Bitcoin A Socially Scalable Contribution To Conflict Prevention In Society
Thread by @TuurDemeester
1/ In this thread I make a philosophical argument for Bitcoin being a socially scalable contribution to conflict prevention in society, contrasting it with the current system of monetary interventionism.
2/ All interpersonal conflict has 4 necessary and jointly sufficient causes:
- Plurality — multiple actors
- Free access — what actors want is accessible to them
- Scarcity — desired good is in finite supply
- Diversity — actors have different values, opinions, preferences
3/ If one manages to completely remove just one of the four necessary causes, it effectively resolves and prevents interpersonal conflict.
4/ Example: There is one pancake in the room (scarcity & access), and you and I both want it (plurality & diversity). If I convince you that I should have the pancake (removing diversity), the conflict disappears. Another solution is to bake more pancakes (removing scarcity).
5/ In the political world, conflict prevention is usually more sought after in the areas of plurality & diversity (solutions of unity & consensus), whereas the business world focuses more on removing scarcity and restricting access (solutions of abundance and private property).
6/ Rather than creating abundance by ramping up production, one can also create it by diminishing one’s (perceived) needs and wants: asceticism. This was especially popular in premodern times (monasticism), and can still be found in many spiritual/religious teachings.
7/ Now let’s apply this framework to money.
8/ In a pre-money, barter world, people don’t have a lot of possibilities to get their needs and wants met. Even division of labor is hard: if I’m a cobbler, I can’t get eggs until the chicken farmer needs a new pair of shoes.
9/ Enter money, a technology that helps to prevent conflict by giving people a highly marketable good that they can use to access a variety of goods and services on a non-coercive basis (i.e. providing abundance by meeting needs & wants).
10/ In order for money to reliably serve as that near universal “key to markets”, it must acquire several characteristics: durability, portability, divisibility, and widespread desirability.
11/ Over time, governments have started using the institution of money, surely for their own self interest, but also to try and address interpersonal conflict in society.
Let’s look at how:
12/ Government managed money restricts plurality: there is only one entity (e.g. FOMC) which ultimately controls interest rates and money supply. The central bank has the undisputed authority and bears ultimate responsibility.
13/ Governments curb free access: a unit of fiat money can only be owned by one person at a time, and counterfeiting generally is penalized.
14/ Government money is abundant: when scarcity threatens to cause conflict, new money is made available to particular groups.
15/ And finally, governments also pursue monetary consensus: by means of marketing and regulation, citizens are pursued to only use one money (national currency) and to endorse the local monetary policy.
16/ So the ways in which government uses monetary technology to try and prevent societal conflicts is very comprehensive. However, in my opinion this approach suffers from some systemic flaws:
17/ First, over time, central banks hardly ever remain free from political influence (lack of unity). Second, certain groups do get “free access” to newly minted money, for example those who are labeled “too big to fail”, or those allowed to engage in fractional reserve banking.
18/ Third, the monetary abundance isn’t divided evenly over the population — credit expansion & bailouts generally favor debtors to the detriment of savers (causing conflict). And fourth, the resulting inflation undermines the money’s long term desirability.
19/ Finally “social consensus” appears manageable in times of credit expansion, but obviously breaks down in a phase of deleveraging or stagflation. It is unreliable as a conflict prevention mechanism and it’s impossible to prove it offers a net benefit to society.
20/ Now, let’s switch to Bitcoin. In what ways could Bitcoin contribute to diminishing interpersonal conflict?
21/ Remember, there are 4 necessary and jointly sufficient causes for conflict:
- Plurality — multiple actors
- Free access — what actors want is accessible to them
- Scarcity — desired good is in finite supply
- Diversity — actors have different values, opinions, preferences
22/ Bitcoin 100% allows for plurality and diversity: anyone can use it, and the network is censorship resistant — opening the door for any and all diversity. It is also decidedly a scarce good.
23/ However, there is one cause of conflict that Bitcoin does _not_ allow for: free access. Nobody can mint bitcoins in excess of the 21M supply, and with sufficient precautions taken, existing coins can be protected against access from anyone anywhere.
24/ This core ability to restrict free access is not dependent on the decision of a political committee, but rather innate, hardwired in the technology. To borrow from Nick Szabo, Bitcoin is a socially scalable, conflict preventing protocol.
25/ But Bitcoin doesn’t touch at all on the three other categories of conflict-causes. Isn’t that a setback?
26/ On the contrary, Bitcoin is an incredibly powerful startup currency _because_ it fully enables plurality, scarcity, and diversity.
27/ This triple combo allows for bitcoin to be highly divisible, highly portable and scalable, highly durable (predictable supply curve), and therefore it holds the promise of a universally desirable store of value and medium of exchange.
28/ And so, paradoxically, by efficiently removing free access to a scarce monetary good, Bitcoin becomes a socially scalable technological enforcer of property rights.
29/ Bitcoin diminishes conflicts by means of technology, much like how car locks diminish car thefts. It’s a protocol that allows users to peacefully enforce their right to control their own financial future.
30/ Of course, Bitcoin in itself isn’t going to solve all the interpersonal problems that governments are trying to solve. But it holds the promise of doing one thing extremely well: be a reliable form of money.
31/ Here’s is the problem I see with monetary interventionism: it is trying to solve many problems using the same toolset, resulting in unintended consequences and an ultimately unreliable monetary infrastructure.
32/ I’m a strong believer in modular scaling, and I think history backs me up on this: that robust complex systems (including prosperous, thriving societies) are consistently built out of simple, performant mechanisms that lock into each other in a modular way.
33/ And so I see Bitcoin as a small but performant monetary building block that can serve to diminish interpersonal conflict in society. Much technology and many institutions will need to be built around it, no doubt. But it’s an exhilarating start.
34/ TL;DR Governments use monetary intervention as a swiss army knife for society’s problems. This undermines the function of money and has unintended consequences. Politically neutral protocols like Bitcoin could be superior because they are reliable, robust, and modular.
35/ For the philosophical framework used in these tweets I am indebted to prof. Frank Van Dun. For more background, see his “Pure Theory of Natural Law” users.ugent.be/~frvandun/Text… and his “The Logic of Law” users.ugent.be/~frvandun/Text….
36/ Thanks to @KoenSwinkels and @real_vijay for their valuable feedback on my draft. All errors remain my own.
