Cryptocurrency: No One Understands The Monetary System, And That's Not OK

[grarpamp]

No One Understands The Monetary System, And That's Not OK

https://bitcoinmagazine.com/culture/nobody-understands-the-monetary-system

https://twitter.com/SymbolSatoshi/status/1509325939444183040

https://www.aier.org/article/we-can-still-have-a-century-of-liberty
https://www.aier.org/article/pornhub-victim-of-visa-and-mastercard-censorship-or-money-laundering-risk/
https://www.cnbc.com/2021/07/16/jerome-powell-promotes-cbdc-digital-dollar-warns-against-stablecoins.html
https://www.alt-m.org/2022/02/09/making-money-myths/
https://www.aier.org/article/escape-hatches-migration-bitcoin-and-the-ability-to-get-out/
https://www.youtube.com/watch?v=xdfeXqHFmPI
https://bitcoinmagazine.com/business/bitcoin-is-money-for-enemies
https://bitcoinmagazine.com/culture/bitcoin-is-not-democratic-part-five
https://authory.com/JoakimBook/We-Can-Still-Have-a-Century-of-Liberty-ad2f61e1cf67a403585066f1359c9f631

Bitcoin is freedom money for a century of liberty. But to truly grasp
why that is, you need to see what’s wrong with the system it attempts
to overthrow...

Understanding the monetary system is foundational to seeing what’s
wrong with the current system and to have a true grasp of Bitcoin and
its importance.

    “If you want to make an apple pie from scratch, you must first
invent the universe.”

    – Carl Sagan

Among the first objections that arise for anyone who has just learned
about Bitcoin is “this is too complicated to understand.” And it’s
true; private keys, block times, difficulty adjustments, UTXOs,
uncensorable CoinJoin transactions, hash-something — the learning
curve is steep and, for most, the reasons to ascend it seem few and
far between.

The first time I was introduced to Bitcoin in practice (not in theory
— techno-babbling libertarians had unsuccessfully pitched me the idea
for years), the intimidatingly tech-savvy guy who did so botched the
process.

First, he had me download some shady-looking app — which I didn’t have
space for on my phone, and so, ironically, I first had to remove a few
podcasts on monetary economics. Second, he had the app generate some
random words, and in the absence of pen and paper, had me type them
into my phone’s (cloud-saved!) note-taking app. Third, he tried to
send me 100,000 sats, but the spotty internet on his phone kept
interrupting the process.

Clearly, I wouldn’t become a convinced Bitcoiner that evening; the
hardships of the process seemed altogether useless — the cure worse
than the central banking disease it supposedly tried to solve.

After he had gotten his shit together, and my polite patience having
run out a half-dozen times, he finally managed to send the sats — and
triumphantly expressed “See, see! This transaction happened without
anybody knowing! And nobody could stop it!”

Not impressed, I pulled out a $5 dollar bill, handed it to him and
mockingly imitated his triumph: “See, see! That happened without
anybody knowing, and nobody could stop us from doing it!”

Bearer assets are nothing new in the history of money and all he had
convinced me of was that bitcoin was some complicated digital way of
doing that. But if the tech-raptured can’t effortlessly do it, what
hope is there for you and me? And you’re disintermediating a banking
system, the purpose of which is to efficiently and securely make
payments, and to make lending and borrowing possible. Nobody was
trying to stop anybody’s payments — what was this guy on about?

It would be years before I would see those troubles of the current
fiat payment networks.
WHAT’S AMAZING ABOUT BITCOIN IS NOT THAT IT’S DIGITAL

On the Bitcoin 2021 stage, Alex Gladstein wanted to illustrate the
simplicity of using bitcoin by sending sats in real time to Strike’s
fundraising campaign for Bitcoin development. It was eerily similar to
the Bitcoin zealot I described above:

    Gladstein: “So I’m on the Strike page, right here, and I’m going
to go ahead and donate, you know, two dollars’ worth of bitcoin, to
Strike ... It is going to go ... and it’s gone. That’s a bearer asset
that has just moved instantly around the world. And, I didn't ask
permission from anybody.”

Gladstein succeeded much better in illustrating a (Lightning) payment
than the guy who first tried to send me bitcoin all those years ago.
Naturally, the audience “woah”-ed and applauded, but the informed
critic could equally well have responded with “Yes, and? Venmo does
that too.”

In an episode for the “Bitcoin Magazine Podcast,” Mark Maraia
explained his approach to “onboarding boomers” — that demographic with
money, time and a healthy fear of government overreach, yet not
exactly known for their advanced technological know-how. “Forget all
the theory,” Maraia says, pointing to everyday items like computers or
iPhones — do you honestly know how they work? “I have absolutely no
clue," he says, and adds crucially that “That’s OK!”

His quip is nice and comforting: nobody understands technology X, and
that’s fine, because we see what technology X does and we can use it.
Similarly, if you don’t understand Bitcoin, that’s still OK.

Except that it’s not.

Understanding what Bitcoin can do for you — its use case — requires
you to understand the incumbent monetary system. Unlike a phone, a car
or a computer, there is no visible value-add in using bitcoin for a
middle-of-the-road Westerner who has never been sanctioned, never done
anything illegal, never tried to buy goods or services that a payment
processor or government disapproves of, has their salaries (and
savings!) indexed to inflation, don’t understand why recessions happen
and (on a government payroll at least) don’t suffer from them, or what
central banks do or where money comes from.

I don’t need to understand any of the underlying tech in a phone to
see how I might use it and how it could assist my life. In contrast,
Bitcoin’s value-add is tied up with its “compared-to-what” alternative
in the incumbent monetary system that 99% of us never think about,
never cause us any payment-related troubles and we consequently pay no
attention to.

(Source)

A Visa card in Apple Pay can “instantly” pay for things halfway across
the world too. For international transfers, Wise or Revolut or a
plethora of fintechs can move bank money across the world in seconds.

Tech is not the thing. Digital is not the value-add.

Of course, most Bitcoiners know that the Visa-Wise-Apple-Pay analogy
is faulty. And my guy could have made Saifedean Ammous’ argument that
bitcoin has salability across space, which my $5 bill lacks. But to
understand much of what sets bitcoin apart you need to go well into
the monetary plumbing weeds. What happens when we make a bank payment?
What is money?

International transfers or bank-issued Visa cards require
identification in a way bitcoin doesn’t; they don’t provide final
settlement (payments can be revoked later); bank transfers are often
deferred net settlements (though real-time gross settlement payments
are rolled out in more and more central bank payment networks). Funds
in Venmo or PayPal or other lower layers of the dollar banking system
are permissioned, in the sense that any of the half-dozen entities
required for a payment to be successful could block it — for innocent
technical reasons or more malign control/authoritarian reasons.

Thinking that an effortless Venmo payment is akin to an on-chain
bitcoin transfer because they look and “feel” the same, is a rather
elementary error to make. They’re both digital; they both involve
“money,” whatever that means; they both allow for transfer of value
from one place to another. But in order to understand why they are
different, you — like the Carl Sagan quote above — must first explain
the whole monetary system: where it can go wrong, what it relies on,
how new money enters into it, what banks do, which entities have the
power to block, delay, inspect or charge fees for transactions, what
you’re risking by passively holding a constantly depreciating
currency.

To Gladstein’s credit, he has an understanding of the banking
realities of the bottom billion that dwarfs any payment troubles that
most Westerners have ever encountered. But the average nocoiner
doesn’t. Which is why we routinely get news articles where some
clever-by-half financial journalist lumps together bitcoin with
stablecoins, with non-fungible tokens (NFTs) and central bank digital
currencies (CBDCs). Or when the chairman of the Federal Reserve Board
says that CBDCs make the need for bitcoin or stablecoins obsolete:
they’re all the same, really — new, hip, digital ways of storing and
moving what seems to be valuable things.

The Fed is here to help steward the dollar system, so once its own
fancy-sounding technical solution is in place, there could be no need
for private options. And “programmable money” sounds amazing — at
least until the programming of the not-so-kind programmer stops you
from purchasing what you require.

(Source)

>From Gita Gopinath at the IMF, we learn that the Russia-Ukraine
debacle “would also spur the adoption of digital finance, from
cryptocurrencies to stablecoins and central bank digital currencies.”

What about the conflict could possibly spur anything but bitcoin?
Finance is already digital. Fiat bank money is already digital. The
Fed adjusts the monetary base, digitally, through purchases and sales
of assets via its New York Fed branch. The dollar is already
discretionary and permissioned, controlled, regulated and surveilled.
What does a central bank digital currency (CBDC) bring to the table?

If anything, it would make the politicization of banking-related
problems on both sides of the Donetsk battlefield worse, with even
more control by authoritarians who want to mandate what people may or
may not do with “their” money. You don’t need a blockchain or a token
to do 99% of what cryptocurrency projects attempt to do — and the ones
that appear to do something useful, don’t do that better than Bitcoin.

Beyond the first few hours and days, before international transfers
could comfortably arrive to Ukraine’s banks in bulk, there was nothing
that “cryptocurrencies” broadly speaking could do for Ukraine; its
problem was real, not monetary. Help fleeing refugees smuggle out
their savings against a hostile banking system? Sure, bitcoin always
excelled at that, but how would a CBDC, issued and governed by the
National Bank of Ukraine fare? Or worse, Ripple, whose CEO proudly
stated:

    “To clear any confusion – RippleNet (while being able to do much
more than just messaging a la SWIFT) abides by international law and
OFAC sanctions. Period, full stop.”

Instead of being the permissionless, uncensorable, F-U money that
bitcoin aspires to, its cryptocurrency “competitors” proudly uphold
censorship and government sanctions:

    “RippleNet, for example, has always been - and remains today -
committed to NOT working with sanctioned banks or countries that are
restricted counterparties. Ripple and our customers support and
enforce OFAC laws and KYC/AML.”

Complying with authoritarian sanctions is the opposite of what freedom
money does.

I repeat: Tech is not the thing. Digital is not the value-add.

The value-add of Bitcoin is the liberty and independence that comes
with holding your own money outright — unencumbered by a bank, a
payment processor, a financial regulator or a tax man. It’s no longer
being subject to the whimsical demands of your authoritarian ruler,
democratically-elected or not. It’s to no longer suffer the asinine
consequences of the monetary excesses that the dollar’s current
stewards have so catastrophically botched.

Bitcoin is freedom money for a century of liberty. But to truly grasp
why that is, you need to see what’s wrong with the system it attempts
to overthrow.

Understanding how the fiat monetary system works is fundamental to
understanding Bitcoin.