UNEQUIVOCAL ANSWERS TO AN EQUIVOCAL FOUNTAIN OF ANTI-BITCOIN PROPAGANDA
…Regular print: Daron Acemoglu …Answers in green: Oswaldo Lairet
Money depends on trust. It is accepted in exchange for goods and services only because people can confidently assume that others will accept it in the future.
If money depended on trust there would be no need to force it as tender under legal penalties.Trust cannot be imposed, it needs to be earned.
This is as true for the US dollar as it is for gold.
Not true for the US dollar. On the contrary, since centralizing US dollar issuance in 1913, the FED has endlessly replicated it, at the expense of debasing the population’s purchasing power. Conversely, Gold is irreplicable, as real money should always be.
To argue that cryptocurrencies like Bitcoin are merely a confidence game – or a speculative bubble, as many economists have emphasized – is to ignore their popularity.
Bitcoin is the only decentralized digital asset there is. What you call “cryptocurrencies” are worthless copycat schemes controlled by human insiders that benefit from manipulating them at will, exactly as has been happening with fiat currencies since 1971.
Trust thus ebbs and flows, making them fragile and volatile, as Bitcoin’s wild gyrations have amply demonstrated.
Judging Bitcoin’s price-discovery based on its fiat currency pricing is just as naive, as judging the pricing of stocks, bonds or real estate based on the artificial valuations derived from forcing hurdle rates to zero. Central bank manipulation of the price of money is behind the apparent pricing stability, you are comparing Bitcoin against.
Moreover, with Bitcoin and other cryptocurrencies that rely on “proof-of-work” mechanisms, transactions must be continuously verified and logged in a decentralized ledger (in this instance based on blockchain). This requires millions of computers to operate continuously to update and verify transactions – work that is incentivized by the opportunity to be rewarded with newly minted Bitcoin.
On the other hand, imposing the US dollar requires the threat of violence, implemented via arming the nation for war and submitting the citizenship by force.
The energy consumed in these “mining” operations now exceeds that of a medium-sized country like Malaysia or Sweden. Bitcoin’s global annual energy consumption is 189 Tera Watt-hours (TWh). That amounts to 0.1% of 160,000 TWh in global annual energy consumption. Incidentally, it is appalling to find that instead of performing comparative research, a trained economist would prefer to idly echo intentionally misleading media narratives.
Now that the world has awoken to the dangers of climate change (and to the paltriness of our response to it so far), this massive waste should make Bitcoin highly unattractive.
What is unattractive is to employ any amount of energy whatsoever, towards issuing replicable and therefore corruptible fiat currencies.
And yet, despite its volatility, fragility, and massive carbon footprint, five factors have conspired to make Bitcoin an attractive proposition to many people: its political narrative; the criminal activities it enables; the seigniorage it distributes; the techno-optimism of the current age; and the desire to get rich quick at a time when few other economic opportunities beckon. Let’s consider each in turn, going in reverse order.
What you are truly describing in this initial paragraph are the attributes of fiat money, not Bitcoin, as proven by the factual data presented below:
We live in an era of dwindling economic prospects. Even workers with a college degree can no longer count on securing a stable job with good and rising pay. When economic opportunities are so scarce, get-rich-quick schemes become especially alluring. Not surprisingly, there is now an entire industry dedicated to telling people that they, too, can strike gold by investing in Bitcoin. Money has been pouring into the cryptocurrency because millions of people in the United States and around the world think they can realize significant returns from it.
Re get-rich-quick schemes, you must be referring to either the stock market or those scheming “cryptocurrencies” you keep mentioning. Conversely, Bitcoin has been trashed, mocked, discredited and dismissed globally since 2013, by the mainstream media, the political class and hordes of economists like yourself. Yet, because self=interested narratives don’t stand a chance against the truth in the long term, none of your duplicitous narratives have been able to kill it.
The narrative of massive returns for amateur and retail investors from a cryptocurrency is in keeping with our technology-obsessed age. We are constantly being told that technological ingenuity is creating a brighter future. And on the surface, there is no denying that Bitcoin is a marvel of technological innovation. It took genuine creativity and mastery to create such an intricate decentralized system, capable of functioning without any oversight or government enforcement.Seigniorage, or the additional purchasing power conferred (typically to governments) by control of the money supply, is another factor in Bitcoin’s appeal. When the US government puts new currency into circulation, it can use it to purchase services or pay its debt. The prospect of gaining seigniorage is very attractive, and probably helps to explain why there are now more than 1,600 listed cryptocurrencies. In the case of Bitcoin, the absence of a centralized authority means that seigniorage is distributed, thus providing an incentive for mining efforts (which are now being conducted by more than a million people around the world).
Purposely misusing the term Seigniorage in reference to Bitcoin will not confuse knowledgeable readers. Seigniorage is the difference between the face value of money and the cost to produce it. Thus, if paying Bitcoin miners for Bitcoin’s cost of issuance is Seigniorage, then paying gold miners for digging gold would count as Seigniorage in a totally absurd and misleading application of the word.
A dedicated source of demand can help a new currency establish a reliable footing. For cryptocurrencies in general, and for Bitcoin in particular, this anchor is planted firmly in the criminal world. In its early days, demand for Bitcoin was boosted by dark-web sites such as Silk Road, which enabled all sorts of illicit transactions. To this day, criminal activities account for almost half of Bitcoin transactions, by some estimates.
What is criminal is to continue trying to stigmatize Bitcoin in 2021, using the same narrative that has been thoroughly proven false, not only by specialized U.S. government contractors such as Chainalysis, whose latest report confirms 2020 “cryptocurrencies” illicit transactions totaled 0.34%, but also by properly researching why Bitcoin’s pseudonymous addressing can be easily tracked, as both the FBI and the real crooks have known since 2013. On the other hand, nothing can come from fiat currency counterfeiting, but the thick and intricate net of double standards, undeserved power, cronyism, corruption, lies, hidden agendas and criminal behavior that fiat currencies have been unleashing since 1971. As recently proven by The FinCEN Files Investigation, where such as JP Morgan Chase, HSBC, Barclays Bank, Standard Chartered Bank, Deutsche Bank and Bank of New York Mellon, were confirmed to have moved for18 years, more than $2 trillion in payments they knew were suspicious.
Each of these four factors has boosted Bitcoin artificially. Obviously, our society’s economic ills will not be solved by people making money from Bitcoin. Nor has the prevailing techno-optimist mood been borne out in the real world. And whatever benefits there are from distributing seigniorage via mining, they are more than offset by the massive waste of energy.
Again, instead of blindly following baseless and self-interested mainstream media speculation, notice why the real data linked above, proves both of your assertions wrong, categorically.
That leaves the political argument for Bitcoin. Will it liberate us from undue state power over the economy? Not really.True, the US Federal Reserve sometimes acts in mysterious ways, and the Wall Street bailout during the 2008 financial crisis was rightly seen as an inside job that benefited banks and bankers at the expense of ordinary people. The desire to reduce politicians and policymakers’ excessive power is thus understandable.But Bitcoin is not the answer. It appeals to a puerile libertarian ideology in which a lone genius battles an overweening state to liberate individual excellence. Indeed, the real-world person – or persons – who designed Bitcoin and wrote its inspiring manifesto under the pseudonym Satoshi Nakamoto is even more deserving of the “visionary” label than the fictional John Galt (the hero of Ayn Rand’s Atlas Shrugged). Yet the vision itself is pure fantasy. The risk of Western governments producing runaway inflation or undermining the international monetary system is vanishingly small.The real existential threat today lies in political polarization, the unraveling of democracy, and democratic political systems’ inability to keep economic elites and authoritarian politicians in check. A new currency will not solve these problems. What is needed are measures to ensure that politicians, bureaucrats, and Silicon Valley and Wall Street tycoons act responsibly. This requires democratic participation and active civic engagement. Gimmicks like Bitcoin are a distraction from the real work that must be done.
Everything you are stating and promising in this last paragraph is exactly what self-interested elites have kept offering their subjects for millennia, while harnessing as large a share of everyone’s income and resources as they can, especially, since the dawn of the twentieth century. As Mogg and Davidson’s 1997 The Sovereign Individual asserted, “Persistent make-believe” of the kind that disguised the fall of the Roman Empire  is a typical feature of the decomposition of large political entities and now disguises and masks the collapse of the nation-state.”
Hence, contrary to your unfounded arguments against Bitcoin, the information society launched by the global spread of the microprocessor over the past four decades is about to start using the only digital asset there is to place resources in cyberspace, outside of the reach of its current enslavers. Through Bitcoin, private individuals all over the world, become immune to fiat-currency debasement, the premeditated theft performed by the politico-financial power elites that rob them of their private property.
Much to your chagrin and that of your enablers using rhetorical fallacies, misinformation and the omission of factual data, Bitcoin’s astonishing accomplishments against monetary corruption is destined to stop global power elites from continuing to capture at will, the population’s life-savings and their productivity’s ongoing economic value added.
The final answer then is YES! Bitcoin Fixes This!