Connect with us

Money

The Financialization of Life

Published

on

A recent article about the BlockChain appeared on the Italian version of Vice’s Motherboard and raised a series of interesting conversations, and was soon followed up by another one.

In that article I was called to express a series of opinions about what was happening with BlockChains and cryptocurrencies, from the point of view of an organization such as the one I lead (HER, Human Ecosystems Relazioni), which deals with data, complex connections between sciences, technology, society, design and art, and the social, political, cultural and psychological implications of these connections and interactions.

In my job, everyday, I deal with multiple points of view which confront with these impacts brought on by data, blockchains and cryptocurrencies, with a wide variety of subjects from hyper-technical ones, to entrepreneurs and investors, to policymakers, up to the ones beyond suspicion, “ordinary” people who have to understand what an artwork which uses the blockchain does, or who deals with culture, museums, the city’s neighborhoods. People who — whether they like it or not — have to do with these technologies and practices. A large variety.

I have the maximum respect for the blockchain. It possibly is the technology which bears the highest potential for radical innovation and transformation today. With all its limits and problems.

My critique is not technical, but psychological.

It moves across the domain of perception and of comprehension of reality.

In this domain — the one of the psychic processes which are engaged and shared by people and their relations as they interpret the world to understand how to orient themselves and how to act in it — technologies like the Blockchain are a disaster.

Why?

On the one hand, they are a very powerful agent towards the transactionalization of life, that is of the fact that all the elements of our lives are progressively turning into transactions.

Which overlaps with the fact that they become “financialized”. Everything, including our relations and emotions, progressively becomes transactionalized/financialized, and the Blockchain represent an apex of this tendency. This is already becoming a problem for informality, for the possibility of transgression, for the normation and normalization of conflicts and, thus, in prospect, for our liberties and fundamental rights, and for our possibility to perceive them (because we are talking about psychological effects).

On the other hand, they move attention onto the algorithm, on the system, on the framework. Instead of supporting and maintaining the necessity and culture of establishing co-responsibility between human beings, these systems include “trust” in procedural ways. In ways which are technical. Thus, the necessity for trust (and, thus, on the responsibility to attribute trust, based on human relations) progressively disappears.

Therefore, together with it, society disappears. Society as actively and consciously built by people who freely decide if and when to trust each other, and who collectively agree to the modalities of this attribution.

What remains is only consumption of services and products. Safe, transparent and all. But mere transactionalized consumption. Society ends, and so does citizenship: we become citizen of nothing, of the network, of the algorithm.

These are not technical issues, but psychological ones, perceptive ones. And, thus, even more serious.

Technology is not neutral.

I can use a hammer to plant a nail or to smash it on your head, that’s true. But what is also true is that as soon as I have a hammer in my hand, everything starts looking like a nail.

This is the same for Blockchains. As soon as I start using them, as soon as I start imagining the world through them, everything starts looking as a transaction, as something which is “tokenizable”. And this is a disaster, in the ancient sense of the word (dis-aster, without stars for orientation).

Technology creates us just as much as we create technology.

We are starting to design systems which are, on the one hand, completely open and transparent. Which is a good thing from one point of view, and a problematic thing to do on the other. (unless the complete transparency of “The Circle” scenarios is something we feel comfortable with).

From another point of view, these systems are progressively being associated to identity systems, meaning that all the advantages and freedoms deriving from the fact that digital identity is anything but univocal and fixed are progressively being lost. Byebye anonymous, temporary, shared, multiple, plural, identities. Goodbye all the freedoms that come with them.

What derives are “citizenship” sytems (not “existence”, not “inhabitantship”) which are literally trustless, “without the need for trust”, in which trust is in the peer-to-peer network, in the automation, in the algorithm.

Institutions and other people disappear, replaced by an algorithm. Who knows where trust is at/in! It is everywhere, diffused, in the peer-to-peer network. Which means that it’s nowhere, and in nobody.

In a weird way it is like in call centers: they are not really useful for the client, and they completely serve the purpose minimizing bother for the companies, letting clients slipping into the “procedure” (which is synonym with algorithm), and avoiding them from obtaining real answers and effects, in their own terms outside of procedures.

These are all processes which separate people from each other, from institutions, organizations, companies, through the Procedure.

Citizens of everywhere. Citizens of nowhere and nothing.

From a philosophical and psychological point of view it corresponds to a powerful addition to a process which is already taking place on a large scale: the transactionalisation of life.

Everything is turning into a transaction: our relationships, emotions and expressions; our ways of producing, acquiring and transferring knowledge; communication; everything.

As soon as each of these things become the subject of a service, they become transactions: they become an atomic part of a procedure.

Because this is what a transaction is: an atom in a procedure, in an algorithm. This includes the fact that transactions are designed, according to a certain business, operational, strategic, marketing model.

This means that when our relationships, emotions, expressions, knowledge, communication and everything become transactions, they also become atoms of those business models whose forms, allowances, degrees of freedoms and liberty are established by those models.

With the Internet of Things these processes also arrive to the objects which fill our daily lives, to the elements of the environment and to the environment itself.

This means that we will be surrounded by transactions, within ourselves and in everything around us. It will become truly difficult to think of something that does not correspond to a transaction.

As said above: this will bring on issues for informality, the possibility for transgression and for our freedoms and rights.

Many of these these will simply disappear, as we lose capacity to conceive them outside of the “procedure”, of the transaction that embodies them. Whether it is purchase or an emotional expression, it will not make any difference.

Furthermore, speaking of transactionalization and its equivalent, financialization, the issue of access will also arise from the fact that there will be a limited amount of subjects who will have the resources to sustain the cost of the transactions which are needed to have rights and freedoms, or to pull themselves out of the procedures themselves. And of course there will be people who don’t have these resources.

These reflections have long been outside of the discussions which are going on about these new technologies. Hackers, activists, researchers, philosophers, antropologists are talking about the blockchain, as well as governments, organizations, companies and banks themselves. Yet none of these doubts are yet on agendas. There is a mono, singular narrative, which is interpreted for activism, business, governance, exploitation.

Investments, from above (with governments, financial institutions, investors) and below (with crowd based operations, evangelism, activism and also with the desire to exploit and to access funds and resources, to abandon the state of crisis) are happening.

And yet we must consider.

The Blockchain is the first tentative answer in years to the extremely centralized models which are de facto ruling us today, whether we talk about energy, environment, finance, welfare, governance.

The Blockchain is all about distribution of power.

And yet, this same distribution is its weak spot, if our objective is to collectively create a society with more freedoms, solidarity and opportunities for relation, emotion, communication and knowledge.

Because this distribution of power does not require conscience and desire, and the responsibility of these conscience and desire. Because these are in the algorithm, not in ourselves and in our relations.

It is not the algorithm serving us, and what we want. It is the algorithm turing us into itself, making us become like it.

What can we do?

The most important thing we can do is, probably, that we need to realize that these are not technological or technical issues.

Design only arrives up to a certain point. The design and production of services, products and instruments does not address a class of issues which are aesthetic, psychological and which deal with sensibility and imagination.

For example, in our practice we often talk about the Third Infoscape, which is originated from the concept of the Third Landscape.

As in the Third Landscape: where “technicians” see “weeds”, the Third Landscape sees opportunity, biodiversity, an open source media which is a reservoir for the future of the planet, which does not require energy to maintain, but produces energy, food, knowledge, relations.

As Marco Casagrande describes, the entire territory becomes a form of knowledge, with all its conflicts, dissonances and polyphonies. This is not a transactional (or transactionalizing) vision. It is a thing in which data and information are not laid out geometrically, formally, as in gardens, but more like the woods and wild nature, in which multiple forms of dimensions, boundaries, layers and interpretations co-exist by complex desire, relation and interaction, not by design.

It is a different kind of technology, a different kind of science, with a different imagination to support it.

The Third Infoscape, just as the Third Landscape, is not a matter of technology or technique. It is a question of sensibility, of imagination and of aesthetics.

The problem? It is current science and data. Which we are now using as something absolute and immutable. As a society, we are now using Science and Data like once we used Religion and Magic.

The Blockchain is one direct effect of this.

It is the procedure that “liberates” us from trust, from having to trust, from having to trust others. It compels you to trust, because it is the algorithm itself which embodies trust. And, by doing that, by forcing you to become like it, transforms all into a transaction.

To make trust exist, it transforms all into itself.

We need a change in sensibility and imagination, not disruptive services.

_____________________________________________

About the Author

This article was written by Salvatore Iaconesi, founder at Art is Open Source, Human Ecosystems and Nefula. Remixing the world through ubiquitous technologies.

Money

Bitcoin is a Bubble – Here’s Why

Published

on

Humans are considered rational beings. Every once in a while greed and exuberance trumps rationale we end up with a Bubble. Bitcoin is a bubble and it will fall precipitously. Here’s why:

Some Economics

Value of any product is arrived at through a process that matches demand and supply. If there is a lot of demand for a product and few people offering it, the price go up. There is a greater perceived value for it since the supply is limited — Everyone who wants it, cannot have it. The vice versa is also true. But as with most things in life there are certain exceptions to this rule. High-end luxury products have an aspirational value and hence the higher the price the higher the demand tends to be. These are called Veblen goods. There are also Giffin goods where this effect is seen with inferior goods.

Either way, in all of these cases price is a consequence of consumption.

There is another case where prices can be made to rise artificially, through hoarding and creating artificial scarcity. The hoarder buys large quantity of a good and waits for the price to rise high enough before beginning to sell it slowly to the actual consumer at an elevated price.

Markets play an essential role is matching demand and supply, which results in price discovery. Markets are the price discovery platform that most of us depend on. We have markets for everything, stocks, currency, commodity, bonds, etc. Most of these trades take place through instruments that are representative of the same. Stock is a company is represented by shares — Stock here represents the assets of a company and the ownership is attributed through shares. There are similar trading instruments for everything that is traded.

The place where this trade is managed, which I referred to an a market earlier, is known as an Exchange. An exchange is where trades are executed and the instruments change hands between the buyer and the seller. The job of an exchange is to provide a framework, to regulate and enable the trade to take place.

Blockchain

Let us say you have a Rs. 10/- currency note. You take this note and buy tea from a tea stall. He in turn takes the note and pays for the fuel bill. He in turns takes the note and pays the school fees for his child. The note has been used for several transactions but we do not know where it originated from and how many hands it changed. If this note were an online token we could track it all the way through.

If there are a set number of tokens in circulation and each of the token can be tracked, there is no way that any fake token can be introduced without changing the total number of token in the system. Furthermore if an anomaly is found, it can be quickly tracked back to its origin.

A Blockchain is a chain of records which are called Blocks. Each block represents one transaction and hence the entire history of an single instrument can be tracked from beginning to the end. A blockchain is what makes it possible for us to track every token. Research on blockchain began in 1991 but the distributed blockchain, which is the basis of all modern blockchain was invented in 2008. The distributed blockchain kept the block of records on every computer that is a part of the system. This redundancy is the secret sauce that make blockchain a phenomenal technology.

This makes it near impossible to fake any transaction because that fake transaction. It is not enough to enter a fake transaction in your own block, the same transaction needs to exist in every copy that is part of the system. Each copy is protected by public key encryption on each user’s system (If you wish to know how encryption works). If any anomaly is found, it can be quickly localized and eliminated.

Bitcoin

Bitcoin is one of the implementations of blockchain as a currency. Bitcoin tokens can be mined by solving mathematical problems, but the total supply of bitcoin available is limited by the algorithm. The more bitcoins get mined, the harder it becomes to mine further. The mathematical problems are solved using the computer but the problems take longer and longer to solve as times goes on.

Now, once you have these Bitcoins, you need a way to transact, for which bitcoin wallets exist, where these coins get stored. The wallet is your copy of the blockchain.

Some people thought, “Hey! Why not trade bitcoin?” and they created Bitcoin exchanged. Just like a stock exchange, Bitcoin is bought and sold on Bitcoin exchanges. There are several across the world and they execute bitcoin sale and purchase.

Individuals and companies have been mining bitcoins since it was introduced. Today this mining has assumed industrial scale with more and more people getting interested and mining becoming harder and harder. There are entire server farms that are being committed to mining bitcoins and in all likelihood these are being hoarded for a future date when it would likely be sold.

Value of any product finally lies in its consumption

The value of anything is down to consumers finally adopting the product and using it. This is where demand invariably arrives out of. Whether it is businesses or individuals, utilisation is the key. Keeping something does not create value unless it is an antique. Bitcoin is definitely not an antique.

Consider confirmed Bitcoin transactions per day. At its lowermost it is about 130,000 and at its peak its at about 365,000. It averages out at about 275,000 per day. Let me just add some perspective. Visa processes about 24,000 transactions per second. So in about 12 seconds Visa does the entire days worth of transactions on Bitcoin!

Although this is not a straight comparison since Visa is a method of exchanging money while Bitcoin itself is a store of value. The market capitalisation of Visa as a company stands at USD 230 Billion while that of Bitcoin stands at USD about 70 Billion dollars. A third of the value of Visa? Comparing it with gold, which is a store of value unlike Visa which is a transaction mechanism akin to Blockchain; Comex which is a commodity exchange based out Chicago (one of many across the world) does about 289,000 gold contracts per day. The number across the world would probably be in the millions, not to mention the transactions that take place through stores, banks and other means.

There are about 16,500,000 Bitcoins available today. Out of this only about 640,000 is exchanged everyday.

Hoarders will dump

I think the value ascribed to bitcoin given its abysmally small circulation is purely due to the hoarding that many are engaging in. Most of the people just buy bitcoin for the purposes of speculation.

People buy bitcoin and then they keep it. Since nobody is selling (Would you, if you know what you have is doubling in value every 6 months?) — Prices rise. People hear prices are rising — They clamor to buy. Demand rises — Price rises. Some of the early hoarders keep releasing small amounts of it.

For price to rise, the demand has to be high; this demand should be powered by consumption and not hoarding.

My take on this is that the price rise of Bitcoin is speculative. It is powered by speculators who are willing to pay more and more in the hope that prices would keep rising. The limit on the supply is additionally helpful in driving the prices up and keeping them there.

Looking into the past

There are plenty of cautionary tales of bubbles but for me the one that most closely matches this is — The Tulip Mania. Tulips by themselves had no great value.

Tulip was a unique flower and was used for royal gifting. The prices of tulips shot up suddenly on speculative purchase of tulip futures. There were, many who made money during the upsurge. After a couple of years of frenzied buying, the demand for buying newer and newer contracts seemed absent. There was no inherent value in it. Panic set in and ultimately it suddenly collapsed in Feb 1637. Within 3 months all of the value was wiped out, because there was none to begin with!

The same is true of Bitcoin today. Its not like Bitcoin is the preferred currency for transaction or that people are switching to transacting through bitcoin at unforeseen pace. A crazy number of speculators are buying into it for the sake of speculation. There is no inherent value and one day in the not so distant future people will realise it.

________________________________________________________________
About the Author 
This submitted article was written by Vivek Srinivasan and represents his personal opinions not professional advice. 
Continue Reading

Money

4 Important Tips for Bitcoin Investors in 2018

Published

on

Bitcoin may be worth more than this, but I’ll only give two cents for it.

The infamous cryptocurrency, Bitcoin, saw its value explode in a matter of months. It was at $1,000 / bitcoin at the beginning of 2017, $6,000 a month ago, and around $13,000 today (well, stay put, that will change again tomorrow). Can you believe it started off with a negative value?

WHY ARE BITCOINS WORTH SO MUCH NOW?

Because there is a sudden surge in demand for it along with limited supply. Announcements and recent business deals made Bitcoins rapidly more popular, and as it gained value fast, more people wanted “in”, thus demand increased, and so did its value.

Bitcoins are continuously created (or “mined“) but at a modest, continuous and predictable rate. This is key for a currency to become a true alternative to dollars, euros and other currencies: its supply / quantity remains reliable. What happens when a currency is not supplied reliably? We saw an unfortunate example of this in Zimbabwe between 1995 and 2008.

Understanding the dynamics of demand and supply of bitcoins helps understand the craze around it. If it succeeds as an alternate currency to national currencies, it can help people live and survive beyond the failure of governments. It may have been used in Zimbabwe (yes, again) as an alternative mean of exchange, more reliable than local money.

This said, what can you use bitcoins for? What can you buy with it?

You’ve probably read about drugs, assassins for hire, escorts, and other unconventional businesses. Not untrue, but that’s not any different than what happens with dollars or yens. A few online services and shops started to accept payments in bitcoins, but would you really use bitcoins to purchase a pair of shoes, a car or a trip abroad? Definitely not now: even if the bitcoin price of an item varies along with bitcoin’s value, you’re most likely paying more for this transaction than by paying in dollars. Why would sellers bear any of the risks associated with the currency fluctuation?

So bitcoins can only really buy you money – they have no other use at the present time. Bear this in mind when you estimate future demand.

LET’S TALK ABOUT INVESTING IN BITCOINS

Now, we all want to be billionaires. And if it’s as easy as putting money in the right place, even more so. The recent exponential growth of the value of bitcoins makes everyone dream of it, particularly as the speculation for a continued growth is hotly debated among economists – supposedly the “experts”.

Is it a good idea to invest in bitcoins? In my opinion, no.

It feels like a gamble, rather than an investment, at this point in time. If you are not adverse to risk though, maybe there’s a lot to gain?

Say you want to consider trying it, this is what you should consider. Since value growth is about demand, it is about human behavior. If you want to beat it and earn while it grows, sell before it falls, you should do it with a minimum of discipline to optimize your results (and sleep at night). Most of it is passive and not necessarily time-consuming.

Here, some ideas to work on…

1. WHAT HAPPENED BEFORE DOES NOT DETERMINE WHAT HAPPENS NEXT

Sudden growths in investments are often made by “bandwagon effects“, i.e.nobody was interested in bitcoins until everyone else around them became interested. If you bought bitcoins early on, say on November 11 (a month ago) for about $6,000 each, you almost tripled your value. But did you?

It’s tempting to jump on the bandwagon, hoping that it will continue to grow. Realize that to continue to increase the value of bitcoins, demand for bitcoins must increase (and not stay the same): there has to be more people wanting to buy bitcoins than when you purchased it. To me, it sounds a lot like a potential Ponzi Scheme.

But without facts, there’s no confidence that it will continue to grow, there’s just hope.

 

2. SLOW DOWN ON THE NEWS AND STAY CRITICAL

News outlets make the case of increase demand and crazy stories about what people are ready to do to get bitcoins (including, apparently, mortgage their house). These news are only useful to you if others waste their time reading it.

Remember: to beat the market, everyone but you has to lose.

You must purchase bitcoins before everyone else, and sell them before everyone stops buying and sells. Why? Because as soon as people start selling, demand decreases and so does the value. When value decreases, more people may be tempted to sell to protect their earnings. And it goes on.

Reciprocally: everyone wants you to lose.

The Internet has spoken!

 

3. BE READY TO LOSE WHAT YOU’VE INVESTED

From a cherished economics professor, whom I trust for his sense of business: be ready to lose everything at a moment’s notice. Clearly the value of bitcoins changes a lot and will continue to do so until we find some use to it (retailers accept it and people use it there), so investing today feels like a gamble. Be ready to lose the bet.

Banks have tools to help you calculate what economists call your “aversion to risk”. If you’re a risk taker, take the bet. If not, consider other investments (there are plenty).

4. HAVE INVESTMENT OBJECTIVES

If you invest now, you’re likely to pay a for a high value estimate (compared to a month ago). But maybe it is still lower than the value in a month from now. Who knows?

Let’s say you invested $1,000 worth of bitcoins (about 1/16th).

What you need to do is to set yourself investment objectives that you will follow:

To limit your losses, you set a minimum value for your investment (say $500): if it reaches this point, you sell. In this example, it means that if bitcoins lose half of their value ($1,000 to $500), you sell. You’re losing money, but you are not losing all of it. People tend to keep their investment for too long and, worse, keep investing in it, hoping that buying at a lower value will help. It can, but it’s unlikely with something so volatile.

It’s called the “sunk cost fallacy”. In Thinking Fast and Slow, Daniel Kahneman said that

“organisms are more prone to minimizing the threats than maximizing the opportunities.”

To secure your gains, you also set a maximum value of my investment (say $1,500). If bitcoins continue to grow up to this point, you sell. Yes, you may be tempted to wait to see it grow more, but, again, what happened before does not predict well what will happen next.

Where you set your minimum and your maximum depends on your tolerance to risk with the money you invested.

THE BOTTOM LINE

Bitcoin’s potential is enormous as an alternate currency. It has been well received in low income countries as a way to protect individuals’ savings from government failure to protect and promote a country’s currency.

As an investment, bitcoin’s value is volatile and difficult to predict. Don’t be too sensitive to the news. Don’t trust what other people say, but look at what they do. Set yourself minimum & maximum values of your investment at which you will sell.

And chill.

______________________________________________

About the Author

This article was written by Gatien de Broucker of Non Solum Data. 

Continue Reading

Trending