Making Sense of the Crypto Wars

7-January-2018

The rise of cryptocurrencies has sparked a debate about centralized vs decentralized financial systems. But this is only the surface manifestation of a much deeper divide that has been present in the West since the Enlightenment at least, and probably much longer than that. To understand why cryptocurrencies are so contentious, we must understand the older and more fundamental rift between individualism and collectivism.

Locke and the Logos

Western civilization is founded on the ideals of the Enlightenment, which themselves were the product of a lengthy evolutionary process, beginning with Greek and later Roman political philosophy merged with Judeo-Christian metaphysical presuppositions.

For the Enlightenment philosophers, particularly John Locke, the individual is the fundamental unit of society. This proposition rests on the assumption of a state of nature in which all individuals live in perfect freedom to do what they please, but cannot rely upon this freedom due to the threat posed by others. Thus, they form social units to mutually preserve their lives and livelihoods.

The sovereignty of the individual and the emphasis on individualist reason rests upon Judeo-Christian metaphysics. In Genesis, God creates the world out of chaos through speech. He then creates Adam and Eve in his image and likeness, that is, with the capability to use speech in a creative capacity. The Gospel of John opens by proclaiming that "In the beginning was the Word, and the Word was with God, and the Word was God."(John 1:1). More strikingly, John continues by saying that "the Word became flesh and made his dwelling among us..." (John1:14), leading to the Greek word Logos being used for Christ in many traditional Christian texts.

The consequences of this metaphysical underpinning were tremendous. The individual, as one made in the image and likeness of God and given the capacity to reason, contains within him something of divine origin--the ability to use Logos to bring order to chaos. In Locke's view, only God himself was sovereign over the individual in the state of nature, and in the absence of a divinely selected ruler, no hereditary system of government was legitimate.

When applied to politics, this philosophy leads to classical liberalism, in which individual rights, separation of powers, and democratic election of leaders protects the sovereignty of the individual against encroachment by the state.

With science, it leads to the development of the scientific method to aid reason as it attempts to find and bring order to the world.

It leads to religious tolerance, as each individual's search for truth must be respected and allowed to continue without the imposition of force.

Economically, it leads to free market capitalism, where individuals are free to pursue the material goods necessary for them to thrive with minimal government interference.

Crucially, it presupposes that there is an objective truth and that freedom will allow the individual to discover it, which will benefit not only the individual, but society at large.

Despite the tremendous economic and scientific achievement of the Enlightenment societies, opposition began to mount from those who favored a more traditional religious approach, such as Kant, and those who wanted a collectivist, centralized state, such as Rousseau.

Rousseau's Counterattack

Rousseau accepted that civilization brought tremendous material wealth compared to the state of nature, but argued that this wealth generated jealousy, competition, and strife. The constant struggle between people for increased wealth meant that some won and some lost, which bred inequality. The winners in the system had a tremendous incentive to keep the system going¹, often at the expense of the losers. Rousseau believed that civilization was a "zero sum game"² in which it is impossible for all to be winners. The core culprit of civilization was reason.

For Rousseau, human beings are primarily dominated by passions rather than reason. An emphasis on reason leads to self-centered moral decay, even as it leads to material success. Instead, society should be founded on and led by passions, which override reason and its subsequent individualism. The leadership will express the "general will", which will be good for the whole. Each individual "...puts in common his person and his whole power under the supreme direction of society's leaders"³. However, the state must also have the ability to compel the individual to accept state supremacy. This supremacy is total. "...when the prince says to him: 'It is expedient for the State that you should die,' he ought to die, because it is only on that condition that he has been living in security up to the present, and because his life is no longer a mere bounty of nature, but a gift made conditionally by the State."⁴

Rousseau's ideas of a strong, centralized, collectivist state were highly influential among socialists in the late 19th and early 20th centuries. Both left wing and right wing socialists organized their ideologies around Rousseau's themes. Marxists stressed that there was a war between disparate economic groups. Marxist collectivism was designed to correct this through strong centralization, use of force, and forced redistribution of wealth.

Right wing socialists agreed with Marxists about the fundamental struggle and inequality between groups, but organized around racial rather than economic identities. The National Socialist party in Germany put forth a program intended to take state control of the economy, redistribute wealth, and create a racially pure society.

In both cases, collectivism led to centralization in order to bring that collectivism into being.

Today, the collectivist tradition exists in the form of postmodernism, which is an amalgamation of themes from right wing and left wing socialism.

Postmodernists see the world according to a modified version of Hobbes' state of nature. Whereas Hobbes claimed the state of nature results in a "war of all against all" on the individual level (necessitating government to keep peace), postmodernists think of the identity group as the building block of society. It is these groups that are in a Hobbesian war against each other. They could be based on race, sexual identity, gender identity, language, or even species. Any kind of relationship between groups involves some form of exploitation of one by the other, according to postmodern thought.⁵ As was the case with postmodernism's socialist predecessors, this emphasis on endless struggle between groups means it is the job of society to side with the victim against the oppressor, and use force if necessary.

Accordingly, the individual is reduced to being nothing more than a representation of his/her group. This facilitates categorization, which is necessary in order to assign blame or victim status.

A Decentralized Future?

Many of the reactions to cryptocurrency are more easily understood when seen as a continuation of this divide between individualism and collectivism. Cryptocurrency restores individual sovereignty over one's own finances by allowing near-instant peer-to-peer transactions anywhere in the globe without reliance on a bank's or government's approval or even knowledge. Private and fungible cryptocurrencies such as Monero are essentially electronic cash, but without the geographic or political limitations of cash. Eliminating these limitations allows the freest of free markets in human history.

The resistance to this vision is most acute from believers in collectivized, centralized control over the economy. Prominent critics of cryptocurrency such as Paul Krugman are often ardent supporters of government regulation and social welfare, and argue in favor of an active government role in eliminating inequality through the use of regulation and redistribution. Cryptocurrency is a practical obstacle to this ambition due to its existence outside the sphere of government control. Philosophically, it is a repudiation of the collectivist ideals that is difficult to answer, especially as its utility increases.

It is not easy to know whether the promises of cryptocurrency will be achieved. There is expected resistance from both banks and governments, neither of whom is eager to be left out of any transaction. But the debate should be seen in the context of the much deeper and older debate between individualism and collectivism. It is from this level that much of the pro and anti-crypto sentiment emerges because it provides a public rallying point for believers on both sides.