Unfortunately bitcoin alone doesn‘t fix the fundamental problem
2023-06-24 12:00:00 +0700 by Mark Smith
Bitcoin and crypto in general are truely marvelous technologies. I've spent the past year or so really going deep to try to understand the fundamental dynamics. Along the way I've learnt a lot about the current financial system, as well as the history of money and trade, and of course thought about the possibilities that these new monies could open up in our future.
The conclusion that I think I'm reluctantly coming towards is that bitcoin and crypto alone don't solve the fundamental problem, and in fact I think it's very likely they could make it a lot worse. As with a lot of things that are present in so many of the things we do as humans, it's a mixed bag. It could undoubtably make things better in many respects, but at the same time it could make things worse for a lot of people.
The fundamental problem is that people exploit other people
I think the fundamental problem, and I say this knowing it's rather vague, but you have to start somewhere. If I were to put it into words it would be something like - people exploit other people. Of course it's much more nuanced and it's a spectrum with well paid, fullfilling and consentual jobs and businesses on one end and really unpleasant things like slavery, entrapment, starvation, thirst and other types of physical and psychological mutilations on the other.
How people treat each other varies enormously. I've travelled to many places around the world, seen and experienced many cultures, and it's abundantly clear to me that the notion that most people are good, is totally incorrect. In some situations, it's the complete opposite. Now whether it's malice or some sort of emergent group behaviour, or a combination, is perhaps something different entirely, however the fact remains that some people are treated horrendously by others.
One way to think about it, and admitedly it's a somewhat crude way of approaching a very complex situation, but I think it's useful nonetheless because you can get a sort of macro sense of what might be happening, is to imagine that people either fix or break other people's lives. Again it's a spectrum, from small breakages to things that are more permanent or even terminal. People can be both fixers and breakers, at the same time even. Life is full of contradiction.
We have to fix much faster than we break
In this hypothetical world of fixers and breakers it's pretty clear that overall the fixing has to happen faster than the breaking, or else eventually everyone and everything will end up broken. You can look at the world at many scales from countries to individual people's lives, but it's sort of the same result. The reality is that we all live on the same planet shaped boat.
Current fixing rates are woefully innadequate
You just have to spend a little while speaking with homeless people, or indeed have a brush with homelessness yourself to realise that the fixing rates are woefully inadequate in most places. Supply outstrips demand 99 to 1, yet there's not enough. Yes but all homeless people are drug addicts you might say. Well there might be some truth to that statement, but the question is what circumstances led to that. There are very bad people out there who benefit enormously from thoroughly breaking other people's lives. We aren't talking about lone individuals either, we are talking groups that cement their places in society by ruthlessly oppressing others.
There are also many people in need of help that are sober, and even for them it's an almost impossible existence. Guess what looks like addiction: hunger and thirst. In fact it's basically the same thing, humans are in a sense food and water addicts. Thinking all homless people are drug addicts is not only incorrect but it's basically a death sentence to sober homeless people. And one day you too could be a sober homeless person fighting for your right to survive because others broke your life.
Crypto ups the game by an order of magnitude
The thing with crypto is that it opens up enormous possibilities for everyone. That's great in an evenly ballanced world, but the reality is that people that break other people's lives whether through malice or misguidely thinking they are doing the opposite, are much more active. Much like the dynamics in open source software, there are just more people trying to find exploits (notice the similarity in language) than there are people writting and fixing the software.
That's the current state of affairs, but we are entering a period of rapid change. Crypto technologies could enable great things to happen, lets say it's an order of magnitude change, well if the fixing rates remain the same, then things will necessarily get a lot worse for many. And we aren't just talking about homeless people, or people in developing countries. Think about how many people are stuck in jobs or relationships they want out of. This issue cuts across all parts of the world and through all parts of society. I don't see any evidence that fixing rates got any better in the previous big monetary system change. Moving from gold to fiat money made a lot of things possible, but I would argue that fixing rates didn't increase proportionately.
AI will up the game even more
Remember also that this is happening at the same time as the mass introduction of powerful AI technologies that can analize our collective behaviours in mindboggling detail. That's at least an additional order of magnitude in the technological power available. Oh and guess what, after that it's quantum computing. Yet another order of magnitude.
AI financing is the subject of this week's newsletter, the part about cost curves and training is particulary relevant. Out a bit later today @ 12:45 +07:00:
The Economics of Catching the AI Wave (Issue #120)
In a different world
In a different world, bitcoin and crypto could be truely amazing. Yesterday I had the realisation that if a small amount of people are controlling the supply of fiat money, the equivalent to controlling water spigots, literally starving and thirsting vaste swathes of people, then why not create new monies, new water supplies? Surely it's the moral thing to do.
I imagined a world where there were a multitude of crypto currencies, for different loosely affiliated groups. Coins for scientists, coins for musicians, for people into a multitude of fringe and mainstream hobbies. Initially it sounds like it would be too complicated, but with a bit of imagination it needn't be. You would be able to effortlessly spend all of these from your crypto wallet because all shops would be crypto exchanges, and your wallet would be smart enough, because of AI, to always have enough for what you needed or wanted to do. With integrations with other AI software that would help you manage other aspects of your life, it's not unfathomable to think that it could 'just work'.
And by the way, it really is a small amount of people controlling the spigots, cash money is being created at 7 times the rate than actual humans are being created. That's an indication to the current ridiculous innequality throughout the world. It's so mindboggling that it's difficult to fully comprehend. It doesn't have to be that way though. Things could be a lot better for everyone.
And that's why I'm so conflicted on crypto. I return to the main point of the article. These amazing bitcoin and crypto technologies simply are not enough. IMO the cultural make up of our societies is in a state that could make crypto adoption very dangerous long term, where a class of folks, that remain somewhat in the shadows, have enormous power by ensuring breakages in peoples lives happen faster than they get fixed.
That's the core dynamic that needs to be fixed. Maybe Fiat is the worste money, but until the breakages problem is handled, perhaps it's only the worste money except for all the others.