Abstract
Based on the Marxist perspective of money and particularly Marx’s analysis of the fetishism of money and capital, Nakatani and Mello grapple with the nature of crypto-currencies, especially Bitcoin, highlighting their explosive growth in 2017 as a part of the dynamics of the overaccumulation of capital, which has been circling the world for decades, particularly in financial markets, in search of new and old assets that might serve as the means for the appropriation of fictitious income and which have taken on the most foolish and fetishized forms.
This chapter was originally published in Portuguese with Crítica Marxista, 47, in 2018, and was translated into English by Kenton James Keys.
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Notes
- 1.
Verse
Verse Gold? Yellow, glittering, precious? ... Thus much of this, will make black, white; foul, fair; Wrong, right; base, noble; old, young; coward, valiant. … What this, you gods? Why this Will lug your priests and servants from your sides, Pluck stout men’s pillows from below their heads; This yellow slave Will knit and break religions; bless the accursed; Make the hoar lebrosy adored; place thieves, And give them title, knee and approbation, With senators on the bench; this is it, That makes the wappen’d widow wed again: … Come damned earth, Thou common whore of mankind (SHAKESPEARE, Timon of Athens apud Marx, 1990, pp. 229–230).
“Gold is a wonderful thing! Its owner is master of all desires. Gold can even enable souls to enter Paradise”. (Columbus, in his letter from Jamaica, 1503, apud Marx 1990, p. 229)
- 2.
Agreeing with Marx, we consider money as an abstract category and coins as forms of the existence of money that have arisen historically in different kingdoms and territories and which were later centralized by kingdoms, rulers, and nation-states. “Money takes the shape of coin because of its function as the circulating medium. […] The business of coining, like the establishing of a standard measure of prices, is an attribute proper to the state . The different national uniforms worn at home by gold and silver as coins, but taken off again when they appear on the world market, demonstrate the separation between the internal or national spheres of commodity circulation and its universal sphere, the world market” (Marx 1990, pp. 221–222).
- 3.
These certificates were debt securities that became a means of circulation and a means of payment, as if they were money. Whenever the certificates were redeemed for gold on deposit, initially with goldsmiths and/or money traders, they were cancelled.
- 4.
This is also the origin of what Marx called fictitious banking capital. Nowadays, an analogy can be made between gold deposits and cash deposits in banks. “In as much as the Bank issues notes that are not backed by the metal reserve in its vaults, it creates tokens of value that are not only means of circulation, but also form additional – even if fictitious – capital for it, to the nominal value of these fiduciary notes. And this extra capital yields an extra profit” (Marx 1991, p. 675). Regarding the concept of Fictitious Capital, cf. Chaps. 5 and 6 of this book.
- 5.
The Riksbank of Sweden, founded in 1668, and the Bank of London, founded in 1694, are considered the first Central Banks. The latter, whose origin is private, gradually began to exercise, through regulatory laws, the functions of financier of the government, monetary issuer and guardian of reserves, and later of rediscount and lender of last resort. In 1946 it was nationalized. Most capitalist countries created their Central Banks in the first half of the twentieth century (Freitas 2000).
- 6.
Thus, notwithstanding its private nature, the constitution of money and its specifically capitalist forms of manifestation are inseparable from the modern State. As Marx demonstrates in his earlier account of the concept of money in the first chapters of Capital, therefore, before its subsumption to the concept of capital, the State already plays a decisive role in the constitution of money as currency, as regards the definition of the price pattern and the unit of account, as well as the minting of coins (Marx 1990, p. 222), which presupposes the construction of a legal, technical, and institutional framework.
- 7.
It is, according to Prado (Prado 2016, p. 139), “a form of value that “does not have value, because it only represents it”; when presenting this category, the author establishes an analogy with the concept of fictitious capital, “a nominal representation of non-existent capital”, because “even though it is not really real, the fictitious capital is negotiable as if it were, that is, it usually circulates as capital-value” (Prado 2016, p. 148). Its fictitious nature, its historical process of production and generalization, and the fact that this money is unconvertable (it does not give right to any type of ransom) and does not yield interest , evidences that it is not simply credit money, but a specific social form that justifies a particular categorical treatment, which is not explicit in the expository structure of Capital.
- 8.
Cf. Chap. 7, of this book.
- 9.
Cf. Chap. 1 of this book.
- 10.
The great difficulty, perhaps even the impossibility, of counterfeiting bitcoin has, in a free market, led to the creation of other virtual currencies, in a process like that in the US, in the period referred to in the following note, where, in counterfeiting of existing dollars, counterfeiters started to create their own dollars on behalf of phantom companies. Currently, anyone with the proper equipment and knowledge of software development can create their own crypto-currency and multiply it through “mining” or other mechanisms.
- 11.
Cf. https://coinmarketcap. com/all/views/all/. This accelerated spread of crypto-currencies resembles the uncontrolled creation of US dollars in the nineteenth century, where each bank could print and issue its own dollar bills, as well as large companies such as railways and mines.
- 12.
Nick Szabo is frequently referred to as the progenitor of crypto-currencies, having launched the idea of “bit gold”, seeking to “mimic in cyberspace, as faithfully as possible, the security and confidence characteristic of gold, and especially the fact that it does not depend of confidence in a central authority” (Szabo apud Pech, 2012). Orlieb (2017) also has Marx’s critique of political economy as a reference and analyzes crypto-currencies in the light of the fetishism of commodity and money, maintaining important points of convergence with this text.
- 13.
“Bitcoin mining is very much like a giant lottery in which you compete, through your mining hardware, with everyone on the net, aiming to earn bitcoins. Faster mining hardware is able to perform more attempts per second to win this lottery, while the bitcoin network adjusts itself every two weeks or so to maintain the hash rate of one winning block in ten minutes” (Estevão 2017). The advantages of using more powerful and sophisticated machines reveal that this lottery is flawed. It should be added, however, that not all crypto-currencies are liable to be mined, that is, they must be created and put into circulation by a specific agent.
- 14.
“The public can see that someone is sending an amount [of bitcoins] to someone else, but without the information linking that transaction to someone else” (Nakamoto 2008). According to Bonneau (2014), this confidentiality is fragile, since the crossing of a set of information can lead to the revelation of the identity of a good part of those who engage in negotiations with bitcoins. Nevertheless, it is known that crypto-currencies were catapulted when used in the transactions of Silk Road, a virtual space outside any State regulation, which became known as an instrument for the commercialization of drugs, weapons, and all kinds of illicit activities (Christin 2012).
- 15.
That is designed to have a maximum size of 1 megabyte, which is equivalent to about seven transactions per second. This limitation serves to prevent the proliferation of false transactions (spam) and to allow verification by home computers, in order to preserve the decentralization of the system.
- 16.
Despite the sophistication of the system, it is far from being impregnable. On the contrary, a series of frauds have already been reported: to cite just a few: (a) the disappearance, on 21th November 2017, of US$31 million from Tether, the company that manages the virtual currency USDT; (b) the theft, in April 2017, of more than R$15 million in crypto-currency and, in December 2017, of 17% of its digital currencies, from Youbit, a South Korean company that bought and sold crypto-currencies and that led to its failure and which had repercussions for prices of other crypto-currencies on the Asian markets (the Bitcoin, for example, fell 15%; see https://brasil.elpais.com/brasil/2017/12/20/internacional/1513760990_056377.html); (c) the theft, on 6th December 2017, of US$60 million from the mining platform NiceHash; (d) in July 2017, US$32 million in Ethereum was stolen from the company Parity; (e) the theft, in August 2016, of 120,000 bitcoins, worth US$72 million, from the exchange house Bitfinex; (f) the theft, in January 2015, of 19,000 bitcoins, worth US$5.1 million, from Bitstamp, a type of crypto-currency share; (g) the theft, in March 2014, of US$473 million in bitcoins from MtGox, who at the time processed more than 70% of world bitcoin transactions; (h) in August 2010, still in its infancy, Bitcoin Core developer Jeff Garzik realized that a hacker had made a transaction of 184 billion bitcoins in just one block.
Worth mentioning is the US$101 million Ethereum theft in June 2016, which caused Ethereum creator and CEO Vitalik Buterin (who was only 19 when he created the crypto-currency in 2015) to reboot the system, going back in time to the moment before the robbery. With this change in the blockchain itself, which until then had been understood as definitive and impregnable, the notion that crypto-coins are immune to the designs of any kind of monetary authority has been shaken. For these and other robberies, see, for example, https://portaldobitcoin.com/os-maiores-roubos-de-criptomoedas/
- 17.
Incidentally, one of the alleged advantages of crypto-currencies, a supposed lowering of transaction costs, thanks to its decentralized character, does not seem to hold up, at least in the short term. According to Malmo estimates (2015), in 2015, a bitcoin transaction consumed 5000 times more electricity than a credit card transaction, and the electricity equivalent spent daily, on average, for one and a half US households. According to Roberts (2017), “bitcoin mining is already consuming more computing power than Ireland’s annual electricity consumption”. With current technology, this expense will tend to increase strongly with the passage of time. By mid-November 2018, total energy consumption in the production and circulation of bitcoins exceeded 73 terawatt-hours (by comparison, total electricity consumption in Brazil in 2017 was 467 terawatt-hours, according to the Statistical Yearbook 2018), which corresponds to the emission of more than 36 megatons of CO2 (see https://digiconomist.net/bitcoin-energy-consumption). Still regarding energy expenditure, a single bitcoin transaction is equivalent to almost 270,000 transactions made through the Visa network, and the way it is configured the bitcoin system can perform at the most the derisory number of seven transactions per second, while the Visa system can reach 56,000 transactions per second.
- 18.
The first deal involving bitcoin took place in the second half of 2009, at a rate of 1 BTC = 0.0007 US$, which would be its estimated cost of production when the computational capacity and energy then required for both are taken into consideration.
- 19.
If, for example, the cost of printing a $100 bill was $1.00, seignorage would be $99.00 because the issuing agent could buy goods and services or pay off debts and loans at the nominal value of the printed note. Presently, seignorage is estimated through an average interest rate on public debt securities, as the creation of money around the world is basically performed through the records of accounting operations between the banking system and the rest of the economy.
- 20.
The list of persons and companies that accept bitcoin as a means of circulation or payment can be seen at: https://coinmap.org/#/world/29.53522956/-19.33593750/2. For example, recently, a Brazilian construction company, Valor Real Empreendimentos Imobiliários started accepting payment in crypto-currency in real estate of the “Minha Casa, Minha Vida” Programme. See: https://infomoney.com.br/mercados/bitcoin/noticias/7144657/construtora-brasleira-aceita-pagamento-criptomoedas-imoveis-minha-casa-minha-vida
- 21.
The modern credit system was able to overcome all these demands of the movement of commodity-capital.
- 22.
Hoarding in the form of metallic money or banknotes, besides serving as a form of accumulation of wealth, also played an important role in regulating the necessary amount of money to establish the value of commodities in the process of capital circulation. Each time money circulation demanded more money, a portion of the treasured money was discharged into the process of conversion of wealth. All excess money, unnecessary for circulation, returned to the particular treasuries of wealth owners, banks, businesses, or families.
- 23.
“Money as such is already potentially self-valorising value, and it is as such that it is lent, this being the form of sale for this particular commodity. Thus, it becomes as completely the property of money to create value, to yield interest , as it is the property of a pear tree to bear pears. And it is as this interest-bearing thing that the money-lender sells his money. Nor is that all. The actually functioning capital, as we have seen, presents itself in such a way that it yields interest not as functioning capital, but rather as capital in itself, as money-capital” (Marx 1991. p. 516).
- 24.
See Paulo Nakatani (2017).
- 25.
- 26.
- 27.
In this respect, it is worth remembering Hebert Marcuse (1998, p. 132): “the concept of technical reason is perhaps in itself ideology. Not only its application, but already the technique itself is methodical, scientific, calculated and calculating domination (about nature and about man). Certain ends and interests of domination are not granted to technique only ‘subsequently’ and from outside – they are inserted already in the very construction of the technical apparatus”.
- 28.
After hayek gold, another company launched bitgold. See: https://www.anthemvault.com/; https://bitcoinmagazine.com/articles/hayekgold-anthem-vault-represents-physical-gold-bitcoin-blockchain-1433455153/ and https://www.bitcoinmining.com/bitgold-goldmoney-review/
- 29.
Recently, China announced that its payments on the oil account would be in renminbi convertible into gold, in a complex piece of financial engineering. See: http://resistir.info/eua/roberts_18out17.html
- 30.
As Romano (2004, p. 16) commented: “Under the merciless mechanism and intellect, there are living bodies, souls that feel and vibrate with the beautiful and the true. Bodies that, if they could, would wear luxurious cosmetics with a lot of ornaments and sumptuous Sunday clothes, souls that would unfold in the reverie of dreams awakened by the five senses in all the arts, but capitalism prevents the somatic and soul-feast, and produces its opposite”.
- 31.
As written elsewhere (Nakatani and Mello 2018), “the deification of gold, which has led to extermination, slavery and to the torture of millions throughout the history of capitalism, and which in some places continues to catalyse military conflicts, genocide, and the subjection of multitudes to degrading conditions of work, such deification, we said, reappears here as a farce, a pseudo-nostalgia, an ode to fetishism, which assumes the most unfortunate forms of manifestation”.
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Nakatani, P., Mello, G.M.d.C. (2019). Crypto-Currencies: From the Fetishism of Gold to Hayek Gold. In: Mello, G., Sabadini, M. (eds) Financial Speculation and Fictitious Profits. Marx, Engels, and Marxisms. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-23360-0_4
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