Exploring Fictitious Capital

Tagcoins, Chikns, and the Future of Value

Bored Apes, Hashtags, Mutant Chickens: Increasingly, speculative assets woven from strands of data have tangible value in the attention economy.

I met Ryze Conley, an enthusiastic, amiable crypto entrepreneur in Tulum last year. A few months ago, he reached out to me on Facebook. He was working on an innovative new blockchain-based cryptocurrency project, Tagcoin. As an admirer of my work, he wanted me to explore the project, interview the founder and write something about it. In return, he would pay me for my piece. I was reluctant at first, but he persisted.

I told him that I generally don’t write sponsored articles for marketing purposes. Finally I relented. I agreed to do it as long as I maintained control over the copy. I genuinely liked Conley’s vibe and his enthusiasm won me over. We agreed on terms.

I resisted because I suspected Tagcoin was a scam of some kind — yet another complex mechanism for extracting value that my non-mathematical mind would struggle to understand. In the end, after reviewing Tagcoin and speaking to its founder, I don’t think it is more of a scam than most other well-known and respected crypto projects. It may even be less of one. In fact, I enjoyed delving into this operation and would be happy to do the same with other projects in the future. It gave me a lot to reflect upon, which I will try to unpack in what follows.

The tenuous relationship between money-creation and actual value remained hidden from most people until the 2008 financial crisis. At that point, the mass populace learned that money was simply created out of nothing by those who control the money supply, depending on the financial elite’s needs and priorities. Around that time, Bitcoin was released.

The first or “genesis” block of Bitcoin encoded an article about how the English government intervened to save “too big to fail” banks with massive injections of capital. In other words, Bitcoin was intentionally designed to disrupt the control of money-creation maintained by governments and Central Banks by establishing a decentralized system for storing and exchanging value with a strictly limited supply (only 21 million Bitcoins can ever be minted). If it displaces the US dollar as the global reserve currency, Bitcoin could restore something like the Gold Standard, limiting the funds available for the US and other governments to speculate on wars or ambitious social programs.

“Web2.0” transformed our legacy systems of media and communications. “Web3.0” is meant to bring about a similar metamorphosis for our economic and financial systems. In fact, the jury is still out on whether Web2.0’s impact on society is, as a whole, positive or not. There are many good reasons to be concerned about the probable impact of Web3.0 as it “decentralizes” and “dis-intermediates” money-creation. Dissenting views include this essay by engineer Molly White and this one by Professor George Galloway, plus The Crypto Syllabus site maintained by Leftist academic Evgeny Morozov. David Golumbia’s short book, The Politics of Bitcoin: Software as Right Wing Extremism, is another useful reference.

There is no doubt that cryptocurrencies, including Bitcoin and Ethereum, vastly enriched a small number of early adaptors, creating a new wealth class. There are now thousands of cryptocurrencies on the market that seek to build upon or replicate the incredible success of those initial projects. Recently, we have also seen the skyrocketing success of Nonfungible Tokens (NFTs), which function as certificates of digital ownership on the blockchain. The regulatory laws for handling this innovative — or speculative — sector of the economy are still evolving, with huge differences from country to country and even state to state.

I admit that I continue to struggle to accept Bitcoin as a permanent part of the financial landscape rather than something like a pyramid or Ponzi scheme that will inevitably collapse. Despite my suspicions, I expect it will continue to increase in price, despite extreme volatility, for a number of years. There is no underlying value to Bitcoin and it carries a tremendous ecological cost. But the belief in it and the marketing behind it are very powerful at this point.

One of the selling points of Tagcoin is that it doesn’t require “Proof of Work” mining, which is energy intensive. The ingenious concept of Tagcoin is to link its trade-able currency, Tagcoin, to hashtags. Hashtags are used everyday on a massive scale across social media platforms like Twitter, Facebook, and Instagram. As part of my payment for writing this piece, I was given a hashtag, #shamanism, that now costs $600 in the cryptocurrency created by Binance, a well-known exchange. Every time #shamanism is used across social media, I make a tiny profit in tagcoin, which can be converted into a cryptocurrency such as Ethereum and then into fiat. Essentially, hashtags are utilized instead of mathematical proofs as the basis for tagcoin “mining.”

Around the same time I was hired to write this article, I learned about another money-generating project in the crypto space that seems representative of the industry. This is a site called Chickn.farm, where people buy virtual chickens that they feed regularly and which produce eggs. The eggs are also assets in the in-game currency. A friend in Oregon had discovered the project early on and bought a chicken for $100 worth of a cryptocurrency called Avalanche, which is apparently similar to Ethereum but with much lower fees for transactions. As more people discovered Chikn, the cost of the digital chickens skyrocketed to a minimum of $2,500 per chicken, depending on weight and other features. My friend makes about $20 per day on the eggs generated by his chicken — an added income, for as long as it lasts, of over $7,000 per year.

Chikns for sale. Will lay digital eggs for feed.

From my perspective, there isn’t a huge difference between Chikn and Tagcoin, except that Tagcoin is based on the daily generation of hashtags while Chikn has created its own in-game currency that can be converted back into monetary value. Both are “magic Internet machines” that produce financial value de-linked from the production of tangible assets, or the sale of actual goods and services. Ultimately, I suppose, what makes them profitable is the attention focused on them, and how they are marketed. There is exploding interest in such speculative assets, which can be called, borrowing a term from Karl Marx, forms of “fictitious capital.” Both projects also create artificial scarcity to increase the market value of their assets: There are 10,000 Chikn NFTs available for sale or trade, and a maximum of 100,000 hashtags, set to go up in value over time.

The founder of Tagcoin, Vishal Gupta, developed the underlying technology and wrote the White Paper. He has a longstanding interest in Bitcoin and other cryptocurrencies and was a part of earlier ventures in the space. This included co-founding Bitcoin Alliance India. Living in Dubai, he created Tagcoin because of his interest in the underlying technology as well as desire for financial reward. In a way that is typical of many Americans in the blockchain space, Conley promotes Tagcoin in more grandiose terms — as an environmentally harmless alternative to Bitcoin that the United Nations might adopt to support its Sustainable Development Goals. Gupta is more circumspect, which I appreciated.

Gupta doesn’t see any particular social utility in Tagcoin and doesn’t think the project will solve the world’s problems. In fact, he doesn’t think the world’s problems can be solved, pointing to his home country of India. “India has 1.4 billion people who want the amenities you have in America. They want a refrigerator and a car.” On a systems level, we know that if the huge populations of India and China acquire these items, climate change and other ecological disasters will intensify. But, Vishal asks, how can we deny those people the right to such consumer goods which we have long taken for granted? Hence, our doom is sealed, whatever we do.

Vishal believes we have reached a point in the evolution of industrial society (at least in the developed world) where productive labor is no longer available for everyone. “A factory that used to employ 500 workers now employs one, because of automation.” Therefore, the speculative economies of NFTs and cryptocurrencies, based on newly invented forms of “fictitious capital” (digital chickens, Bored Apes, hashtags) will provide new forms of revenue for the formerly middle-class “precariat,” which will swell in numbers as more lose their jobs to increasing automation, self-driving vehicles, and AI. We are already seeing video games like Axle Infinity and Splinterland provide livelihoods to poor children in countries like Venezuela or the Philippines (which we might see not as liberation but as a new way of exploiting child labor, proposes Alison McDowell). This trend seems likely to increase.

My original art work, Mutant Chicken Yacht Club, #MCYC, is available as an NFT for an extraordinary amount of ETH. DM me for details.

The Future of Value

I love the enthusiasm and creativity in the NFT and crypto world, but I feel uneasy about its impact and, when you peel away the boosterism, the often cynical or at least fatalistic ideology behind it. What I have proposed in past works is that we need a systemic redesign of the global economic system to prevent ecological collapse that is likely to bring about our extinction in a short span of time. I could go over the mountains of evidence that we only have a few years left before it really is too late, but I have done that many times already (here are some resources).

Most crypto projects have, as Golumbia noted, an intrinsic Libertarian bias. They combine individual wealth-creation with tax avoidance. If you get in early on a successful token or NFT drop, you might make exponential rewards that are otherwise inaccessible. In that sense, crypto is the cutting edge of Capitalism, and keeps its underlying mythology (that infinite wealth can be attained by the motivated individual, even if they start out poor and disadvantaged - the Horatio Alger dream) alive. This essential Capitalist myth has been threatened by the growing realization that our society has become an oligarchy, where wealth and influence are preserved for the elite, often through family lines.

Crypto speculation has temporarily re-energized late-stage Capitalism, just as hydrofracking and extraction of fossil fuels from shale and Tar Sands has temporarily obscured the inescapable approach of Peak Oil.

I find myself increasingly tempted by the prospect of accepting that it is, indeed, too late to salvage this civilization, or humanity, and I may as well seek to maximize personal wealth and position in the general collapse of everything, which might take a few years or a few decades or slightly longer. But in fact, when I consider actually adopting this belief – this short-term approach – I feel a great gnawing sense of grief, sorrow, futility. I feel I would be shirking an innate responsibility for my fellow humans as well as future generations.

Of course, many people pursue personal wealth with the argument that, once they amass it, they can give some of it away via philanthropy or charity. Personally, most forms of charity and philanthropy also make me uneasy. They seem efforts to assuage a guilty conscience, or PR, or they attempt to patch up aspects of a destructive system rather than addressing the system’s core functionality, which is what I believe we need to do.

But how do we do that?

Interestingly, the word “value” has both an ethical and economic meaning. I suspect we need a transformation in how we understand both sides of this coin. When enough of us share this new understanding, perhaps we can find a way to apply the amazing tools now available to us to build a new social, technical and economic infrastructure for a larger scale change – a redesign of the operating system for human society. While this may seem absurdly idealistic, we are experiencing massive changes taking place with extraordinary speed, due to our interconnectivity and increasing capacity to iterate quickly.

In an upcoming newsletter, I will explore our options.

My new book, Afterlife: Is There Consciousness After Death?, is now available as an EPUB here, and also on Amazon for Kindle here. There will be a paperback version available on Amazon in a few days. The EPUB version is free for paid subscribers.