If Satoshi Nakamoto and Nick Szabo Have the Same Unique Argument Is the Argument Stronger?
There was once a time when you could argue bitcoin, a politically neutral internet currency, wouldn’t “work”. That time has long past. There is however still debate about what bitcoin should ultimately be developed to become. The active developers, economic experts, and computer scientists are calling for a safe schedule of scaling bitcoin to the level of a global currency while a faction of early adopters led by Roger Ver have a polar opposite belief on how bitcoin should be developed.
Economists have long sought to explain the origins of money and this pursuit is extremely relevant to bitcoin because in order for it to be accepted by experts of related financial and economic fields there needs to be a supporting argument as to how bitcoin could go from zero to hero in regard to its price as a reflection of its value.
This is why Nick Szabo’s explanation of how proto-money arose and eventually evolved into the money we use today is so important. Nick’s argument is important because it allows for an understanding and explanation of bitcoin that is inline with our historical observations on money.
In the essay Shelling Out Szabo argues money fulfills a coincidence of wants that naturally arises in the face of barter situations. Nick Szabo is credited by Satoshi Nakamoto for creating for designing what was a precursor to bitcoin:
In “Logical Emergence of Money From Barter” Szabo shows how mental transaction costs create such a need for money:
What Moldbug’s argument, properly corrected, shows is that some of the costs that arise from the noncoincidence of wants occur even if there are no transport or storage costs, but only mental transaction costs.
I brought this assumption out into the open and formalized it in terms of mental transaction costs being, even in the absence of storage and transport costs, sufficient for the emergence of money.
In other words, it’s just not the case that in *any* market money is needed or will arise.
We can compare this unique view on money to how Satoshi first introduced and described bitcoin. Satoshi explained bitcoin using a metaphor of an intrinsically value-less commodity with one magical property:
As a thought experiment, imagine there was a base metal as scarce as gold but with the following properties:
- boring grey in colour
- not a good conductor of electricity
- not particularly strong, but not ductile or easily malleable either
- not useful for any practical or ornamental purpose
and one special, magical property:
- can be transported over a communications channel
A perfect analogue for Nick Szabo’s bitgold.
The key insight here is that Satoshi also alludes to how an otherwise intrinsically worthless but transaction-cost-free object could gain value and status as a currency:
I think the traditional qualifications for money were written with the assumption that there are so many competing objects in the world that are scarce, an object with the automatic bootstrap of intrinsic value will surely win out over those without intrinsic value. But if there were nothing in the world with intrinsic value that could be used as money, only scarce but no intrinsic value, I think people would still take up something
There are very few economic philosophers in the world today that can be caught giving an academically based argument for WHY bitcoin should have value. Szabo and Satoshi each give essentially an identically unique explanation.