Something From Nothing: A Tale of Cryptocurrency

When the market was bad, he offered to create for me the illusion of accrual. His wealth had nearly doubled, and with it he wanted to buy my nothing at an inflated rate. I declined his offer. The experiment was over, and our results had been conclusive: emotional investments are rarely zero-sum, but when they involve a buy-in, someone always wins.

In San Francisco, where “wins” and “losses” are euphemisms for gentrification and displacement, winners live in the Crypto Castle. Jeremy Gardner, a 25-year-old investor and hedge fund manager, is the king and creator of the Crypto Castle. He wanted to provide a safe space for other young investors, who are otherwise barred from spending their cryptocurrency without concern. Everyday purchases still require fiat currency, which means that being a winner doesn’t necessarily confer feeling like one. For most investors, buying cryptocurrency is a choice, but spending it is a lifestyle predicated on a series of annoying conversions. Turning digital coins into cash requires a mediator in the form of an online exchange, and bank transfers, which are required to make a deposit, can take weeks to complete. In the Crypto Castle, however, winners are rich and they feel like it too. Tenants pay rent in crypto, buy bottle service in crypto, and order gourmet meals for delivery in crypto. Half a dozen of them have become millionaires during their residency, and now the gates are flocked with pilgrims.

Investments in cryptocurrency, much like the communities that convene around them, are often galvanized by a fear of missing out. Market demographics resemble those of a mediocre frat party, and like any mediocre frat party, the optimal time to arrive is always a few hours before you’ve managed to leave the house. By now the brothers are rapping along to The College Drop Out, and they’re too drunk to care that they’ve got the lyrics all wrong. Replace “drunk” with “wealthy” and the analogy holds true. In the words of Nellie Bowles, whose profile of crypto millionaires was published in the New York Times Style section last month: “Everyone is Getting Hilariously Rich and You’re Not.”

But the Style section’s Everyone isn’t everyone’s Everyone, and for each news piece about a millennial getting rich, there exists an equal and opposite news piece about a millennial getting hacked. Last April, Mark Frauenfelder lost $30,000 worth of bitcoin when the woman who cleans his apartment threw the sole record of his pin—a slip of orange paper inscribed with the words that enable access to his hardware wallet—in the trash. In November, a digital wallet service called Parity was revealed to contain a bug that ensured it stayed true to its name. One of its developers, devops199, “accidentally” seized and locked the assets of hundreds of other users; $300 million worth of cryptocurrency was lost forever. One month later, in New York City, a man was lured into a minivan by another man he foolishly believed to be his friend. The second man held a gun to the first man’s head, and released him only after he relinquished the $1.8 million worth of Ether he had in his possession.

Because the value of fiat currencies is reliant on the scarcity of cash—the mint prints bills, and then banks put them into limited distribution—every win, under capitalism, necessarily incurs a loss. Cryptocurrency, on the other hand, was designed to be an economy of plenty. When Satoshi Nakamoto—the person or people behind Bitcoin—published “Bitcoin: A Peer-to-Peer Electronic Cash System” in 2008, they announced that Bitcoin’s version of the mint would also be its version of the bank, and that both would be collapsed into a decentralized public ledger called the blockchain. Miners—computers installed with special software—would secure the blockchain, and when they verified peer-to-peer transactions, they would be rewarded with a unit of cryptocurrency that could then be circulated in their networks. In the words of the Badlands Crypto Group, whose MONEY DIES/CRYPTO LIVES pamphlet was published in October, “the system of recording payments is the currency itself.”

Cryptocurrency’s most significant innovation is the transparency it grants its participants, and the transparency they, in turn, are forced to grant one another, but the networks of popular opinion that arbitrate its success assume a logic of competition. A coin’s legitimacy is presumed to fluctuate with its value, and every investment, accordingly, bears two possible futures: either you get rich quick, or you blow it all away.

When an escape from the state is understood to be potentiated by the accrual of capital gains, getting rich is the cheapest way out. But the Crypto Castle is still a castle, and life inside its gates is governed by principles nearly indistinguishable from those it tries so resolutely to guard itself against. Crypto-millionaires mine currency by solving computer problems, and then call their individual success a means of liberation. But capitalism’s foot soldiers—the state agents who ensure liberation is always on the horizon, never here—mine currency too, and have been doing so for hundreds of years. Analog forms of resource extraction (enslavement, bail, predatory lending programs, etc) have always fueled profit margins, and always to the detriment of low-income individuals and communities of color. “The hegemony of finance is antidemocratic not only because financial institutions are opaque,” writes Jackie Wang, “but also because fiscal crises . . . authorize the use of state power to extract from the public.”

Those who are millionaires and those who have the potential to become millionaires often share the same traits. Their emotional attachments to capital, a cord of stubborn knots, are made to appear rational, like a braid. The braids are mutually enforcing. The millionaires and would-be millionaires tether them together, and then call their weave work a symptom of subjugation. Their hands are bound, which is why they feel oppressed, but the feeling is misleading, because the strictures are metonymic. Their binds were spun from braids, the braids were wrought of knots, and the knots were an approximation of an affliction whose pain is referential, and therefore can’t be seen.

When you feel aligned, in affect, with people who have been systematically denied an economic livelihood, but nevertheless benefit materially from the networks of policing, surveillance, and data aggregation that ensure they remain poor, the only way to speak of your discomfort is by turning their suffering into a figure of speech. Halsey Minor, who would like to create a crypto-paradise, turns natural disasters into figures of speech. He plans to move his blockchain company from the Cayman Islands to San Juan, where real estate prices plummeted following Hurricane Maria. In Puerto Rico, 25 percent of residents still don’t have electricity, and the death toll is rising; in Puertopia, investors will be able to frequent crypto-owned airports, resorts, restaurants, and bars cashless and tax-free. “What’s happened here is a perfect storm,” Halsey told the New York Times. “While it was really bad for the people of Puerto Rico, in the long term it’s a godsend if people look past that.”

In the long term, cryptocurrency will live or cryptocurrency will die, and the ability to look past the literal storms, binds, and strictures that condition either scenario will not be a question of faith, or of financial clairvoyance, or even of hope. Rich people and white people, but especially people who are white and rich, see themselves in everything. When given the authority to dream up a communal future, they imagine a utopia that bears an uncanny resemblance to the unfortunate reality that the rest of us, at this very moment, are being forced to endure.

But the gimmick is cheap: the Crypto Castle is a gentrified house, and Puertopia has borders that will, without doubt, be strictly policed. With the state these crypto-millionaires are bound in the spiral dance: together they choreograph our fiscal losses, and then claim their profit as a form of attachment. It is a form of attachment, but one borne of tyranny, not of likeness or of love. Every cryptocurrency story begins with an experiment, and every experiment that ends in wealth involves variables that go unaddressed.

Maya Binyam is a writer living in New York. She is on the editorial staff of The New Inquiry and the Paris Review , and is the co-creator of Bail Bloc.