What do you mean by “a bad prep”? I’m not familiar with it. Googling didn’t help much. Do you mean, like cryptos prepare badly for working/integrating with the real world?
Ahh, I think I get you now – ‘a bad prep’ meaning that one of the motives for ppl buying/valuing bitcoin is as a contingency for like social collapse, but most of the ways that society could collapse mean that bitcoin would be worthless, anyway. so – for preppers – bitcoin isn’t an effective way of prepping; something like gold is better.
I agree with that. (I remember this sort of thing being brought up like 10-7 yrs ago – EMPs, collapse of society stuff – some ppl tried to argue bitcoin still could work via offline stuff b/c the blockchain would come back when tech did, but mostly the discussion went nowhere. Also, using bitcoin offline like that wouldn’t work without very sophisticated tech – if you had that tech then it wouldn’t be offline anyway)
I think there’s a line of dialog (or more than one) in the big short about betting against the US and that it wasn’t easy. I get the feeling that a decent chunk of the crypto community want govt currencies to fail – like they’re betting against society and that isn’t difficult for them.
It could be argued that bitcoin’s value can’t be permanently destroyed as long as the data of the original blockchain is still around, because at a later date (after civilization comes back) the community could reset the blockchain to the point before all the bad stuff happened. There might be widespread disagreement about precisely what block everyone ought to reset to (e.g. was it directive 312-A-1 that destroyed bitcoin or was it 315-C?), and different choices of reset point among different sub-communities would lead to different branches (different daughter currencies). If you had access to your wallet from the original chain, you’d have access to wallets for each of these daughter currencies, so it’s not clear how much value you’d lose.
All we can say for sure is that an individual bitcoin wallet’s robustness against societal collapse depends acutely on a lot of unknowns about future peoples’ preferences and the precise way in which things collapse, whereas gold doesn’t.
I think Elliot was not arguing that bitcoin’s value could be permanently destroy – just that it could be permanently harmed. IDK if you were adding-to or responding-to but thought it worth mentioning.
(These next paragraphs are based on my recent in-progress reading of Theory of Money and Credit)
I think the idea that USG could do permanent damage is somewhat self-evident, in that bitcoin’s value can be traced back to nothing more than the fact it is (or at least capable of being) an economic good. Given that some initial demand was generated for it during 2009-2010 (it doesn’t matter if that demand was mistaken), it took on some value. While ppl do (currently) judge it to have some subjective value, if this demand were significantly damaged then there’s no reason to expect it to return to some equilibrium (unlike gold). If there was an argument that Bitcoin would return to its top-place-status (or any other equilibrium), then I think it should answer other questions too, like why not just start a new chain? why not use other existing chains?
In TOMAC, Mises says (early on) that money is the common medium of exchange – it’s not a thing that you legislate, it’s a thing that’s adopted. Let’s assume Bitcoin is a common medium of exchange: if it’s harmed by USG (or whomever) then demand for such a medium will move elsewhere. Now let’s remove the source of that harm (e.g. USG’s legislation isn’t enforced, USG collapses, change of administration, w/e) – why should the bitcoin price go back to where it was, especially if an alternative was already adopted as a common medium? ATM it seems to me that bitcoin is the #1 crypto because bitcoin was the #1 crypto because bitcoin was the first crypto. that’s it.
More generally: what’s the difference between that and starting a new chain with a pre-mine that matches the distribution of the old chain?
While it’s possible that ppl might revive a dead bitcoin chain, I don’t see any reason for that to be rational, esp if civilization has gone and come in the mean time. IMO that’s future people creating value (or doing something) as opposed to past value being destroyed.
Note: i presume we’re talking about like the canonical Bitcoin blockchain’s token-unit-thing; like BTC, not the general idea of bitcoin/blockchains/whatever (I think this is consistent with everything we’ve said, but thought it should be stated for clarity).
Edit: I said above “as opposed to past value being destroyed.” – I meant “as opposed to past value being preserved.”
It was meant to be a response. I should have used the words “permanently harmed,” but I think the logic of my argument applies either way (it’s not clear that the USG can permanently harm bitcoin’s value, for the exact same reasons).
I’m glad you clarified this, because I actually was using bitcoin as a stand-in for the general idea of like, a cryptocurrency with a public ledger.
Hmm, I don’t understand your question. What does it mean to match the distribution of the old chain? In such a scenario, who is it that starts out with bitcoin in their wallets?
The reason why (I think?) it’s rational to resurrect an old chain is the reason why it’s rational for them to keep running the main chain tomorrow: The people maintaining it have a vested interest in maintaining it. I guess this could break down if society has collapsed for a very long time and a significant fraction of the original keys are lost.
The exact same addresses are assigned the exact same value of BTC in the genesis block of the new chain. So the exact same keys own the exact same coins (equivalently: the set of unspent transaction outputs is identical). LMK if that doesn’t answer your questions.
In the future, why would everyone else want to resurrect that chain tho? if other ppl don’t buy into it (and make a new chain or w/e) then it’ll just be the old-guard amongst themselves. IMO that wouldn’t end up with much value.
Other ppl do have a reason to buy-in to bitcoin today: it’s the most secure chain. That goes away with a discontinuity. (Not to mention that mining rewards would be super low relative to adoption if you rebooted a dead bitcoin)
Good to know. I have kept my comments just to bitcoin atm – like ether (ETH) can be seen as a commodity, unlike BTC. so WRT the current discussion it seems like other chains should be discussed separately (tho we can make some generalizations like LTC is basically BTC wrt reasoning about its value as money).
Okay, I understand what you mean now. Is there some important technical difference between resurrecting an old chain and “starting a new chain with a pre-mine that matches the distribution of the old chain”? In my mental model these are basically equivalent, but admittedly I only know how the bitcoin specification works on a high level of abstraction.
The answer to that question might not be relevant, because either procedure could restore some part of the value to the owners of the original BTC, which was my essential point.
I think I covered that specific point when I said “The reason why (I think?) it’s rational to resurrect an old chain is the reason why it’s rational for them to keep running the main chain tomorrow: The people maintaining it have a vested interest in maintaining it.”
The security comes from the robustness of the code, and the large volume of miners. I don’t think that the USG has the power to permanently damage either of these.
BTW, I don’t think this is true. ETH doesn’t have value other than as a medium of exchange. Sure you can burn ETH to have a computation performed for you, but when you do that you’re actually paying for services from the miners (albeit indirectly). Unlike commodity money, if no one else valued ETH, then ETH would be completely worthless to you: you couldn’t burn it and have computations performed for you.
Let’s break your self-quote down – this is how I read it:
- is
- “The reason why”
- “it’s rational to resurrect an old chain”
- “the reason why”
- “it’s rational for them to keep running the main chain tomorrow: […]”
- “The reason why”
who is them?
if ‘them’ means the ppl who were miners in 2021 and (after the fall and rise) want to start it back up, well that doesn’t address the ‘old-guard’ criticism.
but more to the point, you claim the reason is the same for both; that is: “The people maintaining it have a vested interest in maintaining it.”
That does not explain why, 2 or 20 or 200 years in the future, a group of ppl would have an interest in continuing something that’s been dead for X yrs – even if those ppl were previously miners/hodlers of bitcoin.
This crit could be summarized as: continuity matters.
(edit: I wanted to note that I have more to say on other things you raised, but this seems like a good point to focus on to start with)
(edit2: I said “a group of ppl would have an interest in continuing something that’s been dead for X yrs” – ‘an interest’ is mb not a good choice of words; I have ‘an interest’ in promoting a scam that benefits me (i.e., I could profit) but I’m also unwilling to do that. A better choice of words mb was like ‘a group of ppl would pursue goal Y over starting a new chain from the same principles as bitcoin’; like the point is that there are better things for them to advocate than reviving old-bitcoin)
btw, as some context: in 2013 I wrote about how bitcoin was a new type of money and thought it was a good thing that bitcoin wasn’t commodity money. I changed my mind on that yesterday.
(edit: I think I changed my mind on a lot yesterday. Example: I now think Mises would be against Bitcoin – yet Mises was (in like 2010-2013) one of the economists held up (by the community) as someone who would support bitcoin. That’s a pretty big error on my (and the community’s) part)
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I haven’t explicitly stated it, but I disagree with you on several points. I would like to discuss the things we’ve been talking about.
One reason you might not want to discuss with me is that I am currently reading TOMAC so it’s likely I’ll make mistakes applying things I read (on this first, exploratory reading). On the other hand, I have a lot of experience and a long track record with this stuff[1], so a discussion could be productive anyway.
For me, this is an opportunity to revisit some long-held ideas of mine and discuss them in a new, more critical light. I know that my knowledge of these sort of foundational matters is lacking, and I’m looking to improve it.
-
bitcoin et al ↩︎
I wrote my comment
partly because I understand there to be bitcoin fans with significant libertarian leanings, particularly in the earlier community when it was less mainstream. So I thought Mises (a libertarian thought leader) writing a criticism that applies to bitcoin was notable.
I haven’t read TMC for a long time (possibly since before I knew bitcoin existed) but I reviewed a little bit of it a few days ago, and I noticed the implication about bitcoin.
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Commodity money has two sources of demand (the commodity usage and for a medium of exchange) which helps stabilize it against crashes. It reduces people’s fear of being stuck holding the bag at the end when no one wants it anymore (this comes up in e.g. major inflations or crashes with government fiat moneys – no one wants to have the money last when it no longer has value, which drives the value down in advance when people predict the currency may die). With e.g. gold, you may be left with something that has lower value than it used to, but it will still have value (and it’d be hard to guess in advance what else would hold its value better, taking into account storage downsides – even with the reduced value it’d still be a reasonable thing to have, which is one of the reasons it will retain value as a medium of exchange even in bad circumstances).
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Let’s start with a simpler question that involves no hypotheticals: Why do a group of people have an interest in maintaining the blockchain for another block? Why are they interested in continuing something that’s been dead for 10 minutes (the block update time)?
(Partial) answer: The new blocks are created by the miners. The miners are interested in mining because bitcoin has a value per kWh that’s better than their alternatives. Bitcoin has value because [???].
I don’t fully understand what [???] is, but in order to show that the value of a BTC wallet can be permanently damaged by USG, you’d have to explain to me why [???] disappears after 2, 20, or 200 years, but not after 10 minutes.
One of the reasons in [???] is that BTC has value as a medium of exchange, and insofar as this is true, the value comes from the people who own/use it. Those people strongly prefer to keep using BTC, as opposed to switching to another currency. [By the way, this is why I didn’t define “them”: it’s kind of murky, because it’s the miners who maintain BTC directly but it’s the users/owners who bear the responsibility for making it valuable].
I actually would be interested in this (maybe you could break it off into a new thread or something? I don’t know how). I’ve also been following crypto stuff for a long time, and I have some (mostly negative) beliefs about the value of blockchain technology, but I haven’t subjected them to serious critical discussion.
I think you are over-estimating my knowledge of economics. E.g. I have never read TOMAC (or any economics textbook for that matter, my knowledge about economics is very ad-hoc), and I don’t think I have a real understanding of why non-commodity money is bad (though I’m already sympathetic to that idea).
FYI I’m going to be kind of slow about responding for the next 10 days though because I have an exam coming up.
edit: quoted what I was responding to for clarity
I’d suggest you guys (lmf, Max) use a discussion tree for this discussion. I’d specifically suggest one with only the main points, not to cover everything that’s said. You can each write specific text that you want to include in the tree, and make it short (typically one sentence), clear, and something you’d stand behind in debate. Then only the text intended for the tree gets put in the tree. One result is it helps focus attention on people’s main points (the ones they put in the tree). Another result is the tree shows what points haven’t been replied to.
I did some searching for Mises + Bitcoin stuff this morning:
- https://wiki.mises.org/wiki/Bitcoin (doesn’t mention the crit)
- https://mises.org/wire/bitcoin-and-theory-money
In light of Mises’s sweeping claims, we can quickly see why so many fans of the Austrian school have a major problem with Bitcoin: Since Bitcoin was born to be a currency—rather than first serving as a regular commodity—doesn’t that mean it can’t be money? Or, going the other way, if Bitcoin ever did become money, wouldn’t that mean that Mises must have been wrong?
At the risk of being evasive, we are not here going to explore the fascinating question of whether the case of Bitcoin violates the regression theorem, or whether its unorthodox features can be made compatible with Mises’s monetary framework (which he obviously conceived with tangible goods in mind). Other economists familiar with the Austrian school and Bitcoin have weighed in on this intriguing issue.9
- https://mises.org/topics/bitcoin there are lots of posts on mises.org about bitcoin
One thing I did find was The Mises Theory of Money, Bitcoin, and Saving the Economy Explained in 10 Minutes (linked @ 5:45 – the speaker mentions the crit but refers to prior work – note: it’s a 30 min vid)
The prior work: http://understandingbitcoin.us/wp-content/uploads/2017/12/2017.11-Understanding-Bitcoin-v1.11.pdf
One notable thing (p.12):
“Bitcoin” encompasses two related but distinct concepts. First, individual bitcoins
(lowercase-‐b) are units of (fiat)9 digital currency.
I have been thinking that BTC is fiat over the past few days – I like that the authors understand that (which they should given that Robert Murphy (the guy in the video) claims to be an economist with a background in Mises/Austrian econ).
footnote 38 (on page 57) reads:
We are using the terminology and framework for monetary economics developed
by Ludwig von Mises, a giant in the school of Austrian economics. We are spending
time carefully developing the distinction between a medium of exchange and money
because this is crucial to defusing a later objection, regarding Mises’ “regression
theorem.” For the most sophisticated discussion of these issues, Mises’ classic work
The Theory of Money and Credit is available for free online here:
http://mises.org/library/theory-money-and-credit. However it is a challenging
book and newcomers are encouraged to consult Murphy’s accompanying study
guide: http://mises.org/library/study‐guide‐theory‐money‐and-credit.
(Note: the links don’t work here and don’t work in the source doc either)
page 62:
This seems to, like, miss the point.
I don’t think ppl should argue that bitcoin cannot be money (it seems obvious that it could). the origin of value for commodity money is not a requirement on all monies; but, for all monies, we should be able to analyze where that value came from.
(Two reasonable answers to this question occur to me: the value of bitcoin originates in: 1. ideas that ppl have about bitcoin/finance/banking which generates subjective value in holding, using, and promoting BTC (somewhat independent of the price), and/or 2. the first economic transaction of 10k BTC for a pizza. (1) explains why it took on and continues to hold value, even outside the continuity of objective exchange-value)
“Our answer to this objection is pretty simple: It has been refuted empirically.” – sure, because it was the wrong objection (and ATM looks like a misunderstanding / misapplication of the regression theory, too – but I haven’t finished TMC yet).
From what I’ve seen the authors don’t deal with the actual problem: is Bitcoin good money or not?
From later on in the same answer:
Mises includes 2 examples of how fiat money could arise early on in TMC (part 1 I think, mb early part 2). “So if any reader thinks that Mises showed that any money must have originated as a regular commodity”, then I guess they haven’t read TMC recently.
Also, it looks like mb the authors just like dodge the question by arguing it’s not relevant :(
isn’t that behavior directly criticized by Mises wrt quantity theory and marginal-utility!?!? A theory of money must be able to answer where did the value originate? but the authors just like pass it on by.
I’ve had little success trying to discuss/debate with current Austrian economists including people associated with mises.org (George Reisman did speak with me, and I have a higher opinion of him.)
One of the problems with those people is that a bunch of them dislike Ayn Rand. I think that’s a major reason they don’t treat Reisman better (e.g. promote and study him more).
I replied with a discussion tree under a new topic. I don’t mind if it’s in a new topic or here – a new topic seemed safer.
@lmf – I have made a first draft with all the important nodes I found. I have abbreviations and things which might harm clarity, so I might redo my nodes to make sure it’s text deliberately for the tree and short, clear, something I’d stand behind. ATM your nodes are just my summaries of your points; pls feel free to object to any wording or make your own tree or whatever.
I think I’ve changed my mind about Bitcoin as money. Particularly: it’s a fiat currency
The reason for the change-of-mind is that I’ve started reading Theory of Money and Credit by Mises (TMC).
Related discussion: https://discuss.criticalfallibilism.com/t/crypto-currency-fraud/128/18 (this post and on).
This doesn’t give proper credit. It makes it sound like your idea that you came up with after you started reading the book on your own initiative. “Related discussion” doesn’t communicate “where I got the idea, and the book recommendation, from someone else”.