I think the march of bitcoin is actually a better example of how AI is taking over the world. People in AI are fascinated by AGI - but the bitcoin ecosystem is actually a real world example of how AI will take over the world.
Specifically, the march of AI won't happen at 'edge' nodes, it won't be incremental, it won't happen by replacing humans with machines. The march of AI will start at the core, at a rethink of the fundamental infrastructure that powers an industry making it more amenable to machines and 'hostile' to most humans.
People underestimate the amount of resources required to articulate monetary policy by a central bank. Bitcoin can already do that much better than maybe 70% of the worlds central banks. India, China and US can think about banning/regulating bitcoin. But there are countries in Africa who can already do better by simply leapfrogging to bitcoin and ditching their national currencies.
Bitcoin is here to stay. And it cant be stopped.
I doubt this would do any good for them.
* Their currency would be totally exposed to 3rd parties.
* They would loose the control over the rates, which are an important tool to attract investments, if are stable and controlled well.
* AFAIK some Chinese private companies control large part of the mining network. Basically the central bank would be in private, and foreign hands.
* The slow transactions would make it totally infeasable for use in everyday life, especially as people there have limited access to necessary technologies (stable network connections all round the countries, stable electric power everywhere), so daily transactions of the ordinary people would either fall back to barters, or use some fiat paper money, eg. USDs.
I totally don't get how could you reach tis conclusion, your whole post is a SV bubble wishful thinking with some trendy bullshit, eg. software eating the FED, fed is replaced by code. Bitcoin does better than centralbanks. If some currency looses 30% of its value a single day, that is not a sign of health, and this happended the very week with bitcoin. Actually Bitcoin does its job worse than an african dictatorship's currency, if its job is being a fiat currency, which is useful for the people in daily life.
I doubt its job is that, so it may do its job well, but for this task it is unsuitable.
My post wasnt just about Bitcoin specifically, but around the entire blockchain ecosystem.
> But there are countries in Africa who can already do better by simply leapfrogging to bitcoin and ditching their national currencies.
Also: The concern about infeasability in everyday life is network based and not a shortcoming of bitcoin. So it's not dependent on the coin you are using.
All other points seem to be inherent to public blockchains, so it is quite the leap of faith to believe they are fixed in any public blockchain cryptocurrency.
Bitcoin only has totally clear monetary policy because it's increase of the money supply is entirely predetermined: It is created at an ever decreasing rate approaching a limit.
The result of this certainty in monetary policy is a currency that is naturally deflationary (literally by definition). This makes Bitcoin perfect as digital gold but shit as a functional unit of currency. You don't want to spend an asset that will naturally appreciate in value, discouraging using it.
You could have a cryptocurrency that generally trends at the same inflation rate as regular currencies: 2-3% annual and use that to pay the miners (or just give everyone a wealth endowment through giving any current owners a 1% increase in their current wallets and use the other 1-3% for the miners) and you would have a currency that could stay price stable with out Fiat currencies instead of always increasing in price like BTC has (at least over a sufficient moving average to reduce the volatility from speculation).
In your example, HDD space is purely a good to be consumed though and not a currency (or an investment beyond an actual capital investment because it does work for data storage). Thus, if you need to store data, you will buy storage simply because you need it then. But you can't sell that storage in the future for a positive return, so the incentive I'm talking about doesn't really exist in the example you used.
Money is a means of allocating production. If it is just stored under a mattress, it isn't being useful and production is being wasted. We capture the negative effects of that waste with inflation.
Deflationn is basically a death spiral for an economy, as everyone consumes only essentials because everything will be cheaper tomorrow; lots of production is wasted because it can't be saved easily for tomorrow, people are laid off, companies go out of business, it sucks. Wars have even been started over silver and gold's deflationary tendencies (e.g. See the opium wars).
Don't confuse inflation with hyperinflation, the latter of which just destroys trust in the currency and makes it useless to save at all, causing runs on all production and starving investment. A bit of inflation is all that is needed to put money's use into a positive state without flipping in the other direction.
Whereas inflation at least basically forces the wealthy to invest in real assets or else slowly transfer the value of the cash towards debtors.
Yes, we agree on that. However, I think we need to also acknowledge that 1) a large proportion of wage earners have very few, or negative net assets, so deflation actually hurts them and 2) even though deflation helps savers, the biggest savers in the economy are actually the rich. Deflation helps savers, but the people with 80%+ of nominal assets are the already-wealthy.
In fact, the most common form of household wealth is a house, where you own a real asset and owe a nominal debt.
Under inflation, your house value grows at inflation while your debt remains constant, so this even benefits the saver. Under deflation the opposite happens.
> Are we going to act on theories that match the data or does not match the data?
You need more data. The developed world has been on the gold standard since the late 19th century through to the 1970s. During that time the US has seen:
- the Robber Baron age and the Long Depression (where the rich got much richer)
- the roaring 20s, when wealth was more distributed
- the subsequent crash and the Great Depression, where the entire world was in misery (but inequality was very high)
- WW2 and the post-war era, which saw large decreases in wealth inequality
Seems a bit silly to say that 'the gold standard was responsible for lowering wealth inequality', given the huge swings back and forth in inequality while we were on the gold standard over 100+ years.
It'd probably be surprising to know how many businesses have been killed by intentionally or inadvertently releasing information about an upcoming product.
Do you think people were queuing to buy the iPhone 7 once Apple announced the September event? No, because there's a new model and old models would become cheaper
Let's say you need to store an extra 1Tb per year, for the next 5 years. Do you think it's better to buy 5 1TB HDs now or one every year? (disregarding backups/raid/etc, this is an economics question, not a storage question)
The answer is obvious
Think about it: for every dollar you earn, the government can print its own one dollar to basically halve your earnings. Why would anyone want such a thing. With bitcoin, you don't need to invest in stocks/real estate and other inflation resistant things to beat inflation. You can hold your earnings in it and you are already beating inflation.
Even just minor deflation is disastrous for economies because if there is 3% deflation, you could get 100% of what was generally typical GDP growth for developed countries without spending any money to produce anything. This encourages everyone to be risk averse towards spending money on anything at all.
Thus, monetary policy over the past century has settled on a steady but small amount of inflation as the ideal policy for balancing economic growth and unemployment.
A currency being inflationary shouldn't really affect spending because lots of different investments already exist, so you can make money holding them instead of the dollar. The dollar being inflationary (or shouldn't, for rational actors) incentivizes trading it for something else, but not necessarily increase spending in unnecessary, depreciating, products.
That's true, but someone has to end up holding the nominal assets.
Like yes, a saver can trade all their fiat currency for real assets by buying a house or stocks, but then the person who sold them those stocks would get hit by inflation. At the end of the day, if the 'real assets' in the economy are worth say $10 trillion and there is $1 trillion of currency in circulation, then whoever is holding those dollars will pay for the inflation.
Btw, the most common nominally-denominated asset is debt. Savers who hold debt (Treasuries, mortgages, etc.) get hit the most by inflation.
What are some real world examples of this?
The Great Depression in the U.S. as well.
There's a possible counterexample with the Long Depression in the U.S:
Here, prices fell slowly: 1-2%/year, caused by sharply rising productivity. The period was also called the Gilded Age, and it was a mixed bag economically. On one hand, the structure of American society dramatically changed through massive technological advance, consumer goods became abundant, and businesses who adopted those techniques became fabulously wealthy. OTOH, many small farmers went bankrupt and were forced to sell off their land to service debts they couldn't pay with money that was now more valuable than when they took out the debt. Ditto lower-class laborers, who were squeezed into tenements with dozens of families living together as their wages remained stagnant for a generation but their employers became fabulously wealthy and bought up much of the prime real estate.
The Long Depression is largely forgotten today (unless you're an economic history geek), but it was a prime impetus for the monetarist school of thought. The whole idea that the government needs to continually print money to catch up with rising productivity and availability of goods is largely based on the experience of the U.S. in the Long Depression, when they didn't print money.
Also, there's a good amount of evidence that our current period of history resembles the Long Depression a lot more than either the Great Depression or 1970s stagflation, and will play out in similar ways. I'd personally put us around the mid-1890s in terms of historical parallels.
This triggered massive hoarding of currency, despite harsh legal measures that tried to outlaw it. Everyone had an incentive to hoard the old, higher silver coins while shunning the new debased coins being issued . 'Bad money drives out good' .
Eventually, the majority of the Roman economy became demonetized, and people had to resort to barter again. Welcome to the feudal ages.
* Note that there is a confusion of terminology here -- things look inflationary if you are counting the number of coins it takes to buy something, but highly deflationary if you measure the amount of silver to buy the same item, as silver was sucked out of the economy and then hoarded.
From a certain perspective, both factors actually came together to destroy the late Roman monetary system -- the real 'store of value', silver, was removed from the system and hoarded because it was deflationary. And hyper-inflation in the fiat currency simultaneously made the coins totally worthless and therefore unsuitable for doing transactions.
Could you elaborate how you think bitcoin monetary policy is better than 70% of world's central banks? To me, one of the most important tasks of monetary policy is to have a stable value of a currency (not against other currencies but against stuff people actually buy). And with that measure, I have difficulties identifying one single central banks that is worse than bitcoin within the last few years. (Maybe Zimbabwe or Venezuela?) But 70%? No way.
(Note that bitcoin also fundamentally lacks a mechanism for price stability, not that anyone actually owning bitcoin would that want.)
And Africa ditching national currencies for bitcoin? How do you propose that an illiterate farmer in rural nambia is going to use bitcoin? Even if you figure that out, do you think that the african governments - crappy as they may be - are that stupid that they don't figure out that instead of paying the seignorage to bunch of bitcoin nerds who currently own the currency, they can make their own fork and pocket the seignorage themselves?
Bitcoin has no future as an usable, official currency anywhere. That should be obvious.
This may be technically true, but probably won't happen anyhow. There's a reason that those currencies are terrible, and that reason is that a person or people in power benefit from the seigniorage that is the cause of the currency inflation.
None of the BTC startups, even the remittance ones, want to touch that market with a ten foot pole (Despite their slide decks shouting from the rooftops about banking the unbanked.)
Maybe it's because BTC doesn't actually solve any of their problems.
It would be trivial for them to shut down exchanges. Without that, it would hard, and expensive, to convert to fiat.
Legit businesses would not accept Bitcoin. The only uses would be black market, and I doubt they would continue using bitcoin on the darknet markets. Without the ability to easily convert to the currency of the country you live in, Bitcoin would have little to no value.
I hope those bitcoin guys won't get guns to actually execute people who are not buying.
They already leapfrogged them a decade ago with m-pesa.
Why AI takeover is always considered against humans? Why can't it co-exist with humans?
there's high potential for people gaining freedom from the west's monetary system. but i'm very pessimistic about us getting this right and not loose "control" to state and corporate powers exactly like we did with the internet.