Wednesday, January 20, 2016

Fork Bitcoin

I don't have a dog in the Bitcoin fight, but it's worth reading Fred Wilson's post for his (invested) perspective:
I’ve been writing about the Bitcoin blocksize debate here at AVC (the only place I write and I’m hard core about that) for the past year. It’s a big deal. At the core of the debate is whether the Bitcoin blockchain should be a settlement layer that supports a number of new blockchains that can be scaled to achieve various goals or whether the Bitcoin blockchain itself should evolve in a way that it can scale to achieve those various goals.

In my simple mind I liken it to this. Should Bitcoin be Gold or should Bitcoin be Visa. If it is Gold, it’s a store of wealth and something to peg value to. If it is Visa, then its a transactional network that can move wealth around the globe in a nanosecond
My understanding is that the politics of Bitcoin set is up as Gold initially. I've written elsewhere about why I think this model of money is incorrect, based on gold-standard thinking instead of understanding money as a way to track obligation (or "balance sheet" thinking). Bitcoin's value is from its distributed ledger technology, the blockchain, not particulars of how Bitcoin itself will or will not scale (ultimately, structurally it cannot be a store of value).

I don't know if Fred is on the Gold or Visa side, but personally, I think Visa is more likely to be valuable than Gold.

4 comments:

  1. Winterspeak,

    I read this post and the linked one. I think I understand your position. I am wondering if you have read Nick Szabo's The Origins of Money essay. http://szabo.best.vwh.net/shell.html

    He makes a very compelling argument for collectables being used to minimize transaction costs as the origins of money.

    I agree that money is really just a tool for tracking debt. However, I think it is important because it limits transaction costs. Bitcoin, and to be clear I have no dog in this race either, but bitcoin has the potential to eliminate 3rd party transaction costs by tracking its own ledger.

    So, I think you're on the right side with the Visa vs Gold. And I also agree that at some point USG steps in and collapses the value. I think they've already got the vague legislation they would need through. They maybe waiting to let others invest in developing technology that they can benefit from down the road.

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  2. Yeah, I've read Szabo (and was told the same "origin of money stories" in primary school), and it's writings like this which make some suspect that Nick's the real original creator of Bitcoin.

    But conceptually, he has it wrong. Here's the tell: "Money greatly improved the workings of even small barter networks by greatly reducing the need for credit."

    Money *is* credit. Instead of thinking about these two as substitutes, you really need a balance sheet view to get your head around it.

    Money formalizes and enables the scalability of obligation, but it's the obligation that is the thing, money is just a tally.

    USG should shut down Bitcoin because it facilitates fraud and terrorist activity. If Bitcoin doesn't implode in its own Dutch Tulip Bubble first. The Blockchain will then find more useful applications.

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  3. Thanks for the response.

    I quickly coming around to the idea of money as credit. Mosler has lifted the fog left over from my macro class at university.

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  4. In this context the difference between gold and visa is more about how the cryptocurrency community organizes itself. If bitcoin serves as the former, you'll need other tools to provide the infrastructure for actual commerce, bitcoin is merely a standard and backbone, like gold reserves of early banks.

    I think you're wrong that bitcoin cannot be a store of value.

    I like chartalist thinking, and I describe the value of money as coming from political authority over resources. This is generally source of the value of issued assets even if the exact levels of exchange/purchasing power may fluctuate with a wide variety of factors.

    In the case of bitcoin, people who reject political authority, or at least seek a degree of independence from political authority in online financial exchanges, tend to coalesce around this kind of value standard as a neutral convention. This can be as simple as people who think governments are ill-equipped to regulate global online exchange even if they support governments locally and pay taxes.

    This itself is a political act, and if entities with political clout in these communities recognize a bitcoin standard that can be a foundation for bitcoin's value.

    Granted, there aren't as many political channels for stabilizing value as you have with state currencies(taxes, regs). But the point is all these actions are political, even promoting anarchy is being political. People respond to these things and use them to organize themselves and their efforts.

    Theories of value are all over the map. I think Steven Keen has a pretty good handle on this https://www.youtube.com/watch?feature=player_embedded&v=jvBWJWFTZWY#t=3688

    Credit theory of money has a place, but money can be just as much about expectations or recognition, it's not only about obligations. An expectation and an obligation are different because one is a promise while the other is merely a prediction. Sometimes we want to simplify what money is so we ignore all these potential nuances.

    I hear you like Graeber's Debt. I think anthropologists have a lot to offer because humans are really weird and money is ultimately about the interaction of humans.

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