Bitcoin Is the New Birkin Bag
Ten years after Bitcoin's launch, the coin’s scarcity has generated a market that's more luxurious than libertarian.
This article originally appeared on GARAGE Magazine.
In 2012, a single Bitcoin was worth less than $10. On New Year’s Day 2018, it was worth $13,000. When its value dipped below $8,000 soon after, some suggested that the cryptocurrency movement was a temporary fad: like all trends, it was meeting its end. But the price is back up again, to over $11,000. Despite the fact that there’s no such thing as a physical Bitcoin, the digital currency has, over the last few years, become a conspicuous display of wealth and financial prescience—when it’s on the up. The currency is our newest symbol of luxury, a badge of the elite—at least on paper, as it were, and at least for the moment.
Cryptocurrency’s general gains in dollar value have also gained it cultural capital, and its unpredictable plunges have made it infamous. Rappers name-drop Bitcoin in songs, Paris Hilton promotes obscure virtual coins, and young visual artists are incorporating the technology into artwork. “I see Bitcoin as an exotic financial asset that rich people are using to make more money, which at times is similar to art,” says New Mexico–based artist Sterling Crispin. You just have to know when to buy and when to sell.
In 2012, Crispin came up with an idea for a sculpture about the apocalypse—which at the time seemed nigh: The end of the Mayan calendar threatened universal extinction. The technological singularity, when humans would mesh with robots and we would upload our souls to the cloud, threatened the end of our species as we know it. And the rise of Bitcoin threatened financial, political, and social chaos. Crispin titled the sculpture Self-Contained Investment Module and Contingency Package. Inside its cubic, steel framework is a post-apocalyptic survival kit composed of an emergency radio, heirloom seeds, a filtration water bottle, and, most importantly, Bitcoin mining hardware.
When Crispin completed the sculpture in 2015, the price of a Bitcoin was $220. “If I had dedicated [the hardware] to mining for the three years I had it, and then didn’t panic and sell when the price hit $300, I would probably be a multi-billionaire right now,” Crispin says. He’s transformed this regret into a kind of perverse creative delight. “I love the idea that as a material within a sculpture, the cryptocurrency might become more valuable than the sculpture itself,” he says.
Crispin intended the sculpture to be tongue-in-cheek; like the rest of his work, it’s critical of technological utopianism. Yet it demonstrates how cryptocurrency has evolved from a financial tool into something more akin to a Louis Vuitton suitcase, a Cartier watch, or a Jeff Koons sculpture. “People are not only buying Bitcoin in order to make money; they’re buying Bitcoin to be the kind of person who holds Bitcoin,” explains Jay Owens, a futurist and research director at the London firm Pulsar. “It’s functioning as a brand name.”
“Hardcore Bitcoin people think there’s a new aristocracy. They’re super convinced that they’re the new .01 percent, and there’s a decent chance that they’re right.”
Like art objects or a clothing line, digital currencies come with their own particular aesthetics that make them desirable. If the old displays of wealth were gold, fine art, and opulent fashion, the latest might be a number in a digital wallet or the logo of your primary coin holding. Efforts have been made to translate cryptocurrencies into the material world—including extravagant, iridescent metal coins and high-design USB sticks to hold the numbers—but none of these effigies have stuck.
“Not having a corporeal manifestation is totally not an obstacle to it being a status symbol,” says Eric Meltzer, who became a partner at the Chinese cryptocurrency investment fund INBlockchain in 2017. “Hardcore Bitcoin people think there’s a new aristocracy. They’re super convinced that they’re the new .01 percent, and there’s a decent chance that they’re right.”
Bitcoin was launched in 2008 by a figure named Satoshi Nakamoto, whose actual identity (or identities) remains unknown. Years passed before the currency received much mainstream attention. In 2012—the year Crispin began his sculpture—early adopters formed the Bitcoin Foundation, the closest thing the currency has to an official governing body, led by Gavin Andresen, whom Nakamoto had made lead developer of the Bitcoin project shortly before he vanished from the internet in 2010.
“Narrative is super important when it comes to crypto,” says Berlin-based artist Simon Denny, whose work has responded to the Bitcoin boom. The currency’s mysterious origin story is a core part of its appeal; the impenetrable anonymity around Nakamoto reinforces the anonymous nature of the currency itself. Launched just after the financial crisis, Bitcoin has, as Denny puts it, “a wider resonance with a lot of other centralized distrust stories that were emergent at that point,” including news about ineffective banks, corrupt politics, and biased media. Its popularization is in part a symptom of the same disillusion that culminated in the Brexit vote and the election of Donald Trump.
Decentralization is at the heart of cryptocurrency. To understand how Bitcoin works—in a loose visual metaphor—picture an enormous treasure chest buried in the ground. In the chest are 21 million slips of paper, each with its own unique number. These are “coins.” Nakamoto unlocked the first 50 Bitcoin in January 2009, releasing them from the treasure chest. As users spend and receive the released currency, a decentralized computer network ensures the accuracy of every Bitcoin transaction. Using powerful hardware, individuals known as miners (who are estimated to number from tens to hundreds of thousands) work to verify the transactions. They perform the functions of banks, except without any centralized authority, eliminating the danger of some forms of corruption. Miners are compensated in newly minted Bitcoin, hence their name: their work brings more Bitcoin into circulation.
Anyone can become a miner by plugging in the right hardware, but it’s expensive and time-consuming to participate. As more Bitcoin is mined, the verification process becomes more difficult and requires more computing power, meaning miners must band together into pools to share the rewards. Eventually, the maximum of 21 million Bitcoin will be mined—a limit imposed by Nakamoto, the creator. There are currently around 16.8 million in circulation, though many have been lost or forgotten by their miners; it’s easier to misplace a number than an ingot of gold. The currency’s market capitalization, as of January 2018, is around $290 billion.
Through secondary-market exchanges, any user can buy and sell the coins, split up into fractions of any size. “It’s not like the Birkin bag, where you have to know someone who knows someone to get on the waiting list,” says Alice Lloyd George, a principal at the New York City investment firm RRE Ventures, which invests in start-ups that build on the technology. “You can buy or gift a fraction of cryptocurrency.”
There are two benefits to this system. The first is that, unlike anything else on the internet (an animated GIF file, for example), the “coins” are in limited supply and nonreplicable, meaning they can accrue value in the same way as paintings by a famous artist. The second is that the encrypted number of each “coin” is trackable, even as it remains anonymous, so every Bitcoin deal is public knowledge. The database of every transaction, built by the miners, is called the blockchain. It’s like a super-secure Wikipedia, presenting a user-generated record of everything that’s happened in Bitcoin’s history, even if the coin holders aren’t named.
Bitcoin is to cryptocurrency as Supreme is to streetwear: it’s the biggest and best-known currency built on blockchain technology, but it’s far from the only one. Ethereum, created in 2014 by the young Russian-Canadian programmer Vitalik Buterin, improves on some of Bitcoin’s technology and adds the ability to program on top of it, using its blockchain as infrastructure to set immutable contracts and create records without third-party verification. Litecoin, launched by Charlie Lee in 2011, is often called the silver to Bitcoin’s gold, since it has a lower price and a higher maximum of coins, at 84 million. There is also a proliferation of smaller coins, such as Ripple, Monero, Zcash, Sumokoin, or more outlandish “alt-coins” like PornCoin (for the adult-film industry) and TrumpCoin (devoted to making America great again). These are sold off in “initial coin offerings” (ICOs), much like the initial public offering of a company’s stock.
Which coin you acquire, like your fashion choices, says something about your personality. “There’s a certain class of dudes who want to talk about this obscure ICO, this coin that you’ve never heard of,” says Aaron Lammer, a founder of the podcast Longform and co-creator of Coin Talk, a new podcast on cryptocurrency. Investing in obscure coins is driven partly by the cool factor, partly by the potential for huge profits if you pick the right one. The price of the coins is more or less linked to the visibility of their brands: the more people who jump into the market, the more valuable they become. No other justification is needed. Lammer is an active participant in the cryptocurrency scene. The appeal, he says, is “engaging in this proto-future pursuit and also just holding cold value.”
Crypto-billionaires are becoming the new Medicis, funding a wave of art, culture, and technology efforts commissioned in their own image.
As their dollar value rises, cryptocurrencies have opened up a profitable form of investment to a demographic for whom quick, high returns are otherwise out of reach. In the United States, an accredited investor must show an income of more than $200,000 or a net worth of more than $1 million to put money in a hedge fund or start-up venture capital fund. Anyone can invest any amount of money in cryptocurrency in the hope of instant riches. For those who have already made their fortunes, the question of how to spend all that unorthodox money remains.
Crypto-billionaires are becoming the new Medicis, funding a wave of art, culture, and technology efforts commissioned in their own image. The new digital wealth is already reshaping the traditional domains of the 1 percent—even philanthropy. In late 2017, an anonymous cryptocurrency holder launched Pineapple Fund, devoted to giving away $86 million worth of Bitcoin to charities. Its slogan suggests the scope of the crypto boom: “Once you have enough money, money doesn’t matter.” The fund’s creator notes that the $86 million represents most, but not all, of their hoard.
If you don’t want to give it away, the next best option might be to buy things that reinforce your status among the new digital elite: crypto-bling. In April 2015, Harm van den Dorpel became the first artist to sell a work to a museum for Bitcoin: a screensaver that was bought by the Museum of Applied Arts/Contemporary Art, in Vienna. “The deeper impulse was to make people aware that files, or any other digital asset, are material as well,” van den Dorpel says. “The cliché binary opposition between physical and virtual really does not explain anything anymore.” The artist now runs his own online gallery, Left Gallery, selling digital art objects for Bitcoin. The commodification of digital art using blockchain technology, which recreates the scarcity of physical objects online, is “inevitable,” van den Dorpel says.
Gallerists are adapting to the new framework as well. Acquiring digital art on the blockchain isn’t much different from buying a painting, but what you take home is made of numbers and files rather than wood and canvas. “When the sale happens, the token exchange happens, which transfers ownership of the digital hash object to the new owner,” explains Kelani Nichole, owner of Brooklyn’s Transfer Gallery, which is known for its support of internet-native artists. Unlike the largely unregulated art market, with its veiled incentives and backroom deals, the crypto version will be transparent. “All editions of digital work can always be tracked on this public ledger,” Nichole says. “Any instance of a work online can also be tracked to its original node of provenance.”
Provenance is vital to an artwork’s value: witness the confusion that accompanied the November 2017 sale of a Leonardo da Vinci painting at Christie’s for nearly $500 million, despite some doubt that it was from the master’s hand. A future is possible in which every object that comes out of an artist’s studio is trackable in all its iterations via blockchain. This would take the guesswork out of the secondary market, creating a permanent record of all ownership changes and sale prices.
Cryptocurrencies can also enable an artwork to create a market of its own. In 2015 the artist Sarah Meyohas launched her own cryptocurrency, called BitchCoin. One BitchCoin was equal to 25 square inches of one of her photographic prints. Whatever the value of the work in US dollars, the BitchCoin-to-artwork rate would always remain the same—an incentive for admirers of Meyohas’s work to invest in the currency early. Digital currencies are always risky, however: BitchCoin’s website no longer processes transactions.
Cryptocurrency is not a neutral medium. As part of an artistic practice, as an investment, or just as a popular commodity, Bitcoin comes with unexpected costs. The most immediate is its electricity usage. Worldwide, the currency is said to consume as much power as some small countries, largely driven by mining hardware. The artist Man Bartlett bought a small fraction of a Bitcoin when the price was under $1,000. He forgot about it, then realized how much its value had increased—and found that he didn’t want to hold onto it anyway. “I sold it because I didn’t want to participate in an ecosystem that is increasingly causing great harm to the environment,” he says.
Like Arctic oil reserves or the pelt of an endangered animal, Bitcoin might be rare and valuable but obtaining it isn’t necessarily worth the cost, whether in environmental terms or in the context of the online economy. Luxury is inextricable from an obsession with scarcity. For a brief moment in the 1990s and 2000s, the internet developed on the premise that scarcity could be vanquished forever, that we could all share digital resources without diminishing them. The blockchain has restored the possibility of scarcity, perhaps for the worse.
Blockchain technology was supposed to create a new, decentralized, anarchic order. Yet the cryptocurrency boom has, ironically, recreated the crushing inequalities of capitalism: just 4 percent of its holders own 95 percent of the Bitcoin in circulation. The commodification of cryptocurrencies as luxury goods occludes their revolutionary capacity to place money outside of government control. More pressingly, it brings up the question of what truly amounts to a luxury in the 21st century. As Sterling Crispin asks, “What’s Bitcoin, or anything, good for if you don’t have clean drinking water?”