Bitcoin: The Oligarch Privatisation Of Money (Part Two)
“But a percentage of the profits is fair, right? I mean, the idea is his startup!”
That was a question my friend asked me after explaining to him the concept of Bitcoin — and the fact its creator kept one million of the total 21 million available.
It is an insightful question.
Answering it unfolds a key element of what Bitcoin REALLY is:
The implications are far greater than one can initially imagine.
Why?
The question I have is...
Is this what the world really needs right now?
The Dark Side Of Austrian School
If you want to build a theory of economics, one way is to focus on competition, and the other is to focus on entrepreneurship.
Neoclassical economics focused on competition, which drove the development of a static model described by easy mathematics.
Had the focus been on entrepreneurship, the model would be dynamic instead of static, for which no easy mathematics is available.
That was one of the key contributions of the Austrian school of economics — dispelling the neoclassical belief of a perfect world seeking a static equilibrium state.
Less discussed is that Austrian economists expected monopolies to form in an increasingly dynamic economy.
“There are exactly two kinds of businesses in this world; businesses that are perfectly competitive and businesses that are monopolies. There's shockingly little in between and this dichotomy is not understood very well because people are constantly lying about the nature of the businesses they're in.” —Peter Thiel
Such dynamics have been fast-forwarded by tech network effects, exemplified by Facebook and Google.
In truth, the initial intention of the Internet was the opposite.
Early Internet pioneers believed that the Internet would be a great democratizer.
They were wrong.
It turned out to be the greatest centralizer in human history!
The phenomenon is described in great detail in the book “The Curse of Bigness” by Tim Wu.
What's worse, tech monopolies have not necessarily solved the REAL problems in the world—had they done so, we would have better managed Climate Change by now instead of wasting time on Facebook watching Funny Cat Videos.
“The fact is that many of our most important technologies have drifted from the goal of enhancing and serving humanity.” —Tim Wu
The second question I have is...
Is the fascination with Bitcoin diverting us from addressing REAL problems in the same way we can stare at Funny Cat Videos all day and accomplish nothing?
A Viral Effect Of False Narratives
Bitcoin is something like Funny Cat Videos - both attract a great deal of attention.
That is something that Robert Shiller argues in his book “Narrative Economics” on how contagious stories affect people’s economic decisions.
He proposed a new economic model based on seven propositions, with one of them that the “truth is not enough to stop false narratives”.
When false narratives spread quickly, the truth can be slow to catch up, and the damage may already have been done when it does.
“Ultimately, a story’s contagion rate is unaffected by its underlying truth. A contagious story is one that quickly grabs the attention of and makes an impression on another person, whether that story is true or not.” —Robert Shiller
Bitcoin's success is not because it is backed by gold but because a constellation of false narratives backs it.
“Few people who trade Bitcoins understand this technology. When I encounter Bitcoin enthusiasts, I often ask them to explain some of its underlying concepts and theories, such as the Merkle tree or the Elliptic Curve Digital Signature Algorithm, or to describe Bitcoin as an equilibrium of a congestion-queuing game with limited throughput. Typically the response is a blank stare.” —Robert Shiller
In that perspective, Bitcoin economics is not explained by the Economic Austrian School but by epidemiology mathematics as in virology.
领英推荐
The narrative phenomenon occurs when Bitcoin Believers feel attacked in their belief system.
Bitcoin Believers tend to shun arguments against their dear cryptocurrency, preferring instead to fall back on uninformed narratives.
The third question I have is...
How will Bitcoin Believers fix the world as originally promised if they can't handle criticism and fall prey to false narratives?
Do We Have Alternatives?
In this article, I’ve presented the main dangers of Bitcoin:
Unfortunately, we don’t seem to have the intellectual capacity from the current economic schools, let alone the Bitcoin community, to address these critical aspects.
“I don't think anyone's an expert in Bitcoin” —Eric Weinstein
To align this new technology with the real needs of society, it will be crucial to:
Until then, Bitcoin Believers will continue to ignore valid criticisms of their cryptocurrency, preventing the technology from being used as originally intended.
The danger of being stalled in their thinking is real.
A potential new crypto could disrupt the market and disprove all of the narratives Bitcoin is currently sitting in.
“I simply can't see Bitcoin surviving because I think those design flaws there's too many of them and it's too close to the crunch time on a whole range of those like in the next decade. There's often what it’s called ‘The First Mover Advantage’ but I think Bitcoin is ‘The First Mover Disadvantage’ because of those mistakes and the design of the system on top of it. Some of the other cryptocurrencies which are being developed may well end up succeeding using the original ideas of Bitcoin.” —Steve Keen
The final question I have is...
What truth, technology & economic theory can be created to eliminate the danger of a Bitcoin oligarchy system?
Thank you for reading this newsletter!
What Can You Do
The way we perceive Bitcoin reflects the way we perceive the world.
And the way we perceive the world is the way we perceive ourselves.
Ultimately, our actions are driven by perceptions that guide us in our decision-making.
I coach people who feel trapped in their mental prisons — all of us do.
And has with Bitcoin, so there is a constellation of narratives that we build over the years about ourselves and the others.
There are ideas so commonplace that they become invisible to us.
Debunking common thinking, therefore, is critical to the development of our thinking
If you want to learn more about how your narratives can be challenged, don’t hesitate to schedule an introduction call here
Alternatively, feel free to DM for more information.
Nuno Reis
Former Bitcoin believer turned into a Bitcoin sceptic.
Disclaimer:
This newsletter does not represent the views of the author’s employer and is not a financial or investment advice.
It intends to be a psychological, philosophical and systemic approach to the Bitcoin phenomenon to elevate the consciousness levels in the finance industry.
The newsletter is about Bitcoin and should not be generalised as views to the wider theme of Blockchain technology.
The writing of this article intends to be gender-neutral.