Bitcoin is Venice: Difference between revisions

Bitcoin is Venice (view source)

Revision as of 14:21, 11 May 2024

1,262 bytes added , 11 May

no edit summary

Amwelladmin

Bureaucrats, Interface administrators, Administrators

83,229

edits

@@ Line 109: / Line 109: @@
 The same might be true of Bitcoin, but only to the extent debts are denominated in bitcoin. Mostly, bitcoin is traded not as a currency but as a commodity, for which the debt is denominated in fiat.
 ===Agency as a sustaining life force===
-{{Drop|T|hat an artefact}} with no intrinsic worth can nonetheless keep a metaphorical one is not an impossible scenario: all literature depends on it. It is, near enough, the trick that fiat currency has pulled off. [[Bitcoin]]ers do not tire of reminding us of this.
+{{Drop|T|hat a statement}} with no literal truth value can nonetheless hold a metaphorical one is by no means an impossible scenario: all literature depends on it. We do not struggle to reconcile our understanding of ''Oliver Twist'' with the fact that every word of it is, literally, false.
-Currencies generate their own momentum and when enough [[systemically important]] institutions have enough vested interest in maintaining them  as a viable thing — if they are making enough money out of it — the currency will generally carry on, because too many agents have too much riding on its success to contemplate it's failure. This is of course, the stuff that bubbles are made of — Enron was largely built of imaginative accounting treatment, but survived for so long in part because so many — law firms, accountants, management consultants, executives, employees, trading counterparties, academics, politicians, [[thought leader]]s —stood to gain as long as the fiction, that [[ this time is different]], carried on.
+Fiat currency has, near enough, pulled off the same trick. [[Bitcoin]]ers do not tire of reminding us of this.
-But it is not inevitable that every [[metaphor]] fails. Bitcoin has proven resilient so far, and has acquired it's own momentum as it as acquired brokers, exchanges,
+Like all metaphors, currencies generate their own momentum. When enough institutions have a vested interest in maintaining a metaphor as a viable means of furthering their own interests — if they are making enough money out of it — the currency will generally carry on, because too many agents have too much riding on its success to contemplate its failure.
-intermediaries, [[futures]] [[exchange -traded fund]]s and their authorized participants, clearers and market makers. It even has its own ISDA definitions booklet. This is another importance of intermediation: these intermediaries all take their skim, or earn a crust of the intellectual activity of ''attending to bitcoin'', just as they once attended to [[Enron]], or tranched [[synthetic credit derivative]]s and preserving that income compels them to support the narrative.
-Yet another irony in a phenomenon apparently constructed out of them: the thing that vouchsafes this decentralised platform’s viability may be exactly the sort of institutions it is meant to undermine.
+This is of course, the stuff that bubbles are made of: [[Enron]] was largely built of imaginative accounting for purely hypothetical cashflows. It survived for so long in part because so many of its enablers — law firms, accountants, management consultants, executives, employees, trading counterparties, academics, politicians, [[thought leader]]s, chancers and grifters — stood to gain as long as the fiction, that [[this time is different]], carried on. You don’t even need to believe the metaphor to enable it: you just have to believe you can get out ahead of it when it fails.
+Not every [[metaphor]] fails. The dollar has not. [[Bitcoin]], too, has proven resilient so far, and has acquired its own momentum as it as acquired first miners, and then brokers, trading venues, intermediaries, [[futures]] exchanges, [[exchange-traded fund]]s and their authorised participants, clearers and market makers. It even has its own ISDA definitions booklet. All of these [[stakeholder]]s stand to prosper as long as ''someone else'' believes the metaphor.
+This is another importance of intermediation: these intermediaries all take their skim, or earn a crust of the intellectual activity of ''attending to bitcoin'', just as they once attended to [[Enron]], or tranched [[synthetic credit derivative]]s, or whatever hysteria happens to have a hold of quotidian minds for the time being, and preserving that income compels them to support the metaphorical narrative.
+But for [[Bitcoin]], this is yet another irony in a phenomenon apparently constructed out of them: the very institutions that vouchsafe this metaphor’s  continued viability — a set of incentivised trusted intermediaries — are exactly the institutions it is explicitly designed to undermine. The whole point of [[Bitcoin]] is to jettison the need for trusted intermediaries. That is the program.
 ==== Bitcoin as a token capital ====
@@ Line 129: / Line 134: @@
 Nevertheless, this is where I part company with Farrington, though it may be one of those “agree to disagree” scenarios.
-Perhaps this is the [[nocoiner]]’s fundamental misapprehension: have we been slating bitcoin for lacking qualities it isn’t even ''meant'' to have? If it is not a currency, then criticisms that it isn’t very good at the sort of things currencies are meant to be good at fail, defeated by the simple objection, ''so what?''
+Perhaps this is the [[nocoiner]]’s fundamental misapprehension: have we been slating [[Bitcoin]] for lacking qualities it isn’t even ''meant'' to have? If it is not a currency, then criticisms that it isn’t very good at the sort of things currencies are meant to be good at fail, defeated by the simple objection, ''so what?''
-Farrington correctly sees a “fiat currency” as necessarily an instrument of [[indebtedness]]: a person who holds it has a promise for value from someone else. He doesn’t say so but he may say regard [[indebtedness]] as, in itself, a form of compulsory trust — trust on pain of enforcement by the state, i.e., ''violence'' — and therefore intrinsically undesirable.
-Graeber might agree about currency, and monetary indebtedness, but not indebtedness in general. To the contrary, mutual, perpetual, rolling ''non-monetary'' indebtedness is exactly the glue that binds a community together. It creates ''voluntary'' trust. That kind of trust — credit — is fundamental to how any functioning civilisation works. Discharging that sort of indebtedness releases us from our ties and obligations to each other — thereby dissolves the “community of interest”. One of the things that Graeber finds so pernicious about [[indebtedness]] is that it is precisely quantifiable: it sets a precise value for loyalty, and therefore a price at which loyalty may be discharged. The vagueness and irreconcilability of “social” indebtedness makes this a lot harder to do.
+Farrington correctly sees a “fiat currency” as necessarily an instrument of [[indebtedness]]: a person who holds it has a promise for value from someone else. He doesn’t say so, but he may regard [[indebtedness]] as, in itself, a form of compulsory trust — trust on pain of enforcement by the state, i.e., ''violence'' — and therefore intrinsically undesirable.
-====Currency as an anti-asset====
-Currency, on this view is tokenised, accountable unit of trust. That is a glass-half-full way of describing indebtedness — not financial indebtedness to or from a specific person, as arises under a loan contract, but disembodied, abstract indebtedness ''in and of itself''. This is quite an odd concept.
-Currency is, on this view, not an asset, but an ''anti-asset'': something that has a negative value in and of itself, and which, therefore, you can only generate value from ''by giving it away''. I can discharge a private debt I owe by transferring away my public token of indebtedness — cash — to the lender. We can see there that to hold cash, and not use it to acquire capital, discharge debts, or create indebtedness in someone else, is a bad idea.
+Davi5Graeber might agree about currency, and monetary indebtedness, but not indebtedness in general. To the contrary, mutual, perpetual, rolling ''non-monetary'' indebtedness is exactly the glue that binds a community together. It creates ''voluntary'' trust. That kind of trust — credit — is fundamental to how any functioning civilisation works. Discharging that sort of indebtedness releases us from our ties and obligations to each other — thereby dissolves the “community of interest”. One of the things that Graeber finds so pernicious about monetary [[indebtedness]] is that it is quantifiable: it sets a precise value for loyalty, and therefore a price at which loyalty may be discharged. The vagueness and irreconcilability of “social” indebtedness makes this a lot harder to do. There is always something on the table. These are the ties that bind.
+====Cash as an anti-asset====
+Cash, on this view, is a tokenised, accountable unit of trust. That is a glass-half-full way of describing [[monetary indebtedness]] — not financial indebtedness to or from a specific person, as arises under a loan contract, but disembodied, ''abstract'' indebtedness ''in and of itself''. This is quite an odd concept.
-There is an important distinction here between ''holding'' cash and ''putting it in the bank''.
+A banknote is, on this view, not an asset, but an ''anti-asset'': something that has a negative value in and of itself, and which, therefore, only generates value ''when you give it away''. I can discharge a private debt I owe by transferring away my public token of indebtedness — cash — to the lender. We can see there that to hold cash, and not use it to acquire capital, discharge debts, or create indebtedness in someone else, is wasteful.
-When, and while, you physically hold currency, for all intents and purposes, the money is not there. You  have an “indebtedness” to yourself. It cancels out. It is meaningless. Worthless. Valueless. (If you are robbed of cash it only creates a (negative) value when it is taken away, because it deprives you of the value you could have created by giving it away to someone else, in return for an asset).
+There is an important distinction here between ''holding'' cash physically and ''putting it in the bank''.
-So holding cash in person is a ''non''-investment. It is to ''disengage'' capital from the market. Since the value of capital is a function of the time for which it is invested, you would expect a capital instrument you have ''disinvested'' to progressively waste away while it is disengaged, and so it does. Cash in your wallet — a loan to yourself — generates no return (how could it?) so, relative to a capital asset in productive use, must depreciate over time. That is the consequence of inflation. It has nothing really to do with central bank policy or fractional reserve banking.
+When, and while, you hold cash physically, for all intents and purposes, the money is not available to the financial system. It is disengaged. You have an “indebtedness” to yourself. It cancels out. It is meaningless. Worthless. Valueless. If you are robbed of physical cash it only creates a (negative) value when it is taken away, because it deprives you of the value you could have created by giving it away to someone else, in return for an asset.
-Compare that to cash you put in the bank. This ''is'' invested: with the bank. You have given the bank your token of abstract indebtedness in return for ''actual'' private indebtedness under which the bank pays you interest — usually not much — as a return for your investment in its capital. It must sit on a portion of the cash its customers give it, but that capital reserve, too, will waste away, while the bank must still pay interest on it to customers. This is what bankers mean when they say “capital reserves are expensive”.
+So holding cash in person is a ''non''-investment. It is to ''disengage'' capital from the market. Since the value of capital is a function of the time for which it is productively engaged, a capital instrument you have ''disinvested'' should progressively waste away. So it does. Cash in your wallet, relative to a capital asset in productive use, must depreciate over time. That is the consequence of inflation. It has nothing really to do with central bank policy or fractional reserve banking.
-The bank will punt out all the cash it can to borrowers in the form of loans — giving away these tokens of abstract indebtedness in return for an investment in ''actual'' private indebtedness. The borrowers, in turn, will want to use that physical cash quickly, because if they don’t, it wastes away, while they pay the bank interest for the privilege of holding cash.
+Compare that to cash you put in the bank. This ''is'' invested: with the bank. You have given the bank your token of abstract indebtedness in return for ''actual'' private indebtedness for which the bank pays you interest — usually not much — as a return for your investment. Prudential regulation obliges the bank to sit on a portion of the cash its customers give it — to keep it disengaged, in reserve to manage the demand of those investors who wish to cancel their investments — but that capital reserve, too, will waste away, while the bank must still pay interest on it to customers. This is what bankers mean when they say “capital reserves are expensive”.
-Nowadays the supply of actual printed money that can waste away in your pocket (economists call this “M1” money stock) is dwindling. Most currency exists electronically on a bank’s ledger, but the difference between the liabilities a bank has to its depositors — a positive number — and the claims for repayment it has against its borrowers — a negative number — represents “under the mattress” cash. A negative energy ''until you have to give it away.''
+The bank will lend all the cash it can to its borrower customers — giving away these tokens of abstract indebtedness in return for an investment in their ''actual'' private indebtedness. The borrowers, in turn, will want to use that physical cash quickly, because if they don’t, it wastes away, while they pay the bank interest for the privilege of holding cash.
-But let's not get distracted. That M1 money cash flies around the system, perpetually depreciating as it goes. It is a hot potato — everyone wants to pass it on as quickly as they can, as it weighs on anyone who holds it like a dark energy.
+Nowadays the supply of actual printed money that can waste away in your pocket (economists call this “M1” money stock) is dwindling. Most currency exists electronically on a bank’s ledger, but the difference between the liabilities a bank has to its depositors — a positive number — and the claims for repayment it has against its borrowers — a negative number — represents “under the mattress” cash. A negative energy ''until you give it away.''
-They can pass it on by sticking it in the bank or give it away in return for capital — that is, ''invest it'' — in something that will be productive over time in an a way that an inert cash instrument in your pocket will not. Capital. An ''asset''.
+But let's not get distracted. That M1 money cash flies around the system, perpetually depreciating as it goes. It is a hot potato — everyone wants to pass it on as quickly as they can, as it weighs on anyone who holds it like a dark energy. The faster it flows, the better the economy performs.
-The thing about particular capital assets is that they are awkward. They are not to everybody’s taste. They are idiosyncratic; fallible: they take up space, require refrigeration, can rust, go off or go out of fashion. They cost money to maintain and store. They are bad things to use as a medium of exchange.
+Holders can stick it in the bank or give it away in return for capital — that is, ''invest it'' — in something that will be productive over time in an a way that an inert cash instrument in your pocket will not.
+===Bitcoin as generalised capital===
+{{Drop|T|he thing about}} particular capital assets is that they are awkward. They are not to everybody’s taste. They are idiosyncratic; fallible: they take up space, require refrigeration, can rust, go off or go out of fashion. They cost money to maintain and store. They can be invisibly encumbered.They are bad things, therefore, to use as a medium of exchange. There will always be friction, cost and doubt. They will always be subject to a ''[[haircut]]''.
 But, despite the conventional (fairy) story of the history of money, money did not come about in the first place as a substitute for the inconvenience of barter.<ref>{{author|David Graeber}}’s book is compelling that this is a fairy story with no grounding in reality.</ref> Currency was ''always'', from the outset, a means of creating [[indebtedness]].
-This is because indebtedness is not an intrinsically bad thing.
+This is because [[indebtedness]] is not — in the [[capital strip-mining]] paradigm, at any rate — intrinsically a bad thing.
-Indebtedness is ''bad'' for a list of reasons Farrington sets out in good detail. If only we could find something that was both an asset ''and'' had the abstract, fungible, transparent, clear nature of a currency — but, critically, ''did not depreciate or imply any form of indebtedness'' — all would be well in our new Crypto-Venice.
+[[Indebtedness]] ''is'' bad, in the [[Crypto-Venice]] [[paradigm]] for a list of reasons Farrington sets out in detail. If only we could find something that was both an asset ''and'' had the abstract, fungible, transparent, clear nature of a currency — but, critically, ''did not depreciate or imply any form of indebtedness'' — all would be well in our new Crypto-Venice.
-But there is a paradox here. A capital ''asset'' derives its value from ''what it is'': its shape, substance, composition, idiosyncrasy, perishability and consumability. On its power to transform: on the change it can make in the real economy.
+But there is a paradox here. A capital ''asset'' derives its value from ''what it is'': its shape, substance, composition, idiosyncrasy, perishability and consumability. On its ''power to transform'': on the change it can make in the real economy.
 A non-degenerative “''digital asset''” that weighs nothing, does nothing, has no calorific content, occupies no space; that is good for nothing but merely stands as an independent abstract symbol of those qualities by which we judge the worth of things that ''have'' those qualities — in other words, things that are “capital” — ''is not an asset''. It might ''look'' like one, but only courtesy of a magic trick. It depends on misdirection. It depends on the master magician’s sleight of hand. Its value holds only as long as the illusion. It depends on consensus.