the level of hominid ethology by the facilitation of delayed reciprocity. (It is only through pedantry that ‘reciprocal altruism’ can be significantly differentiated from ‘trade’, abstractly conceived.) Monetized trade tolerates de-synchronization. Accumulation of collectibles within a circuit of exchange is equivalent to a transactional non-simultaneity – complementary to a primitive ‘borrowing’ of the specific good in question[7]– which allows for the commercial exploitation (arbitrage) of variation in time-preference over an asset. To repeat the critical point: Money – already in its most primitive inception – formalizes time-disintegrated reciprocal altruism, by providing the condition for its simultaneity. The receipt of money now substitutes for the persistence of a debt.

§5.44 — Szabo’s analysis returned money to the comparatively neglected semiotic function of collection, or allocation, within which value exchange (circulation) and storage (accumulation) find a common root. Collected signs are irreducible to signifiers and indices. Their value is not soluble within semantics. The economic category of scarcity is essential to them. It is only in collection that the ‘economy’ of signs ceases to be a metaphor. Collectible value tokens cannot be loaded from a dictionary. They have to be economically acquired.

§5.45 — It might easily seem, under conditions obscured by the creditization and politicization of money, that collectibles are – from the moment of their inception – a prototypical mode of saving (and therefore – by iron reciprocity – of debt). It cannot be sufficiently emphasized that this path of interpretation is profoundly erroneous. This is a point that merits explicit comment precisely on account of its elusiveness, which reflects structural factors of great historical consequence. Money, whether in Menger’s sense, or in Szabo’s – and even in Graeber’s, once allowance is made for his historical inversion of the credit-money relationship – extinguishes debt. Any monetary transaction substitutes for the persistence of a liability. Acceptance of primordial or non-credit money, whether in the form of a ‘collectible’ or (more specifically) of a precious metal coin, is the alternative to persistence of a credit position. In such cases, receipt of money erases an obligation, rather than confirming, memorizing, or reproducing one. Historically, at least, ‘paper’ or credit money is the anomaly. It is only in this case that monetary assets correspond to another party’s debt, that is, to a preserved obligation. Monetary exchange does not intrinsically involve a credit-debt structure, prior to its financialization. It appears to imply such a structure only when the reality of money as a (comparatively abstract) positive asset has been dissolved, until it appears as no more than a surface effect, or epiphenomenon, of its registration within the ledgers of a banking system. Debt is the conceptually and institutionally convenient interpretation of a more obscure social phenomenon. Market acceptance of money is systematically reconstructed into the recognition of an obligation, as if it exhibited dependence upon an implicit contract. The conceptual imperative at work here is gregarious. Its orientation is to socialization.[8] The tendency is to obliterate all trace of an asset that isn’t already a recording of debt. Liquidity is reconfigured as an entitlement.

§5.46 — Employment of a single word – ‘money’ – for these very different types of valuables lends itself to systematic theoretical disorder. The depth of this confusion is indicated by the fact that not only ‘money’, but also ‘assets’, and even ‘cash’ have been progressively assimilated to the concept of credit[9], in accordance with a general financialization of economic categories that has been consolidated – at an accelerating pace – over recent centuries. Since the concept of money tends to accommodate itself to the dominant pattern of actual monetary usage, it has increasingly been identified with a positive financial balance in a bank account, recorded in the bank’s ledger (where it is registered as an institutional liability), and even – beyond this – with the notion of a credit limit determining spending power. Money has come to seem increasingly like something banks do, through trusted record-keeping fundamentally. On this track it tends to become the name for a complex of banking services.  

§5.47 — In order to control these semantic instabilities, it is worth provisionally introducing – in lieu of enduring technical terminology – a distinction between A-money and C-money.[10] ‘A-money’ is a positive asset, or collectible, uncorrelated to a liability. In the case of Bitcoin, it consists of DSP-proof (or non-duplicitous) ledger entries. The value of A-money is not in any strong sense ‘intrinsic’ but depends – as all commercial value does – on market receptivity. It varies, therefore, between zero and some arbitrary magnitude, when denominated in any other medium whatsoever. This variance, however, has no element of credit risk (or sensitivity to default). No one is under an obligation to redeem A-money for anything. Like any other collectible, it has value in anticipation of market acceptance, and not on the ‘basis’ of any promise made by an issuing authority. It is a commodity, in the broad sense. Redemption is intrinsic (or immanent) to it.

§5.48 — C-money, in drastic contrast, is credit (corresponding to the obligation of another party). It has no value at all separable from the credit quality of the individual or – far more typically – institution that has registered its issuance as a liability. If a depositary accepts A-money for safe-keeping, and thus ‘on loan’, the signed receipts it provides to guarantee restoration of the funds in question are already germinal C-money. This was, as a matter of historical fact, the transactional mechanism that catalyzed modern monetary transformation, from precious metal coinage, to promissory notes, and eventually to credit accounts. The value of C-money is based upon institutional guarantees. Trust is a mathematical coefficient of its value. Trustlessness is therefore essentially intolerable to it. At trust degree-0 C-money necessarily becomes worthless. In each such case, as a matter of historical factuality, an episode of hyper-inflation would then have consummated itself. This is how (C-)money dies.[11]  

§5.49 — Evidently, Bitcoin is a variety of A-money, and not a C-money (or credit) system. Its currency units do not index obligations. They are positive abstract assets. As Szabo insightfully concludes, Bitcoin is a system of digital collectibles. While it is certainly possible to be owed bitcoins (like any other asset), in owning bitcoins one is not thereby owed anything further. The application of the credit relation to bitcoins has necessarily to draw upon institutional resources extraneous to the Bitcoin protocol itself. Crypto-currencies perfectly simulate precious metals in this respect. No promise is inherently attached to them. They can be the substance of wagers, but they are not bets on the word of another agent.

[1] The German historical school of economics was essentially characterized by its aversion to universal mathematical-equilibrium models, of the English classical and neoclassical type. Empirical peculiarity, as carried by the details of social history, was promoted against highly-generalized cross-cultural constructions. In this respect, it was a recognizable descendent of the German Romantic tradition. Its most prominent representatives included Wilhelm Roscher (1817-1894), Bruno Hildebrand (1812-1878), and Karl Knies (1821-1898). The distinctive characteristic of this school is its consistent attempt to delimit classical models within a more complex socio-historical matrix. When translated into the Anglophone world, the principal concerns of the German historical school are perhaps best represented by the New Institutional Economics, developed from the work of Ronald Coase, most notably by Douglass North. Yet here one sees a fundamental distinction in methodical orientation, indicative of broader cultural difference. Among the Coaseans, the principle of intelligibility for an economically-significant institution remains grounded in commercial coordination. Transactional economy explains the existence of an institution (and first of all, the firm). The market process is abstracted, rather than theoretically subordinated. Historical institutions that appear super-economic under German inspection are configured instead as meta-economic by the later Anglophone analysis, which generalizes microeconomics beyond its neoclassical frame.

[2] Accessible online at:

[3] The intensity of Szabo’s involvement in the crypto-current would make his contribution to the general theory of money singularly pertinent, even were its theoretical quality less outstanding. See: ‘Shelling Out – The Origins of Money’ (2002)

[4] Notably, the association between shells and commerce has been promoted by the name of Royal Dutch Shell (familiar to Americans through its subsidiary the Shell Oil Company). The ‘Shell’ Transport and Trading Company (quote marks were included in the title), founded in 1897, was the British side of a merger (in 1907) with the Royal Dutch Petroleum Company that created the international oil giant which still exists today. The pre-merger ‘Shell’ did indeed derive its name from traded sea shells, although this was the main business line of a predecessor company, whose identity was adopted, rather than a continuing commercial specialism. Sadly, shell-trading in the Dutch East Indies does not seem to have been central to the emerging global oil industry.  

[5] Given the biological centrality of food sharing among social animals, it is peculiar that the difference between the recognition of an obligation and the receipt of a commodity could ever be considered of primordial importance. The distinction becomes discernible only through formalization, which corresponds to economic engagement with strangers (marking the phase-transition from anthropology to sociology). When precipitated from the dense fabric of tacit reciprocities, trade accelerates settlement. The game-theoretic structure is comparable to a collapse into non-reiterating interactions, with associated attenuation of reputational structures. Under such circumstances, the importance of compact, instantly-completable, or fully-executable transactions is elevated. Anything left unfinished is potentially lost. Money, in its positive sense (as collectible), thus emerges as an anti-memory. The subsequent elaboration of formal credit systems only emphasizes this fact, insofar as unsettled obligations are priced as risk, and thus exposed in their definite disutility. Graeber’s emphasis upon ‘everyday communism’ is especially unhelpful within this deep context, insofar as it merely assumes the solution to a collective action problem – presenting it as an irreducible ethnographic fact. Parochial inattention to the complexities of trade is promoted as a positive ethical achievement. The question posed by evolutionary biology, which is no different to that of realistic social analysis, is subjected to blank dismissal. Given the considerable (positive sum) advantages of sharing, and the evident coordination problem obstructing it, how is reciprocal altruism actually possible? Markets, concretely, answer this question. Insofar as it can be obliterated in theory, they too can be. This only demonstrates how far theory can depart from realistic application, without losing – and perhaps even enhancing – its function as political rhetoric.  

[6] The transcendental-philosophical problem of time production is approached here as a topic of evolutionary anthropology. Time is distinguished from the present moment through contextualization of present conditions within a larger time-frame. In this way, the cognitive integration of time is the exact complement of its commercial disintegration. For a-synchronous transactions to meet a criterion of reciprocity, they require a mechanism that supports – or effectively substitutes for – deferred settlement. This is a notion comparable to the ‘time-binding’ explored in Alfred Korzybski’s general semantics. The human capability for deterritorialization or comparative environmental independence in space is both echoed and advanced by a capacity for expansive time colonization, with proto-money operating as a cognitive condenser. An inheritable token with the potential to support future acquisitions explodes economic immediacy, in both directions. Its value is inseparable from a time-integration function, which can equally be conceived as a tolerance for time-disintegration, or de-synchronization. It is the virtual suture, permitting the opening of a time-rift. The sheared edges connect only through it. Money lets time-consciousness fall apart. When regressed to the level of the collectible, ‘money’ designates a critical threshold in evolutionary psychology. It is money – even more than ‘the tool’ – that differentiates man from alternative hominid lineages. Homo economicus, then, is at once a modern telic construction, and an archaic cladistic marker. The monetarization of social obligations has consequences that are not restricted to the time-horizon of the psychological individual. Money facilitates the accumulation of inheritable wealth, enabling inter-generational resource transfers, in accordance with incentives strongly predicted by any biorealist account of kin altruism. It thus opens the conceptual space for transferable non-consumption goods, distinct from either territory or perishables. ‘Wealth’ becomes dynastically assignable, thus achieving a comparative independence from primitive power (or immediate dominance).

[7] The theoretically erroneous translation of this flexible exchange into a credit relation will concern us presently.

[8] One highly-influential dynamic model of value socialization – yet to reach its apogee of cultural influence – is found in the work of René Girard. The basic theoretical matrix is laid-out in his (1972) book Violence and the Sacred. It is a notable merit of Girard’s work that rather than merely assuming the social diffusion of values, the process is at least partially explained, albeit through the employment of various relatively cumbersome (or metaphysically-saturated) axioms. In particular – and understandably – theory of mind is presumed solved, and operative as an engine of gregariousness. Girard’s guiding proposal is that desire is mimetic, which is to say social and antagonistic. Its template is always the desire of the other. Concupiscence is originally envious. I’m having what he’s having. Libidinal privacy is thereby rendered inconceivable, with human desire being collectivized ab initio, on a basis essentially incommensurable with the instincts of a solitary animal. It follows that the more anything is wanted, the more it is wanted. Desire spreads through the social body like a contagion. The extreme reflexivity of any system that can be modeled this way makes it explosively excitable, with a tendency towards some crescendo of violence (or ‘sacrificial event’), through which explosively accumulated mimetic tension is discharged. In recent years, the translation of Girard’s model into a more colloquial economic register has been undertaken by Peter Thiel. Mimetic desire is identified with economic competition.  

[9] ‘Credit’ and ‘credentials’ are roughly the same word. Both of its branches pass into English (via Middle French) from the Old Italian credito, vernacular modernization of the Latin creditum, meaning something entrusted, a loan, from the neuter of creditus, past participle of credere to believe, entrust, source also of creed and credence. Credit and trust are indissociable conceptions. It is not only that etymological sense continues to operate within contemporary ordinary usage. Under the current techno-cultural pressure of monetary sophistication, it is undergoing re-activation. Money cannot be technically understood, it turns out, without the concept of trust undergoing complementary rigorization. Economic convulsion corresponds to a crisis of belief.   

According to the dominant (if tacit) teleological scheme, monetary evolution advances along a path of credit elaboration. It trends therefore to financial domination by sophisticated derivatives (‘contingent claims’) composed of options, forwards, and swaps. The sequence of tradable financial products commercializes risk at ever higher levels of distillation. It advances from positive assets, to liabilities, to formalized trading options under specifically-contracted time and price conditions. Credit therefore strongly aligns with financial teleology. It is in an important respect owed the future. The trouble Bitcoin introduces to this structure of meta-debt cannot, therefore, be anything other than considerable.

[10] The term ‘C-money’ has been selected to avoid confusion with Wei Dai’s ‘b-money’ concept (whose importance to the genesis of Bitcoin is beyond controversy). Simple alphabetical order has otherwise been adhered to. Any apparent resonance between the ‘A-’ and ‘C-’ of these provisional terms and the distinction between ‘asset-’ and ‘credit-money’ is purely serendipitous. 

[11] The reference is to Adam Fergusson’s classic study of Weimar-era hyper-inflation:

1 thought on “Crypto-Current (050)

  1. Of course, for Girard, the social diffusion of values is a problem, and indeed the production of difference or individuation is essential for the continuance of civilization. Notably, libertarians and Girard are in agreement in the recognition of rivalry over scarce goods as a potential source of violent conflict. For both this is a central problem of human society, and one which engrosses their attention.

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