Feedback to Nassim Taleb’s draft article “Bitcoin, Currencies and Bubbles”
Nassim N. Taleb, the author of the influential book “The Black Swan”, wrote a draft article on bitcoin, and sought for feedback on twitter. I formulated some thoughts as a feedback, but they are too lengthy to post on Twitter. So I put them together here and hope somehow he will see it.
Mr. Taleb, great article with very good analyses. Thank you.
First let me point out several minor typographical errors. They only matter for publication. And I’m mentioning these not to help you, but to prove that I actually read the article.
Instead of pinpointing the locations of errors, you may do a global search of your article for the following words or phrases, as the errors are apparent once you locate them:
1. safe have (should be “safe haven”)
2. thee (should be “the”)
3. proved closest think (should be “proved closest thing”)
But beyond that, I wish to point out something that you seem to have not considered.
I fully agree with your analysis of bitcoin as a purported currency or store of value (digital gold narrative).
However, this does not touch on the two foundational properties of the genuine bitcoin according to Bitcoin Satoshi Vision (BSV):
First Property: BSV is “digital land” (rather than a purported “digital gold”) on which economies are being built; and
Second Property: BSV is a settlement medium (versus a payment medium).
Your analysis is complete as far as BTC is concerned, because BTC does not have the above two properties. It does not even pretend to have them, much less in reality.
However, BSV requires a different analysis because the above two functions are at BSV’s core design.
Concerning the first property mentioned above, it is important to say that even if BSV coins fail to serve as a currency, a store of value or a hedge against inflation, the failure would not affect the BSV blockchain‘s designed goal of becoming the “digital land” that supports the next generation computational infrastructure powering the following great transformations simultaneously:
(1) decentralization of money;
(2) decentralization of assets through tokenization;
(3) decentralization of data; and
(4) decentralization of computation (different from distributed computation)
(5) decentralization of AI (a combination of the above #3 and #4).
For more detail on this point, I refer to the following article: Why BSV is a value creating system, while BTC a value absorbing system.
Concerning the second property mentioned above, the following comments are provided in relation to Box 3 of your article: Payment system.
The statement you made in Box 3 is true, but you’re probably not aware of the other half of the story with bitcoin. The following messages were initially posted on Twitter, but are presented again below for your attention:
1/ There is a difference between a “payment medium” and “settlement medium”. You analyzed the former, but not the latter.
2/ The real Bitcoin (BSV) is designed to be at least a “settlement medium”. If it can also serve as the “payment medium”, it would be a huge plus, but if it cannot (as you argue, which I only agree with regard to BTC but not BSV), so be it. Store of value is another separate matter.
3/ Regardless of your opinion on bitcoin, one unique property that BSV does have, beyond any dispute, is its ability to have instant settlement, by which it may serve as a “settlement medium” with or without a fiat environment. It works especially well in a cross-border multiple fiat environment or a cross-platform multi-token environment.
4/ But to do that requires it to be vastly scalable (which BTC isn’t, but BSV is).
5/ Consider this specific example: payment for an item priced in a fiat. In making payment, the payor’s fiat is first automatically and invisibly converted to BSV, then sent to payee, where it is automatically and invisibly, but optionally, converted to payee’s fiat.
6/ All this happens automatically and instantly in the backend. In performing this function, bitcoin (BSV) does not even have to be visible, much less used in actual pricing, which can be done by any suitable fiat currency. The users see everything in fiat only (assuming that is the mode elected by the user).
7/ In the above scenario, because BSV enables instant settlement, volatility is irrelevant even if BSV is volatile in a larger timeframe. The instant settlement ability of BSV serves as a global settlement medium, as well as a liquidity medium.
8/ This is what Ripple wishes its XRP to be, but they don’t even have a true blockchain.
9/ However, the above scenario is only one example, which is purposely meant to be extremely conservative and “noninvasive” to the existing fiats. With an extremely efficient settlement medium, however, what will prevent it from eventually becoming a payment medium as well?
10/ Already, for nonconventional merchandises that are created and traded in the digital-verse, pricing using a BSV unit (such as Duro) already works realistically. To the extent that such pricing happens, it satisfies your Box 3 requirement. A new world of merchandising is rising, and the old is also being transformed.
11/ And all the above would not contradict the property of a store of value, which is not the design goal of BSV but may be a naturally emerging property anyway.
12/ Could you first focus on what BSV can already do, and reformulate your thesis? This is not to try to make you a “fan” of BSV, but just a better informed visionary. There are many people who see things deeply but narrowly, but you clearly can do both deeply and broadly.