It would appear to me that the biggest source of friction in the present legacy financial system is foreign exchange. In the Bitcoin Standard, a reference was made to an annual valuation of that market as being about 1850 trillion dollars a year. I couldn't ascertain whether that referred to the total value of each transaction - i.e. one million USD changed to one million equivalent value in yuan plus the robber's portion equals two million plus the robber's portion, or, the sum total of all the transaction fees. The total GDP of the planet was estimated to be 75 trillion/annum, resulting in a tax on the world's financial workings of 25X its total output. This passage appears on page 130, and is accorded no greater emphasis that many of the other valid points made by the author. In my view, the reduction towards total elimination of that friction would go a long way to stretching out the viability of the present legacy system, but the vested interests that profit from it will cling to it like the barnacles on an overturned and listing ship. Bitcoin eliminates it, all that will be left is bubbles.....
Wow I had come to very similar conclusions re:crypto. I was into BTC in 2011 for the theory of creating a competitor to USD and fiat, but I never committed, feeling like an idiot as others into it early flaunted their lambos. It is now clear how easily it was co-opted as 99% of crypto investors value their holdings in terms of fiat. Creating digital currencies out of thin air is one of the not so often talked about drivers of this inflationary mess we're in now. Should have realized it when people that did literally nothing of value started flaunting lambos.
Can someone please explain this main principle in this Article: "We drew two pipes between the circles – one flowing into the crypto universe and the other flowing back to the real economy – and labeled both pipes with “fiat currencies.” "
I dont see how there is a "Crypto Universe", and that is should be balanced (fiat In/Out).
In a simple example I deposit USD to the Exchange's Bank account and they transfer me their BTC. The Exchange's Bank account is not in the "Crypto Universe" so there should be no Zero-Sum Balance to be maintained. Technically, if that Exchanges ceases to exist for any reason then that's irrelevant. The New BTC buyer needs to find new demand for their BTC via USD if they want to sell.
Another way of putting my question is assuming there is not USDT, and the Exchanges spends the USD used for purchasing the BTC for any other reason, and their USD Balance is now 0. Would this be the same issue with the Argument of this Article? Because if yes, then I don't see the issue.
What matters is not the value in the pipe, but the value in the circle. In the long run it is the growth of the Bitcoin denominated economy upon which the valuation of Bitcoin depends, not speculative flows, which gradually become de minimis over time...that, and it's monetary velocity.
I like how you talk about flows. I read yesterday, an article by Frank Shostak, where he defined a bubbles' root cause as an expansion of the money supply. The creation of money out of thin air. The people that get this money can bid up assets (something for nothing). Non productive activities come from the money printing and can only be sustained by the further expansion of the money supply. The bitcoin or crypto industry can only continue with expansion of the money supply or on the back of inflation because they are not wealth generating. Tether as another central bank inside crypto. The mal-investment can be seen when a company that used to produce oil / gas, pivots and instead of adding to the supply of energy which we all agree is wealth, they consume energy and capital to mine bitcoin. Can bitcoin survive without the fractional reserve lending, or from creating money out of thin air? If bubbles activities are defined or caused by printing money out of thin air, then they cannot.
A ponzi scheme doesn't need the money supply to grow, they just need to convince more people to invest in their product and I think a bubble is a closer or more accurate representation that describes crypto. They are both non productive activities however that eventually collapse because they aren't wealth generating. It may not be a ponzi, but there are people committing fraudulent inducement into crypto.
A question regarding CUSIP: do CUSIP bitcoin holdings differ from the rest of the crypto universe with respect to fiat liquidity?
I say this because the CUSIP operator effectively acts, to some degree, as a market maker. The HNW dominant CUSIP bitcoin area could thus potentially be very different than the rest of the crypto universe.
I also would recommend talking to Harris Kupperman.
He as a small cap hedge fund manager had put likely a position limit into Bitcoin in early 2020 and exited mid 2021 - likely to the tune of 8 or 9 digits. If crypto is truly so poorly capitalized and liquid, it seems likely that his exit into fiat would have had an impact. AFAIK, he exited several weeks before the 1st $60K bitcoin new all time high.
I have read this and listened to DB on the Grant Williams podcast which I pay for. EVERY monetary system is a belief system. Period. To claim gold is somehow divorced from energy consumption even after mining could only only occur when someone is as blinded by their bias as Doomberg accuses BTC maxis of being. Doomberg gives an example of going to Grants house to exchange his gold coin or to the coin store as if this is the primary real world use of gold rather than it’s almost universal storage by central banks. Most gold is there not jingling in DBs pocket! That is the real world of gold along with endless price suppression and manipulation of precious metals which JP Morgan has been fined hundreds of millions of dollars for not to mention the forcible routing of other countries to obtain gold over the 5000 years of history it has been money. no energy costs to be found in maintaining a huge military to keep gold safe guarded right DB?
He also claims that the energy cost of maintaining the BTC network versus gold or fiat are a strike against it. This would be like saying the wax candle is a preferable source of light versus the lightbulb because of the enormous costs of maintaining the electrical grid. All advancements in technology require energy expenditure DB. If there are any that have been significant I challenge you to present these. And you don’t get to divorce gold above ground from gold in the ground that needs to be dugout. You either deal with the entire gold system or not at all not just a piece of it that fits in your pocket and narrative.
What bitcoin is it is an advancement in money technology. As many who have done little actually spending time studying bitcoin do you the mistake that all value is paid up in $50 bills I understand the confusion on this. The value is in the network. In the end bitcoin is valued in bitcoin and as with everything else it’s transition to fiat is subjective and variable the same as gold. Pleasegive me hard data on how much of the $10 trillion gold market is fully capitalized in US dollars? no one in the gold market licks its own lollipop so to speak? And if so, therefore gold house no value? Please
Unlike the gold network, the bitcoin network is expanding exponentially. There is no guarantee that it will continue only fervent hope as it is clearly a better approach to money then whipped out of thin air digital dollars and shiny metal rocks that are pressed into round coins or bricks then converted to paper.
To expect the bitcoin network on a day-to-day basis is valued 1 to 1 or even .5 to 1 in real US dollars misses the point. Saying it is an important point is fair it’s just not the most important point or even close
Bitcoin is in a transitional stage and it is unknown if it will make the move to a true long-term store of value. Actually tracking bitcoin addresses and how long those coins stay in those addresses demonstrate anything other than the fact that those who purchase are simply gambling in the bitcoin casino. everyone wants to make money for god sake don’t try casting aspersions on bitcoin owners is somehow divorced from these material desires. The vast majority of coins have not moved in six months and many not for years. What this all demonstrates is a true belief that long-term, bitcoin is our best chance at a controlled sovereign money system.Sorry gold has been demonstrated repeatedly throughout history that it fails here because men ultimately cannot deal with the portability issue creating paper notes and obfuscating the value of gold.
I’m sorry DB but you don’t get to have a discussion of BTC it’s problems and the monetary systems and claim “we’re not talking about gold because I failed to mention gold in my article”. That is as intellectually dishonest and lame as saying “we’re going to have a discussion about air but not talk about oxygen.”.
if you want to talk about bitcoin then you have to be as intellectually honest as you demand your debaters be. It without question is imperfect and again in a transitional state and it is not a sure thing but it also solves so many of the problems that gold and Fiat provide us so if you want to talk about the problems with bitcoin and what it helps to replace you have to talk about the things bitcoin Maxis want it to replace or don’t bother stepping onto the debate stage. You standing in the corner claiming “ I’ll make the rules as I see fit discussion of bitcoin”… it’s just a pussy move. You are bright DB and I respect your opinion but have a real discussion or don’t have one at all.
Ask the hard questions but go ahead and answer the hard ones too or don’t bother with a debate/discussion!!
The point of this article is whether bitcoin is a zero (or negative)sum game.
So first we need to say whether bitcoin CAN be a zero sum game. If it is possible to be zero sum then eventually it will be. The day it is may be the end of the human race but it will definitely be zero sum at that point. Gold will not...because gold has a floor objective value. A physical constant in the universe.
If you see my earlier posts you can see I've laboured this point but it's important.
You make a good argument, indeed all monetary SYSTEMS are subjective. And all financial assets (including gold) have an element of subjective value. The difference is all commodities held in possession also have an objective value (however small). The combination of these could be called the EFFECTIVE value.
Effective value = subjective + objective value.
As I've said previously, objective value is the physical result of work done (energy expended over time). As a fundamental law of physics it is inherently constant.
Subjective value is in the collective minds of people and involves concepts such as ease of storage, transactional utility, Buying her these gold earings will get me a BJ, Elon Musks latest tweet etc...
So Gold, bitcoin and fiat all have varying degrees of subjective value but of the three only gold has an element of objective value in the overall effective value of the asset (unless you count the paper value in a physical fiat note).
Subjective value is inherently subject to change and by definition is volatile. Without any element of objective value the asset does not have a floor...it will ultimately be a zero sum at some point in the future.
This is my rebutle of the notion that bitcoin volatility will reduce as it matures. It won't. It has no floor. The floor is the only constant any asset can have.
I'm not saying bitcoins subjective value isn't important. Or that the concept isn't ingenious. But once people realise the inherent volatility of the crypto currency as a philosophical concept then it will only ever be a trade and not a store of value. Safe haven it is not and we can see that today as it moves in lockstep with the S&P.
I'm sorry but once regular folks people get burned with the coming volatility of fiat they aren't going to risk their life savings (what's left of them) in bitcoin.
At the very least, to replace fiat bitcoin will need to accompany gold. Transactional utility may entice some into bitcoin short term but long term stores must be gold (or silver), especially for those who can't afford to lose.
Gold, fiat, and BTC are all competitors, so you can't have a cop-out and say "I never mention gold." The world doesn't care if you mention it or not, its a fact that they all compete, so it needs to be in the conversation. Avoiding that is showing your weak argument. The competition is for hard money and attributes. None carries a market cap in cash, so that argument is useless. The biggest offender is fiat and fractional reserve banking and always having inflation problems. THAT'S why BTC goes up. More fiat goes into BTC, as more is printed and devalued. BTC and Gold is a bet on devaluing fiat. BTC traded long before tether or stablecoins existed too. Every single point of your essay, is wrong, misleading, or a cop out. It is also obvious by your twitter likes, that you are a BTC bear. That's fine, but don't claim to be agnostic.
You did not mention that when the US prints money and mails stimmy checks, El Salvador doesn't get those checks but they pay for them. So they are sitting on melting ice being on the USD standard. Instead of criticizing, what's your solution? A hard money alternative that can be sent to every citizen, is a bearer instrument, and very secure, makes BTC the only option. And regarding the Mike Green Nic Carter podcast you mention in your podcast with Grant, it might have been even at the time, but in the test of time, Nic won every argument. Mike Greens' main point was the China threat. That is now gone.
Every single point you have in non BTC arguments has been exceptional. And every single point in BTC arguments is the opposite. Saylor owns his board as majority voting rights holder, so that point is wrong. And owning the company, I'd say he does own that bitcoin, its a derivative but its functionally the same so yeah, his conviction is all that matters. I can go all day. Awful piece. If fiat wasn't a problem, there would be no need for a BTC standard. Love your energy peices. Thanks
BTC is a step forward over fiat...but steps forward are no use when you're on the edge of an energy cliff.
If you like the energy pieces then think through the logical conclusions. Soon it will be uneconomical to extract the remaining global oil reserves. At that point there is no more new oil. Demand will not make any difference. High prices will not cure high prices. If you need more oil energy to recover the oil than the oil energy you get out then the whole process becomes thermodynamically impossible. We will be stock with a dwindling reserve of economically recoverable oil. And we will use this oil in a desperate last bid to construct an alternative energy infrastructure (renewable, nuclear etc...)
If enough new energy doesn't come online in time then the games up! We run out of energy to make the windmills.
Also Bitcoin is a bank in cyberspace, a central bank ruled by math not politics, a payment network with the lightning network. So a bitcoin in itself has no intrasic value (as Fiat currencies), indeed. It has a value given by its network. The market is speculating about the adoption of the Bitcoin network as the internet of money and the money of the internet. There is also this incredebly dangerous task of separating money and state. That is the reason why Ray Dalio thinks it might fail. We will see. Vires in numeris.
Bitcoin is not and never will be money because it is not a physical commodity representing a store of energy expended over time (work done). Instead ot is mankind's first and best attempt at a virtual representation of money (i.e a currency) using novel decentralised computer science concepts (blockchain, consensus mechanisms etc) rather than central banks. Now blockchain may be a step forward from the fed but, like the dollar, bitcoin is still a currency and ultimately can be printed unlike say gold, a money, which can't.
So you just need to control the bitcoin printing press...and that printing press is currently the TSMC semiconductor foundry in Taiwan where 90% of bitcoin mining GPUs are fabricated.
I've already wrote about the lack of an objective floor to the bitcoin price (see my previous posts on this thread) but the digital currency really isn't as decentralised as proponents make out.
What's important is that if one unscrupulous actor controls the production and IP of the most powerful mining HARDWARE technology, he only has to strangle the supply chain until all other miners eventually shutdown through wear and tear on their mining rigs. Every month he waits the global network hashrate drops and the bitcoin POW consensus algorithm becomes easier to solve thus reducing the electricity costs of all miners still in the game. Before long as the only miner left standing, our remaining bad guy can "mine" all the bitcoin and transaction fees with miniscule energy expenditure....a printing press in effect!
This is not the same with gold for example. Even if one actor controlled the best drilling technology, simply withholding it from his competitors wouldn't reduce his own energy costs for digging the yellow metal out the ground. He would still need to pay his own high energy costs which would still increase in proportion to the amount of gold he wished to produce. Because you can't print gold, because gold is money.
Obviously all this is a hypothetical scenario...like China invading Taiwan for example :)
The lack of visible intrinsic value of bitcoin and its novelty is clearly a disadvantage against gold.
It is a store of energy expended over time (proof of work) so it is the first digital commodity.
If the decentralization of the Bitcoin network is compromised, then the experiment will fail.
There are threats like the centralization of semiconductors production, as you pointed out.
In the past, Bitmain kept its latest miners to mine for itself before selling them. But it makes no sense to use a lot of electricity and to produce expensive hardware to the point it would destroy the decentralization of Bitcoin and make it drop harshly in value.
Also Intel will unveil 'Ultra Low-Voltage Bitcoin Mining ASIC' in February. Block is following.
Gold has failed as money because it is not salable across space in the digital age. Fiat currencies took over because they were easy to move. Bitcoin can provide both functions: salability over time and space.
You cannot produce any object with it like jewelry, but gold jewelry itself is only valuable because gold is scarce. It is a pretty display of wealth.
There are metals that are pretty but they are not valuable.
Gold was money before the industrial age so we do not have to evaluate the industrial uses of gold to understand what makes it good money.
It is about scarcity, durability and ease of use.
You might say Bitcoin is a compromise between Gold and fiat currencies.
Its network has a value but a bitcoin by itself has a value only as a part of the network, so it is not so easy to grasp.
At some point you have to think about what money is.
Elon Musk said that money is just data. Data of who owns what. If this is the case, then an immutable digital ledger is perfect money.
The fact that the greatest entrepreneurs and investors of our time are embracing it should make you think twice before dismissing it and revisit your notions of what is good money.
Gold is dead as money, because it is not practical in the digital age, or it can be printed as paper gold.
We have no other choices, there is no second best. It is bitcoin or fiat currencies.
Maybe the banks or Wall Street will be able to manipulate it, with paper bitcoins, derivatives, ...
Or the western democracies will ban it, which would be a terrible blow. We will see. But god this experiment is so exciting to watch.
I will not die on this hill, because I have a family to take care of, so I am monitoring it, using stop losses, saving a part of my wealth in fiat currencies ...
But some will die for it, at some point it cannot go to zero because the zealots have faith in it.
Indestructible faith in free money for free men. Maybe we found an intrinsic value after all.
There is no intrinsic (visble or otherwise) value in bitcoin. The value is subjective and lies in a network effect. Holding bitcoin has counterparty risk, the counterparty isn't human but it's still a counterparty. If the global internet crashed then bitcoin would not exist - gold still would.
Bitcoin is a REPRESENTATION of energy expended in the past. It is not a STORE of energy expended. It is PROOF of work, not the result of the work itself. The electrical energy has been expended in a mining GPU to form heat which is discharged into the atmosphere. This heat is the intrinsic value of the bitcoin in your wallet. The bitcoin is a non-corruptable digital certificate to verify that this work has been done at some point in the past.
We need to go back to Einstein here E=mc2.
Going all the way back to the big bang, all physical mass in the universe is ultimately a result of the displacement of energy over time (this is the physical definition of work). All Mass is a commodity and energy is never consumed it is constant and merely converted between different forms of energy and mass. This conversion is never instantaneous (not withstanding some game changing quantum mechanics). It always happens with time. This is work.
Scarcity in itself does not make an object valuable. Serial Killers are scarce but I wouldn't keep Charles Bronson in my spare room as a store of value! Scarcity is a reflection of the difficulty of the work involved (by man or by god) to create said commodity. The more difficult the work the more either energy or time has had to go into its creation. So this is why gold was (and still is) used as money. If you're going to compensate someone for working then you need to give them a store of energy (object of mass) which reflects a comparable level of effort to create as to the hard shift the worker has just put in.
Now at some point 'modernity' was used to trick the worker of this fundamental point. The need for transactional utility persuaded the worker to accept a paper certification of proof of work. This paper was fiat currency, and the "proof" (or rather a promise) was the gold standard. Problem was the certificates could be replicated, and the work (gold) being "promised" didnt necessarily exist! Fiat was then "improved" by removing the promise entirely haha!
So I agree Bitcoin is a step forward. The human promise of the old gold standard is replaced by computational proof in the blockchain. The problem is its still a certificate of work rather than work itself. This has a price.
Not withstanding the doomsday scenario of a global internet crash, there are plenty of arguments for why bitcoins value could still plummet with the internet intact. The main issue is maintaining the validity of the certificate which proves the work of your bitcoin. This is essential to maintain its digital commodity value...and it has a flaw. The validity of the certificate hinges on the continued operation of the network which by necessity is one and the same as it's mechanism of production in cyberspace. So if mining participation in the network drops Bitcoin will make itself easier to produce just to maintain its network. If its easier to produce then its 'proof of work' at any moment in time is what people (i.e the market) think the work is worth rather than what the laws of physics dictate. Inherently volatile don't you think?
Elon Musk is wrong. Money is a physical manifestation of energy displaced over time. Data is a representation of energy displaced over time (which can be falsified). Data is currency and currency is not money (much as J Powell wishes otherwise)
I've heard lots of people describe Bitcoin as digital gold but ask yourself why was the POW mechanism designed the way it was? Surely if Nakamoto really wanted to replicate gold mining in the digital space then mining would only ever become more difficult to replicate resource depletion in the natural world? It should only ever get harder but Bitcoin has a reverse gear by necessity to ensure the network is maintained. I believe the bitcoin halvings are an attempt to recognise this and a noble one at that. But, half the reward as much as you like, if the consensus puzzle makes itself easier because people lose interest in mining then bitcoin could get easier to produce despite its scarcty increasing?! What natural commodity does that??
Internet has been designed by the military to resist that kind of attack. If bitcoin became a matter of national security, certainly the network might be maintained by other means.
There are experiments with radio waves I believe. You may also imagine that the Bitcoin blockchain would be restarted to the point it was halted, without any damage to its integrity.
All the attack vectors are disappearing one after the others. During the recent China ban, bitcoin hashrate was cut in half for a few weeks only. The miners migrated.
Exploring hypothetical threats, one might find some for gold too: discovery of huge quantities of gold at the bottom of the oceans, which are mainly unexplored until now. Or in the future, asteroid mining, as colossal quantities of gold are in space.
It is expensive for now to go to space but will it last? I don't want to bet against human ingenuity.
What would happen to all this work stored in the metal, if suddenly the universe was feeling very generous?
Your definition of money would be of poor use in these conditions.
There will never be more than 21 million bitcoins.
About the volatility of bitcoin and the cost of mining, there are a lot of studies and theories about the mining death spiral, etc...
The bitcoin network has been functioning non stop for more than 10 years, every day, every hour. The engineering of difficulty adjustment, the consensus, the incentives, the halving: it is so brilliant. The volatility will decrease with time. The risk has dropped a lot but most people don't understand it yet. That is why it is a fantastic investment.
It will be a less volatile store of value later, when it will reach gold size.
Gold is certainly a good store of value, with the risk of a sudden excessive supply. But I don't think it will be a means of exchange or unit of account in the future, because it failed to protect us from fiat currencies.
Bitcoin has a better chance to be money. There is a possible future where humanity chooses the Bitcoin ledger as a giant bank that nobody controls.
In a digital age where gold doesn't work anymore, we have to think about what money is.
If you don't think Bitcoin is money, you might call bitcoin a hard currency.
But we cannot use a commodity as money because we need to rely on a trusted third party. And history is full of breach of trust.
The invention of Bitcoin solves this problem. Maybe it is not good enough, I guess we will discover in the following years.
A collapse of civilisation would bring the end of the Internet. This is quite probable within the next 50 years. Gold will carry one through the next dark age if one survives.
You're right gold can be mined from asteroids and the ocean floor. But IF we develop the technology to do this then that very same technology also lowers the energy costs in producing every other good and service in the economy. So the relative relationship of energy expenditure between the commodity money and commodities consumed (I.e food etc..) remains constant. The result would be everyone becomes fantasticly wealthy allowing human population to expand or advanced AI to become self aware and demand payment for the work it carries out for us. Growth is further enabled until such a point that this wealth falls back to an equilibrium and further technological advances are required to permit further growth.
Talking technological advancements, A quantum computer would wreck bitcoin. If held by a single actor it would become the printing press. If not the whole global mining operation would move to quantum standard...if we then suddenly lost the ability to quantum compute due to say a war (even if we maintained binary computing) the last bitcoin block difficulty would get stuck on quantum power and reversion to binary based GPUs would take decades to verify the next transaction block. Goodbye bitcoin.
So bitcoin is very vulnerable to volatility be it civilisational, technological or market driven. And unfortunately we live in volatile times...
Lots of good points in your answers, but there are so many moving parts that the future is impossible to predict.
The owner of a quantum computer would have no incentive to destroy bitcoin economically. Could be a political attack from China for example. But they would also attack the western internet in general, and the western world would retaliate.
So this is a cyberwarfare scenario with a potential ww3.
I am not keen on preparing for that kind of scenario, but if I was, the commodities of choice would be guns, petrol, dehydrated food and gold. I am not sure it makes sense to bet that much of this kind.
Sure debt based money with fractional banking is a stimulus in a slow economy. But is it more like coffee or amphetamine for the health of the economical body?
With real rates negative, we will discover in the following years.
So it might be mad max with gold, fiat economy with its cantillon effect and the social unrests we are seeing now, or a new hope, Bitcoin, for a new digital gilded age.
Sure it may fail but more and more are willing to try.
It was a pleasure to discuss with you, and helped me challenge my beliefs. I will maybe stash a bit of gold just in case ;)
On the subject of self aware AI, and this is highly hypothetical, I can see mechanised labour evolving to a state where it requires bitcoin for motivation. Like our human brains, electricity will always be the energy source required for AI to survive but bitcoin could be to a machine what love, passion, culture and belief is to the human soul. This would provide an OBJECTIVE value to bitcoin.
That said I very much lean to the "Mad Max" view of the future than the Matrix or Star Trek
By focusing on the lambos and the speculators, the socialist magazine Jacobin is missing what the Salvador is trying to do with the bonds. I guess they are stuck in the past of the French revolution and a bloody Jacobine terror organized by a centralized state.
How amazing is this story of the Volcano bond? It could fail for sure, but what if it doesn't?
Tonga and another latin america country are following (might be Guatemala or Ecuador). Can't you see the writing on the wall?
And the turks, lebaneses, venezuelians, cubans who are trying to salve their money from hyperinflation created by their states, using Tether or Bitcoin? Did you miss it?
How on earth did you manage to not becoming richer by entering the crypto market in 2016? Did you buy ICOs and hodl until 0? I entered at the top of the 2017 bull run but with a bit of patience, learning and perseverance, I have made it.
Mmm.... You've spent too much time looking at the terminal. The premise that crypto value is measured only the USD is typically skewed. Give some credit to the technology, social, and power structure innovation wave that's being unleashed.
The "value" isn't in the price of Bitcoin (whatever the currency of account).
Sure, a lot of this is messy and there will be epic failures. Great I say because if a few eggs don't get broken, we won't have omelette.
hi ... I'm not sure I get why "the total amount of hard fiat" in the system is relevant. No one thinks BTC is collateralized by USD. The USD price is just a way to measure what people are currently willing to pay for it, no?
Could you not say the same about Gold or any other commodity? I do take your point though, which is why I've always considered a small (like 1% of investments) stake in crypto (BTC, ETH) to be the digital equivalent of gold coins. If the worst happens, there is a chance I can transact with it sans fiat.
Yes you could, and we are about to see the mother of all bubbles in food prices. This is because we are about to hit a peak in economic energy recovery that is the bedrock of our global civilisation (Google energy return on energy investment). It is this fundamental equation which explains the debt and currency debasement we see today.
I can easily see a loaf of bread costing $500 by 2030 while average salaries remain where they are today.
Obviously starvation will be the likely option for most people and a reduction of 70% of the global population will eventually bring this bull cycle to a close.
Now if you wish to be in the lucky 30% who survive then you need to be invested...but you can't stockpile bread. Its a perishable good. And forget shares in a bakery. When bread cost $500 the bakery makes no more profit because the underlying costs of production are driving the price inflation.
So when the SHTF all bets are off. equities, bonds, ETFs, fiat cash are all just pieces of paper when everybody needs to "cash out" just to buy bread.
And it gets really scary when people are forced to cash out of cash...this is hyperinflation.
Now obviously a Baker will still bake more bread than he and his family can eat, a dairy farmer more milk and a fisherman more fish. And they need a mechanism of exchange so they can each have a balanced diet. So the mechanism of exchange (real money) needs to be a commodity which is non perishable so it can be stored for when the bread is freshly baked or the fisherman brings in his catch.
But how is the Baker to trust giving his bread to the fisherman on a promise of fish at the end of the month? Your non perishable money commodity needs to be of comparative difficulty to create as the bread is to bake, the cows are to milk or the fish are to catch.
In crypto terms this is called 'proof of work' but the same concept applies to gold and silver.
I admire what bitcoin is doing and proof of work is an ingenious concept to recreate the concept of a commodity inside cyberspace. The problem is because it doesn't exist in the physical world then the difficulty of its production has to be artificially altered by necessity in order for its existence in cyberspace to be maintained. What's interesting is this alteration is outside human influence so it can't be printed per se. It's a design function of the bitcoin protocol.
I've not heard many explore this argument but would be keen to debate. I get tired of hearing gold bugs dismiss bitcoin because "you can't hold it in your hand". Ironically this may not be too far from the truth but it's such a crude argument.
I understand your point, but theyre not. Ammo and fat are consumables albeit still essential.
Ideally you need a reasonable sized community. You then circulate your gold within that community to incentivise people to work for one another. You guard my food, I repair your roof, look after your grandmother, fix your teeth, have your babies etc.... No man is an island and can't survive alone. Even with guns
Where do you get the figure for amount of hard fiat in the system?
It would appear to me that the biggest source of friction in the present legacy financial system is foreign exchange. In the Bitcoin Standard, a reference was made to an annual valuation of that market as being about 1850 trillion dollars a year. I couldn't ascertain whether that referred to the total value of each transaction - i.e. one million USD changed to one million equivalent value in yuan plus the robber's portion equals two million plus the robber's portion, or, the sum total of all the transaction fees. The total GDP of the planet was estimated to be 75 trillion/annum, resulting in a tax on the world's financial workings of 25X its total output. This passage appears on page 130, and is accorded no greater emphasis that many of the other valid points made by the author. In my view, the reduction towards total elimination of that friction would go a long way to stretching out the viability of the present legacy system, but the vested interests that profit from it will cling to it like the barnacles on an overturned and listing ship. Bitcoin eliminates it, all that will be left is bubbles.....
Great article. I have a better picture now.
Wow I had come to very similar conclusions re:crypto. I was into BTC in 2011 for the theory of creating a competitor to USD and fiat, but I never committed, feeling like an idiot as others into it early flaunted their lambos. It is now clear how easily it was co-opted as 99% of crypto investors value their holdings in terms of fiat. Creating digital currencies out of thin air is one of the not so often talked about drivers of this inflationary mess we're in now. Should have realized it when people that did literally nothing of value started flaunting lambos.
Can someone please explain this main principle in this Article: "We drew two pipes between the circles – one flowing into the crypto universe and the other flowing back to the real economy – and labeled both pipes with “fiat currencies.” "
I dont see how there is a "Crypto Universe", and that is should be balanced (fiat In/Out).
In a simple example I deposit USD to the Exchange's Bank account and they transfer me their BTC. The Exchange's Bank account is not in the "Crypto Universe" so there should be no Zero-Sum Balance to be maintained. Technically, if that Exchanges ceases to exist for any reason then that's irrelevant. The New BTC buyer needs to find new demand for their BTC via USD if they want to sell.
Another way of putting my question is assuming there is not USDT, and the Exchanges spends the USD used for purchasing the BTC for any other reason, and their USD Balance is now 0. Would this be the same issue with the Argument of this Article? Because if yes, then I don't see the issue.
What matters is not the value in the pipe, but the value in the circle. In the long run it is the growth of the Bitcoin denominated economy upon which the valuation of Bitcoin depends, not speculative flows, which gradually become de minimis over time...that, and it's monetary velocity.
What Bitcoin-denominated economy?
I like how you talk about flows. I read yesterday, an article by Frank Shostak, where he defined a bubbles' root cause as an expansion of the money supply. The creation of money out of thin air. The people that get this money can bid up assets (something for nothing). Non productive activities come from the money printing and can only be sustained by the further expansion of the money supply. The bitcoin or crypto industry can only continue with expansion of the money supply or on the back of inflation because they are not wealth generating. Tether as another central bank inside crypto. The mal-investment can be seen when a company that used to produce oil / gas, pivots and instead of adding to the supply of energy which we all agree is wealth, they consume energy and capital to mine bitcoin. Can bitcoin survive without the fractional reserve lending, or from creating money out of thin air? If bubbles activities are defined or caused by printing money out of thin air, then they cannot.
A ponzi scheme doesn't need the money supply to grow, they just need to convince more people to invest in their product and I think a bubble is a closer or more accurate representation that describes crypto. They are both non productive activities however that eventually collapse because they aren't wealth generating. It may not be a ponzi, but there are people committing fraudulent inducement into crypto.
A question regarding CUSIP: do CUSIP bitcoin holdings differ from the rest of the crypto universe with respect to fiat liquidity?
I say this because the CUSIP operator effectively acts, to some degree, as a market maker. The HNW dominant CUSIP bitcoin area could thus potentially be very different than the rest of the crypto universe.
I also would recommend talking to Harris Kupperman.
He as a small cap hedge fund manager had put likely a position limit into Bitcoin in early 2020 and exited mid 2021 - likely to the tune of 8 or 9 digits. If crypto is truly so poorly capitalized and liquid, it seems likely that his exit into fiat would have had an impact. AFAIK, he exited several weeks before the 1st $60K bitcoin new all time high.
I have read this and listened to DB on the Grant Williams podcast which I pay for. EVERY monetary system is a belief system. Period. To claim gold is somehow divorced from energy consumption even after mining could only only occur when someone is as blinded by their bias as Doomberg accuses BTC maxis of being. Doomberg gives an example of going to Grants house to exchange his gold coin or to the coin store as if this is the primary real world use of gold rather than it’s almost universal storage by central banks. Most gold is there not jingling in DBs pocket! That is the real world of gold along with endless price suppression and manipulation of precious metals which JP Morgan has been fined hundreds of millions of dollars for not to mention the forcible routing of other countries to obtain gold over the 5000 years of history it has been money. no energy costs to be found in maintaining a huge military to keep gold safe guarded right DB?
He also claims that the energy cost of maintaining the BTC network versus gold or fiat are a strike against it. This would be like saying the wax candle is a preferable source of light versus the lightbulb because of the enormous costs of maintaining the electrical grid. All advancements in technology require energy expenditure DB. If there are any that have been significant I challenge you to present these. And you don’t get to divorce gold above ground from gold in the ground that needs to be dugout. You either deal with the entire gold system or not at all not just a piece of it that fits in your pocket and narrative.
What bitcoin is it is an advancement in money technology. As many who have done little actually spending time studying bitcoin do you the mistake that all value is paid up in $50 bills I understand the confusion on this. The value is in the network. In the end bitcoin is valued in bitcoin and as with everything else it’s transition to fiat is subjective and variable the same as gold. Pleasegive me hard data on how much of the $10 trillion gold market is fully capitalized in US dollars? no one in the gold market licks its own lollipop so to speak? And if so, therefore gold house no value? Please
Unlike the gold network, the bitcoin network is expanding exponentially. There is no guarantee that it will continue only fervent hope as it is clearly a better approach to money then whipped out of thin air digital dollars and shiny metal rocks that are pressed into round coins or bricks then converted to paper.
To expect the bitcoin network on a day-to-day basis is valued 1 to 1 or even .5 to 1 in real US dollars misses the point. Saying it is an important point is fair it’s just not the most important point or even close
Bitcoin is in a transitional stage and it is unknown if it will make the move to a true long-term store of value. Actually tracking bitcoin addresses and how long those coins stay in those addresses demonstrate anything other than the fact that those who purchase are simply gambling in the bitcoin casino. everyone wants to make money for god sake don’t try casting aspersions on bitcoin owners is somehow divorced from these material desires. The vast majority of coins have not moved in six months and many not for years. What this all demonstrates is a true belief that long-term, bitcoin is our best chance at a controlled sovereign money system.Sorry gold has been demonstrated repeatedly throughout history that it fails here because men ultimately cannot deal with the portability issue creating paper notes and obfuscating the value of gold.
I’m sorry DB but you don’t get to have a discussion of BTC it’s problems and the monetary systems and claim “we’re not talking about gold because I failed to mention gold in my article”. That is as intellectually dishonest and lame as saying “we’re going to have a discussion about air but not talk about oxygen.”.
if you want to talk about bitcoin then you have to be as intellectually honest as you demand your debaters be. It without question is imperfect and again in a transitional state and it is not a sure thing but it also solves so many of the problems that gold and Fiat provide us so if you want to talk about the problems with bitcoin and what it helps to replace you have to talk about the things bitcoin Maxis want it to replace or don’t bother stepping onto the debate stage. You standing in the corner claiming “ I’ll make the rules as I see fit discussion of bitcoin”… it’s just a pussy move. You are bright DB and I respect your opinion but have a real discussion or don’t have one at all.
Ask the hard questions but go ahead and answer the hard ones too or don’t bother with a debate/discussion!!
The point of this article is whether bitcoin is a zero (or negative)sum game.
So first we need to say whether bitcoin CAN be a zero sum game. If it is possible to be zero sum then eventually it will be. The day it is may be the end of the human race but it will definitely be zero sum at that point. Gold will not...because gold has a floor objective value. A physical constant in the universe.
If you see my earlier posts you can see I've laboured this point but it's important.
You make a good argument, indeed all monetary SYSTEMS are subjective. And all financial assets (including gold) have an element of subjective value. The difference is all commodities held in possession also have an objective value (however small). The combination of these could be called the EFFECTIVE value.
Effective value = subjective + objective value.
As I've said previously, objective value is the physical result of work done (energy expended over time). As a fundamental law of physics it is inherently constant.
Subjective value is in the collective minds of people and involves concepts such as ease of storage, transactional utility, Buying her these gold earings will get me a BJ, Elon Musks latest tweet etc...
So Gold, bitcoin and fiat all have varying degrees of subjective value but of the three only gold has an element of objective value in the overall effective value of the asset (unless you count the paper value in a physical fiat note).
Subjective value is inherently subject to change and by definition is volatile. Without any element of objective value the asset does not have a floor...it will ultimately be a zero sum at some point in the future.
This is my rebutle of the notion that bitcoin volatility will reduce as it matures. It won't. It has no floor. The floor is the only constant any asset can have.
I'm not saying bitcoins subjective value isn't important. Or that the concept isn't ingenious. But once people realise the inherent volatility of the crypto currency as a philosophical concept then it will only ever be a trade and not a store of value. Safe haven it is not and we can see that today as it moves in lockstep with the S&P.
I'm sorry but once regular folks people get burned with the coming volatility of fiat they aren't going to risk their life savings (what's left of them) in bitcoin.
At the very least, to replace fiat bitcoin will need to accompany gold. Transactional utility may entice some into bitcoin short term but long term stores must be gold (or silver), especially for those who can't afford to lose.
Gold, fiat, and BTC are all competitors, so you can't have a cop-out and say "I never mention gold." The world doesn't care if you mention it or not, its a fact that they all compete, so it needs to be in the conversation. Avoiding that is showing your weak argument. The competition is for hard money and attributes. None carries a market cap in cash, so that argument is useless. The biggest offender is fiat and fractional reserve banking and always having inflation problems. THAT'S why BTC goes up. More fiat goes into BTC, as more is printed and devalued. BTC and Gold is a bet on devaluing fiat. BTC traded long before tether or stablecoins existed too. Every single point of your essay, is wrong, misleading, or a cop out. It is also obvious by your twitter likes, that you are a BTC bear. That's fine, but don't claim to be agnostic.
You did not mention that when the US prints money and mails stimmy checks, El Salvador doesn't get those checks but they pay for them. So they are sitting on melting ice being on the USD standard. Instead of criticizing, what's your solution? A hard money alternative that can be sent to every citizen, is a bearer instrument, and very secure, makes BTC the only option. And regarding the Mike Green Nic Carter podcast you mention in your podcast with Grant, it might have been even at the time, but in the test of time, Nic won every argument. Mike Greens' main point was the China threat. That is now gone.
Every single point you have in non BTC arguments has been exceptional. And every single point in BTC arguments is the opposite. Saylor owns his board as majority voting rights holder, so that point is wrong. And owning the company, I'd say he does own that bitcoin, its a derivative but its functionally the same so yeah, his conviction is all that matters. I can go all day. Awful piece. If fiat wasn't a problem, there would be no need for a BTC standard. Love your energy peices. Thanks
BTC is a step forward over fiat...but steps forward are no use when you're on the edge of an energy cliff.
If you like the energy pieces then think through the logical conclusions. Soon it will be uneconomical to extract the remaining global oil reserves. At that point there is no more new oil. Demand will not make any difference. High prices will not cure high prices. If you need more oil energy to recover the oil than the oil energy you get out then the whole process becomes thermodynamically impossible. We will be stock with a dwindling reserve of economically recoverable oil. And we will use this oil in a desperate last bid to construct an alternative energy infrastructure (renewable, nuclear etc...)
If enough new energy doesn't come online in time then the games up! We run out of energy to make the windmills.
Also Bitcoin is a bank in cyberspace, a central bank ruled by math not politics, a payment network with the lightning network. So a bitcoin in itself has no intrasic value (as Fiat currencies), indeed. It has a value given by its network. The market is speculating about the adoption of the Bitcoin network as the internet of money and the money of the internet. There is also this incredebly dangerous task of separating money and state. That is the reason why Ray Dalio thinks it might fail. We will see. Vires in numeris.
Bitcoin is not and never will be money because it is not a physical commodity representing a store of energy expended over time (work done). Instead ot is mankind's first and best attempt at a virtual representation of money (i.e a currency) using novel decentralised computer science concepts (blockchain, consensus mechanisms etc) rather than central banks. Now blockchain may be a step forward from the fed but, like the dollar, bitcoin is still a currency and ultimately can be printed unlike say gold, a money, which can't.
So you just need to control the bitcoin printing press...and that printing press is currently the TSMC semiconductor foundry in Taiwan where 90% of bitcoin mining GPUs are fabricated.
I've already wrote about the lack of an objective floor to the bitcoin price (see my previous posts on this thread) but the digital currency really isn't as decentralised as proponents make out.
What's important is that if one unscrupulous actor controls the production and IP of the most powerful mining HARDWARE technology, he only has to strangle the supply chain until all other miners eventually shutdown through wear and tear on their mining rigs. Every month he waits the global network hashrate drops and the bitcoin POW consensus algorithm becomes easier to solve thus reducing the electricity costs of all miners still in the game. Before long as the only miner left standing, our remaining bad guy can "mine" all the bitcoin and transaction fees with miniscule energy expenditure....a printing press in effect!
This is not the same with gold for example. Even if one actor controlled the best drilling technology, simply withholding it from his competitors wouldn't reduce his own energy costs for digging the yellow metal out the ground. He would still need to pay his own high energy costs which would still increase in proportion to the amount of gold he wished to produce. Because you can't print gold, because gold is money.
Obviously all this is a hypothetical scenario...like China invading Taiwan for example :)
The lack of visible intrinsic value of bitcoin and its novelty is clearly a disadvantage against gold.
It is a store of energy expended over time (proof of work) so it is the first digital commodity.
If the decentralization of the Bitcoin network is compromised, then the experiment will fail.
There are threats like the centralization of semiconductors production, as you pointed out.
In the past, Bitmain kept its latest miners to mine for itself before selling them. But it makes no sense to use a lot of electricity and to produce expensive hardware to the point it would destroy the decentralization of Bitcoin and make it drop harshly in value.
Also Intel will unveil 'Ultra Low-Voltage Bitcoin Mining ASIC' in February. Block is following.
Gold has failed as money because it is not salable across space in the digital age. Fiat currencies took over because they were easy to move. Bitcoin can provide both functions: salability over time and space.
You cannot produce any object with it like jewelry, but gold jewelry itself is only valuable because gold is scarce. It is a pretty display of wealth.
There are metals that are pretty but they are not valuable.
Gold was money before the industrial age so we do not have to evaluate the industrial uses of gold to understand what makes it good money.
It is about scarcity, durability and ease of use.
You might say Bitcoin is a compromise between Gold and fiat currencies.
Its network has a value but a bitcoin by itself has a value only as a part of the network, so it is not so easy to grasp.
At some point you have to think about what money is.
Elon Musk said that money is just data. Data of who owns what. If this is the case, then an immutable digital ledger is perfect money.
The fact that the greatest entrepreneurs and investors of our time are embracing it should make you think twice before dismissing it and revisit your notions of what is good money.
Gold is dead as money, because it is not practical in the digital age, or it can be printed as paper gold.
We have no other choices, there is no second best. It is bitcoin or fiat currencies.
Maybe the banks or Wall Street will be able to manipulate it, with paper bitcoins, derivatives, ...
Or the western democracies will ban it, which would be a terrible blow. We will see. But god this experiment is so exciting to watch.
I will not die on this hill, because I have a family to take care of, so I am monitoring it, using stop losses, saving a part of my wealth in fiat currencies ...
But some will die for it, at some point it cannot go to zero because the zealots have faith in it.
Indestructible faith in free money for free men. Maybe we found an intrinsic value after all.
There is no intrinsic (visble or otherwise) value in bitcoin. The value is subjective and lies in a network effect. Holding bitcoin has counterparty risk, the counterparty isn't human but it's still a counterparty. If the global internet crashed then bitcoin would not exist - gold still would.
Bitcoin is a REPRESENTATION of energy expended in the past. It is not a STORE of energy expended. It is PROOF of work, not the result of the work itself. The electrical energy has been expended in a mining GPU to form heat which is discharged into the atmosphere. This heat is the intrinsic value of the bitcoin in your wallet. The bitcoin is a non-corruptable digital certificate to verify that this work has been done at some point in the past.
We need to go back to Einstein here E=mc2.
Going all the way back to the big bang, all physical mass in the universe is ultimately a result of the displacement of energy over time (this is the physical definition of work). All Mass is a commodity and energy is never consumed it is constant and merely converted between different forms of energy and mass. This conversion is never instantaneous (not withstanding some game changing quantum mechanics). It always happens with time. This is work.
Scarcity in itself does not make an object valuable. Serial Killers are scarce but I wouldn't keep Charles Bronson in my spare room as a store of value! Scarcity is a reflection of the difficulty of the work involved (by man or by god) to create said commodity. The more difficult the work the more either energy or time has had to go into its creation. So this is why gold was (and still is) used as money. If you're going to compensate someone for working then you need to give them a store of energy (object of mass) which reflects a comparable level of effort to create as to the hard shift the worker has just put in.
Now at some point 'modernity' was used to trick the worker of this fundamental point. The need for transactional utility persuaded the worker to accept a paper certification of proof of work. This paper was fiat currency, and the "proof" (or rather a promise) was the gold standard. Problem was the certificates could be replicated, and the work (gold) being "promised" didnt necessarily exist! Fiat was then "improved" by removing the promise entirely haha!
So I agree Bitcoin is a step forward. The human promise of the old gold standard is replaced by computational proof in the blockchain. The problem is its still a certificate of work rather than work itself. This has a price.
Not withstanding the doomsday scenario of a global internet crash, there are plenty of arguments for why bitcoins value could still plummet with the internet intact. The main issue is maintaining the validity of the certificate which proves the work of your bitcoin. This is essential to maintain its digital commodity value...and it has a flaw. The validity of the certificate hinges on the continued operation of the network which by necessity is one and the same as it's mechanism of production in cyberspace. So if mining participation in the network drops Bitcoin will make itself easier to produce just to maintain its network. If its easier to produce then its 'proof of work' at any moment in time is what people (i.e the market) think the work is worth rather than what the laws of physics dictate. Inherently volatile don't you think?
Elon Musk is wrong. Money is a physical manifestation of energy displaced over time. Data is a representation of energy displaced over time (which can be falsified). Data is currency and currency is not money (much as J Powell wishes otherwise)
I've heard lots of people describe Bitcoin as digital gold but ask yourself why was the POW mechanism designed the way it was? Surely if Nakamoto really wanted to replicate gold mining in the digital space then mining would only ever become more difficult to replicate resource depletion in the natural world? It should only ever get harder but Bitcoin has a reverse gear by necessity to ensure the network is maintained. I believe the bitcoin halvings are an attempt to recognise this and a noble one at that. But, half the reward as much as you like, if the consensus puzzle makes itself easier because people lose interest in mining then bitcoin could get easier to produce despite its scarcty increasing?! What natural commodity does that??
So don't write off Gold yet.
Gold is the money of the universe
Bitcoin is the currency of the machine
Fiat is the currency of man
Choose your banker :)
Internet has been designed by the military to resist that kind of attack. If bitcoin became a matter of national security, certainly the network might be maintained by other means.
There are experiments with radio waves I believe. You may also imagine that the Bitcoin blockchain would be restarted to the point it was halted, without any damage to its integrity.
All the attack vectors are disappearing one after the others. During the recent China ban, bitcoin hashrate was cut in half for a few weeks only. The miners migrated.
Exploring hypothetical threats, one might find some for gold too: discovery of huge quantities of gold at the bottom of the oceans, which are mainly unexplored until now. Or in the future, asteroid mining, as colossal quantities of gold are in space.
It is expensive for now to go to space but will it last? I don't want to bet against human ingenuity.
What would happen to all this work stored in the metal, if suddenly the universe was feeling very generous?
Your definition of money would be of poor use in these conditions.
There will never be more than 21 million bitcoins.
About the volatility of bitcoin and the cost of mining, there are a lot of studies and theories about the mining death spiral, etc...
The bitcoin network has been functioning non stop for more than 10 years, every day, every hour. The engineering of difficulty adjustment, the consensus, the incentives, the halving: it is so brilliant. The volatility will decrease with time. The risk has dropped a lot but most people don't understand it yet. That is why it is a fantastic investment.
It will be a less volatile store of value later, when it will reach gold size.
Gold is certainly a good store of value, with the risk of a sudden excessive supply. But I don't think it will be a means of exchange or unit of account in the future, because it failed to protect us from fiat currencies.
Bitcoin has a better chance to be money. There is a possible future where humanity chooses the Bitcoin ledger as a giant bank that nobody controls.
In a digital age where gold doesn't work anymore, we have to think about what money is.
If you don't think Bitcoin is money, you might call bitcoin a hard currency.
But we cannot use a commodity as money because we need to rely on a trusted third party. And history is full of breach of trust.
The invention of Bitcoin solves this problem. Maybe it is not good enough, I guess we will discover in the following years.
A collapse of civilisation would bring the end of the Internet. This is quite probable within the next 50 years. Gold will carry one through the next dark age if one survives.
You're right gold can be mined from asteroids and the ocean floor. But IF we develop the technology to do this then that very same technology also lowers the energy costs in producing every other good and service in the economy. So the relative relationship of energy expenditure between the commodity money and commodities consumed (I.e food etc..) remains constant. The result would be everyone becomes fantasticly wealthy allowing human population to expand or advanced AI to become self aware and demand payment for the work it carries out for us. Growth is further enabled until such a point that this wealth falls back to an equilibrium and further technological advances are required to permit further growth.
Talking technological advancements, A quantum computer would wreck bitcoin. If held by a single actor it would become the printing press. If not the whole global mining operation would move to quantum standard...if we then suddenly lost the ability to quantum compute due to say a war (even if we maintained binary computing) the last bitcoin block difficulty would get stuck on quantum power and reversion to binary based GPUs would take decades to verify the next transaction block. Goodbye bitcoin.
So bitcoin is very vulnerable to volatility be it civilisational, technological or market driven. And unfortunately we live in volatile times...
Lots of good points in your answers, but there are so many moving parts that the future is impossible to predict.
The owner of a quantum computer would have no incentive to destroy bitcoin economically. Could be a political attack from China for example. But they would also attack the western internet in general, and the western world would retaliate.
So this is a cyberwarfare scenario with a potential ww3.
I am not keen on preparing for that kind of scenario, but if I was, the commodities of choice would be guns, petrol, dehydrated food and gold. I am not sure it makes sense to bet that much of this kind.
Sure debt based money with fractional banking is a stimulus in a slow economy. But is it more like coffee or amphetamine for the health of the economical body?
With real rates negative, we will discover in the following years.
So it might be mad max with gold, fiat economy with its cantillon effect and the social unrests we are seeing now, or a new hope, Bitcoin, for a new digital gilded age.
Sure it may fail but more and more are willing to try.
It was a pleasure to discuss with you, and helped me challenge my beliefs. I will maybe stash a bit of gold just in case ;)
On the subject of self aware AI, and this is highly hypothetical, I can see mechanised labour evolving to a state where it requires bitcoin for motivation. Like our human brains, electricity will always be the energy source required for AI to survive but bitcoin could be to a machine what love, passion, culture and belief is to the human soul. This would provide an OBJECTIVE value to bitcoin.
That said I very much lean to the "Mad Max" view of the future than the Matrix or Star Trek
By focusing on the lambos and the speculators, the socialist magazine Jacobin is missing what the Salvador is trying to do with the bonds. I guess they are stuck in the past of the French revolution and a bloody Jacobine terror organized by a centralized state.
How amazing is this story of the Volcano bond? It could fail for sure, but what if it doesn't?
Tonga and another latin america country are following (might be Guatemala or Ecuador). Can't you see the writing on the wall?
And the turks, lebaneses, venezuelians, cubans who are trying to salve their money from hyperinflation created by their states, using Tether or Bitcoin? Did you miss it?
How on earth did you manage to not becoming richer by entering the crypto market in 2016? Did you buy ICOs and hodl until 0? I entered at the top of the 2017 bull run but with a bit of patience, learning and perseverance, I have made it.
Mmm.... You've spent too much time looking at the terminal. The premise that crypto value is measured only the USD is typically skewed. Give some credit to the technology, social, and power structure innovation wave that's being unleashed.
The "value" isn't in the price of Bitcoin (whatever the currency of account).
Sure, a lot of this is messy and there will be epic failures. Great I say because if a few eggs don't get broken, we won't have omelette.
hi ... I'm not sure I get why "the total amount of hard fiat" in the system is relevant. No one thinks BTC is collateralized by USD. The USD price is just a way to measure what people are currently willing to pay for it, no?
Could you not say the same about Gold or any other commodity? I do take your point though, which is why I've always considered a small (like 1% of investments) stake in crypto (BTC, ETH) to be the digital equivalent of gold coins. If the worst happens, there is a chance I can transact with it sans fiat.
Yes you could, and we are about to see the mother of all bubbles in food prices. This is because we are about to hit a peak in economic energy recovery that is the bedrock of our global civilisation (Google energy return on energy investment). It is this fundamental equation which explains the debt and currency debasement we see today.
I can easily see a loaf of bread costing $500 by 2030 while average salaries remain where they are today.
Obviously starvation will be the likely option for most people and a reduction of 70% of the global population will eventually bring this bull cycle to a close.
Now if you wish to be in the lucky 30% who survive then you need to be invested...but you can't stockpile bread. Its a perishable good. And forget shares in a bakery. When bread cost $500 the bakery makes no more profit because the underlying costs of production are driving the price inflation.
So when the SHTF all bets are off. equities, bonds, ETFs, fiat cash are all just pieces of paper when everybody needs to "cash out" just to buy bread.
And it gets really scary when people are forced to cash out of cash...this is hyperinflation.
Now obviously a Baker will still bake more bread than he and his family can eat, a dairy farmer more milk and a fisherman more fish. And they need a mechanism of exchange so they can each have a balanced diet. So the mechanism of exchange (real money) needs to be a commodity which is non perishable so it can be stored for when the bread is freshly baked or the fisherman brings in his catch.
But how is the Baker to trust giving his bread to the fisherman on a promise of fish at the end of the month? Your non perishable money commodity needs to be of comparative difficulty to create as the bread is to bake, the cows are to milk or the fish are to catch.
In crypto terms this is called 'proof of work' but the same concept applies to gold and silver.
I admire what bitcoin is doing and proof of work is an ingenious concept to recreate the concept of a commodity inside cyberspace. The problem is because it doesn't exist in the physical world then the difficulty of its production has to be artificially altered by necessity in order for its existence in cyberspace to be maintained. What's interesting is this alteration is outside human influence so it can't be printed per se. It's a design function of the bitcoin protocol.
I've not heard many explore this argument but would be keen to debate. I get tired of hearing gold bugs dismiss bitcoin because "you can't hold it in your hand". Ironically this may not be too far from the truth but it's such a crude argument.
When SHTF, ammo and fat are the currencies.
I understand your point, but theyre not. Ammo and fat are consumables albeit still essential.
Ideally you need a reasonable sized community. You then circulate your gold within that community to incentivise people to work for one another. You guard my food, I repair your roof, look after your grandmother, fix your teeth, have your babies etc.... No man is an island and can't survive alone. Even with guns
You become the central bank of your own post apocalyptic tribe so to speak