_Broken Money_ book club, part 2 \ stacker news ~bitcoin

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101.5k sats \ 70 comments \ @elvismercury 18 Oct 2023 bitcoin

Amigos, it's time to explore part 2 of Lyn Alden's book Broken Money.

The general pattern will be the same as it was in part 1 -- I'll stir the drink a bit with some high-level comments inspired by these sections of the book, but you should feel free to comment in whatever way your heart moves you.

Caveat: I am neither a historian of money nor of the hermeneutics of Lyn Alden. I'm just some guy. These are just some thoughts.

Let's do it, @k00b, @carlosfandango, @satscats, @ekzyis, @q, @lawndough, @0fje0, @OsomSala49491, @fred, @BTCMagician, @Undisciplined. (Sorry if I forgot anyone who wanted to be poked!)

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338 sats \ 18 replies \ @elvismercury OP 18 Oct 2023

Part 2 of Broken Money describes many ways in which banks have historically been important and powerful. Bitcoiners often focus on abuses of this power (which are usually easier to see), but what if we flip it the other way, and ask: what kind of institutions and functions could be similarly important and useful to the bitcoin ecosystem as banks are to fiat?

380 sats \ 17 replies \ @Undisciplined 18 Oct 2023

Functioning credit markets are generally considered to be extremely important for facilitating consumption smoothing over a person's lifetime. Basically, not having to wait until you're 50 to own a home, even if you have a good job.

I also think most people are not going to want the responsibility of handling their own keys and there will be demand for banks that hold people's savings for them.

161 sats \ 0 replies \ @elvismercury OP 18 Oct 2023

If there's one thing I'm sure of -- and I'm sure of almost nothing -- it's that your latter point is spot on. There's never been a course of human events where most people were like "Hey, you know what, I'd like to do a bunch more work and manage a lot of complexity that I don't understand."

At best, the complexity just sort of diffuses and gets absorbed into other things. But more often it's irreducible, and now someone else owns that complexity. And with btc, in fact, there's this foundational issue of what constitutes ownership and sovereignty. So there's a tension between where all of human endeavor wants to go, and what the more hardcore btc folks advocate for.

161 sats \ 0 replies \ @k00b 18 Oct 2023

Functioning credit markets are generally considered to be extremely important for facilitating consumption smoothing over a person's lifetime.

Credit as consumption smoothing is a lovely framing. tbh it blew my mind a bit.

110 sats \ 9 replies \ @siggy47 18 Oct 2023

Did you listen to the What Bitcoin Did episode with Jeff Booth and George Gammon? A big part of the discussion involves whether an inevitable fractional reserve system would emerge under a bitcoin standard. https://fountain.fm/episode/LsJM0bmcjFAiElUzUlH1

185 sats \ 8 replies \ @Undisciplined 18 Oct 2023

I didn't, but I have pretty much always been in the camp that believes fractional reserve banking is inevitable (on any monetary standard). The incentive to cheat is just too high, as is the ability to get away with it for awhile.

132 sats \ 3 replies \ @elvismercury OP 19 Oct 2023

Do you think fractional reserve can only emerge as a result of cheating, and has no actual utility?

This is something I'm wrestling with, drawing inspiration from the history of free banking, and from Selgin's book Good Money which probably was the single-biggest influence in getting me to think about btc seriously, which is ironic.

152 sats \ 2 replies \ @Undisciplined 19 Oct 2023

I haven't done a deep dive into this debate. I know much ink has been spilled on the question.

However, I think even in a framework of contract based fractional reserve banking, the temptation to cheat would prove irresistible. If the contractual arrangement specifies a 10% reserve, some lenders are going to push it to 9.9% and hope they get away with it.

132 sats \ 1 reply \ @elvismercury OP 19 Oct 2023

Agreed, that has historically been the temptation. In the brave new world of blockchains, though, I think we have a means to put an end to that -- define the fractional reserve limit in advance, and make it visible to all. I suspect this is inevitable, and we'll see in practice how it shakes out.

0 sats \ 0 replies \ @Undisciplined 19 Oct 2023

People thought gold was safe, too. Then bankers invented paper gold certificates.

You're right that this new verification technology makes it possible for people who really care to have high confidence in the integrity of the reserves. However, there will be bad actors who obfuscate what they're actually doing and lure in customers with the promise of higher returns.

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110 sats \ 3 replies \ @siggy47 18 Oct 2023

I agree. I know this is heretical to some, but a fractional reserve system could be much less susceptible to fraud and manipulation with bitcoin as the asset. Gold is notoriously difficult to audit, even with good intentions. Bitcoin's ease of custody and transparent ledger could foster a whole new credit system.

143 sats \ 0 replies \ @elvismercury OP 18 Oct 2023

I'm with you on this one -- fractional reserve is a tool that affords certain things, and you pay for those affordances w/ certain failure modes. If you make a drastic change to some underlying aspect of how it works, you should expect different outcomes to ensue.

Given the (what seems to me) genuine utility in institutions that do a good job in assessing something akin to credit-worthiness, deploying capital, etc., I can see an explosion of new types of fractional-reserve constructs and institutions made possible because of btc.

33 sats \ 1 reply \ @Undisciplined 18 Oct 2023

Where bitcoin strikes me as particularly interesting in this regard, is that the free market remedy for fractional reserve banking is bank runs and those can occur very rapidly with digital money.

That means you're probably right that bitcoin will greatly reign in the amount of fractional reserve banking that occurs.

110 sats \ 0 replies \ @elvismercury OP 18 Oct 2023

Yeah, this is one of those really interesting cases where velocity would seem to unlock some new possibilities -- kind of like the financial analogue of more is different.

It's hard (for me) to reason about what this will actually mean, but also obvious (to me) that it will mean something.

110 sats \ 4 replies \ @ek 18 Oct 2023

Functioning credit markets are generally considered to be extremely important for facilitating consumption smoothing over a person's lifetime. Basically, not having to wait until you're 50 to own a home, even if you have a good job.

I thought the causal relationship is the other way around: Because we have functioning credit markets, it's actually hard to own a home without credit?

200 sats \ 3 replies \ @Undisciplined 18 Oct 2023

I think where that shows up is in the types of homes that get produced. Absent credit markets, more cheap starter homes would be produced, because young people can't afford to buy the kind of house they ultimately want to live in.

The consumption smoothing allowed by credit markets let's people live closer to the conditions justified by their lifetime earnings for more of their lifetime.

110 sats \ 2 replies \ @elvismercury OP 18 Oct 2023

It's interesting to think about how this is bound up, at least in my mind, with environmental predictability. For instance, once upon a time you were a plumber, and people had a good idea (or what they did) about the prospects of a plumber. And now, if you were trying to predict a person's prospects, wtf would you even guess?

If credit is super important to function in society, and yet the basis for estimating it is fraught and getting more fraught, what happens downstream of that? Does btc change this calculus at all?

152 sats \ 1 reply \ @Undisciplined 18 Oct 2023

Forecasting lifetime earnings for particular professions might be getting more difficult, but earnings are somewhat reliably forecastable based just on factors like parental education and earnings, so there are lots of adjustments people can make to continue earning a living.

We are really bad at understanding non-linear trends, like technological advancement, though. That will likely cause people to underestimate their real lifetime earnings.

Bitcoin at least removes all the volatility from our unstable monetary regime, so it should improve consumption smoothing.

0 sats \ 0 replies \ @elvismercury OP 19 Oct 2023

We are really bad at understanding non-linear trends, like technological advancement, though. That will likely cause people to underestimate their real lifetime earnings.

Or perhaps to over-estimate them. I think generative AI is going to be a profound change in how work gets done, and what work there is to do. I think it will bring civilization to face a hard truth about who is capable of doing what.

Related to this comment in its implications.

210 sats \ 7 replies \ @elvismercury OP 18 Oct 2023

If you're reading SN, and you're reading this post, you've likely been inundated with information on topics pertaining to the development of banks, the rise of fiat, and the implications of those structures.

Given your likely background in these matters, what stood out for you from part 2? What made an impression? What threads would you like to pull?

100 sats \ 6 replies \ @k00b 18 Oct 2023

When I was reading the proto-banking chapter, the overarching theme for me was trust as a scaling solution. After reading @wefofficial's trust as a scaling solution essay collection, I can't not think of trust this way.

The Hawaladars and suftaja were such vivid examples of trust being used like it were a technology.

100 sats \ 2 replies \ @elvismercury OP 18 Oct 2023

I hadn't seen those essays and they sound amazing, so thanks for the link! And "trust as tech" is, upon reflection, exactly right. Not just metaphorically right, but literally true based on a definition of technology that describes it as a force-amplifying tool.

The idea that trust is bad, and that we would be better off without it, is one of my most foundational beefs w/ the maxi narrative as one encounters it in the wild. (Not saying that this is a necessary or ubiquitous point of view, but I am saying that you literally hear it all the time.)

Low-trust societies are not paradises, they are fucking hellscapes. Full stop. It's not something to be hoped for.

100 sats \ 1 reply \ @k00b 18 Oct 2023

a definition of technology that describes it as a force-amplifying tool

It's a biological technology. A technology humans didn't make yet still a technology in the sense that it's a critical tool.

The idea that trust is bad, and that we would be better off without it, is one of my most foundational beefs w/ the maxi narrative as one encounters it in the wild.

That's such an interesting bone to pick. The ubiquitous maxi perspective is probably "trust should be optional," but I can see it showing up as "trust is bad" too.

10 sats \ 0 replies \ @elvismercury OP 18 Oct 2023

Yeah, I'm not trying to strawman it. I think a useful, and totally legit thing, is to say: btc allows us to remove trust from certain aspects of transacting in a way that scales; and that this trust-removal unlocks conditions where trust can actually grow globally. So you remove the requirement for trust in one part of the ecosystem, and on net this is good for global trust.

That's a nuanced take that I could fully endorse. I'm sure some people do talk that way. But there are so many takes that are just as bad and caricaturish as I represented.

0 sats \ 2 replies \ @0fje0 18 Oct 2023

Off-topic, but...

...have I just witnessed a new SN feature, or am I imagining things?

Comments I haven't seen on the thread before are now (briefly) highlighted when I refresh the page?

21 sats \ 1 reply \ @k00b 18 Oct 2023

That's been there for like 8 weeks :)

The outline remains until you cursor over it (or touch it on mobile) ... or simply leave the thread.

0 sats \ 0 replies \ @0fje0 18 Oct 2023

Ah, thanks.

Not the first time you have to point out the obvious to me either :)

110 sats \ 8 replies \ @ek 18 Oct 2023

To be honest, I am still reading chapter 1 but my mind was blown when she casually explained why it's called "spot trades". Because you're finalizing the transaction on the spot.

Sorry to not add any value to part 2 atm, but I'll try to read faster :) Was just bad at allocating time the past weeks for it.

10 sats \ 2 replies \ @ek 18 Oct 2023

and definitely looking forward to get my mind blown more - gradually and suddenly :)

10 sats \ 1 reply \ @cryotosensei 18 Oct 2023

I think you commented gradually n suddenly on one of my comments recently - and it has stuck in my mind haha

10 sats \ 0 replies \ @ek 19 Oct 2023

Mhh, must have been someone else

0 sats \ 4 replies \ @elvismercury OP 18 Oct 2023

Read as fast as you read, I'm glad you came to participate anyway.

Could you summarize the origin of the "spot" term? I didn't latch onto that one when I read it, and I don't have the book in front of me to review.

111 sats \ 3 replies \ @ek 18 Oct 2023

Read as fast as you read, I'm glad you came to participate anyway.

And I'm glad you're doing this so I want to contribute in any way :) Using social media without the miserable parts is actually great, lol

Could you summarize the origin of the "spot" term? I didn't latch onto that one when I read it, and I don't have the book in front of me to review.

Sure, good primer to put it into my own words to see how well I understood the mentioned concepts :)

It was about trades within a trusted community vs trading with foreign groups.

When trading within trusted communities, you use a form of "social credit": You give something to someone in need but implicitly expect that this favor is returned in the future.

When trading with foreign groups, you need to settle the transaction on the spot since you might never see them again or just don't trust that they would return any kinds of favors in the future. So that's where you actually exchange goods and the problem of "double coincidence of wants" appears. And where the need for something which is universally valued arises.

So with "spot" the current location and time is meant. The transaction is settled right here and right now.

Did this answer your question or did I just summarize exactly all that you already knew? lol

52 sats \ 1 reply \ @elvismercury OP 18 Oct 2023

No, that's a perfect summary, and I'm glad you drew attention to it. Who you can and can't trust, for what, and under what circumstances and over what timescale, seems to be at the heart of everything.

0 sats \ 0 replies \ @ek 18 Oct 2023

Yes, I think so, too. It's actually crazy to think about how much we trust each other to not kill each other - by accident or on purpose. Just driving on a highway makes me highly aware of that.

0 sats \ 0 replies \ @cryotosensei 18 Oct 2023

It’s a trivial point but I feel smarter for having read it. I’m always interested in the origin of words - how we came to say certain things in particular ways

358 sats \ 2 replies \ @SatsCats 18 Oct 2023

Pinging a few others from the previous conversation, it also buys me time to catch up on my homework lol :)

@siggy47, @SpaceHodler, @cryptosensei, @scottathan, @Bullen

30 sats \ 0 replies \ @elvismercury OP 18 Oct 2023

Thanks @SatsCats, I forgot to do that :)

10 sats \ 0 replies \ @cryotosensei 18 Oct 2023

Haha thanks for the ping

110 sats \ 5 replies \ @elvismercury OP 18 Oct 2023

Lyn compares bank runs to a game of musical chairs (pp 74-75) -- when people start to doubt whether the bank is solvent, they withdraw their money; as more people withdraw their money, the less solvent the bank becomes, and the more other people withdraw their money. In this way a lack of belief in the bank's solvency becomes self-fulfilling, and it's really important to adjust your beliefs before others do.

How do these forces play out wrt btc? Given that btc is a good of pure abstraction, does it make sense to consider things like the price implosion from $69k to $15k to be a 'bank run' in the belief in btc as a credible money?

200 sats \ 2 replies \ @cryotosensei 18 Oct 2023

I think that as much as we would like to think of BTC as an independent entity, it is not entirely uncoupled from conventional assets at this point in time. Hence, if something devastating were to happen to the macroeconomic environment, traditional assets like stocks will take a hit, and along with it, Bitcoin. A price drop in Bitcoin will not necessarily mean that people are losing faith in this trustless digital money.

Also, this year, something just clicked in my mind - and I want to live the Bitcoin Standard as some Stackers do here. It will be a tall order for me because I am based in Asia and can’t receive my salary in BTC as of now. But selling fiat to buy BTC is such a worthy ideal to work towards, so I will start my journey by buying gift cards from Bitrefill. I guess what I want to say is that if we spend sats to save spend invest share in our everyday lives, we then remove ourselves from the clutches of the fiat system and have no reason to be bothered by any price implosion of Bitcoin xP

10 sats \ 1 reply \ @elvismercury OP 19 Oct 2023

I guess what I want to say is that if we spend sats to save spend invest share in our everyday lives, we then remove ourselves from the clutches of the fiat system and have no reason to be bothered by any price implosion of Bitcoin xP

And yet that decision -- to dive more deeply into a btc economy -- is still a function of believing that it's a sensible thing to do, which in turn is based on a host of factors. But it's not like believing in the laws of physics, right? Or do you think that it is? Is it a pure determinism play for you?

0 sats \ 0 replies \ @cryotosensei 20 Oct 2023

Great question! I don’t think it’s like believing in the laws of physics - those are immutable. Whereas the blockchain technology governing Bitcoin is cast in stone and won’t mutate and throw curveballs at us Bitcoiners, diving deeper into a BTC economy requires a leap of faith. Things like trust in my ability to get paid in Bitcoin, trust that the merchants who accept Bitcoin payments will only increase with time (Thank you, Ferrari!) etc. but I think it’s about making a choice at the end of the day. Once we decide to live the Bitcoin Standard with conviction, we are determined to overcome all challenges associated with it, come hell or high water

152 sats \ 1 reply \ @k00b 19 Oct 2023

I'm nitpicking but I think she made an error with the analogy. An individual bank's bank run is like a game of musical chairs but a fractional reserve banking system - which she describes very clearly - is more like a house of cards.

A fractional reserve banking system is like a game of musical chairs; it functions for a while but if something ever stops the music, it call fall apart quickly.

It's more like a house of card-like games of musical chairs lol

Given that btc is a good of pure abstraction, does it make sense to consider things like the price implosion from $69k to $15k to be a 'bank run' in the belief in btc as a credible money?

This is interesting. When bitcoin's price decreases, is the market pricing entries in bitcoin's ledger like a failing bank's ledger? When the cards begin to fall in a fractional reserve system, the price of legitimate ledger entries (gold say) tend to appreciate.

When people panic withdraw from bitcoin's ledger, what do they perceive are bitcoin's liabilities?

An alternative take: maybe we're only seeing the price of sub-ledger bitcoin (as held on exchanges) decrease during bitcoin's "bank runs." It's hard to wrap my arms around that, but I could see that being true.

100 sats \ 0 replies \ @elvismercury OP 19 Oct 2023

An alternative take: maybe we're only seeing the price of sub-ledger bitcoin (as held on exchanges) decrease during bitcoin's "bank runs." It's hard to wrap my arms around that, but I could see that being true.

Interesting idea -- separates the pricing mechanism btwn on-exchange and off-exchange btc, like they're two distinct type of conceptual entities. Not sure what implications that has, but I'm going to noodle on it.

110 sats \ 8 replies \ @elvismercury OP 18 Oct 2023

Lyn describes the hawala network in a way that seems to have some deep similarities with features of the btc lightning network: balances flowing through channels, money changing hands but in another sense not moving at all.

Does this metaphor suggest anything about the future state of payments over lightning? For instance, about where lightning might find more natural adoption, and where it might struggle?

100 sats \ 7 replies \ @k00b 18 Oct 2023

Highlighting the similarities seemed intentional on Lyn's part:

Collectively, these hawaladars form a decentralized ledger and channel-based payments system, which normal users of the network can access through their local hawaladar.

Does this metaphor suggest anything about the future state of payments over lightning?

If it is, it's suggesting a non-pure hub and spoke network rather than a mesh network. The lightning network has evolved this way with LSPs making up the hubs in many cases.

For instance, about where lightning might find more natural adoption, and where it might struggle?

More adoption: cross border payments, long term trade partnerships Less adoption: intra-nationally among privileged and fee insensitive people

100 sats \ 6 replies \ @elvismercury OP 19 Oct 2023

You're right, it does seem intentional, now that you mention it.

From a 'deterministic' perspective, I wonder what configuration the lightning network 'wants' to be. I agree that hub and spoke seems the most likely, and I don't think that's bad -- nature is full of power laws for a reason. So if you believe that, I guess LSP becomes a growth industry? And then how can one support that growth?

It makes me think Maller's model -- bridging currencies using btc as the intermediate layer -- has more legs than I used to believe.

152 sats \ 5 replies \ @k00b 19 Oct 2023

So if you believe that, I guess LSP becomes a growth industry

@MaxAWebster uses a transportation system analogy to describe the eventual layout of the lightning network and I can't fault it.

Much like our collection of railways, highways, and roads, channels on the lightning network:

have unavoidable and high fixed costs
the payload capacity scales in some proportion to fixed costs

10 sats \ 1 reply \ @elvismercury OP 19 Oct 2023

It's interesting to consider what other types of L2s might look like, and how different tradeoffs would produce different architectures w/ different consequences. At some point, "layers" and "institutions" start to blur together -- in a way, a bank is a layer, where transactions between bank customers update its internal ledger but don't produce final settlement -- a kind of scaling.

Some of these instutions/layers are starting to pop up in btc w/ Fedimint, Liquid, etc. I think that these will be really crucial in the end, and the ultimate means by which most people interact w/ btc.

152 sats \ 0 replies \ @k00b 19 Oct 2023

Some of these instutions/layers are starting to pop up in btc w/ Fedimint, Liquid, etc. I think that these will be really crucial in the end, and the ultimate means by which most people interact w/ btc.

When we do AMAs, I always ask the Theilism, "what's something you believe about bitcoin that no other bitcoiner believes?" The one answer I heard the most was "most people will use custodial forms of bitcoin."

Completely unrelated but the most surprising answer came from @ODELL which was something to the effect of "bitcoin will be used to pay for armies of autonomous drone assassins."

152 sats \ 2 replies \ @k00b 20 Oct 2023

This has me wondering what are bitcoin's boats and airplanes.

0 sats \ 1 reply \ @elvismercury OP 20 Oct 2023

I looked around for the "transportation system" source of @MaxAWebster that you mentioned, because I want to think about this boats / airplanes thing. I read a couple but didn't see one that was obviously what you referring to. Do you have a link?

0 sats \ 0 replies \ @k00b 20 Oct 2023

I'm not sure he's every written about it publicly yet. It was something he shared with me in conversation.

100 sats \ 4 replies \ @elvismercury OP 19 Oct 2023

In part 2, Lyn digs into the speed differences of transaction and final settlement. In the era of fiat, the speed with which it could be transacted vastly outstripped gold. With btc, this speed difference has eroded, and perhaps even reversed. What practical difference does it make, though? As machine intelligence explodes, how do these speed limits change the value proposition of btc?

152 sats \ 3 replies \ @k00b 24 Oct 2023

As machine intelligence explodes, how do these speed limits change the value proposition of btc?

I love what this question gets at. If telecommunications raised the bar of transaction speed, will technology raise the bar again?

Fiat is already transacting at the speed of telecommunications, so I don't think bitcoin wins on transaction speed. But, does AI raise another bar, demand another property of money, that fiat can't (yet) compete on like faster settlement?

You shared the table during part 1.

https://miro.medium.com/v2/resize:fit:720/format:webp/1*_63fojX4ZSQxWlLNR6brLQ.png

Are (semi)autonomous machines going to demand more scarcity, durability, or censorship resistance? Like speed and portability, could there be a sub-property of censorship resistance that makes a practical difference to a machine?

It's too early to say what autonomous machines might want, but if they have long lifecycles I can imagine them wanting durability and scarcity.

0 sats \ 2 replies \ @elvismercury OP 25 Oct 2023

In my mind, this question is intimately tied up with the one about technological determinism you commented on, below. What [semi]-autonomous machines will want from money is (I think) the same thing humans want, which is the ability to reliably coordinate their activities in a way that cannot be perverted for anyone's advantage. When we're talking about machines smarter than we are, the anti-perversion mechanism becomes really important.

One of the metaphors I like for btc, and for this idea of coordination, is certain hormones. Since hormones are for signaling, to some extent, their absolute levels don't matter. If you had twice as much dopamine floating around, after an adjustment period, nothing much would change. The "hormone printing press" has about the same effects that the real printing press does -- some local Cantillon effects, and then general systemic adjustment as "inflation" takes its course. [1]

My knowledge of physiology is not sophisticated enough to go too much further into this metaphor, but it's enough to get the idea. AIs will need an un-forgeable coordination mechanism between themselves. They'll need it to be robust to bullshit and manipulation, which is where grounding into the physical reality via PoW should be a crucial constraint. It doesn't how smart they are, they aren't changing physics. Constraints of that kind seem crucial when we're talking about entities whose capacities will eventually be beyond our ability to reason about.

All of that is sort of a function of velocity, but after a point you reach a terminus here, too, I think. But, as above, and as you proposed, maybe there's something that can't be anticipated that will nonetheless prove relevant.

[1] This isn't the case for all hormones. Take twice as much testosterone and different things will happen.

152 sats \ 1 reply \ @k00b 25 Oct 2023

When we're talking about machines smarter than we are, the anti-perversion mechanism becomes really important.

Nice. Smarter -> larger chess board.

One of the metaphors I like for btc, and for this idea of coordination, is certain hormones. Since hormones are for signaling, to some extent, their absolute levels don't matter. If you had twice as much dopamine floating around, after an adjustment period, nothing much would change. The "hormone printing press" has about the same effects that the real printing press does -- some local Cantillon effects, and then general systemic adjustment as "inflation" takes its course.

This is all to say, the "hormone printing press" being un-forgeable is important to machines too, right? Because they are, like us, hormone receptors.

0 sats \ 0 replies \ @elvismercury OP 25 Oct 2023

Exactly. I'm assuming that our AI overlords want to be able to coordinate interactions and resources with each other without concern that they will be diluted through some kind of arms race, or something external the system (e.g., fiat) messing up their relative relations with each other.

100 sats \ 5 replies \ @elvismercury OP 19 Oct 2023

We discussed last time the idea that btc has a kind of technological determinism about it. From the book:

If we were to run this period of human development back a hundred times, I think almost every time we would wind up in a similar place in terms of money, due to the path dependence of technological development itself.

If you agree, then presumably you agree that a subsequent change in technological affordances would produce equivalently deterministic consequences. Is this a disturbing thought?

152 sats \ 4 replies \ @k00b 24 Oct 2023

I wish technological determinism received even more direct treatment from Lyn. It implies that understanding the arc of technology is understanding the future of money. Most historical accounts of money focus on human needs but there's a huge gap between human needs and modern money and Lyn is hinting at the nature of the gap.

Is this a disturbing thought?

Yes, mostly when I consider technology accelerating. If a ledger can't meet technology's needs, then we'll all shift to the ledger that does. It implies technology is primary and ledgers are secondary.

0 sats \ 3 replies \ @elvismercury OP 25 Oct 2023

I personally don't share that worry, because to me, the technology has a terminus: it has been attempting to serve the function of human coordination, and it seems that btc has achieved that in its purest form -- it is pure coordination, distilled to its absolute essence. Once you arrive at that essence, technological advances have nothing more to offer. Once you invent zero, no need to invent super-zero; and in fact, the concept is ill-posed.

You will not have missed that I've made a giant assumption there, basically, that atomic exchange between individuals or aggregates is the ultimate form of coordination that we require money to effect. But is that right? Could we find some new variant that is somehow not a transaction, and therefore, that demands a pseudo-money with different properties?

I can't imagine such a thing, but at the level of abstraction we're talking about, my failure of imagination is not as comforting as I'd like.

228 sats \ 2 replies \ @k00b 25 Oct 2023

I'm not actually worried. But when I force myself to worry, I worry that we only ever see technology's local terminals.

Once you invent zero, no need to invent super-zero; and in fact, the concept is ill-posed.

Bitcoin is much like zero in that it represents something abstractly true. Nature is conservative and transactional on the basis of energy and you can imagine nature being an energy ledger. Yet, especially in the context of this book, which focuses on humans using ledgers, might human abstractions in some way be human-only?

We might as well assume we know what's true. But, if I want to worry, we don't¹. And we certainly don't know everything that's true - even abstractly - yet.

Maybe machines will always be subject to human-like abstraction needs because we made them though.

btc has achieved that in its purest form -- it is pure coordination, distilled to its absolute essence.

I'd argue it isn't exactly pure even if I'd agree it's as pure as we've ever had and maybe pure enough to meet all future human-like needs. Bitcoin the Idea is a digital ledger grounded in nature's ledger of matter and energy. Yet, nature isn't Bitcoin the System's only dependency.

In my attempt to worry, I worry Bitcoin the System is not pure enough for machines.

I'm channeling Donald Hoffman if it weren't obvious. ↩

100 sats \ 1 reply \ @elvismercury OP 25 Oct 2023

Yet, especially in the context of this book, which focuses on humans using ledgers, might human abstractions in some way be human-only?

That is an evocative question. I think we have to reserve some probability mass for not-knowing? Which is an uneasy thing to consider.

Yet, nature isn't Bitcoin the System's only dependency.

Great point! I hadn't considered that, from the perspective of an AI, they might think that the non-nature (e.g., the non-purely-technical) aspect of btc adds too much noise. And that seems like a fair point -- certainly, right now, squishy human relationships, persuasiveness, etc., can have a massive influence. That's a giant negative from an AI perspective.

Or is it? Imagine the game changing from _breaking bitcoin-the-sytem to influencing bitcoin-the-meta-system. Spooky.

In my attempt to worry, I worry Bitcoin the System is not pure enough for machines.

You've converted me to worrying your way. Super, that's what I needed.

152 sats \ 0 replies \ @k00b 25 Oct 2023

Spooky indeed!

I think we're also guilty of anthropomorphizing machines more than we deserve to. Many sci-fi novels depict intelligent machines behaving more like intelligent ants than humans. If machines aren't game theoretically human-like, all bitcoin bets are off. The only reason machines would terminate at human-like coordination is that it's optimal or because we force them to. Do we know if either is true/possible?

I'm trying to look so far in the future, it's purely an exercise. This potential spookiness will maybe be relevant long after I'm dead.

100 sats \ 4 replies \ @elvismercury OP 18 Oct 2023

It's interesting to learn about the proto-banking systems, and all the ways that trust plays out there. I'm not sure if it requires more trust or less. Mostly, it just seems different. (Page 64 has some nice details.) This trust profile changed in some profound ways when bearer instruments were created.

How does trust manifest in the financial ecosystem that btc is spawning? People talk about "trustlessness" but what practically does that mean?

100 sats \ 3 replies \ @k00b 18 Oct 2023

I'm not sure if it requires more trust or less.

If the old systems require more trust than the new systems? I'd find it easier to argue old systems require more trust. Mostly in the sense that new systems are more accountable (relatively) wrt to things like information latency. When Lyn was walking through examples of suftaja, it made me anxious to consider trading money for a cashier's check that I might be able to spend in 2 weeks at my destination. In the unhappy path, it'd take me 4 weeks to confront the original merchant I received the suftaja from.

How does trust manifest in the financial ecosystem that btc is spawning?

Exchange is what comes to mind. Specially exchange of bitcoin for assets that bitcoin isn't aware of.

People talk about "trustlessness" but what practically does that mean?

This was harder to answer than I want to admit. If we take trust in things that bitcoin the systems depends on as given, like the internet, bitcoin is trustless in only a handful of important ways:

issuance
storage
transfer

100 sats \ 2 replies \ @elvismercury OP 18 Oct 2023

Mostly in the sense that new systems are more accountable (relatively) wrt to things like information latency.

That's true -- the main thing I had in mind was that new-style systems are process-oriented and relatively tightly-specified, which we might default to thinking of as requiring less trust; but if you get caught between the cracks somehow, you're doomed. If you have an issue that the system cannot process, or that falls outside the greased rails, you can be disappeared from it; whereas the older systems seem to have more dependence on actual human relationships. But I'm not sure how convincing I find that argument to be.

100 sats \ 1 reply \ @k00b 18 Oct 2023

It's like we traded deep trust in a few institutions/individuals for a shallow breadth of trust in many layers of institutions/individuals.

The new system spreads trust around to the point where we're probably subject to more breaches of trust, but the breaches are smaller and trust violators are more easily replaced - which seems to sum to more efficient markets.

So maybe trust isn't being removed and instead it's being dispersed and displaced.

100 sats \ 0 replies \ @elvismercury OP 19 Oct 2023

I like this idea of redistributing trust. It gives you the mental toolkit to ask: where did this trust migrate? instead of getting wrapped around the axle of talking about trust vs trustlessness. And that, once you can start to talk about its migration, you might figure out what the new trust distribution portends.

One thing that jumps out at me: the core devs are the recipients of such a massive amount of trust, not in the sense that a bad actor could introduce a bug or an evil feature -- I guess that's possible, but the level of oversight vs such things is so high, that I don't worry about it. But rather: the devs choose what to work on, and they have a lot of influence with their peers, and these things, little by little, shape the values of the entire ecosystem.

Imagine if more of the early devs would have found the big block argument to be the more compelling one? There are certainly credible arguments to be made. Everything is tradeoffs, and one can hold a totally legit big-block position. That version of bitcoin would be very different one and portend different things in the world, and so that is a very powerful, trusted position. It's just not the flavor of trust that we're used to thinking about -- it dispersed in a new direction.

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