What would value be in this equation? What people deem the value?
I like the idea that money is a store of value. Not that it itself is value, but that so long as it is hard enough (can't be reproduced easily) then you can save it to use another day.
Some of these ideas remind me of thoughts I have previously had, partly explored in my essay "Abolish Money" [1]. Particularly, the economy is not adequately described purely in terms of money, rather the 'real' economy is best described as stocks and flows of resources like wood, time, and energy. Money obscures this and hinders our analysis of the economy by proposing these resources are all interchangeable at their given prices, but the qualitative nature of different resources cannot be ignored.
Funnily enough, in the Soviet Union a mathematician was working towards the opposite conclusion: only through making all quantities fungible could everything be treated as a gigantic linear programming problem in order to optimize the economy.
One's a mirror of the other. Stocks and flows are primal values; prices are dual values.
And if you live in the nice kind of economy where there're no fixed costs or nonlinearities, you can translate between the two without any loss of whatever it is you're trying to optimize, courtesy of the strong duality.
Reality is not that nice, of course, but a linear programming economy would be vastly better than what the USSR had at the time. Not that they could've switched even if they had supercomputers: too much politics invested in the material balances system.
By the way: Shalizi paints probably a bit too bleak a view on the use of large-scale LP. There exist linear programming algorithms that are O(nnz(A)), i.e. scale as the number of nonzeroes in the (presumably sparse) matrix. E.g. https://papers.nips.cc/paper/2015/file/0966289037ad9846c5e99...
I think this gets the “incumbents” argument slightly wrong. The argument is not that Bitcoin is “valueless”, but that it is a purely speculative instrument with little to no intrinsic value.
It doesn’t seem to have a path towards becoming a global medium of exchange, and it would be a store of value in the same sense as other speculative instruments like baseball or pokemon cards.
The arise of a new speculative instrument would also _seem like_ Bitcoin today, so I think a little more proof is needed to claim what we are seeing is the rise of a new monetary system.
> ... speculative instruments like baseball or pokemon cards.
Or paintings, or pretty baubles. People like what they like. If the number of people liking something grows large enough, the "something" can apparently become an exchange medium.
Successful currencies generally need some price stability, otherwise they are avoided or hoarded, and their use as a medium of exchange vanishes. Historically this would happen with coins minted from precious metals like gold: when the price of gold rose above the face value of the coins, the coins disappeared from circulation.
How would you define "intrinsic value"? This would imply that things have value whether or not humans agree they have value. Money itself should not have any value from utility other than being money.
> It doesn’t seem to have a path towards becoming a global medium of exchange
Money is layered. The Fedwire is not a global medium of exchange, nor was gold. But as the base layer that scales with solutions like the Lightning Network and others, Bitcoin has the obscene advantage of being digital, decentralized, and salable across space and time.
All value is inherently speculative - you likely speculate that your fiat savings won't inflate away rapidly. What is being speculated upon is that Bitcoin is an improvement upon the monetary system.
It’s true that prices fluctuate and vary, but some assets are less speculative than others. Gold has value for its industrial or commercial uses, even if that’s a small part of its value. USD has value over other assets as a currency because of its status as legal tender within the US, meaning I know I can pay taxes and discharge debts with it.
It’s not clear to me that the advantages you described are “obscene” compared to USD or other assets, and I’m not sure people buying Bitcoin are buying because they think it’s a “better monetary system”. I think they’re buying it because it’s a hot speculative asset at a time when rates are still fairly low.
I’m also not sure what “salable across time and space means”
If I had to hazard a gues about scale: 8 decimal places is 10 million units. Physical objects cannot be divided into 10 million pieces, shared, and circulated as a pseudo-currency.
I’ll stick my foot in my further and say space is a speed of light or the limitations on data transmissions vs. once again, a physical thing being used as a medium of exchange.
It means my money (in Bitcoin) can be accepted anywhere that can receive data, and preserved without information loss over time. Gold cannot be transmitted over space as information, fiat does not preserve its share of value over time because of inflation/debasement.
I can leave my country tomorrow with my wealth stored as a 12 word phrase in my head and exchange it into local currency in practically any country in the world. That among many other incredible properties give Bitcoin significant advantages over any other money. You can programmatically transfer real wealth - not credit - with Bitcoin. Look the Lightning Network to see how money can be streamed each second, with finality. There are many reasons Bitcoin as a base layer, instead of fiat, will reward its network participants.
You... Realize fiat actually has the same property? In fact, Gold changed hands at the speed of data too.
Banking became a thing because merchants realized an IOU was as good as the thing itself. Chuck the bullion in a vault, then maintain a ledger of who it belongs to, and as long as the numbers check out on both sides, donezo. Heck, get your timing right, and you don't even have to move any or wait on the other guy to come get it.
Don't even need an electrical grid or semiconductor fabs. Just a sheet of paper, a vault, and decree something to be a store of value to chuck into it. Then don't think too hard about it, or else your society gets infected by the economics.
All downhill from there... Notbin' worth seein' down that rahd.
The major issue with transactions right now is that a whole lotta people want to be able to track any exchange of value period. Bitcoin actually gives them that wish. Personally? I'll accept wait times for privacy if everyone else would get with the program so we could kick VISA et al. to the curb.
Except it isn't (for many reasons, chief among which is counterparty risk).
But the banks and the merchants sure brainwashed everyone into accepting this as a tenet of the modern economy.
They event went quite a step further with fractional reserve: we all know there's only 25% of the actual stuff in the vaults, but still ... the IOUs are 1:1.
Until, of course, when the "faith threshold" is reached, they aren't anymore.
Uhh, you can burn cash for warmth. Coins can be used for games. They have "intrinsic " value regardless of their status as currency. That intrinsic value may be very low, but it's not nothing.
Not mentioned in the article, but this reminded me that although Wittgenstein's family was extremely wealthy he gave away the fortune he inherited and become a primary school teacher.
"Bitcoin can’t be a store of value because it has no intrinsic value. It can’t be a unit of account because it is too volatile. It can’t be a medium of exchange because it is not widely used to price goods and services. These are the three properties of money. Therefore, Bitcoin can’t be money. But Bitcoin has no other basis for being valued, therefore it is valueless. QED."
The last sentence introduces an extraneous assertion that is incorrect: "But Bitcoin has no other basis for being valued...". Not everything that has value is money. A painting isn't money: it has value because people want it and want to pay for it. Bitcoin isn't money, but it has value as long as people want to pay for it.
I'm part of a think tank (not for or against Bitcoin) speculating on what, from an analytic/continental philosophy tradition. Stuff like: Universality and its species: The Market is the empty universal element that contains the Money Market (aka banks, hedge funds and day traders) but also its species of particulars that fail to be contained by the Money Market: the Real Economy. The Real Economy concerns the production, purchase and flow of goods and services within an economy. (Laclau). Crypto is the antagonism between the particular element (The Market) which hegemonizes universality and the element (the Real Economy) which, within this universality stands for what is excluded from it.
I've read your account here and I'm finding your blog enjoyable. You are a beacon on these forums. It's a pleasure to meet you. HMU some time; we should be friends.
> if "money" can be modeled as excitations of a complex probability wave field.
Eric Weinstein insists, if I understood him correctly, that money is a gauge theory[0] and transactions can be modelled as locally enforced conservation laws[1]. If you understand his point, please do say more about your idea.
Bitcoin are more like Rai stones than dollars. They're more of a tradable valuable than a true money due to the high transaction costs, relative scarcity, etc.
You can transact Bitcoin on the Lightning Network for near-0 cost. Scarcity is arguably the most desirable property of money since it ensures the store of value property. That's why gold was chosen over other precious metals. Bitcoin is a significant upgrade to the dollar.
Try sending $1B from the U.S. to Europe and compare transaction time and costs vs. BTC.
Gold was chosen not because it's rare (it's not, compared to many other metals) but because it's pretty and inert. Scarcity is not a desirable property of money if you like economic activity. There's a reason why we dump it in the economy when there's a downturn.
Its stock-to-flow ratio is the highest among metals, it is also divisible (although not easily), durable, portable, etc. which all make it desirable. However it's worse in most of these categories when compared to Bitcoin.
Early monies like shells were often abandoned when a new supply was found as it allowed for precisely this re-allocation of wealth before re-pricing occurred.
Best treatise on money is David Graeber's Debt, the first 5000 years.
One huge revaluation in that book is barter is not really a thing. Prior to hard currency and state money, people just got into debt with each other. They didn't barter.
Money on the other hand and markets were created by emperors and kings to fulfill needs of the soldiers and the empire. No place just creates markets without state influence.
In other words, markets were a hack used by kings to get wha t they want. They forced markets on people via money (which requires taxes). In other words, to create markets you first need to force people to pay taxes.
Fascinating book and also gives a reason why bitcoin is not money, but at best a proxy and store of value.
Yet another article defending Bitcoin that only tackles strawman arguments and ignores the indefensible issues.
1) Bitcoin is environmentally harmful
2) Bitcoin's only practical use right now is paying off ransomware, or hiring criminal enterprises.
In other words: From all appearances, from the time that Bitcoin was created, the net effect on society has been negative. And there is no sign of that changing in the future.
1.4 billion dollars of Ransomware vs a private company using it as a way to shuffle money around.
I don't think you'll find it easy to convince me that Tesla playing games with their private assets has actually yielded any "good" in the world. The impetus is on the bitcoin apologists to show why the ransomware industry and environmental impact is worth all the damage. Where is the positive impact?
No need to assume that everyone who disagrees with you hasn't done their own research. I've read plenty on Bitcoin, thanks.
Instead of sending a dozen articles and expecting someone to read it and figure out what point you are trying to refute, could you perhaps just state a position and defend it?
What I see when I see your post: A bunch of people saying that bitcoin is good for the environment because... "Bitcoin can't be printed with a stroke of a keyboard"? It's a bunch of non-sense.
Please actually read what you post, and give the best argument, don't expect me to make your argument for you.
I think this is a covert shill for bitcoin. Those arguments have been directly debunked over and over, including (in part) in the article we are commenting on. Are you trying to make people think all the arguments against bitcoin are weak?
I mean, a lot of things are thrown out here as rhetorical questions that actually have simple answers that undermine the thesis of the piece.
It doesn’t look like a currency precisely because it doesn’t have the properties of fiat currency. It’s not a good way of performing small transactions because the transaction costs are so high.
There are precendents for things that have high value but low intrinsic value. Gold and diamonds are good examples. So the question is, why is Bitcoin fundamentally different from these?
I think the scale of the transaction is the key to whether or not using Bitcoin makes sense for the exchange. An eight dollar transaction fee on fifty thousand dollars is an acceptable amount but that same fee on a coffee makes no sense.
It's roughly akin to trying to pay for everything with 100 dollar bills (The out of print 10,000 dollar bills would be an even better comparison). It's still a valid medium of exchange but it's not really appropriate since it's such a hassle to do.
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[ 0.22 ms ] story [ 96.4 ms ] threadI like the idea that money is a store of value. Not that it itself is value, but that so long as it is hard enough (can't be reproduced easily) then you can save it to use another day.
Money is “the most marketable commodity.”
Money is simply that for which a person would trade nearly anything else.
[1] https://jpreston.xyz/2020/05/07/abolish-money.html
(See Red Plenty, and a discussion here https://crookedtimber.org/2012/05/30/in-soviet-union-optimiz... )
And if you live in the nice kind of economy where there're no fixed costs or nonlinearities, you can translate between the two without any loss of whatever it is you're trying to optimize, courtesy of the strong duality.
Reality is not that nice, of course, but a linear programming economy would be vastly better than what the USSR had at the time. Not that they could've switched even if they had supercomputers: too much politics invested in the material balances system.
By the way: Shalizi paints probably a bit too bleak a view on the use of large-scale LP. There exist linear programming algorithms that are O(nnz(A)), i.e. scale as the number of nonzeroes in the (presumably sparse) matrix. E.g. https://papers.nips.cc/paper/2015/file/0966289037ad9846c5e99...
It doesn’t seem to have a path towards becoming a global medium of exchange, and it would be a store of value in the same sense as other speculative instruments like baseball or pokemon cards.
The arise of a new speculative instrument would also _seem like_ Bitcoin today, so I think a little more proof is needed to claim what we are seeing is the rise of a new monetary system.
Or paintings, or pretty baubles. People like what they like. If the number of people liking something grows large enough, the "something" can apparently become an exchange medium.
Successful currencies generally need some price stability, otherwise they are avoided or hoarded, and their use as a medium of exchange vanishes. Historically this would happen with coins minted from precious metals like gold: when the price of gold rose above the face value of the coins, the coins disappeared from circulation.
> It doesn’t seem to have a path towards becoming a global medium of exchange
Money is layered. The Fedwire is not a global medium of exchange, nor was gold. But as the base layer that scales with solutions like the Lightning Network and others, Bitcoin has the obscene advantage of being digital, decentralized, and salable across space and time.
All value is inherently speculative - you likely speculate that your fiat savings won't inflate away rapidly. What is being speculated upon is that Bitcoin is an improvement upon the monetary system.
It’s not clear to me that the advantages you described are “obscene” compared to USD or other assets, and I’m not sure people buying Bitcoin are buying because they think it’s a “better monetary system”. I think they’re buying it because it’s a hot speculative asset at a time when rates are still fairly low.
I’m also not sure what “salable across time and space means”
I’ll stick my foot in my further and say space is a speed of light or the limitations on data transmissions vs. once again, a physical thing being used as a medium of exchange.
Speculative or not.
I can leave my country tomorrow with my wealth stored as a 12 word phrase in my head and exchange it into local currency in practically any country in the world. That among many other incredible properties give Bitcoin significant advantages over any other money. You can programmatically transfer real wealth - not credit - with Bitcoin. Look the Lightning Network to see how money can be streamed each second, with finality. There are many reasons Bitcoin as a base layer, instead of fiat, will reward its network participants.
Banking became a thing because merchants realized an IOU was as good as the thing itself. Chuck the bullion in a vault, then maintain a ledger of who it belongs to, and as long as the numbers check out on both sides, donezo. Heck, get your timing right, and you don't even have to move any or wait on the other guy to come get it.
Don't even need an electrical grid or semiconductor fabs. Just a sheet of paper, a vault, and decree something to be a store of value to chuck into it. Then don't think too hard about it, or else your society gets infected by the economics.
All downhill from there... Notbin' worth seein' down that rahd.
The major issue with transactions right now is that a whole lotta people want to be able to track any exchange of value period. Bitcoin actually gives them that wish. Personally? I'll accept wait times for privacy if everyone else would get with the program so we could kick VISA et al. to the curb.
Except it isn't (for many reasons, chief among which is counterparty risk).
But the banks and the merchants sure brainwashed everyone into accepting this as a tenet of the modern economy.
They event went quite a step further with fractional reserve: we all know there's only 25% of the actual stuff in the vaults, but still ... the IOUs are 1:1.
Until, of course, when the "faith threshold" is reached, they aren't anymore.
The last sentence introduces an extraneous assertion that is incorrect: "But Bitcoin has no other basis for being valued...". Not everything that has value is money. A painting isn't money: it has value because people want it and want to pay for it. Bitcoin isn't money, but it has value as long as people want to pay for it.
Eric Weinstein insists, if I understood him correctly, that money is a gauge theory[0] and transactions can be modelled as locally enforced conservation laws[1]. If you understand his point, please do say more about your idea.
[0]: http://www.eric-weinstein.net/economictheory.html
[1]: https://youtu.be/ifX_JnBfxTY?t=2h03m31s
Try sending $1B from the U.S. to Europe and compare transaction time and costs vs. BTC.
And how many of these has anyone here made in the course of their lives? :)
Scarcity is a desirable property of money unless you like the Cantillon Effect. https://en.wikipedia.org/wiki/Richard_Cantillon#Monetary_the...
Early monies like shells were often abandoned when a new supply was found as it allowed for precisely this re-allocation of wealth before re-pricing occurred.
If you'd like to see where money was dumped into the economy endlessly, you can look at Weimar Germany and the value of its currency thereafter. https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...
One huge revaluation in that book is barter is not really a thing. Prior to hard currency and state money, people just got into debt with each other. They didn't barter.
Money on the other hand and markets were created by emperors and kings to fulfill needs of the soldiers and the empire. No place just creates markets without state influence.
In other words, markets were a hack used by kings to get wha t they want. They forced markets on people via money (which requires taxes). In other words, to create markets you first need to force people to pay taxes.
Fascinating book and also gives a reason why bitcoin is not money, but at best a proxy and store of value.
1) Bitcoin is environmentally harmful
2) Bitcoin's only practical use right now is paying off ransomware, or hiring criminal enterprises.
In other words: From all appearances, from the time that Bitcoin was created, the net effect on society has been negative. And there is no sign of that changing in the future.
>From all appearances, from the time that Bitcoin was created, the net effect on society has been negative.
Citations needed.
1.4 billion dollars of Ransomware vs a private company using it as a way to shuffle money around.
I don't think you'll find it easy to convince me that Tesla playing games with their private assets has actually yielded any "good" in the world. The impetus is on the bitcoin apologists to show why the ransomware industry and environmental impact is worth all the damage. Where is the positive impact?
Here are some references for you to actually know what you're talking about: https://laurentbenichou.medium.com/bitcoin-a-gift-to-environ... https://twitter.com/yassineARK/status/1360343382556483587?s=... https://davidveksler.medium.com/will-bitcoin-burn-the-planet... https://www.seetee.io/static/shareholder_letter-6ae7e85717c2...
And here's a video giving a small glimpse of the humanitarian possibilities Bitcoin enables: https://twitter.com/gladstein/status/1357757736394444800?s=2...
Its net effect has been tremendously positive. Maybe you'll have time to read these articles and realize that before the next astonishing bull run.
Instead of sending a dozen articles and expecting someone to read it and figure out what point you are trying to refute, could you perhaps just state a position and defend it?
What I see when I see your post: A bunch of people saying that bitcoin is good for the environment because... "Bitcoin can't be printed with a stroke of a keyboard"? It's a bunch of non-sense.
Please actually read what you post, and give the best argument, don't expect me to make your argument for you.
It doesn’t look like a currency precisely because it doesn’t have the properties of fiat currency. It’s not a good way of performing small transactions because the transaction costs are so high.
There are precendents for things that have high value but low intrinsic value. Gold and diamonds are good examples. So the question is, why is Bitcoin fundamentally different from these?
It's roughly akin to trying to pay for everything with 100 dollar bills (The out of print 10,000 dollar bills would be an even better comparison). It's still a valid medium of exchange but it's not really appropriate since it's such a hassle to do.
- Not decentralized (51% attack, even worse with PoS), still subject to manipulation therefore
- Privacy, transactions can be traced back, therefore they can be censored/rejected
At least with plain cash I can have anonymity.