Thinking about crypto and web3, I’m constantly reminded about the ideological battles fought over the big digital platforms and Web 2.0. A decade ago, some of us easily saw through the hype promoted by the likes of Eric Schmidt or Mark Zuckerberg. But the reason why the ideological premises of Web 2.0 were so hard to dismantle was because for every Eric Schmidt, with his commitment to US-led global domination of the planet, there were five Stanford undergraduates who wanted to build an app to feed the hungry children of Africa or teach Syrian refugees how to code or stop violence against women.
Most of these apps failed but they did provide the ideological and political context in which the likes of Google and Facebook could flourish; without the former, the latter would never enjoy the legitimacy that they did – as long as both belonged to the unstoppable force of nature that was Web 2.0, our collective disempowerment by the digital platforms was the price to be paid for helping the Global South code itself out of underdevelopment.
Surveying the many promises of crypto and web3, I see a very similar dynamic: whatever it is that venture capitalists like a16z are doing in this space is whitewashed through the whataboutism regarding the blockchain's promises to also help us prevent the climate catastrophe or heal the planet or redistribute resources more wisely. Let me make a prediction here: when all these solutionist projects fail, as they inevitably will in the next 5 years, all that will remain standing is a16z.
With the crypto community not professing great interest in the broader history of failures to fix development or facilitate conservation or solve the climate problem through market-based interventions, I thought it’s important to talk to someone who could connect the dots. So I turned to Pete Howson, a scholar with the rare talent for clear exposition, who has written both on the failures of various market-based instruments to address social problems and also on the uncritical embrace of the blockchain technology by many development organizations. His critique of “cryptocarbon” is really worth a read.
~ Evgeny Morozov
Keywords: Crypto-carbon, Surveillance Philanthropy, Blockchain, Degrowth, Crypto-colonialism
In an article on crypto-carbon that you co-wrote in 2019, you discuss how the rhetoric of blockchain-enabled forest protection is ultimately dependent on market-based mechanisms, with the imaginary of more effective “green capitalism” shaping much of the neoliberal unconscious behind such efforts. Could you explain how exactly these market mechanisms operate in these projects, perhaps, by situating some of these blockchain efforts in the longer history of implementing natural asset market mechanisms such as Reducing Emissions from Deforestation and Forest Degradation (REDD+)?
REDD+ was an idea born shortly after the Kyoto framework. There was a lot of excitement in the late 90s, early 00s, among economists. They saw opportunities for markets to fix human-induced climate change. So, no need to make laws and stop industries from making lots of profits from spoiling the earths support systems. To them we just needed better pricing structures, so that the environmental and social costs of making stuff would be priced in. A big part of that idea involved offsets. Forests could be made seemingly more valuable standing than cut down using clever accounting. And there was this appetite for very flexible solutions. If airlines and coal-fired power plants can’t cut their emissions without effecting their bottom line? Doesn’t matter. We have these super cheap offsets that you can make your customers pay for, so these companies benefit from the green branding, while also potentially profiting from carbon markets. These projects were bad news for people who lived in and around REDD+ forests. Indigenous peoples were kicked off their land with what we call “green grabbing.” These people were then often forced into unsustainable livelihoods involving poaching, illegal logging, or just working on palm oil plantations. And cryptocurrencies and a blockchain can’t make the “green economy” dream more equitable. The best thing we can do most of the time is to give these forests back to the indigenous communities that have lived in and around them and have managed them sustainably for thousands of years. But there’s big bucks to be made from the “green economy”, so that ain't going to happen.
Given all his long history, why was there initially so much excitement about the promise of the blockchain in this field? What were the most utopian expectations associated with it? Why was so much hope pinned on the idea of “cryptogovernance”?
REDD+ relies on what we call “baseline narratives”, which are sometimes completely bizarre. It’s worth remembering that when you “offset” your emissions flying to Benidorm or wherever, no-one actually goes out and plants trees on your behalf. You’re effectively just donating money to a conservation project that claims to have prevented trees from being cut down. And it's super difficult, perhaps impossible, to ever really know if those trees being protected were ever in any actual danger of being cut down. Or whether the trees still exist, or if they’re now just someone’s hardwood decking when you donate your money. Or whether your donation is just going to some cowboy in Indonesia who claims to own a forest, but actually it’s just a golf course and he lives in Benidorm. So this is an area rife with corruption. Multi-billion euro VAT frauds were committed using offsets. And there’s so many of these REDD+ style forests, because people were promised a booming carbon economy. But the market for these credits never materialized. That’s for many reasons, but mainly because people rightly didn’t trust them. So then this magical technology pops up around the same time as REDD+, known as “blockchain.” And this promises to be a “trustless” technology. You can’t trust these carbon cowboys, and corrupt governments in these banana republics, but you can trust these nice folks in Silicon Valley who upload entries on an immutable, secure, shared electronic database, can’t you? And this tech enables the local people who presumably live in the forests and plant the trees to get paid for doing it, rather than all the cash going to horrible middlemen. Sellers are able to connect these carbon offsets to cryptocurrencies, so you can dodge the tax man, make micro-purchases, and avoid the exchange fees. And this can all be automated with what they call “smart contracts.” So theoretically if a satellite spots that the forest you’re paying to protect is actually a golf course, the funds can be withheld. No untrustworthy poor people trying to pull a fast one. All sounds great right?
In the 2019 article, you and your co-authors identified four typical faults of the blockchain-inspired crypto-fixes in this field. Could you quickly walk us through them and provide some examples of each, perhaps, also with existing projects? Would you add any more faults and revise the ones that you identified initially now that it’s been two years since the article came out?
It's not great though. It’s actually far worse than what we had before. There were these fundamental problems with REDD+ projects that blockchain people claim to be fixing, but actually they’re just creating new problems or even making the original problems worse. So these are: leakage, additionality, permanence, and measurement. Leakage refers to the fact that while deforestation might be avoided in one place, the root causes of deforestation aren’t tackled, so the problem is just moved to another area of forest or a different country. Additionality refers to the impossibility of predicting what might have happened in the absence of the REDD+ project. Permanence refers to the fact that carbon stored in trees is only temporarily stored. All trees eventually die and release the carbon back to the atmosphere. And measurement refers to the fact that accurately measuring the amount of carbon stored in forests and forest soils is extremely complex — and prone to significant errors.
These problems have always beset climate offset projects. And these cryptocarbon initiatives have not only failed to overcome them, they actually make it worse. Because of the “garbage in—garbage out” dilemma, the data that’s understood as infallible on a blockchain is just as trustworthy/untrustworthy as data stored on any other database, and its usually all highly flawed, designed to max the profits of the seller. Communities are rewarded in a cryptocurrency, which is effectively worthless to them. They can’t normally spend it in shops or convert it to anything more useful. And when they can spend it, these tokens are programmed so they can only be spent on things the donor wants it to be spent on – what I call “surveillance philanthropy.” And a lot of these cryptocarbon projects rely on Proof of Work blockchains, like Ethereum. These blockchains have a combined carbon footprint equivalent to medium-sized countries, emitting around 150Mt CO2 every year. How is that a climate fix?
You have also recently written, quite persuasively, about the ongoing “crypto-colonialism,” whereby the blockchain technology is enabling new forms of resource appropriation from the Global South. Disturbingly, even if not surprisingly, much of this is justified under the banner of “sustainable development.” Could you tell us a little bit about what exactly is meant by “crypto-colonialism” and also about the history of the concept, which predates crypto currencies? How does it relate to the much popular notion of “disaster capitalism?”
Michael Herzfeld used the term “crypto-colonialism” originally to make sense of the clandestine nature of geopolitical impositions that used debt and asymmetric trade relationships to maintain colonial ties. I use it in a different way, to show how blockchain and cryptocurrency experiments are being imposed in places suffering from the scars of past colonial invasions. And yeah, sustainable development is often used to legitimize these projects. But crypto developers are not necessarily drawn to poor, marginalized parts of the Global South because they want to fix things or the local environment. Poverty, oppression, and corruption are the ideal conditions for crypto entrepreneurs to extract resources, find new punters and perform real-world tests.
Like Naomi Klein’s argument around disaster capitalism, these tech bros are seeking out populations suffering from climate disasters, debt, and war, the more scarred from past colonial abuse the better, to experiment and incubate new crypto ideas.
You cite some very interesting examples from Indonesia and Zimbabwe to show how blockchain technology enables new forms of “green grabbing.” Could you explain to us what this is and how exactly the blockchain is implicated in this process, using those two – and any other – countries as examples?
I’m not sure how many of the projects I mentioned in the paper are still going. I’m sure many of them have taken money during early token sales and they’ve just done a runner, screwing over the locals. We know in Zimbabwe that locals haven’t received anything for giving up their land for these projects. The same in Indonesia. When I last went there, the local offices of these conservation areas had no idea how or why cryptocurrencies were being used by people in the US to sell bits of their forest from under them. They certainly weren’t receiving a cut. Many of them hadn’t even heard of cryptocurrency or blockchain. But since I wrote that paper more and more of these sorts of blockchain-based projects have sprung up. The people behind Cardano, which is currently one of the biggest cryptocurrencies, have recently set up this platform called Veritree. These guys suck. I’ve written a lot about Cardano and what they’re imposing on people in war-torn Ethiopia and elsewhere. I predict these carbon projects won’t end well if Cardano is involved.
You show how in several of the blockchain-based carbon offsetting projects there’s actually no impact whatsoever on local communities, with the sale of private credits benefiting mostly investors overseas. Could you explain how this works and why no benefits actually accrue to the communities that are meant to be helped by these supposedly well-meaning crypto-initiatives? How come the financiers in the Global North are the ones to cash out – an ultimate irony given that the crypto-currencies were supposed to help contain and limit their power?
Mainly because it’s really hard in Europe or the US to send money to poor countries without going through the KYC/AML hoops that intermediaries like PayPal and Western Union help with. In the UK I can link my crypto wallet to my PayPal or credit card. I can convert my Tree Coins to Fish Coins and back to pounds sterling no problem. You can’t do that so easily in Peru or Zimbabwe. So this is all useless to them. These forest communities can’t do anything with their Tree Coins. And these carbon credits were all produced years ago. When you buy these Tokens/Credits today, the project just takes your money and pays back their investors and directors. It’s taking "real" money from Peter to pay Paul, while giving useless crypto tokens to Bill, who can’t spend them on anything. And then an electronic certificate goes to Peter that suggests some trees existed once upon a time in the past. That’s pretty much it. That’s the business model.
You have explored the potential of the blockchain technology for the degrowth agenda, finding that, while potentially useful, they nonetheless present advocates of degrowth with a number of dilemmas to ponder. What are those dilemmas and why some care needs to be exercised? What needs to change for blockchain technologies to be useful to the degrowth agenda?
The sole purpose of a blockchain is to replace the need to trust someone. And without exception, every attempt to use a blockchain for something has resulted in the creation of a platform that would work better without a blockchain. Using a conventional shared database for example. But we’re seeing some experimentation with blockchain anyway for things like local energy micro-grids and community currencies. They’re being used by indigenous groups to assert customary land claims. The technology potentially opens doors to new possibilities. You may have heard this quote, from Zizek or Mark Fischer, “it’s easier to imagine the end of the world, than the end of capitalism.” Some of these blockchain projects are helping communities get over this neoliberal crises of imagination. But, degrowthers and anyone else interested in building a sustainable post-capitalist future must be mindful that blockchain projects exist because their users do not trust their institutions or even each other. It was born from game theory. Proof of Work, which is the consensus protocol that secures a lot of these blockchains, depends on John Nash’s "Fuck You Buddy" idea. This is the idea that everyone using a network is acting purely towards their own self-interest. And that privileging of the sovereign individual brings about what Hayek and others refer to as ‘spontaneous order’ – peace through suspicion and competition. Ivan Illich, a prominent degrowther back in the 1970s, defined conviviality as “individual freedom realised in personal interdependence.” That’s the total opposite of "Fuck You Buddy". So the goal of degrowth projects then, should never be to use blockchain for degrowth. But perhaps they be open to technologies like blockchain, if a transition to degrowth requires them?
Blockchain technologies have now also been widely used in the development context and also in philanthropy. Having studied their deployment in multiple projects, you have warned about the rise of “surveillance philanthropy,” much of it enabled by the blockchain. Could you explain what this is and how it’s transforming power relations between donors and aid recipients? What are some of the main tradeoffs and downsides of relying on crypto-infrastructures in this field?
Charities are in a pickle right now. Because of Covid, in the UK, the US, and elsewhere charities are going bust because they can’t bring in money. Sporting events and charity shops have been closed. People and corporations aren’t donating like they were, because they’re scared an economic downturn’s coming. And this is all happening when crypto is going to the moon, so to speak. A lot of bitcoin early adopters for example, who accrued hundreds or even thousands of bitcoin with very little effort back in 2010, 10 years later they’re now billionaires. So charities are looking to this new group of crypto rich as cash cows. And these are young people, who traditionally have never given money to charity regularly, like older people do. Charities are also in a pickle because people don’t trust them. High-profile abuse scandals in Haiti and DRC, massive salaries and annual bonuses for charity bosses, charities like WWF accused of being complicit in torture, rape, murder, in their conservation areas. So a lot of charities now are turning to blockchain as a way of improving their image, making themselves more transparent and trustworthy. But in using this tech they open themselves up to a massive power shift in the sector. With traditional project funding, donors usually just have to trust charities to send the funds to wherever it’s promised. The charity has the power. But with these ‘smart contract’ blockchains, donors can encode conditions into the giving platform. It works like this. Your everyday crypto enthusiast is rarely an expert in the complex realities of disaster relief and humanitarian aid projects. But with crypto giving, donors are able to remove flexibility from the experts while exerting maximum control over the charities’ actions.
AidChain, for example, perhaps the starkest example of “surveillance philanthropy,” has developed an AidCoin token, which they hope will be the preferred global method of charitable giving. Using a smart contract, donors can track and manage how funds are spent. AidChain incentivizes charities to pay their service providers in aidcoin in order to improve transparency in the tracking process. For a similar project called Promise Giving, the funds are pulled back to the donor automatically if the recipient charity doesn’t do exactly as they said they would. There’s blockchain projects that only issue funds to poor people with suitably high saliva cortisol levels – proving they’re sufficiently stressed. There’s projects that demand refugees have a crypto wallet linked to their biometric data and they have to have iris scans if they want to buy things at their local market. Not anything mind, only things the charity says they can have. So this is all giving maximum oversight and control to the donors, who are all probably crypto-bros in their parent’s basement with no idea. Meanwhile, the charities facing bankruptcy are having to roll with this new setup. Or go bust. In the paper I discuss many more examples of this sort of thing.