The gaslit asset class
blog.dshr.org
blog.dshr.org
Of course Dropbox is dumb when rsync exists. Of course og Twitter was dumb when group sms existed. Of course Bitcoin is dumb because...(waves hands in all encompassing disbelief). Wrong every time.
It doesn't pay to be the 'smartest guy in the room', as a figure of speech. It pays to be able to figure out how the everyman will act, no matter how much it pains you. And maybe those people who do are the real 'smartest people in the room.'
But with Bitcoin, even with the benefit of hindsight, I still don't get it.
Socially:
Some people don't trust governments to handle one of the most powerful collaboration technologies ever invented (money). All financial systems before Bitcoin were government controlled. Some have behaved in a trustworthy way, many have not. And over the longer term they all tend to mess it up eventually.
So these people set out to build an alternative that they believed governments couldn't control.
Technically:
The interesting key advance that made Bitcoin interesting and successful was coming up with an algorithm that solved the problem of getting parties that don't trust each other at all, to collaborate on maintaining a global ledger to everyone's benefits, without them having to even know about each other.
This is already a feature of money (I don't need to know about you to have indirect financial ties to you) but was not true of the financial system itself until Bitcoin.
Company scrip, community currency, hawala have all existed for centuries.
Also Bitcoin is also government controlled. It lacks the anonymity required to protect participants making it trivial for nation states to influence. And it does nothing to prevent the centralisation of capital that causes so much manipulation in traditional currency systems.
> And over the longer term they all tend to mess it up eventually.
Over the long term the probability of failure of all systems is 1.
All of these have the problem of centralized and permissioned issuance, where one entity can arbitrarily inflate the supply without the knowledge or consent of others.
> Also Bitcoin is also government controlled
In what way?
> It lacks the anonymity required to protect participants
This is false and does not make it government controlled. I’ll concede that there are many ways for one to lose privacy when using Bitcoin though.
> And it does nothing to prevent the centralisation of capital
The ‘centralization of capital’ isn’t an issue Bitcoin aims to solve. One of the big problems Bitcoin solves is the unjust accumulation of capital via arbitrary issuance (IORB, RRP, loans via newly created bank deposits, etc.)
It’s considered a security; a representation of value for sure. Move it around all you want until you’re blue in the face.
But money still has to come out of an exchange and through some sort of bank. So it’s all a shell game that’s decidedly not anonymous or protected at all.
That’s why so many have concluded that crypto is a scam; we might as well be smuggling Egyptian grave goods.
Which is great when applied to rural areas of underdeveloped countries. But realistically it's more about financial infrastructure for criminals, outcasts, scammers and rich people in counties with strict financial controls
Bitcoin is completely useless as a currency since its value does not decline with time, thereby making it an investment vehicle instead of a currency. An asset can't be good at being both a medium of exchange and an investment. Only criminals use bitcoin as currency, and they do it because the alternative for them is moving cash around in suitcases.
It's neither over-logical nor "smartest guy in the room" to equate Dropbox with rysnc. Instead, it's a category error.
Consider that rsync syntax is basically : rsync <src> <dst>
Before that command is run, that "<dst>" has to exist somewhere that's reachable by all client devices that want to see the same files. That means creating that "dst" target such as arranging a $5/month VPS at Hetzner, or a self-hosted NAS at home with Tailscale/CloudflareTunnels VPN, etc.
Dropbox takes care of the "<dst>". rsync does not. That makes a profound difference in usability for non-techies.
(One could use rsync only as a peer-to-peer sync between client computers with no "server" but that doesn't work well for a 1-to-many file sharing setup to facilitate a "Single Source Of Truth".)
Interesting cases, thanks for sharing. I didn't know what real-life inspiration the movie "Rain Man" came from. However, the two people seem to be worlds apart socially. While Peek seems to be extremely "stunted" in his social development, Flansburg appears to be coping well with his position as a speaker, which I always thought to be rather unusual for people with autism spectrum disorder.
One of them is in the class of "if enough people believe it, it's true", the other one is actually subject to logic.
Twitter/Dropbox offer more convenience to people: Bitcoin offers _less_. That's why people are using Bitcoin for two things: crime and speculation. People aren't buying houses with Bitcoin, they don't use it as a store of value (because it has extreme deflation), and they aren't doing their books using BTC as the currency.
What features/improvements does Bitcoin offer over the financial system? So far, the differences to me seem to be
- It's easy (or at least possible) to get a bank transaction reversed by going to court.
- If you forget your password, your bank can reset it and you don't lose all your money.
- When you transfer money using your bank, it arrives immediately in the recipient's account. When you transfer money using Bitcoin, it takes hours. The bank checks that the name matches the bank account number beforehand.
- If you get hacked, and the hacker tries to steal all your money, your bank's fraud detection system will kick in and stop this.
- Banks are regulated, and the currency is stable. This means that you can quote a price in USD, and do your accounting in USD, whereas very few people do their accounting in BTC.
- People have faith in fiat currencies because they have state backing, which means that the central bank will intervene to maintain price stability.
It is also a dump speculative asset. I'd even claim Tesla stock is better as speculative asset, at least it may be a positive-sum game.
Caveat: I am one of those people OP mentioned.
{{currency}} is a negative-sum game. You can only get out what others put in and {{entities}} continuously have to {{maintain infrastructure}}.
An actual argument could be derived from the last point by asking whether the cost of maintaining the infrastructure is worth it. This is something the market decides.
It's common knowledge that one shouldn't pay back a low-interest loan faster than is expected, because it's better to have liquidity or to invest.
But it's real easy to look at the past and say "oh I could've invested in that". It's also very easy to look at success stories and forget that poverty is widespread and the poor don't talk about their misfortune.
Video games are interesting because you can count how many times your character dies before you actually manage to finish the game.
Others who were very early (source: I was there and interacted with them) were extremely wealthy investment bankers with a track history of being able to make money, some kinds of cryptographers (Hal, Adam, etc) and others who were ultra-competent, often inventors of new technique in their own right.
It's a well-studied but unfortunately not particularly well-known result that the people most interested in Bitcoin are at the two ends of the expertise spectrum—highly highly financially competent, and financially incompetent people.
You will never hear from most of the highly-competent people because they also recognize that being noisy about owning Bitcoin draws a giant target on their backs. E.g. try and find ArtForz now.
I would offer that the late and very great James Randi's often-repeated comments on ultra high-skilled people being some of the easiest to trick are probably illustrative, and my personal opinion at the moment is that many of these people have been tricked long ago into thinking that Bitcoin is something bad.
We may not get rich, but we may miss out on becoming poor, too.
But it is important that you keep thinking that you are the smartest man in the room.
Why would cynics be poor? The OP mentioned "techies", many of whom have jobs paying 6 figures a year.
Sceptical people will be grounded by what we know to be true. They will explore new ideas but will not be swept up by them. We need people like that or we'll waste our time on flights of fancy. But we need the irrational optimists to explore new ideas too. It's a classic exploration vs exploitation trade-off.
The Cynic has enough if he has his cloak and found some food in the garbage can. He feels like he has enough. You might feel like that's not enough.
Conversely I might think the richest man in the world (by net worth) has enough. He feels like he needs more.
But it could be this too in some cases.
Some people do things unless they find a reason not to but so a skeptical person will only do things if they find a reason.
People who really feel they have enough might not see any reason to spend their time or effort placing bets, even on things they think are probable. But I don't think many people think that way.
Quite the opposite: it takes a lot of strong will and risk to talk against a hype. A kind of risk-affinity that unluckily rarely makes you rich. :-(
Same for friends living in high inflation LatAm countries - crypto stablecoins are a way to escape rampant inflation
They want cryptocurrency because it helps them avoid taxes and trading fees.
In a lot of these places, things like Paypal don’t work. So you have to send wires. You get an awful exchange rate + fees for sending it. And they get an even worse exchange rate when receiving it
You easily lose 5-10% spread for every payment
And the “avoid taxes” part is, again, heavily western biased where for all their ills, the governments actually work for the people. I say as someone from a third world country - taxes are largely siphoned off by politicians and bureaucrats. Everything from public schools and hospitals and roads are unusable. Avoiding taxes is perfectly morally correct if all it does is feed an oppressive machine
Even the volatility of BTC really doesn't seem like a dealbreaker when you've seen your country's own currency lose 50% of its value in a year.
My best idea, that probably gives governments too much credit, is that it's pretty useful to have a transparent record of illicit money flows, and that you can be OK with a bit of crime to get it.
Governments are huge and consists of many different institutions. I guess many would like to see Bitcoin stopped, but how to do that without fondling with the basic human rights, such as the right to free communication? So far the governments have been regulating it, trying to reduce the illicit use, which doesn't really stop it but actually makes it more legitimate.
Most bitcoin users aren't storing illicit assets. They're hedging against the state doing something absurd.
[edited to correct a couple of typos]
I don’t remember the powhatan or Lenape (Virginia-MD-PA tribes that were exterminated in order to build the core of the US trade and political networks) being consulted on any of this.
So, the answer is more or less "all of them," from dollar parity day to the latest all time highs.
One need only look at the rapid rise of cryptocurrencies in criminal enterprises over the last 10 years or so to see the truth in that.
Personally I'm also against it, but you're correct that it's a legal use case.
It’s expensive as hell to use crypto to move money. It’s very slow, and I’m forced to use centralized coin exchanges which destroy the original decentralized nature of the currencies.
Why should we be excited about a product that is the opposite of what it sets out to do?
Much easier for me to send a small amount of crypto to a VPN provider, or a custom parts supplier in a “strange” country where Visa/MC/bank wires are a huge hassle if available at all.
It’s not a huge use case, but it removes a ton of unnecessary friction from transactions traditional banking left behind as deemed “not worth the hassle” to them.
Or as I describe it: Digital cash. I don’t need the flea market vendor to need to be vetted by some financial provider to sell me their 3d printed parts collection.
Even had there been charges, donating would still have been legal.
Furthermore, your criterion was “not better served”; please don’t move the goalposts.
Remittances and cross-border donations are way better served by cryptocurrencies than any other mechanism, full stop. It’s faster, cheaper, and way more reliable than any other method.
They could also just really like cryptocurrencies, but that's not a point in favor of the technology.
There are fintechs for customers who want lower fees and don't need e.g. physical branches or phone support. That's perfectly fine.
But a fintech that didn't perform KYC would be shut down pretty quickly by the police, so there's a floor on how low fees can be while remaining legal.
That's the same as "not legal".
But I agree that it's still a useful technology, because the moral argument sometimes trumps the legal one. If a north korean defector uses Bitcoin to exfiltrate their life savings, I don't think anybody will complain how it was technically illegal under North Korea's law.
[2017]: https://www.cnbc.com/2017/09/11/bitcoin-price-falls-on-repor... "Bitcoin price falls again on reports that China is shutting down local exchanges"
[2021]: https://www.cnbc.com/2021/06/22/china-crypto-crackdown-wipes... "China’s renewed crypto crackdown wipes $400 billion off the market as bitcoin slides"
Also it funnels money to the people running it which enables them to lobby etc politicians.
>The incentive for it to happen suddenly is that, even if Nakamoto's fix were in place, someone with access to the first sufficiently powerful quantum computer could transfer 20% of all Bitcoin, currently worth $460B, to post-quantum wallets they controlled. This would be a 230x return on the investment in PsiQuantum.
Thats some really bad accounting on the incentives and ROI available. You can't just start selling and expect the price to be stable.
But it does bring up a secondary question I've never seen any numbers on; How much money could you possibly make if you knew for certain the value of bitcoin magically went to 1% in a panic sell?
Are there any institutions open to selling a billion dollar put option?
https://www.cmegroup.com/markets/cryptocurrencies/bitcoin/bi...
Simply having possession of the bitcoin is valuable. You can borrow against, for other cryptos assets and for fiat. You can invest with it to someone else that also won’t sell it, either at all or all at once, you can obtain goods and services from people that wont sell it, and you can also sell it. Treasury companies are buying billions of BTC per week, for now.
> “I don’t think it’s on a trajectory to deliver us from centralized platforms, I don’t think it will fundamentally change our relationship to technology, and I think the privacy story is already below par for the internet (which is a pretty low bar!), but I also understand why nerds like me are excited to build for it.”
In practice, the risk of suffering a double spend if you accept transactions with zero confirmations is less than the risk of chargebacks if you accept credit cards.
The discussion about the $460 billion bounty to take “lost” bitcoin in pre-quantum proof addresses and moved to post-quantum proof ones is worthy of many threads
the quantum-scare in crypto is very unnuanced - even crypto proponents handwaive it away - when the reality explains the original confidence in this system: it adapts. Post quantum addresses will be fine
And speaking of fine, the system is “good enough”. The decentralization is “good enough“, the development platform is “good enough”, the aggregate processing power of the execution environment doesn’t need to be more powerful than a $50 raspberry pi device as it’s “good enough” - you can use those nodes as microcontrollers in the cloud and there isn’t a similar offering and pricing strategy in non-distributed ledger cloud systems
For two reasons:
1. They pay them. Do you trust “big grocery” will provide you food, or did you start a farm in your yard?
2. If that trust were ever broken, millions of bitcoiners who can easily afford to lose $10 a month can mine them. Despite there being no such censorship happening, these uneconomic miners are already a rapidly growing group. Bitcoiners are acutely aware of the state of the mempool.
Your second point essentially requires a decentralized charity to exceed the size of an attacker, which isn't a realistic form of security.
And if I thought "big grocery" could make more money by not providing me food, I would definitely start growing my own food. It's got nothing to do with trust.
You assume Satoshi understood what he created.
The very basis for Bitcoins security is that the real users of the system, the people who have the monetary power to not value it at anything are running nodes.
If those people don't run nodes the rules of the system are just suggestions.
Satoshi never had the chance to understand this before leaving since it's not an obvious property of the system.
IIRC Dwork and Naor's work had a trapdoor (which the server used to cheaply validate the challenges) and would be unsuitable for any kind of decentralized public system. It's not "proof of work" in the same sense, or arguably proof of work at all to anyone but the server and parties that trust them.
There's some good stuff in there but it's just a kind of a gish galloping polemic, it raises some interesting questions but it doesn't do much to sway my opinion on the macro level.
Stable-Coins are the first crypto product with global product-market-fit and real economic impact. That's just to start with.
Please take a look at Ethereum and adjacent tech (L2s, L3s).
Is another way of saying "I am not putting my money where my mouth is".
Yeah, markets can stay irrational longer than you can stay solvent. But also you can stay wrong longer than you can stay solvent. And it's much easier to be personally wrong about something than for the market in aggregate to be wrong about something. So you have to expect that, most of the time, if you disagree with the market, you are in fact wrong.
The gaslighting in this case is therefore inverted.
There's no mention of:
- The lightning network (bitcoin-native layer 2 enabling near-instant transaction speed)
- Role of mining in grid stabilisation, methane reduction, etc.
- How mining hardware is actually used by miners when cost of energy is nearly free.
- Bitcoin's difficulty adjustment algorithm
- Protocols like Cashu (Chaumian Cash based on Bitcoin)
And one last thing. Mixing in a big bag "crypto" and "bitcoin" is in itself just a very bad take. sigh.
As a side note, I highly recommend Lyn Alden's book Broken Money.
Regarding this juxtaposition between between advocacy that others buy-into the system versus, er, tactical-avoidance by advocates, I'll recycle a comment from earlier today:
> [Some proponents say] "That's fixed with private blockchain", which is the equivalent of "That's fixed with Segways that have a second set of wheels and the self-balancing is disabled."
> There's a bunch of people busy reinventing decades-old old tech/accounting, either because they never bothered to learn what was actually new about "blockchain", or because they can't bear to admit that the new stuff wasn't really good/necessary.
> [...O]utside of wild-west cryptocurrency, [unrestricted node membership] usually isn't necessary, nor even desirable when you consider the rest of the cycle-burning baggage and complexity that comes with it.
__________
> They are all either false or misleading. In most cases Nakamoto's own writings show he knew this. His acolytes were gaslighting.
Quibble: Nah, that would be classical lying. "Gaslighting" is more specific and involves trying to make someone doubt your own sanity, memory, or senses.
1. Crypto is a battleground where anything that can be exploited will be
2. Bitcoin is highly vulnerable to 51% attacks
Something's not right here. For all the theoretical speculation about a 51% attack on Bitcoin, it's never happened, so maybe the system is working as designed.
Bitcoin is relatively unchanged since 2009 by design, the author hardly mentions more modern consensus protocols like Ethereum's Proof of Stake + Slashing + LMD GHOST. Even in the most optimal scenarios the cost to attack Ethereum is astronomical.