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Musings Report 2021-29 7-17-21 Here's What's Wrong with Cryptos
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For those who are new to the Musings reports: they're a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
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Here's What's Wrong with Cryptos
Given the splintering of the cryptocurrency space into bitterly acrimonious warring tribes (updating the scene in the Monty Python film Life of Brian, the People's Front of Crypto, Crypto People's Front, Crypto Popular People's Front, etc.) that take no prisoners--"the only things we hate more that fiat currencies are the Crypto People's Front and the Crypto Popular People's Front"-- it would unwise to go public with any criticism of cryptos, no matter how modest and measured.
Those of you who engaged in radical political groups know this is exactly how it goes: the real bile is saved for rival groups, not the status quo.
And so we see rabid Bitcoin Maximalists, various warring camps in the Ethereum space, speculators pumping and dumping several thousand alt-coins and tokens, and buried beneath this sea of acrimony, a layer of serious programmers trying to advance the utility of the blockchain and cryptos.
Then there are the endless technical battles (proof of work vs. proof of stake, etc.), regulatory debates, and so on.
I have spent quite a few years thinking about the potential of cryptos, for example this blog post from 2013 (Could Bitcoin (or equivalent) Become a Global Reserve Currency? November 7, 2013); this interest culminated in my 2015 book A Radically Beneficial World that outlines how a labor-backed cryptocurrency would work.
From my observational perch, the utility of cryptos has been swept aside by the speculative frenzy to become millionaires from trading cryptos.
Every advance is touted not for its actual utility but as a driver of a moonshot in valuation that will make speculators rich.
This is what's wrong with cryptos: they have become an extension of the existing financial system, and thus everything that is wrong with the status quo financial system.
For example, MicroStrategy borrows $500 million in the existing financial system to buy more bitcoin, not as a utility but as a means to get richer.
The problem with seeing cryptos as a means to get rich is that the real wealth is only made by the earliest buyers/ miners/ promoters. Compare the profits reaped by those who bought bitcoin at $10, $100 or even $1,000 to those who bought at $30,000 or $40,000. Those buyers had to have the trading moxie to have sold at $60,000, and many didn't, persuaded by the HODL ideology (hold on for dear life).
Late entrants can lose a fortune rather than reap one, as the speculative frenzy generates extreme volatility.
The big problem in my view is cryptos in their current configuration are not designed to alleviate poverty or enable a localized, efficient DeGrowth economy. Proponents can argue that cryptos are "part of the solution" because they're decentralized sound money, and so on, but nothing in their design precludes them from being bought up/hoarded by the wealthy, just like all other assets.
In contrast, a labor-backed currency doesn't enrich miners (there are none in my model) or early entrants, as the currency has a demurrage function much like airline miles: any currency sitting unused in an account will expire.
(I detail how a Level II labor-backed currency could become permanent so that it could be used as a reserve currency, but this is a specially designated type of crypto not for everyday use.)
A labor-backed currency is only issued as payment for work that benefits the community and that meets specific guidelines: there must be evidence the work was completed and that it meets the guidelines for approved community-based projects.
There are other concepts that extend beyond the proof-of-work/stake miners/smart-contract milieus, for example, Ben Hunt's "proof of plant" idea:
"Proof-of-plant is a method for the tokenization of symbolic betting markets in positive social goods, and I think this is how crypto will change the world. Not as “money” and not as Bitcoin! TM and not as a security and not as this speculative coin versus that speculative coin. Not by facilitating a market of goods, but by facilitating a market of GOOD."
The problem with this (and other similar concepts) is there is no actual mechanism for issuing cryptocurrency that has rules that can be instantiated in software and that map to the messy real world.
Suffice it to say that the cryptos of today are unlikely to be the final iteration, and while the world's wealthy will place a premium on sound money-crypto and use the existing system to scoop 90% of it up, what the world really needs is a new non-debt-based monetary mechanism for alleviating chronic poverty via wages that builds a localized, decentralized community-based economy with rules that require transparency, competition, fairness, adaptability, responsiveness and accountability--the key sources of systemic stability and sustainability.
Highlights of the Blog
Welcome to the 21st Century Sequel of the Catastrophic 1600s 7/16/21
Here's Why America's Labor-Shortage Will Drive Inflation Higher 7/14/21
The $50 Trillion Plundered from Workers by America's Aristocracy Is Trickling Back 7/12/21
Best Thing That Happened To Me This Week
Fixed our $14 toaster (purchased at Walmart two years ago)--the lever wouldn't stay down. At first I thought the problem was a mechanical catch had worn out, but YouTube University raised the possibility that the catch was a magnet which was no longer connecting to the steel plate due to crumbs/debris.
Removed two screws, cleaned the magnet and steel plate, and it works fine. Probably 95% to 99% of all toasters with similar problems end up in the landfill, alas, because few people are willing/able to pursue even modest repairs/cleaning and the toaster isn't worth enough to take to a repair shop (if such even exist)..
On the homemade food front, here's a banana cake (bread recipe in a Bundt pan) with our own grated coconut and bananas, and hand-rolled whole wheat tortillas.
From Left Field
To Be Sustainable, Green Energy Must Generate Adequate Taxable Revenue -- Gail Tverberg makes extremely important points about alt-energy's subsidies and true net profitability...
Let's Talk About Infrastructure -- and the lifespan of modern concrete....
Manifesto of a Paleo Fellow Traveller: book review of "The Stakes: America at the Point of No Return"
Living Off-Grid Seemed Like Fun Until I Tried it -- a poor plan due to over-reach/unrealistic goals, undercapitalization, insufficient skills--been there, done that... a better plan would have been to build a snug 12 ft. by 16 ft. plywood structure that could be insulated, then repurposed later as a tool shed or guest room...and start by graveling the driveway...
Who is the Emperor of the World? The New Age of Epistemic Dominance -- comparing Google to social media....
Upcoming $1.4B Grayscale Bitcoin Unlock Could Collapse Bitcoin
Nina Teicholz at TEDxEast: The Big Fat Surprise (via Patrick S.)
Job Openings Are at Record Highs. Why Aren’t Unemployed Americans Filling Them? (WSJ.cpm)
Is Global Collapse Imminent? Resources are being used up at a rapid rate, pollution is rising, industrial output and food per capita is rising. The population is rising quickly.
The End of the Industrial Age is Set in Concrete
MIT Predicted in 1972 That Society Will Collapse This Century. New Research Shows We’re on Schedule.
The true extent of America’s food monopolies, and who pays the price -- multiple brands, a handful of corporations...
"In our society, there seems a general rule that, the more obviously one's work benefits other people, the less one is likely to be paid for it." David Graeber
Thanks for reading--
charles |
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