Bitcoin and the dangerous fantasy of ‘apolitical’ money (2013)
yanisvaroufakis.eu
yanisvaroufakis.eu
This (very early / prescient) critique of bitcoin is not casting a harsh enough light on the inadequacy of its design.
But maybe now that the concept of designed and programmable money is on the table people can think of what type of monetary/credit system befits a good society.
Bitcoin it aint and out bizarre private bank money perennially backed by the collective it aint either.
I suspect you need to create a good society first and then decide on a resource/status hierarchy system for it. Trying to do it the other way around is unlikely to work.
Bitcoin was always financial libertarianism. No accountability, no records, and - most of all, but only potentially - no taxes.
Inevitably it turned into Ground Zero for anyone with a scam to upsell.
The people who think cryptocurrency is only for crime are partially right, but not strictly for the reasons they think. Less drugs and more fraud.
No and that's a nasty, nasty surprise when you find out it's not true. There are plenty of ways for big bank customers to claw back payments made to private individuals, long after you or I would consider the transaction settled. And people get in trouble with their banks when they've spent the money and reversing the charges results in your accounts being overdrawn. The closest thing you have to this power is Visa, which is why the little Robin Hood in my head makes me encourage people to use it whenever they can.
There's the old saying, "I'll believe it when I see it."
There's a cheeky variant, "I'll believe it when the check clears."
There's the experienced, "I'll believe it ten days after the check clears."
And there's the jaded, "I'll believe it 30 days after the check clears."
With crypto I guess at least you know for sure where you stand.
Seems like the good old "everything is political" argument.
but politics is just what happens when power interacts in a social context!
...and everything IS social
Also, there is no such "voting on which branch to use", I'm not sure what you are referring to or if you're mixed up with another cryptocurrency. In Bitcoin, the valid branch is the one with the most proof of work. There is no concept of voting.
That's incorrect. Non-mining nodes are passive, they do not cast votes.
> A chain with more proof of work, but that is violating the rules that nodes have formed consensus on, is ignored.
That is correct. Non-mining nodes are programmed to reject invalid blocks... or they can accept them if they want. It's of no importance because what they do has no influence on the rest of the network.
Well you're right in that it doesn't look like casting a ballot in a box, but in practice they very much do "vote" in the sense that they decide on what rules are valid or not. This is what prevents miners from colluding and changing the rules of Bitcoin, the nodes would reject their chain. This is also what prevents developers from introducing a backdoor into the network by releasing malicious code. Node operators can vote to reject a change by not upgrading their nodes.
Inversely, if there is a rule change and the nodes of the network go along with the rule change (by their decision on what to reject or accept), then this is akin to a motion passing. The validity of blocks is not some ethereal thing, and neither are Bitcoin rules written on stone tablets by God. These things are the result of very human deliberation and code commits (by humans).
> very much do "vote" in the sense that they decide on what rules are valid or not.
Yes, they decide for themselves. Their decision is irrelevant and ignored by the network, at protocol level. It doesn't prevent anyone from running modified versions of Bitcoin (in fact, there are tons of those running as we speak). Nor does it prevent miners from mining invalid blocks.
> The validity of blocks is not some ethereal thing, and neither are Bitcoin rules written on a tablet by God.
They are, more or less. I think the last time a hard fork occurred was over 10 years ago for a small bug fix.
Like I was saying, your argument is basically that "everything is political". You are using "vote" in the most abstract and metaphorical sense. Yes, people "vote" for Bitcoin by using it. Just like I'm "voting" for HN by commenting here. That's just not how people typically think of "voting" and "politics". That "vote" has very little in common with the traditional "vote" that is counted and used to reach a decision.
As such and unlike your TV and browser, nodes have been used to influence policy, so I reject your "everything is political" straw man.
> nodes have been used to influence policy
Which policy are we referring to? There is no centralized authority here. Each participant has the autonomy to decide which blockchain to support. If a Bitcoin fork appeals to you, you're free to use it. The only semblance of "politics" that emerges is the debate over semantics, the "true Bitcoin," but this isn't dictated by the protocol. It evolves in a decentralized and organic manner, devoid of any formal political process or voting.
It bears very little resemblance with typical notions of voting and politics. It's only political in the broadest sense of the term, when starting from the axiom "anything involving humans is political". Which dilutes the significance of the term 'political' - a trend that I personally find very irritating, hence my initial snarky comment.
* BIP 141 version bits and BIP 148 as a voting mechanism: https://github.com/bitcoin/bips/blob/master/bip-0141.mediawi... and https://github.com/bitcoin/bips/blob/master/bip-0148.mediawi...
* core developer votes: https://en.bitcoin.it/wiki/Segwit_support
* posturing and maneuvering: https://cointelegraph.com/news/samourai-wallet-intends-to-ru...
> It evolves in a decentralized and organic manner, devoid of any formal political process or voting.
Just because the voting mechanisms are generally informal if we exclude the formal BIP voting process, that doesn't make them not voting mechanisms. I'll grant you that the politics of Bitcoin can be chaotic and hard to follow (this is intentional), but in times of crisis, the obfuscated leadership structure usually emerges from the darkness. Another example is what happened in the 2013 crisis, where light was cast on where the power in Bitcoin truly lied: https://freedom-to-tinker.com/2015/07/28/analyzing-the-2013-... . In this example, a couple devs took charge and had the miners abandon the longest chain.
If all these things are not politics to you, in that they are not specifically about governance, power, or voting, again we'll have to disagree. I am definitely not saying "everything human is political" so again we can drop that straw man.
The world ran on a depoliticized money for thousands of years: gold. This experiment with government money is just over a hundred years ongoing, and really only fully realized since 1971. It would appear to me that it has been an abysmal failure; many countries have experienced hyperinflation, financial instruments have become monetized and bubbles have been pumped full of paper money, peoples savings are 1% of what they were when this all started, at best.
The author gets a whole lot wrong about bitcoin (an algorithm that sends ones and zeroes from one device to another?) and clearly doesn't understand it. But that doesn't matter; this is a critique of the larger "fantasy of apolitical money", not a technical critique of bitcoin itself.
What is it about an "industrial society" that requires a government to control the money? This is glossed over, but is at the crux of their position.
It ran on credit, at least for most people for their day-to-day life:
* https://en.wikipedia.org/wiki/Debt:_The_First_5000_Years
The very first instances in the written, historic record (clay tablets) were of credit:
* https://www.sfu.ca/~poitras/jesho_UR_14.pdf
Entire civilizations (e.g., Incas) ran without currency (they used gold for ornamental jewelry, not transactions).
> many countries have experienced hyperinflation, financial instruments have become monetized and bubbles have been pumped full of paper money, peoples savings are 1% of what they were when this all started, at best.
Please list these "many countries".
And of the ones that I'll bet you will list, they have specific causes:
> There are differences in details and emphases, but the basic story of outside coercion, losing a war/civil war, internal corruption, incompetent/bad economic education/bad policies on banking/currency, elite minorities clinging to power, foreign denominated debt, collapse in real production etc. are the same in Weimar and Venezuela as in Zimbabwe.
> As always, the “printing” is the result, not the cause.
* https://clintballinger.com/2021/01/12/the-myth-of-hyperinfla...
And there have been various 'incidents' ("bubbles) during the Gold Standard era without fiat / 'paper money':
* https://en.wikipedia.org/wiki/Panic_of_1873
* https://en.wikipedia.org/wiki/Panic_of_1893
* https://en.wikipedia.org/wiki/Panic_of_1896
* https://en.wikipedia.org/wiki/Panic_of_1907
And in the pre-Gold Standard (<1870) there was the Tulip bubble, South Sea Bubble, canal mania.
> What is it about an "industrial society" that requires a government to control the money? This is glossed over, but is at the crux of their position.
It has been found (in the US) that it helps with financial stability, especially post-Fed creation:
* https://www.theatlantic.com/business/archive/2012/08/why-the...
Yet Bitcoin's emission is quite unlike that of gold. Every next generation gets to mine 32x less bitcoin. Over gold's millennia long history, every generation mines a roughly similar amount of gold as the next.
It’s true that he doubled down, but I also suspect he anticipated what actually happened, which was that the price of bitcoin spurred custom hardware, which ramped up the capacity to mine coins past what Moore’s Law would have predicted. It also ruined PC gaming for the lower- and middle-middle class for a few years.
Whether that’s prescient or just an artifact of a logarithmic drop off in the available key space is anyone’s guess. I don’t fix problems I don’t see as problems that often, and most of my peers are even worse.
What do you mean by that? The key space is either 2^160 for hashed keys, or about 2^256 for unhashed or Schnorr keys. The number of keys appearing on-chain is not limited by emission but by the block size limit of 4M weight units (each new key contributing a few hundred weight units).
Keys discovered versus keys remaining is a logarithmic curve.
(more precisely you might be saying how it happens that which I'm asking if that's what you're saying happens.... I mean I'm asking my question because I'm a bit confounded)
Murdered Quote Warning: One might as well seal paper money inside bottles and bury them in disused coal mines for people to dig up.
Bitcoin is exactly that. Even better you don't even need to bury the stuff.
One of the big risks with fiat currency is that your government might do "something stupid" or "something corrupt" with monetary policy and cause the fiat currency to crash in value.
The most popular cryptocurrency (Bitcoin) has a monetary policy that's set in stone. You're protected from an incompetent / corrupt government who either accidentally or deliberately break the money supply.
That's what bitcoiners mean by apolitical.
The article then goes on to point out how the monetary policy of bitcoin is not very good monetary policy. He's right when he says this, but you can only have good monetary policy if you've got a competent government. A lot of people don't have a competent government.
If bitcoin was literally worth 0, any one company could decide to make money on it by using Bitcoin as their personal stablecoin. That would be enough to facilitate payments: one person buys BTC from the company above the fixed price, the other person sells below the fixed price.
But thanks to decentralization any other company can jump in and start doing the same, compete on the spread of prices.
If the price of BTC is too low at a certain time, all of available BTC gets tied up in transactions. There is more demand for BTC-minutes in that hour than there are BTC-minutes. So the companies can temporarily raise the price when they see it happening.
This makes the price of BTC float above the peg depending on the amount of BTC available for sale and the load on the Bitcoin-as-payment-mechanism network. And if the peg is low enough, it is never really reached.
If this theory is close enough to truth, then the instability of Bitcoin really is fundamental: less of a design flaw, more of a (rather severe) trade-off.
Though I wonder if it's possible to construct a stable derivative based on future estimates of the load on the network: a unit that can be used to compare prices of BTC-minutes at different times in the future.
- A globalized world needs a global money. In recent times, this has been $USD. $USD beats gold because it is more portable.
- Money is too large of a concern for any government to do well. There is too much at stake. Too much incentive to do be a poor steward. Too much buddying up to the money printer.
So what's left? Gold and Bitcoin. Gold for deep wealth and Bitcoin for global commerce.
[1] No form of private property can exist without those things.
These two issues are surmountable by other cryptos and unrelated to the idea of an apolitical currency.
He goes on to describe the circumvention of the natural constraint of the gold standard with the rise in derivatives of those assets but that too does not seem to be a nail in the coffin for an apolitical form of money.
Although maybe the existence of the "bitcoin aristocracy" at all points to the core of the problem with any form of currency we might create.
It's the only way to make a participative progressive culture rather than a cynically exploitative, regressive, and oppressive one.
Love it or hate it, there's a whole lot of much more interesting available data and information, and arguable insight, on the issues raised here -- especially the former of "inflation" and so forth;
E.g. if the world wants what crypto has to offer, the limited deflation and/or environmental waste issue has already been solved by other cryptocurrencies, with significant activity and years under their collective belt to prove it.
Contrast with Ethereum, which with its Proof of Stake switch does give some level of control to Ethereum holders.
Which is to say, I see more reason to trust Ethereum to "work right, as stated" precisely because it's just federated enough?