The New Social Contract of Crypto

How crypto assets are creating a new kind of agreement that departs from the problems of sovereignty by banishing violence in exchange for economic enforcement.

In order to understand how bitcoin and crypto assets create their value, we first must speak to their very political and philosophical nature in order to unveil the non-monetary value found within them. While the economic functions of crypto assets are essential for their operations, we must start from the philosophical and political nature to expound any tenable economic theory. In order to do that, we need to understand what Satoshi Nakamoto’s political objectives were around the nature of Bitcoin and cryptography.

Yes, [we will not find a solution to political problems in cryptography.] but we can win a major battle in the arms race and gain a new territory of freedom for several years.

Governments are good at cutting off the heads of centrally controlled 
networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own.

-Satoshi

This indicates that Satoshi understood that cryptography is a munition of war and was specifically developed for communication under duress, which also serves his purpose. This hints towards why cryptography is so essential to how the blockchain functions and why the Nakamoto protocol actually solves the byzantine general’s problem. Cryptography accepts the a priori nature of the State of Exception that can put anyone outside and beyond the power of the law, and expose them to the conditions of total unbracketed conditions of war.

Satoshi accepted that in order to create a new form of economic value that was beyond any state’s control that he would be fully exposed to the full force of the violence of the State, as many prior examples to create a non-state money have proven. Walter Benjamin in On the Concept of History offers us another way to understand what it means to operate from the tradition of the oppressed that Satoshi found himself captured within.

“The tradition of the oppressed teaches us that the “emergency situation” in which we live is the rule. We must arrive at a concept of history which corresponds to this. Then it will become clear that the task before us is the introduction of a real state of emergency; and our position in the struggle against Fascism will thereby improve.”

-Walter Benjamin, On the Concept of History, VII

The oppression of our traditions is one in which we all understand the ‘emergency situation’ that we live is the rule. From Satoshi’s first correspondence, he kept his face and real identity concealed for an understanding of the history of our world, and the meaning of the task he was to introduce. Now we have a real state of emergency, where the hidden meaning of crypto is improving our position in the struggle against the renewed shadow of fascism in a technological cloak.

Satoshi, in the quote at the introduction, offers us a key insight to understanding how government authority functions within the State of Exception. State apparatuses use the process of juridification to place themselves outside and above the law, while any person can be branded as Homo Sacer and placed outside and beneath the law (the PATRIOT act is this par excellence). This is the fundamental form of the State of Exception, and how it overthrows all law through emergency decree under which we all live today. Satoshi does not cite the law, but rather the violence which the governments uses to “cut the head off” that which they find undesirable. He also points out that decentralized networks are not vulnerable to this kind of violence, which has great importance. This quote of Satoshi’s above seems to reference the following Michel Foucault interview in “Truth and Power”:

Sovereign, law and prohibition formed a system of representation of power which was extended during the subsequent era [the modren age] by the theories of right: political theory has never ceased to be obsessed with the person of the sovereign. Such theories still continue today to busy themselves with the problem of sovereignty. What we need, however, is a political philosophy that isn’t erected around the problem of sovereignty, nor therefore around the problems of law and prohibition. We need to cut off the King’s head: in political theory that has still to be done.

Michel Foucault, Truth and Power

So the real question that we should be asking ourselves is:

Does Bitcoin and other crypto assets somehow create a new form of social agreement and political philosophy which no longer sullies itself with the problems of sovereignty, law, and prohibition? Does crypto somehow create a new stratagem of law through cryptoeconomics by departing from the theology of law in exchange for a science of mathematic verifications? Why can pure P2P networks resist decapitation by governments and why do governments need to attack these networks under the guise of ‘safety and security’ and not the law itself?

These questions took me on a long journey of intellectual exploration that had me go through the likes of Michel FoucaultGeorges SorelMikhail BakuninKarl MarxVlad LeninGeorg LukacsWalter BenjaminHannah ArendtMartin HeideggerCarl SchmittTheodor AdornoMax HorkheimerJoseph SchumpeterMax WeberFriedrich HayekLudwig von MisesPierre ProudhonAuguste BlanquiHenry ThoreauThe Invisible CommitteeTiqqunFriedrich HegelRudolf RockerLouis AlthusserFriedrich NietzscheThomas Hobbes, and Jacques Derrida, but I have found that Giorgio Agamben’s work investigating sovereign power in the Homo Sacer series has been the most valuable to me in this investigation.

What led me to his works was the fourth book in the series called “The Sacrament of Language: An Archaeology of the Oath” (summery here). This text, which is specifically deals with the topology of power found in the oath, observes the relationship between the judicial and theological institutions, and how the oath precedes both of them. This offers an archeological understanding and explanation for what the oath is, and perjury that must coincide with it, which fuses law and violence into singularity order to render the law potent. In the quote below, Agamben points out the true function of the oath:

“The oath does not concern the statement as such, but is the guarantor of its efficacy: what is in question is not the semiotical or cognitive functions of language as such but the assurance of its truthfulness and its actualization.”

Giorgio Agamben, The Sacrament of Language

While it may be possible and expected for humans to profane their words in the oath (thus demanding the violence that must be the final arbitrator of all human law), machines that are governed by the very language of the code that creates their existence does not have this luxury. Machines are held within the complete poverty of their language; incapable of violating the oath upon which their handshake is predicated.

Code is the only language machines can obey; there are no laws which are capable of prohibiting the exchange that is their existence.

The machines are doomed to the total obligation of the code which animates them and must fulfill their oath within the code that is their law. This means what is at stake in the oath for machines is distinctly different from that of humans. The Oath of Man allows for him to create Law, but it is also what allows for him to profane it; enacting the spectre of violence which oscillates between law-making, and law-preserving violence for all of history. Machines, however, cannot violate the very form-of-life that express them — their language that is the code — condemning them to the sanctity of what is written to always give it meaning, even in error.

Machines specifically lack any capacity to profane their oath. There is no God to hold them accountable except the brute facts of Mathematics; the spectre of a nihilistic Spinozian god who sees all within His celestial sphere. The decisions of such a god are immediate and binary, or as Philo pointed out “God spoke and it was done, with no interval between the two.”

There is no God for the machines to foresake; only a semantic form of rule which captures their total existence. Math, the God of the Machines; absolutely cannot be profaned, and their oath to the equation cannot be broken. They are completely obligated to their Yahweh watching them always, immediately, forever, and infinitely.

If the ‘law’ of code is a sacrosanct to itself, than we must accept that what is at stake in the oath of the code is the realness of its assertion in semantic sense, which allows for it to communicate itself. Otherwise it would be unintelligible copypasta incapable of rendering itself.

In order to better understand the full ramification that the oath of machines cannot be broken in the same way that man’s can, we need to look at one the preeminent scholars on sovereignty to better understand this: Carl Schmitt.

“The Sovereign is he who decides on the state of exception”

Carl Schmitt, Political Theology

This was the fundamental dictum that Schmitt presented in “Political Theology.” All sovereign rulers must be capable of deciding on the exception, or they are not sovereign. Within cryptosystems there is no possibility of an exception, of banishing the mathematical laws which govern the system; or of creating some kind of exception to which math cannot be held accountable[1]. Starting from the acknowledgment that The State of Exception is the norm for the operation of all law within the modern state, and understanding that any person can be captured in this Zone of Indistinction that creates Homo Sacer; Satoshi understood the need to conceal his identity and remain anonymous in order to consummate the functions of this new system of agreement. In Satoshi’s need to conceal his identity also enlies the signature of the hideous fact of what it is to be governed today:

“Auctoritas, non veritas facit legem” (Authority, not truth makes legitimacy).As surmised by Hobbes about sovereign power in De Cive:

Cryptosystems absconds from the legitimacy of lies of legalism by creating a new system from which rules can dictate the exact opposite of Hobbes’ Leviathan:

“Veritas, non auctoritas facit legem.” (Truth, not authority makes legitimacy)

By abandoning the authority of legal power and the violence it must entail, for the economic power and protection of cryptography, a whole new strategy of agreement and law is born. This brings us to the second dictum of Schmitt’s Theology of Politics, which also has stark ramifications for this study:

“All significant concepts of the modern theory of the state are secularized theological concepts not only because of their historical development — in which they were transferred from theology to the theory of the state, whereby, for example, the omnipotent god became the omnipotent lawgiver — but also because of their systematic structure, the recognition of which is necessary for a sociological consideration of these concepts. The exception in jurisprudence is analogous to the miracle in theology. Only by being aware of this analogy can we appreciate the manner in which the philosophical ideas of the state developed in the last centuries.”

-Carl Schmitt, Political Theology

It is from this hidden weakness found in the scales of Leviathain’s underbelly that the achilles’ heel of sovereignty, law, and prohibition is exposed. It is from this understanding of the law as being secularized theological concepts that Satoshi was able to develop new digital-social agreement which could depart from the schizophrenic violence of the sovereign by reactivating the power of the liturgical oath through cryptography.

This oath found in cryptography is unlike the oath taken between sovereign and subject. This is due to the fact that the sovereign is non-existent in this system, and thus the rule of law has no way to be suspended. This oath is similar to that which was found in the old Swiss Confederacy called eidgenossenschaft, or oath-fellowship roughly in English. This allows for a form of agreement that is based on mutualism of the oath, and the equality of each party within that agreement to act as enforcers, rather than allowing for force to be relegated to authoritative bodies.

Using this hidden theological power buried in cryptography, a new form of oath that cannot be violated is created. Enforced by the machines, cryptosystems homogenize power and dissipates it through the body of the system as a form of an internal panopticon as nodes. This surveillance is no different from the theological concept of the watchful eye of God of any religion, or the light from the spire of the panopticon itself. This ensures that power remains decentralized, and controlled by no single individual but by its very architecture which creates at-rest enforcement defused into a system of optics. This is similar to how ‘the law’ was enforced in monastic forms-of-life, the conjurationes agreements which created the sovereign communes of the early middle age in Europe, and citizenship in Roman Republic. Everyone takes responsibility in the policing of the system, or as Romans would say, “Ius civile vigilantibus scriptum est.”(Civil law was either written by, or for, the watchful).

Let us see what Foucault has to say about the nature of power in panopticons and what relationship this may have to the blockchain in order to understand the topology of this form of power.

“The Panopticon is a marvelous machine which, whatever use one may wish to put it to, produces homogeneous effects of power.

A real subjection is born mechanically from a fictitious relation. So it is not necessary to use force to constrain the convict to good behavior, the madman to calm, the worker to work, the schoolboy to application, the patient to the observation of the regulations.”

-Foucault, Punishment and Discipline 

Foucault points out how panopticons operate on a different topology of power from the sovereign, which blockchains also use. Through the monitoring functions of surveillance (also found within blockchains), violent force is dislocated and replaced with systems of disciplines. Panopticons create modes of disciple without violence, and punishment without force. This is no different from how God surveils within His Kingdom, and enforces within His Convent.

Through taking this methodology of surveillance and inverting it inorder to use it economically against the corrupt powers that be, the blockchain transmutes into an apparatus of sousveillance, or policing the police. This allows for blockchains to create a new form of law that is predicated upon the explicit banishment of violent force, in exchange for an economic one. This yields a fundamentally different form of agreement from that of sovereignty, law, and prohibition by banishing the violence which inherently must be found in all forms of state law and contracts.

Let us revisit what Walter Benjamin has to say about the possibility of non-violent conflict resolution in Critique of Violence:

“Is any non-violent resolution of conflict possible? Without Doubt. The relationship of private persons are full of examples of this. Nonviolent agreement is possible wherever a civilized outlook allows the unalloyed means of agreement. Legal and illegal means of every kind that are all the same violent may be confronted with nonviolent ones as unalloyed means. Courtesy, sympathy, peaceableness, trust, and whatever else might here be mentioned, are the subjective preconditions. Their objective manifestation, however, is determined by the law (the enormous scope which cannot be discussed here) that unalloyed means are never those of direct, but always those of indirect solutions. They therefore never apply directly the resolution of conflicts between man and man, but only to matters concerning objects. The sphere of nonviolent means opens up in the realm of human conflicts relating to goods.”

-Walter Benjamin, Critique of Violence

The blockchain engages in this same nonviolent form of economic agreement taken to its most extreme place. People under the sovereign protection of the divinity of crypto knowingly abandon the false protection of any state in order to allocate that power to only unalloyed means. Cryptopians understand this offers greater protection than any false ‘rights’ the state could offer, as the code cannot forsake itself in the same way that the law has proven itself to. In other words, Veritas, non auctoritas facit legem [Truth, not authority creates legitimacy] is the law that animates blockchainsThrough the abandonment of the possibility of legal or physical force, and replacing it with an economic imperative, a new form of agreement that is antithetical to law and the violence it is inherently bound up with, is born.

While the focus on crypto assets has overwhelmingly been on their banal economic nature, there is a very real new form of power that goes far beyond the economic wealth that has been created. So long as cryptopians continue to ignore the philosophical and inherently political praxis of cryptography and how blockchains engage this new form power, it will remain hidden, unable to reveal its true nature to a people who are wholly unworthy of it. We will continue to find boring, ill-informed, and un-insightful analysis that offers nothing more than the poverty of economics and the idiocy of money.

If we are to allow for this technology to change the world, than we cannot deny the revolutionary nature active at the center of this technology. To have a means of economic exchange that cannot be predicated upon violence opens the possibility for a new epoch under what can only be called Messianic Law. Once again all the eternal forms are open to pure divine violence, which myth bastardized with law. It may manifest itself in a true war, stasis, exactly as in the divine judgement of the multitude on the criminal. It can only be so fitting that we would be given the divine holy grail hidden in something so vain and hollow as money.


  1. ‘Salus populi suprema lex esto’ in regard to hardforks ‘changing the law’ is something more ackin to Stasis via mutatis mutandis than creating an exception within the law of code. This is what has allowed for projects like Monero to become successful with forking bitmonero, and allocation power to Fluffyponey, or even the first bitcoin hardfork which destroyed all of the coins made from the erroneous op codes. We could also see Bitcoin Cash as a form of stasis within the oikonomos of Bitcoin.

Erik is a crypto-anarchist, iconoclast, and thinker that has been working in the bitcoin ecosystem since 2012. His primary concerns are the intersections of political, economic, and social theory as they relate to bitcoin specifically and crypto generally.