Right now Bitcoin is experiencing a gigantic drop in hashrate due to the Chinese Communist Party (CCP) shutting down mining in the country. Already being dubbed “The Great Hashrate Migration,” a huge amount of mining equipment is being unplugged and shipped to friendlier jurisdictions around the world. Some Chinese miners have taken to booze as expectations are that nearly all mining operations will be shut down. The largest difficulty adjustment in Bitcoin’s history is likely to occur as a result of the disruption.
The motivations for such a move are opaque. Rumors abound that the CCP is preparing a rollout of their own central bank digital currency around the 2022 Winter Olympics. Mining can be a crafty method of capital flight, sending bitcoin straight into an offshore cold wallet which is a nuisance for the Party. Corrupt cadres could be siphoning energy into their own operations or paid off by local miners. Maybe a younger, digital-native clique in the Party got a little too much bravado and crypto-wealth for Xi Jinping’s tastes. Others have suggested the CCP takes climate change very seriously and is taking a leap forward for the good of the planet. Whatever the reasoning, the CCP decided mining is a threat to their power in some way. The result is that massive amounts of Bitcoin infrastructure currently residing in China is getting the hell out of there as rapidly as possible.
China is the perennial Bitcoin hot topic and a common roll on the FUD dice. Peter Thiel made news earlier this year with an unsettling sound bite that bitcoin could be a “Chinese financial weapon,” stating:
“From China’s point of view they don’t like the US having [the dollar as the world] reserve currency because it gives us a lot of leverage … The euro you can think of as, in part, a Chinese weapon against the dollar [as an additional reserve currency] … Even though I’m sort of a pro-crypto, pro-bitcoin maximalist I do wonder whether at this point bitcoin should also be thought of as, in part, a Chinese financial weapon against the U.S. It threatens fiat money, but it especially threatens the U.S. dollar … China is long bitcoin and perhaps from a geopolitical perspective the US should be asking some tougher questions about exactly how that works.”
Americans are notoriously bad at understanding China — its history, culture, political system and motivations — and perhaps Thiel is no exception despite his level of credibility. But if China is long bitcoin, they either had an epic Elon Musk-style public turn-around or a brilliantly planned leveraged short to get cheaper sats on the other side. Because if the CCP considered bitcoin a financial weapon against the U.S., they just unilaterally disarmed themselves.
It’s also possible that Thiel wasn’t totally wrong but that a shift in attitude occurred inside the Politburo creating a sense of urgency to implement strict controls on Bitcoin in China. As recently as April officials with the People’s Bank of China were stating, “the main role we see for crypto assets going forward … is investment alternative.” The CCP made several half-hearted attempts at restrictions on Bitcoin and crypto-trading over the last decade. When news of this mining ban spread it was initially underestimated by many long-time Bitcoiners until on-the-ground reports confirmed that this time the CCP was dead serious and acting swiftly. This turn of events begs the question: what changed the Party line?
Bitcoin is a monkey wrench thrown into history that Marx, Lenin and Mao couldn’t fathom.
For much of the 20th century the “scientific” next stage of history after capitalism was generally presumed to be socialism, even among top ranks in the capitalist world. Marxist theory of history as class struggle: progressing from feudalism to capitalism, then capitalism to socialism and finally from socialism to communism when — according to the science — the state withers away, classes are abolished and humans become the new Communist Übermensch, free from alienation and want. That narrative did and still does carry weight as almost a predestined arc of history towards progress. Eschatology for the non-believing materialist.
Socialism with Chinese characteristics, the living successor to Maoism and ideological framework of the CCP, is a rat’s nest of revisionist contradictions. Political words have a way of losing meaning as displayed by the colorfully evil Democratic People’s Republic of Korea. Phrases are thrown around like authoritarian-capitalism or degenerated-workers-state or state-capitalism to describe China’s current system. Yet in their own constitution — and by Marxist standards — China is a socialist country led by a vanguard Communist Party and the dictatorship of the proletariat.
The easiest explanation of the mining crackdown in China is that allowing continued use and growth of Bitcoin is contrary to the core mission of the CCP: keeping power by any means necessary. Whatever economic liberalization and market-based reforms are put in place, the Party is sovereign because they won the civil war. The People’s Liberation Army is the armed wing of the CCP, not the State. The Party’s raison d’etre is protecting the Revolution from threats foreign and domestic, as well as guiding the development of socialism with Chinese characteristics through the stages of history to its predestined conclusion: fully automated luxury space communism … with Chinese characteristics.
In his preface for the new edition of The Sovereign Individual, Peter Thiel wrote:
“… the great conflict over our megapolitical future is only just beginning. On the dimension of technology, the conflict has two poles: AI and crypto … It is no coincidence that AI is the favorite technology of the Communist Party of China. Strong cryptography, at the other pole, holds out the prospect of a decentralized and individualized world. If AI is communist, crypto is libertarian.”
That somewhat contradicts his more recent “China is long bitcoin” comments but maybe he’s right about this one. As discussed in Part I, the revolutionary act of Bitcoin is the invention of a new type of property rights — which do not require a State to enforce — on a peer-to-peer, decentralized accounting ledger. The open source monetary network Satoshi released into the world threw a firebomb into a century’s worth of Marxist theory and practice.
Bitcoin is for enemies, but anti-communism is written into its code. The Marxist ideal and Bitcoin are simply incompatible, since private property is abolished under communism. Every individual on the planet can now hold valuable property in their mind with a memorized passphrase. No one can take that property without the owner deciding to give it up, and even the threat of violence is limited in effectiveness when the owner takes greater precautions.
The entire Marxist theoretical framework developed from the 19th century onward depends on the assumption that property rights are solely determined and enforced by the State. This is why the left holds a special ire for the police and military as working class traitors upholding the capitalist system. It’s why the capitalist bourgeois state must be overthrown in a revolution and replaced with the dictatorship of the proletariat, which does not necessarily mean authoritarianism but is the Marxist way of saying “workers state”. At least in the Leninist variety, it’s also why an organized Party of professional revolutionaries is absolutely necessary in order to take state power and with it sovereignty to repress the prior regime with terror and violence.
Socialism is not primarily the self-absorbed baizuo socialists of the U.S. or Europe. China is a country of 1.4 billion people led by the Marxist-Leninist CCP. Their influence is gaining momentum and looked to as a model in the developing and developed world alike. Bitcoin and the new power it brings to the individual does not exactly fit into their holy book. As Bitcoin truly enters the geopolitical realm, the CCP and Marxist ideology will be important long-term adversaries not allies.
The only surprise is that it took this long for China to get serious.
During the last day of Bitcoin 2021 in Miami, mischief makers threw trash bags full of Venezuelan bolivars into a large dumpster outside the conference center and the wind scattered them across the ground. As Strike CEO Jack Mallers ended the conference with the emotional El Salvador announcement and attendees began to leave, thousands of 50 bolivar notes were under their feet, courtesy of Nicolás Maduro, the Bolivarian Revolution and socialism of the 21st entury.
China is not the only place where socialism maintains a considerable amount of influence. In Latin America the political shift known as the Pink Tide brought leftists to power in almost every country south of the U.S. border at some point since the new millennium began and continues to this day. Happening concurrently with El Salvador’s move to make bitcoin legal tender last month, Peru held a contentious presidential election that — at least temporarily — has resulted in a narrow victory for the leftist candidate Pedro Castillo. Like former president Evo Morales of Bolivia, Castillo is an indigenous union organizer and a major part of his support comes from the significant indigenous population (25% in Peru, between 40-70% in Bolivia). Right now large numbers of people who are struggling the most in Latin America — those in need of hope — look to socialism and the ubiquitous image of Che Guevara.
One of the most interesting things about El Salvador’s jump into Bitcoin is President Nayib Bukele’s political background. He is a creature of the Left. Bukele was a member of the Farabundo Martí National Liberation Front (FMLN) — the legitimized political party of former communist guerrillas in the Salvadoran civil war — until he was expelled from the party for breaking discipline and then subsequently elected president in a wave of popular support. He ran on an anti-corruption campaign against his former party and the right-wing ARENA, both of whom have former leaders in prison or exile for their crimes.
The first nation-state to make bitcoin legal tender is run by a president that disassociated from the dominant leftist party, won the presidency and after the most recent legislative election has super-majority control over Salvadoran politics and overwhelming popular support. This is a consequential set up for Bitcoin’s true entrance into geopolitics. Political power in the developing world has alternated from neoliberal to socialist and back again for decades, often accompanied by large-scale violence. Developing countries have plenty of battle scars to show for it. Because of El Salvador’s decision, a new option could be emerging that provides an alternative source of hope to the broken politics of the 20th century. No longer are ultra-conservative authoritarians like Jair Bolsonaro of Brazil or neoliberal marionettes like Juan Guaidó of Venezuela the only available opposition to the popularity of socialism in Latin America. Now, there’s a new choice: the bitcoin standard.
The influence of a Marxist theoretical framework reaches from Beijing to Caracas to Brooklyn, and will be with us for the foreseeable future. Few socialists have noticed yet — or perhaps they believe the idea is absurd on its face— but Bitcoin strikes a dagger into the heart of their pseudo-scientific worldview. Though that may be starting to change. It’s possible that China’s move to ban bitcoin mining and implementing a harder line against crypto is the CCP taking notice of this fact as “number go up”. As Bitcoin enters the memespace of global ideological conflict, socialism is a major opponent on the horizon. An opponent that is strong among the oppressed, popular among the academy, organized on a worldwide scale and has no qualms about sending you to a gulag.
This is a guest post by Demi Pop. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.