IÂ feel we’re on the precipice of some delightfully weird and possibly very alarming developments at the intersection of code and money. Â There is something deep in the rules that is getting rewritten, only we can’t quite see how yet. I’ve had this feeling before, as a self-described Cypherpunk in the 1990s. We knew or hoped that encryptedÂ communication would change global politics,Â but we didn’t quite know how yet. And then Wikileaks happened. As Bruce SterlingÂ wrote at the time,
At last â€” at long last â€” the homemade nitroglycerin in the old cypherpunks blast shack has gone off.
That was exactly how I felt when thatÂ first SIGACT dump hit the net, by then a newly hired editorÂ at the Associated Press. Now I’m studying finance, and I can’t shake the feelingÂ that cryptocurrencies — and their abstracted cousins, “smart contracts” and otherÂ computational financial instruments — are another explosion of weirdness waiting to happen.
I’m hardly alone in this. Lots of technologistsÂ think the “block chain” pioneered by bitcoinÂ is going to be consequential. But I think they think this for the wrong reasons. Bitcoin itselfÂ is neverÂ goingÂ to replace our current system of money transfer and clearing; it’sÂ much slower than existing payment systems, often more expensive, uses far too much energy, and don’t scale well. Rather, bitcoin is just a taste, a hint: it showsÂ that we can mix computers and money in surprising and consequentialÂ ways. And there areÂ more ominous portents, such as contracts that are actually code and the very first “distributed autonomous organizations.” But we’ll get to that.
What is clear is that we are turning capitalism into code — trading systems, economic policy, financial instruments, even money itself –Â and this is going to changeÂ a lot of things. Continue reading The Dark Clouds of Financial Cryptography