Bitcoin Tangents
By Bodhi P. Break on The Capital
Thanks for sticking with me through this article series thus far. All we have left is this article and a final one with my predictions of what’s to come over the next decade. Hopefully, you’ve learned a thing or two about money, about your relationship to money, and about bitcoin as money. You’ll enjoy this particular article if you self-identify (as I do) as a misfit in life, a person who can’t quite fit neatly into a single box and whose swim lane feels like it cuts across all the other lanes. This article is about misfit bits of bitcoin information, those fun nuggets of knowledge that didn’t quite fit into the structure of the earlier articles. Enjoy.
On Hypocritical Advice: “Hey kids, put all your money in stocks and bonds and let it ride for 40 years, the market outperforms on long time horizon and just ignore the volatility, your retirement will be safe. Oh, and past performance is not indicative of future performance.”
On Gold Standard Flaw: The flaw in the gold standard was the centralization of it and allowing banks — specifically central banks — to get intimately involved in transactional control.
On Sound Money and Sovereignty: Sound money needs to have individual sovereignty to disallow governments from taking over the value creation process.
On The Business of Government: Governments are in the business of enforcing and making rules and expanding power. At a conceptual level, they are in the same game as private businesses (power expansion) except that governments are the makers of the rules of the game, giving them an unfair advantage. They also have the banality of bureaucratic propaganda and the fatality of legal violence to support their endeavors.
On Store of Value: A “store of value” is one of the functions of money and that is one of the main reasons that people purchase bitcoin. Bitcoin investors believe that the purchasing power of bitcoin will continue to increase as adoption increases, they trust math over human nature, they like direct access (24/7) to their assets, and they like the affordable portability of a store of value that protects financial purchasing power over time.
On Printing Gold: A sound money supply like the gold standard implicitly acknowledges that countries cannot make all people richer by the printing of money.
On Intellectual Laziness: Intellectual complacency tends to accompany wealth, especially wealth that was easily earned or inherited.
On The Irony of Government Money: Ironically governments couldn’t just create and declare dollar bills as money unless they held gold to back it up. Holding gold was the persuasive tool they used to get their printed money accepted by the masses. It was the prime mover for systemic trust building…and then they left the gold standard but continued buying up tons (literally) of gold. In an era of government fiat (I told you so money), governments own more gold in their reserves than they did under the international gold standard of 1871–1914.
On The Four Horseman of Money Transfers — Trust, Fees, Limits, Holds: People have trusted third parties (intermediary company) to carry out money transfers. People accepted high fees from these third parties because of a lack of alternative solutions. People accepted arbitrary limits (ceilings) on money transfers because of a lack of alternative solutions. People accepted arbitrary wait times (holds) on money transfers because of a lack of alternative solutions. Bitcoin changes all of this. On the bitcoin network transfers of more than a billion dollars have occurred that have taken less than an hour for final settlement and for a $0.48 fee. Oh yeah, and these transactions legally occur across nation-state boundaries all the time without having to pay all sorts of unscrupulous currency exchange rate fees.
On Jargon as Power: Jargon is a language that two groups of people speak: experts and people wanting to sound like experts. People who use jargon with non-experts are doing so because they’re poor communicators, they’re trying to enhance their status, or they’re flexing their power. It’s most likely some combination of these three things. Throughout time small groups of powerful humans decided it’s better to keep topics complex and abstract, even topics that could be considered simple and straightforward. The abstraction, obscurity, and “meaning gatekeeping” makes ideas difficult to understand and this gives the jargon users power over others. In organizational settings, complexity is the enemy of action. So we can argue that a decision to use complex or abstract language could be a strategic way to stifle action and thinking. The fields of medicine, military, and finance are filled with so much jargon and euphemisms (a mild way of talking about something difficult) they’ll make your head spin. Just talk to any doctor, military leader, or financial expert and see if they can get through 10 seconds of talking without using an acronym or term you won’t grasp.
On Central Bank Policy: The official policy of the U.S. Federal Reserve is to keep inflation at 2% per year. This equates to your money losing 2% of its purchasing power every year, as per the official policy of the central bank.
On Predictability In Chaos: Asset confiscation and capital controls happen during times of crisis and national instability. Governments and other organizations with sophisticated planning resources and capital reserves never let a good crisis go to waste. The financial restriction reactions to chaos are predictable, much like what happens to a bull rider after the gates go up.
On Value Creation: Value does not exist outside the realm of human consciousness and creativity.
On Privacy vs. Secrecy: Privacy is the desire to avoid surveillance and have parts of one’s life shielded from the public eye. Secrecy builds on privacy and is also the holding and hiding of a truth.
On Hayek: Good money is gone until it is out of the hands of government, and we obviously can’t (and shouldn’t) take it violently from the government (our fellow citizens), so all we can do is by some sly roundabout way introduce something that they can’t stop. (my paraphrase of Hayek, 1984 interview). Bitcoin is the best chance of that.
On Lack of Choice: Currencies choose us, we are born into their playing field because we are born under a flag that represents a nation-state with a particular set of rules and values, whether we like it or not.
On Purchasing Power Is What Matters: We must judge currencies not by who issued it but by who uses it and for what purpose. Purchasing power is all that matters.
On Change: Until 2008 sovereignty defined currency, now currency creates sovereignty.
On A Recipe For Ignorance: “There is a principal which is proof against all arguments and which cannot fail to keep man in everlasting ignorance — that principle is contempt prior to investigation” (quote from Herbert Spencer). To simplify, Spencer is talking about forming conclusions before finding, knowing, or understanding facts. If that’s your preferred “thinking” method, you are choosing to become a late adopter or laggard adopter of bitcoin and other digital financial assets.
On Credit Card Problems: The token itself is the secret key for a credit card, so you are transmitting your secret keys during every credit card transaction.
On Money Evolution: Bitcoin has changed money into a content type — money is disconnected from the information content because you can encode a bitcoin transaction into emoticons, the back of a digital image, or whatever digital product that is useful to you. It doesn’t just have to be the long bitcoin transaction string that we are used to seeing. The medium is not the message anymore because bitcoin overcomes how most mediums influence, constrain, and distort the message. By separating the message from the medium, the perception of value shifts from the costs of production to the value the message generates to the audience.
On Mistaken Assumptions: Controlling the medium is the source of quality, this is what most legacy financial and media institutions believe. Every generation mistakes the medium for value and considers the next iteration of the medium — which widens access, opens availability, and broadens forms of expression — as a trivial, vulgar, dumbed-down, naïve, and cheapened message. Financial gatekeepers have confused their payment network fees for the value of their service. The quality of service isn’t in the gatekeepers or their control, their limitations and rules, or their censorship.
On Resiliency: Bitcoin gives you a set of ingredients and a recipe — this encourages and unleashes creativity and innovation at the edges, it allows the emergence of resiliency and with less focus on specialization of knowledge.
On Risk Taking & Early Adopters: Businesses with market caps in the hundreds of millions of dollars (and more) like Fidelity, Coinbase, Bakkt, Kraken, and SALT Lending are all taking a degree of legal risk because no one knows for sure how a judge in litigation or bankruptcy will classify digital assets in the absence of clear laws and regulations. All participants who eventually join the bitcoin network benefit from the risks these early adopters take.
On Bitcoin’s Hard Capped Supply: “Instead of the [bitcoin] supply changing to keep the value the same, the supply is predetermined and the value changes” (quote from S. Nakamoto).
On Cyclical Innovation: A key feature of crypto cycles is that each cycle plants seeds which later grow and drive the next cycle. We witnessed the creation of many new companies in the cryptocurrency space during and after the 2017 bull market. Those new companies — the ones that have stuck around and remained solvent with a solid strategy and roadmap — are leading the next round of innovation in the crypto space, leading to the next (potential and anticipated) bull run.
On Incremental Innovation: In the last 15 years, megabanks and credit card companies innovated from changing a swiped card into a floated card…not a huge amount of progress. When you have a monopoly, you don’t need to change. You simply acquire good ideas and own them or kill them.
On Forking: A fork in cryptocurrency can be explained if a rally car race driver decided to go “off-road” and began making her own race outside of the official boundaries of the sanctioned race. If no other drivers followed, that driver’s decision is basically worthless in terms of the business of racing (winning a race) because she would be disqualified and vilified…but if all the other drivers follow her a new race is created. Spectators and sponsors would watch and enjoy this type of spontaneous spectacle, eventually aiming to systematize and monetize the idea for future races. Value would be created. Crypto forks are similar — if the fork from the original protocol can attract enough miners, nodes, and users to follow the new protocol, then it will create value. If critical mass doesn’t follow the new protocol, then the new fork is not valuable or useful.
Author Disclosures
1. I own a small amount of bitcoin.
2. I own small amounts of other digital assets.
3. This series of articles is for education, it is not financial advice.
4. We can always enhance our knowledge — this ties into the bitcoin ethos of self-sufficiency and DYOR (do your own research).
5. My goal is to give readers information to help you make choices that align with your life goals. You spend your time and money as you see fit and I’ll do the same. That’s the American way.
6. Make decisions from positions of knowledge, not fear.
7. Enjoy the journey.
Sources
Ammous, Saifedean. (2018). The Bitcoin Standard: The Decentralized Alternative to Central Banking.
Antonopolous, Andreas. (2016). The Internet of Money: Talks by Andreas Antonopolous.
Ferguson, N. (2008). The Ascent of Money: A Financial History of the World.
Photo Credits
Evolution of Money: https://www.publish0x.com/cryptosorted/the-origin-history-and-evolution-of-money-the-transition-to-xyjkkg
Money Cigar: https://www.nationofchange.org/2017/05/02/absurd-amount-entitlements-go-rich-people/
Bull Rider: https://artzline.com/jim-connelly-predictable-chaos/
Rally Racing: https://vrscout.com/news/shooting-360-rally-car-racing/
