The new aristocracy, in my opinion, will likely be people who got in on bitcoin early.
Almost nobody wants to believe the dollar can fail. Lots of stupid people gambled huge amounts on “crypto.” Lots of intelligent people fell for Vitalik Buterin’s Ethereum scam. To most supporters of the current aristocracy, and even many detractors - Bitcoin seems far too simple to be believable.
It's far too volatile on a short term basis for anyone except really confident, anti establishment people who are confident in their long-term prospects to buy into. Bitcoin is perfectly coded for a more meritocratically selected elite than “getting into the ivy leagues”, since all you have to do is buy some, and hold on while ignoring the old elites screaming at you they you’re an idiot. That takes a combination of confidence in yourself + distrust in the current elites + financial wherewithal to at least weather the storm.
I can't think of any group that's as confident about the future as bitcoiners, until you start getting into the territory of religions. Which is probably the right way to see bitcoin maximalism.
This, incidentally, is why bitcoin will fail eventually -- because society can't tolerate the idea that their new aristocracy is a bunch of unwashed geeks who happened to be interested in cryptocurrency in 2013 and were bull-headed enough not to sell in the following twenty years.
Society would rather tear itself apart than submit to the dictatorship of the crypto-nerd, I'm afraid.
Alternatively: while some form of cryptocurrency may be inevitable, why on earth should The Powers That Be choose Bitcoin to be that cryptocurrency? That's giving away money to all the wrong sorts of people (i.e., everyone who has supported Bitcoin so far). Instead, they could just start a new cryptocurrency and make Bitcoin illegal.
Why would the powers that be have any say in the matter? They are in the process of trashing the dollar, which underlies all their power. If the global south follows the lead of El Salvador and much of Africa, the powers that be can only watch as their empire melts.
This isn't a prediction of the immediate future, but of the long term. That's why I didn't specify any particular government or organization.
I think it's inevitable that at some point, a major world power will decide that some form of cryptocurrency would be useful for it's goals. (Unless the whole project turns out to be technically flawed.)
At that point, I think they will choose to create one of their own, rather than using Bitcoin. Why use a clunky prototype? Why reward all the then-current holders of Bitcoin, rather than being able to send that value to their own constituents and power sources?
Having chosen one of their own, why allow the competitors?
I don't think the Nigerian government remotely counts as a major world power.
I actually agree with your 2nd paragraph. But to me, the key word is "choose".
[Edit due to mobile interface glitch:] What I'm saying is that no will be allowed to make that choice. Hence the part about a sufficiently powerful government.
> They are in the process of trashing the dollar, which underlies all their power. If the global south follows the lead of El Salvador and much of Africa, the powers that be can only watch as their empire melts.
Inflation peaked at 9% annualized. Over the last year, the dollar has gained 6% on the Euro and even more on the Yuan. Inflation is expected to average 2.5% per year over the nexts 5 years.
In what sense is the dollar being "trashed"? And how is a year of 9% inflation supposed to cause an empire to "melt"?
From the treasury bond and TIPS bond markets - i.e. an almost ideal prediction aggregating the expertise of thousands of experts with significant skin in the game
What you mean here is "the regime said that inflation peaked at 9% annualized."
Lot of problems with that. One is that there's no reason to trust them to tell the truth. Two, lots of people might think it mean something like "The regime only debased the currency to the tune of 9%," which is terrible already and in fact understates the problem.
> One is that there's no reason to trust them to tell the truth
So, I've had conversations like this a number of times. The one time I got someone to actually provide concrete evidence, they gave three specific goods from receipts they had saved that showed price increases above the official inflation rate. However, when I checked the CPI subindices, they matched this person's lived experience, suggesting this person only disagreed with the weights the CPI uses. Shockingly, this person did not change their mind at all and gave literally zero reason to think the weights used in the CPI are biased. Given this experience, I'm extremely skeptical of people like you claiming the government is lying and inflation is dramatically higher than officially stated. Slightly higher? Maybe, there are a variety of methodological issues still being debated. But dramatically higher? Please give evidence.
You say it is "terrible already". According to what metric? The performance of the Federal Reserve in the last couple decades has been an enormous improvement over the previous several decades and are significantly better than most other central banks in the world. You mean terrible compared to perfection... sure, I agree. And? How is that either fair or useful?
Finally, except insofar as you are assuming (with no evidence) that the government is lying about inflation, in what sense is the problem being understated?
So, that recent SEC ruling that effectively said that Bitcoin was different from other cryptocoins, was not something I was expecting. Possibly the world is a little less grim than I'd thought. :-)
MODERATOR HAT ON: "lots of intelligent people fell for Vitalik's Ethereum scam" is a low-content, high-temperature comment - you're drive-by asserting a really controversial, potentially inflammatory thing and not backing it up. If you hated all crypto I would let it pass, because everyone knows the generic anti-crypto arguments by now. As it is I am officially chiding you.
MODERATOR HAT OFF: I still find this comment baffling. Bitcoin is up 10,000x and it hasn't produced anything like a new aristocracy. I can't think of any notable pure Bitcoin billionaires or multimillionaires besides Satoshi. Even though there have to be some, they've made so little imprint on the culture that even I, who pay attention to the tech social world, can't think of them. The only people from crypto who I think are even part of the tech aristocracy, let alone the general aristocracy, are Vitalik Buterin and maybe some of the Coinbase people, and maybe a few others I forget (and until recently SBF, RIP). And this is less because of their fortunes than because Vitalik, Balaji, etc seem intellectually interesting.
Even if Bitcoin went up another 10x, it would produce, what, another couple billionaires and another crop of multimillionaires. So what? That's like as many as Google has produced, and Google hasn't become a new US aristocracy. But even if it produced many many more billionaires, I don't think they would have the networkedness, clout, and intellectual reach necessary to become a new ruling class - again, even tech considered as a whole and including crypto hasn't done that.
I am thoroughly fascinated by this moderation input here. I’m sure that you are simply par for the course as far as your normal boundaries of moderation go, but that it’s over ethereum/crypto (or rather perhaps the imputed insult to someone who did/didn’t ‘fall’ for how ethereum is structured or what happened to it, or something along those lines, or the imputed insult to Vitalik) is what’s so very interesting.
I’ve been following the crypto collapse closely, but hadn’t followed the industry since I thought it left reality somewhere after bitcoin went over $1k. So I don’t know every jot, swerve, and history of the past ten years and only picked it back up in February.
I’m a jail cop who loves economics, but my circle doesn’t have many people in it who are into crypto as you may have guessed. Hence my curiosity and this question: if you feel it has to be moderated, I’m sure you’re right and that kind of thing is stirring up animosity, but is it that bad out in the Bay Area? Or maybe more among your readers/commentators?
The reason I even mentioned it is I could imagine saying something I think is obvious about any given topic, ….and then do to my ignorance about what people are sensitive about now, I am then warned/given the evil eye/permanent poor grade mark on my report card as a decent chap who doesn’t say nasty or insensitive things to strangers he’s having a conversation with.
I could see the line you are officially chiding as being a throwaway comment by the poster (I of course don’t know that it was), but yes I could see someone who is sensitive about that topic getting very up in arms and defensive if they’ve staked their life savings in assets that had recently lost a lost of value.
But compare it to what I’m sure most people on this forum would consider another throwaway line; ‘lots of otherwise intelligent people fell for that line in the Bible about Noah bringing two of every kind on the ark and seven of a few kinds’ and if I said it around half the people I know and am friends with, I would have a major controversy and have started half a dozen fights. I’d have to worry about my kids being allowed to play with other kids because their interpretation of that would lead them to think I don’t believe in the Bible and am on the slippery slope to atheism. (And about ten percent of the parents would think, ‘how many conversations that my ultra literal interpretive friends are going to insist on having do I now have to have with them?’)
I am of course not questioning/challenging your moderating or or the issue here at all. One of the reasons I like reading here is there is non-insulting engagement going on across many topics and I’m genuinely interested in following the conversations. It’s great! I’m also sure that it requires a decent amount of moderation, but whatever the exact philosophy is seems to be working.
That said, What if I am simply not plugged in enough to know that I’m insulting or considered baiting? Do I get a ‘Yokel pass’? ‘I didn’t know I wasn’t supposed to sound dismissive about X action occurring in Y topic! I didn’t notice that trend because I only meet up with that crowd who would know that allowing my to figure it out through conversational osmosis once a year, twice if I’m super lucky! I have to be careful about how I phrase which elections were stolen and by whom at work for God’s sake! I just taught these people that there was more than one crypto currency a month ago!’
You get my point I’m sure. I want to take part in these conversations on occasion, but oy please be gentle as i sometimes possibly bring my own and sometimes other’s very different cultural outlooks in with me.
Also postscript I think you’re dead on about moderator-off comment on crypto not really changing the face of who the ruling class it. A few new entries, nothing other of real note any time soon.
I think we should all expect to stumble across norms we weren't aware of, or use words that imply things we didn't intend, fairly regularly as we interact with a broad community of internet folks.
Getting a warning (from a sane moderator, which I believe Scott to be) isn't so much a "permanent poor grade mark on your report card" as a way of making you aware of your mistake so that you can learn from it. If you repeat the mistake after being warned it may become a permanent poor grade mark.
Mild negative feedback is, in general, a *good* thing - it means you are learning new things, have a chance to improve, and the person giving you the feedback still has hope for a positive relationship with you.
I think it's in general easy to tell the difference between someone obliviously blundering over battle lines in a conflict they are unaware of and someone deliberately engaging in an ongoing political conflict.
And what exactly has happened to ethereum, apart from the general crypto crash which doesn't seem to have had affected it disproportionately? The eth/btc chart has been ~flat for over a year.
Perhaps that could be adopted as a specific warning: ‘you don’t appear to understand what you violated, but here is why I’m warning you. This is a Yokel Warning, level 1. You really didn’t know you stepped on toes.’ As opposed to a ‘level 5’ where you truly didn’t know you are wrong and there is ample, culturally wide, easily accessible evidence contradicting what you believe. ‘I truly didn’t know that slavery was bad and happened in this country and the holocaust wasn’t just made up!’ This Yokel warning comes with a ban that includes a list of evidentiary books, articles, and links to news that would convince any rational person that the thing being referenced is settled beyond all reasonable conversation.
“I don't think they would have the networkedness, clout, and intellectual reach necessary to become a new ruling class - again, even tech considered as a whole and including crypto hasn't done that.”
That sounds like it could have been written by a New York Times columnist playing defense for the Bluecheck crowd. It is not clear to me at all that the East Coast meritocrats have forever beaten the West Coast STEM nerds and their allies.
For instance, what if one of the tech elite (Elon?) pivots to use their wealth and social media platforms to authentically speak for flyover-land against East Coast meritocracy?
I don't see anywhere near the significant cultural difference between Silicon Valley STEM nerds and PMC managerial types that so many people here seem to.
In particular, I've seen vanishingly little evidence that tech types are any less convinced that their intellectual superiority to the rest of the population gives them a natural right to higher status.
The vast majority of Silicon Valley STEM types have *exactly* the same 'Blue Tribe' meritocratic political and cultural views and attitudes as their PMC counterparts. And the minority who don't--the 'Grey Tribe'--seem even *less* inclined toward populism or noblesse oblige, as shown by, e.g, their inclination toward right-libertarianism or their frequent emphasis on IQ as the greatest source of an individual's value.
I don't really where to put this, but, to my experience, crypto-fans are not techies. About 80% of my friends work in IT, and none of them has ever had any interest in crypto, even when they were required by their employers to work on that. Crypto-fans are mostly... normal people. I mean, SBF and his friends are not techies: they were junior traders and bankers, something quite far culturally removed from "techies", and quite into the "traditional elites" space. I do not see how crypto-fans can be an alternative elites, since they are not separate from the traditional elites.
I would agree that crypto-fans and tech are disjoint groups. But the one thing they have in common is that they both chafe against the institutional powers jealously guarded by East Coast bluecheck meritocrat wordcel elite.
I can see how this is different from saying 'all of crypto is a scam', and I can see why most people haven't internalized the argument that all of crypto _except for bitcoin_ is a scam.
Thank you for articulating a general principle i can abide by: it is wise to understand which arguments are known, even if not accepted, by the audience you are speaking to, and to have a reasonable model of anticipating what will be inflammatory by the standards of that specific community.
I think that this community is not _aware_ of bitcoin maximalist or the arguments made by bitcoin maximalists. I'll attempt to share that perspective here.
We believe that all of cryptocurrency is a scam, with the sole exception of bitcoin.
Fortunately there's even a new York times article about this perspective
Hopefully having the NYT describe the movement without saying we are racist doesn't wreck your trust in this movement as credible. If it will help, there are plenty of arguments by the NYT saying bitcoin is evil elsewhere.
Here's the key bit: “Bitcoin is decentralized, digitally scarce money. Everything else is centralized.”
Bitcoin was a breakthrough in theoretical computer science. Proof of work + longest chain solved the byzantine generals problem in a way that didn't require trusting in some set of third parties. I don't think most people have the technical background to really understand the details of this. That means they are left to evaluate arguments based upon their level of trust, which i think comes down simply to shared values.
They get hints of these values based upon the following properties that are unique to bitcoin.
Bitcoin has the following properties that no other coin does:
- no one in charge of it
- circulated in the wild for about a year with zero value
- no 'premine' where the founders kept coins for themselves
No other coin has these properties. Someone is in charge of all of them, which means they are all effectively centralized and subject to decision making by some central party. In the vast majority of cases, these pre-mines made the founders incredibly wealthy.
I'm more than happy to explain why Ethereum, in particular is a scam, in particular.
Ethereum has the following properties:
- It has been sold as decentralized, but there is clearly a group in charge.
- 71% of all Ethereum were created in a 'premine', which included 10% given to the ethereum foundation, and 60% given to intial investors in ethereum. This is THE SAME MODEL that every other ICO scam does: initial investors get most of the tokens, price goes up, they dump on bag-holders later. See details here:
- They used phrases like 'code is law.' Once the DAO hack happened, they decided that code _wasn't_ law, so they reached out to exchanges and said 'stop all trading on Ethereum'. This is making a promise and then breaking it. Code isn't law if the people in charge of ethereum can stop all trading in ethereum.
- The move to ethereum 2.0 and proof of work hinges on how secure proof of stake is. Vitalik argued that proof of work is secure, >>>>>so long as we re-define secure to not solve the single most important problem bitcoin solves<<<<
The experience of being in the field of distributed computing, deeply understanding distributed systems, and seeing what is happening here is frustrating because it's damn near impossible to communicate to outsiders how bad these lies are. They hinge on seemingly arcane technical details like what, precisely a 'security model' is.
If 0 is 'knowingly telling lies in order to raise money' and 1 is 'you honestly believe what you are saying to be true, but you've suborned your commitment to the truth to your desire to succeed in your project', i think ethereum is close to one.
If it's fair to call FTT, the FTX token with a huge preime and only 3% of the tokens actually circulating a scam, then i think it's also fair to call ETH a scam.
Sorry for not making this more clear earlier. I'll try to do better to say something like, 'there's a longer argument to be made here', and make it clear that I'm espousing beliefs that are not yet considered reasonable inside the community.
What a fantastic response to mod pushback. Thanks for the clearly articulated response, and for the education. I trend generally skeptical about crypto, but vaguely lumped ETH and BTC together as comparatively stable and trustworthy. I hadn't really thought about the fact that BTC is unusual in having no public leaders.
Thank you! Yes, the bitcoin community sees itself as fundamentally apart from the rest of “crypto”, which we see as a series of inferior copies of bitcoin made by people who don’t understand why bitcoin was a theoretical breakthrough, sold to unwitting people who don’t know the difference.
Solid argument for that part. However all bitcoin is a just a crypto token. You can create unlimited amount of these( well technically limited by computational and energy resources).
It does not have any fundamental value. And fundamentals even in 21st century. Even in pure AI future will still be same - space and energy. Aka land and resources. Plus power to exert actual control over them
Crypto secured distributed token on essentially unforgeable ledger
Is a great piece of technology. However its just that. And not even nearly as monumental as nuclear power. Or Internet. Or flight
Well, additional bitcoin is impossible to create in the same way that your home printer can't print American dollars.
People can make as many *new* cryptocurrencies as they want, but that has about as much effect on Bitcoin as your home-printed MaxDollars do on the US Dollar
Quite late here, but I think Monero mostly passes your criteria (not sure what the initial value was, but there was no premine and no central control), and it even has a clear use case and is actively used as a medium of exchange. It's an antisocial technology and will probably never be adopted as a store of value, but I'm comfortable saying it's not a scam.
The only way to make sense of this perspective is to put on the bitcoin maximalist perspective. It's far too difficult to share that perspective and argue for its validity, so i'll mostly focus on the former.
Bitcoin maximalists will think bitcoin is still in early stages until it is globally accepted by basically every investor that bitcoin is a better store of value than gold, and that fiat currencies are doomed to inflation forever. The gains that you are describing, we think are still likely to come. I don't have any doubt bitcoin will hit $1,000,000 eventually, because i think this is where the incentives of al particpants lie. Bitcoin maximalists see bitcoin as a game theoretic black hole that eventually will suck in everyone.
This probably sounds crazy. So maybe it helps to mention Moloch here. Bitcoin maximalists think the dollar is currently being eaten by Moloch. Bitcoin maximalists think fiat money is Moloch money, and that sound money helps to keeps Moloch at bay by allowing Moloch to devour smaller systems before they get too big. Bitcoin Maximalists believe that fiat money has the effect of allowing corrupt systems to grow faster than non-corrupt systems, because growth can be sustained forever by getting closer to the money printer and convincing the money printer that you share its values.
Bitcoin Maxiamlists are betting that Moloch will eat the dollar system alive, as its participants all follow their incentives, which leads to the infinite creation of dollars, because printing more money is always better in the short term, but incurs some illegible long term cost and risk.
(Aside: Me, personally, i view trade networks as being distributed AGI's, and I view fiat money as an AGI figuring out how to wirehead itself. If I can do $10 worth of good, i can do $20 worth of good by printing another $10!)
Bitcoin maximalists believe that all fiat currencies will collapse in value, and the world will return to the kind of sound money system that dominate the world _before_ world war 1.
We think sound money was hated by governments (because it limited their power) and bankers (because it exposed them as lying when they printed receipts for gold in excess of the gold they actually held.) We think the transition into fiat money was done by a series of fraud and theft:
- Banks printed receipts for gold in excess of their reserves, because it was literally printing money. We consider this to be fraud, not too different from what SBF did.
- The instability of bank runs was a result of bankers telling lies (issuing receipts in excess of their true holdings). Given the choice between 'stop lying' and 'build a system to make the lie true by forcing everyone to play along with it', both politicians and big bankers chose the later. They conspired to form the federal reserve bank, to keep the game going.
- When world war 1 broke out (hello again, Moloch!) the UK issued bonds to fund the war, but investors said, no thanks. So the bank of England engaged in the first QE ever, printing money to cover 2/3 of the value of this bond. They lied about it for ~100 years, and it only recently came to lighit: https://www.businessinsider.com/bank-of-england-covered-up-war-bond-failure-in-1914-2017-8
Do you see why we think fiat money helps moloch? World war 1 would not have happened with honest money. It required banks lying, and working with mass media to tell lies.
- printing all that money put the bank of england at risk of being found out, so the bankers reached out to their american friends, who were more than happy to help print more money too, causing the boom of the 1920's and the, of course, eventually crash
- the crash was blamed on 'the gold standard' rather than the fact that everyone was lying about how much gold there actually was
- privately held gold was then stolen from citizens by Executive Order 6102, in order to 'mark the gold price to market'. If citizens could actually hold onto their gold, there would have been price discovery showing how bad the printed money had gotten.
- after world war 2 the US promised everyone at bretton woods they would back the dollar by gold, and then immediately started printing in excess of their reserves. The worlds was now on a 'gold standard' but it was only accessible to nation states, and the US was already lying about their reserve ratio.
- When nixon took the US off the gold standard in 1971, he said this was 'temporary.' Why?
I grew up in history class being told that the gold standard was bad because it prevented banks from lowering interest rates to stave off depressions. But if that's true, why didn't we leave the gold standard until 1971? Why did nixon lie when we did it?
From our perspective, Every aspect of the dollar system produces incentives for its participants, and the short term incentives for elites are always to print more money. We have been betting hard on inflation for years. In 2018 when i tried to sell people at Google on bitcoin, a lot of people said, 'why are you worried about inflation?'
In 2020, I left Google, a giant profitable company, for snapchat, an unprofitable company. Yet my compensation doubled, and the comp was entirely liquid. Does that make ANY sense? To get paid twice as much to leave a profitable company for an unprofitable company, without taking on risk like, 'what if the company fails'?
From the bitcoin maximalist perspective, what SBF did has much more in common with the global financial system for the past ~100 years than it does with bitcoin. The aristocracy that i expect to rise won't happen until the following events that i expect:
- giant economic crash hits, probably in 2023, due to the fed raising rates faster than ever before despite more revolving debt than ever
- CBDC's are offered as the solution. "We need to keep rates high to fight inflation, but here's some free money so you don't riot, the only catch is that we monitor all your transactions and limit what you can spend it on to socially approved causes"
- people ditch the BidenBucks as quickly as they can ,for whatever goods they can resell on the black market for 'real dollars', and soon the price of the two diverges so bad that nobody is willing to pretend that CBDC's are worth the same as 'real dollars'
- inflation doesn't actually go away because the federal government has so much revolving debt, they'll need to print money to keep themselves solvent with interest rates at 5%
- thus the dollar keeps losing value over time, other fiat currencies get worse, and eventually foreign central banks follow El Salvador's lead in a bid to stabilize their currency
> even tech considered as a whole and including crypto hasn't done that.
It kind of has. Nobody in human history has ever had the kind of reach of Joe Rogan + Elon Musk. I think that trend will continue. I think we will see absolute chaos for a while, and the people that come out of that chaos doing well are going to to be people huge followings. If nothing except for bitcoin can hold value over time, bitcoiners will likely use their bitcoin to buy people's loyalty, just like what happened in Rome with the system of patronage.
It may be worth adding that if the 'bobo' thesis is true, it's not like the old elite _died_. They're still around, and the bush family still has power and influence. There are simply two elites jockeying for power with each other. Maybe a third comes in, and absorbs some of the old elite with more libertarian leanings. Like the winkelvoss twins, i expect to see the trend of 'bitcoin is money for libertarians and some republicans' get amplified, until eventually you have the GOP saying america needs to go on a bitcoin standard.
This is a wild ride you've got us all pegged for. I have zero technical expertise in this area and so won't dispute anything in particular you've said, but in my experience, predictions that require a precise chain of events like this usually don't come true.
Come back to this thread in a few years and let’s see how well it ages.
The piece that most people seem to be unable to grasp is that the dollar is likely to fail.
Ray Dalio, who runs the world’s largest hedge fund, foresees a similar chain of events but he thinks nation states will ban bitcoin.
From my perspective, I’m simply looking at something like a chessboard. There are only so many moves a central banker can make. Raising rates too high makes revolving debt too expensive. Lowering them too soon triggers inflation. Not lowering them soon enough triggers a crash. No reason to think it’s possible to somehow stick the landing.
> I don't have any doubt bitcoin will hit $1,000,000 eventually, because i think this is where the incentives of al particpants lie. Bitcoin maximalists see bitcoin as a game theoretic black hole that eventually will suck in everyone.
[...] Bitcoin maximalists think fiat money is Moloch money,
This "black hole" metaphor makes it sounds like bitcoin is Moloch money rather than fiat...
Moloch is all about screwing people over by convincing them to act in their short term interest while igonring long term consequences.
Bitcoin tells people, 'just save for the future. Don't worry about anything else.'
Bitcoin enables freedom from oppressive regimes. It's used by people to safeguard themselves and their families in countries with dictatorships. Does that sound like moloch to you?
Bitcoin requires every user transacting with it to burn value in a tallest-trees competition for places in blocks, and every miner to continuously burn value in a tallest-trees competition to create blocks. Even if you think everything else is worse, this is very much Moloch.
(Moloch is about screwing people over by convincing them to act in their local interest, not (only) short-term interest, while ignoring negative global, not (only) long-term, consequences. It only becomes what you describe when Moloch has someone play the game against their past/future selves rather than other people.)
You are ignoring the lighting network and the enormous cost of maintaining fist money.
Bitcoin is far faster and cheaper and more environmentally friendly than the fiat networks., which need the US military to prop them up.
Meanwhile, bitcoin makes renewable energy more economically feasible by acting as a buyer with infinite demand below market price. The world’s oldest hydroelectric plant was brought back online because bitcoin mining made it it feasible.
Moloch makes politicians in every country play against their opponents to deliver value to voters now. If you create systemic risk by doing so… well… the other guy will, so what choice do you really have? This is why deficits kept going up every year.
Bitcoin is also WILDLY volatile; it's gone through several boom-and-bust cycles already. Don't you think that this volatility would have an impact on its use as a store of value? If you have $100,000 USD saved up in BTC, it might be worth $25k next year and $200k (inflation-adjusted!) five years from now.
Do you think its volatility is an intrinsic property of bitcoin?
My perspective is that it’s only volatile because it’s a tiny, tiny asset class with deeply inelastic supply. I expect that it will be less volatile as it’s market cap grows over time.
I was mainly remarking that 'getting sucked into a game theoretic black hole' sounds exactly like Moloch to me. I guess your point is that once everybody is sucked in we'll be in an awesome utopia thanks to the sound financial system (rather than some kind of dystopian hellspace which is the usual Molochian destination). I'm skeptical about this, but I was also skeptical that bitcoin would ever go past ~$0 initially, so it's not like I have any kind of track record to boast of here.
> Bitcoin maximalists believe that all fiat currencies will collapse in value, and the world will return to the kind of sound money system that dominate the world _before_ world war 1.
All of the following theorizing is severely undermined by the frequency and severity of panics in this time period in contrast to what has happened since, as well as by observing the political situation in Europe (there was a lot more that caused WWI than banking).
Money generally serves 3 purposes: a medium of exchange, a store of value, and a standard measure of price. Anything which can vary wildly in price is obviously not reliable for any of these purposes: If you store it, you might lose everything; if you try to exchange it or compare prices, then what you can exchange it for won't be reliable. So far, bitcoins has this extreme volatility in spades.
More fundamentally, I don't think the problems that BTC fixes were very large, and the way it does so is very costly. Most transactions don't require you to be able to verify the entire history of the currency from both parties; I can be fairly confident that most of my business is not performed with stolen money. The cost to the economy of theft is much lower than the energy cost of mining bitcoin. It's certainly an innovative CS solution to the question of "how do you ensure that exchanges are legitimate?" But social trust and basic policing accomplishes the same thing for much cheaper.
The instability was due to bankers lying about their deposits. They’d issue far more reciepts than they had. This is lying.
The gold standard doesn’t work, for that reason. It’s impossible to tell if the banks are “pulling a Sam Bankman Fried” and gambling with customer deposits. It’s far too hard to call BS on a bank that’s lying because taking custody of gold is costly and expensive.
Bitcoin fixes this by making it much easier to verify a bank’s assets and for people calling BS to take custody of their assets directly.
Bitcoin’s volatility is just a function of it being new and tiny. You can see it’s gone done over time. I think it’s intellectually honest, when considering the volatility to also consider that it’s almost entirely ~upside~ volatility.
You are ignoring the main benefit of bitcoin: can’t be inflated away. If you think “theft” is the problem is solves, you might consider doing more research.
There was a lot more to 19th century recessions than just bankers lying. Anyone finding a new deposit of gold or silver would cause problems. If there had been a sufficiently large change in the supply of either when the gold-standard and silver-standard parts of the world depended on France to keep them in balance, then international trade would have become vastly more difficult. High volatility in a currency is absolutely horrible; there is no "good" or "upside" volatility in this context. Bitcoin rising in price is good for early investors; similarly, hyperinflation is good for people who owe money denominated in the inflated currency, but it's overall bad for the economy. Deflation--which is what inevitably will happen if the amount of the currency is capped but its use, and therefore demand, increases--is very very bad.
"You are ignoring the main benefit of bitcoin: can’t be inflated away. If you think “theft” is the problem is solves, you might consider doing more research."
Ensuring that transactions are happening with legitimate money is a real thing that a bitcoin-like system could theoretically do. In contrast, "cap the money supply at X" is a solution to inflation the same way that a leaky pipe in your house can be solved by blowing the house up. If this is really the goal of bitcoin, then in my mind it has gone from "interesting and novel but overhyped" to "all-time bad ideas in economics."
There are no “bitcoin mines” to be discovered, so we don’t have to worry about that. Bubbles come from huge sudden bursts in supply, which do not exist in bitcoin.
Deflation is only bad if you think the credit-induced bubbles are good. If economic activity gets to an unsustainable pitch, what do you think should happen? The current systems says, “keep the game going at all costs regardless of how unsustainable it is!”
I left a job at Google for one at Snapchat, and doubled my compensation while taking on zero risk. Why should I earn more money leaving an deeply profitable company for one that’s burning cash? How does they make sense?
> I don't have any doubt bitcoin will hit $1,000,000 eventually, because i think this is where the incentives of all participants lie.
The total wealth of all the world's bitcoin maximalists, or even bitcoin highly-enthusiasts, is way less than $21 trillion. Therefore, in order for bitcoin to hit $1,000,000, someone who isn't a bitcoin maximalist/enthusiast/whatever will have to part with one million actual US dollars to buy one bitcoin. That person, really a whole lot of people like that, is a necessary participant in the system.
How is it in *their* interest for the price of bitcoin to be $1E6? I have a million dollars. Hypothetically, I want to buy bitcoin. Why would I want my money to buy one bitcoin when it could buy ten or a hundred? There are scenarios where I am *indifferent* to the dollar value of a bitcoin, but I'm not seeing one where it would be in my hypothetical interest for my megabuck to buy me one bitcoin instead of ten,
You're arguing in circles. You claim the market price of bitcoin will be one million dollars, and when asked why you say because everybody will want to buy and sell bitcoins for one million dollars. When asked why they'll want to do that (obvious for the sellers, not so much the buyers), your answer is "suppose that's the market price of bitcoin"?
For my part, I suppose that the market price of bitcoin *isn't* one million dollars, and I don't see enough people wanting to change that to matter.
The easiest way to answer this question is to turn it around.
Why do you think the price is $16,000 today, instead of zero?
Could you argue reasons that this might happen to someone in 2012 with only evidence available then? Back then the highest bitcoin had ever gotten was $30 during a crazy bubble in summer 2011. At mid 2012, it was hovering around $10. Why would it possibly go up to some absurd number like $10,000?
I agree the future of the current monetary system looks pretty bleak and uncertain, I also hadn't really considered that blockchain creates a whole new game-board for game-theoretic games to play out on (nut sure how how to judge how significant that will turn out to be, not very is my first guess).
But isn't the dollar ultimately backed by the US military (petro dollar, reserve currency etc.)? wouldn't it require the US state to lose the monopoly on violence for the dollar to collapse?
Also what about states that just don't have much patience for these money games. I could easily see China just taking direct command of the economy if the monetary system failed, they've already cracked down on bitcoin.
I also think bitcoin creating a stable economy after the collapse (or ever) seems pretty unlikely, more likely you'd just get anarchy or the great depression x100.
And come on, no way bitcoin is anti-Moloch, that's just silly.
>wouldn't it require the US state to lose the monopoly on violence for the dollar to collapse?
You can't use violence to convince people to accept something that doesn't hold its value.
Your battleships mean nothing to people who are determined not to starve or lose everything they have.
> Could easily see China just taking direct command of the economy if the monetary system failed, they've already cracked down on bitcoin.
China's government is more authoritarian and competent than America. They already have the great firewall. Yet _even they_ haven't been able to stop bitcoin mining in china! If China can't stop mining, and republican politicians are already coming out as pro bitcoin, what chances does America have to stop bitcoin transactions?
> also think bitcoin creating a stable economy after the collapse (or ever) seems pretty unlikely, more likely you'd just get anarchy or the great depression x100.
The way i think this will play out is small local groups will use federated chaumian mints to issue local currencies. In red areas, these will be backed by bitcoin. Blue areas will go bankrupt before realizing they can't run forever without a functioning federal government, and the federal government won't be able to keep functioning without depending on seignorage.
Local governments that successfully maintain law and order will become way way more powerful, and the federal government will become increasingly irrelevant. They've already stopped enforcing the border as well as drug prohibition, basically because the incentives for people to break these laws vastly outweigh the cost of enforcing them. I think more things will move in that direction, and the feds will resort to taxing cities and states _directly_, rather than trying to tax an increasingly resentful and technology savvy population.
Not in America, because we are politically stable and have a sound financial system. But in Lebanon and Nigeria, this is totally a thing. People in lebanon hold up banks to get their own money out.
I wouldn't say the dollar is backed by the military, so much as it's backed by three connected factors: (1) the enormous size of the US economy, which makes US citizens pretty well off, especially compared to the rest of the world, and which also makes the US market highly attractive for many foreign firms, (2) the enormous slice of US production (25% of GDP) that citizens are willing to allow to be siphoned off by the Federal government as taxes, meaning basically 25 cents of every $1 that changes hands domestically passes through government possession in the form of taxes, and (3) that you can only pay taxes in dollars.
The combination of (2) and (3) mean there is intrinsically and always a huge demand for dollars inside the US economy, come hell or high water, because 1/4 of the economic activity simply *must* be transacted in dollars. What (1) adds is the fact that a great deal of word economic activity also ends up being transacted in dollars, because people want to sell into the world's biggest market, and the people in the world's largest market have a strong need for dollars (to pay their taxes).
I mean, imagine Amazon all of a sudden would only take payment in BTC, and then suppose for some strange reason a law is passed saying you can *only* buy toilet paper and soap from Amazon. Imagine the sustained and permanent demand for BTC! That's basically the shtick the Federal Government has set up.
Yeah, the MMT people say taxes are how currencies get established in the first place, and drives demand for the currency etc., that seems correct.
I'm not sure you can say the size of the US economy drives demand for dollars though, since the size of the economy (compared to other national economies) is measured in dollars in the first place. Basically "the US economy is bigger than other national economies" means US products /services have a higher dollar value, i.e. they exchange for a lot of dollars on international markets, so can trade against a lot of goods/services from non-dollar economies.
If the value of the dollar fell the US economy wouldn't be as big anymore, I think that's basically how international exchange works, definitely the relative GDP would go down, so "the size of the US economy drives demand for dollars" seems circular (unless you measure the size of economies in population or something, but the US isn't especially big by those measures).
Well, I would say *your* argument is circular. I'm saying the dollar is held up by the size of the American economy -- all the goods and services traded within it, something which is measureable without referring to dollars[1] -- and you're saying "well but if the dollar went to zero all those goods and services would be valued at $0."
I mean, that's technically true, but how does that happen? If the value of the dollar is derived from the size of the real economy, how does it go to zero unless the economy itself implodes? Generally speaking, the values of currencies are derived from the size and health of the economy, and not the other way around. It feels to me like you're mistaking price for value, and overlooking the fact that the former is derived from the latter, and not vice versa.
---------------
[1] You touch on this in your comment about measuring economies by population, but what you miss is that you can measure economic activity independent of population -- and independent of dolllars. Population certainly matters, but it's population times economic productivity, roughly, that you can measure. I can determine how many man-hours it takes to plant and harvest a bushel of wheat, or smelt a ton of iron, or synthesize 100g of amoxicillin, and I can measure how man-hours are going into those things.
> (1) the enormous size of the US economy, which makes US citizens pretty well off, especially compared to the rest of the world,
How much of this prosperity is due to us producing lots of useful goods and services, and how much is because we're the global reserve currency, so we have been able to borrow really cheaply for decades to fund an unsustainable system?
> because 1/4 of the economic activity simply *must* be transacted in dollars.
Why?
What stops people from doing underground transactions, especially if they can avoid paying taxes? If the dollar keeps losing value, bitcoin keeps getting more stable over time, and governments try to phase our cash for their surveillance money CBDC, what's to stop the "organized retail crime" rings from fencing their stolen goods for satoshis instead of central bank surveilance money?
My friend did work in entrepeneurial for a while. He told me that with business deals, he'd be asked about "how much coffee, how much cream". A typical deal was 80% coffee, 20% cream, which means 'how much of the money is taxable'. What would stop that from happening here?
It's my belief that this is already happening, as the labor force participation rate dropping indicates. I doubt these people aren't working; my guess is that more people are working under the table for cash because you get paid more AND you don't have to pay taxes.
> That's basically the shtick the Federal Government has set up.
People actually _want_ toilet paper.
What exactly is the fed selling? Protection, but from whom? China? People don't pay any more taxes than they have to. Once people start to earn money without paying taxes on that income, why would they ever go back?
*All* of the prosperity is due to people selling goods and services to willing buyers. How else? I certainly agree an artificially low cost of capital leads to foolish investments and economic inefficiencies -- which is reflected in crappy real economic growth -- but I don't see how it leads to fake prosperity. How would that work, exactly?
What stops most people from working off the books is the forest of laws that prohibit and punish it. Yes, I can hire an illegal to cut down a tree and pay him $500 in cash, and that works -- for a guy on the economic fringe, who is just scraping by. People in the illegal drug business can also earn fabulous sums, for a time usually much shorter than they think, by taking huge risks. Retirees can earn pin money babysitting, or tween selling lemonade, and nobody reports expense or income to the IRS.
But it doesn't work for most regular people who need regular-sized incomes and income security, and who aren't willing to risk committing crimes that can send you to pokey for a decade. A business with even modest revenue will file a tax return because otherwise the IRS comes knocking, and you can easily be put in jail for tax evasion and even longer for keeping two sets of books. Naturally the business wants to pay the least possible taxes, so they're going to deduct all the employee salaries from their gross revenues -- which means they're going to issue W-2s. And now the IRS knows about the money the employees make.
That doesn't mean it's not possible for the black market (in jobs and goods) from exceeding the size of the open market, it certainly is, but that represents an economy on the ropes, a citizenry at war with their own government, and it can only generally happen when the citizens can't change the government peacefully -- you don't have a democracy. I'm not saying the United States *can't* become a dictatorship with its economy in ruin -- but then if that does happen, I don't see the Internet working smoothly enough to enable blockhain transactions easily, and I particularly don't see that dictatorship being fine with a giant chunk of real wealth locked up in private hands that are within their physical reach.
What the Federal government these days is selling is largely income security. Socal Security, Medicare, Medicaid, CHIP and ACA spending, the EITC and various other Federal income assistance programs all together add up to about 57% of spending. An additional 13% goes to defense, 7% to interest on the debt, 7% to retirement benefits for Federal workers, 3% on education, and the rest is noise. In short, the Federal government is in the business of transferring enormous amounts of money from citizens who produce more than they consume to citizens who consume more than they produce.
Why the citizens as whole continue to vote to support this enormous interfering superstructure I have no good idea, except for Juvenal's acidic observation about bread and circuses, but as long as we live in a republic where the ants can outvote the grasshoppers, this is what we will have, and it has enormous power.
At some point the consensus breaks and everyone wants out, preferably before the coin loses all value. Or alternatively , it slowly declines into irrelevance while bleeding % every month.
This seems to contradict current evidence. The Fed is raising interest rates right now, as it has at many points in history, while you're predicting that every political interest would race to debase the currency as quickly as possible. Surely if that were true it would have played out that way? For that matter if these systems are so unstable, why have they persisted through so many of the most economically successful first world countries in human history?
“As quickly as possible” is always constrained by political reality. Nixon lied when he took America off the gold standard in 1971. Why did he do that, instead of saying, “good news everyone, we all know the gold standard is bullshit so now we can just stop pretending.”
As for “why have these systems persisted?” Any historical timeframe of less than 100 years is something I consider to be short term. It’s barely encompassing a single generation!
Viewed through this lens, it seems strange to pin one's hopes on a cryptocurrency created in 2008/09, which in turn relies on a scaffolding (the internet) that didn't exist in any form in 1950 and not in the form recognizable today until the 90s or so.
I'm one of those who believes the intrinsic value of crypto is zero, but one of the least critical things I can say about it is that its real-world application has not been road-tested for any of the scenarios for which it is supposed to hold the greatest promise.
This is a first world perspective. Bitcoin has already been used by people to preserve their wealth from oppressive regimes in Lebanon, Venezuela, Nigeria and Belarus.
I'm certainly not one to say that politicians should lie, but "populists are weirdly enamored with gold" seems like a rather simple explanation for why someone might lie. If merely telling people that the gold standard is known to bullshit worked, we wouldn't be having this conversation!
Your implied explanation is also possible, but this is very far from a knock-down argument.
In other words, whether the reality is "hard money limits the state's ability to steal from the people and is therefore good" or "hard money limits the state's ability to mitigate the disastrous effects of recessions and is therefore bad", you should expect a politician to lie about moving away from hard money because:
- the people who want to move away are happy with the reality
- the people who are unhappy with the change can be somewhat satisfied with the lie
i would imagine we should see this dynamic play out all over the place.... when there's a tricky, complex reality, expect politicians to ~practically~ select one side of a tradeoff, while rhetorically claiming that they are selecting the other side, as a way of satisfying as man people as possible
Not only your chain of future events is highly speculative, but frankly I do not accept even the previous, past steps. There isn't and there has not been any consensus on the idea that fractional reserve and fiat money are "a fraud".
Sure, that sequence of events is so specific that it’s unlikely to play out.
The broader, simpler prediction is that fiat money will lose its value because there is no inherent limit to its supply, and creating more of it satisfies immediate demands while posing only illegible risks for some unspecified future.
There WAS consensus that pure fiat money was a fraud but this consensus was eliminated around a hundred years ago with the rise of progressivism and a resulting state/academic alliance.
IMO, the bitcoin price is a function of two distinct groups. Bitcoin maximalists buy at any price, but they buy more when it’s recently crashed, like now. Some will not sell as a matter of principle, as they seem themselves as engaged in a Jihad against the status quo. Others will sell when the price gets “too high”, based on long term trends. I think this group is tiny and has the effect of putting a long term price floor on bitcoin . That floor rises over time as this group grows in size, and as halvenings reduce new supply of bitcoin. These people love it when bitcoin’s price drops because it means they can buy more cheaply. Again, this group is tiny.
The second group is “cryptocurrency speculators” who buy when the price is rising and sell when they think it’s low. This second group causes huge blowups and drawdowns, as these buyers aren’t sold on bitcoin as the future and are hoping to profit in dollars. These people a panic when bitcoin’s price drops.
The key dynamic that confuses everyone here is that bitcoin’s fixed total supply and decaying issuance schedule means that over time, coins migrate towards the true believers and mostly stay there. More true believers are born slowly, both every crash that doesn’t destroy bitcoin, and with people going down the rabbit hole that starts with “what is money” and ends with people realize that dollars have effectively unlimited supply and are likely to follow the path of every other form of unbacked, pure fist money in history.
You can find evidence for this theory looking at metrics like “coin data destroyed.” Lots of bitcoin haven’t moved in a year, which means that they are held by long term holders.
Ask yourself: what evidence has a true believer seem to make them doubt? What evidence have they seem to convince them their theory is right?
The use bitcoins have is in storing value over long periods of time.
The fact that bitcoins aren't moving is evidence that they are doing what the design intended to: acting as a store of value that can't be corrupted by theft or inflation.
But Bitcoin value so far goes down with inflation, and in the end will be deflationary by design. I am still not sure that in the long term it will turn out as you say.
No, bitcoin's value has not gone down with inflation. This is confusion.
Bitcoin's value went down, along with stocks, as cheap money went away. Inflation is tiny, just 10% a year. Stocks and bitcoin aren't falling 'because of inflation'. They are falling because the fed is raising rates, and raising rates cuts off the flow of money creation, which has the effect of reducing the number of speculative buyers.
So the price of bitcoin falling isn't people like me losing faith. It's miners selling at the rate they mine coins, and wave of new buyers drying. The reason the price isn't falling to zero is that there are some people who are happy to buy bitcoin at any price.
Honestly, if you think BTC can become the de facto currency of almost everybody *and yet* almost everybody will allow the first movers to become trillionaires because, welp, they got there first and fair's fair -- you haven't really thought through the nature of a republic and the nature of human beings.
If BTC ever *were* to become that important, you can be 100% sure The People will expropriate the wealth of anyone who happens to have gotten in so early his stake represents a massive share of the new currency. Certainly that expropriation will be swathed in a lot of noble talk about the good of the many, for what that's worth.
Here’s what I see happening: as fiat currencies fail with increasingly bad inflation, large scale holders will buy local political support with bitcoin. I expect lots of bitcoin donations to local police officer pension funds, for example.
So, suppose you have a bitcoin baron who has kept the local providers of law and order fed and paid. Say it’s the winkelvoss twins.
Who is going to take their bitcoin and how do they do that?
Carl, thank you for saying this. I've been thinking this for years but never run into anyone who agreed. Clearly I haven't been talking with the right people.
(Mark, I'm sorry that this will ping you. I don't want to pile on any more than I already have.)
Honestly, an even simpler solution would be to just copy the code, make a new crypto called PeoplesRepublicOfCrapistanCoin or whatever, and declare that the new currency. Money has value as long as people believe that it does; nothing would force them to use BTC specifically.
But even if that happened, why would anyone switch to a system that leaves them penniless while creating a handful of trillionaires. Even going back to the barter system sounds better than that.
Bitcoin incentives people to buy it because it can’t be faked. People still trust the dollar to hold value over long periods of time. That trust is eroding.
Individuals will choose to adopt bitcoin privately, to protect themselves from inflation.
Your argument is interesting, but I don't see why we should expect the number of bitcoin maximalists to experience net growth over time.
Gold is a similar asset to bitcoin: restricted supply, with antigovernment gold enthusiast investors ("goldbugs") who sing its praises. Goldbugs have lost mindshare over the past 10-20 years in my estimation. I remember seeing more goldbug libertarian memes when I was younger. The S&P 500 has been outperforming gold over the past 10 years, at least.
Like gold, BTC is not a wealth-producing asset.
2008 produced cynicism about the mainstream financial system. FTX collapse etc. will tar the reputation of a crypto alternative. Outsiders either don't understand the "not your keys not your coin" point, or else don't trust themselves to manage their keys securely / can't be bothered to deal with the hassle. DeFi will continue appealing to a niche audience, similar to gold.
IMO most price action is/will be driven by whales and institutions. Even if bitcoin maximalism as an ideology gains adherents, that may not matter, if whales & institutions are what control the supply and demand curves.
My general impression is that bitcoin pretends to be a hedge but in reality most price movements are driven by social media hype. That makes it a bad safe haven asset. Gold seems better in this regard.
I also think bitcoin has a decent chance of being displaced by a different coin that's technologically superior.
Try comparing stock market growth to the money supply growth.
There is going to be a monetary schelling point. If all fiat currencies are losing value to inflation and run by nation states that want to spy on everyone and censor their oppositions, bitcoin is your out.
A bitcoin, you actually own. Everything else is a piece of paper with your name on it, dependent on the good graces of a nation state to let you have what’s yours.
Perhaps you trust your political leaders not to scree you. This is a decreasingly popular opinion.
"Almost nobody wants to believe the dollar can fail."
Actually, a lot of people are aware that the dollar can fail; they've seen a lot of other currencies fail. But as a friend of mine said, "The US has been on a roll for 300 years and it's not likely to end any time soon." And as long as the US government demands taxes paid in dollars, there will be a market for them.
Isn't it the case that a bitcoin standard would make life worse for everyone but the rich? Economic activity would slow down as everyone hoards rather than spend or invest. Unprecedented inequality, with most people being slaves to an untouchable elite. A significant fraction of the world's energy output burned for proof of work.
If you're not a big holder, a bitcoin future is not in your self-interest. But if you think it's game-theoretically inevitable, you can make your future slightly less terrible by buying bitcoin now, thereby accelerating the slide down to hell.
Do you disagree and claim that a bitcoin future would actually make most people better off than they are now? Or do you believe that it will indeed make most people worse off, but it's inevitable anyway because people won't be able to coordinate to avoid it?
Yes, I disagree. I think hard money works far harder for everyday people because they can just spend less than they earn and save reliably, rather than being forced to participate in a complex system of politics that nobody understands and is controlled by the elites, ie modern financial markets.
The 19th century had mostly gold as money, and exhibited more growth on average than the 20th century.
Right now, with fiat money, elites can borrow against their stocks, at low interest rates. Concentration of wealth is therefore way worse under printed money, as the value of assets just grows indefinitely.
You say "concentration of wealth is therefore way worse under printed money, as the value of assets just grows indefinitely". My reading is that you're implicitly claiming that printed money is a primary cause of assets growing indefinitely (which I interpret as "existing in a regime of net asset appreciation across the whole economy rather than net asset depreciation") - this I disagree with - and that concentration of wealth is a consequence of net asset appreciation - this I agree with.
To provide a quick counterexample, there was a lot of concentration of wealth during the time leading up to the Great Depression, which was only really solved with abandonment of the gold standard, among other government interventions. I think the standard narrative is that the Great Depression couldn't really have been solved without eliminating the gold standard (or I suppose with some modern ideas like a wealth tax and/or universal basic income that have more or less the same impact). Certainly, this seems to argue against the idea that the gold standard protected against concentration of wealth.
My explanation for why hard money doesn't solve concentration of wealth goes back to Thomas Piketty's explanation for concentration of wealth: when the rate of growth of investments is greater than the rate of economic growth, then concentration of wealth necesarily results. Hard money doesn't really solve that, since people can still make leveraged investments, do high-frequency trading, etc., to invest in the stock market but grow faster than the market as a whole (and the stock market as a whole should grow about as fast as the economy in the long term, unless something funny and temporary is happening like decreasing dividends). As Piketty points out, these methods tend to work better for people who have a larger fortune to begin with, since things like leveraged investment funds and high-frequency trading houses themselves have upkeep costs, and people who are already rich get better economies of scale on them.
So I don't think fiat money is the primary cause of concentration of wealth. It might contribute to it, but at some point someone still has to come up with a better long-term way of managing concentration of wealth, so moving back to hard money doesn't seem to have an advantage in that respect.
(I have an implicit assumption that economic growth will continue in the long term, which I won't address because it seems pretty safe.)
I dunno, I think in order to become an aristocracy, the group needs to win CONSISTENTLY, not just win big one time. Early crypto folks seem to mostly be contrarian libertarians whose worldview allowed them to spot an opportunity when others were indifferent to it. If crypto had never happened, I don't see much of a chance they would have ended up vastly wealthy.
That just means that nerds that bought $100 worth of Bitcoin in 2010 and HODLd it are the new aristocrats. These seem to be related to the WSB "apes" that pumped GameStop to the moon.
The new aristocracy, in my opinion, will likely be people who got in on bitcoin early.
Almost nobody wants to believe the dollar can fail. Lots of stupid people gambled huge amounts on “crypto.” Lots of intelligent people fell for Vitalik Buterin’s Ethereum scam. To most supporters of the current aristocracy, and even many detractors - Bitcoin seems far too simple to be believable.
It's far too volatile on a short term basis for anyone except really confident, anti establishment people who are confident in their long-term prospects to buy into. Bitcoin is perfectly coded for a more meritocratically selected elite than “getting into the ivy leagues”, since all you have to do is buy some, and hold on while ignoring the old elites screaming at you they you’re an idiot. That takes a combination of confidence in yourself + distrust in the current elites + financial wherewithal to at least weather the storm.
I can't think of any group that's as confident about the future as bitcoiners, until you start getting into the territory of religions. Which is probably the right way to see bitcoin maximalism.
This, incidentally, is why bitcoin will fail eventually -- because society can't tolerate the idea that their new aristocracy is a bunch of unwashed geeks who happened to be interested in cryptocurrency in 2013 and were bull-headed enough not to sell in the following twenty years.
Society would rather tear itself apart than submit to the dictatorship of the crypto-nerd, I'm afraid.
Alternatively: while some form of cryptocurrency may be inevitable, why on earth should The Powers That Be choose Bitcoin to be that cryptocurrency? That's giving away money to all the wrong sorts of people (i.e., everyone who has supported Bitcoin so far). Instead, they could just start a new cryptocurrency and make Bitcoin illegal.
Why would the powers that be have any say in the matter? They are in the process of trashing the dollar, which underlies all their power. If the global south follows the lead of El Salvador and much of Africa, the powers that be can only watch as their empire melts.
This isn't a prediction of the immediate future, but of the long term. That's why I didn't specify any particular government or organization.
I think it's inevitable that at some point, a major world power will decide that some form of cryptocurrency would be useful for it's goals. (Unless the whole project turns out to be technically flawed.)
At that point, I think they will choose to create one of their own, rather than using Bitcoin. Why use a clunky prototype? Why reward all the then-current holders of Bitcoin, rather than being able to send that value to their own constituents and power sources?
Having chosen one of their own, why allow the competitors?
The Nigerian government tried this. People rejected their CBDC in favor of bitcoin.
Why would people choose state controlled surveillance money that loses value over time when they can choose open permissionless money that doesn’t?
I don't think the Nigerian government remotely counts as a major world power.
I actually agree with your 2nd paragraph. But to me, the key word is "choose".
[Edit due to mobile interface glitch:] What I'm saying is that no will be allowed to make that choice. Hence the part about a sufficiently powerful government.
Because they have the guns.
> They are in the process of trashing the dollar, which underlies all their power. If the global south follows the lead of El Salvador and much of Africa, the powers that be can only watch as their empire melts.
Inflation peaked at 9% annualized. Over the last year, the dollar has gained 6% on the Euro and even more on the Yuan. Inflation is expected to average 2.5% per year over the nexts 5 years.
In what sense is the dollar being "trashed"? And how is a year of 9% inflation supposed to cause an empire to "melt"?
One year won’t, of course not.
But what about 5? Or 10? How many years can the dollar lose 9% of its value before something fundamental breaks?
Where are those expectations coming from? The same people who said inflation was transitory?
From the treasury bond and TIPS bond markets - i.e. an almost ideal prediction aggregating the expertise of thousands of experts with significant skin in the game
Edit: See, for instance, https://fred.stlouisfed.org/series/T5YIE
What you mean here is "the regime said that inflation peaked at 9% annualized."
Lot of problems with that. One is that there's no reason to trust them to tell the truth. Two, lots of people might think it mean something like "The regime only debased the currency to the tune of 9%," which is terrible already and in fact understates the problem.
> One is that there's no reason to trust them to tell the truth
So, I've had conversations like this a number of times. The one time I got someone to actually provide concrete evidence, they gave three specific goods from receipts they had saved that showed price increases above the official inflation rate. However, when I checked the CPI subindices, they matched this person's lived experience, suggesting this person only disagreed with the weights the CPI uses. Shockingly, this person did not change their mind at all and gave literally zero reason to think the weights used in the CPI are biased. Given this experience, I'm extremely skeptical of people like you claiming the government is lying and inflation is dramatically higher than officially stated. Slightly higher? Maybe, there are a variety of methodological issues still being debated. But dramatically higher? Please give evidence.
You say it is "terrible already". According to what metric? The performance of the Federal Reserve in the last couple decades has been an enormous improvement over the previous several decades and are significantly better than most other central banks in the world. You mean terrible compared to perfection... sure, I agree. And? How is that either fair or useful?
Finally, except insofar as you are assuming (with no evidence) that the government is lying about inflation, in what sense is the problem being understated?
So, that recent SEC ruling that effectively said that Bitcoin was different from other cryptocoins, was not something I was expecting. Possibly the world is a little less grim than I'd thought. :-)
Do you think most of society is aware of the aristocracies depicted here? Why would the bitcoin aristocracy be legible to the public?
MODERATOR HAT ON: "lots of intelligent people fell for Vitalik's Ethereum scam" is a low-content, high-temperature comment - you're drive-by asserting a really controversial, potentially inflammatory thing and not backing it up. If you hated all crypto I would let it pass, because everyone knows the generic anti-crypto arguments by now. As it is I am officially chiding you.
MODERATOR HAT OFF: I still find this comment baffling. Bitcoin is up 10,000x and it hasn't produced anything like a new aristocracy. I can't think of any notable pure Bitcoin billionaires or multimillionaires besides Satoshi. Even though there have to be some, they've made so little imprint on the culture that even I, who pay attention to the tech social world, can't think of them. The only people from crypto who I think are even part of the tech aristocracy, let alone the general aristocracy, are Vitalik Buterin and maybe some of the Coinbase people, and maybe a few others I forget (and until recently SBF, RIP). And this is less because of their fortunes than because Vitalik, Balaji, etc seem intellectually interesting.
Even if Bitcoin went up another 10x, it would produce, what, another couple billionaires and another crop of multimillionaires. So what? That's like as many as Google has produced, and Google hasn't become a new US aristocracy. But even if it produced many many more billionaires, I don't think they would have the networkedness, clout, and intellectual reach necessary to become a new ruling class - again, even tech considered as a whole and including crypto hasn't done that.
They were famously rich before entering crypto...
But they're still best known as the guys who got Zuckerberg'd
I am thoroughly fascinated by this moderation input here. I’m sure that you are simply par for the course as far as your normal boundaries of moderation go, but that it’s over ethereum/crypto (or rather perhaps the imputed insult to someone who did/didn’t ‘fall’ for how ethereum is structured or what happened to it, or something along those lines, or the imputed insult to Vitalik) is what’s so very interesting.
I’ve been following the crypto collapse closely, but hadn’t followed the industry since I thought it left reality somewhere after bitcoin went over $1k. So I don’t know every jot, swerve, and history of the past ten years and only picked it back up in February.
I’m a jail cop who loves economics, but my circle doesn’t have many people in it who are into crypto as you may have guessed. Hence my curiosity and this question: if you feel it has to be moderated, I’m sure you’re right and that kind of thing is stirring up animosity, but is it that bad out in the Bay Area? Or maybe more among your readers/commentators?
The reason I even mentioned it is I could imagine saying something I think is obvious about any given topic, ….and then do to my ignorance about what people are sensitive about now, I am then warned/given the evil eye/permanent poor grade mark on my report card as a decent chap who doesn’t say nasty or insensitive things to strangers he’s having a conversation with.
I could see the line you are officially chiding as being a throwaway comment by the poster (I of course don’t know that it was), but yes I could see someone who is sensitive about that topic getting very up in arms and defensive if they’ve staked their life savings in assets that had recently lost a lost of value.
But compare it to what I’m sure most people on this forum would consider another throwaway line; ‘lots of otherwise intelligent people fell for that line in the Bible about Noah bringing two of every kind on the ark and seven of a few kinds’ and if I said it around half the people I know and am friends with, I would have a major controversy and have started half a dozen fights. I’d have to worry about my kids being allowed to play with other kids because their interpretation of that would lead them to think I don’t believe in the Bible and am on the slippery slope to atheism. (And about ten percent of the parents would think, ‘how many conversations that my ultra literal interpretive friends are going to insist on having do I now have to have with them?’)
I am of course not questioning/challenging your moderating or or the issue here at all. One of the reasons I like reading here is there is non-insulting engagement going on across many topics and I’m genuinely interested in following the conversations. It’s great! I’m also sure that it requires a decent amount of moderation, but whatever the exact philosophy is seems to be working.
That said, What if I am simply not plugged in enough to know that I’m insulting or considered baiting? Do I get a ‘Yokel pass’? ‘I didn’t know I wasn’t supposed to sound dismissive about X action occurring in Y topic! I didn’t notice that trend because I only meet up with that crowd who would know that allowing my to figure it out through conversational osmosis once a year, twice if I’m super lucky! I have to be careful about how I phrase which elections were stolen and by whom at work for God’s sake! I just taught these people that there was more than one crypto currency a month ago!’
You get my point I’m sure. I want to take part in these conversations on occasion, but oy please be gentle as i sometimes possibly bring my own and sometimes other’s very different cultural outlooks in with me.
Also postscript I think you’re dead on about moderator-off comment on crypto not really changing the face of who the ruling class it. A few new entries, nothing other of real note any time soon.
I think we should all expect to stumble across norms we weren't aware of, or use words that imply things we didn't intend, fairly regularly as we interact with a broad community of internet folks.
Getting a warning (from a sane moderator, which I believe Scott to be) isn't so much a "permanent poor grade mark on your report card" as a way of making you aware of your mistake so that you can learn from it. If you repeat the mistake after being warned it may become a permanent poor grade mark.
Mild negative feedback is, in general, a *good* thing - it means you are learning new things, have a chance to improve, and the person giving you the feedback still has hope for a positive relationship with you.
I think it's in general easy to tell the difference between someone obliviously blundering over battle lines in a conflict they are unaware of and someone deliberately engaging in an ongoing political conflict.
And what exactly has happened to ethereum, apart from the general crypto crash which doesn't seem to have had affected it disproportionately? The eth/btc chart has been ~flat for over a year.
I'm very glad Scott gave me the warning he did. I don't want to be a Yokel.
Perhaps that could be adopted as a specific warning: ‘you don’t appear to understand what you violated, but here is why I’m warning you. This is a Yokel Warning, level 1. You really didn’t know you stepped on toes.’ As opposed to a ‘level 5’ where you truly didn’t know you are wrong and there is ample, culturally wide, easily accessible evidence contradicting what you believe. ‘I truly didn’t know that slavery was bad and happened in this country and the holocaust wasn’t just made up!’ This Yokel warning comes with a ban that includes a list of evidentiary books, articles, and links to news that would convince any rational person that the thing being referenced is settled beyond all reasonable conversation.
“I don't think they would have the networkedness, clout, and intellectual reach necessary to become a new ruling class - again, even tech considered as a whole and including crypto hasn't done that.”
That sounds like it could have been written by a New York Times columnist playing defense for the Bluecheck crowd. It is not clear to me at all that the East Coast meritocrats have forever beaten the West Coast STEM nerds and their allies.
For instance, what if one of the tech elite (Elon?) pivots to use their wealth and social media platforms to authentically speak for flyover-land against East Coast meritocracy?
I don't see anywhere near the significant cultural difference between Silicon Valley STEM nerds and PMC managerial types that so many people here seem to.
In particular, I've seen vanishingly little evidence that tech types are any less convinced that their intellectual superiority to the rest of the population gives them a natural right to higher status.
The vast majority of Silicon Valley STEM types have *exactly* the same 'Blue Tribe' meritocratic political and cultural views and attitudes as their PMC counterparts. And the minority who don't--the 'Grey Tribe'--seem even *less* inclined toward populism or noblesse oblige, as shown by, e.g, their inclination toward right-libertarianism or their frequent emphasis on IQ as the greatest source of an individual's value.
I don't really where to put this, but, to my experience, crypto-fans are not techies. About 80% of my friends work in IT, and none of them has ever had any interest in crypto, even when they were required by their employers to work on that. Crypto-fans are mostly... normal people. I mean, SBF and his friends are not techies: they were junior traders and bankers, something quite far culturally removed from "techies", and quite into the "traditional elites" space. I do not see how crypto-fans can be an alternative elites, since they are not separate from the traditional elites.
I would agree that crypto-fans and tech are disjoint groups. But the one thing they have in common is that they both chafe against the institutional powers jealously guarded by East Coast bluecheck meritocrat wordcel elite.
Moderator comment response:
Thank you for the clear warning.
I can see how this is different from saying 'all of crypto is a scam', and I can see why most people haven't internalized the argument that all of crypto _except for bitcoin_ is a scam.
Thank you for articulating a general principle i can abide by: it is wise to understand which arguments are known, even if not accepted, by the audience you are speaking to, and to have a reasonable model of anticipating what will be inflammatory by the standards of that specific community.
I think that this community is not _aware_ of bitcoin maximalist or the arguments made by bitcoin maximalists. I'll attempt to share that perspective here.
We believe that all of cryptocurrency is a scam, with the sole exception of bitcoin.
Fortunately there's even a new York times article about this perspective
https://www.nytimes.com/2022/08/02/technology/crypto-bitcoin-maximalists.html
Hopefully having the NYT describe the movement without saying we are racist doesn't wreck your trust in this movement as credible. If it will help, there are plenty of arguments by the NYT saying bitcoin is evil elsewhere.
Here's the key bit: “Bitcoin is decentralized, digitally scarce money. Everything else is centralized.”
Bitcoin was a breakthrough in theoretical computer science. Proof of work + longest chain solved the byzantine generals problem in a way that didn't require trusting in some set of third parties. I don't think most people have the technical background to really understand the details of this. That means they are left to evaluate arguments based upon their level of trust, which i think comes down simply to shared values.
They get hints of these values based upon the following properties that are unique to bitcoin.
Bitcoin has the following properties that no other coin does:
- no one in charge of it
- circulated in the wild for about a year with zero value
- no 'premine' where the founders kept coins for themselves
No other coin has these properties. Someone is in charge of all of them, which means they are all effectively centralized and subject to decision making by some central party. In the vast majority of cases, these pre-mines made the founders incredibly wealthy.
I'm more than happy to explain why Ethereum, in particular is a scam, in particular.
Ethereum has the following properties:
- It has been sold as decentralized, but there is clearly a group in charge.
- 71% of all Ethereum were created in a 'premine', which included 10% given to the ethereum foundation, and 60% given to intial investors in ethereum. This is THE SAME MODEL that every other ICO scam does: initial investors get most of the tokens, price goes up, they dump on bag-holders later. See details here:
https://www.cryptoglobe.com/latest/2018/10/vitalik-buterin-under-fire-over-ethereums-premine/
- They used phrases like 'code is law.' Once the DAO hack happened, they decided that code _wasn't_ law, so they reached out to exchanges and said 'stop all trading on Ethereum'. This is making a promise and then breaking it. Code isn't law if the people in charge of ethereum can stop all trading in ethereum.
- The move to ethereum 2.0 and proof of work hinges on how secure proof of stake is. Vitalik argued that proof of work is secure, >>>>>so long as we re-define secure to not solve the single most important problem bitcoin solves<<<<
The experience of being in the field of distributed computing, deeply understanding distributed systems, and seeing what is happening here is frustrating because it's damn near impossible to communicate to outsiders how bad these lies are. They hinge on seemingly arcane technical details like what, precisely a 'security model' is.
If 0 is 'knowingly telling lies in order to raise money' and 1 is 'you honestly believe what you are saying to be true, but you've suborned your commitment to the truth to your desire to succeed in your project', i think ethereum is close to one.
If it's fair to call FTT, the FTX token with a huge preime and only 3% of the tokens actually circulating a scam, then i think it's also fair to call ETH a scam.
Sorry for not making this more clear earlier. I'll try to do better to say something like, 'there's a longer argument to be made here', and make it clear that I'm espousing beliefs that are not yet considered reasonable inside the community.
What a fantastic response to mod pushback. Thanks for the clearly articulated response, and for the education. I trend generally skeptical about crypto, but vaguely lumped ETH and BTC together as comparatively stable and trustworthy. I hadn't really thought about the fact that BTC is unusual in having no public leaders.
Thank you! Yes, the bitcoin community sees itself as fundamentally apart from the rest of “crypto”, which we see as a series of inferior copies of bitcoin made by people who don’t understand why bitcoin was a theoretical breakthrough, sold to unwitting people who don’t know the difference.
Very useful and interesting comment, thanks.
Solid argument for that part. However all bitcoin is a just a crypto token. You can create unlimited amount of these( well technically limited by computational and energy resources).
It does not have any fundamental value. And fundamentals even in 21st century. Even in pure AI future will still be same - space and energy. Aka land and resources. Plus power to exert actual control over them
Crypto secured distributed token on essentially unforgeable ledger
Is a great piece of technology. However its just that. And not even nearly as monumental as nuclear power. Or Internet. Or flight
More like vhs vs CD
Well, additional bitcoin is impossible to create in the same way that your home printer can't print American dollars.
People can make as many *new* cryptocurrencies as they want, but that has about as much effect on Bitcoin as your home-printed MaxDollars do on the US Dollar
Quite late here, but I think Monero mostly passes your criteria (not sure what the initial value was, but there was no premine and no central control), and it even has a clear use case and is actively used as a medium of exchange. It's an antisocial technology and will probably never be adopted as a store of value, but I'm comfortable saying it's not a scam.
Response to non-moderate comment:
The only way to make sense of this perspective is to put on the bitcoin maximalist perspective. It's far too difficult to share that perspective and argue for its validity, so i'll mostly focus on the former.
Bitcoin maximalists will think bitcoin is still in early stages until it is globally accepted by basically every investor that bitcoin is a better store of value than gold, and that fiat currencies are doomed to inflation forever. The gains that you are describing, we think are still likely to come. I don't have any doubt bitcoin will hit $1,000,000 eventually, because i think this is where the incentives of al particpants lie. Bitcoin maximalists see bitcoin as a game theoretic black hole that eventually will suck in everyone.
This probably sounds crazy. So maybe it helps to mention Moloch here. Bitcoin maximalists think the dollar is currently being eaten by Moloch. Bitcoin maximalists think fiat money is Moloch money, and that sound money helps to keeps Moloch at bay by allowing Moloch to devour smaller systems before they get too big. Bitcoin Maximalists believe that fiat money has the effect of allowing corrupt systems to grow faster than non-corrupt systems, because growth can be sustained forever by getting closer to the money printer and convincing the money printer that you share its values.
Bitcoin Maxiamlists are betting that Moloch will eat the dollar system alive, as its participants all follow their incentives, which leads to the infinite creation of dollars, because printing more money is always better in the short term, but incurs some illegible long term cost and risk.
(Aside: Me, personally, i view trade networks as being distributed AGI's, and I view fiat money as an AGI figuring out how to wirehead itself. If I can do $10 worth of good, i can do $20 worth of good by printing another $10!)
Bitcoin maximalists believe that all fiat currencies will collapse in value, and the world will return to the kind of sound money system that dominate the world _before_ world war 1.
We think sound money was hated by governments (because it limited their power) and bankers (because it exposed them as lying when they printed receipts for gold in excess of the gold they actually held.) We think the transition into fiat money was done by a series of fraud and theft:
- Banks printed receipts for gold in excess of their reserves, because it was literally printing money. We consider this to be fraud, not too different from what SBF did.
- The instability of bank runs was a result of bankers telling lies (issuing receipts in excess of their true holdings). Given the choice between 'stop lying' and 'build a system to make the lie true by forcing everyone to play along with it', both politicians and big bankers chose the later. They conspired to form the federal reserve bank, to keep the game going.
- When world war 1 broke out (hello again, Moloch!) the UK issued bonds to fund the war, but investors said, no thanks. So the bank of England engaged in the first QE ever, printing money to cover 2/3 of the value of this bond. They lied about it for ~100 years, and it only recently came to lighit: https://www.businessinsider.com/bank-of-england-covered-up-war-bond-failure-in-1914-2017-8
Do you see why we think fiat money helps moloch? World war 1 would not have happened with honest money. It required banks lying, and working with mass media to tell lies.
- printing all that money put the bank of england at risk of being found out, so the bankers reached out to their american friends, who were more than happy to help print more money too, causing the boom of the 1920's and the, of course, eventually crash
- the crash was blamed on 'the gold standard' rather than the fact that everyone was lying about how much gold there actually was
- privately held gold was then stolen from citizens by Executive Order 6102, in order to 'mark the gold price to market'. If citizens could actually hold onto their gold, there would have been price discovery showing how bad the printed money had gotten.
- after world war 2 the US promised everyone at bretton woods they would back the dollar by gold, and then immediately started printing in excess of their reserves. The worlds was now on a 'gold standard' but it was only accessible to nation states, and the US was already lying about their reserve ratio.
- When nixon took the US off the gold standard in 1971, he said this was 'temporary.' Why?
I grew up in history class being told that the gold standard was bad because it prevented banks from lowering interest rates to stave off depressions. But if that's true, why didn't we leave the gold standard until 1971? Why did nixon lie when we did it?
From our perspective, Every aspect of the dollar system produces incentives for its participants, and the short term incentives for elites are always to print more money. We have been betting hard on inflation for years. In 2018 when i tried to sell people at Google on bitcoin, a lot of people said, 'why are you worried about inflation?'
In 2020, I left Google, a giant profitable company, for snapchat, an unprofitable company. Yet my compensation doubled, and the comp was entirely liquid. Does that make ANY sense? To get paid twice as much to leave a profitable company for an unprofitable company, without taking on risk like, 'what if the company fails'?
From the bitcoin maximalist perspective, what SBF did has much more in common with the global financial system for the past ~100 years than it does with bitcoin. The aristocracy that i expect to rise won't happen until the following events that i expect:
- giant economic crash hits, probably in 2023, due to the fed raising rates faster than ever before despite more revolving debt than ever
- CBDC's are offered as the solution. "We need to keep rates high to fight inflation, but here's some free money so you don't riot, the only catch is that we monitor all your transactions and limit what you can spend it on to socially approved causes"
- people ditch the BidenBucks as quickly as they can ,for whatever goods they can resell on the black market for 'real dollars', and soon the price of the two diverges so bad that nobody is willing to pretend that CBDC's are worth the same as 'real dollars'
- inflation doesn't actually go away because the federal government has so much revolving debt, they'll need to print money to keep themselves solvent with interest rates at 5%
- thus the dollar keeps losing value over time, other fiat currencies get worse, and eventually foreign central banks follow El Salvador's lead in a bid to stabilize their currency
> even tech considered as a whole and including crypto hasn't done that.
It kind of has. Nobody in human history has ever had the kind of reach of Joe Rogan + Elon Musk. I think that trend will continue. I think we will see absolute chaos for a while, and the people that come out of that chaos doing well are going to to be people huge followings. If nothing except for bitcoin can hold value over time, bitcoiners will likely use their bitcoin to buy people's loyalty, just like what happened in Rome with the system of patronage.
It may be worth adding that if the 'bobo' thesis is true, it's not like the old elite _died_. They're still around, and the bush family still has power and influence. There are simply two elites jockeying for power with each other. Maybe a third comes in, and absorbs some of the old elite with more libertarian leanings. Like the winkelvoss twins, i expect to see the trend of 'bitcoin is money for libertarians and some republicans' get amplified, until eventually you have the GOP saying america needs to go on a bitcoin standard.
This is a wild ride you've got us all pegged for. I have zero technical expertise in this area and so won't dispute anything in particular you've said, but in my experience, predictions that require a precise chain of events like this usually don't come true.
Come back to this thread in a few years and let’s see how well it ages.
The piece that most people seem to be unable to grasp is that the dollar is likely to fail.
Ray Dalio, who runs the world’s largest hedge fund, foresees a similar chain of events but he thinks nation states will ban bitcoin.
From my perspective, I’m simply looking at something like a chessboard. There are only so many moves a central banker can make. Raising rates too high makes revolving debt too expensive. Lowering them too soon triggers inflation. Not lowering them soon enough triggers a crash. No reason to think it’s possible to somehow stick the landing.
Ok, let me make a note in my calendar for December 2nd, 2023
If precisely none of your predictions have come true by then, how will you update?
Dollar will fail. No doubt about it. But what is gonna replace it is cbdc. Or at least that's what will get serious push behind it
Other alternatives (distributed secured crypto tied to something actually valuable) are not present yet
> I don't have any doubt bitcoin will hit $1,000,000 eventually, because i think this is where the incentives of al particpants lie. Bitcoin maximalists see bitcoin as a game theoretic black hole that eventually will suck in everyone.
[...] Bitcoin maximalists think fiat money is Moloch money,
This "black hole" metaphor makes it sounds like bitcoin is Moloch money rather than fiat...
Moloch is all about screwing people over by convincing them to act in their short term interest while igonring long term consequences.
Bitcoin tells people, 'just save for the future. Don't worry about anything else.'
Bitcoin enables freedom from oppressive regimes. It's used by people to safeguard themselves and their families in countries with dictatorships. Does that sound like moloch to you?
Bitcoin requires every user transacting with it to burn value in a tallest-trees competition for places in blocks, and every miner to continuously burn value in a tallest-trees competition to create blocks. Even if you think everything else is worse, this is very much Moloch.
(Moloch is about screwing people over by convincing them to act in their local interest, not (only) short-term interest, while ignoring negative global, not (only) long-term, consequences. It only becomes what you describe when Moloch has someone play the game against their past/future selves rather than other people.)
You are ignoring the lighting network and the enormous cost of maintaining fist money.
Bitcoin is far faster and cheaper and more environmentally friendly than the fiat networks., which need the US military to prop them up.
Meanwhile, bitcoin makes renewable energy more economically feasible by acting as a buyer with infinite demand below market price. The world’s oldest hydroelectric plant was brought back online because bitcoin mining made it it feasible.
Moloch makes politicians in every country play against their opponents to deliver value to voters now. If you create systemic risk by doing so… well… the other guy will, so what choice do you really have? This is why deficits kept going up every year.
Bitcoin is also WILDLY volatile; it's gone through several boom-and-bust cycles already. Don't you think that this volatility would have an impact on its use as a store of value? If you have $100,000 USD saved up in BTC, it might be worth $25k next year and $200k (inflation-adjusted!) five years from now.
Do you think its volatility is an intrinsic property of bitcoin?
My perspective is that it’s only volatile because it’s a tiny, tiny asset class with deeply inelastic supply. I expect that it will be less volatile as it’s market cap grows over time.
I was mainly remarking that 'getting sucked into a game theoretic black hole' sounds exactly like Moloch to me. I guess your point is that once everybody is sucked in we'll be in an awesome utopia thanks to the sound financial system (rather than some kind of dystopian hellspace which is the usual Molochian destination). I'm skeptical about this, but I was also skeptical that bitcoin would ever go past ~$0 initially, so it's not like I have any kind of track record to boast of here.
> Bitcoin maximalists believe that all fiat currencies will collapse in value, and the world will return to the kind of sound money system that dominate the world _before_ world war 1.
I can't say that I take this idea at all seriously. Monetary systems prior to WW1 were *awful*. The US and Europe experienced extremely frequent recessions and panics at this time, most notably https://en.wikipedia.org/wiki/Long_Depression which arguably lasted for *20 years*. A gold standard is among the most unpopular ideas among economists (https://www.igmchicago.org/surveys/gold-standard/), perhaps even worse than rent control, and for good reason. You can see how much worse it was in a graph like this one: https://fred.stlouisfed.org/graph/fredgraph.png?g=X3Vq
All of the following theorizing is severely undermined by the frequency and severity of panics in this time period in contrast to what has happened since, as well as by observing the political situation in Europe (there was a lot more that caused WWI than banking).
Money generally serves 3 purposes: a medium of exchange, a store of value, and a standard measure of price. Anything which can vary wildly in price is obviously not reliable for any of these purposes: If you store it, you might lose everything; if you try to exchange it or compare prices, then what you can exchange it for won't be reliable. So far, bitcoins has this extreme volatility in spades.
Also, while hyperinflation is known to be bad, *deflation*, which is what you will get if the money supply is fixed, is also very bad, see e.g. https://en.wikipedia.org/wiki/Deflation#Deflationary_spiral
More fundamentally, I don't think the problems that BTC fixes were very large, and the way it does so is very costly. Most transactions don't require you to be able to verify the entire history of the currency from both parties; I can be fairly confident that most of my business is not performed with stolen money. The cost to the economy of theft is much lower than the energy cost of mining bitcoin. It's certainly an innovative CS solution to the question of "how do you ensure that exchanges are legitimate?" But social trust and basic policing accomplishes the same thing for much cheaper.
The instability was due to bankers lying about their deposits. They’d issue far more reciepts than they had. This is lying.
The gold standard doesn’t work, for that reason. It’s impossible to tell if the banks are “pulling a Sam Bankman Fried” and gambling with customer deposits. It’s far too hard to call BS on a bank that’s lying because taking custody of gold is costly and expensive.
Bitcoin fixes this by making it much easier to verify a bank’s assets and for people calling BS to take custody of their assets directly.
Bitcoin’s volatility is just a function of it being new and tiny. You can see it’s gone done over time. I think it’s intellectually honest, when considering the volatility to also consider that it’s almost entirely ~upside~ volatility.
You are ignoring the main benefit of bitcoin: can’t be inflated away. If you think “theft” is the problem is solves, you might consider doing more research.
There was a lot more to 19th century recessions than just bankers lying. Anyone finding a new deposit of gold or silver would cause problems. If there had been a sufficiently large change in the supply of either when the gold-standard and silver-standard parts of the world depended on France to keep them in balance, then international trade would have become vastly more difficult. High volatility in a currency is absolutely horrible; there is no "good" or "upside" volatility in this context. Bitcoin rising in price is good for early investors; similarly, hyperinflation is good for people who owe money denominated in the inflated currency, but it's overall bad for the economy. Deflation--which is what inevitably will happen if the amount of the currency is capped but its use, and therefore demand, increases--is very very bad.
"You are ignoring the main benefit of bitcoin: can’t be inflated away. If you think “theft” is the problem is solves, you might consider doing more research."
Ensuring that transactions are happening with legitimate money is a real thing that a bitcoin-like system could theoretically do. In contrast, "cap the money supply at X" is a solution to inflation the same way that a leaky pipe in your house can be solved by blowing the house up. If this is really the goal of bitcoin, then in my mind it has gone from "interesting and novel but overhyped" to "all-time bad ideas in economics."
There are no “bitcoin mines” to be discovered, so we don’t have to worry about that. Bubbles come from huge sudden bursts in supply, which do not exist in bitcoin.
Deflation is only bad if you think the credit-induced bubbles are good. If economic activity gets to an unsustainable pitch, what do you think should happen? The current systems says, “keep the game going at all costs regardless of how unsustainable it is!”
I left a job at Google for one at Snapchat, and doubled my compensation while taking on zero risk. Why should I earn more money leaving an deeply profitable company for one that’s burning cash? How does they make sense?
> I don't have any doubt bitcoin will hit $1,000,000 eventually, because i think this is where the incentives of all participants lie.
The total wealth of all the world's bitcoin maximalists, or even bitcoin highly-enthusiasts, is way less than $21 trillion. Therefore, in order for bitcoin to hit $1,000,000, someone who isn't a bitcoin maximalist/enthusiast/whatever will have to part with one million actual US dollars to buy one bitcoin. That person, really a whole lot of people like that, is a necessary participant in the system.
How is it in *their* interest for the price of bitcoin to be $1E6? I have a million dollars. Hypothetically, I want to buy bitcoin. Why would I want my money to buy one bitcoin when it could buy ten or a hundred? There are scenarios where I am *indifferent* to the dollar value of a bitcoin, but I'm not seeing one where it would be in my hypothetical interest for my megabuck to buy me one bitcoin instead of ten,
What am I missing?
Suppose that’s the market price of bitcoin, and inflation has been 10%+ for 5 years straight and they are still printing lots of money.
You're arguing in circles. You claim the market price of bitcoin will be one million dollars, and when asked why you say because everybody will want to buy and sell bitcoins for one million dollars. When asked why they'll want to do that (obvious for the sellers, not so much the buyers), your answer is "suppose that's the market price of bitcoin"?
For my part, I suppose that the market price of bitcoin *isn't* one million dollars, and I don't see enough people wanting to change that to matter.
The easiest way to answer this question is to turn it around.
Why do you think the price is $16,000 today, instead of zero?
Could you argue reasons that this might happen to someone in 2012 with only evidence available then? Back then the highest bitcoin had ever gotten was $30 during a crazy bubble in summer 2011. At mid 2012, it was hovering around $10. Why would it possibly go up to some absurd number like $10,000?
Well that was a wild read.
I agree the future of the current monetary system looks pretty bleak and uncertain, I also hadn't really considered that blockchain creates a whole new game-board for game-theoretic games to play out on (nut sure how how to judge how significant that will turn out to be, not very is my first guess).
But isn't the dollar ultimately backed by the US military (petro dollar, reserve currency etc.)? wouldn't it require the US state to lose the monopoly on violence for the dollar to collapse?
Also what about states that just don't have much patience for these money games. I could easily see China just taking direct command of the economy if the monetary system failed, they've already cracked down on bitcoin.
I also think bitcoin creating a stable economy after the collapse (or ever) seems pretty unlikely, more likely you'd just get anarchy or the great depression x100.
And come on, no way bitcoin is anti-Moloch, that's just silly.
>wouldn't it require the US state to lose the monopoly on violence for the dollar to collapse?
You can't use violence to convince people to accept something that doesn't hold its value.
Your battleships mean nothing to people who are determined not to starve or lose everything they have.
> Could easily see China just taking direct command of the economy if the monetary system failed, they've already cracked down on bitcoin.
China's government is more authoritarian and competent than America. They already have the great firewall. Yet _even they_ haven't been able to stop bitcoin mining in china! If China can't stop mining, and republican politicians are already coming out as pro bitcoin, what chances does America have to stop bitcoin transactions?
> also think bitcoin creating a stable economy after the collapse (or ever) seems pretty unlikely, more likely you'd just get anarchy or the great depression x100.
The way i think this will play out is small local groups will use federated chaumian mints to issue local currencies. In red areas, these will be backed by bitcoin. Blue areas will go bankrupt before realizing they can't run forever without a functioning federal government, and the federal government won't be able to keep functioning without depending on seignorage.
Local governments that successfully maintain law and order will become way way more powerful, and the federal government will become increasingly irrelevant. They've already stopped enforcing the border as well as drug prohibition, basically because the incentives for people to break these laws vastly outweigh the cost of enforcing them. I think more things will move in that direction, and the feds will resort to taxing cities and states _directly_, rather than trying to tax an increasingly resentful and technology savvy population.
>Your battleships mean nothing to people who are determined not to starve or lose everything they have.
Who is this? This describes almost no one. No one is starving or losing everything they have.
Not in America, because we are politically stable and have a sound financial system. But in Lebanon and Nigeria, this is totally a thing. People in lebanon hold up banks to get their own money out.
I wouldn't say the dollar is backed by the military, so much as it's backed by three connected factors: (1) the enormous size of the US economy, which makes US citizens pretty well off, especially compared to the rest of the world, and which also makes the US market highly attractive for many foreign firms, (2) the enormous slice of US production (25% of GDP) that citizens are willing to allow to be siphoned off by the Federal government as taxes, meaning basically 25 cents of every $1 that changes hands domestically passes through government possession in the form of taxes, and (3) that you can only pay taxes in dollars.
The combination of (2) and (3) mean there is intrinsically and always a huge demand for dollars inside the US economy, come hell or high water, because 1/4 of the economic activity simply *must* be transacted in dollars. What (1) adds is the fact that a great deal of word economic activity also ends up being transacted in dollars, because people want to sell into the world's biggest market, and the people in the world's largest market have a strong need for dollars (to pay their taxes).
I mean, imagine Amazon all of a sudden would only take payment in BTC, and then suppose for some strange reason a law is passed saying you can *only* buy toilet paper and soap from Amazon. Imagine the sustained and permanent demand for BTC! That's basically the shtick the Federal Government has set up.
Yeah, the MMT people say taxes are how currencies get established in the first place, and drives demand for the currency etc., that seems correct.
I'm not sure you can say the size of the US economy drives demand for dollars though, since the size of the economy (compared to other national economies) is measured in dollars in the first place. Basically "the US economy is bigger than other national economies" means US products /services have a higher dollar value, i.e. they exchange for a lot of dollars on international markets, so can trade against a lot of goods/services from non-dollar economies.
If the value of the dollar fell the US economy wouldn't be as big anymore, I think that's basically how international exchange works, definitely the relative GDP would go down, so "the size of the US economy drives demand for dollars" seems circular (unless you measure the size of economies in population or something, but the US isn't especially big by those measures).
> taxes are how currencies get established in the first place,
Can you share an historical instance of this happening, where a new currency comes into being specifically for the purpose of paying taxes?
Well, I would say *your* argument is circular. I'm saying the dollar is held up by the size of the American economy -- all the goods and services traded within it, something which is measureable without referring to dollars[1] -- and you're saying "well but if the dollar went to zero all those goods and services would be valued at $0."
I mean, that's technically true, but how does that happen? If the value of the dollar is derived from the size of the real economy, how does it go to zero unless the economy itself implodes? Generally speaking, the values of currencies are derived from the size and health of the economy, and not the other way around. It feels to me like you're mistaking price for value, and overlooking the fact that the former is derived from the latter, and not vice versa.
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[1] You touch on this in your comment about measuring economies by population, but what you miss is that you can measure economic activity independent of population -- and independent of dolllars. Population certainly matters, but it's population times economic productivity, roughly, that you can measure. I can determine how many man-hours it takes to plant and harvest a bushel of wheat, or smelt a ton of iron, or synthesize 100g of amoxicillin, and I can measure how man-hours are going into those things.
> (1) the enormous size of the US economy, which makes US citizens pretty well off, especially compared to the rest of the world,
How much of this prosperity is due to us producing lots of useful goods and services, and how much is because we're the global reserve currency, so we have been able to borrow really cheaply for decades to fund an unsustainable system?
> because 1/4 of the economic activity simply *must* be transacted in dollars.
Why?
What stops people from doing underground transactions, especially if they can avoid paying taxes? If the dollar keeps losing value, bitcoin keeps getting more stable over time, and governments try to phase our cash for their surveillance money CBDC, what's to stop the "organized retail crime" rings from fencing their stolen goods for satoshis instead of central bank surveilance money?
My friend did work in entrepeneurial for a while. He told me that with business deals, he'd be asked about "how much coffee, how much cream". A typical deal was 80% coffee, 20% cream, which means 'how much of the money is taxable'. What would stop that from happening here?
It's my belief that this is already happening, as the labor force participation rate dropping indicates. I doubt these people aren't working; my guess is that more people are working under the table for cash because you get paid more AND you don't have to pay taxes.
> That's basically the shtick the Federal Government has set up.
People actually _want_ toilet paper.
What exactly is the fed selling? Protection, but from whom? China? People don't pay any more taxes than they have to. Once people start to earn money without paying taxes on that income, why would they ever go back?
*All* of the prosperity is due to people selling goods and services to willing buyers. How else? I certainly agree an artificially low cost of capital leads to foolish investments and economic inefficiencies -- which is reflected in crappy real economic growth -- but I don't see how it leads to fake prosperity. How would that work, exactly?
What stops most people from working off the books is the forest of laws that prohibit and punish it. Yes, I can hire an illegal to cut down a tree and pay him $500 in cash, and that works -- for a guy on the economic fringe, who is just scraping by. People in the illegal drug business can also earn fabulous sums, for a time usually much shorter than they think, by taking huge risks. Retirees can earn pin money babysitting, or tween selling lemonade, and nobody reports expense or income to the IRS.
But it doesn't work for most regular people who need regular-sized incomes and income security, and who aren't willing to risk committing crimes that can send you to pokey for a decade. A business with even modest revenue will file a tax return because otherwise the IRS comes knocking, and you can easily be put in jail for tax evasion and even longer for keeping two sets of books. Naturally the business wants to pay the least possible taxes, so they're going to deduct all the employee salaries from their gross revenues -- which means they're going to issue W-2s. And now the IRS knows about the money the employees make.
That doesn't mean it's not possible for the black market (in jobs and goods) from exceeding the size of the open market, it certainly is, but that represents an economy on the ropes, a citizenry at war with their own government, and it can only generally happen when the citizens can't change the government peacefully -- you don't have a democracy. I'm not saying the United States *can't* become a dictatorship with its economy in ruin -- but then if that does happen, I don't see the Internet working smoothly enough to enable blockhain transactions easily, and I particularly don't see that dictatorship being fine with a giant chunk of real wealth locked up in private hands that are within their physical reach.
What the Federal government these days is selling is largely income security. Socal Security, Medicare, Medicaid, CHIP and ACA spending, the EITC and various other Federal income assistance programs all together add up to about 57% of spending. An additional 13% goes to defense, 7% to interest on the debt, 7% to retirement benefits for Federal workers, 3% on education, and the rest is noise. In short, the Federal government is in the business of transferring enormous amounts of money from citizens who produce more than they consume to citizens who consume more than they produce.
Why the citizens as whole continue to vote to support this enormous interfering superstructure I have no good idea, except for Juvenal's acidic observation about bread and circuses, but as long as we live in a republic where the ants can outvote the grasshoppers, this is what we will have, and it has enormous power.
It's easier to change the dominant cryptocurrency through cultural fads, than change the periodic table.
As such, gold will always remain a boring but practical store of value. BTC can either moon or go -99% next year.
Can you explain how cultural fads would change the minds of bitcoiners?
If they weren’t willing to listen to cultural fads up until now, what would change that?
At some point the consensus breaks and everyone wants out, preferably before the coin loses all value. Or alternatively , it slowly declines into irrelevance while bleeding % every month.
This seems to contradict current evidence. The Fed is raising interest rates right now, as it has at many points in history, while you're predicting that every political interest would race to debase the currency as quickly as possible. Surely if that were true it would have played out that way? For that matter if these systems are so unstable, why have they persisted through so many of the most economically successful first world countries in human history?
“As quickly as possible” is always constrained by political reality. Nixon lied when he took America off the gold standard in 1971. Why did he do that, instead of saying, “good news everyone, we all know the gold standard is bullshit so now we can just stop pretending.”
As for “why have these systems persisted?” Any historical timeframe of less than 100 years is something I consider to be short term. It’s barely encompassing a single generation!
Viewed through this lens, it seems strange to pin one's hopes on a cryptocurrency created in 2008/09, which in turn relies on a scaffolding (the internet) that didn't exist in any form in 1950 and not in the form recognizable today until the 90s or so.
I'm one of those who believes the intrinsic value of crypto is zero, but one of the least critical things I can say about it is that its real-world application has not been road-tested for any of the scenarios for which it is supposed to hold the greatest promise.
This is a first world perspective. Bitcoin has already been used by people to preserve their wealth from oppressive regimes in Lebanon, Venezuela, Nigeria and Belarus.
https://reason.com/video/2021/02/05/bitcoin-is-protecting-human-rights-around-the-world/
I'm certainly not one to say that politicians should lie, but "populists are weirdly enamored with gold" seems like a rather simple explanation for why someone might lie. If merely telling people that the gold standard is known to bullshit worked, we wouldn't be having this conversation!
Your implied explanation is also possible, but this is very far from a knock-down argument.
This is a great point.
In other words, whether the reality is "hard money limits the state's ability to steal from the people and is therefore good" or "hard money limits the state's ability to mitigate the disastrous effects of recessions and is therefore bad", you should expect a politician to lie about moving away from hard money because:
- the people who want to move away are happy with the reality
- the people who are unhappy with the change can be somewhat satisfied with the lie
i would imagine we should see this dynamic play out all over the place.... when there's a tricky, complex reality, expect politicians to ~practically~ select one side of a tradeoff, while rhetorically claiming that they are selecting the other side, as a way of satisfying as man people as possible
Not only your chain of future events is highly speculative, but frankly I do not accept even the previous, past steps. There isn't and there has not been any consensus on the idea that fractional reserve and fiat money are "a fraud".
Sure, that sequence of events is so specific that it’s unlikely to play out.
The broader, simpler prediction is that fiat money will lose its value because there is no inherent limit to its supply, and creating more of it satisfies immediate demands while posing only illegible risks for some unspecified future.
There WAS consensus that pure fiat money was a fraud but this consensus was eliminated around a hundred years ago with the rise of progressivism and a resulting state/academic alliance.
Banned for making this comment in response to a moderation warning explaining why I wanted fewer comments like this, come on.
What market forces do you see pushing the price of Bitcoin upwards? DeFi seems like a solution in search of a problem.
What forces do you think have driven it thus far?
IMO, the bitcoin price is a function of two distinct groups. Bitcoin maximalists buy at any price, but they buy more when it’s recently crashed, like now. Some will not sell as a matter of principle, as they seem themselves as engaged in a Jihad against the status quo. Others will sell when the price gets “too high”, based on long term trends. I think this group is tiny and has the effect of putting a long term price floor on bitcoin . That floor rises over time as this group grows in size, and as halvenings reduce new supply of bitcoin. These people love it when bitcoin’s price drops because it means they can buy more cheaply. Again, this group is tiny.
The second group is “cryptocurrency speculators” who buy when the price is rising and sell when they think it’s low. This second group causes huge blowups and drawdowns, as these buyers aren’t sold on bitcoin as the future and are hoping to profit in dollars. These people a panic when bitcoin’s price drops.
The key dynamic that confuses everyone here is that bitcoin’s fixed total supply and decaying issuance schedule means that over time, coins migrate towards the true believers and mostly stay there. More true believers are born slowly, both every crash that doesn’t destroy bitcoin, and with people going down the rabbit hole that starts with “what is money” and ends with people realize that dollars have effectively unlimited supply and are likely to follow the path of every other form of unbacked, pure fist money in history.
You can find evidence for this theory looking at metrics like “coin data destroyed.” Lots of bitcoin haven’t moved in a year, which means that they are held by long term holders.
Ask yourself: what evidence has a true believer seem to make them doubt? What evidence have they seem to convince them their theory is right?
Doesn't the fact that most bitcoins never move proves that Bitcoins have no use?
The use bitcoins have is in storing value over long periods of time.
The fact that bitcoins aren't moving is evidence that they are doing what the design intended to: acting as a store of value that can't be corrupted by theft or inflation.
But Bitcoin value so far goes down with inflation, and in the end will be deflationary by design. I am still not sure that in the long term it will turn out as you say.
No, bitcoin's value has not gone down with inflation. This is confusion.
Bitcoin's value went down, along with stocks, as cheap money went away. Inflation is tiny, just 10% a year. Stocks and bitcoin aren't falling 'because of inflation'. They are falling because the fed is raising rates, and raising rates cuts off the flow of money creation, which has the effect of reducing the number of speculative buyers.
So the price of bitcoin falling isn't people like me losing faith. It's miners selling at the rate they mine coins, and wave of new buyers drying. The reason the price isn't falling to zero is that there are some people who are happy to buy bitcoin at any price.
Sounds like the end result is that all bitcoins are held by a small number of true believers and everyone else goes back to ignoring them.
That changes when inflation goes unfixed for a long enough period of time. Then more people become true believers.
Even right now, some true believers sell at the peaks because they have way more than they’ll ever spend.
Honestly, if you think BTC can become the de facto currency of almost everybody *and yet* almost everybody will allow the first movers to become trillionaires because, welp, they got there first and fair's fair -- you haven't really thought through the nature of a republic and the nature of human beings.
If BTC ever *were* to become that important, you can be 100% sure The People will expropriate the wealth of anyone who happens to have gotten in so early his stake represents a massive share of the new currency. Certainly that expropriation will be swathed in a lot of noble talk about the good of the many, for what that's worth.
How do you imagine that playing out?
Here’s what I see happening: as fiat currencies fail with increasingly bad inflation, large scale holders will buy local political support with bitcoin. I expect lots of bitcoin donations to local police officer pension funds, for example.
So, suppose you have a bitcoin baron who has kept the local providers of law and order fed and paid. Say it’s the winkelvoss twins.
Who is going to take their bitcoin and how do they do that?
Carl, thank you for saying this. I've been thinking this for years but never run into anyone who agreed. Clearly I haven't been talking with the right people.
(Mark, I'm sorry that this will ping you. I don't want to pile on any more than I already have.)
Honestly, an even simpler solution would be to just copy the code, make a new crypto called PeoplesRepublicOfCrapistanCoin or whatever, and declare that the new currency. Money has value as long as people believe that it does; nothing would force them to use BTC specifically.
But even if that happened, why would anyone switch to a system that leaves them penniless while creating a handful of trillionaires. Even going back to the barter system sounds better than that.
Incentives.
Bitcoin incentives people to buy it because it can’t be faked. People still trust the dollar to hold value over long periods of time. That trust is eroding.
Individuals will choose to adopt bitcoin privately, to protect themselves from inflation.
Your argument is interesting, but I don't see why we should expect the number of bitcoin maximalists to experience net growth over time.
Gold is a similar asset to bitcoin: restricted supply, with antigovernment gold enthusiast investors ("goldbugs") who sing its praises. Goldbugs have lost mindshare over the past 10-20 years in my estimation. I remember seeing more goldbug libertarian memes when I was younger. The S&P 500 has been outperforming gold over the past 10 years, at least.
Like gold, BTC is not a wealth-producing asset.
2008 produced cynicism about the mainstream financial system. FTX collapse etc. will tar the reputation of a crypto alternative. Outsiders either don't understand the "not your keys not your coin" point, or else don't trust themselves to manage their keys securely / can't be bothered to deal with the hassle. DeFi will continue appealing to a niche audience, similar to gold.
IMO most price action is/will be driven by whales and institutions. Even if bitcoin maximalism as an ideology gains adherents, that may not matter, if whales & institutions are what control the supply and demand curves.
My general impression is that bitcoin pretends to be a hedge but in reality most price movements are driven by social media hype. That makes it a bad safe haven asset. Gold seems better in this regard.
I also think bitcoin has a decent chance of being displaced by a different coin that's technologically superior.
You can’t send a million dollars worth of gold through an internet connection for free.
You can’t spend $500 worth of gold without carrying around a chunk of metal that the other person has to measure and weight.
You can’t store $10,000,000 worth of gold without significant cost and expense and risk.
The supply of gold actually has some elasticity to it.
To understand where maximalists are coming from you have to beleive the current system is totally unsustainable and it will die an inflationary death.
>“what is money” and ends with people realize that dollars have effectively unlimited supply
Ever heard of inflation-adjusted bonds? Stocks? Real estate? Commodities? Why would I prefer bitcoin to any of those?
Try comparing stock market growth to the money supply growth.
There is going to be a monetary schelling point. If all fiat currencies are losing value to inflation and run by nation states that want to spy on everyone and censor their oppositions, bitcoin is your out.
A bitcoin, you actually own. Everything else is a piece of paper with your name on it, dependent on the good graces of a nation state to let you have what’s yours.
Perhaps you trust your political leaders not to scree you. This is a decreasingly popular opinion.
"Almost nobody wants to believe the dollar can fail."
Actually, a lot of people are aware that the dollar can fail; they've seen a lot of other currencies fail. But as a friend of mine said, "The US has been on a roll for 300 years and it's not likely to end any time soon." And as long as the US government demands taxes paid in dollars, there will be a market for them.
Why does the US being on a roll mean inflation will remain a non-issue?
Isn't it the case that a bitcoin standard would make life worse for everyone but the rich? Economic activity would slow down as everyone hoards rather than spend or invest. Unprecedented inequality, with most people being slaves to an untouchable elite. A significant fraction of the world's energy output burned for proof of work.
If you're not a big holder, a bitcoin future is not in your self-interest. But if you think it's game-theoretically inevitable, you can make your future slightly less terrible by buying bitcoin now, thereby accelerating the slide down to hell.
Do you disagree and claim that a bitcoin future would actually make most people better off than they are now? Or do you believe that it will indeed make most people worse off, but it's inevitable anyway because people won't be able to coordinate to avoid it?
Yes, I disagree. I think hard money works far harder for everyday people because they can just spend less than they earn and save reliably, rather than being forced to participate in a complex system of politics that nobody understands and is controlled by the elites, ie modern financial markets.
The 19th century had mostly gold as money, and exhibited more growth on average than the 20th century.
Right now, with fiat money, elites can borrow against their stocks, at low interest rates. Concentration of wealth is therefore way worse under printed money, as the value of assets just grows indefinitely.
You say "concentration of wealth is therefore way worse under printed money, as the value of assets just grows indefinitely". My reading is that you're implicitly claiming that printed money is a primary cause of assets growing indefinitely (which I interpret as "existing in a regime of net asset appreciation across the whole economy rather than net asset depreciation") - this I disagree with - and that concentration of wealth is a consequence of net asset appreciation - this I agree with.
To provide a quick counterexample, there was a lot of concentration of wealth during the time leading up to the Great Depression, which was only really solved with abandonment of the gold standard, among other government interventions. I think the standard narrative is that the Great Depression couldn't really have been solved without eliminating the gold standard (or I suppose with some modern ideas like a wealth tax and/or universal basic income that have more or less the same impact). Certainly, this seems to argue against the idea that the gold standard protected against concentration of wealth.
My explanation for why hard money doesn't solve concentration of wealth goes back to Thomas Piketty's explanation for concentration of wealth: when the rate of growth of investments is greater than the rate of economic growth, then concentration of wealth necesarily results. Hard money doesn't really solve that, since people can still make leveraged investments, do high-frequency trading, etc., to invest in the stock market but grow faster than the market as a whole (and the stock market as a whole should grow about as fast as the economy in the long term, unless something funny and temporary is happening like decreasing dividends). As Piketty points out, these methods tend to work better for people who have a larger fortune to begin with, since things like leveraged investment funds and high-frequency trading houses themselves have upkeep costs, and people who are already rich get better economies of scale on them.
So I don't think fiat money is the primary cause of concentration of wealth. It might contribute to it, but at some point someone still has to come up with a better long-term way of managing concentration of wealth, so moving back to hard money doesn't seem to have an advantage in that respect.
(I have an implicit assumption that economic growth will continue in the long term, which I won't address because it seems pretty safe.)
I dunno, I think in order to become an aristocracy, the group needs to win CONSISTENTLY, not just win big one time. Early crypto folks seem to mostly be contrarian libertarians whose worldview allowed them to spot an opportunity when others were indifferent to it. If crypto had never happened, I don't see much of a chance they would have ended up vastly wealthy.
That just means that nerds that bought $100 worth of Bitcoin in 2010 and HODLd it are the new aristocrats. These seem to be related to the WSB "apes" that pumped GameStop to the moon.
Just pinging to see if yah saw my post in the most recent OT: https://astralcodexten.substack.com/p/open-thread-253/comment/10928960
yup, replied there.