Tag Archives: Bitcoin

Why Bitcoiners Are Doing What Libertarians Never Could, by Paul Rosenberg

Libertarians are theorists, not doers. Bitcoin, on the other hand, has handsomely rewarded those who have embraced it and understood its decentralization and autonomy, things Libertarians claim to cherish but never really advance. From Paul Rosenberg at freemansperspective.com:

I am not trying to insult libertarians; they’ve been right, or reasonably close to right, on most everything, and for decades on end; that’s not a trivial thing. Nonetheless, they could never get much moving in the world, while Bitcoiners, to use an old but fitting phrase, are turning the world upside-down.

I think it’s important to understand why.

To Say And To Do

Can you name a Libertarian martyr? I’m not sure I can, and I’ve been involved with libertarian things for a long time. There’ve been a few anti-tax protesters, but they weren’t actually libertarian martyrs, largely because libertarianism excluded them.

Now, shall we name martyrs for the causes of Bitcoin and cypherpunk ideals? The list, as most of us know, is long. We can begin with Julian Assange and Ross Ulbricht, and from there we can go on to Charlie Shrem, near misses like Phil Zimmerman and at least a dozen lesser-known names.

Martyrdom doesn’t prove too much, of course – thugs will destroy for many reasons – but there is a clue here, and it’s this: Libertarians didn’t threaten very much. The powers that be never loved them, of course, but publishing policy papers didn’t overturn very many apple carts.

Now, to be very frank about this, and with apologies for doing so, libertarianism is a philosophy of intellectuals who wish to change the world without risk or suffering. That is, they imagined they were smart enough to do it by intellect alone.

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Calling Out The Willfully Ignorant, by Omid Malekan

Ignorance of a subject has never stopped anyone from bloviating at length about it. The phenomenon is rife when it comes to cryptocurrencies. From Omid Malekan at zerohedge.com:

Paul Krugman is the gift that keeps on giving.

The popular and supposedly progressive columnist has a special talent for prophesizing things that are already demonstrably false.

Back in 1998, he predicted that the internet would have no greater impact than fax machines, because “most people have nothing to say to each other.”

Yesterday, he said that crypto doesn’t matter because there are no use cases beyond speculation and criminal activity. Specifically:

“..Bitcoin and its relatives haven’t managed to achieve any meaningful economic role..”

Here is a quick summary of how wrong he is:

  • Stablecoins on various public networks are now the fastest growing fiat payment method in the world. Krugman mentions Venmo as being useful in his column, but is ignorant of the fact that Ethereum will move more dollars in the month of May than Venmo, PayPal, Square and Adyen combined. This is why both Visa and Mastercard are scrambling to integrate stablecoins into their networks. Notably, unlike the FinTechs above, stablecoins do not discriminate based on nationality, wealth or immigration status. That’s the kind of access real progressives celebrate.

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The Rise of Bitcoin, by William J. Luther

A good explanation and history of Bitcoin, from William J. Luther at aier.org:

In hindsight, the rise of cryptocurrencies appears to have begun with the introduction of bitcoin in 2009. Earlier cryptocurrencies had been launched in the 1990s, but they failed to take hold. David Chaum’s DigiCash is widely thought to have been ahead of its time. Chaum founded his company at the start of the decade, well before the rise of e-commerce. By 1998, it had filed for bankruptcy. More generally, early “digital-cash firms made a fatal miscalculation,” Julia Pitta wrote for Forbes in 1999. “They figured, wrongly it turns out, that consumers would be leery of using credit cards on the Web and would demand tight security and ironclad privacy.”

It was not clear, at first, that bitcoin would be any different. Perhaps fearing the fate of e-gold creator Douglas Jackson, bitcoin’s designer(s) adopted a pseudonym––the now-famous Satoshi Nakamoto––and shared the upstart open source project in email to the Cryptography Mailing List on January 8, 2009. Nakamoto had circulated a white paper explaining the technical details a few months before. Congratulatory replies soon followed, but there was little indication that bitcoin would quickly become a household name. It was little more than a novelty discussed by a handful of programmers on the Internet.

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In Praise of Bitcoin, by Ben Hunt

Like a lot of art, it’s hard to pin down exactly why Bitcoin has value, but it does. From ben Hunt at epsilontheory.com:

One evening a few weeks ago, I was on a Zoom call with a bunch of academic, think tank and Fed economists for a Bitcoin discussion. A lot of names you’d know if you’re familiar with those circles, the most famous one being Paul Krugman (who, btw, I found to be charming, genuinely open-minded, and surprisingly humble about the entire enterprise of academic economics). I had been invited to be on the anti-Bitcoin ‘side’ of the discussion, but they needn’t have bothered. Because there was no pro-Bitcoin side.

Krugman led with a simple question – what’s the use case for Bitcoin? Not a theoretical thing, but an actual use of Bitcoin to solve a problem in the real world? – which led to an hour-long, extremely earnest and altogether unsatisfying conversation about financial transfers out of Venezuela, trade settlement and securitization on a blockchain, and Taylor Swift’s ability to control the scalper/resale market for her concert tickets.

All of which are real things. All of which are interesting things. All of which are good things. But none of which are what got 20 busy people on a Zoom call at 8 pm on a Thursday night.

None of which ARE Bitcoin.

Now, to be fair, there were no old-school Bitcoin maximalists on the call, or if there were, they were too intimidated to make an Austrian economics, hard money, neo-goldbug, Bitcoin-is-the-inevitable-global-reserve-currency argument in front of Paul Krugman. LOL.

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Scarcity Cred, by Scott Galloway

Scarcity can be a value, which is one explanation for the people scratching their heads about the popularity of cryptocurrencies. From Scott Galloway at profgalloway.com:

Any firm that approaches $1T in value has tapped into a basic human instinct. Consuming, signalling, loving, and praying have been the fuel of Amazon, Apple, Facebook, and Google’s ascents, respectively. That the crypto asset class universe has reached $2T reveals, I believe, that it taps into two attributes we instinctively pursue: trust and scarcity.

Trust

Our superpower as a species is cooperation, which requires trust. It’s the reason banks, traffic lights, and anesthesiologists exist. Even before crypto, creative minds have been drawn to finance, as trust creates opportunities for leverage and securitization. In 1997, seeking more control over his songwriting catalog, David Bowie raised $55 million with Bowie Bonds. The bonds paid 7.9 percent interest over a 10 year-long term — a scant premium to a U.S. 10 Year Treasury Note at 6.4 percent. What made Bowie Bonds unique was the collateral, or source of trust: future royalties on Bowie’s music, which the bondholder felt people would continue to value. Moody’s rated the bonds A3 and Bowie used the proceeds to buy out his former manager, shoring up the bonds and securing long-term control of his music.

Though innovative in its collateralization, the Bowie Bond was on its face a vanilla financial instrument, no different in form than a bond issued by GM or P&G. In order to connect his art and potential investors, Bowie had to rely on the (expensive) apparatus of traditional gatekeepers in finance and entertainment to imbue his bonds with the essential attributes of trust and scarcity. The royalty stream (trust) was mediated by lawyers and accountants in big publishing houses, and the legitimacy of each individual bond (scarcity) was dependent on the financial powers of Wall Street.

What if Sir David Bowie (note: he declined knighthood in 2003, but it’s my blog) fell to earth in 2021? What might Bowie have done … with crypto?

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“You’d Have To Shut Down The Internet” To Ban Bitcoin, Says SEC’s Hester Peirce, by Tyler Durden

Will governments ban Bitcoin and other private cryptocurrencies? Tread carefully, it’s not clear what the outcome will be. From Tyler Durden at zerohedge.com:

Any government efforts to ban Bitcoin would be “foolish,” said Hester Peirce (aka “Crypto Mom”), a very Bitcoin-friendly commissioner at the U.S. Securities and Exchange Commission (SEC), during a MarketWatch virtual conference earlier this week, according to Cryptoslate reporter Liam Frost.

“I think we were past that point very early on because you’d have to shut down the Internet,” Peirce said, adding, “I don’t see how you could ban it. You could certainly make the effort. It would be very hard to stop people from [trading Bitcoin]. So I think it would be a foolish thing for the government to try to do that.”

Not only that, but the government would immediately wipe out $2 trillion in net wealth – the market cap of the crypto sector – an event that would have profoundly deleveraging consequences, and since much of that wealth is now backed by debt, for example all those debt-funded purchases of bitcoin by Microstrategy, such a move by the government would immediately destabilize the all important debt market.

The statement came on the heels of Ray Dalio, a billionaire investor and founder of Bridgewater Associates, arguing that there’s “a good probability” that governments around the world would ban Bitcoin and other cryptocurrencies.

Dalio told Yahoo Finance:

“Every country treasures its monopoly on controlling the supply and demand. They don’t want other monies to be operating or competing, because things can get out of control. They outlawed gold, that’s why also outlawing Bitcoin is a good probability.”

However, according to Peirce, the main issue for authorities—at least when it comes to cryptocurrencies—is to find an approach to regulation that would be productive and non-restrictive at the same time. She noted:

“We’ve seen other countries take, I would say, a more productive approach. We really need to turn that around. And I’m optimistic, with a new chairman coming in with a deep knowledge of these markets, that is something we could do together—build a good regulatory framework.”

At the same time, Peirce also pointed out that she doesn’t know when—or if—a Bitcoin exchange-traded fund (ETF) will finally be approved in the U.S. Recently, we’ve seen a new wave of major investment companies, such as Fidelity Investments, SkyBridge Capital, and VanEck, filing their applications for Bitcoin ETFs with the SEC.

The regulator, however, never approved a single filing of this kind so far, which as discussed earlier, may be a good thing for not only bitcoin but the entire nascent DeFi ecosystem where hundreds of billions in very real money is now intertwined.

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The Greatest Game, by Jeff Booth

This article will stretch your brain a bit, but can’t we all use some mental exercise? From Jeff Booth at medium.com:

“You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete”

Buckminster Fuller

Breakthroughs, that step-change our lives for the better, invariably come from something that most people couldn’t see. Our belief of how the world should exist and operate is shaped from looking backwards, not forward, so it makes sense that new paradigms that change everything — face resistance in our minds. Because most people don’t see them, breaking through an existing paradigm needs to provide enough compelling value for users to disrupt an old paradigm. Apple’s iPhone for instance, didn’t copy the market leader, Research in Motion’s Blackberry design of needing a keyboard or selling to businesses who required RIM’s security. It created a digital interface when that wasn’t ‘needed’ and created an entirely new platform that changed the industry as a result. Along the way, the Blackberry died, unable to compete with the value for users, that was now increasing exponentially on Apple’s platform.

That process describes “Creative Destruction” a paradoxical term first coined by Joseph Schumpeter in 1942 to describe how Capitalism works in a “free market.” Entrepreneurs innovate and “create” value for society — and that value gained by society also often “destroys” the former monopoly power. That process and its importance is at the centre of how all modern economies have evolved and given rise to most of the benefits to society we take for granted today. New winners become so valuable that they disrupt existing market power or structures. It is all driven from a near-constant flow of innovative entrepreneurs with bold ideas and the capital backing them that go up against the status quo and are only successful, “if’’ they create value for society.

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China’s Digital Currency Has Nothing to do with Bitcoin, by Peter C. Earle

Bitcoin is a truly revolutionary idea that allows people to transact and store value away from the prying eyes of governments. China’s digital currency is just another state-issued currencies that gives the Chinese government even more control over the lives of its citizens. From Peter C. Earle at aier.org:

China’s digital currency has left the testing stage and is set for a full rollout to the entire country and region. For some reason, the major media stories on the topic circle around the issue of Bitcoin, invented in 2009 as an alternative to government paper money.

Just because a money has the word “digital” in the title doesn’t mean it is a form of Bitcoin. It is not. It is nothing more than a government currency with a different delivery system.

  • The digital Yuan does not live on a public ledger. It is controlled centrally by Chinese authorities, to be changed if, as, and when political whims require such.
  • The digital Yuan is not a peer-to-peer currency but rather requires the use of officially regulated financial intermediation.
  • The digital Yuan does not have a market-based valuation independent of the old version of the currency. They are tied together.
  • The digital Yuan does not have an algorithmic protocol dictating the production of new assets (akin to money creation), much less an end date at which point no more will be created. It is a currency with a discretionary money supply controlled by the government.
  • The digital Yuan is programmable to the point that the currency can be made to expire, thus forcing consumers to use it up by a certain date. This is a twist on an obscure, unconventional monetary policy innovation known as a Gesell currency: expiring money, which gives the issuing government a heightened degree of control over money velocity.
  • The digital Yuan permits a new method for surveilling the population, creating new data which can be tracked by authorities. Bitcoin has pseudonymous protections for user privacy.

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88 Years Ago, FDR Banned Gold. Will A Bitcoin Ban Be Next? by Tho Bishop

Governments always want a monopoly on money, although they invariably mismanage said monopolies. From Tho Bishop of mises.org:

Today is the eighty-eighth anniversary of Executive Order 6102, signed by President Franklin Delano Roosevelt, “forbidding the hoarding of gold coin, gold bullion, and gold certificates within the continental United States.” The order was one of the several disastrous responses to the Great Depression that succeeded in escalating the financial crisis. Later in the year, the US Congress would pass a resolution retroactively supporting the legislation; however, it was the determined autocratic leadership of FDR that made way for these unprecedented measures. It would be a crime for Americans to hold gold for over forty years, until President Gerald Ford reversed the order in 1974.

This episode has several lessons for the current financial environment, particularly given the acceleration of tyranny-by-expert rule that has taken over much of the worst this past year.

The underlying legislation that evoked by FDR’s executive order was the Trading with the Enemy Act of 1917—a by-product of World War I—despite the fact that the US was in no way in a period of war in 1932. Similarly, we have seen war on terror–inspired financial legislation increasingly used against American citizens. For example, in the name of “fighting terrorism” the US PATRIOT Act significantly increased know-your-customer laws, empowering federal regulators to use the traditional banking system to better track the economic behavior of American citizens.

In the eyes of the federal government, “antiterrorism” legislation was quickly expanded to include additional missions—such as stopping money laundering and drug crimes. Increasingly, these bogeymen have been used by policymakers around the world to erode financial privacy assets—such as cash and secret Swiss bank accounts.

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Here Comes Bitcoin’s Big Test: The Empire Strikes Back, by John Rubino

Can governments kill Bitcoin and replace it with something more amenable to their control? From John Rubino at dollarcollapse.com:

One of the flaws in the revolutionary mindset is a tendency towards overconfidence. Combine absolute belief in a new idea with a couple of early wins and you get an absurd level of cockiness. This leads the would-be revolutionary to underestimate the challenges involved in getting from there to ultimate victory.

Why? Because those early successes happened when hardly anyone was paying attention. Once the threat is recognized, the Empire usually strikes back with intent, and the revolution turns out to be a lot harder, and a lot less certain, than it seemed.

History is littered with examples of this principle, from 20th-century geopolitics (where the Nazis and Communists, at various times, each thought they had world domination in the bag) to investing, where the 1990s dot-coms were going to grow forever – until they collapsed under the weight of their own hubris — and 2006 home flippers thought they could build real estate empires without bothering to learn the business.

Which brings us to bitcoin. Its early success has been spectacular …

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