The longer I listened to this conversation the more discouraged I felt. But by the end I noticed the encouraging ray of hope running through it.
What I found discouraging is that it’s pretty obvious to anyone significantly involved in the cryptosphere that Charles wants to reinvent the wheel.
First, let me point out that there is a long modern history of “community money” arising in locales for very local trade that bypasses the larger economy while greasing the wheels of small local entrepreneurial work and local labor. It’s particularly vibrant in pockets in the northwest. If that were all he’s after, it exists and there are articles and books written about various ways it’s been done and how to do it for one’s own community.
But Charles goes further, envisioning some pan-local network of such communities learning from and trading with one another. So his conception needs another level; the coinage needs to be pan-local, yet not managed by some elite that can bend it to their advantage at the expense of the people actually doing the work.
But there, too, he’s reinventing the wheel. This is what the cryptoverse is already doing. He doesn’t need to invent a new coin protocol, he just needs to apply one that already exists. I think he could fruitfully look at the Ethereum platform, for example, that allows the development of coinage and associated contracts by which the coinage is released when the contact is fulfilled. The Ethereum platform will let anyone design a new coin with its own rules. And already there are prototype programs to let these coins interact with one another; an agreed relative value between two or more communities about each group’s coin’s value would complete the linkages. There ya go. But, hey, that’s just begging for the existing fiat system and arbitrage all over again.
Also, Ethereum isn’t really decentralized, which Charles says is an important element. When it comes to crypto, there is only one truly decentralized, democratic, from-the-bottom-up coin, which began with people voluntarily and with great passion pursuing exactly the vision Charles is coming to like a latter-day saint. That, of course, is Bitcoin.
Charles objects to Bitcoin even though it hits every concern he raised, and meets every interest he expressed. He faults it for being generated by miners rather than arising from “labor.” Clearly he doesn’t understand the role of miners. It is, first, to create and release the coin on a scheduled basis over a long period of time. Anyone can become a miner, so there’s a democratic element to it. But because of the schedule, throwing more mining power at the task of creating more Bitcoin doesn’t increase the rate of coin creation, because the algorithm that has to be solved to reward a miner with a coin automatically adjusts - also on a regularized, predetermined schedule - to account for the computing power being thrown at the process.
In addition, there is nothing miners can do about the fact that there is built in a total number of coins to be mined, after which there will be no more mining. No amount of computing power will change that. It’s what makes Bitcoin a true hard money; ultimately the hardest (scarcity principle).
Now, as miners sell their coins into the system, they earn the money to keep their computers operating, which is how the “AI” of blockchain keeps going. Someone has to pay for the computer time, whether in Charles’ new system or in existing Bitcoin. Charles hopes for some benefactor who feels guilty about how much s/he has made in the extractive economy to want to fund getting his new system off the ground. He uses the sum of $10 million as a “for instance.”
That’s nowhere near enough for a pan-local system. Yes, it might get a local or regional system off the ground - but barely. Any computerized system that takes off beyond the local level is going to require hundreds of millions of dollars of computer equipment and power to operate efficiently to track and reward millions of people’s “labor,” and provide them the (in Charles’ system) democratically approved number of coins. The Bitcoin system is estimated to be worth several billions of dollars of realized investment already. It would take at least that much to duplicate its reach. Yet, thousands of individuals at first, and then consortia later, put up their own money in good free-market style, and either made a go of it or failed. Either way, they built out the existing system. It’s so large now that no one - not even a country with the wealth of the US - could afford to finance its duplication.
Who is to pay for Charles’ system and its electrical use? Are the people operating his system - or just maintaining the various nodes and troubleshooting issues - engaged in “labor” by his definition? If so, why aren’t miners?
Also, how do we assure that the people in Charles’ system don’t corrupt the AI protocol to benefit themselves, or to seize monetary control? They are the weak point; the point of systemic power, and therefore will attract the sociopaths. Charles wants to rely on the good graces of an angel investor at first; and then he “hopes” for some emergent ethos or group of ordinary people who will arise to prevent anyone or any group from corrupting the system.
Talk about “hopium”! I’m remembering that Google was founded on the principle “Do no harm.” And I remember seeing an interview with Eric Schmidt, back while he was CEO of Google, on TV with doubtful Glenn Beck assuring Beck and all those watching that there was simply “no way” Google could ever do anything bad because “it’s just not in our corporate ethos.” How’s that working out?
Bitcoin is immune to that kind of outcome because of the wide dispersal of the system. There are an unknown number, but known to be over 10,000, computer systems spread around the world on which the blockchain protocol operates to prove the algorithm that adds a block to the Bitcoin chain, and it’s all open source and transparent; there’s the integrity of the system. There is no pinch-point; there is no place at which someone can take over the system.
The miners facilitate the system’s development; that’s their “labor”. They don’t control it. They do the “good” of gradually releasing coin into the ecosystem according to an immutable predetermined schedule they cannot cheat, to create a liquid, hard money regime as the ecosystem builds out and increasing numbers of people join the usage community.
Yes, today there are a lot of people in Bitcoin who are holding coins as an investment, because they rightly expect the value of each coin to skyrocket as the number mined slowly reduces and the demand for coin increases. Never-the-less, that’s only a function of building the system to a sufficient level of expansion and adoption that provides the liquidity a successful money system has to have, especially if it’s meant to be pan-local. The day will come when people don’t buy Bitcoin but earn it for work performed, and pay it out for work or goods received. In fact, that day is already emerging: there are increasing numbers of people who are paid in Bitcoin for their daily labor. Those people then have to spend some of their wages to purchase the items they need and want - and that is how a new economy is created. It’s happening.
Furthermore, because of how Bitcoin is designed, it has all the privacy (another key feature Charles wants) of a current fiat cash transaction. It can have even more privacy than Charles envisions for his ideal money - and it can exactly match his ideal, too. The great thing about blockchain as a protocol is that it allows those who use it to control their own data, and to release only what they want to release and only to those to whom they want to allow access.
There is nothing Charles wants to do that isn’t already done by Bitcoin and the blockchain that makes it possible. And it does it better, by eliminating the obvious pinch-points Charles seemingly can’t see a way past except by trusting to the good graces and noble intentions of human actors.
Bitcoin, by contrast, does not need to rely on hopium, nor to believe in the (demonstrably non-existent) natural goodness of the human soul. It is both disappointing and frustrating that he doesn’t understand, and that Chris apparently fails to grasp as well, that the new monetary system that dethrones sociopaths, democratizes the economy, and empowers ordinary people to make and keep their wealth has been right under their noses for a decade.
I can hypothesize that the economic drama of the Bitcoin birth process has blinded them to what the project is all about - as if starting up any new money can be done without a roller coaster ride of acceptance and rejection, especially one that’s emergent from the constantly churning chaos of ordinary people operating on ordinary mixes of greed and altruism. But guys, c’mon. It’s time to update your respective understandings of what’s going on in the crypto universe as a whole, and also in regard to what Bitcoin really is beneath all the drama of its birthing process.
On the other hand: that this conversation even took place inspires hope. It suggests a new level of openness, and that’s the prerequisite for seeing more clearly and understanding more deeply.
A Hacker’s Teleology: Sharing the Wealth of Our Shrinking Planet.
