Bitcoin

It's a shame Jean Baudrillard is dead...

Humanity’s blind desperate faith in a brighter future, the same quality that brought us crusades, world wars, and pensions, has cooked up an impressive new scheme. If French cultural theorist Jean Baudrillard were alive to see this, he would be dead.¹ Not to mention Karl Marx, who will not be mentioned. 

That the world would create another simulacrum of money, that plastic cards representing entries in bank ledgers representing paper bills representing (not even!) ounces of gold representing real goods and services wasn’t too far down the rabbit hole of abstraction was never the surprising thing. People are always itching for the next simulacrum. What’s wild is that it caught on. 

For millennia, humans have sought the secret formula for the transmutation of matter into gold. They called it alchemy. It turns out that what they had wrong was not the transmutation part, like everyone thought, but the starting point: matter. Starting instead with a symbol, and transmuting it with math and many metric butt-tons of electricity, humanity made gold (or at least, its signification, i.e. the thing we want from gold: wealth).² 

And we saw that it was good, for the most part.³ People generally agree that getting rich slaps, and this strange new alchemy was getting a lot of folks rich. Nevermind that like gold, digital gold did little more than shine. That it could get you rich was enough. In fact, it’s better for the price of Bitcoin that it rarely serves its purpose as a currency. A useful currency needs to be stable; if everyone bought their pizza with Bitcoin, who would speculate on the price? As Roland Barthes said of the Eiffel Tower, “Use never does anything but shelter meaning.” Better for this (mostly) useless currency to remain so, while its meaning flutters around the globe infecting people with hope and possibility. 

But that it pretends to be gold, this should give you pause. Past performance is not an indication of future results! say the stock brokers. But it’s all we have to go off of, and humanity’s past performance with chasing riches (esp. gold) is troubling to say the least.⁴ So far, the worst crypto has brought us has only been the largest robberies in world history—the people who lost money in the hacks of Mt. Gox, Wormhole, etc. invested in a nascent tech, knew the risks, and probably lost money they could afford to lose, nbd—but it’s still a nascent technology. What happens when the dark cohort of imperialism, authoritarianism, et al. gets involved? And what about the community’s values—are there any besides greed? Is it concerning that a community whose whole ethos purportedly revolved around decentralization has become very centralized, very fast? These questions are too big and universal for speculation, but what do we think about the little guy? What happens when the simulation encloses around them? Can I interest you, dear reader, in a parable?

You’re a teacher at a public school somewhere in the US. You’re not paid as much as you deserve for your labor, certainly not, but you are paid enough to set a little aside each month in a savings account. Now, the cash in your savings account just sits there. You would invest it in the stock market, but you already tried that, and in 2008, you lost more than half of it. Nobody’s gonna fool you twice. You prefer solid, stable assets, like cash or gold. But gold is pretty unwieldy. If you need money to, like, pay rent, how do you liquidate a brick? 

You hear, from the school’s Econ teacher, that this new currency called Bitcoin is essentially digital gold. You hold onto it, and it goes up in value, simple as that. Sometimes it goes down, but ultimately, over time, it goes up. It’s an inflation-hedge,⁵ like gold, and it’s all stored in a computer so it’s much easier to liquidate. And, it was created in 2009 in response to the ’08 crisis; it was built to work on its own community-run system, outside of the manipulation of dirty banks. It was made, in short, for you.

So you get the Econ teacher’s help buying some—wallet, key, hash, pass, click—and now your savings are in digital gold. 

In the first week, your account’s value is down 7%. In the second week, it’s up 10%. Overall, with enough time, the trail does seem to go up, but there a plenty of switchbacks. Before, you never thought about your savings account; it was just there, in the dark, saving. Now, you check the amount daily. Too much. So you go see the Econ teacher and say, whaaaadafuck?

She tells you about another digital currency, stablecoins. They’re specially engineered for stability. Each stablecoin is worth $1, but they’re better than dollars because they accrue more interest, waaaaay more interest, sometimes as much as 20%! And it’s easy to swap your Bitcoin for stablecoins, and vice versa. She shows you how, you pick a coin that offers a cool 5% interest, because 20% smells weird, and now your savings are in stablecoins. 

What a relief. Now your account’s value doesn’t change, except for the interest rolling in. You can finally forget about it. And the stablecoin you chose, says the Econ teacher, is algorithmically determined to be worth one dollar, meaning its price is out of human hands. No one can mess with it, it just works, by the power of math. 

You can probably tell where this is going. One day, you see that your account’s value has shrunk. Somehow, your $1 stablecoins are worth 35 cents each. When you try to swap them for another currency, the transaction fails. Before long, the stablecoins are worth less than 1 cent each, and your savings are gone. Poof.

That was the real life story of a stablecoin called TerraUSD. When enough people wanted to sell, the algorithm broke. $40 billion got torched.⁶ What the algo couldn’t account for was a total breech of confidence, and all that mattered for confidence was the symbolic value of the coins, because the coins were purely symbolic. As soon as people stopped trusting the symbol, its value vanished. 

But the point is not that people lost money, the point is that they lost faith, and faith, remarkably, still matters. It was not the technology that failed—the algorithm did what it was programmed to do—it was the symbolism. This was a glitch in the simulation. Or, it’s a vote of confidence in more concrete systems of value.

Except…

What’s weird is that Terra is the outlier. Other coins have broken, but most don’t. The crypto community has built a simulation of a financial system, and, on the whole, it renders, because people have enough faith in the simulation to uphold it.⁷ Which is kinda cool, and also kinda scary. Because it’s only a matter of time before people try to simulate everything with algorithms. Money, sure, everyone knows it’s fake. But what happens when we put algorithms in charge of law and order, and the people decide it’s all a sham, and just like Terra, a supposedly stable thing goes to zero?  

Losing money gambling is the least of our worries. Let’s look at another story. This time no parables, and the little guy can be a little more independent. 

Speed begets more speed, so the scheme gathered momentum, spiraled into a maelstrom of gambler’s euphoria. People got rich. They bought lambos and tendies.⁸ They reached into the bag and pulled out their prizes, then they passed the bag down the chain of digital blocks. 

When it finally landed in your hands, you reached into that fabled bag and found it empty. You got burned. Beneath your feet there was, as it were, no rug. 

You had borrowed the money from your sister, Sara. When you’d told her what the loan was for, she was skeptical.  

“I don’t know if this stuff’s real,” she said over text. “The internet facilitates communities of solipsists, inter-passive networks of like-minds who confirm, rather than challenge, each others’ assumptions and prejudices.”

“Do your own research!” you fired back, aware that she had stolen this quote from Mark Fisher’s 2009 treatise Capitalist Realism.⁹ 

“I’m afraid that won’t help,” she said. “This mythos will reproduce itself until there’s no truth, sincerity, or memory remaining. The only semiotic value left will be money. What good is research then?”

She could be so pedantic. Which is why you dreaded telling her that her $10,000 was gone for good, lost to a stablecoin offering an alluring 20% yield with, uhh… no catch. 

But her equanimity surprised you. “You’ll pay me back. I just hope you learned your lesson,” went her response. “Forgetfulness, thoughtlessness, and irresponsibility prevail during the growth phase, whereas historical memory becomes a characteristic of the crisis phase.”¹⁰

“I’m sorry,” you said, though you weren’t. You were close to striking it rich. You just need to fine tune your methods. And borrow more money. 

Fortunately, a Mysterious Stranger rides into town, on a lambo as red as the sun. Its insides roar with hunger. You can tell this man has what you seek, so you follow him into Cardsharps, a Western-themed saloon bar on the Vegas Strip. 

Inside the swinging saloon doors is a shockingly faithful recreation of the 1850’s West. Cowboy getups, liar’s dice, sex workers in elegant corsets, dusty unmarked bottles of liquor, all shot through with the arrogant hedonism of Westworld. In one corner a man bleeds from a game of five finger filet. It’s a crypto bar.

You sit at the Stranger’s table, wishing you’d worn a hat. 

“Howdy,” you say. 

The stranger nods. Under his black Stetson, he looks vaguely German, like Klaus Kinski. 

“I see you done alright for yourself,” you venture. “Must be a crypto-cowboy, like myself.”

“Sure am,” he says. As he leans to extend his hand, a large gold chain slips out of his shirt. The shirt is clean, so white it seems to sparkle, and there are red letters on it, spelling SUPREME. 

“I’m lookin for the Dip,” you say. “Can you point me in the right direction?”

“You tried gettin a job?” he asks.

“Yessir. Hit don’t work for me,” you say, in the best Wild West accent you can muster. 

He sips his whiskey. “So you wanna strike gold, huh?” he says. “First thing’s first, you gotta get ridda the logical part of your brain. Mine’s been shot and killt. See?” He lifts up his Stetson to reveal a perfectly good head, everything in tact. 

You nod. 

“Digital gold,” he says. “Doubles when it halves. But I reckon ya already know that. I got somethin better for ya. A business venture, stock tradin. I got a real winner. It’s set to quadruple, could even octuple if we play our cards right. And I’ll tip ya off for free, cause the more folks that get involved, the better. Besides, you don’t look like one of them bandits from the S-E-C.” He spits. 

You lean in closer. The back legs of your chair hover above the floor. 

“The company sells video games, all kinds of em. Shooters, sports, role-players. There’s even one I like to play called Red Dead Redemption.” He chuckles. “But that’s not what matters. The important thing is me and some of the boys are fixin to put a run in on the stock. Call options, wild ones. It’s goin straight to the moon, pardner.” 

“What’s the stock?”

“Aw, shoot. You don’t take me seriously, do ya? You think I’m some kinda lunatic.”

“No, no I don’t. I’m a believer, a true believer.”

“Well then, you gotta swear somethin. If you’re buyin, you gotta swear you won’t get yella and turn around and sell this stock. You gotta hold it for five years, minimum. Or else ya screw over the whole gang, and we’ll come after ya.”

“I swear it.” 

“Good, cause I like the stock, and so will you. The ticker’s GME.”

Isn’t this, roughly, how it went down? What people learned from the Gamestop saga is that a bunch of Mysterious Strangers can band together around a common (financial) dream, regardless of how irrational that dream may seem, and through their sheer power in numbers, manifest it. 

Except they didn’t really learn this from Gamestop. They learned it from Bitcoin. They applied that knowledge to Gamestop. 

But there’s still a catch. To keep levitating the stock price at its simulated height, it takes a high degree of compliance from the community. It’s like a spell that only works when a great number of people are casting it.¹¹ If enough people bail, the spell breaks, and the levitating object falls. The catch is that no one can cash in on their profits without selling, i.e. converting their profits to USD, bailing on the community and weakening the spell. And as much as you may hate screwing over that band of Mysterious Strangers, you cast the spell to get rich, didn’t you?

This is the dilemma that’s been playing out around NFTs, the metaverse, and all those other silly, futurist terms you don’t actually want to read about. Gamestop’s price chart tells an interesting tale. The price, a representation of society’s belief in a simulated notion of the company,¹² shot up (as you probably heard) when it went viral and the community piled on. Since then, it chopped around pretty drastically at a much higher price than traditional finance would tell you it’s worth, until finally, when the crypto bubble burst in October ’22, it settled at an, I don’t know, normal-ish price, whatever that means. 

I don’t care about the price. What interests me is the tension between the realists and what I’ll call the simulationists. The realists, many of whom were just gambling for gambling’s sake, smelled danger and/or wanted real money they could spend, so they sold, while the simulationists, holding onto their belief in “The Mooning” or whatever they called it, continued to cast Levitate long after the virality faded. A lot of them probably kept buying more, seeing each surge by the realists as a “dip.” 

But what do the simulationists really believe in, and where does that belief lead? I don’t think many of them give a shit how many copies of Call of Duty Gamestop sells, they believe in the power of groupthink. They believe that enough rugged individuals like themselves, scattered throughout the four corners of the internet, will eventually take their side, sending the price of their beloved meme stonk to their collective dream of the moon. They believe, in short, in the simulation.

For these people (and many of them are Bitcoin maximalists for the same reasons) the conflict over GME’s price was more than a mere tension—it was a battle. And I don’t use that term lightly. It was a battle not just between simulationists and ‘realists,’ but also between little guys and big, rebels and establishment, online and offline, absurdists and normies, disaffected and affected. 

It was a battle that had a lot to do with the loneliness that contemporary society imparts on the individual, but we won’t get into that here.¹³ All I’ll say now is that the larger war’s still ongoing, and the stakes are high. People have come up with a pretty damn cunning way of tokenizing their allegiance to the side of simulation (with crypto, yes, but also with meme stocks and the commodification of pretty much any dumb joke Elon Musk makes). The simulation is already total if you want it to be, and now people have a crystal-clear incentive for wanting it to be.¹⁴ 

But hold up, there’s something I forgot to mention. This is all fucking hilarious. 

Let it sink in. Let us not forget that most people lean into the simulation as a joke. The border that constitutes this community is irony. If you move outside of it, you get trolled. Because how could you take yourself too seriously, you idiot? How could you not understand that all of this was done simply for teh lolz? Irony is an excellent mask for insecurity, and it’s only natural for a bunch of desperate, isolated, interdependent souls casting all-or-nothing spells to feel insecure. 

If you’ve read this far into the book, then you know I’m all for a healthy dose of irony, but as we adjust to our simulated surroundings, where meaning is derived solely from the relation each symbol has to the others, what we bring in with us matters. It didn’t take a very sophisticated grift for Theranos to get people to part with their blood money. As the simulation continues to render around us, one can only wonder what kinds of businesses will thrive in the new environment. At what point will executives be bound, by their fiduciary duty to their shareholders, to meme, troll, inflate, evade, and lie? Exaggeration is already the norm. If you examine the communities that follow virality, the one thing they all value appears to be entertainment. If that’s all we care about online, we’re in for a wild ride. 

To close, I’ll leave you with a thought experiment.¹⁵ Imagine the Mysterious Stranger from the previous story leans in to offer you another tip. 

“Pardner,” he whispers. “I’ll let ya in on the hottest new cryptocurrency.” He turns off his phone and checks to make sure no one’s listening. “The name’s QuietCoin. It’s governed by an alg-o-rhythm that automatically sells to lower its price whenever it’s mentioned on the internet. There’s no shortin, no shillin, and no sharin allowed. If folks keep on buyin it, without goin and blabbin on their computers, we all strike it rich. But ya can only spread it by word-o-mouth. Got it?”

Would the numbers go up, or down?¹⁶

1. A quick refresher course on Baudrillard’s theory of Simulation and Simulacra: In JB’s view, our understanding of signs and symbols has evolved over time. He notes four distinct ‘orders’ in this evolution. In the first order, people understand signs to mean what they represent (e.g. a Medieval figure of the Virgin Mary representing the Virgin Mary). In the second order, the signs lie, but we still believe there’s an underlying truth that they’re lying about (e.g. US newspapers claiming the Spanish Navy sank the USS Maine). In the third, where things get all wonky and postmodern, society no longer believes in an underlying truth, and despite all their pretending, the signs ultimately point to this absence of meaning (e.g. the conspiracies swirling around JFK’s assassination). In the fourth, the subject of this essay, even the absence of meaning is gone; the signs are copies of copies (he calls them simulacra) and they can only reference each other. The simulation is complete. 

BTW: This is a huge oversimplification of the theory (a simulacrum, and a shoddy one at best). If this stuff doesn’t make your brain want to eject out of your cranium, you might like to read the original thing. If it does, well, I have some other stories you might like better…

2. In practice, it took centuries of iteration and a whole lotta Stalinism^⁠1 for symbols to accrue values entirely independent of the things they represent, but like it or not, they did. And abstraction’s here to stay. If this sounds far-fetched, that’s because it is, yet it’s still a real phenomenon. Try googling “what is one Youtube view worth?” Abstract notions have concrete values, because human beings live, increasingly, in abstraction. This is nothing new. To be clear, no one is saying you have to have to put makeup on your avatar and sign up for the metaverse, but they are saying (and have been for a while) that you have to take a unique social security number and register it with the Internal Revenue Service (if you want to occupy any sort of symbolic place in society). 

¹ This is also, of course, an oversimplification. The real reasons that social conditions were ripe enough for cryptocurrencies to take root are numerous and complex. The biggest political factor in recent history (since we’re already playing around with -isms) is probably neoliberalism, because the notion of governments stepping back to let markets rule inevitably produces citizens who look to find solutions in products, not political processes. For more on this phenomenon, see: the rest of this book…

3. There are plenty of reasons why this is concerning. Let’s concentrate on the inflation of symbolism part. If you accept that people have a finite amount of attention to ‘pay,’ then the more attention people pay to abstract symbols, the less they can pay to the things for which they stand. (Look at what Facebook posts have done to politic movements…) In this case, the case of commerce, the internet’s gaze leads us to fixate on symbolic businesses, at the expense of real ones. More meme stonks, more ponzi schemes, more bag-passing, and less funding for companies making coffee, or microchips, or whatever it is the internet runs on. 

4. See, for reference: the Spaniards’ rendezvous with the great Aztec Civilization, now a historical footnote.

5. This idea, if you were wondering, turned out to be false.

6. Most investors probably took their medicine and fled to more realistic assets, but some, surely, fled deeper into the cryptoverse, just like our little guy fled from BTC into stablecoins. See? It’s a rabbit hole, like much of the internet.

7. Back to Baudrillard, still dead: “Simulation is characterized by a precession of the model, of all the models based on the merest fact – the models come first, their circulation, orbital like that of the bomb, constitutes the genuine magnetic field of the event.” The model, in this case, is the algorithm. When someone comes up with a new cryptocurrency, they share its algorithm in something called a white paper,^⁠1 and then people can decide whether or not they want to buy it. Whatever happens after that is understood to be a product of the algorithm.  

¹ Or, you know, they can simulate this step (simulation is infinitely reproducible!), post a .jpeg meme, and call it a day.

8. Chicken tenders..?

9. In the actual text, Fisher attributes this idea to BBC documentary filmmaker Adam Curtis.

10. Sara is once again quoting a relatively obscure political economist, Christian Marazzi, from an interview with Fondazione Prada. 

11. Before anyone gets out their six-shooter let me say that I’m ignoring all the institutional investors who played their part in the Gamestop saga. I’m not a finance guy; I’m really only interested in the symbolic and communal aspects of the story, and the implications they have on other realms of society. Indeed, the big players like hedge funds and investment banks were instrumental in the actual rise and fall of the stock price, but let’s imagine for argument’s sake that the little guys had more pull, because in certain less financial cases, they will. 

12. Setting aside advanced spells like shorts, options, and other necromancy, you either “buy” into the notion, or not. In Baudrillardian terms, the ticker (GME) is the simulation, because it’s meant to simulate something real in the world, i.e. the sales and earnings of Gamestop. The stock price, then, is the simulacrum, because it simulates the simulation, i.e. the community’s idea of Gamestop.^⁠1 

¹ Okay, you could argue that the ticker is already a simulacrum if you feel it doesn’t actually point to any of Gamestop’s actual doings in the material world (as in, corporate earnings are already a construct completely divorced from reality) and you’d technically be right, but for everyone’s sake, let’s just chill here. This is heady enough as it is.

13. See again, for reference: the rest of this book.

14. Can you get any clearer than numbers that go up or down? It’s so easy, an ape could do it…

15. If you’re still with me on the Baudrillard Express, consider this. Baudrillard wrote that the biggest threat to a simulated reality is a simulated event. A real event is too easily incorporated into the simulation, but a simulated one might pose a real threat. A simulated bank robbery, he claimed, is much more dangerous to the illusion of banking than a real one…

16. In addition to the philosophers referenced here, I owe a substantial debt to Matt Levine’s Bloomberg story on crypto, not just for many of the ideas in this piece, but also for the form. If you want to know more about the history, absurdities, and actual mechanics of crypto, it’s a great piece. And if you’d rather not send your hard-earned USD to Bloomberg’s coffers, you can do what I did and dust off that old @aol junk mail to cash in on your first free article, which, in this case, happens to be a full cover-to-cover issue. I’m pretty sure Money Matt will be alright.