Honey for the Bitcoin Bear
“It is so desirable in game theory to have transferable utility … although it might not be entirely ﬁtting except for individual games of comparatively small weight played by large insurance companies.” John Nash, Ideal Money.
Bitcoin as bearer instruments are something less considered in a Bitcoin bear market: the price is the price, the trend is a friend; and technical porridge may seem inappropriate, given recent price growls.
To such regard and irrespective, there is much talk to the idea Bitcoin is a bearer instrument — and it holds relevance in how Bitcoin will regain trend momentum.
Not Your Private Keys, Not Your Bitcoin
There has been a dominant belief that if you don’t possess the private keys to the Bitcoin [you lay claim to owning], then the Bitcoin isn’t really yours:
“As Wall Street raises the stakes around cryptocurrency, large institutional players are circling this new asset class and bringing with them their own set of requirements.” Ian Allison, The Crypto Insurance Market May Total $6bn. That’s Nowhere Near Enough
There is now dialogue on how institutions will become comfortably familiar with Bitcoin and cryptocurrency: in other areas they invest, they have protection against theft and other forms of loss.
The problem as expressed in Ian Allison’s article is the amount of insurance [thought] available in the market, falls considerably short of that required in terms of actual volumes transacted and assets held.
The Bearer Asset and Why it Matters to Bitcoin
“Insurance is critical for getting institutions to invest because unlike stocks and bonds, crypto is for all intents and purposes a bearer asset. Once a thief obtains the private keys to a wallet, the money is gone, like cash or jewellery pilfered from a safe.” Ian Allison, The Crypto Insurance Market May Total $6bn. That’s Nowhere Near Enough
The idea that Bitcoin is a bearer asset is expressed because it’s thought [generally] identity-less and available to spend without bank account or third party:
However, it is refuted here that Bitcoin is a bearer asset:
“The relationship between the bearer assets and underlying assets is determined by the promise between the issuer and the bearer. That is, a bearer asset is an instrument whose terms allow its bearer to make a claim against its issuer for an underlying asset.” Rob Henham, Bitcoin is Not a Digital Bearer Asset
Cash is sometimes considered a bearer asset, but most easily and properly when a paper note redeemable for the underlying commodity or instrument. Here we can see Bitcoin is the asset, not the paper which lays claim to the underlying [asset] itself.
This matters to Bitcoin, when we consider scaling.
In returning to the Bitcoin insurance problem, we can glean insight from this tweet:
The insight being insurance companies may not make BTC/native offerings because it would require Bitcoin exposure, which whilst may give competitive advantage over immediate peers, it would still expose them and their offerings as behind others with large enough holdings to start.
Nash Equilibrium applies where parties cannot unilaterally gain by deviating from their existing strategy: in this instance, insurance companies would be wary of Bitcoin’s value outpacing the sovereign expression of [such] a value should the paper bearer instrument (cash) not have such a similar claim to the Bitcoin standard.
In other words, insurance companies could be bankrupted by claims.
The Optimising Trend
It has been noted [that] nature uses ideals as blueprints, to which [nature] then tends toward [asymptotically]:
And a response:
Insurance Evolving Sophisticated Liquidity: To Not Think Twice
If Nash was correct in understanding transferable utility as optimising in comparatively small games between large players, there follows suggestion such ‘Ideal Money’ would be fit for highly scaled peers — both euphemism and allegory for those who make the money.
The ideal of insurance is many fold: it is restorative, assuring, trustworthy and helps remove doubt, uncertainty, and regret shadows from action forms.
Such insurance when [optimising] is closing kimono.
The expression of not your keys, not your Bitcoin; becomes adolescent by comparison: money has become figurative to the regard of social consensus and trustworthiness — insurance — and without such an understanding, Bitcoin is a pointless abstraction of computer code: its proof of work is otherwise useless.
And so the ‘chicken and egg’ problem for insurance can be expressed in portmanteau:
The event to be insured will be played out here: