Repurposing blockchain for societal collapse

Matthew Slater is the audiobook narrator for Breaking Together. But when he is not reading books out loud, he works on the design and implementation of community exchange systems – also known as community or local currencies. I recently wrote about how expansionist monetary systems drove societal collapse. If you don’t fully understand that, then I recommend asking the new JemBot to explain things, as it draws from my book. But once we accept such an analysis, it can leave us a bit stumped about what to do about it. That’s why in Chapter 12 of my book on positive responses amongst those experiencing societal disruption or preparing for societal collapse, I mention a few initiatives that include a monetary aspect to their local resilience efforts. It is a fast moving field, and one that is now attracting attention from those with experience in the rather less community-focused arena of blockchain and cryptocurrency. Therefore, I am delighted to publish an essay on these trends from Matthew Slater. It is a rather technical topic, but an important one, which I believe is set to grow. Thanks, Jem

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Jem Bendell’s book Breaking Together emphasises how the destruction of life on Earth is driven in part by an expansionary monetary system, which also shapes our behaviours towards each other and nature. He holds little hope of any meaningful reform at the national and international levels. Rather, he points to local initiatives that practice alternative forms of exchange, with alternate currencies, in a context of building community resilience.

I’ve been helping hundreds of groups operating such systems, by providing free software for many years, in which time I’ve also been paying attention to the rollercoaster and the hype of the blockchain and cryptocurrency movement. As someone interested in societal collapse, I want to share with you some news about a new ‘motion’ (something which could become a movement!) which is changing the way some people in the blockchain and cryptocurrency fields think about money and monetary activism. That is important, as it is beginning to lead to more meaningful and impactful work, in light of the difficulties that lie ahead. It is about Collaborative Finance, or #CoFi for short, and I find myself in a lead communication role, and somewhat prepared for it since I did Bendell’s course Leading Through Collapse a few years ago! (He wanted me to tell you that applications are still open for the online course in January that is suitable for the Americas).

There are some very technical aspects to both finance and the technologies which facilitate it, but here I will focus on the bigger picture. I will start with a quick critical history of the cryptocurrency, blockchain and Decentralised Finance fields, or #DeFi, for short, before explaining the new approach, called #CoFi. It is one which fits with Jem’s call for a ‘great reclamation’ of our power, which he discussed in a recent Novara Media podcast.

‘The blockchain’ enables anyone to create a private wallet and to receive and pay digital coins, thereby “disintermediating the banks” so there is freedom from financial controls and surveillance. The database is unhackable, which suggests it is more permanent and reliable, or some would say trustworthy, than governments or banks. Libertarians are using blockchains to provide finance and other services which compete, or aim to compete, with governments and banks. In this potential power struggle, most of the blockchain sector is being financed by capitalists, and is therefore building capitalist-friendly infrastructure – markets, speculative vehicles, protected assets etc. Bitcoin itself was framed as, accurately in my view, a digital form of metal money, a form of quintessentially private property, with deflation built in to favour its hoarding rather than its circulation.

After 14 years of frenzied speculation, booms, busts, dubious accounting practices, legal spats, and thousands of millions of dollars hurled at stupid projects, a handful of useful applications have emerged beyond Bitcoin’s digital gold-currency function. Perhaps the most prominent is that supply chain management could be made much more efficient if managed centrally, i.e. on a blockchain outside any one organisation which holds the definitive record. Other applications could replace or support some government functions. The mushrooming phenomenon called #DeFi, Decentralised Finance hasn’t yielded much noteworthy: it is becoming easier to swop tokens, and the multitude of blockchains is becoming more interoperable.

Please stay with me, as it will soon become apparent how important the new direction towards #CoFi can be for collapse readiness. A useful step forward came in 2017 when the hype switched to #DeFi, or decentralised finance, which means fully-automated financial services independent of the companies that set them up. This is probably a misnomer for two reasons. Firstly, one axiom of the blockchain is that knowing the private key to a wallet is what defines ‘ownership’ of the tokens. Blockchain affords no way to prove someone’s identity, no trust, which makes proper ‘finance’ impossible. That is because finance depends on the legal system to enforce and adjudicate debts, and the government identity system to know the creditors and debtors – personally, as it were. The second reason ‘#DeFi’ is a misnomer is that the volatility of the crypto-assets makes them very unsuitable for lending, because neither debtor or creditor knows how much (dollars equivalent) is likely to need repaying in the near or less-near future. Thirdly, the regulators have managed to put a chasm between cryptocurrencies and the official financial system, which makes it very tedious to move your money in and out of crypto.

The initial promise to “disintermediate the banks”, has been met in a limited way. The trouble is that 97% of money resides in banks, and cryptocoins have done little to replace that – you still can’t use cryptocurrency for much other than swopping for other cryptocurrencies, or selling them for money in your bank account.

DeFi hasn’t yet touched the real economy. It doesn’t have the reach to be useful for payments, partly because of competing efforts. It offers savings at various interest rates, but a number of high profile failures make banks seem much safer. Other services are no more commercially appealing than their #TradFi forebears, and are used only by die-hard blockchainers. Because the whole ethic is ‘trustless’ it means there’s no lending, which means no mortgages, business loans, or trade-credit. Even if lending was possible, debt’s cannot be collected without force, in which the state has a monopoly; and what was lent would still need to be sold (creating exchange rate risk) to acquire the bank deposits need to trade in the real economy.

So for those that hope one day to do finance without banks, #DeFi still has a long way to go from providing toys for speculators. Meanwhile, traditional finance is failing both businesses and home-owners; Big Finance is simply infrastructure to funnel much needed money to the very richest, while pushing the world into the ‘polycrisis’ through wasteful consumption and imbalances of power. For many reasons, there is no money to do what needs to be done, and wont be, for the foreseeable future. For example, Prince William’s #EarthShotPrize is pure tokenism, and any #GreenNewDeal turns out to be unsustainable extractive colonialism on steroids. The bankers have worked out how to monetise protect the wilderness for private profit. There’s no money to adapt infrastructure to anticipated climate shocks, build social resilience by financing small businesses, or improve life through education, healthcare and the arts: all of those things are not profitable enough to bother financing. With the current system, money is more valuable than what it can buy.

So we, the 99%, are on our own.

Actually that doesn’t sound so bad, if only we could coordinate with some other means than the money and finance controlled by the 1%! The essence of modern credit money is the thing that blockchain sought to obviate – trust. Insofar as we can trust each other instead of the 1% who devour the Earth, and insofar as we desire to trade equitably, and with the help of blockchains and other new tools, another financial system could be assembled. That is the thrust of #CoFi. Is this beginning to sound interesting and relevant to solidarity in an age of collapse? Here are some aspects of a #CoFi approach:

• This approach is for people and businesses who trust each other and want to share some risk and reward. By forming groups, large or small, they are able to start doing finance on a small scale within the group. This contrasts starkly with the global every-person-for-himself marketplace, and can also provide some protection from it. Within those groups, and later between them, financial mechanisms can be gradually introduced:
• If the members have spare cash they can lend it to other members, or pay for things in advance. Such groups are very widespread in the Majority World, and have come to be known as ROSCAs (Rotatin savings and credit associations).
• Members can give each other discounts so as not to take monetary profit from members of the family, so to speak. This also encourages them to buy their raw materials from within the group, driving trade inward and increasing self-sufficiency.
• Members can invest in each other, buying shares and sharing the risk/reward – a bit like a co-op.
• By collaboration, groups can increase their power in the market. That enables consumers to buy discounted goods in bulk. Producers can do something similar.
• If the members are trading amongst themselves, they can smooth cashflow by factoring invoices and offering each other short term credit.
• Finally in the spirit of cooperation instead of competition, businesses can share data with each other about customers and suppliers which can increase efficiency of trade.

None of these ideas will be new to you, they are all tried and tested. There are innumerable startups and other projects working to provide up-to-date infrastructure for these kinds of mechanisms. The ones closest to me are:

• Informal Systems is building ‘multilateral offset clearing’ for the Cosmos blockchain.
• Mutual Credit Services is helping community initaitives with accounting technologies
• EthicHub (Spanish) is pre-purchasing coffee to guarantee growers fair prices.
• Grassroots Economics (featured in Jem’s book) is helping groups of traders in Africa to issue vouchers.
• Economic Space Agency is designing ‘Post Capitalist protocols’ to support all these ideas and make them interoperable.

These technologies tend to be very single-function though, very poorly financed, and sometimes competing with each other or unaware of each other – there is much room for improvement!

For collapse-aware people in a blockchain sector that has yet to move any needles marked ‘systemic change’ and ‘impact’, I would like to offer the following principles for Collaborative Finance (CoFi):

Own the tech and institutions
Our financial technologies need to be owned and governed by us, their users. Acting as economic parasites, what Bendell describes in Breaking Together as ‘the money power’ suck the wealth we create by monopolising the infrastructure, determining the regulations, and baffling us with mumbo jumbo. For instance, they argue that their systems are more efficient than ours, but extracting other people’s wealth and deliberately choking the supply of the medium of exchange is not the kind of efficiency to which most of us aspire. Owning the systems ourselves also helps with privacy, because we then own all the data that flows through them and can decide how much privacy we require.

Trust-ful not trust-less
One can agree with the blockchain critique that Big Finance and government have betrayed our trust. The blockchain response has been to build fully automated trustless anonymous systems and pretend they are apolitical. #CoFi suggests rebuilding trust, and investing it in smaller, more accountable institutions, followed by eternal vigilance – there is no shortcut! As Bendell makes clear in his book, freedom must be built and defended collectively, rather than through individualist fantasies.

Grassroots before global
Much high-level political ambition is now striving towards a homogenous global singularity, a single world order, controlled by unaccountable technocrats with unimaginable power. That power could perhaps theoretically be used for Good, but whoever tries to take it will be consumed by it. We must build a different kind of power-base from the bottom up. It will be slow, there is no time, and triage is probably the best we can do. Fortunately this bottom up approach doesn’t involve elites making tough choices about who to leave behind.

Relationships before reification
Reification is a sociological word that describes how language makes intangible notions appear like ‘things’, and how we then treat those notions as if they were real. An example is ‘technology’. If you think that technology is what you buy from the Apple store, then you are a slave to Apple. But if technology is a body of knowledge and practice with which we improve our lives, then it empowers us! Similarly a coin is a physical manifestation of money, but money, even gold money, is rooted in relationship, in agreements and conventions and in debts that need to be paid. When we imagine money as a thing, we surrender power over it to those who control the thing. When we understand that money is a claim on others participating in a marketplace, expressed as private property, and we express those claims in other ways, the politics looks very different.

Protocols before platforms.
Early dreams about cyberspace being beyond politics were soon thwarted as the open protocols which defined the internet were used to build enclosed private platforms like Facebook and Youtube. In hindsight it seems inevitable that the structures that could capture value would be the best funded, and so the internet was a new commons to be enclosed, a space for old monopolies to grow into and for new ones to flourish. The reason is that you can be stopped from visiting a web site, but you cannot be stopped from speaking a language – that’s why Bitcoin cannot be shut down. The enclosure story is repeating itself with the open protocols of blockchain. To avoid this fate, we must remember we stand on the shoulders of giants, that only a small part of our achievements are really our own, and that a world in crisis needs them. Concentrating on protocols (like Bitcoin) rather than platforms (like Paypal) keeps everything interoperable, helps to ensure a level playing field, and allows people to put old tools to new purposes.

Don’t binge, build!
While a lot of new blockchain wealth has been given away in philanthropy, such charity is unlikely to create lasting or systemic change because its beneficiaries tend to become dependent on it, and it never lasts forever. The Regenerative Finance movement (#ReFi) is doing a great job of channelling donations into interesting and valuable ecological projects, but what then? We can remember the old adage that systemic change doesn’t come from giving the people fish, but from teaching people to fish. Similarly in an age of decline and widespread shortages, we need to think more about how wealth and health can be generated from what is already there and retained, and less about how to flush more money through our worthy projects.

Moving into action – yours!

Money and payments are privatised services which should belong in the public realm to serve the public good. Once a certain level of citizen-coordination is reached it is possible and desirable for them to own and run these non-bank, non-government systems. Those of us interested in alternative financial systems have lost a decade when everyone was chasing blockchain dollars. Now the time has come to build more radical alternatives. Blockchain and cryptocurrencies have a role to play, not if they think they are building a flying-car future, and measuring their success by numbers in their bank accounts.

One of my favourite projects is Mutual Credit Services, run by Dil Green. Adamant about not taking the wrong kind of money, he has pulled together several activists and is designing and building open source software tools for a handful of community-based projects. He’s living the paradox of knowing that his work will be meaningless on a small scale, needing millions of dollars of investment to build and scale new systems before the old ones collapse, and knowing that no sources of ‘fintech’ funding will support community-owned infrastructure. At least the slow growth tends to build more sustainable, resilient systems!

Sometimes payments and credit can seem dull, irrelevant or just the provenance of accountants. But there are concrete ways that everyone can help. For example simply by holding and using cash, you are constraining the power of banks, and possibly insulating yourself from the next financial crisis. When you demonetise your social relationships – which means accounting with gifts instead of dollars, letting people pay you with something other than money, you are helping to reduce the grip that money has on our psyches. Whenever you let people and customers pay you back later instead of now, you are creating credit (and taking risk) instead off the bank.

But for #CoFi to make any kind of serious difference, it has to be done at massive scale; it has to be normalised. From a capitalist realist perspective, that’s never going to happen, there is no alternative, but from a collapse-anticipation perspective, we should be building this infrastructure, practising with these tools, and making those relationships, because finance as we know it cannot continue. That is why the folks at Shareable have become so interested in the analysis in Jem’s book, and believe the breakdown will encourage us to develop community-based alternatives.

As a reader of this blog on collapse risk, readiness and response, I know you will be wanting to know what you can actually do to start reclaiming the money-power for your community. It’s not easy because money is fundamentally a collective reality. That means the first thing is to start thinking collectively – this is itself a big step if you inhabit a modern society which celebrates the isolated individual. Once you are involved in local politics, activism, religion, you can usually think of ways to start small – such as buying things collectively to use collectively, buying in bulk, even just sharing Netflix subscriptions or internet connections, building up a fund for emergency borrowing. As people club together to try and cope with the spiralling costs of living, such efforts are increasing. If you get involved, you’ll soon have more and better ideas, and when more people join you’ll need better accounting tools. #CoFi will be there for you! (you can find my email here).

Until then, and depending on where you are in the world, check out how to set up a ROSCA, see some ideas at Stroud Commons (UK), open an account at Common Good Bank (USA), see how advanced they are at Cooperation Jackson (USA). See this collection of materials from the first #CoFi gathering and sign up for the CryptoCommons Association newsletter.

And remember, as with all things resilient: building before you need them is cheaper but it means swimming against the tide. Building them after everyone needs them and while various forms of infrastructure are collapsing, would be chaos! So although this area of work might seem to offer slow returns on your efforts, it is key to a freedom-loving response to collapse.

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