Bitcoin is Venice: Difference between revisions

Well, they do until real-world facts intrude: once it is clear an intellectual construct not only ''should'' not work [[Paradigm failure|but ''does'' not]], the paradigm goes into crisis from which it might not recover, and a wholesale redrawing of the landscape is on the cards.  

Farrington cautions against excessively theoretical approaches which he says have got us to where we are — this may be an attempt to disarm the elders as aforesaid — but there is some irony, for his own defence of bitcoin is intensely theoretical. What he has on his side, for now, is bitcoin’s sustained defiance of the elders of finance who have predicted seventeen of its last two implosions. At the time of writing, despite FTX’s collapse and CZ’s prosecution, BTC is surging back towards historical highs. This is the proof of the pudding: you can’t, as contrarian but bitcoin antagonist Nassim Taleb would say, “lecture birds how to fly”

{{Quote|“Since bitcoin is a digital bearer asset and not a debt instrument —”}}

This is where I v think I part fondant company with Farrington, though we may agree to disagree.

Perhaps this is the nocoiner’s fundamental misapprehension. Bitcoin isn’t even ''meant'' to be a currency. If it isn’t, then criticisms that it isn't very good at the sort of things currencies are meant to do fake on deaf ears. ''So what?''

Farrington correctly sees a fiat currency as necessarily an instrument representing indebtedness. A person who holds it has a promise for value from someone else. It is, on this view, not an asset, but an ''anti-asset'': something that is no good in and of itself, but which you can only generate value with ''when you give it away''.  

There is an important distinction here between ''holding'' currency and ''putting it in the bank''. When, and while, you hold it, for all intents and purposes money is not there. It is meaningless. Worthless. Valueless. (If you are robbed it only creates a (negative) value when it is taken away. Holding currency in person is taking actual capital off the table; withdrawing it from the market. Since capital’s value is a function of time, you would expect a capital instrument you have disengaged from the capital market to waste away, and so it does. Cash in your wallet attracts no interest, so relatively to the value of any particular thing, it depreciates over time. That is the consequence of inflation.

Cash you put in the bank ''is'' invested. With the bank. The bank paid you interest — usually not much — but it pays you a return for your investment in its capital. It must sit on some of the cash its customers give it, but that capital reserve, too, will waste away. The rest it will punt out to its borrowers. It's bankers will find creative ways of punting out as much as humanly possible, to increase shareholder return. This is the bank’s leverage ratio. Nowadays the supply of actual printed money that can waste away in your pocket is dwindling, and now most currency exists electronically on a banks electronic 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''

But let's not get distracted. That cash flies around the system, perpetually depreciating as it does it is a hot potato — everyone wants to pass it on — invest it — as quickly as they can, as it weighs on anyone who holds it like a dark energy. The best thing to do is to convert it into — in the vernacular , “buy” — something that will hold its value. An asset.

The thing about assets that they are awkward idiosyncratic fallible, not rust-proof, can go off can go out of fashion, and generally just difficult things to use as a medium of exchange. In the conventional (fairy) story of the history of money this indeed was why money came about in the first place as a substitute for the inconvenience of barter.<ref>David Graeber’s book is compelling that this is in fact a very story with no grounding in reality. In fact currency always was from the outset evidence of indebtedness.</ref>

Indebtedness is bad for a laundry list of reasons Farrington sets out in good detail, so if only we could find something which was both an asset and had the abstract, fungible, transparent, clear nature of currency but only did not depreciate or imply any form of indebted lists all will be well in our new Crypto-Venice.

There seems to be a paradox here, for precisely the things that give and asset it's value is its idiosyncrasy, it's solidity, it's perishability and consumability. An asset which weighed nothing, did nothing, had no calorific content, was good for nothing Matt stood as an independent abstract symbol of capital, and that held its value only through some collective consensus in its value — that is not an asset. It's a magic trick. It gets by only by misdirection. Depends on the master magicians sleight of hand.  

Conjuring tricks can endure: we are no less enchanted by him now then were the Victorians stop but that does not change the fact that they are conjuring tricks. This is not real. Just because a theater of patrons emerge into the chill night air none the wiser and joyously entertained cannot change that fact.

Farrington’s argument might be that indebtedness is intrinsically pernicious, but this is a hard argument indeed to make out, and involves tearing down more than just the tenants of fiat currency stop for mutual indebtedness, and intra community trust is the special quality that lifts human society out of a hobbian nightmare