By Geert Lovink and Nathaniel Tkacz

I like challenging authority.

• Max Keiser

It is time to combine radical critiques of global finance with investigations into emerging revenue models, payment systems and experimental currencies. We believe that these trajectories should be linked and feed off each other. It is not enough to demand a reform of the financial sector and hope for a return to Keynesian employment policies. Our attempt is situated inside contemporary network cultures. For the past decades the informal nature of networks meant that the buzzing communication sphere was perceived as an autonomous realm, a world apart from the 'official' reality with its formalized social and economic relations. The rise of high-speed trading over the past 15 years has shown how fast niche software, still under development, can take centre stage. This is not just about memes that come and go. So far, relations between networked subjects have rarely been primarily monetary in nature but that can change overnight. Until recently, if money circulated in the internet economy it either did so through traditional direct purchases of goods and services (for instance through e-commerce) or indirectly, behind the back of the user, through adds such a web banners and the sales of private data. If we want to step up our critiques of the Googles and Facebooks and their culture of organized cheating, it is important to start to make the economic dimensions of the digital more explicit and visible. An important first step could be to remove the 'free' and 'open' away from the marketers. The gesture of giving away for free should once again become a genuine gift, with financial exchanges taking place on a peer-to-peer level.

In economic textbooks it is commonly written that money functions first and foremost as ‘a medium of exchange’. Indeed, money’s other functional qualities – storing and measuring value – lend themselves equally to its status as media, perhaps the first of all computational media. Conversely, the functioning of finance and general economic activity have always rested on complex systems of media. Despite this recognition in mainstream economics of money-as-medium, few have taken such a coupling seriously. It is now impossible to conceive finance without reference to its mediation and its situated-ness in network cultures. There are new and emerging media of finance, and it’s time for arts, humanities and activism to get involved in the discussion of its protocols and architectures.

The dominant economic model of the outgoing neo-liberal internet era remains the Free. The Free works in various ways that combine new and old (media) techniques. The Free operates through ads and data profiling, where ‘you are the product’. The Free operates through ‘harnessing user contributions’ where you create a product, a product for other users, but not the product, which remains ads and data profiles. The most novel operation of the Free, however, comes about with the rise of platforms. Here the Free is fundamentally speculative, based on an imagined timeline geared completely toward the future. In the ‘future’ there will be revenues and profit. The Free ushers in a new form of anticipatory capitalism, where it is not so much imagined or prototype products and services (to be pitched to venturists) that are anticipated and fed back into the present for speculation, but entire markets. The platform tries to steal market share from other platforms, but only to create its own internal market. ‘If you build it first, all business will come to you’ is the mantra of anticipatory capitalism. The promise of the successful platform is a mass of platform-dependents, ‘users’ who are locked in via their own emotional ties and previous identity work (self-presentation) who have nowhere else to go. Instead of markets, anticipatory capitalism creates monopolies.

The flipside of the Free, or better, its ‘back end’ is the Withdrawn. The exchange of goods and services takes place ‘once removed’ from the interface and the sharing of content – and although ‘promotional’ creep continues, it cannot become too visible, too present, or the game is up and the crowds will leave. The Withdrawn must not be understood as a retreat, but a shying away. It is value extraction as shameful practice. ‘Just don’t let me see it’.

The ideology of the Free only benefits venture capital, backed first movers who aspire to become monopolists. The VC construction makes sure there is enough investment to knock out competition through cynical tools (labelled for outsiders as 'creative') such as viral marketing, creative bookkeeping and internal management tricks. In order to get the highest market share as soon as possible, investments are necessary, right now: cloud infrastructure, marketing, global presence. In 2008 Wired editor-in-chief Chris Anderson summarized the Free ideology just before it lost its innocence and secret seductive side.[1] In the wake of the unfolding global financial crisis, free remained the default for many services, but they also lost their aura of invincibility. ‘If you're not paying for it then you are the product’ is now a common insight, shared in frequent Facebook debates. The criticism of free and open already goes back to late 1990s[2] and has become louder and more pronounced over the past few years.[3] But what is to be done if you do not want to join the innovative entrepreneurial rat race? What if you have other ideas about sustainable growth, paying the ones who really contribute (and not just those who work in infrastructure), when you prefer 'slow communication' and prioritize local and networked economies that have disassociated themselves from the destructive global banking circuit?

Whether general and abstract critiques of money-as-such are justified and a healthy guide in life remains to be seen. Thanks to David Graeber's bestseller Debt[4] and the related anti-debt movements, there is a growing attention to the mounting debt problem of students, house owners and other members of the declining middle class. But disgust of money outright (which, in times of crisis can so easily be politicized and mutate into organized anti-Semitism) also keeps us away from how we can imagine to redistribute wealth, rebuild public infrastructures and design new models of value creation. In times of economic crisis we do not merely need more money, we push for drastic measures on the top in combination with new models for small (networked) units to generate income.

…

Today’s real-time flows of global finance reflect the technical infrastructure they are conducted on. Screen interfaces, information visualizations, financial models and trading algorithms comprise the media ecology of contemporary financial practice, organizing routine operations and guiding decision-making process in a probabilistic fashion. To note the complexity of the situation has become a common trope of government regulators seeking to 'simplify the system'. But the unknowability of the 'deep waters' and 'dark pools' of finance runs deep. Attempts to ‘democratize’ finance through electronic markets and high-speed trading platforms – in the name of transparency and openness – turn out to be nothing more than a libertarian dream of programmers who, in the end, only seem to contribute to secretive 'algo wars', leaving only the biggest, most sophisticated, connected firms to seriously compete. As a result of this author of Dark Pools, Scott Patterson, speaks of ‘an algorithmic tragedy of the commons, in which all players, acting in their self-interest, spawned a systematically dangerous market that could threaten the global economy’.[5]

Competitive advantage increasingly derives from securing state of the art material infrastructures, geographical proximity to the main switches of trading platforms (known as ‘co-location’), the ability to generate the best predictive models and the capacity to act on these models using the patented financial algorithms of automated trading. With these technical, material and legal barriers – 'barriers to entry' in economic speak – it is not possible for ordinary citizens to know the contemporary state of the arts in the world of finance (even if they are willing to trawl through the piles of books that attempt to diagnose what went wrong in 2008). Even the experts work in a space of known unknowns, not only trying to counter future market uncertainty (via derivatives etc.), but also the strategic actions of competitors and the unpredictability of their own automated trading tools (due to developments in ‘machine learning’). Models have come to replace the seer and strategy takes the specific form of game theory. Indeed, while the ‘gamification’ meme continues to trend, becoming the preferred means of society (to any end), Aristotle had already formulated a vision of finance as the gamification of the economy, M-C-M, and Rudolf Hilferding did the rest in his 1910 classic Das Finanzkapital. All the rest, from 1929 to 2008, is history.

In global finance, electronic trading has come to replace the spectacle of the trading pit and its ‘market makers’. As anywhere, computational processes are now totally routine and because of this, economic practices develop computational characteristics. Consider how automated high-frequency trading co-emerges with a distinct form of technical accident, the so-called 'flash crash' of May 2010, which reportedly wiped one trillion US dollars of wealth, was the catastrophic result of algorithms working as designed but in conditions unforeseen. As a 'flash crash', the computational glitch takes on decidedly financial traits (and ramifications). Indeed, flash crashes have become increasingly regular in high-frequency trading to such a degree that we can rightly call contemporary finance ‘glitchy’. Whereas a decade ago it was cool for traders to look down on small investors and pension savings of ordinary citizens who could not keep up, creating a ‘hunter-seeker battlefield’ that fed ‘Uncle Joe and Auntie Millie to the sharks’, the situation right now has turned against autonomous computer systems themselves. Either these financial weapons will be decommissioned all together, ending the arms race, or we will see desperate attempt to reform, postponing the Big Breakdown with meaningless speed limit regulations.[6] To be clear, we are not suggesting that it’s a simple matter of cleaning (or regulating) a few bugs in the system.

Attempts to know the operations of finance at the level of practice and with technical rigor have been made by those working in the small field of Social Studies of Finance, an offshoot of Science and Technology Studies. Some of their insights have included: 1) that financial markets are ‘postsocial’, where traders’ primary relationship is with screens and other telecommunication devices and where a ‘global market is entirely exteriorized and embodied on computer screens’[7]; 2) that markets are multiple and can be designed in different ways (leading to different outcomes and consequences); 3) that the devices and material infrastructures of financial markets are central to the operations of finance (its ‘design’); 4) that methods of economic description, such as modeling, are equally inscriptive (that is, they act on economic situations as much as they describe them, influencing how decisions are made or becoming embedded in ‘tools’ that can significantly reconfigure the market). All of these insights are now taken for granted. The question for this field is the extent to which their technical and material analysis connects up to the political (as Chantal Mouffe calls it), and to lived antagonism. Donald Mackenzie ends his recent book, for example, by calling for an opening up of the ‘black boxes of finance’ and he notes that ‘market design is a political matter’ which must include ‘a nuanced politics of technology’ that actively seeks to shape processes of innovation.[8] Despite such desires, which are admirable, the kind of (ontological) politics performed in this descriptive work has remained largely invisible throughout the ongoing crisis. It is also unclear to what extent a commitment to tinkering with dominant market structures can be generalized as a political strategy or whether, instead, more radical (technical) interventions are required.

Critical responses to the ongoing financial crises have taken several forms. One trajectory has oriented itself largely around negating the present – especially the ‘asymmetrical’ bailout of those ‘too big to fail’. ‘Occupy’, ‘Strike the Debt’, ‘End Austerity’ and ‘Down with the 1%’, are some the refrains of this tendency. Proponents of the more ‘pragmatist attitude’ argue that we will somehow weather the storm. When there is no alternative, capitalism comes to resemble the weather: sometimes it rains, there are droughts – and that's it. We can argue to what extend the weather is human-made, but in the meantime we will have to stick with its (predictable) ups and downs. Even though we can imagine organizing the social along different principles, for the time being we are stuck inside the Capitalist Sphere and can only speculate on the implications of all the cybernetic networks coming down together.

Another response is the legitimate call to first of all get a better understanding of the dark world of finance—and highspeed trading in particular. These efforts go back to the work done by Saskia Sassen who, already in the 1990s, drew convincing lines of dependencies between electronic trading, global cities, social movements and internet cultures.  A more technical approach comes from the software studies academics that emphasize the importance to get a better understanding of the role of algorithms and bots.[9] Yet another trajectory, the one that interests us most, focuses on the development of alternative forms of money and finance outside of the mainstream banking system. Micro-credits and barter, crowdfunding, P2P banking, timebanks, mobile money and net currencies are examples of these parallel strategies. We can ask ourselves how the production of such financial alternatives is positioned in relation to the broader critique of global finance and whether it is actually possible to operate as autonomous systems outside of the influence national banks, the US-dollar and the influence of credit card companies? If there is ‘no right life in the wrong one’, as Adorno stated, how should we read these exercises, presuming that they resist the rhetoric of innovation (if not actively then at least in a passive way)?

Tales from the cryptocurrency

Alternative forms of exchange emerge for a number of reasons, including structural failure, group marginalization, and more strategic, proactive interventions. Digital money is no exception. In the 1980s, Michael Linton developed a computerized system for the facilitation of LETS (Local Exchange Trading Schemes), which he named LETSystem. This system sought to ‘marry the efficiency of commercial barter with the liberatory potential of the countercultural exchanges’.[10] In the 1990s, David Chaum’s DigiCash was thought to be the game changer.[11] Chaum was a pioneer in applying cryptographic techniques to currency, effectively turning money into a cryptographically encoded string of numbers. In 1994, Steven Levy wrote a feature article in Wired which detailed this Dutch project and others of the day in what we can now understand as the first serious flirtation with digital cryptocurrency. Passages from this old piece could have been written yesterday:

David Chaum has devoted his life … to creating cryptographic technology that liberates individuals from the spooky shadows of those who gather digital profiles. In the process, he has become the central figure in the evolution of electronic money, advocating a form of it that fits neatly into a privacy paradigm, whereby the details of people's lives are shielded from the prying eyes of the state, the corporation, and various unsavory elements.[12]

After DigiCash we had Mondex and more recently MintChip. Is there anything we can learn from these historical forerunners?

Today, Bitcoin has taken over the cryptocurrency mantle. The first thing must be asked of Bitcoin is: Why now? Has the 'free' consensus finally broken down? Is it that Levy’s words (and Chaum’s sentiments) suddenly ring more true as the reality of the Big Data Society unfolds before us? Or can we put the early success of Bitcoin down to the technical achievements of Bitcoin’s chief architect and mythical figure, Satoshi Nakomoto? Is it the open source or decentralized architecture? What role does the GFC play, especially considering the coincidence of a sharp spike in the currency’s value with the collapse of the Cypriot banking system in March 2013?

Bitcoin realizes the crypto-libertarian dream of the global private market: that is, a market that does not depend on state facilitation and regulation. Through the use of public key encryption technologies combined with distributed P2P software architectures, Bitcoin enables semi-anonymous transferal of funds between users. Early on, the most visible antagonistic capacity of this new currency was its facilitation of illegal marketplaces (the sale of illegal goods), most notably Silk Road. Such illegal transactions can be ‘seen’ by governmental eyes but not easily regulated or traced back to users. More damaging for states, though, is the potential for this currency to simply scale up and be used for mundane ‘over the counter’ purposes. What happens to the ritual of tax when a critical mass starts operating in a private economy? The simply answer is that governments would never let such a situation develop. And isn't it a 90s dream to see cyberspace as a separate cosmos with its own laws? The most disruptive potential of Bitcoin might very well be its range of less controversial and more pragmatic functions. It could be used, for example, as a default currency for remittances, greatly reducing if not eliminating the fees associated with sending money across borders. Here, the otherwise antagonistic and disruptive capacities of Bitcoin come to resemble the more palatable Schumpeterian creative destruction, where current economic practice is overturned (outcompeted), but only in such a way as to reaffirm its overall logic.

Like the current economic order, Bitcoin privileges specific forms of exchange, and of relating to people. It is currency as Weltanschauung. And like all systems, it will produce its own animal spirits. In order to come to terms with Bitcoin, we must account for its value, but also its ‘values’ as is the domain of economic sociologists and anthropologists. In fact, these two notions need to be reunited. What are the values that underpin the design of Bitcoin to give it value? Besides the thrill of financial speculation, can we speak too of a certain geek-cool, of a hacker geek value?[13]  Do you have any Bitcoins? How cool.

Is it possible to single out certain technical and material aspects of the currency system as explicitly political? Regular Bitcoin commentator and free market enthusiast Jon Matonis describes the currency as non-political because, in the last instance, it is not backed by the sword of Leviathan.[14] But this obviously rests on the narrowest definition of ‘politics’, and on the fantasy that markets are somehow outside of politics. Even the liberal legal scholar Lawrence Lessig was able to acknowledge the political dimensions of software within his own quasi-legal paradigm through his formula ‘code is law’.[15] And so, as code, we could ask, what are the laws of Bitcoin? Or, what values have become law?

As noted, Bitcoin is underpinned by public key cryptography – a technique of privacy specific to the realm of communication. As Jean-Francois Blanchette has recently put it, cryptography is a form of communication that takes place ‘in the presence of adversaries’.[16] But cryptography is more than the communication of secrets. It is not equivalent to a whisper. Rather, it privacy that resides in public, ‘in the presence’ of others. We might equally refer to it as the persistence of privacy in a world enamored by open communication. The question is, however, if and how the cryptographer’s imperative shapes Bitcoin, besides the very fact of making it possible? Is there any relation between the politics (or privacy) going in (design) and out (use)? Other than supporting the dream of the private market, what are the concrete practices that are emerging through this currency system? One thing that has become very clear is that it is now possible to see money as an artifact of design. No longer imagined as a universal commodity (gold), or as the monopoly creation of governments (fiat), basic questions about the function, source (of value) and purpose of money are once again on the table. Perhaps it was the recent existential crisis of fiat monetary system, and its failure in hiding its designed existence – whether it be quantitative easing or selective bailouts – that has somehow led to this situation. Whatever the case, these basic questions will have to be addressed by every experimental currency – and not just at the level of discourse.

AdVentures in crowdfunding

New creative projects have long relied on either venture capital or grants from governments, foundations and other third sector institutions. Workers in the creative industry more generally hold onto the dream of permanent, well-paying, creativity-quenching work, but sustain this dream through a patchwork of one-off projects, forced voluntarism, underpaid and supplementary gigs. They are caught in a precarity-idealism nexis: ‘the dream job is just around the corner’ … ‘soon they’ll give me a permanent contract’ – and so they go on… These issues were explored in detail by the MyCreativity network of the Institute of Network Cultures from 2006-2008.[17] Since then a range of networked funding initiatives have emerged, holding new promises for the creative class that one day there will be Content Justice. In the short run, prospects remain bleak. Ever heard of Amazon writers, Netflix directors, iTunes bands?

Crowdfunding platforms assume many forms, but the model usually looks something like this: A person or group needs money to fund a project. They pitch the project on a website, inviting the ‘crowd’ to contribute funds. The pitch will include a specific project quote (e.g. $10,000) and a deadline by which the quoted figure must be met. If enough people ‘pledge’ money and the target figure is reached, the project becomes active and the pledged funds are collected. If the figure is not reached, the ‘pledged’ funds remain with the funders. This ‘all or nothing’ model is used on sites like Kickstarter and Indiegogo. Project funding also often includes ‘tiers’, with the option to contribute a large or small amount of funds, with different ‘returns’. Returns range from tokens of appreciation, the product itself (if there is one), to exclusive or ‘individualized’ versions of the product for the higher tier contributors.

Seeking to bypass government patronage, the Venturists and other intermediaries, crowdfunding has become a boutique industry. The games industry in particular has embraced the logic of crowdfunding, which begs the question of the relationship between funding and fan cultures. The most successful project in the games industry so far has been the OUYA console, which was backed by over 63,000 funders, raised a total of $8,596,474 and received over nine times the amount requested (904% funded).[18] And while indie and documentary films have also been turning to crowdfunding for some time, at the time of writing (March, 2013) crowdfunding is experiencing its first awkward alliance with Hollywood. A film based on the teen-detective TV show, Veronica Mars, surpassed its funding goal of $2,000,000 US in less than a day. According to the pitch, ‘Warner Bros. wasn’t convinced there was enough interest to warrant a major studio-sized movie about Veronica and the project never got off the ground.’ Here the funders double as an audience-in-advance. It is tempting to see such mainstreaming as the step forward, but given this Hollywood moment can be read as a simple case of risk outsourcing, dumping the costs but not the profits on fans, what seems clearer is that the platform itself comes with no guarantees.

For workers in the creative economy, the dream of crowdfunding is that it represents a viable alternative to the venturist and (research/cultural) grant models from either private foundations or the state, cutting out a whole chain of parasitical intermediaries. Promotion, for example, takes the form of (Facebook) liking, embedding and tweeting. Popular projects rise to the top and enjoy increased site visibility. ‘Interesting’ projects find themselves on site-sanctioned curated lists. Some appear on ‘featured’ pages. Kickstarter sends updates on ‘projects we like’ to site subscribers. Really popular projects make headlines. All this, of course, increases the chance of funding success.

Research into crowdfunding is now trying to unlock the secrets behind successful projects, often through quantitative techniques which function through correlation and pattern detection. Number of friends on Facebook, the inclusion of a video in the pitch, geographical location of the project, pitch duration (shorter is better), and being ‘featured’ on the funding platform all correlate with success.[19] In short, be popular and live in a cool city. What is needed, however, is a better understanding of how the logics and mechanics of crowdfunding shape the process of funding in ways that differ to older models, such as Inge Sørensen’s comparative investigation of funding documentary films in the UK.[20] Unsurprisingly, it turns out that different funding models favor different documentary genres. Why and how do some projects circulate like memes and attain their funding goals many times over? What does the long tail of failure look like? We might equally ask more radical questions such as whether or not crowdfunding could become a machine for producing the commons, where private inputs are translated into common outputs, leaving no room for the Warner Bros. of the world? Kickstarter is the most visible crowdfunding site thus far, but what are the alternatives and local analogues and how do they differ in terms of design and output?

Beyond these structural inquires, we must also consider the experiential and psychic aspects of these new funding models. What would Simmel make of all this? Is crowdfunding better understood as the 'democratic distribution' of the mindset of the financier, and therefore as an intensification of the logic of finance? What is the effect of turning funding into an act of web-browsing? Or, when design interfaces and ‘user experience’ becomes key criteria in funding outcomes? Ian Bogost thinks sites like Kickstarter are instead better understood within a trajectory of reality television and that focusing on products (outputs) misses something crucial:

When faced with the reality of these products, disappointment is inevitable--not just because they're too little too late (if at all) but for even weirder reasons. We don't really want the stuff. We're paying for the sensation of a hypothetical idea, not the experience of a realized product. For the pleasure of desiring it. For the experience of watching it succeed beyond expectations or to fail dramatically. Kickstarter is just another form of entertainment.[21]

Entertainment it may be, but we might also ask: why are we willing to pay for a ‘hypothetical idea’? It’s not just a hypothetical product we are investing in, but also an idea of funding by other means.

Mobile Money in Africa

Whereas in the West US-American credit card companies remain in control, when it comes to internet payments elsewhere in the world things look different. Over the past few years the alternative payment methods of using mobile devices have grown at exponential rates across many parts of the so-called developing worlds. In a time when traditional banks were not interested to service the poor, telecoms took over this job, expanding their initial monetary system to purchase airtime and SMS credit to an expanding range of services from P2P payments to water and electricity bills, school fees and transportation. Today, Mobile Money is front and center in development discourses. It is tied to a new understanding of development, one which eschews outdated notions like charity and instead seeks to foster the entrepreneurial spirit of the poor, while making a buck along the way. Mobile Money is positioned as a way to 'solve the unbanked problem' and to foster new financial literacies and the responsible management of money. Meanwhile, many at the other end of the financial spectrum are looking for a way out. As the Mobile Money industry matures, new telco-banking arrangements are being forged and local state regulation is being rewritten. Underpinned by the new narrative of development as commerce, these processes are further legitimised by the eager participation of NGOs, who have equally bought in to the idea that 'there is a fortune at the bottom of the pyramid'.

The question of who, in the end, will dominate the Mobile Money space remains open. Will it be the Asian and African telcos or rather Visa (who currently owns much of the underlying software that mobile money companies utilize)? Will large global banks one day wake up and buy themselves into this market? And what about the proposition of a Bitcoin clone developed for peer-to-peer Mobile Money payments? The strength of the existing platforms is precisely that they are making use of the existing national currencies (and treasuries that issue them) and are not tempted to go in the 'virtual' direction of parallel currencies. Policy-wise this is also what the term 'financial inclusion' seems to suggest. No exodus and no outside. With an estimated 80% of adults in Africa still 'un-banked' the potentials are obvious. Around three billion people worldwide lack access to formal financial services. Are there lessons to be learned from the 'micro-finance' saga? We also need to consider the wider position of Mobile Money in relation to the new media of exchange unfolding 'at the top' such as Microsoft, Google, Apple (and Ubuntu?) who will all have their own strategies how to integrate monetary transaction in future smart phone architectures. Will the telcos and their Mobile Money initiatives eventually fold into the existing banking system or will it be the other way around?

Big questions remain. Who is in charge of what and where should we go to make our demands? Is it justified to expect that we will have to develop our own alternative money flows? Is barter the way to go? How can we turn the demand to redistribute wealth into practice? Can we disarm the online traders, taking away the toys from the boys? What is 'slow money'? How do alternative visions of finance, such as P2P banking or the All Street sit within these developments? In short, what is the status of experiments from Bitcoin to Kickstarter in the larger picture?

If we turn to the troubled cultural sector we can see that the creative industries meme is not offering concrete revenue models for artists besides corporate sponsorship and the (morally) bankrupt model of intellectual property. In this time of economic crisis we can no longer only criticize financial capitalism but need to imagine, and practice alternatives. What are the longterm prospects of crowdfunding platforms? Is there a way for the precarious cultural workers to earn money directly, cutting out the intermediates, through a peer-to-peer economy, using Bitcoins? It is not hard to see that free and open as facilitating ideologies of the 1990s no longer appeals. If there is anything in need of disruption it is the global finance sector.

Notes: