Why Bitcoin is not a socialist’s ally (2020)
diem25.org
diem25.org
(Even if the control isn't formal, owning a large percentage of a finite "thing" still counts as control, if the "thing" is the unit of exchange for people's work, property, etc. A BTC economy would depend on what the large holders decide to do with their portion).
With Bitcoin, the community that controls the money supply is not at all democratic; it is the early adopters with large holdings that carry all the weight.
From the perspective of a non-early adopter, the Bitcoin world would be even worse then the central bank and government world. Banks can be regulated and governments can be thrown out. Bitcoin would create a tyranny of "hodlers" protected by intractable mathematics.
I dont think currency should be democratic, it should be impersonal and outside the whims of any group of people. Gold is like that. Cryptocuyrrencies may reach that stage after they solve all their bugs and their source code becomes fossilized.
People who advocate for gold... wait for it ... have gold ! It's the same as bitcoin.
The best currency is worthless and fleeting and represent work effort today and must be quickly converted back to work. Invest in schools to pay for a productive future that can afford your retirement, instead of clutching your precious metal.
If gold (or some other precious metal) is such a fantastic currency for a modern economy to use, why are no modern economies pegging their currencies to gold? Why didn't Nixon keep the dollar convertible to gold?
Nothing which responds to interactions with humans operates outside the whims of any group of people.
Agreed, this is something to fix. The current crypto bubble is driven by clueless hype
> Nothing which responds to interactions with humans operates outside the whims of any group of people.
Science does and so do mathematics.
Gold is not like that at all. In the days of gold backed currencies, owners of gold mines had tremendous power to manipulate the market at their own whims.
The mechanism according to which Bitcoin upgrades has nothing to do with decisions of whales or democracy. Read about how soft/hard forks and UASF specifically works.
In a Bitcoin-centered economy, a relatively small community of "whales" would have de-facto control of the supply, because the supply available for circulation would depend on what they decide to do with their holdings.
The plan for "parallel" currency of IoUs was made so that Greece could continue functioning in case European Central Bank forced banks in Greece to be closed.
What Varoufakis doesn't get is that he has no control over the future direction of Bitcoin. It's in large part an escape hatch for those who are fed up with technocratic debasement of money. Neither Varoufakis nor anyone else will be able to prevent people from using Bitcoin. They'll try, but lose enormous credibility when they fail.
Those fed up with technocratic debasement of money, and organized crime. I just read here [0] that Bulgaria is the second largest owner of Bitcoin, after Satoshi Nakamoto, due to "a crackdown on organized crime by the Bulgarian law enforcement in May 2017 resulted in the seizure of a stash of 213,519 Bitcoins".
Same article claims FBI is number 4 owner, after "they brought down Silk Road, the infamous dark web drug bazaar, and seized 144,000 Bitcoin owned by the site’s operator Ross Ulbricht, better known as, “Dread Pirate Roberts”, in 2013.
I do not know how correct this information is, though, so take it with a grain of salt. In any case, it makes one wonder how much more cryptocurrencies are owned by organized crime.
[0]: https://usethebitcoin.com/top-10-richest-bitcoin-owners/
https://www.reuters.com/article/us-usa-bitcoin-idUSKBN0F7199...
I can’t imagine a world without fiat currency, for the simple reason that governments operate in a deficit. A world without fiat currency would imply that all government workers are paid with crypto, all roads are funded with crypto, the military is funded with crypto, etc. And since this currency is limited and deflationary, this would imply that the only people who can fund these governments are the crypto whales. This sounds like a dystopian nightmare.
Further, it seems obvious to me that many of the decisions made by the Ethereum community are only intended to benefit wealth hoarders and early investors (PoS and the deflationary aspect). Their decisions don’t seem to have the larger global community in mind, at least in an authentic way. They seem to see it, simply, as a store of value.
I agree that it is unlikely that cryptocurrency replaces fiat currency entirely. What is more likely is a return to fiat money backed by an asset. A Bitcoin standard as opposed to the (relatively) recently abandoned gold standard.
Fiat currency as the world is experiencing it now is just as grand and uncharted of an experiment as Bitcoin.
Politicians not being able to fund wars using a money printer is a good thing, not bad.
Governments can borrow money with or without fiat currency, so I don't know where you got the idea that a crypto-currency would stop governments from borrowing.
Since the lender would know that they are not guaranteed to get their money back at the expense of the borrower country's population.
The endgame is forcing governments to be more fiscally conservative and generally less bloated.
https://nypost.com/2021/10/26/bitcoin-ownership-concentrated...
If that cabal would require hundreds of groups with no common cause on every continent, then no problem. If it's just a handful of individuals who could make that call, that's a potential problem.
And we just don't know which end of that spectrum the current hash rate distribution actually looks like.
Admittedly, there's no reason a private investor would want to tank their holdings like that I can think of. But, if significant hash rate is being held by state actors as some have suggested, economic warfare comes into the picture.
Even if the cabal of miners decided to make a change in the protocol and print themselves bunch of free coins, those mined blocks would get rejected by the full nodes, which compose the Bitcoin network and validate all the transactions.
Here is a hypothetical situation for consideration (please shoot holes in it!).
The year is 2105, Bitcoin is the defacto world currency. Everyone is paid in Bitcoin and all transactions are performed in Bitcoin. Democratically elected world governments control the majority hashrate since they have decided that it is too risky to allow private individuals to control the network.
A major financial crisis emerges in which prices of goods relative to Bitcoin are on a severe downward trend. Individuals realize that if they simply delay purchases, their own purchasing power will increase - further reducing demand for goods and services thus further decreasing price. Since businesses cannot make a profit in this situation, workers need to be paid less continuing the deflationary cycle.
Democratically elected world governments decide that inflation is necessary in Bitcoin in order to avoid an exceedingly long painful and unnecessary economic depression. World governments work with Bitcoin developers to start rewarding miners with 20 Bitcoin per block mined thus devaluing the currency. 99.9999% of citizens of the world agree with this move. After the financial crisis is abated, world governments determine that a 2% inflation rate should be built into the Bitcoin in order to avoid such problems in the future and virtually everyone is happy with this.
Is such a scenario impossible?
So unless all the world governments decide to make it illegal to mine the old chain, it wouldn't work.
Coinbase, BitGo, Bitmain all tried to force Bitcoin to use larger blocks because that would've gave them more power, and look where we are.
Not sure how you would determine how to contact all the full node owners.
Does anyone know about bubbles under the gold standard? Seems interesting and is a piece of history I've never read about before.
- Panic of 1819
- Panic of 1837
- Railway bubble ~1840
- US farm bubble and crisis (1914–1918, crash 1919–1920) prices rapidly escalated during WWI and crash after war's end . - Roaring Twenties stock-market bubble (US) (1921–1929)
- Florida speculative building bubble (US)(1922–1926)
fully unchecked capitalism
Socialism is (at least in theory) about regulating the market in a way which puts social aspects in the foreground to maximize benefits for the society as a whole even if it's at the cost a a few.
This requires regulation.
Cryptocurrencies like bitcoin are all about avoiding regulation.
Also in cryptocurrencies in the end the wealthy have all the power, because they can use the wealth to dominate the mining and with this can control which changes are accepted by a blog-chain and which are not (this is a bit more obvious for PoS chains, but applies to PoW chains too).
Socialism is also about every natural person in society (theoretically) having the same power, which is in direct conflict with how modern crypto currencies work.
So IMHO crypto currencies are an aspect of hyper capitalism pretending to be something else.
Yes, exactly! The "problem" cryptocurrency solves is people with wealth having too many restrictions on that wealth.
I think blockchain technology is super interesting, and insofar as cryptocurrencies are an implementation of that technology they're interesting, but I'm very much not in agreement that they're solving any real problem that needs solving, and in fact the concept of cryptocurrency as money actually exacerbates an already bad situation. If one is worried about a small number of economic elite having undue influence over society, crypto is part of the problem, not the solution.
There are more, though these two have helped me.
*like e.g. removing videos of a rape used to blackmail a innocent person.
I don't believe that you can magically/blindely solve problems of society with technical solutions.
That's a red hering argument. (In my opinion.)
Tools are designed for a use case.
Tools are also widely used for some (potentially different) use case.
As such tools are often not amoral at all.
A assault riffle is designed to kill people and potentially many of them (self defense per gun doesn't require killing). As such it's not a amoral tool. Even through you might end up using it in a "good" way, or as "hobby" it's design makes it fundamentally a "weapon for killing, not self defense".
Through this is kinda getting off-topic.
Because whatever moral you want to attach to tools is irrelevant for aboves discussion.
Crypto currencies are a tool for unchecked Kaptialism, which has nothing to do with moral nor does it mean others can't use it for other purposes.
Seems we both can agree USA-funded murderer Lon Horiuchi did an evil thing when he pulled the trigger and killed an unarmed mother using an assault rifle.
https://lmtribune.com/northwest/fbi-sniper-is-at-the-center-... 'which Horiuchi said was aimed at Weaver's friend Kevin Harris, instead killed Weaver's wife Vicki. It then hit Harris, lodging in his chest.'
I mean that's the whole point of crypto currencies.
Both for good and bad.
Assuming that a tool is amoral just because it, theoreatically, could be used to act in a morally justified way is just cherry-picking situations in order to have them fit your worldview.
This is especially true for countries without a constitutional right for free speech or such which made the mistake to only protect free speech from the government but not extremely powerful non-government entities.
Furthermore putting checks on capitalism doesn't mean the government is not directly controlling the money (I mean it's not the same as e.g. communist style planed economy).
To make thinks worse as long as a government still has any power they still can undermine freedom of speech even in mostly unchecked capitalism as they can subtle motivate the extremely money-rich entities such a system will produce to use there money to undermine free speech. Now some would bring here the argument that the markets self regulation will fix that, but I think it should be obvious this doesn't really work for many various reasons (like e.g. DRM, or just the simple fact that everything is extremely complex where it's close to impossible for a consumer to e.g. reliable not buy a direct or indirect nestle owned, to just name some examples.).
[+] https://en.wikipedia.org/wiki/Subsidiarity_(Catholicism)
But Bitcoin distribution is so heavily tilted toward the initial years that it's much more uneven than fiat. And other cryptocurrencies are worse yet, especially those with huge premines (which include all coins lacking PoW), concentrating all the wealth on its creators.
cryptobros have an obsession with inflation and rates side of government regulation and they seem to be completely oblivious to the credit system side of regulation - the two-tier private/central bank etc. maybe because they actually have no clue how the current system works)
so besides the inflation/deflation challenge I have yet to see any proposal how one could have stable decentralized unregulated credit markets and would be quite interested if people have serious relevant references.
The point of my comment is that cryptobros are largely financially illiterate and when an economist undertakes the thankless task to discuss the possibility of a "cryptoeconomy" its important to make a list of all the missing parts
https://twitter.com/yanisvaroufakis/status/13015406941594869...
Unless you're talking about blocks/hashing power. But that's consensus, not governance of protocol.
If people haven't read it, I highly recommend reading The Tyranny of Structurelessness, even if the political context of its writing is uninteresting to you, because the lessons are deep:
https://en.m.wikipedia.org/wiki/The_Tyranny_of_Structureless...
And if course, there's value in the critiques of it too. Libertarians can learn a lot from anarchists attempts at building social structures that don't have rulers.
Vitalik wrote about some alternatives[2] on his blog, such as proof of humanity, proof or participation or staking based solutions primarily but most significant projects are still using coin-voting.
Users running bitcoin nodes doing transactions validations, not miners creating transactions.
With USD, the long-run target inflation rate as stated by the Federal Reserve is 2% per year. Seems small, some would argue - a small price to pay to avoid the dreaded risk of deflation. (Side note: why is deflation expected and approved of in computers and electronics but not healthcare or higher education?)
What if I told you that the average worker who works for wages for 40 years, will lose 40% of the value of their lifetime earnings if inflation was 'only' 2% per year? What if I told you that the current inflation rate according to official sources is over twice the target inflation rate and all signs indicate it will remain elevated for years to come?
What if I told you that the real problem with fiat currency is all the trust required? What if I told you that as a worker you now have an alternative to store a portion of your wages in a currency that is engineered using properties of digital scarcity, incredible security, and ingenious game theory to preserve, store, and even grow the purchasing power of your savings at a long-term rate of return that greatly exceed the rate of inflation or the performance of even the riskiest stocks.
Why is it bad for workers to have another option for storing their savings, an option that doesn't leak value due to manipulation by centralized actors? No one is forced to use Bitcoin. Bitcoin is a choice. IMO Bitcoin is the better choice. YMMV.
That's... not deflation? It's literally building wealth. Cheaper computers means more people can afford them/ people can afford more of them. This is a good thing! Cheaper healthcare (or higher ed) would also be a good thing. But for it to be a good thing, you would have to make it objectively easier for more people to access the same-or-better-quality healthcare or higher ed! If by "deflation" here you simply mean "there's the same overall quality and quantity of higher ed, but older people (who had time to hoard money) can access it a lot easier, to the detriment of young people"... that would clearly be a bad thing.
Money is not like that, though. There's no economic advantage to be gained from people hoarding money - they're supposed to be a medium of exchange. If money increases value, you're not spending or investing them, which means less economic activity, hence less wealth for everyone. Money is just a vehicle, never an end-goal.
Tl;dr: wealth is, largely speaking, "more and better stuff for everyone!". More and better computers, electronics, higher ed, healthcare. And money, too, I guess? Except that "more money" is typically associated with "inflation" - which shows you that money doesn't really count, it's just a vehicle.
Isn't inflation/deflation about purchasing power? I.e. how much housing you can buy for a month's salary (for example), how much computing power, how much food you can buy? If you hoard money you can buy more computing power down the line. Isn't that "deflationary"? While if you hoard money and buy food down the line you'd get less of it. So food would be "inflationary".
No, that is the exact opposite of inflation/deflation.
Inflation/deflation are about nominal prices of goods and services.
If you want to talk about the price of a good in terms of a real quantity, then that is not measured by inflation or deflation and you need to specify what your measuring stick is, whether ounces of gold, or gallons of gasoline, or a median hourly wage in a specific labor market. There is one special term, called "real" prices, where the measuring stick is a weighted consumption basket, but that too is not going to represent purchasing power, which suggests deflating by either household income, or wages, or wealth.
USD is managed by the federal government, which despite all its flaws, is still a democracy.
> What if I told you that the average worker who works for wages for 40 years, will lose 40% of the value of their lifetime earnings if inflation was 'only' 2% per year?
You'd be lying. The average worker spends the majority of their earnings immediately meaning that inflation doesn't cut into them, and puts most of the rest towards assets that track inflation (houses) or exceed inflation (stock market / retirement accounts).
> You'd be lying.
Nope, not lying - just calling out the truth that the government systematically steals the purchasing power of the common man by means of inflation, officially at the rate of 2% per year, but I believe the rate is actually much higher.
Currently the official rate is 6.4%, so over 3x the target rate. I’m curious how anyone could see this situation and not be concerned for the future. See 1971 Cost of Living for example https://imgur.com/3YApK5i
Bitcoin fixes this.
how did you come up with this number? rational people don't just accumulate a big pile of cash over forty years. to the extent they have a surplus that doesn't immediately go towards expenses, they purchase assets.
by the way, I don't think it's "bad" that crypto exists as an option. having options is great! but I do think you'd be a fool to park an amount of money that matters to you in crypto.
Tell me why is it, in a functioning economy, that the only option for wage earners to stay ahead of inflation is by risking their savings on volatile stocks or real estate?
Why is it not possible to save conservatively in a bank while staying ahead of inflation? In my opinion it is by design because it is easier for governments to steal wealth by inflation than it is by taxation.
Inflationary monetary policy is a scam designed to steal generational wealth. Bitcoin fixes this.
I'd point out that this was true only of workers who stored all their earnings over those 40 years in cash, and approximately 0% of workers do this. The actual average worker spends a portion of their income pretty quickly on goods and sticks savings into some combination of pension, savings accounts and a house.
> Why is it bad for workers to have another option for storing their savings?
Because "workers" aren't the people with vast reserves of wealth, they're the people who are paid by people with vast reserves of wealth. Make the vast reserves of wealth a zero or negative sum game, and they'll store that wealth in deflationary currency instead of businesses that generate less revenue each year, and the workers will find that their ability to get paid goes down every year.
So, to be able to save, workers are forced to buy real estate that they don't need, making it less affordable for people who actually need to buy a house or get exposed to stock market risks.
All these problems caused by absence of hard money.
No, the average worker definitely isn't forced to buy more houses than they live in :D
I mean, it's always been obvious that the "lack of Gold Standard is the real reason workers are poor" is an astroturf movement by the ultra rich who have successfully lobbied for tax breaks for the rich and elimination of worker protections to blame something else [which removing would further benefit them] for the logical consequences of their actions, but the complete failure to understand what an average worker actually does with money is particularly amusing in this subthread. Strong people who don't work for a living cosplaying people who do energy here...
Since falling wage levels literally are deflation it's a bit hard to argue with a straight face that what the workers really need to be better off is a good old dose of deflationary currency.
And you can call "lack of Gold Standard is the real reason workers are poor" an astroturf, but it's something that actually makes sense to me when I look at the arguments.
If it "makes sense to you" that the lack of Gold Standard is the real reason workers are poor, it probably helps to consider that workers were much poorer for the vast majority of human history with a Gold Standard...
That doesn't tell much. Anyone was much poorer for the vast majority of human history.
How do you explain the wealth inequality trend change starting from 1971? https://wtfhappenedin1971.com/
But obviously the people who advocated the tax cuts for the rich in the 1980s are highly, highly motivated to pretend it was leaving Gold Standard several years earlier that did it. Not least because going back to a gold standard would allow them to make that gap even bigger - the 1% could HODL the 30% their wealth in risk free, liquid, appreciating coins instead of having to take actual risks and create actual jobs. But the deflation that preserves their wealth as they withdraw from funding productive activity is - quite literally - everyone else's wages and sales revenues going down.
However, I can still look at those charts and say that the gold standard does not harm the poor the way you imply it does.
The original discussion was concerning the insane fantasy that the US economy would be better off backed by a deflationary cryptocurrency than the US dollar.
And, the fact that an argument makes sense to you is a really poor response to an argument telling you why your position is wrong. (Of course, calling it an astroturf isn't much of an argument against it, either...)
Lack of a gold standard means inflation can happen. Is inflation why workers are poor? It's part of the reason, and it works this way: Inflation happens, then later workers' wages go up. The price increases come first. That makes workers poorer to some degree.
But workers are still pretty poor during periods of low inflation. Why? Because they aren't paid enough. And why is that? Lack of unions, lack of individual bargaining power, greedy owners, lack of ability to produce enough value to be worth more. (I think that all of the above are true at least to some degree.) Which of those does the gold standard fix? Does it create unions? Does it give individual employees more bargaining power with their employers? Does it make owners less greedy? Does it give workers the skills to do more valuable things? No, no, no, and no.
So the gold standard won't really fix worker poverty.
And of course I also don't think that once gold standard is established, there will be absolutely no poverty.
I would argue that it is less about the lack of a gold standard and more about the lack of a hard money standard that cannot be debased by centralized powers such as governments and central bankers.
Bitcoin is an excellent substitute for gold as hard money since it also cannot be debased (i.e. inflated) by central actors. Debasement (money printing) steals the value of the purchasing power of the worker and gives it to those closest to those in power via the Cantillon effect.
Bitcoin is also much more easily verifiable than gold. There is no such thing as counterfeit Bitcoin. Either you receive valid Bitcoin on an address that you access through a wallet that supports the Bitcoin protocol or you don’t. No need to worry about an assay to ensure that your gold isn’t actually Tungsten.
The fact that there is no option to save an enjoy positive inflation-adjusted returns without taking on market risk is an indication of what a scam the current system of fractional reserve banking and artificially manipulated interest rates is.
> Because "workers" aren't the people with vast reserves of wealth, they're the people who are paid by people with vast reserves of wealth.
Really? Workers have less wealth than rich people so it’s okay to steal their wages via inflation? /s
Please explain your reasoning further.
No, workers have less wealth than rich people (no wealth, in the case of a sizeable fraction of the population)so it's not OK for rich people to steal their wages by getting "positive inflation adjusted returns without taking on market risk". I mean, where do you think "risk adjusted returns without taking on market risk" come from? They come from other people doing more work for the same cash payment.
It still isn't clear to me why you would try to justify a system that doesn't allow an average wage earner or pensioner the mere possibility of earning a positive inflation adjusted (not risk-adjusted) return on savings?
Why are risk-free inflation-adjusted savings options for the working class a negative thing? That's all Bitcoin really is, on a long-term basis for most people.
Well maybe they should? I mean it is a real measurable cumulative effect of 2% inflation compounded over 40 years. It may not be convenient to mention this negative impact of a cheap money inflationary policy, but it is important for us to understand the reality of the situation.
Those who claim that ‘deflation bad’ have only marketing materials from the FED or thought experiments by traditional economists to rely on. Bitcoin is giving us a real-world experiment that allows us to understand what time-preference means in a deflationary currency.
Will it really be the catastrophe that the central bankers tell us or will life go on? Or will offering the public a new option - a money designed to preserve and even grow purchasing power over time?
What if it allows wage earners a new option to consume now or save and consume later, while enjoying the benefits of compounding and the time value of money, one that isn’t manipulated by central bankers to ensure that there isn’t a bank in the world that will pay interest on a savings account sufficient to keep place with inflation?
What if this new option provided a disruptive new option that shifted us from a mass consumer economy - destined to destroy the planet - into a saver economy, where consumption is deferred until it is required.
Instead of shopping till we drop, we as society could save for a more affluent future, build epic projects that span generations instead of always thinking so short term.
Again, Bitcoin fixes this.
Once you gain the power to debase the currency on demand, it lights a fire under people's behinds-- I've got to turn those dollars into goods and services now!
There are definitely real-world examples of currency with an explicit expiration date or that required maintenance fees (i.e. Alberta's Prosperity Certificates) to boost the circulation rate.
I suspect the problem is that we're stuck with the current economic machine on a high level. We don't have facilities to keep the population fed and housed without the side effects of a lot of consumer spending churn.
If you had a partially planned economy to deliver those basics, then you could switch to a harder currency, because an economic slowdown wouldn't head to avoidable mass starvation or homelessness.
> If you had a partially planned economy to deliver those basics, then you could switch to a harder currency, because an economic slowdown wouldn't head to avoidable mass starvation or homelessness.
This is pure speculation. Luckily we will see the experiment play out with Bitcoin over the next few years. I hardly believe it will lead to mass starvation or homelessness, though the Fiat standard we are currently on already has led to both.
>In other words, I shall argue that Bitcoin is not fit for purpose under capitalism, or as a vehicle toward transcending capitalism, but something like Bitcoin will characterise monetary systems in a future world free of private banks and share markets.
Wow the open letter he is responding to is a socialist who believes bitcoin is a good idea for socialism?
Bitcoin is literally the antithesis to socialism. It seems clear to me in this article that Yanis knows this. Greece didn't get control over the euro. They couldn't print lots of money to generate significant inflation to hide their debt. Socialist governments basically dont function without heavy inflation making their people poor.
Something that has never happened in history is a fiscally conservative balanced budget socialist government with fully controlled inflation.
I agree, but the parent poster does have a point. There are places where the economic situation has deteriorated to the point that using Bitcoin can solve some problems. Some things are worse than Bitcoin, but it's a rare phenomenon.
Of any network that exists over the internet, Bitcoin is the least elitist. Participation is permissionless; anyone can spin up a wallet, and it requires no identification. Transactions are borderless, code is open source. No one can prevent you from sending/receiving at a protocol level.