Monero is an also-ran cryptocurrency, in the same proof-of-work family as Bitcoin and Etherium.

Monero.town is a Lemmy instance whose main communities are: Monero, privacy, Monero Memes, Meta, and Monero Mining.

Enough has been written on the negative ecological effects of proof-of-work based cryptocurrency that I think it’s not controversial to say it is incompatible with the Solarpunk vision.

Pictured inciting incident is a person advertising the crypto-capitalist Lemmy competitor “Nostr” in the anarchism community.

I don’t personally mind a debate about Nostr, but like most of the content from Monero.town, it doesn’t belong here. More sales pitches from a crypto-currency hype instance are going to be tedious, and crowd out the kind of progressive politics and human interactions we’re looking to nurture here. Reddit’s /r/anarchism had to constantly repel assholes trying to pass off their edgy capitalism as anarchist, Lemmy gives us the unique opportunity to send a strong message and nip this in the bud.

Fediverse sites that have already blocked Monero.town

reject (10): solarpunk.moe, polyglot.city, freethought.online, icosahedron.website, sunbeam.city, vtuber.house, fruef.social, cutie.city, fuckcars.social, karas.social

followers_only (3): toot.cat, orbsafe.masto.host, partyparrot.social

Image Description

[Image description: Screenshot of an exchange between user Jack@Monero.Town and Five containing the following text

Jack@Monero.Town

Yea, that’s just not how Nostr works. Take a look here: https://github.com/nostr-protocol/nips These are implementation possibilities that the protocol enables. Every client must implement NIP-01. All of the other NIPs are optional so every client that you use (an app for example) has decided to implement different NIPs. You decide which client you use and how Nostr should feel like. Almost no client prioritizes content that received bitcoin.

Your “login mechanism” (private cryptographic key) has nothing to do with cryptocurrency. If you want to send btc to people you have to set that up yourself, manually linking a wallet to your key.

Five

I’m confused why you’re downplaying Nostr’s primary selling point - its close integration with Bitcoin. It’s clearly a cryptocurrency capitalist con job.

Almost no client prioritizes content that received bitcoin.

That’s not what I was saying, but I’m fascinated that you’re implying it’s much worse than I anticipated. Which clients have their priority linked to received bitcoin? ]

  • cacheson@kbin.social
    link
    fedilink
    arrow-up
    3
    arrow-down
    1
    ·
    1 year ago

    Energy Consumption

    This is admittedly the weakest part of my argument. Even if one accepts that the existence of a decentralized digital currency might be beneficial, the energy consumption of proof-of-work is still a real cost, and the benefit needs to outweigh that cost. I think it will become a clear net benefit in the future, but right now things are more hazy and theoretical, as Bitcoin has not yet been fully adopted, nor is its development “finished”.

    Why use proof of work anyway? Because it’s the only way that we’ve found so far to make a hard decentralized digital currency. Non-hard currencies involve trusting someone else, and that someone can be leaned on by governments, can be robbed, or can be a scam artist themselves. Trust is a necessary part of being a social animal, but it is also useful to reduce the degree to which you are at the mercy of others, particularly when money is concerned.

    Proof-of-stake is not a suitable replacement for proof of work. It compromises the security properties of the system, and it introduces a wealth-concentrating mechanism. Stakers are rewarded in proportion to the amount of currency that they have. This literally bakes capitalism into the system. See the next section for more on this.

    Perceptions of Bitcoin’s current and future energy consumption tend to be overblown. Yes, it uses more electricity than entire (small) countries. However, that currently amounts to under 0.5% of global energy consumption, and it peaked at under 1% in 2022 (see here and here).

    Environmentally-focused skeptics tend to assume that Bitcoin’s energy consumption will continue to increase without limit. This is dependent on the “deflationary spiral” idea that the price of bitcoin will also continue to increase without limit. Both are incorrect.

    Yes, there is a hard cap on the amount of bitcoins that will be produced, which makes it a deflationary currency. Yes, this will result in more saving (“hoarding”) and less borrowing when compared with the inflationary currencies that we use now. Yes, that means there will be less investment due to the lack of cheap credit. However the “spiral” part is nonsensical on its face. Bitcoin is not some economic black hole that we’ll throw all of our economic resources into until we starve to death. Besides, from an environmental perspective, less investment should be a good thing.

    Without the “line goes up forever” aspect of the deflationary spiral, the argument for runaway energy usage falls apart as well. Bitcoin will use an (eventually) stable, likely small percentage of our global electricity output. If we’re generating that electricity from sustainable sources, we’ll be fine. If we remain stuck on fossil fuels, we’ll choke to death on carbon even without Bitcoin in the mix.

    There is a silver lining to this aspect of Bitcoin as well. It’s to at least some degree incentivizing renewable energy deployments. There are lots of areas that have “stranded” renewable energy, in that they’re a good place to harvest electricity, but there’s no one nearby to use that electricity, and no power transmission infrastructure to carry it to populated areas. Previously, smelting operations would be set up in these areas to turn bauxite into aluminum. However, Bitcoin mining has significantly lower overhead. You can set up solar/wind/hydro, ship in Bitcoin miners, and make some money off of it without having to run long-distance power lines right away. Once the lines are built, or once some power consumers set up nearby, the mining rigs can be sent off to some other site.

    Continued in reply

    • Five@slrpnk.netOPM
      link
      fedilink
      English
      arrow-up
      2
      ·
      edit-2
      1 year ago

      More Bitcoin Means less Punk

      Yes, there is a hard cap on the amount of bitcoins that will be produced, which makes it a deflationary currency. Yes, this will result in more saving (“hoarding”) and less borrowing when compared with the inflationary currencies that we use now. Yes, that means there will be less investment due to the lack of cheap credit. However the “spiral” part is nonsensical on its face. Bitcoin is not some economic black hole that we’ll throw all of our economic resources into until we starve to death. Besides, from an environmental perspective, less investment should be a good thing.

      Less investment should be a good thing when it comes to oil development, but when money is not re-invested in a capitalist society, the result is increased scarcity. In the absence of bitcoin, a middle-class person might chose to spend their surplus money on a bicycle, building a chicken coup, or learning a new skill. Bitcoin hucksters would prefer they spend it on Bitcoin, with the promise that it might make them more money for less effort by sitting in the blockchain doing nothing.

      Society advances through infrastructure, and while the Solarpunk project requires different infrastructure than what is currently planned, it still requires resources. If we are going to create a society of abundance, building it on a currency that thrives on scarcity is a non-starter.

      Popularity -> Energy -> Scarcity

      Without the “line goes up forever” aspect of the deflationary spiral, the argument for runaway energy usage falls apart as well. Bitcoin will use an (eventually) stable, likely small percentage of our global electricity output. If we’re generating that electricity from sustainable sources, we’ll be fine. If we remain stuck on fossil fuels, we’ll choke to death on carbon even without Bitcoin in the mix.

      If the Bitcoin system survives until 2040, it will reach a maximum of 21 million coins. Once minting new blocks is no longer rewarded with new coins, continued minting is expected to be funded by transaction fees. That does not mean the energy usage will stop, or even plateau. The energy use of bitcoin is related to the demand for Bitcoin. The more demand, the higher the value in dollars. The higher the dollar value, the greater dollar value return for mining it. The more value for mining, the more mining rigs will come online. The more rigs, the more energy is used.

      Currently bitcoin is used for niche markets, and is not widely adopted. If the crypto-bro dreams of mass adoption were realized, like the primary currency of a world-wide solarpunk society, demand would skyrocket and energy use would spiral out of control. Using 1% of the world’s energy is a huge number, but is minuscule when compared to the amount needed in that scenario.

    • cacheson@kbin.social
      link
      fedilink
      arrow-up
      3
      arrow-down
      2
      ·
      1 year ago

      Capitalism

      Let’s be clear. Capitalism is not money. Capitalism is not market exchange. Capitalism is not “line goes up”.

      Capitalism is a system of state-granted privileges for owners of capital. Some of these privileges were intentionally implemented, and some likely came about by accident, but they all have the effect of transferring wealth from the working class to the owning class. The state primarily does the bidding of the capitalists. Even though much of the world is ostensibly democratic, when there are policy disagreements between the working class and the capitalist class, the capitalists generally get their way.

      The capitalist class does not want “anarcho”-capitalism. It does not benefit them. The state already works for them. Without the state, they lose their privileges. Without their privileges, they eventually lose their wealth, as their megacorporations are incredibly inefficient.

      This is not a defense of “anarcho”-capitalism. At best, ancaps are confused. If they were to destroy the state, they would allow the capitalist class plenty of opportunity to recreate it. (And of course, the worst of them are outright mask-off fascists.)

      Bitcoin is not capitalism, even if ancaps tend to like it. Bitcoin is not issued by any government. It doesn’t require the use of the banking system that they control. They cannot use it to manipulate the economy. They cannot freeze anyone’s Bitcoin wallet, nor can they seize bitcoins that are properly protected. The degree to which adoption of Bitcoin diminishes the state’s abilities is a matter of debate, but it does impose some real constraints. And in constraining the state, it also constrains the capitalist class. Issuing money is also seen as one of the reasons we “need” governments, so the existence and adoption of Bitcoin deals a blow to that as well.

      In the previous section, I mentioned that proof-of-stake introduces a wealth-concentrating mechanism. Proof-of-work, on the other hand lacks this. Unlike with PoS currencies, holding bitcoins does not grant you more bitcoins.

      If you want to gain bitcoins through mining, you need to purchase specialized equipment to do so. If done properly you can recoup the dollar cost of the miners, but they aren’t likely to produce as many bitcoins over their useful lifetime as you would have gotten from just using the dollars to buy bitcoins directly.

      Even in terms of dollar return, you can’t just keep buying more miners to gain more dollars compound-interest style. The return on Bitcoin mining always approaches the cost of miners + electricity + labor. There is no guaranteed profit margin.

      As for people getting rich off of buying bitcoins, I’m not aware of any indications that there’s been a particular order in which the various socioeconomic strata have invested. The early adopters were largely not already rich, as far as I know. A fair number of “old money” types have been skeptical of Bitcoin. Of course, one does need to have at least some amount of disposable income to invest in the first place. Some technical inclination also helps. It may just be a case of “the middle class get rich” rather than “the rich get richer”.

      Also note that as I touched on in the previous section, the line won’t go up forever. The price will reach equilibrium once Bitcoin reaches its “final” adoption level, wherever that happens to be.

      Continued in reply

      • cacheson@kbin.social
        link
        fedilink
        arrow-up
        3
        arrow-down
        2
        ·
        1 year ago

        “It’s a Scam”

        I’m not sure if this point is being directed at Bitcoin specifically, or just at cryptocurrencies in general in this thread and in the article that poVoq linked. I’ll address it briefly anyway. (The previous two sections are the more important ones.)

        Many Bitcoin skeptics have described it as a Ponzi scheme or pyramid scheme. If you read about what these schemes actually are, and read about what Bitcoin is, it should be obvious that it’s not a match. Bitcoin isn’t centrally controlled, so there can’t be anyone filling the role of Ponzi or of the directors, at least not for the entire system. It’s certainly possible to run such a scheme using bitcoins, but that’s true of any currency.

        When pressed, these skeptics will usually say something about how everyone invested in Bitcoin is just looking for some group of “greater fools” to pump the price up so that they can make their exit. Like, sure, maybe some people are like that, but to claim that it’s some coordinated scam across all of Bitcoin just sounds like a ridiculous conspiracy theory. There are plenty of people that have had ample opportunity to exit profitably and just… haven’t?

        Being more charitable, these folks largely see Bitcoin as having no future (“it’s a bubble”). If everyone is eventually going to get tired of Bitcoin and give up on it, that does make it a really bad investment. That doesn’t make it a scam, though.

        Anyway that’s enough words, I need to sleep. -_-

        I may or may not respond if people want to argue over this. Not something I have a ton of patience for these days. If you’re genuinely curious and want to pick my brains though, feel free.

        • Five@slrpnk.netOPM
          link
          fedilink
          English
          arrow-up
          3
          ·
          edit-2
          1 year ago

          I appreciate the effort you put into this post. I welcome this kind of discussion, and I hope this will contrast with the kind of bad-faith hucksterism that typically comes from grassroots cryptocurrency sales initiatives.

          I’ve also watched bitcoin and cryptocurrency with interest since the days it cost thousands to buy a pizza. I suspect you may be able to teach me some things, but I also think there are some things you are missing.

          Many Bitcoin skeptics have described it as a Ponzi scheme or pyramid scheme. If you read about what these schemes actually are, and read about what Bitcoin is, it should be obvious that it’s not a match. Bitcoin isn’t centrally controlled, so there can’t be anyone filling the role of Ponzi or of the directors, at least not for the entire system. It’s certainly possible to run such a scheme using bitcoins, but that’s true of any currency.

          Pre-mining Scams

          The structure of bitcoin-style cryptocurrencies is perfect for Ponzi schemes. The first aspect of these schemes is the concept of pre-mining; Before a new currency, bit it Monero, Ethereum, or Shitcoin#02314 is released to the public, its founders create a large cache of currency with little work because they own all of the mining rigs at that point and aren’t competing with anyone. They then hype the fuck out of their coin, usually advertising that people buying the coin that they’ve mined are getting in at the ground level. Once they’ve sold all their coin, the value flatlines, the scammers disappear with their fiat currency, and then start another scheme with a new name. 99% of altcoins don’t survive this phase.

          Even Bitcoin started out with a significant portion of the total cache pre-mined by Satoshi Nakamoto. The halving of bitcoin awards privileges early adopters, and Nakamoto was the earliest. He hardly spent any of it before he stopped participating in Bitcoin development in mid-2010. It is widely speculated that he is dead, but rumors that he might have moved 50 of the 750,000 to 1,100,000 bitcoins held in his wallets are blamed for the crash in May 2020. The uncertainty lead to a $6.5-billion drop in Bitcoin’s market capitalization.

          Pump and Dump Scams

          You rightly identified bitcoin as deflationary - that in addition to market forces that can raise or lower its value, the money supply is designed to grow at a diminishing rate, halving roughly every four years. For comparison, the dollar is printed with the intention to match the demand for bills in circulation, plus inflate at a slow and predictable rate. This encourages re-investment and discourages money hoarding. The principles behind this are based on the lessons learned from economic mistakes during the great depression.

          This makes bitcoin attractive as a store of wealth, but its value derives from its use as currency. While there are over 19 million bitcoins minted, only a small portion of those are ever in circulation. This allows people or cartels with large amounts of bitcoin to have extremely large influence in the supply available and thus the price. This is a weakness that plagued the early stock market, and lead to the formation of regulations and the FTC. No such institution exists for cryptocurrency, making all deflationary crypto a choice medium for pump and dump scams.

          • cacheson@kbin.social
            link
            fedilink
            arrow-up
            2
            arrow-down
            1
            ·
            1 year ago

            I’m going to reply to both of your replies in this part of the thread, because I don’t want to split this up 3 ways. 5000 character limit is really annoying here. -_-

            I appreciate the effort you put into this post. I welcome this kind of discussion, and I hope this will contrast with the kind of bad-faith hucksterism that typically comes from grassroots cryptocurrency sales initiatives.

            I’m down to discuss a bit more, though I may also wander off because very ADD.

            I’ve also watched bitcoin and cryptocurrency with interest since the days it cost thousands to buy a pizza.

            This is good to hear. I find that a lot of times, people that are skeptical of {thing} tend to also not be particularly informed about {thing}, due to a relative lack of interest. I also just don’t like to see stuff that I consider promising abandoned to the right. I’m glad you’re still keeping track of it even if you’re skeptical.

            I suspect you may be able to teach me some things, but I also think there are some things you are missing.

            In terms of what you’ve brought up, I think it’s more that we weigh things differently. I also tend to be biased more towards optimism than pessimism.

            Trying to objectively evaluate the gaps in my knowledge here: I’m a software developer, and I’ve dug through Bitcoin Core’s code a little bit, but not extensively. I’m not particularly well informed about more recent developments, like the Taproot upgrade. My deep dives into Bitcoin stuff tend to correlate with price rises and overall excitement in/around the Bitcoin community (because ADD). During the doldrums I tend to drift off. I was heavily involved in the “Block Wars”, so I’ve got a pretty decent understanding of the Segwit upgrade and the debate and events surrounding it. My understanding of the internals of the Lightning Network is weaker than I’d like. I kind of get the HTLC stuff, but I have no fucking idea how payment routing actually happens. “Economic” arguments tend to make sense to me, though I have basically zero formal education in the subject.

            I also have a definite “because it’s cool” bias.

            Pre-mining Scams

            I would definitely categorize pre-mining as shady, though not necessarily an outright scam. I know that a number of altcoins do disclose ahead of time the amount by which they’re pre-mined and what purposes those funds will be used for. I dislike these arrangements, and think they’re yet another good reason to stay away from those altcoins, but it doesn’t qualify them as a scam. It becomes a scam if the pre-mine isn’t disclosed, or if the pre-mined funds are spent in a manner contrary to what buyers had been led to believe.

            Pre-mining is also not a Ponzi scheme. A Ponzi scheme involves a scammer holding money on behalf of investors, drawing from the held funds to make payouts that give the appearance of productive returns whiling lying about the actual balances held, and then running away with the money once they’ve tricked enough investors.

            When you buy cryptocurrency tokens, it’s an exchange. The dollars you pay are not held in your name by the creator of the cryptocurrency. Those dollars are not yours anymore. Instead, you have the tokens, which may rise or fall in value. You are not being promised any returns. If the cryptocurrency you bought is part of a pre-mining scam, at some point the creator will sell their stake, reducing the value of your tokens. You were scammed by being lied to about the properties of the thing you bought, but that is not the same thing as a Ponzi scheme.

            As for Bitcoin, Satoshi did everything right in this regard that they realistically could. They released the design on a public mailing list in advance of launching the system. They embedded a recent newspaper headline in the first block to prove that it couldn’t have been created before that headline was written. So in that sense, Bitcoin isn’t pre-mined.

            However, as you allude to, they were “shouting into the void” by themselves for a while, and amassed a sizeable number of coins. There is debate about how much of the early coins actually belong to them. Hal Finney was also known to be involved fairly early on. In any case, whoever created Bitcoin almost certainly has a large number of coins. It’s not unreasonable to be concerned about, but I don’t think it’s right to lump it in with pre-mined altcoins, and calling it a scam is too much of a stretch.

            • cacheson@kbin.social
              link
              fedilink
              arrow-up
              2
              arrow-down
              1
              ·
              1 year ago

              Pump and Dump Scams

              Being deflationary doesn’t make an asset a good target for a pump-and-dump scam. PnDs are best executed on assets that are low-valued enough that you can easily force the price up or down using the funds that you have available to you. Being deflationary causes an asset to leave this territory sooner.

              Bitcoin is not a good target compared to altcoins, and as far as I’m aware PnD scammers have largely moved on to those. Bitcoin also has a culture around it that is resistant to the PnD scams. The general advice given to people that are new to Bitcoin (after “only invest what you can afford to lose”) is to dollar-cost-average by investing fixed amounts at fixed intervals, to avoid trying to time the market, and not to panic about large price movements. Following those rules makes one immune to the PnD scam. Newer people are less disciplined about following them, but over time the group of “core holders” continues to grow.

              This makes bitcoin attractive as a store of wealth, but its value derives from its use as currency.

              “Store of wealth” is one of the uses of currency. People tend to get worried that Bitcoin isn’t being used as a medium of exchange as much as they think it should, but there isn’t actually a problem there. As Bitcoin’s value grows, it’s price will become more stable. This gradually makes it a worse growth investment, but a better medium of exchange and unit of account.

              While there are over 19 million bitcoins minted, only a small portion of those are ever in circulation.

              Nearly all of them can potentially enter circulation though, and with very little advance notice. If the order books on the exchanges get wiped out and the price starts spiking wildly upward as a result, those non-circulating coins will start to move.

              The principles behind this are based on the lessons learned from economic mistakes during the great depression.

              I don’t think we should value the lessons of mainstream economic analysis too highly, as they take the existence of the state for granted. Maybe this one is a point in favor of the communists, but I’m not ready to concede it just yet.

              Society advances through infrastructure, and while the Solarpunk project requires different infrastructure than what is currently planned, it still requires resources.

              Fair point, I wasn’t thinking about the infrastructural retooling aspect.

              I do think “more saving” is a point in favor on the anti-capitalist side, though. People that have savings are less inclined to tolerate shitty employment arrangements, and more able to go on strike or start their own ventures.

              Bitcoin hucksters would prefer they spend it on Bitcoin, with the promise that it might make them more money for less effort by sitting in the blockchain doing nothing.

              As I touched on in my other reply, Bitcoin won’t be a growth investment forever. Once it reaches the point of maximum adoption, any further increase in value should be relatively slow. Going from slightly inflationary to slightly deflationary will have some effect, but I don’t think it’ll be as severe as you’re implying.

              Popularity -> Energy -> Scarcity

              The income from fees is something that can we can change by adjusting the block size. Doing so requires broad consensus among Bitcoin’s users, but it can be done. The main question is how much mining is needed to keep the network secure against a 51% attack.

              If things were to get dire, we could even end the block subsidy early through the same mechanism. While consensus between users is needed, such changes can actually be pushed through against the will of the majority of miners.

              • Five@slrpnk.netOPM
                link
                fedilink
                English
                arrow-up
                3
                ·
                edit-2
                1 year ago

                It sounds like you have more technical experience with cryptocurrency than I do. I think I understand the economics side a little better, though I admit I’m not an expert. I’m sure a more professional economist would have a conniption based on how I’m using some terminology and concepts.

                Why is Deflation Bad for Currency?

                ‘Inflationary’ and ‘deflationary’ as adjectives are usually applied by economists to government fiscal policy, not to currency itself. Since cryptocurrency fiscal policy is usually set in code when it is released, and reaching consensus required to change it is rare, I think it’s kind of appropriate to label cryptocurrency with these adjectives, but I realize it’s also confusing. I’ll do a better job of explaining it, because our differing understandings of this concept are going to be a problem if I don’t.

                Money, like all commodities purchased with money, responds to supply and demand. The more money available in an economy, the less that money is worth with regard to other commodities. When the value of money with regard to other commodities goes down (more dollars, less eggs) this is called inflation. When the opposite happens, (less dollars, more eggs) this is called deflation.

                During most of history, money was linked to precious ore. There wasn’t a lot of academic economics going on back then, but this meant that the rate at which ore was mined and minted determined the base of a civilization’s currency supply. Argentarii, Priests, and Metalsmiths offered credit, usually some multiple of the actual amount of precious metals they had on hand. Rulers debased their printed coins with non-precious metals. But these methods of increasing supply had drawbacks, so available ore was king.

                The policy of letting the availability of precious metals have a direct influence on the money supply continued until very recently. I want to be clear - granting government (I use the term loosely here because the FED, Bank of England, and most other national analogues are technically not a branch of government, but are so intertwined to make the distinction irrelevant) control of the money supply gives it another tool of power, and I’m not happy about that. But giving control of the money supply to the rate of strip mining, conquest, and trade policy is still government-involved, and in many ways worse.

                I bring this up because the same economic thinkers who championed Bitcoin are the ones who think a return to the days when money was pegged to the gold standard is a good thing. They’re wrong. Even without the other problems associated with using precious metal as currency, having a money supply that does not adapt to market conditions creates forces that re-enforce hierarchical structures, and privilege the capitalist class over the working class. It gives power to bankers, and removes power from debtors.

                The primary use of money is as a medium of exchange. In cases where money retains its value with regards to other commodities or increases in value over time, it can be used as a store of wealth. But money that is a good store of wealth is bad for use as a medium of exchange. “Good money” slowly loses value over time; slow enough not to cause a panic to spend it, but enough to encourage spending it rather than hoarding it. In order to save money, it must be placed in a bank with an interest rate higher than the rate of inflation. The bank then uses that money to issue debt, and it goes back into the economy.

                Inflation takes some of the edge off of debt - interest rates are decreased when the inflation rate is factored in. Consider what happens when the opposite is true; not only does the total debt increase over time, but the money to pay the debt becomes more and more scarce, both increasing the value of what is owed and making it difficult to pay in a reasonable time. While inflation has an effect on real wages, raising the minimum wage and negotiating salary increases compensate for this effect. It is difficult for banks to renegotiate contractual agreements on long-term loans in the same way.

                Being able to save wealth without banks might be considered a benefit of deflation, but something much worse happens. Working people generally need to spend most of the money they earn, and only a small fraction of a rich person’s income is needed for life’s necessities. When it becomes beneficial to hold on to money, the capital class can easily reduce spending, but those with less money are forced to continue to spend, leading to a pattern that collects more and more of the money supply in the hands of the rich. Because banks and the wealthy are incentivized to hold on to money, less infrastructure is built, loans are harder to get, and the amount of jobs available and total economic activity decreases. This is called a contraction, and a period of economic retraction is called a recession. When a recession becomes really bad, it’s called an economic depression.

                It is no mistake that decoupling the dollar from precious metals coincided with the lessons of the great depression. People lost faith in the political order, revolutions occurred in Russia and Germany, and many turned to fascism. The tight coupling of banks and government is no mistake, as they rely on each other for stability. If we built a society based on a fiscal policy that allowed the currency of exchange to significantly deflate, it would fall into economic depression and revolution also.

                Bitcoin is Bad Exchange Currency

                Bitcoin, unlike precious metals, derives its value from its ability to be used as an exchange currency. I’ve explained why it’s a terrible candidate for that use. Like starving people during the gilded age, the primary people using bitcoin for exchange when it is more valuable to hold are the ones who have little choice in the matter - people with no safer way to get illicit items and victims of ransomware gangs.

                I call Bitcoin deflationary because it was designed from the start to encourage deflation, but even cryptocurrency like Dogecoin, where the monetary supply is designed to increase exponentially, can increase in value if demand for it is high enough. Cryptocurrency will never replace government money so long as it doesn’t improve on its ability to avoid periods of deflation or hyperinflation. In order to do this it needs to respond to market conditions, scaling the money supply when population and economic activity changes.

                As it stands, the monetary supply of bitcoin may be increasing with each minted block, but it is also tempered by the amount of bitcoin ‘burned’ - people losing their keys, or dying with no-one inheriting access to their account. This is the best scenario for Satoshi’s million, for example. It’s difficult to gauge the amount of bitcoin that can come into play even when it is in highest demand due to this ambiguity.

                Since 19 of the 21 million coins have already been minted, and the rate of minting new coins is slow and predictable, the independent variable for Bitcoin’s value is not supply, but demand. Ending the minting of new coins will not cause stability in the price - its price will still fluctuate with demand. Population is projected to grow long past 2040, when Bitcoin will stop minting. Take an absurd and simple model of the world where the entire population uses bitcoin: an increase in the population means the same amount of coins for more people, resulting in deflation, a predictable economic depression, and the collapse of that society unless it adopts a better monetary system.

                • cacheson@kbin.social
                  link
                  fedilink
                  arrow-up
                  2
                  arrow-down
                  1
                  ·
                  1 year ago

                  I think I understand the economics side a little better, though I admit I’m not an expert.

                  Possibly. I do have some familiarity, though it’s more with “political economy” than economics proper. I don’t usually have much patience for dry nonfiction books, though articles and long essays are fine. As a result, my knowledge here is less coherent and more shallow.

                  Why is Deflation Bad for Currency?

                  I broadly acknowledge your points here, and I don’t have a full rebuttal, though I’m not yet prepared to change my mind on the issue. I’m just going to respond to the points where I have something to say.

                  ‘Inflationary’ and ‘deflationary’

                  I do understand inflation and deflation, and it doesn’t seem like there’s been any misunderstanding thus far. There’s supply inflation and price inflation. Central banks use supply inflation and deflation to influence the economy. Increase supply to encourage investment when the economy gets sluggish, decrease supply to rein in price inflation.

                  While inflation has an effect on real wages, raising the minimum wage and negotiating salary increases compensate for this effect.

                  Wages haven’t actually kept up with productivity, though. Arguably it would be better to have real wages increase by default through deflation, and make employers deal with negotiating pay cuts. That way inaction favors the (hopefully unionized) workers and squeezes the employer, instead of the other way around. This may give worker co-ops a competitive advantage in retaining experienced workers, whereas employers may be inclined to fire workers when pay cut negotiations fail.

                  Your claim about the US having abandoned the gold standard around the great depression didn’t sound quite right to me, as I remembered we were on the Bretton Woods system until 1971. It turns out there was indeed a gap in the 30s though.

                  In looking at the chart on the Bretton Woods article, I remembered that the decoupling of real wages from productivity (article) also started in the 70s. I wonder if there’s any connection. I know that Reaganomics was a thing, but that would have started in the 80s. (I promise I’m not doing a conspiracy theorist “ah ha!” thing here, the correlation may be entirely coincidental, but may also be worth further investigation.)

                  Because banks and the wealthy are incentivized to hold on to money, less infrastructure is built, loans are harder to get, and the amount of jobs available and total economic activity decreases.

                  This is a result of the credit monopoly. If we can break that, then the supply of credit should expand as needed, and the effects of deflation of the unit of account should be limited.

                  As one way to help with that, I’ve got some ideas for a friend-to-friend credit network inspired by the Lightning Network and the original (pre-shitcoin) RipplePay. (No blockchains involved, it’s not a cryptocurrency.) The core of it would be a simple app for tracking lending among friends (for example, Alice pays for lunch for her and Bob, and they note this in the app instead of exchanging cash). It would also allow routing in order to make “IOU” payments to friends-of-friends(-of-friends, etc) where no direct trust relationship exists. This could then be used as a sort of community currency. My ideas are still kind of half-formed, I need to look more into the details of how the Lightning Network works, as well as how the shitcoin version of Ripple works to see if they have any ideas worth stealing.

                  The one thing that does bother me that I can’t answer in a satisfactory fashion is that compared to an inflationary currency, deflation imposes a hard floor on the effective interest rate of lending. If the currency deflates at a rate of 2%, and you get a zero-interest loan, the real value of your debt is still increasing by 2% per year. I assume there’s some level of need for actual hard currency that’s relatively stable in the long term, and that people can’t just use credit exclusively. “My friends owe me money” is not a great way to store one’s life savings, after all.

                  • cacheson@kbin.social
                    link
                    fedilink
                    arrow-up
                    2
                    ·
                    1 year ago

                    Cryptocurrency will never replace government money so long as it doesn’t improve on its ability to avoid periods of deflation or hyperinflation.

                    Quibble: Hyperinflation typically only happens due to government mismanagement of their currency, and not as a result of regular market forces.

                    As it stands, the monetary supply of bitcoin may be increasing with each minted block, but it is also tempered by the amount of bitcoin ‘burned’ - people losing their keys, or dying with no-one inheriting access to their account.

                    The effect of this should be minimal once infrastructure around and knowledge of Bitcoin becomes more fully developed.

                    Ending the minting of new coins will not cause stability in the price - its price will still fluctuate with demand.

                    My point was that the current level of instability, with 2000% increases and 80% drops, is only a result of the low current level of adoption, combined with uncertainty over whether Bitcoin is going to be the global currency to replace all others, or a fad that is going to die out. Once the “final” level of adoption is reached, you wouldn’t leave your money “sitting in the blockchain” in hopes of a big return. It’d be more like having your money in treasury bonds. Some return, sure, but fairly unexciting.

                    Take an absurd and simple model of the world where the entire population uses bitcoin: an increase in the population means the same amount of coins for more people

                    Annual population growth from 1950 to the present (the era for which we have good numbers, I assume?) topped out at 2.24% in 1964. We’re currently at 0.88%, and projected to go negative in the 2080s. I assume it won’t be negative forever, but figure maybe 1-2% annual price deflation over the long run?

                    What do?

                    Shifting gears a bit. Let’s say for the sake of argument that the deflation thing is actually very bad. Maybe not catastrophically bad, but at least bad enough that we should prefer that Bitcoin does not succeed.

                    What alternative do we, as anarchists, offer to the world? Besides anarcho-communism, that is. I’m skeptical of it as a totalizing vision, and a lot of people just won’t go for it.

                    I assume that in a post-state society:

                    • There will be some kind of hard currency that is widely but maybe not exclusively used
                    • The world will standardize on a single unit of account, probably the aforementioned hard currency
                    • People will remain at least moderately self-interested

                    Let’s say that all of the other altcoins were obliterated, and that only Bitcoin and Dogecoin remain. Dogecoin would be the better option for society as a whole, due to the supply inflation. However, for individuals it’s preferable to only accept Bitcoin and refuse to accept Dogecoin (Thiers’ law). Dogecoin is unlikely to catch on because of this, even if we ignore Bitcoin’s first-mover advantage.

                    What other good alternatives are there? I don’t think “anarcho central banking” would be viable.