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Yanis: "The Gold Standard is, indeed, a great source of insight into how dangerously primitive Bitcoin maximalist thinking is. Suppose Bitcoin were to take ove

Yanis: "The Gold Standard is, indeed, a great source of insight into how dangerously primitive Bitcoin maximalist thinking is. Suppose Bitcoin were to take over from fiat currencies. What would banks do? They would lend in Bitcoin, of course. This means that overdraft facilities would emerge allowing lenders to buy goods and services with Bitcoins that do not yet exist. What would governments do? At moments of stress, they would have to issue units of account linked to Bitcoin (as they did under the Gold Exchange Standard during the interwar period)." The reason governments could do this with gold is that gold is easy to counterfeit, hard to store securely, and expensive to transact with at a distance. So it makes sense to keep it all in a giant vault (a bank, or central bank) and trust the vaultkeeper to issue ious and transact in those. But bitcoin does not suffer from these defects. I don't think Yanis understands this. https://nassimtaleb.org/2016/09/intellectual-yet-idiot/ https://nassimtaleb.org/2016/09/intellectual-yet-idiot/

llamaimperative 4y ago
No, the reason governments can do this is because people trust their IOUs. That’s why they can do the same thing with or without any underlying asset with any characteristics. The characteristics of the underlying asset would probably modulate the degree of trust people can put in a government’s IOUs, but considering e.g. the extent of people’s trust in the US (with no underlying), I think it’s fair to say if Bitcoin became this currency, governments would have no problem issuing IOUs for it that people would trust.
- thebean11 4y ago
  In the hypothetical future world where Bitcoin has replaced other currency, trust in the central bank is probably gone already (due to hyperinflation or devaluation most likely).
- disruptalot 4y ago
  Why would people accept bitcoin IOUs when the real thing is more interoperable, saleable, private etc.etc. and of course doesn't require trust in the issuer. The answer is force [0] [0] https://en.m.wikipedia.org/wiki/Executive_Order_6102 https://en.m.wikipedia.org/wiki/Executive_Order_6102
  - dehrmann 4y ago
    This was clearly a due process violation by the same man who set up concentration camps for Japanese Americans. He packed the Supreme Court so he could get away with it.
  - 8note 4y ago
    The IOUs would be more private since your transactions aren't public. Likely faster with better user experiences too, per Moxie's argument for why blockchain systems already look more like that.
  - ethanbond 4y ago
    The same reason people accept IOUs for literally anything else: credit. It is actually extremely useful to be able to borrow productivity from the future and use it today.
    - tphyahoo2 4y ago
      Yanis was talking about the government central bank, under a time of stress. Without force, will the government have enough credit? This is what allows the big re-armaments before / during a war, btw. See for instance Hjalmar Schacht's mefo bills in https://en.wikipedia.org/wiki/German_rearmament https://en.wikipedia.org/wiki/German_rearmament In this case stealth rather than force but same principle. It's also a lot harder to do stealth with a non-inflating currency that has proof of reserves.
      - espadrine 4y ago
        Yanis was talking of lending. Lending in Bitcoin can happen in two ways: the first is through imaginary Bitcoin (“borrowed from future installments”) in a layer 2, which is what he was describing, although I agree that, unless the government mandates accepting money from that layer, it is hard to make it systemically used. The second one is to only lend coins that you have. In a deflationary monetary policy, lending is strongly disincentivized, as it would need to beat both the rate you would gain from the value of your coins increasing, and the default risk. Much of monetary policy is about finding a balance where financial institutions will be incentivized to lend despite the risk (which is already a hard sell even under inflation!) without nudging prices. It is plausible that a Bitcoin economy in stablestate (once coinbase transactions are no longer) would have very little lending. Is it outside of the realm of possibilities that, in such a world, innovation may decrease, and legacy becomes a more relevant factor for wealth?
- tphyahoo2 4y ago
  Governments certainly will attempt to issue IOUs backed by bitcoin. And some people will accept them. If you are willing to trust your bitcoin to an exchange, as many people are, you should certainly be willing to trust your government. But a lot of people hold their bitcoin offline, in hardware wallets, in cold storage. It's not that hard. Another feature that bitcoin has, that gold does not, is proof of reserves. Barely any exchanges do this, but this will change with time. Proof of reserves pretty much makes bitcoin IOUs for the government useless. You can't cheat by printing more. I think far fewer people will trust their government with bitcoin under a bitcoin standard, than trusted their government with gold under a gold standard. Particularly after a few governments default. I discuss this more in depth at https://web.archive.org/web/20210116135412/https://taaalk.co/t/bitcoin-maxima-other-crypto-things https://web.archive.org/web/20210116135412/https://taaalk.co... (long)
  - ethanbond 4y ago
    Yeah that’s fair, if a few govts default who knows how that’ll shake things up. Thank you for the thoughtful response!
    - tphyahoo2 4y ago
      Thanks for having an open mind :)
  - shadowgovt 4y ago
    Selection bias. The sort of people interested in BTC tend to be the ones who already don't trust government. I don't expect governments to cater to the mistrustful, so I don't anticipate governments adopting BTC as their core currency in my lifetime.
- onlyrealcuzzo 4y ago
  I think it's more due to force than trust. I don't particularly love the USD, but if I don't pay my taxes in USD, I'll go to jail.
gizmo686 4y ago
If you read the full answer, you would see that his position is that doing that is better than not doing it. If you are correct that it is even more difficult to do so, then his position is that bitcoin is even worse than gold in this regard. > When ‘Bitcoin maximalists’, as you call them, wax lyrical about the inability to print money (and celebrate this inability as Bitcoin’s feature, rather than its bug), they are being terribly unoriginal – banal, I dare say. Capitalism nearly died in 1929, and tens of millions did die in the war that ensued, because of this toxic fallacy that underpinned the Gold Standard then and Bitcoin now. Which fallacy? The fallacy of composition, as John Maynard Keynes called it. Regarding your specific points on the differences between gold and Bitcoin: * easy to counterfeit - Point to Bitcoin * hard to store securely - I'd class this as a point for Gold. * expensive to transact with at a distance - As opposed to Bitcoin, which is just expensive to transact; and gets more expensive the more people use it, as there is a finite amount of transactions per unit time. In practice, most people dealing with Bitcoin are dealing with it through ~banks~ exchanges which gave them a Bitcoin denominated IOU; and which may or may not be engaging in fractional reserve banking.
- tphyahoo2 4y ago
  "In practice, most people dealing with Bitcoin are dealing with it through ~banks~ exchanges which gave them a Bitcoin denominated IOU; and which may or may not be engaging in fractional reserve banking." You're not wrong. Most people do it with IOUs, ie exchanges. But most people, don't have most of the bitcoin. "Crypto Exchanges Hold 6.6% of Bitcoin Supply – One of the Lowest in History" https://bitcoinke.io/2021/09/percentage-of-bitcoins-on-exchanges/ https://bitcoinke.io/2021/09/percentage-of-bitcoins-on-excha... I'd like this number to be even lower. And as more exchanges (and governments) default, I expect it will be. "* hard to store securely - I'd class this as a point for Gold." fair to debate, a lot does get lost because people lose paper backups. but is this really harder than gold? I think it's largely unfamiliarity that will improve with time. "* expensive to transact with at a distance - As opposed to Bitcoin, which is just expensive to transact; and gets more expensive the more people use it, as there is a finite amount of transactions per unit time." if you don't understand how lightning works, of course you will believe this. lots of fud right now. encourage you to kick the tires here, and actually install a lightning wallet and see. as a retail guy, you can start selling slurpees via lightning, today. https://medium.com/coinmonks/strike-partners-with-shopify-blackhawk-and-ncr-to-bring-bitcoin-lightning-payments-to-merchants-a05a1ff3236f https://medium.com/coinmonks/strike-partners-with-shopify-bl... no it's not perfect, but it is non custodial. now imagine you are in venezuela or weimar germany.
Aunche 4y ago
> But bitcoin does not suffer from these defects. Ok. So you're a nation whose official currency is backed by Bitcoin. Suppose that years of economic depression have left your country's Bitcoin reserves relatively sparse. Suddenly, your neighboring country Fiatland is starting to mobilize for war thanks to their freshly printed money. Meanwhile, your nation is only able to raise Bitcoin bonds that must be paid with interest from your already tight Bitcoin reserves. Due to the uncertainty caused by the looming threat of war, Bitcoin interest rates skyrocket, so you're even further limited by the how much you're able to finance. The very obvious solution to this problem is to switch to fiat currency, so you're no longer constrained by some arbitrary limit defined in 2008.
- deleted 4y ago
  [deleted]
- langitbiru 4y ago
  It's funny that you mentioned war because Bitcoin proponents pointed fiat enables reckless wars. "Since the start of organized warfare, the crucial sinew of war had been “endless streams of money.” https://publications.armywarcollege.edu/pubs/2339.pdf https://publications.armywarcollege.edu/pubs/2339.pdf
  - Aunche 4y ago
    Fiat enables. Period. Plenty of kingdoms and empires were able to finance their pointless wars with gold.
    - dmitriid 4y ago
      Two generations from now when new generations fight for scraps of deflationary money, those who amassed wealth early in the crypto cycle will definitely finance wars.
  - shadowgovt 4y ago
    But if it enables war for fiat countries and constrains it for BTC countries, doesn't they imply a significant likelihood that the fiat countries will conquer the others?
roenxi 4y ago
I'm confident in my guess - both you & Yanis will be proven wrong in time. So far nobody in history has taken the complex heaving mass of the global economy and boiled it down to a simple forecast about what it will do when confronted with a new technology. We cannot foresee what is about to hit us. Roughly every possible outcome has been forecast by someone. An untracable, unstoppable & untaxable cryptocurrency might be developed if we get lucky with the research into Zero-Knowledge proofs or a related field. That would be revolutionary in a profound sense.
- tphyahoo2 4y ago
  Even if this untraceability / unstoppability was possible, it might not be as revolutionary as you'd think. It's sort of the same problem as email with pgp. You not only have to secure your email, you also have to secure your counterparty and anyone he forwards your email to. Money is like that as well. So even if monero wins, or bitcoin becomes like monero, there'd still be tax. There was tax under gold. Bitcoin isn't about ending tax.
- throwaway82652 4y ago
  >An untracable, unstoppable & untaxable cryptocurrency might be developed No, this will never happen and it makes no sense to actually want this, not only is it physically impossible but it's a total misunderstanding of threat modeling. The main thing these comments always miss is that these transactions only exist to serve a purpose in the real world. You can come up with all the cryptographic solutions that you want to hide communications but it means very little when someone can walk into your basement and suddenly see the hundreds of mysterious suitcases that weren't there the day before. The only way any of these things could realistically approach being "untraceable" is if not a single person using it ever cashed out and they only spent the money on NFTs and other non-tangible items, and additionally nobody ever conducted physical barter with the NFTs. So basically if it becomes a very restricted and useless and inefficient version of a video game economy, except without the video game.
goodpoint 4y ago
You are completely missing the point and extracting the quote without context.
chalst 4y ago
Since you cite N N Taleb, you might be interested in his assessment of Bitcoin: > its current version, in spite of the hype, bitcoin failed to satisfy the notion of "currency without govern- ment" (it proved to not even be a currency at all), can be neither a short nor long term store of value (its expected value is no higher than 0), cannot operate as a reliable inflation hedge, and, worst of all, does not constitute, not even remotely, a safe haven for one’s investments, a shield against government tyranny, or a tail protection vehicle for catastrophic episodes. https://www.fooledbyrandomness.com/BTC-QF.pdf https://www.fooledbyrandomness.com/BTC-QF.pdf

llamaimperative 4y ago

No, the reason governments can do this is because people trust their IOUs. That’s why they can do the same thing with or without any underlying asset with any characteristics. The characteristics of the underlying asset would probably modulate the degree of trust people can put in a government’s IOUs, but considering e.g. the extent of people’s trust in the US (with no underlying), I think it’s fair to say if Bitcoin became this currency, governments would have no problem issuing IOUs for it that people would trust.

thebean11 4y ago
In the hypothetical future world where Bitcoin has replaced other currency, trust in the central bank is probably gone already (due to hyperinflation or devaluation most likely).
disruptalot 4y ago
Why would people accept bitcoin IOUs when the real thing is more interoperable, saleable, private etc.etc. and of course doesn't require trust in the issuer. The answer is force [0] [0] https://en.m.wikipedia.org/wiki/Executive_Order_6102 https://en.m.wikipedia.org/wiki/Executive_Order_6102
- dehrmann 4y ago
  This was clearly a due process violation by the same man who set up concentration camps for Japanese Americans. He packed the Supreme Court so he could get away with it.
- 8note 4y ago
  The IOUs would be more private since your transactions aren't public. Likely faster with better user experiences too, per Moxie's argument for why blockchain systems already look more like that.
- ethanbond 4y ago
  The same reason people accept IOUs for literally anything else: credit. It is actually extremely useful to be able to borrow productivity from the future and use it today.
  - tphyahoo2 4y ago
    Yanis was talking about the government central bank, under a time of stress. Without force, will the government have enough credit? This is what allows the big re-armaments before / during a war, btw. See for instance Hjalmar Schacht's mefo bills in https://en.wikipedia.org/wiki/German_rearmament https://en.wikipedia.org/wiki/German_rearmament In this case stealth rather than force but same principle. It's also a lot harder to do stealth with a non-inflating currency that has proof of reserves.
    - espadrine 4y ago
      Yanis was talking of lending. Lending in Bitcoin can happen in two ways: the first is through imaginary Bitcoin (“borrowed from future installments”) in a layer 2, which is what he was describing, although I agree that, unless the government mandates accepting money from that layer, it is hard to make it systemically used. The second one is to only lend coins that you have. In a deflationary monetary policy, lending is strongly disincentivized, as it would need to beat both the rate you would gain from the value of your coins increasing, and the default risk. Much of monetary policy is about finding a balance where financial institutions will be incentivized to lend despite the risk (which is already a hard sell even under inflation!) without nudging prices. It is plausible that a Bitcoin economy in stablestate (once coinbase transactions are no longer) would have very little lending. Is it outside of the realm of possibilities that, in such a world, innovation may decrease, and legacy becomes a more relevant factor for wealth?
tphyahoo2 4y ago
Governments certainly will attempt to issue IOUs backed by bitcoin. And some people will accept them. If you are willing to trust your bitcoin to an exchange, as many people are, you should certainly be willing to trust your government. But a lot of people hold their bitcoin offline, in hardware wallets, in cold storage. It's not that hard. Another feature that bitcoin has, that gold does not, is proof of reserves. Barely any exchanges do this, but this will change with time. Proof of reserves pretty much makes bitcoin IOUs for the government useless. You can't cheat by printing more. I think far fewer people will trust their government with bitcoin under a bitcoin standard, than trusted their government with gold under a gold standard. Particularly after a few governments default. I discuss this more in depth at https://web.archive.org/web/20210116135412/https://taaalk.co/t/bitcoin-maxima-other-crypto-things https://web.archive.org/web/20210116135412/https://taaalk.co... (long)
- ethanbond 4y ago
  Yeah that’s fair, if a few govts default who knows how that’ll shake things up. Thank you for the thoughtful response!
  - tphyahoo2 4y ago
    Thanks for having an open mind :)
- shadowgovt 4y ago
  Selection bias. The sort of people interested in BTC tend to be the ones who already don't trust government. I don't expect governments to cater to the mistrustful, so I don't anticipate governments adopting BTC as their core currency in my lifetime.
onlyrealcuzzo 4y ago
I think it's more due to force than trust. I don't particularly love the USD, but if I don't pay my taxes in USD, I'll go to jail.

gizmo686 4y ago

If you read the full answer, you would see that his position is that doing that is better than not doing it. If you are correct that it is even more difficult to do so, then his position is that bitcoin is even worse than gold in this regard. > When ‘Bitcoin maximalists’, as you call them, wax lyrical about the inability to print money (and celebrate this inability as Bitcoin’s feature, rather than its bug), they are being terribly unoriginal – banal, I dare say. Capitalism nearly died in 1929, and tens of millions did die in the war that ensued, because of this toxic fallacy that underpinned the Gold Standard then and Bitcoin now. Which fallacy? The fallacy of composition, as John Maynard Keynes called it. Regarding your specific points on the differences between gold and Bitcoin: * easy to counterfeit - Point to Bitcoin * hard to store securely - I'd class this as a point for Gold. * expensive to transact with at a distance - As opposed to Bitcoin, which is just expensive to transact; and gets more expensive the more people use it, as there is a finite amount of transactions per unit time. In practice, most people dealing with Bitcoin are dealing with it through ~banks~ exchanges which gave them a Bitcoin denominated IOU; and which may or may not be engaging in fractional reserve banking.

tphyahoo2 4y ago
"In practice, most people dealing with Bitcoin are dealing with it through ~banks~ exchanges which gave them a Bitcoin denominated IOU; and which may or may not be engaging in fractional reserve banking." You're not wrong. Most people do it with IOUs, ie exchanges. But most people, don't have most of the bitcoin. "Crypto Exchanges Hold 6.6% of Bitcoin Supply – One of the Lowest in History" https://bitcoinke.io/2021/09/percentage-of-bitcoins-on-exchanges/ https://bitcoinke.io/2021/09/percentage-of-bitcoins-on-excha... I'd like this number to be even lower. And as more exchanges (and governments) default, I expect it will be. "* hard to store securely - I'd class this as a point for Gold." fair to debate, a lot does get lost because people lose paper backups. but is this really harder than gold? I think it's largely unfamiliarity that will improve with time. "* expensive to transact with at a distance - As opposed to Bitcoin, which is just expensive to transact; and gets more expensive the more people use it, as there is a finite amount of transactions per unit time." if you don't understand how lightning works, of course you will believe this. lots of fud right now. encourage you to kick the tires here, and actually install a lightning wallet and see. as a retail guy, you can start selling slurpees via lightning, today. https://medium.com/coinmonks/strike-partners-with-shopify-blackhawk-and-ncr-to-bring-bitcoin-lightning-payments-to-merchants-a05a1ff3236f https://medium.com/coinmonks/strike-partners-with-shopify-bl... no it's not perfect, but it is non custodial. now imagine you are in venezuela or weimar germany.

Aunche 4y ago

> But bitcoin does not suffer from these defects. Ok. So you're a nation whose official currency is backed by Bitcoin. Suppose that years of economic depression have left your country's Bitcoin reserves relatively sparse. Suddenly, your neighboring country Fiatland is starting to mobilize for war thanks to their freshly printed money. Meanwhile, your nation is only able to raise Bitcoin bonds that must be paid with interest from your already tight Bitcoin reserves. Due to the uncertainty caused by the looming threat of war, Bitcoin interest rates skyrocket, so you're even further limited by the how much you're able to finance. The very obvious solution to this problem is to switch to fiat currency, so you're no longer constrained by some arbitrary limit defined in 2008.

deleted 4y ago
[deleted]
langitbiru 4y ago
It's funny that you mentioned war because Bitcoin proponents pointed fiat enables reckless wars. "Since the start of organized warfare, the crucial sinew of war had been “endless streams of money.” https://publications.armywarcollege.edu/pubs/2339.pdf https://publications.armywarcollege.edu/pubs/2339.pdf
- Aunche 4y ago
  Fiat enables. Period. Plenty of kingdoms and empires were able to finance their pointless wars with gold.
  - dmitriid 4y ago
    Two generations from now when new generations fight for scraps of deflationary money, those who amassed wealth early in the crypto cycle will definitely finance wars.
- shadowgovt 4y ago
  But if it enables war for fiat countries and constrains it for BTC countries, doesn't they imply a significant likelihood that the fiat countries will conquer the others?

roenxi 4y ago

I'm confident in my guess - both you & Yanis will be proven wrong in time. So far nobody in history has taken the complex heaving mass of the global economy and boiled it down to a simple forecast about what it will do when confronted with a new technology. We cannot foresee what is about to hit us. Roughly every possible outcome has been forecast by someone. An untracable, unstoppable & untaxable cryptocurrency might be developed if we get lucky with the research into Zero-Knowledge proofs or a related field. That would be revolutionary in a profound sense.

tphyahoo2 4y ago
Even if this untraceability / unstoppability was possible, it might not be as revolutionary as you'd think. It's sort of the same problem as email with pgp. You not only have to secure your email, you also have to secure your counterparty and anyone he forwards your email to. Money is like that as well. So even if monero wins, or bitcoin becomes like monero, there'd still be tax. There was tax under gold. Bitcoin isn't about ending tax.
throwaway82652 4y ago
>An untracable, unstoppable & untaxable cryptocurrency might be developed No, this will never happen and it makes no sense to actually want this, not only is it physically impossible but it's a total misunderstanding of threat modeling. The main thing these comments always miss is that these transactions only exist to serve a purpose in the real world. You can come up with all the cryptographic solutions that you want to hide communications but it means very little when someone can walk into your basement and suddenly see the hundreds of mysterious suitcases that weren't there the day before. The only way any of these things could realistically approach being "untraceable" is if not a single person using it ever cashed out and they only spent the money on NFTs and other non-tangible items, and additionally nobody ever conducted physical barter with the NFTs. So basically if it becomes a very restricted and useless and inefficient version of a video game economy, except without the video game.

goodpoint 4y ago

You are completely missing the point and extracting the quote without context.

chalst 4y ago

Since you cite N N Taleb, you might be interested in his assessment of Bitcoin: > its current version, in spite of the hype, bitcoin failed to satisfy the notion of "currency without govern- ment" (it proved to not even be a currency at all), can be neither a short nor long term store of value (its expected value is no higher than 0), cannot operate as a reliable inflation hedge, and, worst of all, does not constitute, not even remotely, a safe haven for one’s investments, a shield against government tyranny, or a tail protection vehicle for catastrophic episodes. https://www.fooledbyrandomness.com/BTC-QF.pdf https://www.fooledbyrandomness.com/BTC-QF.pdf