“Sound money?”

A quirky paradox

It has previously been observed (here and here) how both John Forbes Nash Jr. and Satoshi Nakamoto present as acolytes to the Italian savant Vilfredo Pareto, that an assumption can be made [Nash and Satoshi] were one in the same.

The paradox of this relates to the supply side of the bitcoin design: according to Pareto efficiency, bitcoin issuance has become “unimportant”.

Pareto “characteristic functions”

The probability distribution functions of Pareto are representative of bitcoin inflation, as seen here:

Pareto probability density function (source: Wikipedia)
Bitcoin supply inflation rate (source: Young Academy)
Pareto culminative distribution function (source: Wikipedia)
Bitcoin mining schedule (source: Bitcoin Mining 101)

The utility of Pareto

The Pareto principle is used as a broad and general method of understanding how to allocate resources, with the associated 80:20 power law meaning 80% of outcomes are attributed to 20% of causes, so that the 20% (the “vital few”) require 80% of time, energy, and attention.

Source: When to use a Pareto chart

This ranking of popularity, gives a “long tail” affect, where to the left are the few that dominate, not only representative of the bitcoin inflation density, but also on its affect to sovereign issuance translation:

Long tail (source: Wikipedia)
Long tail (source: Google)

Suggesting in terms of supply — and as defined by Pareto efficiency — bitcoin has become “unimportant” — and if the power law is a functional relationship of one property to another, it appears bitcoin is susceptible itself to the kind of probability distribution it has subjected the sovereign issuances to, in a game of digital signatures represented by superior hashing power.

It also seems eminently possible Pareto efficiency could be utilized in contract consideration to a form of (Pareto efficient) indexation, so that multilateral cooperation becomes manifest in rendering different kinds of problems requiring multilateral cooperation as solvable, in the game theoretical sense of contractual formation becoming possible, since it was Nash who remarked on the quality of the money unit in the contract making a big difference to the certainty of the contract terms.




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Jon Gulson

Jon Gulson

Ideas in games, language, and trust.

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