Hey guys, I still stand beside my four or five crypto statements from a few years back. Actually, as I am sure you are aware, they weren’t my statements. Many people have said many things like this for many years (centuries). Everything is just a copy, a transform, and a remix ala Kirby Ferguson. (1)
I have no idea what the price of BTC will be tomorrow, next year, next whatever. Nobody does. You cannot mathematize economic prediction. But. Crypto is a few trillion in market cap now. BTC and ETH are 70% of that. A few more have one to three percent and the rest (the well over 10,000 crypto “currencies” now in existence) have less than one percent. There is a similar power law (Pareto) wealth distribution if you look at any tech that has been developed and grown to trillion dollar values (Gates, Bezos, Musk) over the decades. Until the hype crashes, that is!
I don’t own any crypto probably due to the fact that when I was at a Linux Fest conference years ago I passed on putting a few dozen BTC on my credit card. (2) Anyway that error can still be rationalized away with the fact that if you are over 50 years of age, crypto will make absolutely no freekin’ difference to your life … at least, in a western capitalist democracy. (3)
A bad thing about crypto is that is it based on human written code. This, by definition, is not infallible, as both Alan Turning and Johnny Von Neumann showed us. There are bugs. (4) A machine cannot check an algorithm for perfection (halting problem).
A bad thing about crypto, is that every coin out there based on proof of stake (POS ie-ETH) vs. proof of work (POW ie-BTC) is theoretically doomed eventually to be controlled by an oligarchy. These are the gurus who do the rule changing like ETH’s Vitalik Buterin (who btw afaic is more honest than Jesus Christ). Some gurus call every other coin other than BTC, a shitcoin due to this “on high” control. The BTC blockchain has been running for a long time now maybe due to the fact that the founder (my bet is Hal Finney) is dead. (5)
A good thing about crypto is that this is the first time in history where the Byzantine General’s Problem has been solved by DE-CENTRALIZATION. Lynn Alden lays this out really well in her latest masterpiece called Broken Money. Its basic point is that over the last few hundred years every time there is a “friction” (meaning less or no trust) with money we centralize some aspect of the money system to put our trust in.
The inspiration for her book was an 1875 book by William Stanley Jevons of Jevons Paradox fame. Hundreds of years ago, gold was THEE reserve currency but it was very expensive to move it around the world and could be stolen, so we put it in a central London vault and moved it around in that much smaller space with a ledger for efficiency. HOWEVER that efficiency created nice capitalistic borrowing (6) to the tune of a 20 to 1 leverage, which meant that if more than 5% of the owners of said gold showed up at one time wanting their gold, the vaults did not have it.
Another supposed good thing about crypto (which is dependent on computation, which is dependent on computers, which is dependent on electricity, which is dependent on fossils) is that it sucks up stranded electricity in the grid which would be wasted otherwise. Basically a miner mines a coin for exactly the price of the energy plus his amortized costs. Yeah ok, I guess? But miners are COMPLETELY relying on the price of the asset they are mining to go up. This mining is what keeps the ledger of bitcoin immutable (ie-bad people can’t change it) which is all bitcoin really IS. It is just a ledger. What if it goes down (in price relative to the USd)? Yep, small “d”.
A good/bad thing about crypto is that you know which wallet has which crypto but you don’t know which individual person owns which wallet….unless of course the crypto is in an ETF or a custodial service like Coinbase where you need a SIN number to open an account. So the worry that “whales” like the Winklevoss twins will rule the BTC financial world is valid to a certain extent. But owners of BTC don’t all practice HODL, as owners of anything eventually sell into strength of price. You can go down the rabbit hole of all rabbit holes to find out the exponent on the power law distribution of BTC wealth. And that is going to be not nearly as concentrated as wealth in all the other shitcoins out there.
The Michael Saylor disciples of today have touted many uses of crypto but other than a store of value (for now) which is just a proxy for the S&P, it is not taking over the other two use cases for a currency (unit of account and medium of exchange) except maybe in Africa. (7) So Ponzi? Well there are a lot of other bigger Ponzi schemes out there. How about stock buybacks with borrowed zero percent money over the last two decades by big companies to pump earnings per share which jacks up CEO compensation?
In conclusion I used to say that BTC has a 50% chance of going to a gazzillion USd and a 50% chance of going to zero USd (another stolen line, this time from Nat Hagens actually) but I have switched that to 51% the former and 49% the later OVER A LONG TIME. 200 years?
Notes:
1)There are shockingly smart analysts like Mike Green, Lynn Alden, Saifedean Ammous, and Cory Doctorow can be googled for more detail.
2)But that wasn’t as retrospectively stupid as the guy who bought a pizza with BTC when a pizza was twenty bucks and a bitcoin was a buck or two.
3)Capitalist as being loosely defined as the means of production are in private hands with resources allocated by the “market”…… Democracy as being loosely defined as 51% of the votes make the rules for everybody.
4)Like the unintended/accidental forking of BTC in 2013
5)There are one million bitcoins in Satoshi Nakamoto's 22,000 BTC wallets. People now call these coins “burned” as Satoshi has not been around (electronically and undoubtedly physically) for ten years at least.
6)It is almost like this system that we created post Dickens that got rid of debtors’ prisons demanded this leverage to create the innovation (by individuals) that counteracted the natural tendency of governments (the collective) to steal through inflation from its citizens.
7)And it is really variable in Africa…High in Nigeria, low in Egypt.