… there’s no real difference. If it’s irrational at any point it is fundamentally irrational.

The answer depends on what a market is and what rationality/irrationality are. In trade terms a market is irrational if it departs persistently from its real valuation. If a market is defined solely as the place of exchange then it can be continuously irrational provided there is enough liquidity being moved into it. The rational markets hypothesis presumes that the bill falls due at some point and that temporary flights of fancy and high or low spirits will eventually self-correct. Sociologists understand that fundamentally the market is a technical and cultural structure and therefore there is not necessarily a true valuation to self correct to.

One market might evolve into another type with the same formal attributes but different fundamentals. This appears to be happening with Bitcoin. Cryptocurrencies have gone through several stages and are now entering a new one. The first was the initial technolibertarian stage when Bitcoin was decenteralised, and mainly used by people with an ideological or early adopter interest. At this point it was not worth very much. Its technical overhead was low and bitcoin could be mined inexpensively. The second stage was its first use case when it was adopted by the Silk Road cryptomarket. That gave bitcoin its first reliable influx of new users and cash. It also primed the third stage, the bitcoin gold rush. Investors set up mining rigs to squeeze every last drop from the mining process, driving up the price and making it harder to use at the same time. We are now entering a new monopoly digital asset stage with Microstrategy and then Tesla’s $billion buys of the bitcoin.

This stage is one of insititutionalisation and respectablisation. Institutional investors like Tesla are answerable to shareholders and other stakeholders. There is now an incentive to manage bitcoin as a respectable asset, to clean out miscreants, and to shape financial regulation in a way that benefits these kinds of investors and protects their reputations. This may be the stage when bitcoin takes on its final boss form as a regulated financial asset which underpins the internal economies of major companies. To return to the starting point: we should not look for rationality, in the sense of behaviour abstracted from its context. We should look for reasonability and justifiability in how actors make financial and investment decisions. It is certainly easier to find.

Feb 10, 2021

We are well into the era of advanced, generation 2.0 types of malware. Adware, ransomware, cryptocurrency miners and others use social engineering and complex value chains with multiple functions being coordinated through them. Threats to industrial control systems, other backbone processes, and threats that use the internet of things remove the human from the victim loop. Malware is created through bricolage, the assembly of an object from mismatched things.

In September 2010, a new computer worm was isolated which appeared to attack industrial control systems produced by Siemens, the German industrial combine. It was unusual in that it targeted a very specific set of systems, those used to control gas centrifuges, devices for separating out nuclear material and enriching uranium; and its mode of spread, which used USB thumb drives. Though not unique that suggests a specific kind of target and aim. It was clearly designed to infiltrate secure systems that are airgapped. It was designed by US and Israel military intelligence to attack the Iranian nuclear programme. It had some effect, though limited and probably not commensurate with the expenditure of time and one shot security holes employed. The process of development used a patchwork of existing vulnerabilities. It used shared vulnerabilities identified and developed by specialised groups such as the Equation group within the NSA.  

Stuxnent is an example of a nonscalar threat. By design the worm does little outwith its target environment other than spread itself. A significant feature of modern cyber threats is how they work at scale. Stemming from a thoughtful email from one of my students about the imagery of crime in a Europol report, I noticed that the imagery used for serious crimes is often depersonalised and draws on the language of viral, industrial capitalism.  It characterises serious criminal activity in this large scale, industrialised, highly productive terms.

They often crimes that are low severity individually and hence tend to be unreported but have an impact at scale which is what makes them hard to prosecute. This focus on a scalar threat is a recurring one in many documents now such as Mills, Skodbo and Blyth (2013) which explicitly tackles this. To me we are facing two challenges: first, tools and exploitation modes are designed to scale up and down depending on opportunity. Second, distributed delivery means interventions tend to end up punching fog. The scalar affordances of the technology and the labour structure allow for effective and resilient threat industries such as ransomware to emerge and make them difficult to guard against. The ability to scale down as well as scale up is significant for the organised crime group’s degree of resilience to disruption.

Mills H, Skodbo S and Blyth P (2013) Understanding organised crime: estimating the scale and the social and economic costs. London: Home Office.

Feb 9, 2021