Keeping an open mind about crypto, but given the inflating US dollar and the stark reminder that governments can and will under certain circumstances freeze accounts and block payments, wouldn’t you think crypto would be having a moment now? Not seeing it in the price, so far….
It is a pertinent question indeed. In a landscape of rampant inflation, war, sanctions aimed at isolating Russia completely from global financial markets, and even supposedly “liberal” governments like Canada’s taking unprecedentedly illiberal measures to freeze bank accounts of political opponents, one would believe that Bitcoin would be doing better. But it is not.
Instead Peter Schiff is taking the victory lap over gold’s belated break-out through the $2.000 threshold and gleefully predicting Bitcoin’s imminent demise.
There is no question that Bitcoin has failed as an inflation hedge in the short term. Since the all-time high of ~$69.000 in November Bitcoin has taken a just as bad beating as the most over-hyped Nasdaq stocks, whereas gold has held up amid expectations of monetary policy tightening and finally surpassed its 2011 high. Contrary to Bitcoin, gold has done its job as an inflation hedge in the short term, but not in the longer term.
Weisenthal argues that:
The big problem seems to be that for all of the rhetoric about how it’s an inflation hedge and freedom money and all that, it’s just not really treated like that by the actual people who trade it.
Bridgewater Associates’ Chief Investment Strategist, Rebecca Patterson, similarly said that Bitcoin is still trading more like an emerging tech stock than digital gold in an interview on CNBC yesterday, and that the digital currency has yet to prove itself as a store of wealth.
Narrative Flippening?
The question now is if the narrative can flip. From the market seeing and Bitcoin like a typical risk-on asset, trading in tandem with tech stocks, to view it more as a risk-off asset more akin to a digital gold? The current market environment, with next week’s much-awaited Federal Reserve meeting along with the financial fallout from the Russian-Ukrainian conflict do provide a perfect pretext for such a narrative flip to take place. It remains to be seen if it will.
Most Bitcoin books are bad. Many fall in the category of overzealous Bitcoin Maximalist tracts, reading more like religious scripture than factually enlightening non-fiction.
The “Blocksize Wars” is of a different breed. The title admittedly sounds boring. And the subtitle – “the battle for control over Bitcoin’s protocol rules” – even more so.
That is precisely why you should read it. Jonathan Bier chronicles what on the face of it looked like a quite narrow technical disagreement within the Bitcoin community, but which revealed a deep underlying philosophical schism, with two competing visions for what Bitcoin should be. This was Bitcoin’s equivalent of Christianity’s split between Catholicism and Protestantism or the Shia-Sunni divide within Islam.
The two diverging factions that went to war between 2015 – 2017 became known as the small blockers and the big blockers. The former being textualists who wanted to stick to Bitcoin’s pseudonymous founder Satoshi Nakamoto’s original idea of how the cryptocurrency should work, whereas the latter faction preferred a more constructionist approach allowing greater scope for amending and adapting the Bitcoin protocol like a living constitution to new circumstances as time goes by.
The primary point of contention was Bitcoin’s blocksize limit, i.e. the amount of data available in each Bitcoin block. Whereas the big blockers deemed it necessary to progressively increase the blocksize limit in order to facilitate faster and cheaper transactions on the Bitcoin blockchain, the small blockers wanted to keep the original 1MB blocksize limit, (which was actually not included in the code at the time of Bitcoin’s initial release in January 2009 but was introduced by Satoshi a year and a half after in the summer of 2010).
As Bier recounts at stake was not only the technical matter of the blocksize limit, but the fundamental question of how Bitcoin’s protocol rules could be modified, and by whom. Does power over Bitcoin lie with miners or with the ultimate end users? And what time preference should Bitcoin be dictated by? Should Bitcoin be like a tech startup and prioritise gaining market share in the short term: or was it a long-term project, a new global money, that should think decades ahead when making decisions? Should its aim be to offer a fast and cheap payments network to compete with the likes of Visa and Mastercard? Or should Bitcoin’s rather aim to be a form of digital gold, that is used more as a store of value than for small daily transactions?
The plot has arguably gained renewed relevance in light of Tesla founder Elon Musk’s emergence in the cryptosphere as a late-coming big blocker.
The reason why Musk has turned his attention to Dogecoin is because his side of the argument lost. The small blockers won the war.
Why? Did Musk miss something?
At least the arguments Musk have recently been making about Bitcoin scalability sounds like a re-enactment of the [losing] arguments the big blockers made during the Blocksize war.
I will not provide a full account of the war. For that, read the book. But for the briefest of summaries: The opening shots were fired in August 2015 when ur-Bitcoiners Mike Hearn and Gavin Andresen threw their weight behind a new, incompatible version of Bitcoin, known as Bitcoin XT, that would increase the blocksize limit to 8MB and progressively double it every two years until 2036.
According to the big blockers such an increase was necessary for Bitcoin to be able to process more transactions cheaper and faster, which in their world view was a prerequisite for Bitcoin to offer a viable use case and gain mass adoption.
The scheduled implementation of this proposal was five months later in January 2016, and required a vote from the Bitcoin miners, with 75 percent support set as the threshold for activation.
What made the proposal instantly controversial was that it incompatible with the existing Bitcoin network, and thereby would require anyone running a Bitcoin node – (the decentralised network of computers that validate transactions and store the entire blockchain) – to upgrade their software.
If the upgrade had gone ahead it would have constituted what is referred to as a hard fork, i.e. a point where the blockchain can bifurcate and potentially split into two separate coins. To cut a long story short, Bitcoin XT and its successor proposals failed, but a hard fork splitting Bitcoin in two was eventually what happened with the birth of Bitcoin Cash on August 1st 2017. (And then in November 2018 Bitcoin SV split off from that chain again).
So why did the small blockers win the war? And what did it mean?
Interestingly they did win despite being the presumptive underdogs. Gavin Andresen was the closest thing to Satoshi Nakamoto’s heir apparent, and did not hide his pretensions to the throne. Almost all the big crypto corporations, Coinbase notably, supported the big blockers.
But as in Afghanistan an apparent underdog may very well conquer a materially superior enemy if it has strategic patience and more nimble tactics. Having a better understanding of the battlefield also helps.
The main philosophical differences between the small blockers and the big blockers can be summarised more or less as in the below table.
Small Blockers:
Large Blockers:
Long term
Short term
System resilience
User experience
Sustainability
Growth
Theoretical / Scientific
Pragmatic
Cryptography nerds
Business-minded
Ultra decentralisation
Mild Decentralisation
To over-simplify: the nerds beat the suits.
For uninitiated but crypto-curious readers The Blocksize Wars might be as good a primer as any. You have to jump down the rabbit hole from somewhere. Bier provides a very well detailed account of all the battles of the war, with all the technical intricacies at stake, which are interesting in and of themselves, particularly for more initiated readers. Yet he manages to convey the essence of the opposing world views in the overarching philosophical conflict in terms that are perfectly clear even to the lay reader.
The fact that Bitcoin is a decentralised network with an unknown founder makes it stand out remarkably from other emerging technologies in recent times, that have mostly fallen under the control of centralised oligopolies, the tech giants of Silicon Valley and their autocratic founders coming first to mind. As venture capitalist Marc Andreessen said in a recent interview the immaculate conception of Bitcoin from the depths of the Internet and the fact that its creator remains shrouded in mystery “is one of the most amazing things I have seen my entire life.”
What Bier’s book drives home very clearly is how the decentralised nature of Bitcoin limits the power of any one actor. For example Gavin Andresen thought he could use his authority as Satoshi’s heir to force through his vision for Bitcoin. But his hubris was quickly humbled. Likewise the “Fake Satoshi”, Craig Wright. As well as the Bitcoin miners.
At the outset of the Blocksize war the balance of power was assumed to lie with the miners. But what the war revealed was that while the miners play a vital role in running and securing the Bitcoin network, they are far from all-powerful and cannot force through change without the support of nodes and end users.
The most feared known unknown for Bitcoin is a so-called 51% attack, whereby a constellation of malevolent miners gains control of more than 51% of the network and can manipulate the Blockchain in order to potentially double-spend coins.
However, after reading Bier’s book you do start to question how real the risk of a 51% attack really is for Bitcoin, (Bitcoin SV appears to have suffered one recently). It is questionable how much rogue miners would be able to gain from committing a hostile attack without ipso facto negating the theoretical gains from the attack.
Without consensus the attackers may not be able to get very far. Even if the attackers should succeed in sustaining a malignant chain with a bigger number of blocks in it than the main chain for some time, it is questionable if they will be able to force acceptance of this chain on the rest of the community. The Blocksize war proved that the majority chain will not necessarily be considered the “legitimate” chain, solely on the basis of being the majority chain. In all likelihood the price of “Bitcoin” on the illegitimate chain would plummet, thus undermining the profits of the attackers and dis-incentivising miners from working on the chain. Even a successful 51% attack could thus easily prove to be a Pyrrhic victory at most, (as demonstrated in the somewhat similar case of Justin Sun’s failed attack on STEEM, which Vitalik Buterin has written interestingly in his post on Legitimacy).
It has become a cliche that bitcoiners are “in it for the tech”, not the money. The fact of the matter however is that the money talks. Technology follows the money. The two are inseparable. Technology will gravitate toward the most valuable blockchain. Value in turn depend on trust and legitimacy. If Bitcoin does not have trust and legitimacy it will not have value either. The reason why Bitcoin does have trust and legitimacy is because it is consensus-based. It is the monetary democracy. Attackers can in theory succeed in taking over the network, but not without dooming it and themselves. The likelihood that there exist an entity that possesses both a) the technological sophistication and resources to master a 51% attack, and b) the monetary ignorance to actually carry out such a self-defeating attack, must therefore be considered to be quite small, though it cannot be ruled out completely.
Why is not Bitcoin performing better in face of soaring inflation, geopolitical uncertainty, actions taken by Canada against protesters and US sanctions, asks @TheStalwart
Most Bitcoin books are bad. Many fall in the category of overzealous Bitcoin Maximalist tracts, reading more like religious scripture than factually enlightening non-fiction.
The “Blocksize Wars” is of a different breed. The title admittedly sounds boring. And the subtitle – “the battle for control over Bitcoin’s protocol rules” – even more so.
That is precisely why you should read it. Jonathan Bier chronicles what on the face of it looked like a quite narrow technical disagreement within the Bitcoin community, but which revealed a deep underlying philosophical schism, with two competing visions for what Bitcoin should be. This was Bitcoin’s equivalent of Christianity’s split between Catholicism and Protestantism or the Shia-Sunni divide within Islam.
The two diverging factions that went to war between 2015 – 2017 became known as the small blockers and the big blockers. The former being textualists who wanted to stick to Bitcoin’s pseudonymous founder Satoshi Nakamoto’s original idea of how the cryptocurrency should work, whereas the latter faction preferred a more constructionist approach allowing greater scope for amending and adapting the Bitcoin protocol like a living constitution to new circumstances as time goes by.
The primary point of contention was Bitcoin’s blocksize limit, i.e. the amount of data available in each Bitcoin block. Whereas the big blockers deemed it necessary to progressively increase the blocksize limit in order to facilitate faster and cheaper transactions on the Bitcoin blockchain, the small blockers wanted to keep the original 1MB blocksize limit, (which was actually not included in the code at the time of Bitcoin’s initial release in January 2009 but was introduced by Satoshi a year and a half after in the summer of 2010).
As Bier recounts at stake was not only the technical matter of the blocksize limit, but the fundamental question of how Bitcoin’s protocol rules could be modified, and by whom. Does power over Bitcoin lie with miners or with the ultimate end users? And what time preference should Bitcoin be dictated by? Should Bitcoin be like a tech startup and prioritise gaining market share in the short term: or was it a long-term project, a new global money, that should think decades ahead when making decisions? Should its aim be to offer a fast and cheap payments network to compete with the likes of Visa and Mastercard? Or should Bitcoin’s rather aim to be a form of digital gold, that is used more as a store of value than for small daily transactions?
The plot has arguably gained renewed relevance in light of Tesla founder Elon Musk’s emergence in the cryptosphere as a late-coming big blocker.
The reason why Musk has turned his attention to Dogecoin is because his side of the argument lost. The small blockers won the war.
Why? Did Musk miss something?
At least the arguments Musk have recently been making about Bitcoin scalability sounds like a re-enactment of the [losing] arguments the big blockers made during the Blocksize war.
I will not provide a full account of the war. For that, read the book. But for the briefest of summaries: The opening shots were fired in August 2015 when ur-Bitcoiners Mike Hearn and Gavin Andresen threw their weight behind a new, incompatible version of Bitcoin, known as Bitcoin XT, that would increase the blocksize limit to 8MB and progressively double it every two years until 2036.
According to the big blockers such an increase was necessary for Bitcoin to be able to process more transactions cheaper and faster, which in their world view was a prerequisite for Bitcoin to offer a viable use case and gain mass adoption.
The scheduled implementation of this proposal was five months later in January 2016, and required a vote from the Bitcoin miners, with 75 percent support set as the threshold for activation.
What made the proposal instantly controversial was that it incompatible with the existing Bitcoin network, and thereby would require anyone running a Bitcoin node – (the decentralised network of computers that validate transactions and store the entire blockchain) – to upgrade their software.
If the upgrade had gone ahead it would have constituted what is referred to as a hard fork, i.e. a point where the blockchain can bifurcate and potentially split into two separate coins. To cut a long story short, Bitcoin XT and its successor proposals failed, but a hard fork splitting Bitcoin in two was eventually what happened with the birth of Bitcoin Cash on August 1st 2017. (And then in November 2018 Bitcoin SV split off from that chain again).
So why did the small blockers win the war? And what did it mean?
Interestingly they did win despite being the presumptive underdogs. Gavin Andresen was the closest thing to Satoshi Nakamoto’s heir apparent, and did not hide his pretensions to the throne. Almost all the big crypto corporations, Coinbase notably, supported the big blockers.
But as in Afghanistan an apparent underdog may very well conquer a materially superior enemy if it has strategic patience and more nimble tactics. Having a better understanding of the battlefield also helps.
The main philosophical differences between the small blockers and the big blockers can be summarised more or less as in the below table.
Small Blockers:
Large Blockers:
Long term
Short term
System resilience
User experience
Sustainability
Growth
Theoretical / Scientific
Pragmatic
Cryptography nerds
Business-minded
Ultra decentralisation
Mild Decentralisation
To over-simplify: the nerds beat the suits.
For uninitiated but crypto-curious readers The Blocksize Wars might be as good a primer as any. You have to jump down the rabbit hole from somewhere. Bier provides a very well detailed account of all the battles of the war, with all the technical intricacies at stake, which are interesting in and of themselves, particularly for more initiated readers. Yet he manages to convey the essence of the opposing world views in the overarching philosophical conflict in terms that are perfectly clear even to the lay reader.
The fact that Bitcoin is a decentralised network with an unknown founder makes it stand out remarkably from other emerging technologies in recent times, that have mostly fallen under the control of centralised oligopolies, the tech giants of Silicon Valley and their autocratic founders coming first to mind. As venture capitalist Marc Andreessen said in a recent interview the immaculate conception of Bitcoin from the depths of the Internet and the fact that its creator remains shrouded in mystery “is one of the most amazing things I have seen my entire life.”
What Bier’s book drives home very clearly is how the decentralised nature of Bitcoin limits the power of any one actor. For example Gavin Andresen thought he could use his authority as Satoshi’s heir to force through his vision for Bitcoin. But his hubris was quickly humbled. Likewise the “Fake Satoshi”, Craig Wright. As well as the Bitcoin miners.
At the outset of the Blocksize war the balance of power was assumed to lie with the miners. But what the war revealed was that while the miners play a vital role in running and securing the Bitcoin network, they are far from all-powerful and cannot force through change without the support of nodes and end users.
The most feared known unknown for Bitcoin is a so-called 51% attack, whereby a constellation of malevolent miners gains control of more than 51% of the network and can manipulate the Blockchain in order to potentially double-spend coins.
However, after reading Bier’s book you do start to question how real the risk of a 51% attack really is for Bitcoin, (Bitcoin SV appears to have suffered one recently). It is questionable how much rogue miners would be able to gain from committing a hostile attack without ipso facto negating the theoretical gains from the attack.
Without consensus the attackers may not be able to get very far. Even if the attackers should succeed in sustaining a malignant chain with a bigger number of blocks in it than the main chain for some time, it is questionable if they will be able to force acceptance of this chain on the rest of the community. The Blocksize war proved that the majority chain will not necessarily be considered the “legitimate” chain, solely on the basis of being the majority chain. In all likelihood the price of “Bitcoin” on the illegitimate chain would plummet, thus undermining the profits of the attackers and dis-incentivising miners from working on the chain. Even a successful 51% attack could thus easily prove to be a Pyrrhic victory at most, (as demonstrated in the somewhat similar case of Justin Sun’s failed attack on STEEM, which Vitalik Buterin has written interestingly in his post on Legitimacy).
It has become a cliche that bitcoiners are “in it for the tech”, not the money. The fact of the matter however is that the money talks. Technology follows the money. The two are inseparable. Technology will gravitate toward the most valuable blockchain. Value in turn depend on trust and legitimacy. If Bitcoin does not have trust and legitimacy it will not have value either. The reason why Bitcoin does have trust and legitimacy is because it is consensus-based. It is the monetary democracy. Attackers can in theory succeed in taking over the network, but not without dooming it and themselves. The likelihood that there exist an entity that possesses both a) the technological sophistication and resources to master a 51% attack, and b) the monetary ignorance to actually carry out such a self-defeating attack, must therefore be considered to be quite small, though it cannot be ruled out completely.
I have long held the belief that the 1880s were probably the most innovative and transformative decade in human history. We are still reaping the [diminishing] returns of the innovations of the Second industrial revolution – electricity and the internal combustion engine foremost among them – without which the digital revolution would not have been possible.
Silicon Valley tech evangelists have a tendency to exaggerate the progress of the modern era and underestimate the dynamism of the late 19th century West.
Microsoft-founder Bill Gates has published a note on the latest book of his favourite author, Vaclav Smil, and interestingly he seems to endorse Smil’s unmodern view that the 1880s might indeed be the most consequential decade in human history:
“The 1880s were miraculous; they gave us such disparate contributions as antiperspirants, inexpensive lights, reliable elevators, and the theory of electromagnetism— although most people lost in their ephemeral tweets and in Facebook gossip are not even remotely aware of the true scope of this quotidian debt.”
Vaclav Smil
Gates has previously been at odds with younger tech moguls who seem to believe that Internet connectivity will solve all the world’s problems:
“I certainly love the IT thing. But when we want to improve lives, you’ve got to deal with more basic things like child survival, child nutrition.”
Bill Gates
If the 1880s were indeed an era of faster progress than the 21st century, what conclusions might be drawn?
The monster of Stagflation is finally rearing its ugly head again, after more than a decade of massive money printing by central banks.
The central bankers thought “Quantitative Easing” would boost economic growth without stoking inflation. But ultimately this unprecedented monetary experiment may end with spiralling inflation and stagnating growth – with Milton Friedman lecturing from heaven that “inflation is always and everywhere a monetary phenomenon”.
Ironically, Bitcoin, which was created precisely as an antidote to inflationary monetary policies, also plunged after the inflation report.
The Bitcoin dump accelerated further after Elon Musk tweeted that Tesla will not be accepting Bitcoin payment for Teslas after all, (which do raise some interesting questions about the company’s due diligence practices, but never mind).
On the face of it the tweet is bearish for the Bitcoin price, which duly tanked as low as $45.000.
But, how many people would have exchanged Bitcoin for Teslas anyway? Probably not many. And those few would already be holders of Bitcoin. Nobody would exchange fiat currency for Bitcoin for the purpose of buying a Tesla. Ergo, the initial Tesla announcement of Bitcoin acceptance, though much hyped at the time, did not imply any new marginal demand for Bitcoin. If anything, Musk’ statement may inadvertently lead to less demand for Teslas from Bitcoiners.
Likewise, Wednesday’s reversal statement from Musk should not have any implications for Bitcoin demand. Despite dressing up the announcement in environmentally conscious lingo the bottom line is that Tesla will keep hodling Bitcoin. Mr Musk is a mercurial character and it is not easy to know if he has a bigger plan or is just acting ad hoc, but in this case it may very well be the latter.
In any case Mr Musk’s tweet sowed much fear, uncertainty and doubt. But in a world where consumer prices are accelerating ominously, Tesla’s self-appointed techno-king is presenting late-coming hedge fund managers and the Michael Saylors of the world with an opportunity to pick up Bitcoin on the cheap. As I write this the price is already back above $50.000 again, (Caveat Emptor)
The resurrection of Jordan Peterson is an almost less credible story than the resurrection of Christ. Peterson first rose to fame as a Prophet of Pronoun Orthodoxy in 2016, coming out of relative academic obscurity to become an overnight viral sensation. With the publication of his life-hack manual 12 Rules For Life Peterson became a leading light for the proverbial incels and angry white males out of sync with an increasingly woke world, who took solace in his gospel of self-reliance, tradition, Western values and Christian ethics.
At root Peterson took the King James Bible, repackaged it with a blend of Freudian/Jungian psycho-analysis, and spiced it up with a mix of Harry Potter and Disney classics to make the core message more marketable to a younger audience in our Godless postmodern times.
But then came the fall, which was just as abrupt. Short version: His marathon book tour 160-city must evidently have taken a huge emotional and physical toll on Peterson, finding himself in the frontline of the Great Culture War at the same time as his wife was diagnosed with terminal cancer, (which she survived). A more detailed version of how Peterson became addicted to anti-anxiety drugs (benzodiazepines) and ended up being put into an induced coma in a Russian clinic can be found in this interview with Decca Aitkenhead, (subsequently severly criticised by Douglas Murray here), and is recounted by Peterson himself in the introduction of his latest volume.
Peterson has now returned from his Russian exile and published the sequel to 12 Rules, titled Beyond Order – 12 More Rules for Life. As always when a mythical character wanders into the wilderness and eventually returns, it is usually as a changed person. Be it Moses, Gandalf, Anakin Skywalker, the Buddha or Batman. We will probably never know exactly what Balrogs Peterson confronted in Moscow. But if he left as Jordan Peterson the White, he has come back as Jordan Peterson the Grey.
Perhaps unsuprisingly for an author re-emerging from an induced coma, the latest volume feels somewhat sloppy and half-baked compared to the first 12 Rules. The language is less succinct and more repetitive. The book also contains a surprising number of [minor] grammatical errors. As both of the books are based on a list of 42 rules Peterson wrote in a Quora answer (apparently later deleted by Quora), it is hard to escape the impression that Peterson and his publisher first cherry-picked the tastiest twelve rules for the first book, and now we are left with the second rung. Undoubtedly, the publishers will manage to squeeze out a volume III and IV from the remaining rules in the original blog post. This kind of recycling is probably inevitable, as it makes excellent commercial sense. But the intellectual returns are diminishing. Few authors have more than one good book in them.
Nevertheless, the book is well worth reading. While not new, Peterson’s refrain of not succumbing to cynicism, resentment, victim mentality and apathy remains relevant. His style of weaving together biblical and mythical narratives and reframing them in a a contemporary context can be appreciated even by readers who are not necessarily hardcore Peterson fanboys, although the language can sometime tend toward the grandiose.
Peterson’s biggest contribution to civilised society is by all accounts the number of lost souls he has stopped from continuing down the path to the dark side. He should certainly be compulsory reading for all would-be school shooters, ISIS converts and Greta Thunberg-style environmental-fatalists who would rather see the world burn so long as it comes short of their various wicked visions of a pure Utopia.
My favourite rule was probably number VII: Work as hard as you possibly can on at least one thing and see what happens. Unfortunately, it does not seem that so many people are doing that in Western societies where mediocrity increasingly seems to be the new ideal – and the contempt Jordan Peterson is held in by large chunks of Academia, the mainstream media and the liberal commentariat is probably reflective of that fact.
The $69m Beeple N.F.T. art sale is being subjected to some MSM scrutiny.
The WaPo angle that the buyer MetaKovan may have profited from buying and tokenizing other Beeple artworks in advance of the major EVERYDAYS: THE FIRST 5000 DAYS purchase is not wrong, but neither is it news.
MetaKovan has outline as much himself in a blog post back in January, (and repeated again after the auction).
There is nothing much different here from how collectors pump up the prices of their preferred artists in the old art world.
Much has also been made of the fact that Beeple immediately converted his $53m share of the sale from Ethereum to US Dollars. But critics cannot have it both ways, claiming both that 1) the sale was just in funny crypto money which does not count, and 2) that the price is overvalued in dollar terms.
If anything it shows, as Gordon Gekko says in Wall Street: “The illusion has become real.”
Western Decline 