The Greed of Bitcoin
I am attempting to follow in the footsteps of pioneers who have blazed a trail I may not have been able to blaze myself. It is only because of their foundation that I am able to contribute.
I was inspired after reading @danheld ‘s tweet storm.
https://twitter.com/danheld/status/1084848063947071488
I hope this is a compliment to that.
I’ve been diligently studying for the past 2 years but I am by no means an expert on these subjects. My Studies since being introduced to Bitcoin have included computer coding, economics, banking, game theory, decentralized systems, The Fed, Geo-politics, Libertarianism, anarchism, money history, consensys mechanisms, epistemology, praxeology, catallactics and all things Mises.
I know that sounds like a lot, but I have a secret weapon. I have an unlimited data plan on my phone. I listen to podcasts, audio books, and YouTube videos constantly. I replaced the car radio, idle time walking my dog, or any other time I was alone and able to listen, with constant learning. I have absorbed (to one extent or another) thousands of hours of content. I feel like I’ve squeezed 8 years of study into 2. My headphones are always in, ask my family. They’re getting drained a bit.
Needless to say this is all a result of my obsession with learning about, and understanding as much as I can possibly absorb about, Bitcoin. I began developing a vision of what I thought was a really macro perspective.
I was curious about what drives people and society to do… well, anything?
Here’s what I was thinking regarding Bitcoin.
For anyone really wanting to know what to make of Bitcoin, you are likely to need some time. How much will depend on many factors.
Unfortunately, it is a complicated subject, this creation of money thing.
It’s never been done before and many are really not sure how to do it
Oh sure, governments make money all the time. What I’m talking about is money that society chooses.
So how do they choose?
Greed- that’s how.
Let me elaborate.
I’m ready to get all kinds of slack on this but here it is anyway.
Everyone is greedy, period.
To some, this seem intuitive, but there is much more to it. At its core, everyone wants to survive- a greedy desire (oh the horror). It is selfish and it should be.Without it, nothing happens- no progress, no expansion, no vision, no goals- until someone wants more.
In our desire to want more, humans have come to realize the best way to have more is to cooperate with other humans. Obviously this doesn’t always work (Crypto Twitter is a perfect example) but for the most part, intuitively, everyone (who has a little smarts) gets this. Even the strongest understand their strength may be lost, so cooperation becomes clear with maturity and wisdom.
Enter money- It’s history is well written so I will be brief on it here.
Cooperation beyond a small group needed a Medium of Exchange (MoE) so, societies invent one. Actually many.
From the collectible stage, to the MoE stage, then the Store of Value (SoV) stage, and then if successful, a Unit of Account (UoA) stage, all monies chosen freely by societies will follow this adoption path. This is natural money- items found in nature, used as money by man.
Why does it take this path? Because human nature forces it to play out that way. Our greed causes us to collect- because we “want” it. Once someone else wants it (more greed). it can be traded for something. Done enough times, value is established for that collectible amongst those using it.
Now scarcity matters. Anything collectible that can be found by anyone else, has no trade value. So the rarer items began to become MoE. When some realized their MoE could hold value over time, It becomes a SoV without anyone deciding it should. Human nature decides what becomes a SoV because of greed. The amount of value will fluctuate relative to who is doing the valuing, but the motivation to value is a function of the coincidence of wants.
Eventually, independent societies converged on Gold as money because of its natural properties combined with humans’ greedy nature to satisfy wants. There was no worldwide coordination here. This happened naturally.And it happened for the same reasons everywhere (outlined above).
While it was happening, the smartest among societies got it. Their local influence, cause other not-as-smart people to agree, because they trusted the smart ones. But not everyone agreed.
Plenty of people (sh^t-coiners of old) decried the use of a new money. What we have is fine they (likely) said. But they were wrong. Their greed caused them to hold what they knew, while others could see better possibilities.
Money’s natural condition evolved when man quantified and systematized it (more on that below) As such, the natural laws surrounding money adoption and use were altered to expand its natural usefulness.
Why…. you should know by now…. it’s a theme…. Unadulterated, raw, selfish, natural GREED. Giving this universally adopted natural object additional functionality in order to have “more”, was a natural progression in the use of a natural object to complete a natural human desire.
Enter Bitcoin as money- As per Dan’s tweet storm, Satoshi appeared to understand this human nature intuitively and had the overall concept down enough to present a preliminary system that was most of the way there. Where you ask?
On its way to becoming the 1st of its kind. The 1st truly scarce digital file system, able to be transferred files across the internet to anyone anywhere without permission of anyone else. These files can be verified to have been unaltered, and not a copy- but an original. The uniqueness of each file is verifiable & provable to be one of a kind. Once transferred, the new controller of the file has complete control.
Bitcoin is a bearer instrument. Whoever holds the private keys to a given file, controls that file.
So how is a digital file money? It’s really quite simple. For no other reason other than humans say it is. That’s all it takes really. Humans deciding what they will use as a MoE, SoV, or UoA. There is no rule saying to use 1 thing over another. Humans, guided by their greedy human nature, figured it out collectively. No one set rules. No one decided. Society collectively decided.
Smart people have now discovered (or in this 1st case ever- invented) a new form of (almost natural) money- A way to transfer between 2 parties without trusting each other, something that is verifiably scarce, provably original, and independently controllable, and that aligns with the principals that govern natural money.
In fact, Bitcoin has most of the characteristics a sound money should have, and is likely to one day attain all of them, considering how many smart people are working towards that end.
An ideal money material should possess the following qualities:
· General Acceptability:
· Portability:
· Indestructibility or Durability:
· Homogeneity:
· Divisibility:
· Malleability:
· Recognizability:
· Stability of Value:
No money has possessed all qualities, at all times. And not all monies attain all qualities during their lifespan. Bitcoin may be the 1st to attain this, but it will take time if it is to happen. Like the centuries it took for humans to converge on gold as the best money, it will take time (not likely centuries) before Bitcoin is ubiquitous as money everywhere. Just to get through the 4 stages throughout the world, will be a monumental accomplishment (if).
Even more so when you consider there is no 1 actor, or group of actors, who can command absolute control of this 1-of-a-kind man made money. This is my understanding after much investigation but I am aware many will disagree with this point for sure. It has been hotly debated for a while.
For that reason and others, there will likely always be some who will not accept it. That’s not important. Neither is it important who does or doesn’t have X amount of control. The reality is, is if society is going to accept anything as money, it will do it collectively, through the billions of decisions individuals make each day, and the collective results that will spill into society, as they combine with previous and subsequent decisions also made each day by individuals.
There are no groups, only individuals acting, sometimes in unison, always individually. This is a core principle of praxeology.
The current collective consciousness of humans on this planet who have an interest in Bitcoin and related imposters, have so far chosen the UTXO set, of the file system known as Bitcoin (worldwide ticker symbol BTC), to be the best man-made money. This is evidenced by the amount of collective investment in time, computer processing, energy usage, and actual acceptance as the best- by humans walking the earth (so far anyway).
It currently carries (in the judgment of this collective consciousness) the most natural qualities a man-made money can have, given our current state of evolution, and that of technology. It is acknowledged by more humans as the best iteration of a man-made scarce digital file systems that can be used to trustlessly transfer these files to someone else, and in doing, use it as money- as long as we agree to.
If your idea of man-made digital money is not being adopted by more people, or if you think your project was hijacked by people who ruined it, sorry. Society has decided. At least for now, you lost.
You see, in Bitcoin, there truly is no leader- only volunteers who must cooperate. Even miners who get rewarded new Bitcoin are volunteers. Every full node operator is a volunteer. Every programmer is a volunteer unless some other human volunteers to compensate said programmer. And every purchaser and user is a volunteer, no one is forced to use it. Seeing a trend? Voluntaryism anyone?
The system was designed to be as an endless self-supporting loop of incentives, made to appeal to the human desire to remove current and future uneasiness. The want desire… greed. And its worked nearly flawlessly for 10 years now. An absolutely astounding phenomenon. I’m not sure I can articulate how monumental this (so far) is, and could ultimately be for humanity. I’ll go out on a limb here and say it could end up being the single must important invention in all of humanity… and maybe not.
I’m thinking big though, and I think some others are as well. I think the collective consciousness is feeling it.
Additional inspiration for this thought exercise goes to @shembooth1, AngryDentist, and @ryanxcharles for their recent podcast where they discuss in depth how they think BSV is the real Bitcoin because they understand it needs to be cash- RIGHT NOW.
Ok, so these 3 are clueless to money’s natural progression through society as is @rogerkver. They can shout all they want but it will have no impact on the speed at which society adopts a new money.
Consider this principle already eluded to above- anything valued as a collectible, whose properties are such that a group will begin to use it as a MoE, runs a risk that its value might be perceived by those using it, to change. The possibility arises that the collective consciousness of the group using it, comes to recognize its intrinsic value as a MoE that doesn’t seem to lose any value. This is when it morphs into a SoV. Once that happens, another curious human-nature action emerges, the idea of saving it for later use (possibly much later).
Once someone saved a MoE, and saw it didn’t lose value (and perhaps it gained in its purchasing power), human nature demands a lower valued MoE would be desirable for use, so the higher valued MoE (and candidate for a SoV) can be used later.
See Grasham’s law https://en.wikipedia.org/wiki/Gresham%27s_law
So now consider this- The market for so called “crypto currencies” is largely based on the notion of the value of the “currency” may go up in the future so I need to get some now and cash out later. Look at Bitcoin’s exchange rate in the market vs. the USD- $0 to $20,000 in 10 years and now back to $3500 (still insane growth if you owned some early). So the thinking is- if Bitcoin can do that, why can’t another “crypto”?
And the answer is because of the adoption cycle. Anything purported to be usable as money, will have to run through the collective consciousness of a society or group considering its use. It will be debated, tested, mocked, ignored, cloned, counterfeited, slandered, praised, run over, resurrected, and one day if it is lucky- be adopted by some group- as money.
If any other “crypto” gets lucky enough to find wide spread adoption, it will face the same thing Bitcoin faces now. That is- if it may go up in value, why would I spend it now? And so, Bitcoin believers understand the thing they want to use as money, is not likely to be used for that purpose until its purchasing power stabilizes. The chances that will happen soon are slim IMHO.
The purchasing power of Bitcoin will not stabilize to a worldwide currency until the collective consciousness of most of humanity accepts it as a Unit of account, and all commodities are priced in it. Then, the value of the commodities will change relative to how much Bitcoin is needed. It will not be the value of Bitcoin relative to another currency (that you would make purchases in).
For that to happen, a slow transfer of the world’s wealth will need to find its way into Bitcoin. It will happen when the smartest people consider what makes money work, what makes Bitcoin a worthy money, and is there anything better to be used. There are currently 100’s of thousands of individuals who already believe Bitcoin has what it takes.
But this is not like something found in natural money. Check ( @timevalueofbtc ) Nik Bhatia’s recent article https://medium.com/@timevalueofbtc/the-bitcoin-second-layer-d503949d0a06
which does a great job of describing the layers surrounding Gold as money. To understand this, is to understand why those pushing for Bitcoin to become a very stable base layer for a money system say what they say.
The idea that a human invention could replace a natural money, has never been tried before and no one is sure exactly how to do it without failure.
It seems to me, the smartest people who study this are the ones promoting this idea and the ones working to make it happen.
Interestingly, the majority of the collective consciousness of those in this space, have agreed- by their financial support of the BTC UTXO set- that Bitcoin has the best chance to be a new global money.
The fact that some individuals, wrote some code, others downloaded it and began to use it, and through its use it gained an acceptable value to (a limited # of) humans in society is amazing. Those humans then decided to see if they could replicate something found only in nature by agreeing to support the building of a system, that would attempt to prevent the ability for 1 or a group of actors from compromising the trust needed in that system, to allow it to travel down the long and winding road of monetary adoption on a planet.
They took electricity, and arranged its power in the saved state of electronic circuits (the UTCO set). They took additional electricity to prove lineage, accuracy, ownership, transfer, and security (mining).
Think about this one- the concept of Bitcoin (as money or otherwise) occupies no physical space on this planet. It only occupies the identical temporary state of electronic circuits, on thousands of computers all at the same time. Embedded in that temporary electronic state is a verifiable record of an amount of electricity consumed in order to provide trust to humans that the temporary state of electronic circuits is accurate for what it says it should say.
I labored over that last paragraph and I think it makes sense but I’m still trying to wrap my head around it.
When the state of those electronic circuits, changes on every computer, every 10 minutes, and that new state is exactly the same on all computers, the system stays alive. It is a living organism now. It has a heartbeat 6/60 (blocks per minutes).
It is a collective agreement by those using the system- how much electricity has been used, and what it represents. But it is still humans who act (individually- and sometimes in unison) to keep it going. No human intervention is needed to keep the settlement layer of Gold viable. Nature took care of that.
So we have attempted to create a system that replicates something in nature that cannot be altered by humans, that was invented by humans and still needs to be run by humans. Catch 22 anyone?
The ethos of the Bitcoin community (among other things) is to have a money no one controls. And yet humans control it. It was the collective consciousness (aka consensus) of societies that decided gold would be money. And so it is that the collective consciousness of the current society that will decide if there will be another money besides those governments issue. Natural forces will act on all aspects, all the time. Human’s natural greed will also always be acting for the benefit of those acting humans.
It is widely accepted by many that Bitcoin cannot be replicated. Every attempt has so far produced inferior copies. Obviously, this is going to take time to see if humans are able to maintain this system- the 1st human attempt at a natural money.
A natural base money needs no maintenance. Bitcoin lacks this quality currently. There may be a day when the base layer is believed to be unchangeable (some believe we are already there or very close).
Maybe then it can be considered “no maintenance”.
Maybe then it will finally be accepted ubiquitously as money the world over.
If you don’t already have some, I’d suggest getting some. This is big and getting bigger. 10 years for this invention is huge. It may stick around. If it does, it already has enough of the right characteristics to increase in its purchasing power. That alone is worthy of consideration.
I have no idea if anyone cares what I have to say. I’m sure there will be different opinions about it. Maybe no one cares because my perspective is batsh^t crazy? I’m looking forward to seeing if anyone reads this to the end and feels like responding.
Additional thanks to @BitcoinErrorLog and @WhatBitcoinDid for their recent podcast. John indicated he is stuck and can’t get out (of this Bitcoin thing). That hit me hard. I am similarly stuck. I can’t look away. I can’t stop thinking about it. I can’t stop learning about it. I can’t shut it off in my brain. My whole life has been turned upside down. My future has been altered permanently. I will live the rest of my days attempting to convince anyone who will listen to take this thing seriously. Do your homework. Listen to all sides. Question all facts. And then take a stand. Either embrace it, or let it go. But don’t just ignore it. That may turn out to be your biggest regret one day. Don’t let that be you .
Please re-tweet if anything I typed has value. My goal here is to spark conversation, illuminate ideas, and motivate humans to act.
I hope it works.
