Bitcoin Is Venice, Bitcoin Is

Part XIV and Finale of the Bitgenstein Serialization

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“Of the various centres in which republican ideas continued to be discussed and celebrated throughout the later Renaissance, the one with the most enduring commitment to the traditional values of independence and self-government was Venice. While the rest of Italy succumbed to the rule of the signori, the Venetians never relinquished their traditional liberties.”

- Quentin Skinner

I tend to find Bitcoin analogies that aren’t transparently rhetorical to inevitably have some fatal flaw that ultimately makes them more confusing than they are helpful. And yet, Venice has an enigmatic appeal that I cannot bring myself to categorize as entirely fanciful. As a social and political order emerging from feudalism by an embrace of trade and capital formation, it is certainly instructive. But there seems to me to be more. Clearly, Bitcoin is not a city, but it is a system, and a symbol, in a way that transcends its instantiation as code, much as Venice transcended its islands and lagoon.

Some comparisons are cute and easy. Venice was far, far easier to defend than to attack, to the point that attack was essentially futile. Its governance model was bewilderingly opaque and constitutionally resistant to seizure. If seizure nonetheless became a realistic threat, an immune response seemed to be triggered that innovated around the danger. Was the legendary putting down of Bajamonte Tiepolo’s insurrection, tipped not by the Commune’s security forces but by an old woman throwing a stone from a window, a primitive user activated soft fork? Sure, why not. And of course, what of emerging from a dark age characterized first and foremost by monetary debasement? Pirenne’s observation certainly suggests a precedent,

“If it is admitted, as it must be admitted, that the reappearance of gold coinage, with the florins of Florence and the ducats of Venice in the thirteenth century characterized the economic renaissance of Europe, the inverse is also true: the abandoning of gold coinage in the eighth century was the manifestation of a profound decline.”

What of Venice’s relative egalitarianism? John Julius Norwich writes in A History of Venice that Venice was famed, “for a system of justice which gave impartial protection to rich and poor, aristocrat and artisan, Venetian and foreigner; for, in theory, at any rate and for the most part in practice too, every man living beneath the banner of St Mark was equal in the sight of the law.” Pirenne notes this attitude was fundamentally rooted in the necessities of commerce and hence extended beyond the city’s own jurisdiction and internal affairs: “No scruple had any weight with the Venetians. Their religion was a religion of businessmen. It mattered little to them that the Moslems were the enemies of Christ, if business with them was profitable.” Similarly, that Bitcoin is apolitical or “money for enemies” is well memeified at this point, but I was particularly struck by Terry Crewes’ rather more visceral anecdote to this effect:

What of Venice’s continual flouting of the proclamations of the Church, the literal counterpart to Kotkin’s modern clerisy of elite tastemakers and thinkers of right thoughts, who already have and no doubt will continue to take, “a defiant and hostile attitude toward the commercial revival which must, from the very first, have seemed to it a thing of shame and a cause of anxiety,” as Pirenne put it?

But I think the most striking comparison of all is the synthesis of disparate ideas into a financial cornerstone. Very little of commercial note was invented in medieval and Renaissance Venice — double-entry bookkeeping was likely borrowed from Genoa, having originally been imported to Italy from the Levant; the numeral system with which it is most useful is famously Indian, relayed in Arabic via Persia, the Levant, and the Maghreb; most other contributions to business administration were probably imported from Arabia and Constantinople; and the material industrial advances of the time predominantly originated in China. But Venice combined them all to perfection. Most of the outlines of modern finance were arguably present in Venice by the early fifteenth century at the latest, with very little truly invented since, rather than further combined, standardized, scaled, or modernized. To my mind, only central banking and options have been both material and entirely novel.

Of course, technology, industry, and society have advanced immeasurably since, and yet we still live by Venetian financial customs and have no idea why. Even the word “bank,” in the financial sense, originates in Venice, from the banca or “benches” of moneychangers by the Rialto Bridge, with Lane and Mueller pointing out that, “true banking had developed, it is now generally agreed, not from moneylending or pawnbroking, but from the manual exchange of coins.” Modern banking is the legacy of a problem that technology has since solved.

The following explication of Venetian financial infrastructure around the fourteenth century from Lane’s Venice, A Maritime Republic is remarkable in that I think it is a perfectly solid foundation for understanding the role played, today, by credit card networks and bank settlement schemes alike:

The main function of a Venetian banker was not making loans but making payments on behalf of his clients. Even if a merchant had plenty of coins in his treasure chest, it was a bothersome and dangerous business to get them out every time he made a purchase, making sure each coin was genuine and in good condition. Nor did he want to go through a similar process each time he made a sale. He was happy to receive payment by being given credit on the books of a well-known banker. He could use that credit to pay for his next purchase. These credits were not transferred through writing checks, as is done today, but depended on the person who was making a payment appearing in person before the banker who sat behind a bench under the portico of a church at Rialto, with his big journal spread out in front of him. The payor orally instructed the banker to make a transfer to the account of the person being paid. The banker wrote as directed in his book, which was an official notarial record, so that there was no need of receipts. There were normally four or five such bankers with booths on the campo next to the Rialto bridge. Everyone of any consequence in business had an account so that he could make and receive payments through the banks. They were called banche di scritta or del giro because their main function was to write transfers and thus to rotate (girare) credits from one account to another at the command of the merchants.

If we add bills of exchange, credit creation, and floating the state debt, all natural extensions of the utility of these ledgers — and of course if we subtract a hard reserve asset, available on-demand, that was deposited in the first place there is not much left to account for. And note as well the seedlings of why the trust-minimizing natively digital, computational, and decentralized features of the Bitcoin for settlement and Lightning for payments dramatically improve on this setup. Bitcoin may be magic Internet money, but more importantly, it is money for the Internet. Prior to 2009, you could send any information you want to anybody, anywhere in the world, instantly … except the most important information of all: value. Now we are all caught up.

It is often commented that Bitcoin is really more an ingenious combination of prior advances in applied cryptography than an invention in its own right. I am quite partial to the romantic idea that Bitcoin was discovered rather than invented. It is a foundation to scale the next great phase of economic progress. Bitcoin is Venice.

Bitcoin Is

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photo by Christian Puta, via Unsplash

“Our history forbids us to be surprised that an orthodoxy of thought should become narrow, rigid, mercenary, morally corrupt, and vengeful against dissenters. This has happened over and over again. It might be thought the maturity of orthodoxy; it is what finally happens to a mind once it has consented to be orthodox. But one may be permitted a little amusement, if not surprise, that this should have befallen a modern science, which was set up, as it never tires of advertising, to pursue truth, not protect it … If change is to come, then, it will have to come from outside. It will have to come from the margins.”

- Wendell Berry

Colorfully outrageous metaphors finally aside, the most remarkable fact of all remains that Bitcoin even exists. Bitcoin is. This is undeniable, although the reasons why can be ignored — our monetary system is optimized to strip-mine capital — and its ascent can be misunderstood — the mainstream understanding of money invalidates it by definition rather than observation.

Ludwig Wittgenstein once asked a friend, “tell me, why do people say it is more natural to think that the sun rotates around the earth than that the earth is rotating?” The friend said, “well, obviously, because it just seems like the sun is going around the earth.” Wittgenstein replied, “well, what would it seem like if it did seem like the earth were rotating?

If it seemed like a global, digital, sound, open source, programmable money was monetizing from absolute zero, it would seem a lot like this.

n.b. This is a serialization of my previous trilogy on Bitcoin, economics, and capital markets: Wittgenstein’s Money, The Capital Strip Mine, and, Bitcoin is Venice.

go back to Part XIII:

follow me on Twitter @allenf32

maybe a squirrel. maybe not. views my own, not my employer’s.

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