This smells of sophistry. While doing an admirable job of delineating the desirable characteristics of sound money, it is, at best, misguided to advocate for Bitcoin. Do you expect people to jump on board with a digital, not physical, currency created by a mysteriously anonymous figure, a digital construct that has miraculously been left unscathed by the many assaults on other digital currencies, that is mentioned off-handedly by government officials as a potential future vehicle for them, and that relies on the magical blockchain encryption that data indicates has already been compromised? It is a shame to have laid out such a wonderful framework for sound money, only to reach such a flawed conclusion.
As economist Richard Werner describes, ordinary credit, created by banks, is perfectly capable of propelling economic growth. What matters is how the money is allocated—asset purchases, consumption credit, or business investment.
The existence of credit renders a currency's nominal immutability moot.
The implicit assumption in the bitcoinist thesis is that hard-capped money, in other words, radical monetary austerity, is somehow more beneficial for the economy than the ability to fund multiple business ventures with the same dollar.
Bitcoin is wasteful to mine and ultimately could simply disappear one day if someone figures out a way to reverse the hash function it depends on.
We should go back to using pure silver by WEIGHT (never "dollars" or "rubles" or anything but grams or ounces).
Banks should either charge a fee for storage of physical silver, or require the depositor to participate in lending risk in return for interest.
Payments via promises of silver (credit cards, checks) should simply be an instruction for two banks to change ownership of a certain amount of silver metal.
Or perhaps the real role for the blockchain is as a public record of that change in ownership, with unique serial numbers on every silver coin or weight.
Silver is wasteful to mine. Its use as money is hampered by its use as an industrial metal. It is unwieldy to complete large settlements in silver by weight. Even recording ownership of silver on a blockchain requires enforcement for final settlement, because the original owner can refuse physical settlement. I don't see how any of your arguments support the use of silver as base money.
A billion-dollar final settlement of silver requires the transfer of over 2 million pounds of silver. I consider this unwieldy, but perhaps you hire better movers than I do.
Paper is not final settlement. Many clients aren't satisfied with paper claims. Physical gold deliveries over the past two years is evidence of that. Suppose clients are OK with paper claims - will banks want to move 2 million pounds of silver when a large client wants to access or move their silver? And if you're choosing settlement in paper (or a "blockchain" system), why should silver be the underlying asset? Banks don't want to or can't store millions tons of silver. Gold, platinum, SP500 shares, or even bitcoin would be more convenient and less expensive for banks. Listen I think silver is great. It's probably under priced. But I don't understand your arguments for it being a settlement money.
The issue with crypto needing the power to remain on is always going to be a major vulnerability, and I'm not aware of any digital data storage mediums that can hold value for really long periods except maybe M-discs (reputed to be able to last a thousand years).
That said, one crypto currency I've been interested in is Kinesis (https://kinesis.money/) which is meant to work as a gold- & silver- backed cryptocurrency. Something like that could be an interesting fusion of the Apollonian and the Aenean.
How the hell would a shitcoin ledger that you have to TRUST in order to associate a physical unit to a digital ledger entry, be immune to energy grid failure?
I was thinking more of their attempt to marry the physical and the digital, in order to get the best of both worlds. If you have an energy grid failure with Bitcoin, Ripple, or what-have-you then you have *nothing*, but if you have a currency that operates at least in part in a physical medium like gold or silver then chances are there'll be some redundancy because not everyone will be using digital transactions for everything. By comparison, the only people in Bitcointopia who will have physical currency are preppers and collectors.
As for the issue of trust, you need a minimum amount of this for *any* currency to work, Bitcoin included. The lack of anonymity also requires a degree of trust: if you think Internet autists & governments will not be able to link wallet addresses to real people in short order I've a bridge to nowhere to sell you. If you furthermore think that governments won't be able to exert control over Bitcoin transactions in ways that they cannot do nearly so easily when it comes to physical currency transactions... oh boy.
"I'm sorry Mr Jones, your account shows you accepted payment from an unregistered wallet: if you don't pay the fine you could be taken to court."
"I'm sorry Mr Jones, in order to do business in this country your transactions must go through the MasterVisaStripeCoin payment network; they're a private company and can choose not to do business with you."
Just curious as to your view on what is known as "Goldbacks". Combining all the ease and efficiency of a fiat dollar, but having actual gold interwoven into it. Silverbacks might be something to pursue as well. Not too confident about anything crypto - it lives or dies tied to the internet, which can be hacked, and to the power supply which can be cut off. Seems to me, physical possession is the only true security with redesigned "banks" that are not lending institutions but deposit institutions only, that do NOT comingle funds
You can’t do that. Your Goldbacks and silverbacks suffer from the SAME problem that gold and silver suffered from when they became fiat
physical money ends up in the hands of an institution who issues their digital units. There is NO WAY to verify they are not issuing more units than they hold.
But goldbacks have physical gold woven into it. It's a standard amount with all of them, I think it's 1/1,000 of an Oz. The amount of gold is easily verifiable and counterfeiting is impossible. There is no way it can ever become a fiat currency. Look up goldbacks and take a look at it. Either way, crypto is still incredibly dependent upon the grid being up and hackers
I suspect your "Aenean civilization" is more a product of your imagination than any practical near or far future reality. If you do more real, honest research into goldbacks, I think you will quickly find answers to your questions. I won't waist much time except to say: 1) you don't send anything across the internet. Now or ever. The internet is not a transfer, its a ledger. You send credits that banks settle between them. You have a verified deposit amount at your bank that will honor said purchase and the bank sends the actual goldbacks. 2) there are scanners to verify the validity of the goldback. 3) None of your objections are unanswerable or lacking a solution. Your bitcoin solution still faces the fatal flaw of undependable power grids (a fatal flaw), and the problem of ever present hackers
There is one thing missing, Aleksandar, from the curiously short part about energy:
Who is producing the electricity, and the chain of logistics surrounding production and transportation of electricity?
No Bitcoiners did that as far as I know (which admittedly isn't very far at times). Perhaps there are BCs investing into hydro, nuclear, solar and so on to cover the increased costs of electricity they help contribute to? Could even be profitable to do so perhaps.
But if they aren't, they are essentially nothing more than opportunistic parasites creating their own currency from the labour of others without paying anything back into the system creating the pre-requisites for their operation. But then that is not uniwue to them: the Austrian school of economics, or at least its acolytes, ever favoured parasitic practices over communal benefit or just simpy adhering to "Increase the good/Do not cause suffering". (If you have studied Aristotle, you recognise the phrase, I'm sure.)
Someone may react negatively to the above accusation of parasitism: then consider this:
Someone who doesn't work but lives off of welfare and pays nothing towards all the societal systems needed to have a comfortable modern Western life - do we not call those parasites too, sometimes, when it is a person able but refusing to work for their living?
Do we not call them that not just because they mooch off of others, but because they give nothing back - they provide no net increase of the good, and if criminal they often cause great suffering.
Why then would I not call a Bitcoinminer a parasite unless he or she pays - ideally voluntarily - back some of the profits into the system making the profits possible in the first place? Doing so increases the good, and decreases suffering.
---
Anyway, something completely different. A minor nitpick, really, based in me reading it literally and not figuratively:
"Just like you can’t build a house without masonry tools..."
I can, unless you count an axe as masonry tool. As can thousands of people in this region alone. Ideally, you use three types of axe and specific longbladed doublehanded curved knife too, but in a pinch or and emergeny, just a plain wood axe will do. But as I said, that's me being overly literal for the sake of being just that.
Fascinating article. A few things I'd like to add:
For the history of money, Graeber's "Debt: The First 5,000 Years" has a lot of interesting and useful perspectives. He also gives a lot of examples of how debt is used by elites to cage people with their own weaknesses.
"We must develop the character to master its blade."
Who is "we"? The issue is that no matter what words are written on paper, or what system is created, there are a bottom 25-50% who are stupid and/or short-sighted. They will always be a reservoir of money and votes to tap by the unscrupulous, as long as such people are given full citizenship. No matter how virtuous the current elite are, eventually an unvirtuous person will come along to manipulate the bottom-feeders into giving him power and money which will allow that person to out-compete the virtuous elites.
Until we can say, "enough, these people simply can't vote or breed" we will never have a society that can remain virtuous more than a handful of generations.
=
Bitcoin is not impervious to bad actors. It's price rises and falls with activity, and already known bad actors (e.g., BlackRock) control massive amounts of it, enough to start playing fuck-fuck games with the price.
I agree with concept of bitcoin as a digital version of gold, except for the cap. The difficulty factor should be energy dependent, even time dependent, but the ten minute block rule, unlike gold, necessitates the cap. What happens after the cap is reached? If the economy grows we will get deflation. The best definition of inflation is "more money than is necessary for the efficient operation of the economy". Likewise, the best definition of deflation is "less money than is necessary for the efficient operation of the economy". What I worry about is the temptation to hoard or corner the market for money. Read about England during the middle ages - specie was rare - and this limited economic growth. A difficulty factor that allowed for infinite but energy constrained growth would do two things: 1) prevent hoarding, cornering, or large-scale loss by increasing the value of Bitcoin and the incentive to mine when the supply gets too low. 2) encourage the development of new, better computing hardware and increased energy production. Energy is the foundational basis of modern civilization, so the more closely money and energy are linked, the more likely it will support real, productive growth.
I can'r recall where I first came across the idea - late 1980s? - but it went something like this:
Every 5 years (pulling a number out of my...) everyone's accounts are set to zero.
That way, you can't hoard money, but must use it or lose it.
---
That was the essence. It's too bad I don't recall where it comes from because it was a longer piece in a magazine, and was wuite well-thought and laid out, except for the bit on how to go from here to there (as is always the case, isn't it).
It happened in Weimar Germany. As inflation got out of control, people hoarded gold. After the currency finally collapsed, everyone was given 100 Renten Marks to start over. If you had hoarded gold, you ended up rich. Although there were limits on buying gold, the government never confiscated it. I had a great aunt who thought she was clever. She went to the bank every week and deposited a 10 Mark gold coin, and had accumulated over 700 Marks. When inflation went crazy, she went to the bank to withdraw her 700 Marks. The banker gave her 700 paper Marks, which at that time were practically worthless. She said "Oh no, I deposited gold Marks. I would like them back." The banker said "You deposited 700 Marks - you get 700 Marks. No one promised to give you back gold." Needless to say, my great aunt was shocked and forever after claimed the bank had cheated her, and never put money in a bank again.
I think the text I read was more geared towards forcing money to only a medium of exchange, rather than a resource or a commodity in its own right.
Can't say either way if the idea is good.
Speaking of banks, imagine if nation states would say "We no longer undersign and guarantee the solvency and solidity of the private banks - let the free market sort it out".
Not that that will ever happen, since nation states today exist to prop up the private banks and to create profits for the owners of the banking system; even trying it small-scale would lead to a Kennedy-moment for whichever politician dared to challenge the banking clans.
Yes, the history of the United States is one continuous fight with the bankers. It seems that at this time the bankers have won - at least until the next financial collapse. The problem with money only as a medium of exchange is that it can be created at no cost, so eventually it will be debased.
This smells of sophistry. While doing an admirable job of delineating the desirable characteristics of sound money, it is, at best, misguided to advocate for Bitcoin. Do you expect people to jump on board with a digital, not physical, currency created by a mysteriously anonymous figure, a digital construct that has miraculously been left unscathed by the many assaults on other digital currencies, that is mentioned off-handedly by government officials as a potential future vehicle for them, and that relies on the magical blockchain encryption that data indicates has already been compromised? It is a shame to have laid out such a wonderful framework for sound money, only to reach such a flawed conclusion.
You do you. We’ll see where we’re both at in 10yrars
As economist Richard Werner describes, ordinary credit, created by banks, is perfectly capable of propelling economic growth. What matters is how the money is allocated—asset purchases, consumption credit, or business investment.
https://youtu.be/IzE038REw2k?t=363
The existence of credit renders a currency's nominal immutability moot.
The implicit assumption in the bitcoinist thesis is that hard-capped money, in other words, radical monetary austerity, is somehow more beneficial for the economy than the ability to fund multiple business ventures with the same dollar.
Yes it's much better that way.
Bitcoin is wasteful to mine and ultimately could simply disappear one day if someone figures out a way to reverse the hash function it depends on.
We should go back to using pure silver by WEIGHT (never "dollars" or "rubles" or anything but grams or ounces).
Banks should either charge a fee for storage of physical silver, or require the depositor to participate in lending risk in return for interest.
Payments via promises of silver (credit cards, checks) should simply be an instruction for two banks to change ownership of a certain amount of silver metal.
Or perhaps the real role for the blockchain is as a public record of that change in ownership, with unique serial numbers on every silver coin or weight.
Silver is wasteful to mine. Its use as money is hampered by its use as an industrial metal. It is unwieldy to complete large settlements in silver by weight. Even recording ownership of silver on a blockchain requires enforcement for final settlement, because the original owner can refuse physical settlement. I don't see how any of your arguments support the use of silver as base money.
We have enough to start using it right now.
The mining there is compensates for the use in industry.
It's not at all unwieldy to simply transfer ownership.
Banks enforce settlement.
A billion-dollar final settlement of silver requires the transfer of over 2 million pounds of silver. I consider this unwieldy, but perhaps you hire better movers than I do.
Once again: transfer of ownership is a paper transaction. The banks simply mark different amounts as owned by different parties.
Physically moving the silver is not needed as long as the banks can be trusted.
Paper is not final settlement. Many clients aren't satisfied with paper claims. Physical gold deliveries over the past two years is evidence of that. Suppose clients are OK with paper claims - will banks want to move 2 million pounds of silver when a large client wants to access or move their silver? And if you're choosing settlement in paper (or a "blockchain" system), why should silver be the underlying asset? Banks don't want to or can't store millions tons of silver. Gold, platinum, SP500 shares, or even bitcoin would be more convenient and less expensive for banks. Listen I think silver is great. It's probably under priced. But I don't understand your arguments for it being a settlement money.
The issue with crypto needing the power to remain on is always going to be a major vulnerability, and I'm not aware of any digital data storage mediums that can hold value for really long periods except maybe M-discs (reputed to be able to last a thousand years).
That said, one crypto currency I've been interested in is Kinesis (https://kinesis.money/) which is meant to work as a gold- & silver- backed cryptocurrency. Something like that could be an interesting fusion of the Apollonian and the Aenean.
Wow. Did you need read the essay?
How the hell would a shitcoin ledger that you have to TRUST in order to associate a physical unit to a digital ledger entry, be immune to energy grid failure?
2 massive errors in one sentence
I was thinking more of their attempt to marry the physical and the digital, in order to get the best of both worlds. If you have an energy grid failure with Bitcoin, Ripple, or what-have-you then you have *nothing*, but if you have a currency that operates at least in part in a physical medium like gold or silver then chances are there'll be some redundancy because not everyone will be using digital transactions for everything. By comparison, the only people in Bitcointopia who will have physical currency are preppers and collectors.
As for the issue of trust, you need a minimum amount of this for *any* currency to work, Bitcoin included. The lack of anonymity also requires a degree of trust: if you think Internet autists & governments will not be able to link wallet addresses to real people in short order I've a bridge to nowhere to sell you. If you furthermore think that governments won't be able to exert control over Bitcoin transactions in ways that they cannot do nearly so easily when it comes to physical currency transactions... oh boy.
"I'm sorry Mr Jones, your account shows you accepted payment from an unregistered wallet: if you don't pay the fine you could be taken to court."
"I'm sorry Mr Jones, in order to do business in this country your transactions must go through the MasterVisaStripeCoin payment network; they're a private company and can choose not to do business with you."
Etc etc etc.
Ripple and bitcoin are NOTHING alike
I never said they were. For my purpose, all that matters is that they are both purely digital cryptocurrencies.
Might be worth re-reading the essay. You might learn something.
Just curious as to your view on what is known as "Goldbacks". Combining all the ease and efficiency of a fiat dollar, but having actual gold interwoven into it. Silverbacks might be something to pursue as well. Not too confident about anything crypto - it lives or dies tied to the internet, which can be hacked, and to the power supply which can be cut off. Seems to me, physical possession is the only true security with redesigned "banks" that are not lending institutions but deposit institutions only, that do NOT comingle funds
You can’t do that. Your Goldbacks and silverbacks suffer from the SAME problem that gold and silver suffered from when they became fiat
physical money ends up in the hands of an institution who issues their digital units. There is NO WAY to verify they are not issuing more units than they hold.
you think this hasn’t been thought of ?
The gold is literally woven into the bills. Nothing is held by the bank on trust.
https://www.goldback.com/
But goldbacks have physical gold woven into it. It's a standard amount with all of them, I think it's 1/1,000 of an Oz. The amount of gold is easily verifiable and counterfeiting is impossible. There is no way it can ever become a fiat currency. Look up goldbacks and take a look at it. Either way, crypto is still incredibly dependent upon the grid being up and hackers
How do you verify the gold? Everyone has to carry around some machine to detect if it’s gold ?
How do you send it across the internet?
How do you have an advanced civilisation without an advanced communication infrastructure?
What you’re suggesting here is a solution for a civilisation that has long since passed. NOT an Aenean civilisation.
I suspect your "Aenean civilization" is more a product of your imagination than any practical near or far future reality. If you do more real, honest research into goldbacks, I think you will quickly find answers to your questions. I won't waist much time except to say: 1) you don't send anything across the internet. Now or ever. The internet is not a transfer, its a ledger. You send credits that banks settle between them. You have a verified deposit amount at your bank that will honor said purchase and the bank sends the actual goldbacks. 2) there are scanners to verify the validity of the goldback. 3) None of your objections are unanswerable or lacking a solution. Your bitcoin solution still faces the fatal flaw of undependable power grids (a fatal flaw), and the problem of ever present hackers
There is one thing missing, Aleksandar, from the curiously short part about energy:
Who is producing the electricity, and the chain of logistics surrounding production and transportation of electricity?
No Bitcoiners did that as far as I know (which admittedly isn't very far at times). Perhaps there are BCs investing into hydro, nuclear, solar and so on to cover the increased costs of electricity they help contribute to? Could even be profitable to do so perhaps.
But if they aren't, they are essentially nothing more than opportunistic parasites creating their own currency from the labour of others without paying anything back into the system creating the pre-requisites for their operation. But then that is not uniwue to them: the Austrian school of economics, or at least its acolytes, ever favoured parasitic practices over communal benefit or just simpy adhering to "Increase the good/Do not cause suffering". (If you have studied Aristotle, you recognise the phrase, I'm sure.)
Someone may react negatively to the above accusation of parasitism: then consider this:
Someone who doesn't work but lives off of welfare and pays nothing towards all the societal systems needed to have a comfortable modern Western life - do we not call those parasites too, sometimes, when it is a person able but refusing to work for their living?
Do we not call them that not just because they mooch off of others, but because they give nothing back - they provide no net increase of the good, and if criminal they often cause great suffering.
Why then would I not call a Bitcoinminer a parasite unless he or she pays - ideally voluntarily - back some of the profits into the system making the profits possible in the first place? Doing so increases the good, and decreases suffering.
---
Anyway, something completely different. A minor nitpick, really, based in me reading it literally and not figuratively:
"Just like you can’t build a house without masonry tools..."
I can, unless you count an axe as masonry tool. As can thousands of people in this region alone. Ideally, you use three types of axe and specific longbladed doublehanded curved knife too, but in a pinch or and emergeny, just a plain wood axe will do. But as I said, that's me being overly literal for the sake of being just that.
https://en.wikipedia.org/wiki/Log_house
Some good pictures on that article. Not 20km from where I sit, there are log houses built in the 13th century AD, still in use.
Fascinating article. A few things I'd like to add:
For the history of money, Graeber's "Debt: The First 5,000 Years" has a lot of interesting and useful perspectives. He also gives a lot of examples of how debt is used by elites to cage people with their own weaknesses.
"We must develop the character to master its blade."
Who is "we"? The issue is that no matter what words are written on paper, or what system is created, there are a bottom 25-50% who are stupid and/or short-sighted. They will always be a reservoir of money and votes to tap by the unscrupulous, as long as such people are given full citizenship. No matter how virtuous the current elite are, eventually an unvirtuous person will come along to manipulate the bottom-feeders into giving him power and money which will allow that person to out-compete the virtuous elites.
Until we can say, "enough, these people simply can't vote or breed" we will never have a society that can remain virtuous more than a handful of generations.
=
Bitcoin is not impervious to bad actors. It's price rises and falls with activity, and already known bad actors (e.g., BlackRock) control massive amounts of it, enough to start playing fuck-fuck games with the price.
Graeber’s book is midwittery
I want to look at those PabloPeniche art pieces, but I can't easily dig them out of his timeline? (Also, are they AI?)
I agree with concept of bitcoin as a digital version of gold, except for the cap. The difficulty factor should be energy dependent, even time dependent, but the ten minute block rule, unlike gold, necessitates the cap. What happens after the cap is reached? If the economy grows we will get deflation. The best definition of inflation is "more money than is necessary for the efficient operation of the economy". Likewise, the best definition of deflation is "less money than is necessary for the efficient operation of the economy". What I worry about is the temptation to hoard or corner the market for money. Read about England during the middle ages - specie was rare - and this limited economic growth. A difficulty factor that allowed for infinite but energy constrained growth would do two things: 1) prevent hoarding, cornering, or large-scale loss by increasing the value of Bitcoin and the incentive to mine when the supply gets too low. 2) encourage the development of new, better computing hardware and increased energy production. Energy is the foundational basis of modern civilization, so the more closely money and energy are linked, the more likely it will support real, productive growth.
I can'r recall where I first came across the idea - late 1980s? - but it went something like this:
Every 5 years (pulling a number out of my...) everyone's accounts are set to zero.
That way, you can't hoard money, but must use it or lose it.
---
That was the essence. It's too bad I don't recall where it comes from because it was a longer piece in a magazine, and was wuite well-thought and laid out, except for the bit on how to go from here to there (as is always the case, isn't it).
You comment reminded me of it.
It happened in Weimar Germany. As inflation got out of control, people hoarded gold. After the currency finally collapsed, everyone was given 100 Renten Marks to start over. If you had hoarded gold, you ended up rich. Although there were limits on buying gold, the government never confiscated it. I had a great aunt who thought she was clever. She went to the bank every week and deposited a 10 Mark gold coin, and had accumulated over 700 Marks. When inflation went crazy, she went to the bank to withdraw her 700 Marks. The banker gave her 700 paper Marks, which at that time were practically worthless. She said "Oh no, I deposited gold Marks. I would like them back." The banker said "You deposited 700 Marks - you get 700 Marks. No one promised to give you back gold." Needless to say, my great aunt was shocked and forever after claimed the bank had cheated her, and never put money in a bank again.
I think the text I read was more geared towards forcing money to only a medium of exchange, rather than a resource or a commodity in its own right.
Can't say either way if the idea is good.
Speaking of banks, imagine if nation states would say "We no longer undersign and guarantee the solvency and solidity of the private banks - let the free market sort it out".
Not that that will ever happen, since nation states today exist to prop up the private banks and to create profits for the owners of the banking system; even trying it small-scale would lead to a Kennedy-moment for whichever politician dared to challenge the banking clans.
Yes, the history of the United States is one continuous fight with the bankers. It seems that at this time the bankers have won - at least until the next financial collapse. The problem with money only as a medium of exchange is that it can be created at no cost, so eventually it will be debased.
Inflation and debased currency due to using leaves as money?
Burn the forests!
Yes, but what if they use seashells?
lol. And which “money” would you exchange that knowledge for?
The fiat toilet paper they create out of thin air?
🤡
😂😂😂😂😂
Wow. Exchange knowledge for goods.
Genius. Why hasn’t anyone thought of that.