Richard Stallman: We Can Do Better Than Bitcoin

Are these guys really add more value to the economy than chargebacks? I very much doubt it.

And the results the code produces is constantly audited, both internally and externally.

You mean like another lock? But what is stopping the seller from holding buyer's money hostage and force him to release the lock just to get some money back even when he did not receive the goods?

An example of evil buyer would be something like: 1. The buyer buys goods from seller with smart-contract

2. The money in buyer's wallet gets locked.

3. The seller ships the goods.

4. The buyer receives the goods, but never signs the smart-contract.

That way the buyer gets what he paid for, but the seller never receives the money.

No matter how i think about it, smart-contract idea looks abusable.

In many cases the entrenched players in the market already have good prices. Upstarts who can't use economy-of-scale try to make their way by providing superb customer service or providing a better service in another way. But it's hard to give it a try when you don't have the protection of chargeback.

But, that doesn't really solve the problem, it merely pushes things around a bit. It's insufficient to say "credit cards aren't universally loved", because that does not imply that Bitcoin is the correct choice anywhere. It's perfectly possible that the local alternatives to CCs in other nations would still be preferred to Bitcoin. If one wants to sell the idea that BTC is a better choice than X, one must produce compelling reasons why this is so, preferably without relying on ideological statements that don't have universal appeal; I'm sure the goldbugs love BTCs anti-inflation nature, but that argument only carries the day with a very small group of people.

You said - "Your card being stolen has nothing to do with chargebacks. Your mobile could be stolen with your cryptowallet inside and you could do a remote wipe of the device."

You do this in order to try to establish cryptocurrency as being as secure in that situation as a credit card, i.e. theft resilient. I pointed out that if the cryptocurrency was already used, unlike with a credit card, you're unlikely ever to be able to recover the money. Then you started handwaving about cash. This appears to me to be a disingenuous move of the goalposts.

This is true, but the practice is such because the government has previously granted a monopoly on the issuance of money to certain private entities which have little accountability to anyone. Previously, it was not possible to compete with this monopoly, because the state enforced it through the threat or use of violence.

The money issuers now have competition, and the government has no way of "shutting down" the competition due to the way it was designed. Merchants now have alternative options in terms of what currency they're willing to accept and how they can save money, rather than simply spending.

If it happens that the new competition is more desirable to possess than the previous money (due to lack of inflation, meaning it is more likely to retain its purchasing power in the long term), then people will save in bitcoin, and spend in dollars.

The result is that a large amount of wealth will essentially "disappear" from circulation which the state thugs can levy taxes on via use of violence. Economies will take a hit as a result, but the people saving in bitcoin won't be impacted as heavily as those who don't. In fact, it could have the effect where each hit taken by a national economy drives more people to bitcoin, pushing up the demand and value, making those who were smart enough to accumulate it earlier even more wealthy than before the economy took the hit.

As long as there are liquid enough markets (whether those are AML/KYC compliant, or black-market) for people to trade some of their bitcoin back into USD for the purpose of paying taxes, then the dollar is not going to retain its advantage.

> Bitcoin also has a cost associated with it that the dollar does not - a transaction processing cost (yes, there are costs for the handling of money, but it's both significantly less than bitcoin transaction costs, and is relatively constant).

Transaction fees in bitcoin are not consistently high. Some fees were high last year due to the sudden increase in speculation, poor fee estimation in software, and services which were not making efficient use of block-space, at their own cost, or the cost of their clients. Much of this has improved, although we have a long way to go.

The main developments are in the more scalable technologies pinned to bitcoin, which aren't competing entirely for a share of the limited block space. Fees on the lightning network, for example, have a base rate in satoshis (per transaction), and a proportional fee of 1 millionth the value transacted. The fees total fractions of cents. Bitcoin transaction fees are only paid in the creation and destruction of payment channels, which may be very infrequent.

> WRT deflation, the biggest problem (that I'm aware of) is that it disincentivizes spending, something generally considered to be a bad thing for the economy. Sure, people may buy the necessities with a currency that is deflationary, but they're disincentivized by the currency itself to do anything more than that.

The reason that reduced spending is seen as a "problem," is because governments can't cover the interest on their debts unless people are actively spending and paying taxes on those transactions. Governments are not really paying their debts off - they're paying off the interest, and kicking the can down the road even further. The debt will never actually be paid. It is impossible to pay off. At some point, who knows when, your government is going to default. This is inevitable.

> In other words, why would anyone (not just the rich) spend more than the bare minimum when not spending means their net value increases?

People spend because they want something, and they're willing to let go of something else which they value in exchange. For some that might be the bare minimum. For others, they might want to continue wealth-signalling with expensive cars and watches.

Think about that one. The value of that car depreciates by about 20% immediately upon purchase, and then by a further X% every year. It has a lifetime of around 10-15 years before it is basically worth the value of its scrap metal. Yet people are still buying cars frequently. Could it be that people still spend money on products and services which provide them value now, and not just save everything like the deflationary scaremongers suggest?

> Any form of investment that can't accrete value faster than the currency itself becomes a wasteful product. Stocks, bonds, houses, cars, bicycles, startups, family businesses, education - all have the potential of losing all their value when compared to hording currency.

Some of the examples you pick, like cars, bicycles, houses (sometimes), actually depreciate in value over time, which throws away the argument that people won't spend money if they don't see a monetary ROI.

Consider renting a home as another prime example. People will continue to put money into an "investment" which will eventually net them zero return when they move home or get evicted. Yet people still rent.

Many "investments" are simply full of rent-seekers who do not provide any real value to society. If people stop throwing money at these, it won't be missed.

Education is an example of something we can't even measure the ROI on. We just know from observation that the better educated a society is, the higher its productive capacity appears to be a few generations down the line. We also know that some academies do a better job than others, and that some people are willing to pay more to have their children educated at those academies, with no guarantee that they will see a ROI. (The child could turn out rebellious, or just not smart anyway). People still invest in education despite there being no obvious profit motive - their child's future is more important than the value of the money.

The real difference in investment when it comes to deflation is that people simply make better decisions. The incentive is skewed more towards saving than spending, but this is not absolute. People will spend, but think twice about buying that useless gadget that they didn't really need, but they bought on impulse because they had $1000 burning a hole in their pocket.

The argument against deflation is essentially the same as saying "people won't save money if there is inflation," because money is depreciating over time. The incentive is towards spending, but people still save money. The only time they don't save is during hyperinflation, when the value of the money depreciates more rapidly than they earn and spend it. The reverse is true for a deflationary economy. As long as deflation is low, people will still spend, but with more preference to save. It is only if hyperdeflation occurs that people will "hodl" and only spend the bare minimum to survive. Hyperdeflation will occur as bitcoin gains adoption, but it is not the eventual state. Once peak adoption has occurred, the rate of deflation will begin to decrease, with the eventual state that it will be relatively stable. In the even longer term, bitcoin could become inflationary by accident, if the human population as a whole begins to decrease rather than increase - because demand will be reduced.

The problem with today's "investment" is that it is almost entirely on shit that won't last, and is for the purpose of short-term monetary gain than for investment into infrastructure which will last generations. An "investment" today is concerned with the next quarter, 6-months or perhaps even a year. Most companies do not concern themselves with anything longer than 3 years, or anything to do with the well-being of the societies in which they operate. Most companies simply can't operate on the time-scales needed to build and eventually profit from creating infrastructure. Instead of building something with the intent of breaking-even in 10 years, one will instead still be paying back interest accumulated on loans taken out 10 years ago.

The end result is that the role of building infrastructure in developed nations is now almost entirely assumed by governments, or contracted by government, which ends up creating virtual monopolies propped-up or subsidised by the state. Private companies which are profiting hugely from public money, but do not operate like regular companies because they don't have to compete with anybody and have little accountability. It's the worst elements of socialism and capitalism combined into one package.

In the academies, research projects which span 3+ years are now almost unheard of. It's more important to get 3+ publications per year, now matter how garbage they are, else the funding won't come around next year. We're seeing stagnation in many areas of science because research which is not short-term profitable is ignored.

For most of the working and middle classes, the high time preference results in them buying useless gadgets, largely for the purpose of wealth-signalling, eating junk food, getting wasted, anything to fill the requirement to spend the money one has earned, because it is not worth saving the money. For many, paying rent is preferred to buying property, because the latter requires saving to achieve, which is hard when people see their stored value decaying in their bank accounts.

The shift from inflationary money to non-inflationary money will fundamentally affect people's decision making in their purchases. It isn't going to happen overnight, but as people realize they can accumulate wealth without risky investments, they will come to value saving over spending. The companies producing cheap junk for short-term profit will have to change the way they operate to fit the changes in spending habits.

On (4), gold is still inflationary as new sources can be uncovered. It is better than fiat currencies which can be arbitrarily inflated, but it is still worse than zero inflation for anyone who wants to save money.

Gold is not too scarce. It can be more difficult to acquire than Bitcoin in some cases due to red-tape. Gold is not very fungible because it is difficult to separate. It's also difficult to verify that it is real gold. Even under gold monetary systems, a major source of inflation has been to dilute the amount of gold transacted by alloying it with small amounts of other metals. Over time the gold in the coinage has shrunk to fractions of its original amount. This can't be done with Bitcoin.

And the value of transmitting remotely, without censorship or interference should not be underestimated, particularly as governments and technology companies are increasingly pushing towards dystopias in order to attempt to save themselves from their own poor decision making.

Bitcoin also enables a kind of economy that was not previously possible, which is a micro-payment economy for online services. With some of the technology being built on bitcoin, you will soon be able to make instant payments worth fractions of a cent, with transaction fees being negligible. (This can already be done, just not yet at scale).

Since many people are invested both financially, and technologically in this space, it certainly isn't going to go away any time soon. If people happen to have their savings appreciate over that time by holding them in Bitcoin, it will only further cement Bitcoin's future as the next monetary standard.

The first relatively recent, nonobvious, example of hyperinflation that comes to my mind is Brazil during military dictatorship (which, yes, qualifies as a banana republic). According to Greenspan’s “Age of Turbulence,” Brazil paid for 90% of its budget with taxes and bonds like a well-run country, and printed money to cover the gap. Middle class and upper class workers got contracts with automatic inflation pay raises, but lower class workers did not. Those automatic pay raises created a feedback loop and hyperinflation ( http://www.sjsu.edu/faculty/watkins/brazilinfl.htm ). When prices got too crazy, they lopped off a few zeros and renamed the currency (e.g., cruzeiro, cruzado, novo cruzeiro).

The solution to the problem was much more straightforward than I would have expected: (1) stop printing money to cover the deficit, (2) convince people that inflation would go away, and (3) get IMF loans to straighten out the government budget ( https://en.wikipedia.org/wiki/Plano_Real , the loans were quickly paid off).

I was convinced we would have high inflation when the Fed increased the money supply during the financial crisis ( https://fred.stlouisfed.org/series/BASE ). The fact that we haven’t shows that the Fed correctly predicted that people would want more currency on hand because of economic uncertainty, and in fact did a good job predicting the size of the change. I’m impressed that they did such a good job, but I’m not convinced they always will.

I wouldn’t get rid of the Fed, and I don’t have any money in gold or any other inflation hedge. But I don’t expect our current low inflation to last forever (since the Fed has been targeting a higher inflation rate than we’ve seen, I don’t think the low inflation rate is proof that the Fed has complete control of things; it is arguably proof of the Fed’s limits to get what it wants).