I’m not a Bitcoin advocate or an expert in my day to day, and other than doing a few things back in 2013 (bought a few bitcoins, published a startup challenge as part of Aleph, and wrote a blog post), I have been nothing more than an interested observer throughout the last four years. I’ve watched with some amazement how Gibson’s words — ‘The future is already here, it’s just not evenly distributed’ — materialize in front of our eyes. In fact, referencing Bitcoin is probably their most apt use.
Now, my good friend Oren Dobronsky wrote a lengthy post about the perils of Bitcoin, and as he’s a good friend and the purveyor of all the Hummus I eat outside of Israel, I thought it deserved a serious response.
Oren’s main criticisms were that
- Bitcoin might cause the US to lose its throne.
- Bitcoin enables money laundering
- Bitcoin is immoral
In short, the claim is that Bitcoin is bad for society. I would like to argue that Bitcoin is actually a great upgrade to human society worldwide. Here’s why:
What’s Good for America, Good for the World
Oren’s first point on why the Bitcoin should be killed is it might shake the current world order, which is revolving around the greenback dollar and its role at the center of the world economy, and as the direct source of the US’ power. (You thought the source is the Pentagon? Ha! US Treasury is how the United States controls the world).
But here’s the thing. Bitcoin was crafted and engineered to deliver exactly that — a shake-up to the current power structure that runs the world, so obviously if Bitcoin will succeed, it will threaten the current world order. That’s its exact definition of success! It’s been built by people that have gone through the great crisis of 2008 that the current world order has given us. The latest and most powerful member in a long list of crises we’ve encountered since good old Nixon changed a few simple laws some 40 years ago.
They’ve seen how nothing happened to those perpetrators who defrauded the world’s population of Trillions of dollars. They’ve seen how Wall St. literally owns the US government, regardless of who wins the elections (Tax bill anyone?), and they ventured to consider the concept that what’s good for Wall St. and thus to the US government, may not be best for the people of the US or the world. Moreover, as Oren rightly states (although in somewhat different words), the US is using the dollar’s central position to steal money from all other countries. It’s currency is kept artificially high, in effect making everyone else’s stuff cheaper for its citizens/corporations.
Oren’s prediction that within five years the world economy will rationalize and the US will take its rightful place based on its TRUE ECONOMICAL OUTPUT sounds pretty moral to me. US and its citizens had the better part of 200 years to get an unfair head start in accumulating riches. Perhaps leveling the playing field a bit will give a shot also to the Billions of non-US citizens who are both much poorer and also need to work much harder.
BTW, I do not believe in that prediction. It will be much harder for Bitcoin to upend the dollar than Oren suggests. It is much better positioned to replace gold than the dollar.
Bitcoin = Money Laundering
Many believe that Bitcoin is the ultimate tool for money laundering. That, unfortunately, is just plain wrong and a result of bad publicity and misinformation. As I wrote four years ago here: (selfref-blog.tumblr.com/po…/69683277901/bitcoin-speculations), Bitcoin is a really poor tool for money laundering. All transactions are public and are registered forever. All Bitcoin/FIAT transactions are regulated and identified. Four years ago I speculated that at some point in the future, the NSA will develop the technique to identify who’s who on the network, and then will be able to go back and trace every transaction ever made. This is nothing more than an advanced exercise in graph theory and correlations. In the meantime, few companies emerged that are already working on this problem, and frankly, only stupid or misinformed criminals (or nation-states who do not care) will use Bitcoins as their store of value.
But, care to guess what other currency is just great for money laundering? (hint, it’s green) In fact, can you guess the names of top money laundering and tax haven counties in the world? Not Panama, no. Nor the Jersey islands. Our benevolent US of A ranks #3. Try opening a company in the Cayman Islands, and then try doing the same in Delaware. (see here: https://www.theguardian.com/…/panama-papers-us-tax-havens-d… and here: http://www.financialsecrecyindex.com/)
So no, money laundering doesn’t hold water.
Bitcoin is Immoral
Here’s the gist of the claim: Let’s prevent all of those poor misguided people from funneling their life savings into Bitcoin and lose it all when it crashes.
So first, I want to say outright that I do not condone people investing in Bitcoin more money than they’d be absolutely willing to lose. It’s a high volatility asset and will continue to be so for another order of magnitude or more. It’s just a mass thing — it’s young and small, so it’s easier to move it up and down, especially as so little of it is up for sale. In 2013 I bought as much bitcoin as I was willing to buy without feeling uncomfortable divulging to my wife, and I highly recommend you use a similar metric.
That said, the growth of bitcoin will likely create one of the most interesting social mobility experiments ever created, and as such, it has the potential of creating a lot of moral good. You see, social mobility in modern society is in the tatters. If your ancestors haven’t accumulated wealth, your chance is virtually zero. Yes, there are a few Cinderella stories in silicon valley, Tel Aviv etc. but these are opium for the masses. And these stories, typically, are happening to people that are already well-educated, and got some other unfair advantages (e.g. like being able to live in Silicon Valley, Tel Aviv etc.)
With Bitcoin, there’s a group that managed to sneak in without notice into a pole position. Yes, many of them are the same well-educated peeps with well to do parents, but many are poor migrant workers who started using bitcoin to cheaply and securely send money to their families in their home country. Others were deemed too crazy. Some are still considered crazy. Imagine how beautiful it will be if Bitcoin actually succeeds. Just imagine Jamie Dimon’s face. “it’ll be a sight to see, I mean a sight to see. (CJ Craig)”
Besides, there’s a notion that the Bitcoin price is exploding due to high demand because of ‘the greater fool’ phenomena. People believe it will go up even more and they’ll have someone else to sell to. I think a much more important force is the lack of supply. The people that own Bitcoin believed in it when no one did and held on to it almost religiously through the desert years. Now, their belief just became stronger, and they have zero interest in selling any. That’s the underlying force behind the rise in price.
The thing that people don’t fully grasp in their day to day life is that gold and money are just stories. Stories we tell ourselves. There’s nothing more real in a green piece of paper than in a hash sequence. Yuval Noah Harari wrote a book about it, but Douglas Adams summarized it best in a single sentence: “Many solutions were suggested for this problem, but most of these were largely concerned with the movement of small green pieces of paper, which was odd because on the whole it wasn’t the small green pieces of paper that were unhappy.” (HHGTTG)
The thing about stories, is that some of them are extremely viral if they emerge in the right timing. Once such a story emerges and becomes viral, it is the most powerful thing in the world. It may be a story related to a piece of paper with 95 theses written on it, nailed to a church door. It can start with a philosophy book written by a german jew with a name that may fit a London department store. And yes, it can also start with a newsgroup email, inviting few people to check out this cool new idea.
To my dear friend Oren, I’ll just say — yes, Bitcoin may usher a new world order. No, it won’t happen so fast, if at all. But hey, there’s a chance that new world just might be a lot better on the whole, even if not for Jamie Dimon.
