Taleb: Bitcoin, Currencies, and Bubbles
academia.edu
academia.edu
The sooner we can move past these staggeringly inefficient environment-destroying pump-and-dump schemes the better off we'll all be.
Nothing is worthless[1].
Everything worth something to someone at some time.
But some things will be worth much less to everyone at another time.
--
[1] that includes negative prices also, but that because of the externalities, i.e. deflation, storage costs, or pre-existing contractual obligations
Proof of work pays for network security, not Tx volume - the most secure super-computer ever invented.
Transaction processing is a free side-benefit.
With Lightning, TX Processing scales to meet any arbitrary needs.
People using LN are not transacting using Bitcoin. They are denominating their transactions in Bitcoin, and trusting LN to eventually convert to Bitcoin (at the huge bitcoin transaction cost) if/when they eventually need it. Even worse, most people will not use LN directly, they will use yet another third party, one that will operate a bitcoin wallet and LN channel for them (likely the same wallet and channel for many, many different people).
My understanding is that they are onboarding something like 20,000 new users per day through community trainings and bootcamps.
Users can participate with any Lightning wallet such as the free and open BlueWallet.io app or any other Lightning app. No one is obligated to use Strike.
That is the beauty of free, own and interoperable standards such as Bitcoin or Lightning.
Coal and no, because that's the marginal production mode in China.
Arguing that some hyped things don’t suck is not very helpful. I think it’s better to focus on particular qualities and try to move to the right price.
The best analysis I read years ago was predicting present value based on expected future transaction fees. That’s the only basis I saw that made sense and were like 1000000x past that valuation.
It's like feeding vast amounts of wood into an ever growing fleet of steam engines that just travel in circles all day, and once every 10 minutes one of the trains throws off a piece of gravel or a paint chip that humanity has decided has incredible value due to how hard it was to obtain.
Compared to all this, the energy/environmental footprint of bitcoin is laughably tiny.
IMO bitcoin does indeed have the potential of solving a global problem (not easily manipulatable reserve currency) .. that'd be a political/economic benefit that would justify a non trivial expenditure of resources. We'll see in the future whether it can come true. The experiment itself appears already useful to me. More useful than many other things humans have done. Yeah, totally subjective.
https://www.urbandictionary.com/define.php?term=Taleb%27ed%2...
https://www.youtube.com/watch?v=Hv3UC4lz3oQ
It seems to me that the only thing that matters in most of the "crypto community" is that you are contributing to the price going up. When Musk took away the ability to pay with bitcoins the hate for him in every crypto subreddit went through the roof. No one gave a shit about his reasoning. I have a feeling the hate for Taleb is the same, he is not contributing to the price of bitcoin going up, so he is hated by those who have invested in crypto.
Could you be more specific on how he has "destroyed his credibility", is it simply because he is negative towards crypto?
I want to leave you with this quote though
> “First ethical rule: If you see fraud and do not say fraud, you are a fraud.”
> ― Nassim Nicholas Taleb, Antifragile: Things That Gain From Disorder
From Twitter:
> [Peter McCormack] Would you discuss your findings in this paper with me. I’d like to explain to you why I think you are wrong. I believe this paper is not objective, rather written from a position of wanting to confirm your recent anti-Bitcoin position.
> [Taleb] Listen, fucking idiot. Go write your own rebuttal. The only good thing your amoeba brain is good at is in harassing mobs, intimidating innocent people who have a different opinion, pushing them to close their twitter accts. So stay quiet on my thread and keep your mouth shut.
I get that he doesn't want to engage in someone on a non-technical level or dumb down his argument, but these exchanges are off-putting. I haven't seem him express such consistent direct vitriol to others he considers fraudsters (central bankers, economists, pop-pyschology authors, journalists, etc). It's just weird that he's been going on a months long rage against people that invest their own money in something they believe in.
His paper might address this, but it seems like support for crypto to be a rather innocuous interest.
[0] https://twitter.com/PeterMcCormack/status/140673441067473715...
I think such a statement seems to disengage and also discourage future similar potential engagements.
It's just a completely nonsensical and baffling thing to do. As someone who generally likes Taleb, it made absolutely no sense to me. Craig Wright is essentially the most archetypal and most egregious cryptocurrency scammer in history, to the point of absurdity, and basically leads a Q-like cult full of delusional followers.
It's not about being negative towards cryptocurrencies. It's the completely contradictory behavior.
https://en.wikipedia.org/wiki/Ad_hominem
That said, Bitcoin is almost purely based consensus reality for most of its existence. It is worth something because others feel it is worth something.
I question though why choose Bitcoin? I guess a lot of people support it. But it is far from stable, so no one in the right mind, especially poor people should hold significant Bitcoins because it is speculative rather than stable.
I guess stable coins do not have the wide acceptance that bitcoin has? Why not USDC or similar to solve the money transfer problem?
Your respond suggest that Bitcoin is going to the moon, but that suggests you want it to stay the speculative instrument it is now. But if it is going to work in El Salvador you want it to be stable no?
The reason for high fees are the risk in sending the money across borders. Due to fraud there are risks. Bitcoin does nothing to fix this and seems to even enable more scams.
In principal maybe not but in reality, Bitcoin for international exchanges is a game-changer especially if you can keep the money in Bitcoin and spend it as the recipient.
Fees on remittances to El Salvador were up to 50% in some cases. With Bitcoin they are effectively zero.
Bitcoin fixes this.
Bitcoin eliminates counter party risk and international transfer risk. Lightning eliminates cost, latency and transaction volume limits. In every way that matters, Bitcoin via Lightning eliminates high fees and addresses all your concerns.
As for the idea that Bitcoin enables more scams, please provide citations. I am not aware of any scams introduced by Bitcoin or Lightning.
citations are a two way street buddy
Bitcoin is a peer-to-peer network that does not rely on any third party to function - hence no counter-party risk. Bitcoin operates based on rules, but has no rulers, only participants of various flavors.
Bitcoin doesn’t understand or recognize borders. There is no country-code input field in a bitcoin transaction. Bitcoin doesn’t care if you are sending Bitcoin to your friend across the street or North Korea, Iran, <insert scary nation here> - international transfer risk is non-existent for Bitcoin as Bitcoin does not recognize political borders.
Any human anywhere with a computing device and internet connectivity can create an address and transact with anyone else in the network.
Bitcoin is a censorship resistant monetary network open to all 7.5 Billion humans. No bank can compete with Bitcoin on this dimension.
People El Salvador didn't get the $1200 checks that US citizens got from printing more USD, even though they both use USD in theory. The president tried to get a deal with the IMF, but they couldn't agree on the terms, so he decided to give a choice to the people between a safe but inflating currency and a volatile / experimental but deflating currency.
Luckily there are enough market makers in both countries that transferring USD and recieving USD through the Bitcoin / Lightning network is cheaper and faster than using the traditional banking infrastructure.
I have a girlfriend in Colombia, and in addition to the 10% remittance fee she always has to go to the city from her village (1 hour bus ride) just to get money. I wish I could just send her money through Lightning network (she has internet + iPhone, so installing an app is not a problem).
"People El Salvador didn't get the $1200 checks that US citizens got from printing more USD, even though they both use USD in theory."
Are you seriously saying that 5% inflation a year, maybe a bit more worse case, is bad compared to Bitcoin just lost 40% of its value in the last 2 months? Oh no, better not use USD then and switch to Bitcoin!
Maybe we need a stable coin that is a mix of the major currencies if you are against USD in particular? It could be pegged to some ratio of Chinese, US, Euro (and UK or Japanese?) dollars? This would be quite nice and stable.
People in the US can just buy S&P stock in their 401K to defend against it, but most people in the world don't have that privilege.
I agree that volatility of bitcoin is really hard to stomach (I have been through 85% downturns and it sucked, and people have made fun of me many times, I just got used to it). But there are enough people who have so bad pension systems in the world, that they see the huge volatility of bitcoin as a better option than trusting their government.
Zoom out further and USD looks even less attractive as a store of value. In 1933 $20usd bought 1oz of gold. Today it would take $2000usd/oz of gold, netting out to a 100x decrease in purchasing power in ~90 years. Bitcoin meanwhile has grown in purchasing power by 200% per year on average since inception.
What El Salvador has done is brilliant.
Citizens can chose between a short-term stable unit of account that loses most of its value over a long time period (USD) or a short-term volatile but long term deflationary currency designed to increase purchasing power over the long-term (BTC).
Remember that no traditional bank in the world will ever again pay you sufficient interest on savings to preserve your purchasing power over time - not one. Fiat is a terrible long-term store of value.
Bitcoin gives users the option to fix this.
Bitcoin is not "fixing" anything here, a currency that deflates forever is a dumb idea.
Why is is a good thing that widows, orphans, those living in poverty or on a fixed income have no way to save without having to Risk their principal?
The only ones who benefit from inflationary fiat currencies are those closest to the new spending - via the Cantillon effect - namely bankers, politicians and their friends in the military industrial complex.
Some cryptocurrencies may (in some cases, based on past performance) be good on average as long term stores of value, but even those that are good at this are extremely volatile assets, much more so than, say, blue-chip stocks. So they certainly don’t solve any problem of “you need exposure to volatile assets to not lose value of savings” that you might imagine exists.
> Why is is a good thing that widows, orphans, those living in poverty or on a fixed income have no way to save without having to Rick their principal?
People without surplus income have no way to save by definition, with or without risking their income. That people with surplus income need to participate in wealth generation to recurve additional wealth from storage of their surplus income is obviously a feature.
This is a straw man. The argument was not for some cryptocurrency.
It was for Bitcoin. Bitcoin alone has the potential to become the reserve currency of the internet.
It is the only crypto designed from the ground up to withstand attacks from nation states. Bitcoin is the scarcest asset ever created. It is the most decentralized and censorship resistant, and it is secured by the most powerful super-computer in the world.
Therefore it isn't just about past performance, but rather past performance combined with a fundamental analysis of the unique properties of Bitcoin that make it the best performing asset in the history of assets over it's lifetime.
Bitcoin is a unique snowflake. If you cannot tell the difference between Bitcoin and other cryptos you ARE missing the point.
> People without surplus income have no way to save by definition
Poor or rich, most people can find a way to save some of their income for the future. It may not be much to you but giving them the option to access a store of value that grows on average at 200% per year is a revolution for these folks who often have fewer options to grow savings.
You are cherry-picking poor people to suit your argument. Not all poor people have zero surplus income.
Some simply have too little or too insecure surplus income to escape their plight. I for one applaud giving these people more choices for a better life.
This has got to be the laziest rebuttal - think of the orphans!
Those living in poverty, definitionally, have less money than the not-impoverished. A deflationary currency gives value proportional to whomever is holding it. There is no incentive to loan money, as holding this deflationary currency is risk free growth.
Certainly, the government printing fiat could direct those funds in undesirable or corrupt ways, but this is possible whether the fiat currency is deflating or inflating. A currency that is always deflating will be subject to the tyranny of wealth holders, who now have no incentive to put any of that wealth back into the economy, absent a wealth tax or something.
Fiat already has momentum, it can purchase goods and services, which can be used to create value. It can pay taxes. It does not also need to be self-compounding through deflation.
A deflationary currency does not maybe benefit the already wealthy, it directly imparts "real value" proportional to held currency. If you have ideas for a deflationary system that solves this, through wealth taxes or something, I am all ears.
> somehow I don't need to hesitate which one (inflationary, deflationary) I'd rather choose
Because relative to most people, you are wealthy! How are young people supposed to find work in a deflationary system?
I'm sorry you felt my argument to be lazy. Allow me to elaborate. Widows and orphans is a common trope in finance that refers to the most vulnerable members of society, those without the pricing power to keep up with inflation. Typically it means those on a fixed income such as pensioners. These 'widows and orphans' are the worst hit by inflation since high earners can pressure employers for a raise or switch jobs for more pay while the idle rich can keep their assets in inflation-resistant holdings. Pensioners suffer disproportionately - that was my point.
The modern monetary system, which is inflationary, is obviously biased towards wealth holders. This does not imply that a deflationary system would better help the poor and downtrodden. Deflation imparts wealth directly to holders of the currency, directly proportional to the quantity of currency held. Money velocity goes towards 0 as the idle rich lose all incentive to do anything but hold it and watch their purchasing power increase relative to everyone less rich.
You seem to be stuck on the word orphans, let’s use ‘those on a fixed income’ instead.
If you can get past the word orphans, may I ask you to address the core point of my argument?
My questions are:
Why must widows or orphans or anyone have a fixed income?
What is the problem with the government providing subsistence incomes indexed to inflation and letting wealtholders fortunes get inflated away?
How does deflation, which proportionally rewards holders of currency, help those with a fixed income more than inflationary handouts?
There is nothing wrong with the idea except it does not exist. Show me a country where governments provide subsistence income indexed to the official inflation rate, let alone the real rate of inflation. Show me a gov that allows minimum wage to increase at anything approaching inflation. Or show me a traditional bank account that will allow them to save at a rate that keeps up with inflation - It doesn’t exist.
> and letting wealtholders fortunes get inflated away?
and show me a wealtholder who’s fortune is held in cash instead of scarce assets so as to be inflated away - doesn’t exist.
> How does deflation, which proportionally rewards holders of currency, help those with a fixed income more than inflationary handouts?
Watch the bottom 70% of El Salvador’s citizens over the next decade for a real world example. They now get a decentralized savings account denominated in a currency growing at 200% y/y instead of one that is constantly being debased (USD printed 50% of all dollars ever created during the pandemic) - except for crypto no bank account will ever again pay enough interest to keep up with inflation.
No, my argument has always been that inflation disproportionately hurts the poor more than the rich.
You are either misinterpreting my words or intentionally being misleading. Again the ‘widows and orphans’ or those on a fixed income references were simply examples. My argument applies to those on low incomes, middle income or even high incomes.
Only those wealthy enough to live entirely off investments have the potential to suffer a little less from inflation.
I say suffer a little less because even the idle rich suffer from currency debasement - just less than this who are less well off.
Either you don't understand what volatility means, or you think volatility only matters when it's towards the down position. Either way, you're wrong.
Volatility in a currency is not a good thing. Even if some people are making money, other people are losing money due to the volatility. Value stability should be one of the top goals for any currency.
Again, zoom out and the picture looks different.
The US Dollar loses approximately 100% of it’s value per century.
Bitcoin maintains or increases its purchasing power by many orders of magnitude per decade.
While the market rate on offer for Bitcoin at a given moment fluctuates, sometimes wildly, over a multi-year period the value always tends to go up.
This is by design as Bitcoin is the scarcest asset ever invented - giving it the property of hard money which unlike fiat is immune from debasement.
> Value stability should be one of the top goals for any currency.
Per my comment above the US dollar’s value is not stable. It falls by ~100% per century and because of the Fed’s 80 year long policy of continuous debasement the value of US dollars will never be stable over time and will always go down.
By contrast, while Bitcoin is volatile today, as it matures in its price discovery Bitcoin is likely to become more and more stable (read less volatile) in the future.
Imaging how stupid someone would be to generally give advice to “buy some Euro” or “buy some Dollar.”
https://fred.stlouisfed.org/series/M1SL
https://marketcap.com.au/wp-content/uploads/2018/11/WRCurren...
We are in the buildup period for the next currency. What is it we can't be sure, but a world cryptocurrency seems likely.
I'm not really for or against crypto in general. But I do like my bins being collected, and my roads without holes in them - it kind of requires some kind of central governing for this to happen.
If somehow the evidence suggests that growing national debt is indeed a fundamental problem, then maybe some governments will be forced (by voters' will or by peer pressure) to ...
> ... settle for a currency that's out of their control ...
... because it'd remove the ever present temptation for politicians to promise short term gifts to voters that are paid for by devaluation of the currency and by shifting payback into the future.
But even so, would you say it’s stupid to advise a Turk to buy dollars? These past few years, many of them have been exchanging lira for dollars as protection against inflation.
*In practice, the network is struggling to find a true application, and Ether’s utility as a currency is low.
And even advising a Turk to buy dollars would depend heavily on the Turk’s particular situation and would likely mean not buying dollars as an investment but as a hedge against other things.
Perhaps because we have a sample bias towards people who are served adequately by traditional financial infrastructure, and people who are disproportionately preoccupied with blockchain as a potential component of software systems.
As an example, most kids in starting school today will probably have years of experience being their own banker, using apps on their phones, before they ever step foot in place which employs bankers. At that point they may not bother, since the cryptocurrency ecosystem will already provide all the same facilities. This is profoundly disruptive.
Banking is by no means a simple or safe operation.
For example, the disruptive experience you describe happens to statistically nobody. The kids you describe are not being their own bankers - almost all of them are using credit card-backed apps, and even if you only look at the few who use cryptocurrencies at all there’s a very small percentage who aren’t reliant on exchanges which are banks for all intents and purposes.
The only reasons to use crypto are either for speculation, or for trade where traditional networks can't be used - illegal activities, transfer to/from certain countries.