“Capitalism today is afraid of free markets”

A fascinating interview with Andreas Antonopoulos about Bitcoin, Capitalism, Blockchain, crypto secession and the future of the nation-state.

Text: Pascal Hügli
Andreas Antonopoulos

As part of one of Europe’s biggest meetup events, organized by the Bitcoin Switzerland Association, Andreas M. Antonopoulos spent a few days in Switzerland. Besides his talk about his thoughts on the future of programmable money, we were able to meet Andreas and talk about all things crypto.

Looking at crypto from a big picture perspective, what makes it so interesting?

Blockchain technology and cryptocurrencies, in general, introduce a new model for securely establishing trust between transacting parties, but also a trust basis for voting and governance in general. It’s about transforming and reforming the market of trust.

Rather then a general-purpose technology, Blockchain needs to be seen as an institutional technology then?

It’s a non-institutional technology, it de-institutionalizes the market of trust.

But it is institutional in a sense that Blockchain is a technology, which competes with institutions like firms, cooperations, bureaucracies, and governments.

Well, yes. But it’s non-institutional in a sense that a blockchain is actually very inefficient unless you as an institution need some very specific characteristics such as censorship-resistance, openness, and immutability – none of which are particularly interesting to banks and governments at this point in time. In fact, those are the opposite of where the traditional system is going.

Why is that?

Capitalism as we know it is failing to scale. The institutional stack of what we call capitalism has taken off in the 18th century. At first, things worked just fine. Today the system is reaching its limits and is unable to solve global problems. Our traditional institutions, which are hierarchical in nature, have become ever more centralized.

Why is this a problem in your view?

More and more power is concentrated in fewer and fewer hands and more importantly, that power is farther and farther away from where its decisions have an impact.

After all, this might be the natural course of capitalism as economist Joseph Schumpeter recognized.

What we have today is capitalism that is afraid of free markets. Capitalism that strives to create monopoly conditions, licensed organizations and regulated industries that protect their own interest and prevent competition. If you have free markets emerge today, they are fought by the very forces that are supposedly capitalistic.

Not all of them, but many bankers still have an ambiguous relationship with cryptocurrencies.

When I talk crypto within the banking sector, the conversation often boils down to “we are not worried because the new public crypto systems will be shut down by government.” This is a very shocking statement to make. Banks are supposedly bastions of free market capitalism and what they are terrified of is free market competition.

Cryptocurrencies seem to be a competitor that government cannot shut down though.

Yes, and this very much goes against how our system operates today. Since the 1970th it has become accepted common knowledge that every transaction must be visible to government and every participant in any transaction must be known to government.

Expect for crypto, nobody seems to bother.

It’s because today you cannot question the idea that every transaction and every party must be intermediated and visible to government. That idea in and of itself is insane and totalitarian by definition. Such an idea – you’d think – had no place in a free society and yet it has become absolutely accepted wisdom throughout the world. And it’s been pursued at the expense of anything else.

Because it serves the purpose and greater good of stifling crime, so the argument goes.

The system is not actually effective at preventing crime. That is a myth. The funny thing is that the primary narrative still is that the new system of blockchain and cryptocurrencies is only for criminals. This reveals either one of two things.

Such as?

Either you consider every unbanked person, who hasn’t passed the entry tests to your system a criminal or you don’t recognize the fact that the biggest criminals in the world, who commit crimes against billions of people, are bankers and politicians. The idea that an open market system can only be used by criminals is ridiculous when this criticism is coming from a system that breeds criminality, corruption, and fraud on a massive scale.

You would argue for an unregulated und unsupervised system then?

Of course. All-out supervision in financial matters is a historical anomaly. We’ve had anonymous person-to-person transactions without intermediaries for thousands of years. A system like ours today gets abused by both totalitarian as well as non-totalitarian governments to wage currency and trade wars.

That makes it a plaything for geopolitical powers around the globe.

The problem is that today’s system has two functions: Providing for international commerce on the one hand and enabling law, military and geopolitics enforcement on the other hand. Obviously one of the functions has to break and it’s the function for commerce, which gets impeded because we are not willing to let go of using our system for law, military and geopolitics enforcement. So, this is why we are in desperate need of an unregulated system of public, free and permissionless blockchains that can be solely used to foster international commerce.

Blockchains really are a challenge to the current system then?

It’s not so much about challenging than it is about reforming. Because of an unholy alliance of finance and politics, our system is not working properly – neither for the unbanked nor for westerners. Politics corrupts finance and finance corrupts politics, eroding democracy and creating fragile economic structures that cause boom and bust cycles that keep on getting worse.

So, we could call it a challenge to reform the system?

Crypto is reforming the current system by providing a valid alternative. Because these new crypto networks are open networks, they are not challenging the old system unless you considered competing through choice a challenge. If you do, this fundamentally reveals a certain bias that the very idea of competing by offering an alternative is anathema, which shouldn’t be the case in a free system.

Many people from the traditional system certainly consider crypto a challenge?

Absolutely, because the system works for them and they see their power and profit attacked. But once you step outside your comfort zone, you find many people, who don’t profit from the system at all. The further away you go from western nations, the worse it gets.

Is there a declining marginal utility to our current system?

Absolutely, there is! The number of people who are getting served is going down. It’s getting harder and harder for younger generations like millennials, digital entrepreneurs and digital nomads, for people operating in startups and people operating in new industries to be part of our system in any meaningful way.

Can you be more precise?

Unless you have a very traditional lifestyle, with a nine-to-five-job in a cooperation and a regular paycheck to pay your mortgage, the traditional banking system doesn’t really want to touch you. A freelancer sees their PayPal account shut down because of money that has not been identified or people, who move often and can’t provide sufficient documentation of their address, so they are denied a banking account. The system is not only serving few people, but it’s actually serving fewer people, especially in the fast-moving, modern economic activities.

Is this where crypto can provide a remedy?

Yes, unserved people economically secede to a crypto economy and officials won’t be able to do anything about it. Ironically, people are going to bribe police, military, and politicians in cryptocurrencies just as it happened in the Soviet Union when they tried to ban the possession of hard currencies. Hard money will become a very desirable thing at which point all of the bribings will be in that very money. So, in the places where it is banned, you can’t actually enforce the ban.

Won’t an emerging crypto economy be regulated to death?

Once people earn and spend in crypto there is no exchanging that can be overseen and no transacting to apply regulation to. Regulation can only be applied to the fringes, which consist of crypto exchanges. But if impenetrable fences are put around on- and off-ramps, people will stay in crypto. It’s just like when US immigration was made stricter in the 1980s. Many Mexicans would work for a couple of months and then go back to their families. Once immigration became stricter, they just stayed inside the US.

If more and more people move into the realm where government and banks can neither control the flow of information nor the transfer of value, the demise of the territorial nation-state might be upon us?

It’s obvious that our system today won’t last forever. I was recently traveling through Eastern Europe. Less than a hundred years ago most of the places I visited were part of the Austro-Hungarian empire. Where is this empire today? Long gone! The idea that nation-states are eternal is an illusion that is created by permanence. You grow up in a nation-state, so you don’t know anything else, which is why you take it for granted.

Why is questioning the nation-state a taboo then?

People are terrified of change. And that is a normal part of human behavior. People are afraid of the things that are unfamiliar to them that doesn’t mean there are not gonna happen though. There are many things in life that are unthinkable – until they have to be thought because they are actually happening.

How do you see the end of the nation-state unfolding?

Now I think the nation-state is not going to disappear overnight. It might be a century-long path where the nation-state is going to gradually transform over time. Some of the power formerly held by the nation-state will shift towards looser agglomerations and associations with softer borders. The more pessimistic view is a shift towards more fascist and totalitarian solutions. This is the path China is on currently and some Western governments seem to be following along as if they haven’t learned anything from history.

Which of these outlooks is more likely?

There’s no one-size-fits-all answer. In different parts of the world, different scenarios will unfold. There surely are plenty of interesting developments. For example, Estonia with its concept of a service-based nation-state, where the participation in the nation-state is open to a broader range of people and it’s a service-provider relationship with their citizens and not a control-based one.

People from all around the world can use Estonia’s services?

Yes, especially digital nomads, of which there is an increasing amount – not least because of crypto that makes a nomadic lifestyle easier. As a digital nomad, I’ve been living on the road with two suitcases not tied to geography and any specific government. For people, who live like that many jurisdictional controls become negotiable. Not because we get the power to negotiate them, but if we don’t like what we are getting, we move to a different location and change the rules under which we live.

This lifestyle is not for everybody though?

Obviously not. There are mental and social barriers, but there are also practical obstacles. Living as a digital nomad is a very privileged lifestyle and is only available for people, who have a powerful passport. People with a Turkish or a Vietnamese passport can’t do this, only the ones with an American, German or Canadian passport. Or if you are ridiculously rich you can buy yourself different passports.

Speaking of passports, do you think identity in the future is going to change and not be tied to the nation-state anymore?

In some ways, it already doesn’t today. People in many ways trust my Airbnb or Uber identity, which is recognized in many countries, more than maybe my government given identity. We already have fragmented digital identities that are transnational and operate in specific contexts. Facebook has a very powerful identity tool that allows millions of people to log onto different web pages and they control this identity. That is not a good thing, but it’s not a nation-state-controlled identity after all.

Interestingly Microsoft seems to be doing identity-related things on Bitcoin.

They have a very interesting project going on called ION, which seems to be truly decentralized and contrary to the way many other companies do identity.

Can Blockchain usher in self-sovereign identity then?

Yes, we can move to absolutely decentralized identity system and blockchain will surely play its part in this development. And also, in the longer run decentralized reputation systems that can be much more trusted.

What else is interesting in your view?

Besides finance and money as well as identity and reputation there is governance, which is one of the main application of systems like Ethereum. It’s about the ability to express control over something in a decentralized way that is not just money, but maybe something like a voting system for example.

Blockchain governance is still very nascent and vague. Can you maybe flesh it out a little more?

You can think of governance on a small scale but also on a large scale. Decentralized autonomous organizations, vertical cooperations where shareholders and directors can vote digitally and anonymously. But decentralized governance could also reach municipalities and at some point, nation-states.

So, Bitcoin was just the beginning?

Yes, it just opened the door. An entire economic system just came through this door. I firmly believe that we need a strong underlying payment and money layer first before we can really explore some of the other fields very well. But they are coming. Right now, regulators are trying to mentally regulate the Bitcoin of 2012-2013. Bitcoin has moved on and many other things have popped up. Regulators don’t even see what the crypto world is already working on, they are way behind and don’t see what is coming.

That’s the natural fate of every regulator, isn’t it?

Regulators are working on the basis of very slow bureaucratic regulations being faced with a technology that is spreading like a wildfire. You’ve got permissionless rapid decentralized innovation trying to be controlled by bureaucratic, centralized agents. The latter has no chance of succeeding because, by the time they have written the regulations, things have moved on and have changed. Regulators are always two steps behind and the gap is growing.

Which is why capitalism after Satoshi will look a whole lot different?

I hope so. The future model of trust that we are currently building is much flatter, less hierarchical and because it is governed by rules that are built into the system, the system is much harder to be co-opted and taken over. That, in turn, provides for more transparent, efficient and functional free markets.

Is there a good chance that this new model of trust will succeed?

If you have a system where conditions are more open, free and efficient, there’s no question about the outcome. The free open and efficient system beats the closed, centralized and inefficient system every time.


Andreas M. Antonopoulos is a best-selling author, speaker, educator, and one of the world’s foremost bitcoin and open blockchain experts.


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