Cyber-Kowloon grows more complex: Brett Scott on the ideological origins of Ethereum

The journalist and anthropologist of economic anthropology, Brett Scott, favors cash and is wary of digital currencies. In his view, Bitcoin and its analogues do not pose a threat to society in themselves, but governments are waging a full-scale war against traditional forms of money. He lays out his concerns in the book Cloudmoney. Cash, Cards, Crypto and the War for our Wallets, the translation of which is being prepared for publication by Corpus. Here is an excerpt devoted to how the author sees the basic principles by which the Ethereum ecosystem operates.

Imagine children examining a box of colorful plastic tokens. For a while the variety of colours sustains their interest, but eventually the children begin to attribute imaginary properties to the tokens, such as “These are tanks on the battlefield!” The first steps in token complexity looked much the same when innovators began to wonder whether crypto-tokens could be linked to real-world objects. In the drive to move from nouns to adjectives, tokens were made special, turning them, for example, into vouchers for physical goods or into share certificates, promising to access something bigger.

If children can establish an imaginary link between a token and a tank just by declaring its existence, in the adult world a more reliable mechanism is needed to sustain a lasting link. A simple assertion “This token represents a tonne of platinum” makes little sense if it cannot be proven in court. In the absence of such proof, a tightly programmed link is required. For example, imagine a key to a locked warehouse full of platinum. The key itself stores nothing, but it is bound to the platinum by the fact that without it one cannot access the metal. Transferring the key is tantamount to transferring access, so one can say that the key is secured by platinum. This is why crypto engineers have set themselves a new task: to turn tokens into a kind of electronic keys to real-world objects.

However, for crypto to be a decentralized alternative to ordinary banking, its capabilities must extend beyond simple token transfers. In any transaction there are two parties, each of whom must fulfill their part of the obligations—this is what fuels the flourishing of our traditional leviathans. If I grab the goods and run without paying, the shop owner will send the police after me, and even in old Kowloon you might be shot if you harmed one of their wards. Likewise online leviathans such as Amazon have their own means of ensuring deal reliability. But in the crypto world there are no crypto-police (and gangsters) to turn to if someone fails to perform their side when you transfer tokens. Crypto systems need a way to perform multi-step processes such as: “send tokens and receive goods,” “send tokens if the work is done,” or “issue platinum tokens to the one who sends the money tokens.”

The Ethereum team, initially led from the start by the rather odd Russian-Canadian programmer Vitalik Buterin, first raised a substantial sum through an ‘initial coin offering’ of these ethers (the analogue of selling tokens for a yet-to-be-built amusement park) and with that money hired specialists to create the basic infrastructure, launched in 2015. The new system was like a blank slate onto which people could project their visions of a future cyber-economy. Enthusiasts pictured sanctuaries of smart contracts designed to create more complex decentralized autonomous organisations (DAOs). These DAOs, in turn, could serve as alternatives to Silicon Valley platforms, launched with ethers sent by citizens of cyberspace. A wave of ideas from Silicon Valley seeped into these circles. Some imagined cars that would not start unless you bought an electronic key in an electronic vending machine, and which, it is not unimaginable, could be stopped remotely by a signal from cyberspace (much like old payphones that cut you off when your paid time ran out). Others imagined autonomous cars plying the highways and offered for rent through a DAO with payments in cyber-tokens.

But there were also more down-to-earth visions of the future. For blockchain platforms it is often said that they “do not require trust” in the sense that the system can operate without trusting people. For technologists this is a practical, not ideological issue: even if you believe that 99% of people are honest, in a depersonalised internet network of 10 million participants there is enough one malefactor to undermine the system. Technologists are drawn to building systems that endure despite dishonest or incompetent participants. The same applies to staff at organisations helping developing countries—operating in harsh conditions where a decentralised structure may prove more fault-tolerant than a centralised one. As a result, blockchain has been studied in humanitarian organisations. I supplied information for studies conducted by the UN Office for the Coordination of Humanitarian Affairs, the United Nations Research Institute for Social Development, Amnesty International and the United Nations Environment Programme.

Soon almost all major non-governmental organisations took an interest. Climate-focused groups ran blockchain hackathons, while humanitarian groups looked into using the technology to distribute food vouchers. The range of potential blockchain applications included tracking goods through supply chains, tracing blood diamonds, and registering carbon-emission quotas. Groups of this kind did not share the extremist views popular in basic crypto circles. They were pragmatic political centrists seeking new ways to accomplish their tasks. The political pendulum came full circle.

Translation from English by Natalia Shakhova. Published for the edition: Brett Scott.Cloudmoney. Cash, Cards, Crypto and the War for Our Wallets. Moscow: Corpus, 2023.