The brilliant image from Andrey Avgust
Three loud tunes dominate the formation of public opinion on bitcoin by mass-media forcing.
They are:
- A. bitcoin is the new gold
- B. bitcoin is to make banks obsolete
- C. bitcoin will displace fiat currency
and they are all wrong.
Here you are those messages butchered in order of appearance:
The gold thing primarily comes to emphasize that BTC is no good as payment system. Cheapening! Underrating ... not only for crypto, but also for fiat and gold as generations of MESVUA tech.
The ''logic'' seem to be:
- Because it is slow.
NO, it ain't. The 10+ min of set confirmation time is absolutely essential part of the bitcoin protocol by construction. Transaction fees competition pushes closer or further from these 10min the timing of confirmations, but yet the service is 24/7. There are ways to orders of magnitude fast-forward in off-chain mode and as early as ... Satoshi himself was talking about payment channels.
- Because it is expensive.
No. It is not. Even in ATH bubble times - when price of BTC is significantly higher than the mining cost - the average transaction cost only nears the fees for international bank transfer ... only for the smaller sums, due to the network overload from herding of dumb money. Historically BTC is proven to be 300 times less costly transfer than bank wire. Analitically even less if we include the full cost of the fiat system to be able to function.
- Because it is volatile.
Volatility comes from the small yet volume. The whole cryptosphere is under 2% of the global $80t GDP at concurrent $260t wealth and $180t debt. Bitcoin alone under 1%. It is one thing to rock a glass of water, completely another to splash noticeable waves in an ocean . The crypto whales are nothing but shrimp-sized bugs compared with the good'ol Wall St. dinosaurs.
The choir of ''BTC=Gold'' includes pretty important figures like Nick Szabo, Steve Wozniak , Alex Gurevich , Noah Smith , Winklevii ...etc. etc. The overall ''logic'' is ''it at least has a store of value safe heaven function''.
The idea that a deflationary asset is unsuitable to serve monetary function is apparently silly - a thing which is replenishing its value is a far better spendable than an asset with constant or inflatable value, as any honest Austrian will tell you.
Is bitcoin the digital gold? well, nuh! - it is far better than gold. Vastly better.
It took thousands of years of gold to reach its $T-range marcap.
It took a thousandth of that time for BTC to reach entire few %s of that marcap! Hundreds of times faster growth.
And it won't stall once it consumes the whole economy because it shows all the signs to be a Hanson Engine.
Also ''just gold'' is quite pejorative for what together with silver was the almost non-political money of all mankind for so many thousands of years. The reason why it was and is money is splendidly explained by this slide by the Winks Bros. Gold is money.
Gold was also fiat - for cicrulating in the form of disks with royal faces and curses printed on them. Not any gold by mass but the ''king's gold'', only the permissioned gold.
And gold is crypto too by natural way of production - neutron stars collisions. Very rare, very random ''mining'' events. And ''distributed'' by virtue of galactic scale spraying.
The perspective gold to be remonetized is completely open and realistic, too. A kruggerand buys you a posh TV, a handful - a fancy car. Compact, handy, solid, nice looking, felt like real money... Chip it and you get a circulation wonderfully manageable by a blockchain system. The best combination of lo-tech and hi-tech way.
New money never kill old money. They might only push them back into the mere commodity realm. Lets call it recommoditification. Metal money did not drive extinct the cattle money. A quote from the Bible states about paid ''money AND gold'' where the money are ... heads of lifestock. The paper money did not death spiral the price of noble metals to zero, plastic and electric money did not turn the banknotes worthless ... Just like with darwinian biological evolution the new better forms do not exterminate the older ones. Often even do not dominate in occurence.
Gold is NOT rare enough also. The natural abundance in Earth's crust is 0.004 ppm , not insignificant across the Solar system too. All the above-the-surface gold in the world, almost totally recycled and very little sunken, wasted or lost over the millennia fits into an olympic swimming pool and amounts to few hundreds of thousands of metric tonnes. But modest-sized and low delta-V asteroids are estimated to hold ... dozens of millions of metric tonnes of the stuff. Also gold is chemical element prone to mass production should reliable method for nuclear transmutation gets applied. Thus its quantity being only function of the cost of energy. Just like Bitcoin but without any limit of supply.
Bitcoin is scarce. By design. Mathematically capped supply. Ok, forking creates inflation but the forks are not Bitcoin. They are other chains. They are paradoxically with positive effect upon scarcity though because if for some reason the BTC decision makers and takers opt to inflate the coin, there will be strongly deflationary alternatives readily available.
BTC supply even diminishes long term. Lotsa coins lost, and to be dug out will require very serious decryption ''archaeology'' which we can not even imagine now. At some point the decreasing rate of BTC creation will go under the more or less constant rate of key-losses. ( I imagine as completely realistic price increase strategy the destruction of other people's access to their bitcoins for increase of scarcity. Can the world run out of BTC? No. Possible mitigations: divisibility increase into the sub-satoshi domain or very high money velocity. Theoretically a single coin can serve all the payments if moving fast enough )
So, no, BTC is not the new gold. Aside from being vastly better than gold in all aspects it is also the strongest ever form of money. Honest money. As ''most marketable commodity''.
Bitcoin won't kill the banks. Bank exist from the early metal money age, emerged together with cities, writing and libraries/archives. Banks did not die from the introduction of paper money - they erupted into their glory and power back then in the Italian Renaissance free cities in sync with the double-entry book-keeping.
Banks do THRIVE on the new monetary technologies as a persistent rule.
Most money aggregate lives as only electronic records on central and commercial banks and clearing houses databases.
Crypto is MORE convenient for banking, more digestable for the existing bank infrastructure than the paper cash or centralized cash ledgers.
The unbanked or underbanked state of the majority of mankind is due to not only the resent uplift from absolute poverty but also from the unscalability of the current banking system.
I started grazing into that topic years before my Koine essay and intend to tunnel even further.
Bitcoin will make banks stronger than ever! Until the next big money thing makes them even stronger.
The other side of the coin is that crypto desperately needs banks too. Safe storage is the obvious, people can not hold miltimillion worth cold storage printouts in their old aunt bibles ... but the more important is something essential.
Together with being the first implementation of Yuji Ijiri's invention of the three-entry book-keeping, BTC is also the first decentralized means of simultaneous reply of the questions who-what-when.
Great, but ''who'' is not the user but its account. The connection user-account is not governed by the blockchain code but but the God's code - the laws of nature which we are far from knowing and even further from hacking.
There is no yet even a hint about way of on-chain identity management and non-fiat control over tangibles and its firm association with the blockchain states. For the ''physical'' stuff we can still reply only upon external enforcement.
In fact not crypto but the centralized digital money are the biggest treath to the banks!
Hostility of the banks vs crypto can be explained by the wrong memes of such character: anti-government and anti-establishment, characteristic for the early crypto community. A clear example of double misunderstanding from both sides, when even there ain't two sides.
The banks infrastructure is old capital, well lubricated smooth running ready machinery with great value for crypto. It is not absurd to see it the other way round too - crypto moved along the centralized banking channels of swift, visa, sepa, bis, clearstream, chips , etc.
Bitcoin will not displace fiat money.
Bitcoin will move fiat better i.e. faster and cheaper, than anything so far.
The M0 total USD money supply is about $3.5 Trillion. Tether marcup was almost $3b in Oct 2018. Close to 0.1% of all US dollars tethered in stables. I already described what I deem the impact of fiat stabling on the price of crypto.
In the other direction, stabling fiat by blockchain tokenization is analogous to the increased mobilization of the value of gold by use of paper storage certificates. The gold-on-paper is faster than gold. A postal pigeon can carry with ease a shit ton of gold-worth. On-chain-ed fiat is the same way faster and more effcient and possesses number of additional very useful features and efects.:
a. numismatic, bespoke virtual banknotes, why not printable and deprintable too, matter of capacity for on-chain meta-data. physicalization and tangibilization of the fiat-bearing tokens enabled. The technology these to be made unforgeable exists for decades.
b. full real time tracking, equivalent of following banknotes by serial numbers,
c. no money laundry, like with bitcoin once a single transaction is identified by user the whole network of interactions becomes visible, thus never-on-chain fiat would be considered quite suspicious.
d. real time tracking and identification of instabilities and bank-runs,
e. reg-bots in MSBs and other fiduciaries,
f. automated accounting and instant taxation,
g. personalized taxation based on personhood, geodata etc. which enables global harmonization of taxation and sound objective criteria based embargonomics and black-listing.
k. immobilization and scarcification of fiat, just like paper fixed gold still. Because moving its value by other means, arrests the underlying. The bill moves only while asset is vaulted .
l. conversion fiat-fiat, fiat-crypto and crypto-fiat becomes as cheap as the cost of payment channel transaction - literally millions of times cheaper than bank wire. Micro- and nano-payments and their potentials unleashed in full glory.
m. liquidity crawling all the MESVUA phase space in bespoke manner. Users hoDl in the best contemporary storer, and spend in the best available spender units. Pretty automatable arbitrage-as-a-service dynamics, too, btw.
n. disciplining and rigorizing of the fiat issuing. Central banks will not be so tempted to ''print cash'' if everything so instantly visible and effecting.
o. functional fusion between fiat, crypto and CBDCs ... if fiat/cbdc is as stabled as other tangibles, then in one and the same system everything could - commodities, stocks, bonds thus engulfing the Exter's Hourglass in its entirety!
p. effectivelly second-order ot meta-currency realizing the effect of scaling the barter (page 5, table 3) by currency. Aristotelian metaphysics is about the physics of physics, currency of currencies becomes doable and useful. Interoperable multiple chains are like one chain for the user. As one TV service with hundreds of channels. Or as intermodal transportation. ...
... to name a few.
That gvt can not refuse to take their own taxcoin for public debts and nobody can refuse to take payment for any debt in the so sanctioned money. Taxcoin measures the share of the country in keeping the global trade routes open and the world trade running. It's use outlines more or less the jurisdiction overlap.
It is called legal tender.
We will not see government and taxation to go away any time soon. Banks and corporations are government's franchisees at the end of the day, and every successful Pax so far - Hellenica, Mongolica, Romana, Hispanica, Britannica, Americana, The Eurosphere ... was/is about keeping the trade going, keeping the roads open.
My particular reasons for using bitcoin as synonymous with blockchain are historical, not ideological. Ideology is ... with negative return.
There are three meaningful achievements so far in blockchain.:
- the Bitcoin Maelstrom of Satoshi 2009,
- the Mastercoin Scylla of JR Willett 2012 and
- the Lightning Network Charybdis of Poom/Drija 2016
Everything else is yet to be proven to be anything different than endless regurgutations of the same melody stripped of this or decorated with that ''feature''. Non-credited ''citations''.
I am sure we are yet just few first baby steps on the very beach of the vast Crypto Terra continent with its massive jungles and the distant maybe mirage maybe not ... Quantum Money Mountains snowline at the horizon, but with these 3 key technologies are more then enough to scale up to zillions of transactions per second and to serve a vibrant $-quadrillions-sized economy. Just like the present day 2-entry book-keeping fractal does have the capacity to run countries of billions of population and businsees of trillions of dollars, and more.
We have the splendid example of Tether, coming to us thanks to Omni. Tether is not a bankable asset, it is MSB. Imagine tether-like not mere money services but interoperable set of protocols for safe proof-of-deposit between any net of financial institutions.. Digital bearer fiat deposit certificates. Flowing on crypto channels. cf.: Bob Hettinga on that.
Bankable stablecoinage is yet to come and shall come and stay!
A LN moving Layered tokens will open the floodgates for that to happen. It won't matter anymore what coin gets send and what received by atomic swaps. Just like if you pay cash a $49 bill it does not matter what's the exact configuration of bills and coins you give.
What it ''repesents'' and which exactly chain, centralized system of whatever channel it uses.
Which serves another very important thing - to spare the user from the flaws of each particular system and from the collateral damage from the Darwinian war if no better design optimization mechanism is available.
Internet of payment vectors. All by users preferences. Personalization of money.
The Layered as chain-aaS and as tokenization-aaS. B2C, B2B, B2B2X ... all modes.
NOTE: In this essay I threw few dozens of ideas and topics which I promise to revisit in full detail later.
18qSKUUTAGw1uL53simrSiZ6pJpfxKACvj for research support. Thanks.
Copyright © 2019 Georgi Karov. All rights reserved.
