The is an opinion editorial by Bernardo Filipe, thinker, philosopher and author of “Straight Science.”
“Of course, I hate the success of bitcoin and I do not accept a currency that is useful for kidnappers and extortionists, etc. I also do not like to just remove a few billions and billions of dollars to people who just invented new financial products out of thin air. So I have to say humbly that I think all the developments I care about are disgusting and contrary to the interests of civilization. And I will leave the criticism to others. – Charlie Munger
It’s time we condense into a few bullet points some ways in which bitcoin will likely contribute to civilization. For some of his contributions we have now seen. Next, we will analyze Munger’s argument. So, to begin with, bitcoin:
- Reduce administrative bloat. By creating a public ledger, much of the work required to verify and audit wealth transfers has been eliminated.
- Diamonds transfer large amounts of wealth around the world.
- It can have the same potential as treasury bonds but with higher yields. This is because the real return on bonds is always lower than nominal expectations, due to inflation.
- It will increasingly function as a safe store of wealth or even as a savings account, as market capitalization increases and volatility decreases. Both the large amount of computing power that has power Bitcoin, and the way in which this computing power is distributed in several jurisdictions, ensure that the Bitcoin network and therefore the ledger is incorruptible.
The contribution to civilization is expected to be so significant that gold and treasury bonds should gradually become obsolete, as the rate of bitcoin adoption increases. So bitcoin is really just a financial product, or asset, at this point, but if adoption continues to grow, it will gradually replace older, less efficient, and ultimately more expensive financial products and assets. Bitcoin is a real financial technique that stores the flow of energy-work from the site of energy production into an incorruptible and incorruptible digital asset. As Michael Saylor explains, bitcoin is monetary energy with a thermodynamic sound.
Let’s now dissect Munger’s argument:
Munger: “I also don’t like spending billions and billions of extra dollars on people who discover new financial products out of thin air.”
This is an interesting point, at least psychologically, but if we consider that every useful invention starts “out of thin air,” as an idea in a person’s brain, we know that it is baseless. To give an example, the Wright brothers had to imagine the airplane in their minds, “out of thin air,” as Munger said, before going down to build it. Also, those billions and billions of dollars don’t exactly go to bitcoin creators. Whoever buys bitcoin in effect buys a piece of the Bitcoin network, ie, a piece of limited blockchain property, and the piece will belong to the buyer and only the buyer as soon as he owns it. Early adopters become richer as a side effect of the adoption of large assets, but the positive civilizational event here is the radical optimization of the flow of wealth, as summarized above.
If Munger might mean that one bitcoin can be easily created, or replicated, then that is also incorrect. It costs, by design, a significant amount of energy to mine (that is, to create) a single bitcoin. A side effect of this mining mechanic is that it incentivizes us to use a lot of waste energy and also to use electricity infrastructure. This is definitely another great contribution to civilization.
Munger: “I hate the success of bitcoin and I do not accept a currency that is useful for kidnappers and extortionists.”
The thing with this line of reasoning is the same as saying “I hate the success of knives and I don’t like useful tools for criminals.” But what if I told you that you can cut food, skin animals and help build civilization with a knife? Or like saying: “I hate fire because there are pyromaniacs.” But what if I told you that the “discovery” of fire was almost the point at which humans diverged from animals?
Not to mention that if the regulations are tightened, criminals using bitcoin will not be very bright: the ledger is public, and all transactions are tracked. As AML/KYC rules and regulations begin to be implemented (in exchanges, and possibly in wallets), criminality driven by blockchain technology should gradually disappear. Good old plain cash, which is physical cash, is harder to track. Why would a drug dealer, for example, accept bitcoins in an IRS-tracked wallet? In such a regulatory scenario, where the anonymity of bitcoin holders does not exist for the authorities, criminal activity fueled by bitcoin transactions can hardly survive.
Of course, criminals can create their own wallets and market them on the black market, but as soon as a criminal wallet is connected to a wallet tracked by the IRS, alarm bells ring. The “black market of digital assets” will be a short-circuit of the economy-criminals will not be able to use the wealth in the criminal wallet for anything other than untracked, criminal goods and services. Whereas now, money, ie physical cash, criminals make on the black market can flow back to supermarkets, bars, restaurants, etc. and criminals can effectively make a living out of crime.
In fact, even the smartest anarchists are against the widespread adoption of bitcoin, as they admit it could lead to a society where your every move is tracked. So criminals have to fight back too. If bitcoin works at the moment for them, it is because we are still early in adoption and there is practically no regulation. After all, we are talking about replacing an untracked physical wallet, with a tracked digital wallet. How can crime thrive under these conditions? Only through highly organized crime and / or with the help of the government.
When the first plane the Wright brothers built crashed, a man laughed at the brothers. When the first monkey set himself on fire, another monkey laughed. They were probably still monkeys at that time. As for you… Will you stay single?
“That’s a good lesson for anyone: the ability to take criticism constructively and learn from it.” – Charlie Munger
This is a guest post by Bernardo Filipe. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.