Digital Money and Tracking

I recently listened to an interview with Zeke Faux, who wrote Number Go Up. Then I read the book, which is a less-than-flattering book about the cryptocurrency community. This post is not about that book. Here’s a quote from Patrick McKenzie (who conducted the interview) which inspired this post:

One of the accomplishments of the Internet as a system, as an artifact, as a collection of industries was - there was a perception back in the day that the internet is a PVP zone. It’s the wild west. There are hackers everywhere. They’re going to take all your money if you ever show your face on the internet. And there would have been no e-commerce but for innovations like TLS encrypting the credit card when you send it over the wire, PayPal, et cetera. And the regulation - particularly the United States financial system like Regulation E, which says if you lose money, … “Don’t worry, even if the hackers grab your credit card, we will make you whole.”

Though it is safe to transact on the internet, it is safe to buy this thing from this bookstore named after a river in Brazil, it is safe to buy things from a firm that you’ve never transacted with. You don’t need a phone number on somebody’s website to do business with them. And that safe space that we created in this environment that was previously low trust is what allowed the internet economy to evolve. And substantially all of the economic value of the internet is downstream from those footholds of safety, in islands of safety in an ocean of uncertainty.

And if you say “No, we want there to be a separate bloody Hobbesian ocean where everyone is constantly on their guard all the time, where you can lose all of the money, where life savings vanish at the click of a button” - one, nobody should want to transact in that one when they still have the option of transacting in the other one, but two, it’s just a brutal society to create.

My second reaction to hearing this quote was, “this is obviously true for most people always and for me making most purchases.” It is incredible that we have created a monetary system that works as well as it does. Dollars are extremely convenient, in the sense that I can go to any website that sells things or walk into any store in the United States and many in other countries, present a card which tells them that I’m good for the money I’m promising them, and purchase goods and services using dollars. This is arguably due to private infrastructure which is dollar-agnostic, but dollars are dependable money for that infrastructure to traffic. Americans and American companies are always happy to trade whatever they have to trade for dollars, and I can buy the same amount of stuff with a dollar next week as I was able to buy this week (which becomes less and less true as you increase the timelines, but even on the scale of years, the stability is remarkable).

The thing that annoys me about the dollar is that all of the infrastructure which makes them convenient is also infrastructure which tracks everything I do. Companies which have that information will use it to target advertising at me which is intended to change my behavior. It irks me that I can’t buy a beer without Visa bundling up my spending habits into a profile they pass on to banks for the purpose of proposing credit cards to me which I would not have otherwise considered. It is difficult to buy anything online without entering a unique number tied to my identity which payment processors can use to bundle up what stuff I’m likely to buy and pass it to the companies which plaster web sites with ads. There’s also the issue that banks are willing and able to shut down my accounts whenever they want (which is blessedly rare), and federal and state govenments have the ability to ask banks to freeze funds with far less process than it would require to arrest me. Dollars in the bank are only nominally dollars I own. I’ve basically traded all of my money for a (very reliable) promise from a bank that I will get it back, but I don’t have the money anymore. I am theoretically one election or one emergency away from losing access to my money.

And yet, I get a lot of value out of these systems. There is some amount of money you could pay me to make me be ok with you knowing everything I’ve bought ever. There is some amount of money I would pay to gain the ability to pay for things basically instantly wherever I am if I didn’t already have that capability. It is extremely probable that the first amount of money is less than the second amount of money, and I am therefore coming out ahead by submitting myself to tracking. I get a lot of value out of internet sites which are offered to me at no immediate cost. There is some amount of money I would pay to keep those things and there is some amount of money I would accept to deal with ads that I will mostly be able to ignore anyway, and it is extremely likely that the second amount of money is less than the first amount of money, and so I am coming out ahead by using my extremely convenient payment method on the occasions that I actually want to buy something online.

My issue is that I was never really given a choice in this. Nobody made me use Visa cards as a payment method, but, come on, am I just going to never buy anything online? Even if I was willing to do that, I will make myself miserable if I force myself to walk around town paying my bills with cash. I think it’s technically possible to pay all of my bills by check, but then I’m spending money on stamps to mail them in and risking scammers who steal my mail and skim my bank account numbers, which will be really annoying even if the regulatory system ensures that I don’t actually lose money. Nobody made me apply for credit cards, and yet I, as a college student, applied for one anyway because I knew that I would most likely need a credit history to buy a house some day. I knew that every price I paid was three percent higher than it should be because credit card fees are accepted as a cost of business by vendors, and I knew if I didn’t get in on some system to get points back for spending, then I was losing that money.

This post has big “we live in a society” energy. I didn’t get a choice in what speed limits are on the roads either. I didn’t get to choose what schools I had available for myself as a child or how much microplastic would be in my water supply either. The payment system we have is not the worst compromise our society makes by a long shot, but for whatever reason it irks me.

And so I use cash to buy my beer. Is it less convenient than opening a tab? Yes. Am I throwing away money because all of the bars have inflated their prices under the assumption that they need to pay credit card exchange fees? Also yes. Am I risking losing all the money I’m carrying because there’s nobody to call if you lose your wallet that is holding cash? The yes just keeps happening. Do I consistently feel anxiety that everyone around me is exasperated with me because it takes me fifteen extra seconds to count change out instead of tapping a card. Absolutely. Have my friends stopped asking me to pay them back for things because they know I’ll give them cash instead of Venmo? I’m starting to suspect it. But I know that nobody bothers to track literal paper dollars, and it means that I can keep tabs on my spending by knowing how much money I have left in my wallet, and so I trade away convenience for my small act of rebellion.

This brings me to cryptocurrency. My first reaction to the McKenzie quote above was “actually, yes, sometimes I want to dip my toe into the Hobbesian bloodbath.” In particular, there is a cryptocurrency called Monero which is inconvenient to use, but there is no known way to track which accounts have sent money to which other accounts or how much they sent when. I use it to pay for services online, because it’s basically the only way to do that online without using a payment processor which does data analytics. To be more explicit, I like to have access to a selection of the more powerful recent AI models to help me with coding problems, and there’s a site where you can purchase the ability to send queries to a wide variety of models from a single online interface. This is far more cost-effective and convenient than paying for an account with every company that builds a model I might want to try out. Yes, I could do this with a credit card, but this appeals to my unusually strong desire to avoid tracking. I don’t think most people should do this. It’s incredibly easy to irreversably send money to the wrong place, the tax code makes it difficult to properly account for trading digital currency for things of value, and Monero in particular is rather slow to use because the cryptography which makes it anonymous also makes it require your wallet software to process every transaction sent by anyone before you can spend anything. But I’m glad it exists as an option for weird nerds like me who are willing to deal with the hassle, and I wish I had the option to use it more often. There exist services that don’t need to know who I am in order for them to serve me, and I’d rather not tell them who I am. I’d rather limit the circulation of information which can be used to annoy or defraud me.

However, I don’t want my life savings in the bloody Hobbesian ocean. I am still sympathetic to the anti-inflationary radical-self-ownership story of Bitcoin, for example, but I don’t think it should become widely adopted. It’s an energy and privacy nightmare that has delivered, not nothing, but little more than a neat coding experiment and the promise of a price driven up by more people wanting part of its relatively fixed supply over time. Bitcoin only really seems like a good idea to me as a hedge that ties up some of the money of a technically sophisticated person with significant risk tolerance. I think this reality will permanently send the real price down at some point. And hopefully at some point people switch to a coin that doesn’t use the energy-wasting nightmare proof-of-work algorithm used by Bitcoin. I like Monero, but I want to limit my exposure. The fact that the banking system makes it incredibly difficult to lose my life savings unless I personally choose to throw it away (and that the system provides methods for me to undo accidentally throwing my life savings at criminals) is a great feature of the modern financial system. I treat Monero basically like I treat cash. I don’t have much of it. If someone steals the cash I’m carrying or I give it to a scammer, then there’s nothing I can do about it later, so I make sure that I only ever have a little bit of it at a time. But that’s enough to buy beer on occasion. Or some coding help from a chatbot. And I might have a tiny cushion in the case of bad luck or tyrany. Maybe. If the internet is working. Seems pretty unlikely to be helpful to be honest.