Blockchain, cryptocurrencies, NFTs and smart contracts are all the rage. They promise (yet another) revolution. They attract public and private investment. They allow those who have embraced them to make fortunes and lose everything. They are also, however, the umpteenth step towards electronic slavery masquerading as a dream of freedom. Thanks to these technologies – but more generally to how the IT market works – we transfer control over the economic and intellectual value we create with our work and thought efforts to private operators. In exchange for what? by Andrea Monti – Initially published in Italian by Strategikon – an Italian Tech Blog.Production and economic processes based on information technology invert the relationship between a need and its satisfaction. First comes the ‘solution’ and then the ‘problem’ that this solution must solve: the tail, in short, shakes the dog.
It is true that to limit ourselves to the last century, Ford said that if he had to listen to the people, he should have bred faster horses instead of producing cars. It is also true that Steve Jobs said that most of the time, people do not know what they want until somebody tells them. However, it would be wrong to infer from these approaches a general rule that the important thing is to create something saleable and then make sure it serves a purpose. In other words, the fact that a ‘technology is available does not imply that it is mandatory to use it. This conclusion is even more true if we consider that blockchain, cryptocurrencies, and ebooks, music, and various services work as long as telecommunication operators, especially governments, allow it. People take for granted that the physical infrastructure on which blockchain and its siblings work is always available, functioning and, above all, free of political blocks or constraints.
As recent history shows, it is not the case because the first reaction of countries in which unrest breaks out is to block telecommunications networks. These blocks do not only happen in countries considered authoritarian but can also occur in the USA and also in Italy, where from 2019, the Prime Minister’s Office obtained the power to activate the kill switch that shuts down the national internet in an emergency. Moreover, if there is no internet, there is no Blockchain, Bitcoin, NFT, etc. Similarly, given the dependence of these technologies on telecom operators and data centre providers, it is pretty intuitive to understand that the freedom promised by its proponents is a different form of electronic slavery.
Let us, therefore, ask ourselves, first of all, whether we need blockchain. This technology, the vulgate says, is used to guarantee transparency and publicity in transactions between two or more parties, entrusting distributed control with the protection of the authenticity of the exchange. However, what value does this ‘guarantee’ have? None, unless a law gives blockchain ledgers a special legal status. However, attributing a legal value to a blockchain is not something that requires a few paragraphs in a bill. It would require setting up a complex system to meet the needs of the legal system to do something that is already possible with other systems. It would cost much money, including energy, and hand the network over to those who have the computing power to generate the proof-of-work that ‘seal’ the ledgers. On the other hand, current tracking systems designed for logistics, industrial production and the agri-food sector already make it possible to minutely reconstruct the path of raw materials and products without having to reinvent the wheel.
Similar problems concern the attempt to use a blockchain to identify people. Legal identity belongs to the state, not to the individual. From the issuing of the birth certificate and then the registration in the registry, it is the state that certifies who one is and who – in the case of collaborators of justice or other people in exceptional circumstances – he can become. There are no legal alternatives, and, consequently, there cannot be any technological ones.
Finally, but perhaps first of all: why should a decentralised system based on blockchain be conceptually preferable to a hierarchical system of a state nature? What are we afraid of, living in a democratic country firmly rooted in Western culture and values?
First of all, they are not new and do not necessarily depend on a blockchain. Therefore, in this sense, cryptocurrencies are nothing new because the first ‘currency’ to use cryptographic tools was Digicash in 1993. Secondly, they are not ‘coins’ because they are not legal tender and therefore not a means of payment. If instead of Euros, a shopkeeper is willing to accept Bitcoins or the very famous Cameroonian Mud Pizzas, that is his problem. Finally, cryptocurrencies have no objective value but only conventional value because they are only ‘worth’ to those who recognise their exchange value. As long as Bitcoin and its derivatives circulated on networks separate from those of the financial system, they had at least an ideological function: to take away the state’s monopoly on creating value and thus at least partially realise the anarchist utopia. However, since private investment has turned cryptocurrencies into objects to speculate on, they have lost their revolutionary significance. In retrospect, one could say that cryptocurrencies are now fully part of the capitalist system.
A similar fate (but without the initial revolutionary flair) afflicts Non Fungible Tokens (NFTs), a variation of the technology that makes cryptocurrencies work, used to make a file unique and track its ownership. NFT, it is said, is used to give value to digital artworks and protect the rights of authors and those who buy their works. It is no coincidence that it has attracted the attention of entertainment multinationals such as Disney or Netflix.
First of all, to understand whether we need NFTs, we need to decide what we mean by “work of art” and, perhaps, reread Benjamin’s essay on the work of art in the age of its technical reproducibility published in 1935. That said – as a lawyer would say – the following applies. If what counts in a work of art is the aesthetic experience it stimulates, then there is no difference between original and copy, especially about works created natively in digital format. So, to ‘appreciate’ a crypto punk that sells for 12 million dollars, one does not need to download the original (assuming it is public), nor does one need to buy an ‘authorised copy’. It is enough to take a screenshot of one of the many images available online to satisfy the ‘aesthetic need’, especially if experienced on a smartphone or tablet screen. Vice versa, looking at one of the Caravaggios on display in Room 90 of the Uffizi is an experience that no photograph or reproduction “authenticated” by an NFT could allow. Also, in this case, however, one should ponder the role of a physical copy of the painting made by professionals (not necessarily forgers) in the field. In this case, too, from the audience’s point of view, the difference between original and copy progressively loses its meaning. If we go one step further and look at The Next Rembrandt, we discover that the aesthetic experience is not even linked to a specific work but rather to the artist’s style. The Next Rembrandt was not painted by Rembrandt but by software that imitates his expressive language. However, from the viewer’s point of view, this does not matter because what matters is the final effect. If the software uses colours as Rembrandt would have done, if the stroke is like Rembrandt’s, if the subject is one of those that Rembrandt would have painted, then the painting is as if it were Rembrandt’s (those who deal with AI will have recognised, in this reasoning, the functionalist argument based on which one tries to demonstrate that software can, if not be, at least look intelligent). So, getting back to the point, what matters is whether the work has been made with the stylistic features of a specific artist and not whether the ‘original’ artist has made it.
If, then, and at least for digital art, there is no difference between original and copy, NFTs only serve to feed the collectors’ market. That is to say, speculation. Being that the case, it is appropriate to call NFT by their name: like anti-copy systems, they are used for those Digital Right Management systems fiercely opposed by the Free Software community. Mind, there is absolutely nothing wrong with studying how to protect the intellectual property of digitised assets, but it is essential to be clear about the meaning of words.
The idea behind smart contracts is to entrust software (but the word is reductive) with the management of the negotiation and fulfilment of a contract. A (nowadays) banal purchase on an eCommerce platform is, conceptually, a smart contract: the parties’ obligations are ‘codified’ in the procedure of product selection, payment and shipment of the goods according to what has been ’embedded in the platform. Nothing different, conceptually speaking, from buying a packet of cigarettes from a vending machine.
Smart contracts, in the true sense of the word, rely on the ever-present blockchain and, at least on paper, should dynamically manage the contractual relationship. However, one only has to look at the examples most often used to explain what can be used to understand the structural problems of this technology. Three critical issues stand out above all others: the need to interface with a vast number of platforms, the impact of programming errors on people’s rights, and the transfer of the power to judge from the courts to technicians.
Thinking that a smart contract could manage the payment of, say, the instalments of a car lease implies that at least the systems of the finance company, the client’s bank, the car manufacturer and the car itself are connected. At this level of complexity alone, the order of problems that can occur is evident.
To this, we can add, and we come to the second problem, the fact that there are no error-free programmes. As the complexity of the software increases, so does the number of bugs, and therefore in infrastructure such as the one described, which should interact with very different systems, it is inevitable to expect blockages and malfunctions that could affect millions of people at the same time. And we still have not even come close to the security problems of the individual platforms.
Finally, who should judge these malfunctions (and, before that, the parties’ compliance with their obligations)? Indeed not a judge. Unless the magistrate has a degree (and experience) in computer science, it is pretty unlikely that he will realise what he is dealing. Consequently, the Court shall delegate the decision, de facto, to a technical consultant as already often happens in very complex trials.
If we wanted to summarise in one sentence the enormous scale of the problems caused by the distorted approach to technological innovation, there would be no better choice than a book that is as unknown as it is prophetic: The Inmates Are Running The Asylum.