31 Comments

Brett, this is the best debunking of Bitcoin and similar artificial digital commodities I've ever seen.

Bravo!

The real Dollar-Killah requires reclaiming the "credit commons," i.e. community control of credit that producers and sellers of real value allocate to one another, along with denomination of that credit in units based on a real commodity or group of commodities. My recent presentation at the RAMICS Conference in Rome described how that can be done. I'll be posting it soon on my website beyondmoney.net and on my Substack channel.

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I'm looking at your Money book on my shelf, Thomas. I noticed the foreword is by Vicki Robin. I happened to sit next to her at a conference long ago, Slow Money, I think. We had a warm conversation about our experiments in local investing--some good, some not so.

Since that time, I've come out with my book, which is very much in line with the credit commons: https://www.amazon.com/How-Dismantle-Empire-2020-Vision/dp/1733347607.

My system returns the right to issue credit for the mortgages to the commonwealth. It then pre-circulates the credit to repay those mortgages as equally distributed dividends for locally produced food, wellcare, education and home improvements. The credits circulate with no income or sales tax, only the pension contribution to Social Security.

Thank you for all the inspiration from your work!

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I followed a link from your recent post, and am glad I did. This is a great lesson with examples I can understand.

I can't imagine the "behind the scenes" commentary about my ignorance of crypto, tokens, blockchain after I published my Steve Kirsch/Crypto/Bitcoin post. 😅

I label myself as a dumbass so "they" are late to the name calling. I embrace my ignorance but I'm always willing to absorb new info. Boomer's revolution!

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Tereza, thanks for your comment and information about your book. I'd like to know precisely how your model works; "issues credit for mortgages to the commonwealth"??? "Equally distributed dividends." Distributed to whom, how?

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It's been posted as A Real Alternative to the Dollar; It’s not Bitcoin (https://beyondmoney.net/2024/12/11/bitcoin-not-a-real-alternative-to-the-dollar-but-another-way-exists/).

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Thanks, I wasn't quite sure where it was going - got a bit lost in the abbreviations maybe, but then it became very clear. And what a great analogy, something in the tone of the whole crypto business is really well represented by the atmosphere of wrestling (if you ever go to Mexico City I highly recommend the wrestling there, it felt like a much purer, more essential, and somehow more honest expression of the same kind of show.) A couple of thoughts arising:

1. Maybe better to call them pseudocurrencies?

2. Is there not also an inkling, somewhere in the background of our relationships with the standard monetary system monster, of a similar sense of 'taking part in a performance?' Even if we know that the value of the money we use comes into being through a vastly complex multilayered web of influences, there is also a sense that some of the influences behind that value are also somewhat arbitrary - and some people and groups of people have far more power in determining it than we as ordinary users do. The extent of that power is I'm sure debatable, and certainly one I have very little knowledge about.

So even if it's just a story, that a few people have the power to change it, whereas we are chained to the heavy immobility of its complexity, then perhaps what crypto is selling, with the story of 'money being just numbers', is that you too can see the truth behind the creation of value... and that will liberate you.

Though whether buying into crypto could ever give you any similar power - to also make up those numbers without any influence from people of undesirable motive or association - is also highly questionable.

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Just WOW. What's the opposite of mind-blowing? I feel like this was mind-cohering. It took all the things I was trying to say less coherently and put them into one clever and scintillating slamdown.

My reader linked yours on my post about Mathew Crawford's hit piece on me for questioning the religion of Bitcoin: https://thirdparadigm.substack.com/p/mathew-crawford-and-digital-god. And this is where I introduced my dangerous heresy: https://thirdparadigm.substack.com/p/bitcoin-vs-the-caret. Little did I know that such an articulate apostate was a click away. It was that slippery double-identity of Bitcoin that I kept going back to. Is it a currency or is it an asset, valued in dollars? Really appreciate this, Brett.

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Thanks for pointing to this article by restacking it in Notes. I find it interesting that the article points out the obvious fact that the dollar has military (and other) powers behind it. That is why Mathew was trying to saying that caret required military support -- he was mistakenly thinking of it as a fiat currency, a dollar replacement.

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I agree with most of this letter, but in detailing how BTC won't "overthrow" the USD, you overlook the ways the Bitcoin Network does undermine part of the USD Network.

A full argument would be too long for a comment, so in the service of brevity, I'll play a little fast and loose.

The "USD Network" has two facets: "Power" and "Control".

The "Power" or maybe "Power Level" of the network - this comes from people desiring USD and wanting to price objects in USD. This is what you're primarily talking about in your post and I think you're correct in that crypto/BTC cannot undermine this power directly, so long as they're primarily priced against USD (the numerical price level is irrelevant).

The "Control" of the network - this refers to the ability of the United States Government (USG) to influence or coerce the behavior entitles who *own* or wish to *use* USD. This is done via banking rails, AML/KYC, sanctions, etc.

Note that these two facets often trade off against each other. A world where the USD is most powerful is one where everyone uses it for everything. If some people are excluded from USD because the USG doesn't like them, that decreases its power. Historically the USG has favored Power over Control, but in the last 50 years it has taken the opposite track and favored Control over Power (the seizing of Russian State owned USD reserves in 2022 for example)

Permisisonless blockchains do undermine the ability of the USG to coerce people by giving them an escape hatch that is outside of the USG's control. Ironically I think a lot of crypto promoters try and downplay this aspect because they fear the ire of the USG and don't want to be seen as directly attacking it.

The ultimate example of this is USDT ("Tether") which is basically just USD on blockchain rails. As a stand-in for USD, it can only increase the USDs' Power, but it is much harder for the USG to control then the banking system, so it decreases the Control of the USD Network.

You could imagine a world dominated by USD Network Power but totally outside of the USG's Control (with the exception of the ability to print USD). For instance, in a hypothetical world where the only possible form of USD was paper money and all transactions were physically settled (and the banking system didn't exist) but 100% of the world used USD would be a situation of max USD Power but minimum USD Control.

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Hey Ben, thanks for this comment. It's definitely an interesting way of framing it and one that I haven't explored deeply (or at least directly). I do think it is useful.

Some complexities.

- BTC operates on USD countertrade, so in your framing it increases the power of the USD while reducing the control of USG. In many ways I've often implicitly argued this when I say countertrade is *useful* if you want to bypass the banking system, but it relies on the USD. The major framing that I've tended to use in this context is 'parasite-and-host': BTC is hosted by the USD network, and implicitly endorses it, but it can reduce the direct control of the US banking sector

- Sometimes the threat of exclusion from a network can be a way of exerting control - you eliminate threats or force compliance. As you say, stablecoins increase the reach of the USD, but the USG can extract compliance from the companies by threatening to take away their accounts at in the banks etc

I do like your general idea, though, that there is a complex series of tradeoffs between extending power and keeping control. I suppose this applies to imperialistic structures throughout time probably. That said, this is not exactly a new issue for the USD system - or any national system for that matter - even way before crypto, the central bank already only had limited power because its delegated (or 'franchised') out issuance and control of the dollar to the private banking sector

I would say, though, that I'm not sure the direct tradeoff extends as far as you imagine it: i.e. the idea that in a world where 100% of the world used USD would be one of minimum USG control. This might be the case if you're defining 'control' as 'ability to monitor and directly stop something', but 'control' in a currency goes far further than that - there's heaps of monetary policy stuff that players like Tether etc have zero control over, but are affected by, so the USG would have a fair amount of control over the lives of people in a world where everyone relied upon the USD (I mean, I already know this to some extent because my family in Zimbabwe use USD without having any way to have any influence in decisions made by the Fed)

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This is a great read.

I still believe in the potential for web3 applications like lofty.ai, but the key thing is they are tied to real cash flows and legal structures. Unfortunately there is still a fair amount of risk while we figure out which chain(s) will win.

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Sure, tokens that have some actual tie to reality are inherently more practical. That said, they are also more 'dull' precisely because it's much harder to spin mystery around them

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I believe that in the end, most chains will "win".

Because the current multichain landscape makes no sense to navigate and fragment liquidity, they will at some point all be accessed seamlessly from a meta layer.

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And the mystic nimbus is gone...

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Good article. For years now I have been saying that if you somehow took away the ability to exchange Bitcoins for US Dollars then Bitcoin would become worthless overnight. Haven’t had a good rebuttal for that yet!

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I was hooked from the get go by your metaphor and read through to the end with glee and mounting understanding of the significance of Bitcoin. But, am I to understand that the double team is Musk/Trump, whose holdings are denominated in dollars? A terrific dissection of the Market through the inspired use of wrestling as a metaphor.

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Glad you liked in John!

The Double-Team is actually 1) the Bitcoin Industry with its anti-US dollar rhetoric and 2) TrumpMusk with their AmericaFirst pro-US dollar rhetoric

In the wrestling metaphor, it's like the competitor from parts unknown revealing that actually they've dropped the farce of the meta-feud and they're now in alliance with the management they originally claimed to be fighting. There's various ideological reasons why TrumpMusk find the crypto industry useful and it aligns with their AmericaFirst position, but I'll have to do a different piece covering that

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Another part the conflict in the double identity has to elide is that Hodler is, in its monetary identity, massively deflationary. Great, call it a hedge against inflation, but deflation has always been worse for economic activity. And, they are so proud of the limited potential quantity. But, again, deflation.

Say what you will about gold, but it has had a growing supply for as long as anyone has cared. It still has had its (highly problematic, financial crisis, panic-inducing) bouts of deflation, but nothing that could hold a candle to Hodlr/money.

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Your metaphorical capacities continue to amaze me, time and time again.

Thank you for this great piece; i'll be sure to remind myself of it when i see bitcoin's price shoot up too much, and choose to countertrade it for some holidays in greece.

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Ha ha, glad you like it. This metaphor has actually been with me for a few years so glad I've got to explore it

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Brett I love your articles, you’re a great writer, but I seem to be mising something in your argument. So to recap your points are minting does not imbue BTC with thingness, that BTC is not a currency between two networks, that people still price BTC in dollar terms making it a countertrade. That the dollars price is relatively constant. Without justifying these beliefs, to me your argument is based on present social norms and not a foundational argument between the two systems. Maybe I missed some articles? But anyhow, it seems to me your opinion would change if BTC became more stable than the dollar. If BTC was backed by a global military, legal structures and banks. If people traded crypto instead of legacy financial assets like stocks and bonds.… some of this is starting to appear don’t you think? At the end of the day you’re right, we can choose anything to be money, but isn’t that that the point here, people are choosing, and if enough do then in couple decades things may look very different.

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Hi Depinner,

You're right that I didn't cover every aspect of the deep underlying structure of BTC versus the USD in this piece (there are limits to what I can cover in each piece before it gets too long), but I've done a lot of previous work on the foundational differences. For example, you might want to see I, Token https://www.asomo.co/p/the-hole-in-bitcoins-heart, but also a lot of my work on the structure of normal monetary systems. Check out Zero is the Future of Money for a summary https://www.asomo.co/p/the-crypto-credit-alliance

Just one thing: I do not agree with the statement that 'we can choose anything to be money'. I'm not really a 'money is just belief' kinda person. I come from credit theories of money, chartalism etc and also an economic anthropology type perspective where I have a different starting point to most libertarian/commodity-theory-of-money type approaches (see, for example, Money through the eyes of Mowgli to get the foundations of this https://www.asomo.co/p/money-through-mowglis-eyes)

I have in the past argued that the only way to give BTC 'moneyness' is

1) get a state to accept it in taxation and price things in it or

2) turn it into a fetish object and hope that you can countertrade it

That latter option is what the crypto industry tries to do, and it's a weaker path in currency terms. The former is much stronger, but would get much greater resistance (for example, the crypto industry lobbied and funded Trump, but the crypto industry operates on BTC staying a US-dollar asset i.e. they don't want it to be turned into a stable currency used to price everything else, because why would people trade it if it starts to get seen as a stable thing, and why would the crypto whales of the industry want their holdings to suddenly turn into the equivalent of a boring bank account). No, what they want is for Trump to keep the US dollar and pump the BTC price by buying it up via the 'strategic reserve'

In the end, though, even if the US government tried to turn BTC into money via a taxation circuit, for example, the underlying token is still structurally in a weak position to do this. See I'Token etc for more

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I especially liked this part:

"The actual monetary system is a coercive and extractive credit vortex underpinned by powerful legal structures, military and the commercial banking sector around the world. That’s why it works, and that’s how the entire WSMOSC League functions. Capitalism isn’t some merry ye olde market. It’s a gigantic global organism built upon state foundations that uphold private property laws, allows corporations to exist, and hold the reins of a transnational money system that both expands and contracts.

Money isn’t ‘just numbers’, even if it appears with numbers, and the mere fact that Bitcoin is a movable numbered digital object means nothing. A flattened bottle cap found on the road, or a highly rare ornate amulet, or a piece of round plastic, could also have numbers etched into them. They could also be moved. They could also be countertraded. That doesn’t make them anything like the dollar."

The reason most people can't "see" this is because they primarily think of money as an object rather than a system, a habit ingrained from childhood when our first encounters with money are coins and/or bills. This is then compounded by the habituation of confusing numerals for the objects they "count" -- an error that metastasizes in the minds of those who spend all of their time as "symbolic analysts" who by force of habit begin to conflate their spreadsheets with the actual molecules they merely represent. The map is very much often NOT the territory in this regard ...

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The global unit of account is still the Dollar, but I feel like it will ultimately be Satoshis

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Can you explain the mechanism by which this will happen?

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I believe it will be neither.

Given some time, that (time) might be the only unit worth counting in this reality.

And even yet, that's not a given. There might be no counting of anything at all.

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First time encountering your writing, thank you for sharing and I appreciate the sentiment. I feel like this is a really long metaphor to explain something simple:

Bitcoin is not a currency. It's an asset, similar to gold bars, real estate, and vintage wines, and should be thought of and treated as such. (Baked beans maybe more of a commodity? ;)

That it is baffling why some prescribe value to this asset, I can empathize with. Behind all the hype, it is, as you say, just "a protocol that prints numbers when energy is expended".

I am curious to know more about what you think about the current culture that prescribes such immense value to such an asset whose inciting activity is perhaps even less noble than climbing Everest to scratch '50' into a rock, and how we got here, since you were there from the beginning.

Also I think more attention could be given to the idea that, unlike gold, real estate, wine, and baked beans, it can be moved with more ease, speed, and anonymity. Hence Jamie Dimon re: Bitcoin is for "sex traffickers, money launderers, ransomeware"... But I understand the scope of your piece is a debunking of the idea that Bitcoin will replace the USD.

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So the nuts and bolts of this is... the US dollar is real because it's fiat based on state coercion, whereas Bitcoin is not real because it's not fiat?

Also, couldn't the entire countertrade argument be had for the US Dollar?

As for the Bitcoin Beach dinner example, there's no reason they couldn't price things in terms of BTC and accept a different quantity of USD at the end of the meal. It's just a matter of which special numbers they put as their denominator. In Australia the special numbers would be AUD.

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I will get around to doing a separate piece on this sometime, because you're laying out the common counterattack that comes from the BTC industry when confronted with the reality of countertrade. Three points:

1) The typical move (in libertarian circles especially) is to start from the background assumption that an economy is merely a collection of independent individuals trading goods. If you start from this assumption, you will tend towards imagining *commodity theories of money*, and commodity theories of money operate on the idea that money is just a special good-among-goods, and from this assumption you then can come to believe that every good could be priced in any other good. This is the 'everything is barter' assumption

2) The best metaphor to break the everything-is-barter assumption is to think about a tornado and a kite. Trying to claim that actually the USD could be priced in BTC is like saying a tornado could actually be imagined as spinning around a fixed kite, rather than saying the kite spins around the tornado

3) The easiest way to demonstrate the reality of this 'tornado' is to ask a business in Bitcoin Beach to price their meals in fixed BTC prices. Ok, what's going to happen? They can certainly do do that, but:

a) all their input costs are in US dollars (or in currencies within the US-dollar-underpinned global monetary system), so they'd have to convince every single one of their suppliers to price their goods (e.g. bread, tomatoes etc) in a fixed Bitcoin price, but for the suppliers to do that they will need to convince their suppliers to do that too (i.e. the global shipping industry, the agricultural sector etc). It requires an entire network recalibration, which is not something that an individual business can do. This means, if BTC prices go down in the US dollar tornado, the business could easily go bankrupt as their input prices exceed their output price (aka. the BTC countertrade resale price)

b) if, on the other hand, BTC prices go up, they will suffer from a reduction in customers, because all their customers perceive BTC in US dollar countertrade terms, so as the US dollar price goes up the customer will think 'I'm not paying $100 for a salad' and will leave

The business can choose to engage in a fantasy in which they imagine they're doing this, much like a person can imagine that when they're driving their car along the road, they're actually standing still while the earth moves below them, but that's just an imaginative exercise, not a descriptive reality (in fact, picture a person coming in the opposite direction imagining the same thing, except with the earth going in the opposite direction - in reality, both cars are moving relative to Earth - the earth is not moving relative to them, even if the Earth-as-a-whole might be moving relative to other astral bodies in the universe)

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I mean the dollar and bitcoin are both gimmicks because they are fiat. Monetary creation with no accompanying increase in productivity is globohomo. The increase in dollar value of bitcoin and then the subsequent sale and spending of said value is monetary creation just like the Fed and QE.

I think the bitcoin being this “dollar-killah” “breaker of chains” is just junk stock bs to cover up the fact that cryptocurrency CANNOT and WILL NOT be an alternative medium of exchange to supplant the dollar. That is techno-mysticism.

The dollar is guaranteed by a complex web of trade relationships, direct aid, the US military, and the fact that other nations abuse the desire to print almost more than we do. I think it is fantastical thinking that we will have unfettered global internet access (a prerequisite for the survival of a functional block chain) with the absence of the US global hegemonic order (ie the dollar).

Bitcoin is a bet, nay a wish, that the Fed will come crashing down, but the infrastructure required for bitcoin to function is downstream of said Empire. It’s like coming up with a brilliant Latin legal document in 100AD and pretending like it will take down the Empire. NO ONE CARES ABOUT LATIN IF YOU DON’T HAVE AN EMPIRE.

Crypto is not a hedge against the world falling apart, because if it does crypto will be worth less than the energy needed to process transactions.

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Bouncing on your "Monetary creation with no accompanying increase in productivity is globohomo."

I would somewhat agree.

But i'd also point out that the bitcoin case might be kind of an early prototype to try and test out compute power as a productive asset.

I believe that the emergence of AI will make "proof of compute for a transaction ledger" obsolete, in favor of "proof of compute for an AI mesh".

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