Why Bitcoin is not a socialist’s ally

https://www.yanisvaroufakis.eu/2020/07/27/why-bitcoin-is-the-not-socialists-ally-reply-to-ben-arc/

by panarky • 6 years ago

38 91 6 years ago

ogogmad• 6 years ago

Under the gold and silver standards, the public money supply was fixed – and could not be easily manipulated by the state (either the government or the, then non-existent, Fed). But that did not stop private bankers from leveraging public money out of thin air to create huge quantities of private money with which to fund the Robber Barons, i.e. the Jeff Bezoses, of the era.

But didn't the creation of private money happen because gold was so expensive to hold and transport? Assuming Layer 2 solutions like Lightning get off the ground, Bitcoin won't have this problem, right?

sudosysgen6• 6 years ago

Not really.

The gold/silver standard refers to the monetary system where paper cash is backed by precious metals, for which it can be exchanged any time.

It does not refer to literally buying things with gold.

So yes, Bitcoin has all the same issues as a gold-backed currency (a gold standard).

Private forms of money were created in order to help alleviate the extreme inelasticity of gold-backed currencies, which the US abandoned in 1971. So Bitcoin would have all the issues of the dollar from 1944 to 1971.

Melting_Harps6• 6 years ago

Private forms of money were created in order to help alleviate the extreme inelasticity of gold-backed currencies, which the US abandoned in 1971. So Bitcoin would have all the issues of the dollar from 1944 to 1971.

Which is when it began it's World Reserve Status, and was the reason why Capital Markets functioned and helped rebuild the West, and Japan, as well as led to the highest increase in Social Mobility the World had ever seen at that point and led to the emergence of the World's sole Super Power.

I'm an Anarchist and I want to do away with the notions of Nation-states entirely, but even I cannot help but take issue with your framing of what the US Treasury did by identifying those desirable qualities and attributes as 'issues.' The issues emerge when reckless abandon is applied to what was semi-sound monetary policy and you get the perversion of Modern Money and the corruption of Markets that lead to its continual inflationary based asset bubbles and crashes because of cheap/hot money.

Monetary stability is what should be desired, and for that you need a system incapable of the whims from Human Corruption.

Also, I disagree, if Bitcoin lives up to its potential it remains the only really Multi-planetary monetary system in existence. Nothing else even comes close, if you want to try this experiment just try sending money during non-business hours, on a weekend to a person not in your network.

So, BTC is hardly constrained to your confines.

kerkeslager12• 6 years ago

Lightning has nothing to do with holding and transporting Bitcoin. Holding Bitcoin is literally free. Transporting Bitcoin can also be free, depending on what you mean by transporting.

VikingCoder10• 6 years ago

Holding Bitcoin is literally free.

Interesting claim.

How do you secure it, back it up, and bequeath it to people on your passing?

Don't those things cost time and actual money?

Melting_Harps6• 6 years ago

Transporting Bitcoin can also be free, depending on what you mean by transporting.

On-chain? No, that may have been true in the early days (pre 2013?) but a tx fee has to be included unless you want your money held in the mempool. You may get lucky if it has high days destroyed, but that's not really a risk you want to take unless you care about the funds and want to eventually have to resort to a CPFP tx. I did a 18 satoshi/byte tx and it took a few hours to confirm, which for my purposes was entirely fine as it was a low sum. But as we get more people onboard On-chain should only really be used for important, secure, and therefore commanding a higher fee, transactions than would/could be done as a LN tx.

And actually LN has everything to do with how bitcoin is transported, note the lower-case here, LN makes it instant and near no cost tx fees.

Holding, as you said, can be done for free. Many old schoolers never really opted for hardware wallets, as the paper-wallet method can be just as secure, despite it requiring far more planning and contingencies.

I liked Yanis when he was lambasting the Merkle/Rumpy governed EU and telling them they'd prefer to default and exit the EU and take Cyprus and the PIIGS with them. However, ever since the party he helped create (Syriza) failed to do anything different in Greece than the Trokia before it I completely tuned out to him and his tired rhetoric has lost any of its appeal.

And he is right, Bitcoin is completely agnostic to Political Ideology or its proposed factions, in fact I'd say if you understand what it really is: that is entirely the point!

I'm not going to read his article, but if that is his only contention, then he is right. Socialists need not apply, and if the Petro is any indication of what happens when Socialists create their own cryptocurrency (only to see it fail, in value or utility and then have to accept Bitcoin anyway for their services) it doesn't really matter, and proves the above.

roenxi• 6 years ago

If the non-leverage path involves X dollars. The leverage path >X dollars. Unless someone is fairly explicitly trying to stop them then banks (and other businesses) will start inventing private methods of exchange, popularising them and then playing leverage games.

There are extremely powerful interest groups that want money to be creatable on demand (and not subtle ones; the public loves credit). If a sound money system is in use (Gold, Bitcoin, etc) then it may hold for a long while but sooner or later be re-defined out of the system and replaced with something that can be created. The process has nothing to do with the other underlying technical realities of the sound money, the problem being solved is the soundness of the money itself.

einpoklum7• 6 years ago

But didn't the creation of private money happen because gold was so expensive to hold and transport?

No.

1. There was creation of state and of private money, or money-of-sorts, in societies where money wasn't based on gold.

2. If transport and holding was the issue, private money could have been limited to the amount of available gold.

No, that's really not the reason.

heidegger• 6 years ago

all socialists snicker at the mention of bitcoin. it is a punchline, a jab at "Libertarians" and their silly faith in technological solutions to social problems

H8crilA2• 6 years ago

Yeah, if only more people knew some history: https://wtfhappenedin1971.com/

sudosysgen6• 6 years ago

This is a correlation without causation. The root cause of both fiat currency and the worker being ripped off, is globalization.

Fiat currency did not cause the disconnect between productivity and wages, the same way that the disconnect between productivity and wages did not cause fiat currency. They were both caused by the shift to a complex global economy.

yalogin• 6 years ago

For me Bitcoin further exacerbates the already terrible distribution of wealth in our world. BTC is purely a play for the "rich" folks. I say "rich" because it needs not just tech access and disposable money barriers but also has the additional tech knowledge barrier to it.

ColanR• 6 years ago

That is a problem which crypto proponents are actively trying to overcome.

Dahoon• 6 years ago

As long as it requires work by CPUs or GPUs it is for rich people.

sudosysgen6• 6 years ago

Yes, and that is exactly what the essay is about. Crypto proponents will only be able to overcome that issue, under capitalism, if they solve the issue of a fixed money supply. It is not sufficient to solve the computing issue if it leads to massive inequality and concentration of wealth, as well as other problems.

einpoklum7• 6 years ago

But the problem is not technical in nature - it is social. The question of who decides, and how is the decision made, to issue more currency and distribute it, or to obviate existing currency - this is a political(-economic) question.

nerfhammer• 6 years ago

it's not just knowledge and tech, a deflationary currency multiplies existing wealth at no risk while also multiplying the value of debts.

panarky• 6 years ago

Varoufakis only examines two scenarios: (1) Economy remains capitalist and Bitcoin replaces national currencies, or (2) capitalism is replaced with socialism.

Each scenario has such a vanishingly small likelihood that it seems pedantic to debate them.

A more likely scenario is that we retain market economies and national currencies, with more or less corruption, more or less rule of law and more or less authoritarianism. Bitcoin would still exist but it wouldn't replace national currencies.

It seems that during periods of more corruption, less rule of law and more authoritarianism, we'll see more use of state power to debase national currencies for the benefit of the clique currently in power, with financial repression and confiscation for political adversaries and those not in the clique.

During times like this, an asset that is independent of the clique, digital, borderless, and difficult to detect, debase or confiscate might be a more secure way to protect the savings of the little guy and the big guy alike.

thrown1917• 6 years ago

Socialists, at least of the libertarian sort, tend to oppose both unaccountable/centralized political and economic power.

Any unregulated and unconstrained reputation system tends to lead to Zipf-type distributions. What that means for an economy is extreme power at the high end and lots of poverty at the low end.

Thus either there would be no control at all of the economy, or that control would go to the whales by virtue of their very gravity.

The former would be bad, because the system would effectively be blind to many things that political power handles (e.g. externality). And the latter would be worse, because there's no reason to believe that these powerful entities would care about the powerless.

joosters3• 6 years ago

Normally, a big problem in crypto-currency blog posts is that an ill-informed author blathers on about supposed technical features of blockchains.

But this article is remarkable in that it doesn't mention any feature or property of bitcoin at all! You could replace the word 'bitcoin' in the page with any other currency, monetary system or whatever means of accounting that you like (using shells for currency, perhaps?), and nothing would change. The article is amazingly content-free, and its arguments & propositions could be re-applied to whatever you like/dislike!

sudosysgen6• 6 years ago

It isn't an ill-informed author, Yanis Varoufakis is a very respected and competent economist.

Of course! You could replace Bitcoin with any other fixed supply currency. This is literally the point of the article! He is arguing that Bitcoin cannot work for the common man, because it has all the issues of fixed-supply currencies that lead to fiat currency. Transitioning to Bitcoin would be akin to restoring the Bretton Woods system, and would be disastrous for everyone.

He is indeed addressing a feature and property of Bitcoin. That feature is fixed supply. That is what matters to an economist, because it has huge impacts. Varoufakis, in this essay, doesn't talk about the tech, because not only has he already done so, but because it is irrelevant to the analysis that he, as an economist, makes about the consequences of a switch to Bitcoin.

joosters3• 6 years ago

A 'fixed supply' is not key to his points. Point 1 is, more specifically, that you would not be able to get agreement to adjust properties of the currency (remember, bitcoin is only 'fixed' in that there's a number in the code: with enough support, all the numbers can be changed). But he goes on to say that the problem is that the rich & powerful won't have incentives to adjust the money supply, something that could be argued about any money that already exists right now.

Point 2 is just: there will be inequality, the rich stay rich, the poor stay poor. Yes, true, unless you do some huge form of wealth redistribution, you won't change this. But note that this again is not related to the new currency. Jeff Bezos will still remain rich no matter what features your new currency has, because he already is rich.

So, I don't see how these points are related to bitcoin or in fact any currency.

chrisco2554• 6 years ago

Why would restoring Bretton Woods be disastrous? The late 40s through the late 60s were among the biggest economic boom years in world history and perhaps the greatest expansion of wealth and quality of living in human history.

ascorbic• 6 years ago

It doesn't talk about technical features because it's about the macroeconomic features (unsurprisingly, as Varoufakis is an economist). He criticises it because it removes the ability of central banks to sharply increase the money supply during a crisis. Whether or not you agree with his argument, it is quite specific in that respect.

joosters3• 6 years ago

Moreover, this free-rider problem is made far, far worse by the fact that Bitcoin ownership is very unequally distributed, thus giving the Bitcoin-rich powerful incentives to restrain the growth of the money supply (since such restrictions would boost their private rents at the expense of the public interest).

Take out the word 'bitcoin' from this, and all the points still stand. The super-rich tend to be the ones with power, and they are never motivated to change this.

(Which is kind of a truism really, because if the super-rich & powerful were willing to be generous, they wouldn't be super-rich in the first place...)

AcerbicZero• 6 years ago

Sooooo the issue with bitcoin+socialism would be the lack of easily centralized controls by which the party/state can manipulate the currency and that people are incapable of doing altruistic good, therefore the party/state must have those controls?

Authoritarians are gross.

Qworg• 6 years ago

I think you'll find that people (broadly) are capable of altruism, but persons (narrowly) act in their own self interest and take advantage of the altruistic.

pessimizer• 6 years ago

This is an person arguing with socialists about why bitcoin is not good for socialism, not a person trying to convince libertarians to not be libertarians. Try to argue with it on its own terms, not whatever your personal issues are.

sudosysgen6• 6 years ago

Absolutely not. Varoufakis isn't even an authoritarian, he's more the Bernie Sanders type but more open about his worldview.

The issue is that Bitcoin is a currency that has both a fixed supply, and is naturally controlled by the very richest people. This leads to a series of incentives and effects of monetary policy that creates conditions where the average person loses out, big time.

einpoklum7• 6 years ago

The lack of easily centralized controls

No, BitCoin has basically _no_ control of the currency. The algorithm is what it is, and the initial "players" who have the most BitCoin are who they are.

nknealk• 6 years ago

Bitcoin presumes (1) everyone owns a computer (or a smartphone/similar) and (2) everyone has network connectivity all the time. Without these two things, one cannot transact.

There are huge swaths of the world where this isn't true. Short of making computing devices and internet connectivity human rights, these assumptions compound existing inequalities.

drexlspivey• 6 years ago

Performing an online transaction requires a credit card or a bank account which is a far stricter requirement than a smartphone which you can get for 20 bucks

ianmobbs2• 6 years ago

There are also huge swathes of the world where nobody has credit cards or bank accounts. This isn't an argument for Bitcoin as much as it is for physical currency

wmf6• 6 years ago

You could always issue "paper" bills that are denominated/backed by BTC. Such currency wouldn't have all the benefits of Bitcoin but it wouldn't be worse (from a coiner's perspective) than existing paper money that people are using today.

ianmobbs2• 6 years ago

Who is the one backing those paper bills? This brings back centralized banking, which is what most folks in favor of replacing fiat currency with Bitcoin are working away from

pamicel• 6 years ago

A coin or a bank note are far from being non-technologies, and the logistics to getting them to where they are needed are underrated.

Connectivity and devices are not that big of a leap forward from there and seeing how hungry western and Asian businesses are to open new markets in underserved areas, it’s unlikely lack of connectivity itself will further inequalities. Not for long anyways.

The need for powerful computing gear could, maybe, if there is any advantage to being part of the mining network...

splix• 6 years ago

Take a look at OpenDime [1] + ColdPower [2].

First is a one-time hardware private key, with physical protection of it (i.e. you need to break the device psychically to extract bitcoins), and ability to verify address by plugin-in into USB.

Second is a USB power from 9-volt battery. So you can check that the OpenDime is active.

The only hard part is verifying the balance you need an access to blockchain network. Not necessary to do that through internet, because you can receive it though satellite now [3], but you still need a computer, that's the fact.

1. https://opendime.com/ 2. https://usbcoldpower.com/ 3. https://blockstream.com/satellite/

andirk• 6 years ago

Technically, you could literally do the cryptographic math to figure out the validity of a transaction, and then add it to a block down the road when you get a chance, sooner rather than later to not allow double spending

DennisP2• 6 years ago

A lot of this presumes a scenario in which Bitcoin replaces fiat and become the world's sole currency. It's hard to imagine why that would happen.

What we seem to actually be getting is multiple cryptocurrencies, in addition to fiat. Under these conditions, if the world falls into depression, where money is too scarce, then an easy solution is to launch new currencies. On blockchains that support smart contracts, this would be easy to do.

If Hayek was on the right track with his advocacy of competing currencies, this could be a more stable system than we have now. Easy deployment of local currencies could also help support local businesses over large monopolies.

vkou• 6 years ago

"Money is too scarce" is not ever going to be a problem. If the monenatry supply, as a multiple of the economy is experiencing contraction, central banks can always print more.

Bitcoin, in this sense, is once again solving a problem that nobody has.

DennisP2• 6 years ago

Bitcoin is not trying to solve that problem. The article is claiming that Bitcoin would have that problem, if it were to take over the world from fiat. My claim is that this is false, because there can be more than one cryptocurrency.

udue73uru• 6 years ago

I think it's much more likely that the desirable properties of crypto-currencies will be baked into government issued psudo-coins that retain the desirable parts of bitcoin while discarding the inconvenient parts. The only people who hate on fiat money are people who don't understand why backed currencies suck or why it would be bad if every country used the same currency. What doesn't suck though is money that essentially tracks itself and baking that self-tracking feature into an existing fiat currency via some kind of pseudo-coin would make regulatory enforcement wildly easier without the downsides of a backed currency.

kerkeslager12• 6 years ago

Of course Bitcoin is not a socialist's ally in the long run. It's fundamentally a way to get government out of money, which is exactly the opposite of socialism. Bitcoin is an anarcho-capitalist tool.

The article rightly notes that the ability to print money is relevant here, but I think they could have expressed it in simpler terms. In short: printing money is always a redistribution of wealth. If you print a million dollars and give it to a group, you've effectively taken money away from everyone else and redistributed it to that group. The pot of wealth in the country hasn't changed size, the recipients of the newly-minted money just have more of the pot.

In a socialist ideal, this is a key tool because it's one of the main ways of redistributing wealth from the rich to the poor. You print money and give it to the poor. This isn't creating value, obviously, it's just decreasing the value of the money held by the rich, and giving that value to the poor. A decentralized value store can't do that.

However, some socialists would argue that the ability to print money in modern western powers is primarily used to redistribute wealth from the poor to the rich, not the other way around. Due to this, a socialist might say it's better to use a decentralized value store now than to use a centralized value store that is used to redistribute wealth in the wrong direction.

If you're a socialist, the question on your mind with regards to bitcoin should be: Is the power to print money being used to redistribute wealth from the poor to the rich? And if so, is the short term benefit of avoiding this harm worth the longer-term harm of moving value out of stores where wealth can be redistributed from the rich to the poor? These are much more complicated questions: the first might be answerable with data, but the second question involves a lot of future variables which may simply be impossible to predict.

einpoklum7• 6 years ago

Bitcoin is an anarcho-capitalist tool.

s/tool/ponzi scheme/... or in other words - I am entirely unconvinced that bitcoin has a positive short-term effect. Most of what happens with BitCoin is people buying it in exchange for fiat currency, a bunch of speculation, and mining (if that's not mostly over). I don't see it empowering workers' movements.

Melting_Harps6• 6 years ago

Then your view(s) is solely fixed on those who benefit from this exclusionary Monetary System, go ask people who don't have access to bank accounts or are undocumented how horribly they are treated and marginalized then come back and see what is and isn't a ponzi scheme. See how many people are unfairly targeted by the State(s) with policies like Operation Chokepoint in the US, though similar laws exists in other places as well, while at the same those very same Governments bail out Banks and Corporations found guilty in money laundering for Drug Cartels or other illicit crimes and while telling the People they're not doing enough to keep up with the ever-increasing costs of living due to these policies and inflated asset bubbles.

Go look up what System D is, and see what worker movements it could help benefit, because just from that statement alone you show just horribly informed you are and how narrow and ignorant your view of the World really is.

kerkeslager12• 6 years ago

s/tool/ponzi scheme/

This weakens the rest of your argument. Bitcoin obviously isn't a Ponzi scheme. If speaking to an uninformed audience, this could be a good-enough approximation, but when speaking to an informed audience, a cheap shot like this just makes you seem uninformed (which you clearly aren't, based on the rest of your post).

I am entirely unconvinced that bitcoin has a positive short-term effect. Most of what happens with BitCoin is people buying it in exchange for fiat currency, a bunch of speculation, and mining (if that's not mostly over). I don't see it empowering workers' movements.

On the whole, I agree with you on this, and I hope there's nothing in my previous post which makes it seem otherwise.

However, as with any large complex system, there are local effects, and the situation is not as simple as you're making it seem.

m12k• 6 years ago

Not mentioned here, but bitcoin is also a much better tool for tax evasion than banks are, with all their mandatory reporting to the tax authorities. That also makes it less of an ally for a socialist, since it helps the wealthy starve the state of tax revenue, further increasing inequality.

Why Bitcoin is not a socialist’s ally

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