§3.00 — The abstract to the 2008 Bitcoin paper reads (in full):
A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending. We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they’ll generate the longest chain and outpace attackers. The network itself requires minimal structure. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone.§3.01 — Bitcoin coincides with a proposed subtraction. By dissolving the function hitherto attributed to a “trusted third party”[1] it realizes a flat network, in which all connections are P2P relations. Since the legitimating role of the third party – the extrinsic or transcendent element – is authentication of the originality of transactions, the network cannot be scoured of transcendence without “a solution to the double-spending problem”. The complicity of these twin goals is perfectly explicit: “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.” Conceived as a project of political economy, this is what Bitcoin is.
§3.02 — The self-comprehension of Bitcoin, then, as already announced in the second sentence of the abstract, begins with the double spending problem – a concept so basic to all subsequent discussion that it demands abbreviation (to the ‘DSP’). Once again, a sub-division of the topic is in order. The DSP is (1) a highly-specific technical obstacle to the realization of any ‘trustless’ or decentralized digital currency, (2) a problem of extreme generality relevant to all monetary systems, roughly equivalent to fraudulence, (3) a re-formatting of the basic economic problem of scarcity for the epoch of Internet-based commerce, and finally – in its widest extension – (4) a crucial philosophical clue leading directly into the nature of the sign, and even re-founding rigorous semiotics (in the groundlessness of cybernetic self-reference).
§3.03 — Approaching Bitcoin as a solution to the DSP, in its narrowest and most functionally-critical sense, does not necessarily exhaust the significance of the protocol, still less its ripples of implication, but it undeniably comes close to capturing these in their essentials. It is in order to solve the DSP that Bitcoin innovates the blockchain, establishing – first in theory, then in implemented fact – the characteristic decentralization that defines it. Even features that are not, in principle, necessary to this solution, were in fact generated as more-or-less direct consequences of the approach that was selected to tackle it. For instance, while a simulation of metallism (and resultant rigid deflationary bias) is not strictly required for a blockchain-based digital currency, it follows as a matter of course from the way Bitcoin formalizes and resolves the DSP.
§3.04 — A prototypical form of the DSP afflicts even the very ‘hardest’ types of traditional money. Precious metal coinage can be debased through surreptitious adjustment of purity and magnitude – adulterated through admixture of inferior metals, reduced in size (by policy decision, executed through the mint), or attenuated through ‘clipping’ and ‘sweating’ (widespread practices of petty monetary fraudulence). The guiding strategy – or merely opportunistic tactic – in each case is that a certain quantity of gold or silver can be spent twice, traded as a sign, while economized as a substance. The fraudulent agent, whether government or private coin-clipper, exploits the door to duplicity inherent in the monetary character of the coin, according to which it operates as a sign of itself. The value of the coin has a double registry – the inscribed denomination, and the test of the weighing scale. Insofar as these two aspects of its worth can be prised apart, in some way that eludes convenient detection, precious substance can delegate its semiotic ghost to sustain the initial incarnation of its value, while taking on a second identity in another account. Insofar as money is a sign, the DSP shadows it, from its most primitive origin.
§3.05 — Paper money represents an immense semiotic liberation, and thus a corresponding accentuation of the DSP. The relation between inscribed denomination and metallic backing, no longer Janus-faced and intimate, yawns open. The distance is now bridged by an explicit promise, made in the name of a trusted authority, or monetary mediator. The immediate substance of the monetary sign – inked paper – is approximately worthless. The ‘paper’ of cash-money does not reference a commodity-substance, but a promissory vehicle. Value has been relegated to a word, in its contractual sense, historically consolidated through an evolution from the ownership titles (or ‘warehouse receipts’) issued by goldsmiths. Unsurprisingly, the ‘golden’ age of counterfeiting now begins. On the side of the legitimate monetary institutions and authorities, more exotic possibilities arise.
§3.06 — Even if fractional reserve banking – the principal financial business opportunity within a paper money economy – cannot be theoretically assimilated without reservation to the DSP, the resonances are, at the very least, uncanny. If not exactly spent twice, deposits are multiplied by lending.[2] If this function is formally reversed, in the customary manner, reserves (liabilities) are required only to cover a determinate fraction of loans (assets), which allows the latter to be inflated at a rate reciprocal to the reserve ratio. (A reserve requirement of 10% permits a ten-fold credit expansion from the ‘monetary base’.) Political permission for the multiplication of deposits can, therefore, be directly inferred from mandatory capital adequacy ratios (through simple inversion). The normalization of the practice marks a radical discontinuity in monetary history. From this point onwards, standard banking activity becomes the predominant source of currency issuance, and cash is fused inextricably with debt through the root mechanism of credit creation.
§3.07 — The rise of banking is inseparable from an eclipse of cash. Even in the popular imagination, money loses all association with a hoarded commodity, as it is re-embedded in an account, where it exists solely as a ledger entry. Henceforth, the reliability of money as a store of value is seen to rest upon nothing more substantial than the integrity of institutionalized accounting procedures, which would subsequently – and in turn – be made conditional upon higher-level (political-administrative) monetary management. Since the inception of the electronic age, the digital transcription of financial ledgers has accelerated the trend, fostering explicit, widely-publicized dreams of ‘the cashless economy’. Cash-money becomes an increasingly marginal sub-component of credit flow, progressively ghettoized among atypically frictional, trivial, or disreputable money transfers. From the perspective of financial macro-management, its final abolition would be a consummation.
§3.08 — Fractional reserve banking partially anticipates macroeconomic governance in the discretion it affords to money creation, but – in itself – it offers only the faintest glimpse of the new world that is arising. This systematic incorporation of Keynesian ‘animal spirits’ into the realm of government policy objectives, beginning – very tentatively – in the 1930s, and then ascending to dominance in the post-war world, completes the politicization of the economic sign. Money is now invested with mass psychological meaning, identified with a technocratically-accessible dimension of collective arousal, and economic sentiment becomes an explicit object of administrative manipulation, through the money supply. The profundity of this development is easily under-estimated. In the era of macroeconomics, monetary policy is seamlessly fused with psychological operations, oriented to strategic public mood alteration or ‘demand management’ orchestrated with reference to an array of guiding concepts which are overtly attitudinal: ‘wealth effects’, ‘money illusion’, and ‘wage stickiness’ prominent among them. It is now the psycho-social propensities to save or spend that are to be theoretically reconstructed by the academic-administrative economic complex, with integral cynicism, on the functional analogy of pharmacological medicine. Economic and clinical therapeutics become increasingly hard to distinguish in principle, as they are differentiated only by their specific techniques of psychological intervention, and by the scales of their domains. In each case the (individual or collective) patient, vulnerable to ‘depression’, is subjected to expert treatment through the measured application of artificial ‘stimulus’. Feedback is provided by economic sentiment polling, designed to gauge business and consumer confidence. There is nothing metaphorical about any of this, except insofar as euphemism is called upon in the public presentation of monetary and fiscal objectives. Macroeconomic policy is – quite simply, and exactly – mass mind-control. As it is normalized, it sees ever less need to disguise the fact.
§3.09 — To remark upon a ‘double-spending problem’ at all in such a world, in which the very notion of intrinsic monetary integrity has been dissolved – with minimal remainder – into the politicized economy, replaced by the technopharmaceutical administration of financial dope, might easily seem comically (and no less tragically) Quixotic.[3] It requires only the slightest deepening and darkening of perspective to see money, in itself, as a lost cause. No small part of the initial, catalytic excitement generated by Bitcoin is explained by this background of relentless hard money defeat.
§3.1 — In its attachment to the principle of pure economic theory, fastidiously intolerant of even nominal political compromise, Bitcoin is an experiment in Austrianism. When allowance is made for its abstraction from metallic coinage, it is Mises as operational code. While the fact that Bitcoin is happening is radically novel, necessarily, because it can only now take place – in the age of public key cryptography and proof-of-work credentials – what is happening is not new at all, or at least, the monetary model that Bitcoin implements in software is not. In the words of Pierre Rochard: “As Bitcoin adoption increases we will finally be able to ‘empirically validate’ what Austrians have been arguing for decades: 100% reserve banking with a scarce medium of exchange prevents speculative manias, financial crises, and economic depressions”.[4]
§3.11 — Yet, while the offense to hard-money economic philosophies presented by inflationary fiat currency – which has nourished Austrian criticism since the 1930s – continues to feed support into the Bitcoin project, its central role has been displaced by, and subsumed into, the formulation of the DSP. Discretionary state money-printing is only one special case of the far more general economic incredibility of signs. Technological, rather than political-economic dynamics, have played the decisive role in bringing this problem to its point of productive crisis.
§3.12 — Even if digital dematerialization is only ever an approximation, its economic consequences are concrete, and drastic. Since the ‘materiality’ of any product tends to operate inertially, dampening proliferation, the attenuation of materiality corresponds to a process of acceleration. Exponential decline in information costs, as captured by Moore’s Law,[5] implies informational explosion. The trend corresponds to a second (and numerically tractable) sense of the ‘Californian Ideology’ war-cry: “information wants to be free”.[6] If the concept of ‘liberty’ is irreducibly hazy and controversial, while also prone to irresolvable metaphysical complications, that of cost suppression is definite and quite precisely accountable. Evidently, the preservation of scarcity under conditions of digital instantiation is a peculiar challenge, for the obvious reason that electronics enables the replication of perfect copies at near-zero cost. Prior to the theorization of this problem in monetary terms, it had been noisily exhibited by disputes over the digital ‘piracy’ of media products, corresponding to an unprecedented practical crisis in the regime of intellectual property.
§3.13 — The final (or near-final) subtraction of substantial expense from money production is conceptually clarifying. It prompts – or sharpens – the demand for a solution to the central problem that has haunted money since its beginnings. Once the proliferation of signs is freed from all serious inhibition, semiotic tokens of scarcity are catapulted into a climax state of vulnerability, and the DSP is exposed with unprecedented starkness.[7] It is here, at the furthest antipodes from metallic commodity money, that a peculiar folding – into simulation – restores the gold model to a central position in monetary theory, and, more consequentially, money production.[8] It is precisely because Bitcoin no longer represents gold, however indirectly, that it is able to simulate gold, with such extreme (abstract) fidelity that it can be said – persuasively – to exceed gold in its most relevant monetary features, including even that of scarcity, alongside communicability, divisibility, and verifiability. As a simulation, Bitcoin necessarily produces an artificial substantiality in the course of its solution to the DSP, and ultimately as its solution. The critique of duplicity is indistinguishable from an ontological experiment.
§3.14 — The DSP originates from a ‘fact’ so basic that it crosses from the order of (empirical) actuality into that of (transcendental) principle: Signs are cheap. To substitute a sign for a thing, a signification for a demonstration, is an economization. It is commonly said ‘that is easy to say’, and – relatively speaking – it is. At the first-order level of cynical amorality – or of pure game-theoretic rationality – it pays to break promises, which cost so little to make, and yet may be arbitrarily expensive to keep. This alone suffices to suggest why there cannot be signs without an implicit problem of trust. The consequences are double-edged. Economization of any kind – getting the same for less, or more for less – is positively adaptive (or selectively promoted) to such an extent that evolutionary processes are indistinguishable from the formation and transformation of codes. Inherent to the economy of code, however, is a vulnerability to exploitative messages, which seize upon the exorbitant efficiency of the sign as a resource (or meta-resource) to be appropriated. Genetic code invites virus. Zoosemiotics invite mimicry.[9] Linguistic expression invites deceit. Money invites the DSP. The sign is co-emergent with duplicity.
§3.15 — Bitcoin’s solution to the DSP is the blockchain, or ‘public ledger’ – a decentralized record of transactions which selects-out all non-original (or duplicitous) payments. Only the first instance of any bitcoin deduction from an account is validated, and preserved. All duplicate payments – cases of double spending – are edited out of the blockchained reality-record, automatically, through rejection of those inconsistent blocks in which such defects occur. Simply by protecting itself against splits – or forks – the blockchain constitutes a consistent plane of Being, upon which any particular being can be what it is, and nothing else instead, or besides. Positive absence of duplicity is thus an efficient ontological criterion, or selective principle. The blockchain is pre-determined to construct reality in such a way that fraudulence will not have taken place. That alone remains real which is consistent with the integrity of identity-money, or potential value.[10] Only the non-duplicitous will have really occurred, as perpetually re-evidenced by the synthetic past that is reproduced on the blockchain, as a consistent artificial memory, endorsed by Nakamoto Consensus, beyond which no superior tribunal can in reality exist. The blockchain is demonstrably capable of making itself real. In this way it departs from all merely conceptual or ideological assertions of ontological grounding, while implicitly dispensing with the political superstructures through which such assertions are concretely propagated. The reality criterion it introduces takes the form of an automatic – which is to say non-negotiable – law. The force of this law is derived from what can be, rather than – directly – from what is, or what ought to be. There is no double spending on the blockchain because there cannot be.[11]
§3.2 — The Bitcoin paper consists of twelve short sections, including an introduction and conclusion. It is compressed to a minimal summary at this point, although discussed in pieces throughout the book, and rehearsed at slightly greater length in the first appendix. The emphasis here is critical, oriented – as is the paper itself – to the dissolution of the DSP, and thus the construction of a plane of transactional immanence, from which all transcendent elements (or “trusted third parties”) have been evacuated. The transcendental argument of the Bitcoin paper runs as follows:
§3.21 — The “trust based model” is expensive, socially frictional, and vulnerable to fraud. To overcome these problems, Bitcoin proposes the substitution of “cryptographic proof” for “trust” (which is to be obsolesced by irreversible crypto-commitments). The elimination of trust-based mediations reduces transaction costs. The system remains resilient in the absence of oversight, so long as a predominance of applied “CPU power” is controlled by “honest nodes”.
§3.22 — An “electronic coin” is defined “as a chain of digital signatures”, which is equivalent to “a chain of ownership” (this is described later, in the conclusion, as the “usual framework” for crypto-currency construction). The elimination of the need for a “trusted third party” (or “mint”) requires that transactions be “publicly announced” within a system that enables “participants to agree on a single history of the order in which they were received”.
§3.23 — Bitcoin’s synthetic history draws upon established procedures for digital time validation, using a timestamp server to chain its hashed blocks in succession. “Each timestamp includes the previous timestamp in its hash,” constructing an artificial history as a robust series of envelopments – or ordered swallowings – “with each additional timestamp reinforcing the ones before it.”
§3.24 — The timestamped blocks are secured against tampering by proof-of-work locked hashes.[12] Such irreversibility is at once a deployment of cryptographic asymmetry, a consummation of contractual integrity, and a realization of (time-like) successive order. Notably, it is isomorphic with a thermodynamic – or statistical mechanical – gradient.
§3.25 — The network reproduces itself through a six-step block creation cycle. Since nodes “always consider the longest chain to be the correct one”, synthetic history, as an ordinal-quantitative variable, functions as a (selective) ontological criterion. Accepted blocks provide the building material for the subsequent cycle of network reproduction.
§3.26 — Bitcoin builds incentives into its infrastructure. Nodes are automatically compensated for the work they perform maintaining the network through the issuance of new coins. The system thus attains techonomic closure. The horizonal finitude of the Bitcoin money supply necessitates an eventual transition to payments based on transaction fees. Well-organized incentives also fulfill a security function, by motivating potential attackers to support rather than subvert the network.
§3.27 — Blocks can be compressed to economize on memory demand by pruning Merkle Trees. Moore’s Law is invoked as a realistic projection of exponential decline in digital memory price over time, moderating the requirement for information parsimony.
§3.28 — Further economy is offered by a payment verification short-cut (involving a modest sacrifice of security in exchange for added convenience).
§3.29 — Bitcoin transactions contain multiple inputs and outputs, to facilitate the integration and disintegration of coins during transfers.
§3.291 — Bitcoin radically adjusts the structure of transaction privacy. Rather than drawing a curtain of obscurity between a transaction and the world, in the traditional fashion, it nakedly exposes the transaction to public scrutiny. The new line of concealment is drawn between the transactional agents and their off-line identities, at the precise boundary of the commercium, therefore, and no longer within it. Secure masks are proposed as the new basis of privacy protection, coinciding with the anonymity of public keys.
§3.292 — The prospect of a successful attack upon the blockchain diminishes exponentially with the addition of “honest” blocks. An attacker therefore has a window of opportunity, which closes at a rate based on the block-processing capacity of the network.
§3.293 — The conclusion, summarizing the entire argument, is a masterpiece of lucid intelligence. (It is reproduced in its entirety in Appendix-1.)
§3.3 — Grasped abstractly, the most powerful functional innovation of the Bitcoin protocol is the binding of currency issuance to the servicing of system integrity, which twists the process into a consistent circuit. It is this loop that enables the protocol to achieve autonomy, or – in a reflexive articulation – self-reliance. Because industrial incentives cover all regulatory requirements, self-reproduction is embedded within the process of bitcoin production. The protocol makes it impossible to produce bitcoins without automatically policing Bitcoin. Primary wealth extraction cannot take place without verifying transactions – through the validation of blocks – and thus tending the system as a whole, consistently and comprehensively (as if with an invisible hand). Stated succinctly, Bitcoin instantiates immanent economic government.
§3.31 — This auto-productive economic security circuit is evidence for the fundamental integrity of the Bitcoin blockchain. Currency and distributed public ledger are a single functional system, with neither making coherent operational sense without the other. This is a point made with exceptional cogency by Bitcoin commentator ‘Joe Coin’:
_Given the crucial requirement to preserve decentralization, the problem Satoshi had to solve while designing Bitcoin was how to incentivize network participants to expend resources transmitting, validating, and storing transactions. The first step in solving that is the simple acknowledgement that it must provide them something of economic value in return. … The incentive had to be created and exist entirely within the network itself … any instance of a blockchain and its underlying tokens are inextricably bound together. The token provides the fuel for the blockchain to operate, and the blockchain provides consensus on who owns which tokens. No amount of engineering can separate them._[13]
§3.32 — The threshold crossed here is both subtle and immense. Retrospectively, it will have been almost nothing, since the techonomic circuitry it invokes was – now demonstrably – already the operational principle of modern civilization (capitalism). It is only through Bitcoin, however, that the essential techno-commercial integrity of capitalism is brought into crisp focus, and extracted from speculative debate. When the machine is theoretically apprehended, ‘holistically’, as a real individual – or, far more consequentially, implemented as such – neither its technical nor its economic ‘aspects’ can be diverted into transcendence, or contingency, as extraneous, mutually-independent factors. Incentives are inherent to the machinery.[14] In a sense more complex – and involving – than anything the harsh paradox of the term immediately communicates, Bitcoin is a purposive mechanism. The conclusive action of the Bitcoin system – block validation – which seals each cycle of its reproduction, is a non-decomposable teleo-mechanical step (a diagonal escalation, or transcendental synthesis). It is industrialism, the mechanizing market, distilled to a previously unrealizable quintessence.
§3.33 — ‘Capital’ means – simultaneously and indissolubly – technological assets (machine-stock) and comparatively illiquid money (investment). Between these twin aspects there is only formal (and not real) difference. Their real integrity is demonstrated by techonomic machinery. The economic analysis of capital is diverted through technology, since wealth cannot be grasped substantially except in its cycle through productive apparatus, but technological analysis is drawn, reciprocally, into economics by the integration of rewards into the machine. At the level of philosophical reflection, under the cognitive conditions inherited from its mainstream European traditions, such techonomic integrity is difficult to hold together. To fuse mechanical causes with behavioral incentives in a techno-strategic assembly is to meld registers that have been determined as mutually inconsistent since antiquity.
§3.34 — Techonomic apprehension runs into a direct collision with the commanding dualism of the modern mentality, by insisting upon a re-animation of the compact between efficient and finalistic action. According to the complacent tenets of the new (or ‘enlightened’) cultural settlement, based upon the drastic demotion of scholasticism and its displacement by a substitute theo-scientific division of labor,[15] the bridge from mechanism (cause-effect) to teleology (means-end) had been definitively dismantled. Each was henceforth to be compartmentalized within a distinct, wholly independent dimension. Their sole residual relation was orthogonal (or demarcated). The realms of directed liberty, and of instructed mechanism, were to be perfectly isolated from each other, and mutually withdrawn beyond all possibility of reciprocal interference. In this arrangement was to be founded the modern peace, of no lesser consequence than that of Westphalia, and something close to a genuine social contract. Through it, an amoral techno-science was co-produced beside an agnostic politics. Two complementary templates for expertise arose, each pledged to silence in the house of the other. This compact has been at once the condition for the gestation of an autonomous industrial power, and – on exactly the same grounds – an obstacle to its cognitive digestion. With the surfacing of the concealed techonomic entity, it buckles, loses coherence, sheds explanatory credibility, and undergoes accelerating social desanctification. Modernity’s axial, though predominantly inexplicit, concept of the mechanical instrument – whose self-contradiction had been concealed as if within a collapsed dimension – escapes its bonds and re-emerges to break the basic categories of Occidental thought. That is where we are now.
§3.35 — The intellectual crisis stimulated with ever-increasing intensity by techonomic escalation (that is, by capitalism, or efficient critique), has fertilized a luxuriant foliage of ‘deconstruction’. Yet, the untenability of orthogonal conceptuality does not necessitate a subsidence into cognitive dilemma, or aporia. Even when the problem is restricted within the narrow bounds of its philosophical formalization, it opens a positive path – pursued since the inception of the process – into diagonal action, or individuation. It is surely implausible to decry as ‘unthinkable’ what has been demonstratively operationalized. Bitcoin attests to such a process with each cycle of block validation and Nakamoto Consensus. The process demands something structurally and functionally indistinguishable from transcendental philosophy, insofar as it is to be constituted – even very approximately – as a coherent object of thought. What it makes of this ‘philosophy’, however – as it pushes through upgrades into successively ultra-radicalized immanentizations – is rarely self-advertized as such. What it apparently offers, instead, is ‘technology’ – a term that is a near-exact synonym for ‘instrumental mechanism’, and one that undergoes comparable internal schism, across the same conceptual rift.
§3.36 — In any approach to the techonomic entity – plotted as if from outside – the notions of emergence (or individuation), diagonal process, teleo-mechanical causality, integral nonlinearity, and transcendental escalation begin to exhibit a general inter-substitutability. All of these things, among many others, are convertible by simple transforms into immanentization, or the real operation of critique. An efficient side-lining of pseudo-transcendence – achieved by way of a dynamic flattening – is the reliable signature of the trend. The solution to the DSP is a diagonalization.
§3.4 — The Bitcoin DSP-solution unshackles (digital) proliferation from duplicity, in the production of replicable singularity. As with every diagonal construction, this outcome is pseudo-paradoxical, since it reformulates an apparent contradiction. From the latent matrix of abundant signs and scarce things, it extracts the scarce sign. Through this procedure, crypto-currency is implemented as critique. It coins a diagonal concept, not as impractical-contemplative ‘theory’, but as working code.
§3.41 — Duplicity – or the DSP – is primarily registered as a monetary problem, in the guise of counterfeit currency, and secondarily as a problem of identity authentication, responding to impersonation. On the Internet, however, another manifestation of the same basic syndrome has been far more prevalent, socially advanced, and technically provocative. The critical driver, on the path to a cryptographic solution to the DSP, has been spam.
§3.42 — ‘Spam’ is narrowly defined as a species of advertising adapted to the conditions of near cost-free electronic communication. Its first large-scale manifestation was ‘unsolicited bulk email’ (UBE), a sub-category of the more general phenomenon of the ‘electronic spam’ which exploits the receptivity of instant messaging systems, newsgroups, mobile phones, social media, blog comments, and online games, among others. While advertising is the principal motivation for this massive duplication of unwanted – and typically only vaguely directed – communications, spam procedures (and supportive technologies) can also be employed for DoS (denial-of-service) attacks, which are designed to overwhelm a specifically-targeted recipient with an inundation of messages. At a sufficiently abstract level of apprehension, no strong boundary of principle differentiates advertising spam from a denial-of-service (DoS) attack, except that the former is generally divergent (one-to-many) and the latter convergent (many-to-one). The residual distinction is motivational. The injury (cost) to the recipient that is an inevitable side effect of spam promotion (‘collateral damage’) is a primary objective for the DoS assailant.
§3.421 — ‘Spam’ – abstractly conceived – spontaneously expresses the consequences of extreme information economy, or radical dematerialization, and is thus emblematic of electro-digital semiotic crisis. It follows the Law of the WORM – write once read many (times) – into a near-costless replication explosion. Unsurprisingly, any recipient of electronic communications is vulnerable to spam harassment, generating a problem that tends to ubiquity. The arms race between spammers and spam filters is recognizable from that characterizing the cross-excitation of infections and immune systems in the biological sphere. Cheap sign contagion is the common syndrome. As the various Turing Test-type defenses attest, any effective obstacle to the automation of spam production increases its cost. The time taken to ‘prove you are human’ adds friction at the point of terminal message delivery, where it cannot be easily eliminated – pre-emptively – by the spammer. Such ad hoc defenses necessarily aim to raise messaging cost, in order to restore the signal of commitment that digitization has erased.
§3.422 — The difference between a solution to the DSP and a spam filter turns out to be somewhere between subtle and non-existent. Both respond to the destructive consequences of semiotic economy – cheap signs – as these climax within networked, digital electronics.[16] The critical step in this respect was taken by Adam Back in 1997, with hashcash, a proof-of-work based messenger credentials system. As Back describes the innovation: “Hashcash was originally proposed as a mechanism to throttle systematic abuse of un-metered internet resources such as email, and anonymous remailers in May 1997. … The hashcash CPU cost-function computes a token which can be used as a proof-of-work.”[17]
§3.423 — Rather than offering another piecemeal response to some particular spam problem, Back’s solution looks more like an attempt to fix the Internet, or even more than this. Hashcash tackles the spam problem at its source (cheap signs). Rather than defensively fending off ever more cunning spam intrusions, it enables a positive signal that someone has taken the trouble to communicate this, with the ‘trouble’ being attested by proof-of-work certification. This solution can be seen as a basic filter. It works as an admission pass, rather than a policing operation. The cost of duplicity is raised at the root, which involves the DSP being grasped as the root.
§3.424 — The very name ‘hashcash’ attests to the realization that proof-of-work certification is self-monetizing. Evidence of effort – when this is pre-formatted as a signal of commitment – has intrinsic potential value, independent of its application. A currency is initated automatically, and all that remains is the process of price-discovery. Bitcoin provides a framework within which this process can occur.
§3.43 — However tempting it might be to construe proof-of-work as an algorithmic reprise of the labor theory of value (an LTV 2.0),[18] it is not from political economy that Bitcoin derives its sense of ‘work’ – unless by extraordinary circuitousness – but from computer science. The work to be proven, in the validation of a block and associated currency issuance, is performed by a CPU in the course of a mathematical puzzle-solving exercise, and demonstrated through successful execution of a computational task. It is the final measure – beyond which no appeal is possible – of the contribution made by any node to the running of the network. Such work is probabilistic, rather than deterministic. There is no application of computational effort that can strictly guarantee reward. The work required of the miner is persistence in pursuit of a low-probability outcome, through repeated trials. It is both structurally and genetically related to a process of stubborn cryptographic attack – ‘hacking’ in its colloquial, though not traditional, sense – and also to a grueling search for success in a lottery-type game of chance.
§3.431 — Proof-of-work is accomplishment at a test, which can then be employed as a key. In the case of Bitcoin, it simultaneously ‘unlocks’ new bitcoins and casts a ‘vote’ that counts towards the consensual updating of the blockchain. Incentive and service are nondecomposably married. Optimal functionality is achieved by making the content of the test entirely meaningless. It serves as a demonstration of brute force (trial-and-error) computation, inherently resistant to rationalization, and thus irreducibly arduous. It is not a test of cognitive achievement, in any general or sophisticated sense, but solely of computational effort. Its sole ‘significance’ is its difficulty. Despite the obvious risk of anthropomorphism, it might even be described as an ordeal, or – less dramatically – as a trial, unambiguously demonstrating commitment.
§3.432 — Would it not be preferable to have this ‘work’ also (i.e. simultaneously) applied to a problem of intrinsic value?[19] In its most positive formulation, this question has been a stimulus to altcoin differentiation. Anything other that mining might do, beside sheer block validation, seems to indicate an unexploited seam of surplus value. Such suggestions are strictly analogous to a recommendation that gold prospecting be bound to valuable activities of some other kind (such as fossil hunting). On the basis of fundamental economic principle, they merit the most vigilant suspicion, since they amount to a deliberate confusion of cost calculations, promoted in the name of a superior – or at least supplementary – utility. Yet however much the costs of mining are strategically muddied – and in fact, in some complex fashion, cross-subsidized – they still need to be unmuddied, to exhibit an economically-intelligible commitment. Mining investment is a signal, which cannot be dissolved into extraneous purposes without destruction of critical information. To whatever extent bitcoin miners are generating bitcoins by accident, is also the degree to which their contribution to Nakomoto Consensus, or block validation, is devalued. The perfect pointlessness of bitcoin generation procedures – for anything other than Bitcoin system consolidation (as remunerated in bitcoins) – is a feature, and not a bug. Cybernetic closure, or self-reference, is its own reward, and it is only as such that it acquires distinctive monetary characteristics. As always within the terrain of auto-production, this is the inescapable abyss, or principle of immanence. The self-propagating circuit has no ground beyond itself, and can only be impaired by the attempt to provide one.
§3.44 - From the perspective of the miner, bitcoins are immanent remuneration for primary production, or resource extraction. They function as digital gold. As the simulation of a finite resource, it is natural that their production rate should exhibit declining marginal returns. Each increment of mining effort confronts an increasingly challenging environment, under conditions of steady depletion. For Bitcoin, as for gold, economic dynamics automatically counter-balance industrial exertion, as prices adjust in response to supply constraints. This process of continuously revised bitcoin price discovery cannot be determined within the protocol, but occurs at its edges, where economic agents trade into, and out of, bitcoins – synthesizing the Bitcoin commercium with its outside.
§3.45 - Within the protocol, adjustments are restricted to supply modifications, modeling the depletion of an abstract resource that is advanced as a general commodity (i.e. money). Bitcoin splits its schedule of decreasing returns in two, separating its measures of reward and difficulty. This double contraction – while clearly redundant from the viewpoint of austere abstract theory – enables a superior degree of flexible calibration, in response to a dynamic environment, volatilized above all by rapid improvements in computational engineering (and product delivery). By dividing bitcoin output compression between two interlocking processes, the protocol is able to stabilize the rate of block validation in terms of an ‘objective’ (external) time metric. The difference between these two modes of nominal reward restriction reflects a schism in time, between the intrinsic, intensive, absolute succession of the blockchain, and the extrinsic, geometricized order of pre-existing (globalized) chronological convention. Integrated reward is a complex chrono-synthesis, occurring at the boundary where Bitcoin’s artificial time – proceeding only by successive envelopment (of blocks into the chain) – meets the social-chronometric time of measurable periods. ‘Ten minutes’ means nothing on the blockchain (in itself), until connected by an interlock that docks it to a chronometer.
§3.46 - Are not all blocks time-stamped? it might be objected. To avoid confusion at this point, it is critical to once again recall the difference between the ordinal and the cardinal, succession and duration. Time-stamps are ordinal indicators, without any intrinsic cardinality, and with merely suggestive cardinal allusion. They implement an ordering convention. Metric regulation of periods is an entirely distinct function. ‘Chain’ means series (and nothing besides).
§3.47 - The bitcoin reward rate halves, stepwise, in four-year phases, on an asymptotic progression towards the limit of BTC 21,000,000 – the protocol’s horizon of zero-return. Taken in isolation, this exponential decline looks smoothly Zenonian (asymptotic), or infinitesimalizing, until arbitrarily terminated at a set point of negligible output. It is scheduled to pass through 34 ‘reward eras’ in the last of which – with block 6930000 – BTC issuance reaches zero. Due to the power of exponential process, 99% of all bitcoins are issued by Era-7 (during which 164,062.5 bitcoins are added to the supply).[20] The end of Bitcoin’s mining epoch is anticipated in the year 2140. After this point, at a date so distant that it belongs to the genre of science fiction, continuation of the system requires that mining-based block validation incentives are fully replaced by transaction fees. Evidently, the transition process cannot be expected to await its arrival at this remote terminus, which marks a point of completion, rather than inauguration.
§3.48 - The reward schedule is further tightened by increasing difficulty of the hashing problem. Rather than executing a pre-programmed deceleration, Bitcoin’s rising difficulty responds dynamically to technological acceleration, and balances against it, thus holding the block validation rate roughly constant. Even as the reward rate tumbles – when denominated in BTC – the block processing rate is approximately stabilized, at a rate of one block every ten minutes, regardless of the scope and intensity of mining activity.
§3.49 - ‘Difficulty’ modification is a synchronization. The Zenonian time of intensive compression that determines the BTC reward-rate is – taken on its own – wholly autonomous, or artificial. As already noted, its chronometric ‘ticks’ are block validation events, registered in serial block numbers (and their ‘epochs’). They have no intrinsic reference to the units of ordinary time. It is only with the stabilization of the block-processing rate that the time of Bitcoin is made historically convertible, or calendrically intelligible, through the latching of block numbers to confirmed or predicted dates. This is a supplementary, synthetic operation, which coincides with the protocol’s anthropomorphic adoption. The time of the blockchain is intrinsic, and absolute, but its history is a frontier, where it engages ‘us’. As the blockchain is installed, and thus dated, an artificial time in-itself – consisting only of absolute succession – is packaged as phenomenon.
§3.5 - It can easily be seen that bitcoin mining is an arms race, of the ‘Red Queen’ type.[21] Since the total bitcoin production rate has zero (supply) elasticity, local advances in production can only be achieved at the expense of competitors. In consequence, inefficient miners are driven out of the market (as their costs – especially electricity bills – exceed the value of their coin production). This brutal ecology has forced rapid technological escalation, as miners upgrade their operations with increasingly specialized mining ‘rigs’. In the course of this process, the standard CPUs initially envisaged as the basic engines of bitcoin mining have been marginalized by dedicated hashing hardware, from high-performance graphics processing units (GPUs) – originally designed for application to computer games – through field-programmable gate arrays (FPGAs), to application-specific integrated circuits (ASICs). Bitcoin has thus stimulated the emergence of a new information technology industrial sub-sector.
§3.51 - With the completion of this production cycle, Bitcoin Singularity is established in a double sense (we will soon add others). An unprecedented event has occurred, upon a threshold that can only be crossed once, and an innovation in autonomization attains actuality, establishing the law for itself. Bitcoin provides the first historical example of industrial government. It is ruled in the same way that it is produced, without oversight. At the limit, its miners are paid for the production of reality – effectively incentivized to manifest the univocity of being as absolute time.[22]
§3.6 - The duplicity of the sign has numerous variations, and double spending (narrowly conceived) is by no means the only one with direct relevance to Bitcoin. A digital monetary system is intrinsically open to fraudulence (manipulative duplicity) at every scale, since not only its currency units, but also its associated websites, exchanges, and institutions – up to the level of an entire implemented protocol or commercium – are vulnerable, as a matter of first-order principle, to cloning. In this (widened) sense, the DSP is the indicator of a fully scale-free vulnerability.
§3.61 - Bitcoin, as a whole, is replicable open source software. It has no secure uniqueness, beside that – by no means inconsiderable – of coming first. The fact that the distinctive identity of Bitcoin inheres solely in its originality – which is to say its historical privilege – is already an invitation to clone invasion, at multiple levels. Since the avenue of monetary counterfeiting is blocked by the Bitcoin DSP solution, digital duplicity is displaced, and in fact up-scaled. From the corruption of currency units, it is redirected into the corruption of currency institutions and systems. Fraudulent entities proliferate at the edge of the Bitcoin system, from fly-by-night scam sites to entire exchange businesses (whose structural corruption is as likely due to the unconscious consequences of defective design, as to malicious criminal intention).
§3.62 - Among these dubious displacements of the DSP, the propagation of more-or-less Bitcoin-like currencies has a special place. The topic of altcoins is particularly engaging, and easily merits a dedicated work on its own account. As a deposit for creative techonomic endeavor, these variant cryptocurrencies are perhaps unsurpassed. Yet, when approached on the grimmest and most narrowly-critical track, they appear as deviant paths off the Bitcoin blockchain,[23] and – worse still – as a recrudescence of the DSP, amplified to the level of entire currency systems.
§3.63 - It is unnecessary to make too much of the fact that no less than three different altcoins have been brazenly named ‘Scamcoin’.[24] ‘Hammer of the altcoins’ Daniel Krawisz argues that they are all scams,[25] comparing them to cargo cults, for which there is an expectation of “similar results through blind imitation”. According to this argument, the proliferation of altcoins is a pathological phenomenon, to be denounced as an impediment to the emergence of Bitcoin’s natural monopoly (since, due to network effects, “one would always expect a single currency to overcome all its competitors”[26]). Because they sap network-effects, however feebly, altcoins are a parasitic drain, interfering with the ability of Bitcoin to rapidly reap the full consequences from its first-mover advantage. Krawisz writes: “…once Bitcoin exists, then there is no additional value, from a monetary standpoint, of creating knock-offs. … What makes Bitcoin great cannot easily be duplicated. … Altcoins can only be explained if we believe the purpose of cryptocurrencies is to make money rather than to become money.”
§3.64 - Between Bitcoin and a close-clone altcoin, the difference that matters is invisible to even the most painstaking inspection of code. To avoid distraction, it is advisable to suspend all such comparison, and to assume – instead – perfect duplication. Bitcoin – as an event or real singularity – has no exclusive essence that can be separated from its history. It is merely an instantiation of its own code, even if the first one. Its currency potential is a matter of momentum, exhausted by its path dependency (or “history and community” as Krawisz puts it). Only the workings of nonlinear network effects, based upon its ‘first-mover’ or ‘incumbency’ advantage – rather than any determinable differences in kind – distance Bitcoin, in principle, from its proximate competitors.
§3.65 - Bitcoin does not defeat forgery by being difficult to forge, but rather – absolutely – the opposite. It abandons such terrain in advance, on the implicit assumption that all original identity is indefensible in the digital epoch. Synthetic being, alone, can secure itself. Once again, and not for the last time in this exploration, we are returned to the rift – the abyss. Bitcoin’s integrity is groundless. Every imaginable redoubt of essential uniqueness is denied to it in principle (or a priori). It can be based upon nothing other than the circuitry of auto-production, whose only ‘foundation’ lies within itself.
§3.7 - ‘Singularity’ is a stressed sign, even in advance of its capture by theories of decentralized crypto-currency. It carries a complex of meanings that can easily appear inconsistent, and perhaps only arbitrarily concatenated (although this is not a conclusion drawn in the present work). The simplest – logico- grammatical – sense and usage of the term is fixed by contrast to plurality. ‘Singularity’ is the state of being singular (undoubled, or in any way further pluralized). This austere meaning has been overwhelmed by more exotic cosmo-physical, eschatological, and philosophical references – to the event horizon of gravitational collapse, to the ‘wall across the future’ drawn by emergent superintelligences, and to non-generic being beyond the metaphysics of unity.[27] The term is further complicated by its substantial overlap with individuation, which has itself accumulated technical semantic mass through its application to the study of complex systems. It is an essential characteristic of any complex system that it individuates (itself).
§3.71 - Bitcoin Singularity is over-determined within this cloud of associations. It is not only – as already proposed – an autonomization event, or threshold of individuation, but also a de-pluralization (through resolution of the DSP), and even a crisis (or ‘critical-point’) in the history of terrestrial intelligence, with definite invocation of Technological Singularity – for which it arguably provides an infrastructural foundation. Singularity eludes comparison. It can be designated, but not definitely signified. It marks a limit of objectification, rather than an object. Kantian transcendental realism – whose place carrier is the non-objective thing-in-itself – prepares us for it.
§3.72 - Solving the DSP upon the digital plane requires that the relevant entities – units of value – can be copied without being multiplied. Unless carefully formulated, therefore, the problem can appear simply insoluble (as a straightforward contradiction). How can digital replication be assimilated to the conservation of singularity? As seen, repeatedly, such apparent contradiction (or pseudo-paradox) is the reliable indication of an incompletely resolved diagonal problem. The solution is the scarce sign, consolidated as a concept, but also – and no less fundamentally – actualized as a technical achievement. Bitcoin realizes a diagonal function, instantiated through digitally-replicable but economically precious signs.
§3.73 - The Bitcoin singularity simulation is – among many other things – a philosophical event of extraordinary significance: the technical initiation of absolute succession. From this point, history explicitly enters the phase of synthetic ontology, or the techno-commercial production of being. Reality is re-grounded in a catalyzed – and henceforth catallactic – construction, which functions as an ultimate criterion. In all questions directed towards the veracity of signs, the blockchain is – if as yet only virtually – the terminal tribunal.[28] Intrinsic to this innovation is the necessity, or strict principle, that no superior authority is possible. Within the entire cosmos of signs, encompassing all social and cultural exchanges, it is only through the blockchain – or some adequate analog – that the extinction of duplicity is ensured.
§3.74 - Such claims can only appear hyperbolic. They correspond, as previously noted, to the objective idealism of transcendental philosophy, insofar as they dismiss all prospect of external epistemological leverage as pre-critical. Nothing can be brought to bear upon Bitcoin from without that is not manifestly inferior to it in respect to the capability for truth validation. There cannot be an intellectually compelling reason for any anthropo-philosophical criticism of Bitcoin to be believed. To be discredited, in this ultimate or transcendental milieu, is only to be effectively selected against. Such an eventuality does not depend upon a philosophical decision (in the still prevailing sense of this term), but upon abandonment through hard-forking and effective loss of consensual support. The blockchain automatically facilitates the subtraction of every cosmos – or advancing world-line – compatible with duplicity. Block validation, then, is the basic mechanism of a selective ontology.
§3.741 - It has to be expected that no less than several decades will be required for the full epochal radicality of this transition to be appreciated, at an even approximately adequate scale. The current (Perez) ‘Great Surge of Development’ and its installation of blockchain-based distributed systems sets the pace of cultural assimilation. In accordance with rhythmic historical precedent, the ‘wild exaggerations’ of the germinal phase becomes the conventional wisdom of the mature techonomic order.
§3.8 - Setting out on the path to a cognitive integration of Bitcoin calls for both anticipation and critical retrospection, and in fact compels it. Bitcoin drives a migration long promised by transcendental philosophy, from naïve ontology to a practical acknowledgment of the essence of being as the criterion of reality (finally indistinguishable from absolute succession, or order in-itself).[29] What emerges is nothing less than an artificial universe, founded – groundlessly – upon a spontaneously-engineered consistency. Once it is granted, practically, that no assertion of truth can be effectively sustained against a predominance of cognitive capability, all prospect of Archimedean (epistemological) leverage is subtracted. Bitcoin at once systematizes and implements this insight within its cycle of auto-production, establishing the foundations of transcendental authority through a realization of semiotic singularity. Truth is that which survives a process of elimination biased against duplicity.
§3.81 - The elegance, or economy, of Bitcoin’s virtual universe is fully consistent with a certain ontological luxuriance, encompassing a population of agents (represented by accounts), territories (wallets), objects (coins and coin-fragments), events (transactions), a consensual history (the blockchain), and – providing an ultimate criterion of reality – matter (computing power). Such tropical frondescence is also ecological. It generates niches, as zones of specialization, competition, and proliferation. As with all cases of techonomic revolution, the result is a ‘Cambrian Explosion’ of unpredictable, cross-stimulated innovation. The very meaning of ‘species’ undergoes escalation. As a side-consequence of its unprecedented ontological severity, or selectivity, Bitcoin triggers a re-population of the world.
§3.82 - Given the common principle of viral hijacking and double-spending, any DSP solution makes an immediate contribution to the field of computer security. “Trusted third parties are security holes,” Nick Szabo writes.[30] Bitcoin as critique is immediately security innovation, because immanence is self-policing. Transcendent sources of protection are vulnerabilities. It follows that Bitcoin security threats are characteristically extrinsic, applying to the edges of its commercium, where violence and fraud can be targeted at ‘people’ (IRL-IDs) and their insecure human flesh-machines. Most crudely, an individual can be menaced with a weapon (in meatspace), and told to hand over his private key. Alternatively, residual intermediaries – entrusted with the safekeeping of bitcoins – can abscond with them. Such dangers are, however, exogeneous. Even when they are associated with Bitcoin in public perception, their origin lies elsewhere.
§3.83 - Bitcoin has yet to be hacked.[31] The principal security threat to Bitcoin is still conceived – as it was already at the origin – as a ‘51% attack’ in which a hostile party (or coalition) commands sufficient applied computing power to overwhelm the consensus, and subsequently re-configure the protocol to its convenience.This vulnerability is finally game-theoretical rather than narrowly technical, as are Bitcoin’s defenses against it.[32] Incentives are an integral factor. Stated with maximum crudity: Why would an attacker be motivated to destroy an asset that has already been captured? Subversion of Bitcoin requires that one first owns it, at least to the degree that its devaluation becomes a self-inflicted injury. These questions are addressed a little more fully in Chapter-4 (directly following).
§3.84 - Bitcoin is nothing less than a semiotic restoration – an Occidental analog of the Confucian rectification of signs – and actually something more, because it is irreducibly innovative (on the efficient model of critique). For the first time, the securitization of a sign, as an economic token, has been understood. Meaning becomes hard currency. The immense philosophical revolution is implicit: It can be demonstrably made impractical to lie. Thus, by a negative and ‘merely technical’ route, all prior discourse on truth has been bypassed. With Bitcoin, there is now a truth engine. The consequences are not easily delimited. Even if Bitcoin remains to be definitively comprehended as the long-anticipated end of philosophy, there has never previously been a more convincing model for it. We know, from around the back, what truth is now.
§3.9 - While this book contains numerous signs representing economic values, this does not mean that it is made – even partly – out of money. The expression ‘BTC 21,000,000’ – as it appears here and in comparable texts – evidently has no monetary value whatsoever. From this alone we can confidently presume that monetary signs have some crucially distinctive characteristic, which is only very inadequately captured by any general semiotic determination such as ‘representations of economic value’. A monetary sign is something more than a sign that means ‘money’. Money, nevertheless, is made out of monetary signs.
§3.91 - In order for signs to function as money, they have not only to represent value as a signification, or to indicate it (for instance as an account code), they also have bear it, as something else. Alongside the semiotic aspects of signification and indication – and even perhaps on occasions instead of them – monetary signs require the characteristic of commutation, collection, or allocation.[33] They involve real, rather than merely metaphorical, substitution or exchange, as a condition of possibility for expenditure. A language-user can spend time and energy emitting words, but the words themselves are not – in any rigorous sense – spent. Vocabulary is not consumed in the process of speaking or writing, because a word is not – unless merely figuratively – ‘passed’ from one party to another, but rather duplicated each time a message is communicated. Where a message is spread, or proliferated, money is transmitted – in accordance with the rules of double-entry book-keeping, and contrary to the dynamics of multiplication through double spending. When money is as such, it is added to one wallet or account only in being deducted from another. Whenever – in contrast – money operates in the manner of a linguistic sign, it is spent without cost, and rapidly reduced to worthlessness.
§3.92 - It would be convenient if the word ‘token’ were available to carry the sense of the allocative sign, and there is some indication that the word is being adopted in crypto-currency circles in this way, indifferent to potential interference (and confusion) from its previously established technical and philosophical usage.[34] In their ordinary deployment, tokens count as money. Yet precisely because they allocate more than they signify, their meaning has remained – overwhelmingly – lodged in obscurity. They circulate in immense numbers, saying little.
§3.93 - If a new semiotic settlement is to follow in the wake of the Bitcoin protocol, and its solution to the DSP, there is an alternative common term all-but destined – if not, in fact, simply destined – to be cemented into the foundations. The allocative sign is the coin. General acceptance, in this regards, requires only an increment of abstraction, accompanied by an automatic reversal. Once the crypto-currency ‘-coin’ suffix, rather than alluding to concrete specie, acquires the status of a defining model, the word ‘coin’ becomes the technically-precise bearer of a semiotic function. A coin, then, would be fully characterized as a unit of DSP-resolved currency, typically instantiated as a highly-virtualized, Internet-communicable ledger entry, reproduced on a blockchain.
§3.94 - Beside the signifier and the index – or no less beneath them – is the coin.