Peter Thiel’s former portfolio manager says that the crypto narrative is built on half-truths and a nonchalance about the security provided by the nation-state.
Well put. Not to mention that the majority of BTC volume is wash traded USDT (Tether). A $65BB “stablecoin” that is under investigation by the DOJ and refuses to get an audit. The entire space is one ticking time bomb.
The difference between tulip bulbs and Bitcoin is that Bitcoin’s value proposition is driven by a now universal distrust of fiat currencies. It is the ultimate middle finger to politicians who show no concern for protecting the value of currencies.
And the Biden Administration is proving those investing in Bitcoin, justified in their disdain.
Tulip bulb speculation was a true Ponzi scheme. More could always be grown. Not so with Bitcoin.
Interesting article. IMHO, an asset needs to meet two criteria for it to be worth it - secure and rare. BTC is both.
While it not be suitable for currency per se (at the moment) the blockchain (however energy-consuming it might be) is far more secure than any bank and free of the greasy mitts of politicians who wantonly leverage our currency for their doomed-to-fail social programs.
A fascinating debate. Thank you Bari. As one of the oldsters I must say the brilliance of Srinivasan's thinking loses luster by the grandiosity of his claims. I almost expected him to argue that Bitcoin will cure cancer. Utopian thinking often ends very badly when it comes up against the limits posed by human nature. Still I've purchased a very small amount of bitcoin--in case I'm wrong.
Great job, Bari! And very timely. I am in the agnostic column. As a professional money manager for 40 years, I find the emergence of a new currency/asset class fascinating. Yet despite consulting sources both written and oral, I still could not communicate to you how exactly cryptos are mined, why that matters or how that creates value and how my investment in crypto maintains its financial integrity and is secure. Each of those details is vital. My experience tells me “tulips”, but at the same time I can see the allure of a supranational currency. If the current generation of crypto pioneers haven’t figured it out, then perhaps the next one will.
Many of the arguments here are interesting, but the idea that Bitcoin is extremely energy intensive does not hold up. Fiat currencies ultimately cause far, far greater energy consumption and waste of every kind, including war. Fiat currencies are essentially a blank check for governments to spend as much as they want whenever they want, and we have seen this in no uncertain terms this past year. It's also telling that all of the major belligerents of World War I went off the gold standard. America's going off the gold standard in August, 1971 was supposed to be a temporary measure, and it marked the beginning of the era of ever increasing income disparity, with woeful results for what is left of the middle class. Fiat currencies have also deprived savers of their due return, encouraged speculation, and in turn financialized the economy. The financial sector accounts for nearly as much of the economy today as manufacturing. Finance should be there to support industry, not be the backbone of the economy. Alas, today, far more smart people go into finance than would otherwise, and the economy has been less stable than during the gold standard era. Much, much more could be said about the waste enabled by fiat, enough to fill volumes and volumes of literature.
As an aside, is anyone going to press for prohibition of Christmas lights and gaming? Both consume for more energy than Bitcoin, but nobody says anything about them.
Ultimately, Bitcoin is by far the cleanest currency and would do much for world peace if adopted as the world reserve currency. Most people who say otherwise are merely statists who want to control every aspect of the people's lives. Going forward, it's Bitcoin or bust. It's either going to be personal freedom or a Black Mirror hell of Chinese-style government.
Again, Bari thanks for bringing these type of discussions to your readers. There is great value in this "two side of the coin" approach (no pun intended). Here I will simply repeat - and simplify what I said in response to the first "pro" cryptocurrency piece. And that is - we cannot let technology drive policy- which is what the cryptocurrency advocates are looking to do. We first need to determine and agree upon what policies we want and look at how technology may - or may not advance those policies. Moreover we also shouldn't allow the advocates behind a new technology drive the way in which it is implemented in an unfettered fashion. Technology is a tool and can be used for good - or bad. On the flip side just because we may reject the uses of a technology - in this case advocates for cryptocurrency looking to replace sovereign nations with sovereign individuals (if that is accurate), doesn't mean we just reject the technology. There may be perfectly sound and just applications we want to pursue. For example there may be sound applications of the blockchain technology that underlies cryptocurrencies. And, with the right policy controls, there may be sound applications for the currencies themselves. All that to say that in cases like this- policies, processes and governance must come first.
BG, "we cannot let technology drive policy". In a more perfect world perhaps that might be true. In our world, technology definitely drives policy. Consider such diverse things as containerized freight, microchips, and mRNA vaccines. The impact on policy has been considerable. Please do not infer from my comments my position on BTC. I really don't have one.
PS - I agree, currently technology, and more importantly technologists are driving policy because of the lack of leadership. Technology is a tool, it can have a positive impact on society or a negative one -as we have all seen. There is no question that the development of new technologies have policy implications - but that doesn't mean we should let the technologists and business interests behind it - drive how it it impacts policy directions. We need to develop new ways to get ahead of that. The Atlantic Council GeoTech Center is attempting to do that. It is worth looking at what they are doing. https://www.atlanticcouncil.org/programs/geotech-center/
For me, the hesitancy of "investing" in Bitcoin has to do with who stands behind it? In the case of the dollar, I have the US government standing behind me if bad actors, etc., victimize me. Who would help me if defrauded using Bitcoin currency?
Great article, Bari. I love reading your articles. I first heard of you on Megyn Kelly's podcast when you were her guest. I've been a subscriber and follower ever since.
This article is better than Mr. Srinivasan's, but as with Balaji's piece, I find it frustrating that little of it is really relevant to the question of whether or not Bitcoin is a good thing for the world. Mr. Green pokes holes in the tactics of Bitcoin evangelists, which is all well and good but ultimately beside the point; he suggests that we should be worried that certain countries hostile to the West are heavily involved in Bitcoin, but never tells us what exactly they could do to harm us with their Bitcoin processing power. I agree with him that the starry-eyed utopianism of writers like Mr. Srinivasan (which strongly reminds me of the silly techno-libertarian idealists of the '90s) is highly clueless, but I don't feel he's really made a strong argument here as to why Bitcoin is actually a danger rather than merely another silly fad.
These arguments have been thrown at Bitcoin since the beginning. The author is being dishonest to begin with in reference to Thiel. Thiel was making the point, that the US Treasury should be BUYING BITCOIN, because China may be doing it already.
Thiel IS PRO BITCOIN. (see the video on his thoughts)
Bitcoin is a threat to ALL FIAT, but the Dollar is the world's reserve currency, so it has the most to lose. Thiel also said the EURO was China's hope to take down the dollar, so it is not limited to Bitcoin. Theil is warning the USA that China, Russia and others are embracing crypto. THe USA needs start moving or will be left in the cold.
Also, Bitcoin mining is now moving to using renewable energy, so the energy argument is weakening. Using excess methane from Oil patches for mining is more economical and climate positive, for example.
But most importantly Bitcoin is a decentralized network that is controlled by NO ONE. Bitcoin doesn't care if you believe in it. There will only be 21 million produced. It doesn't care if you buy it. Its supply, unlike the US Dollar is finite. And the Treasury is printing dollars out the gazoo, much like Venezuelan money printing.
Munger and Warren Buffet are in their 90s and will not live to see Bitcoin be "stopped" .. and neither will we.
I fight the greed in me (https://www.biblehub.com/john/3-30.htm) yet still have that feeling I should have joined the pump and dump of Bitcoin. Glad I didn’t after reading your article. Your explanation of the memetic warfare employed to exploit greed is wisdom. Bravo
I was just having this discussion with some people, one of whom was arguing that Bitcoin's utility for "cancellation of debt" was not nearly as good as USD, but then went on to argue that Bitcoin is a better "repository of value" than USD because of QE and inflation. His "repository of value" argument struck me as completely wrong because the only thing Bitcoin has going for it in that regard is its scarcity whereas USD has a central bank and monetary policy coordinated with and backed by the U.S. government. My argument was that the intrinsic value of USD comes from trust in U.S. laws and regulations, whereas the value of Bitcoin comes only from the confidence that investors have in it. As such, it is the dictionary definition of a confidence game. I hadn't even considered that the majority of Bitcoin computations happen in nations that are hostile to the U.S. Since most of what I was going on was intuition, it is good to read an analysis confirming my suspicions by someone who knows what the heck he's talking about.
Wow—what a great case! Extremely trenchant—thank you!
Well put. Not to mention that the majority of BTC volume is wash traded USDT (Tether). A $65BB “stablecoin” that is under investigation by the DOJ and refuses to get an audit. The entire space is one ticking time bomb.
Many thanks to Ms. Weiss for introducing me to Michael Green and Simplify. Just the investment vehicles I was looking for but didn't know existed.
The difference between tulip bulbs and Bitcoin is that Bitcoin’s value proposition is driven by a now universal distrust of fiat currencies. It is the ultimate middle finger to politicians who show no concern for protecting the value of currencies.
And the Biden Administration is proving those investing in Bitcoin, justified in their disdain.
Tulip bulb speculation was a true Ponzi scheme. More could always be grown. Not so with Bitcoin.
The article is hard to take seriously when it ends with the word freedom in scare quotes.
More of the debate format, please!
Interesting article. IMHO, an asset needs to meet two criteria for it to be worth it - secure and rare. BTC is both.
While it not be suitable for currency per se (at the moment) the blockchain (however energy-consuming it might be) is far more secure than any bank and free of the greasy mitts of politicians who wantonly leverage our currency for their doomed-to-fail social programs.
A fascinating debate. Thank you Bari. As one of the oldsters I must say the brilliance of Srinivasan's thinking loses luster by the grandiosity of his claims. I almost expected him to argue that Bitcoin will cure cancer. Utopian thinking often ends very badly when it comes up against the limits posed by human nature. Still I've purchased a very small amount of bitcoin--in case I'm wrong.
Great job, Bari! And very timely. I am in the agnostic column. As a professional money manager for 40 years, I find the emergence of a new currency/asset class fascinating. Yet despite consulting sources both written and oral, I still could not communicate to you how exactly cryptos are mined, why that matters or how that creates value and how my investment in crypto maintains its financial integrity and is secure. Each of those details is vital. My experience tells me “tulips”, but at the same time I can see the allure of a supranational currency. If the current generation of crypto pioneers haven’t figured it out, then perhaps the next one will.
Many of the arguments here are interesting, but the idea that Bitcoin is extremely energy intensive does not hold up. Fiat currencies ultimately cause far, far greater energy consumption and waste of every kind, including war. Fiat currencies are essentially a blank check for governments to spend as much as they want whenever they want, and we have seen this in no uncertain terms this past year. It's also telling that all of the major belligerents of World War I went off the gold standard. America's going off the gold standard in August, 1971 was supposed to be a temporary measure, and it marked the beginning of the era of ever increasing income disparity, with woeful results for what is left of the middle class. Fiat currencies have also deprived savers of their due return, encouraged speculation, and in turn financialized the economy. The financial sector accounts for nearly as much of the economy today as manufacturing. Finance should be there to support industry, not be the backbone of the economy. Alas, today, far more smart people go into finance than would otherwise, and the economy has been less stable than during the gold standard era. Much, much more could be said about the waste enabled by fiat, enough to fill volumes and volumes of literature.
As an aside, is anyone going to press for prohibition of Christmas lights and gaming? Both consume for more energy than Bitcoin, but nobody says anything about them.
Ultimately, Bitcoin is by far the cleanest currency and would do much for world peace if adopted as the world reserve currency. Most people who say otherwise are merely statists who want to control every aspect of the people's lives. Going forward, it's Bitcoin or bust. It's either going to be personal freedom or a Black Mirror hell of Chinese-style government.
Just ignore the anti energy, anti growth, anti human propaganda. That is all it is. Energy use harms no one.
Again, Bari thanks for bringing these type of discussions to your readers. There is great value in this "two side of the coin" approach (no pun intended). Here I will simply repeat - and simplify what I said in response to the first "pro" cryptocurrency piece. And that is - we cannot let technology drive policy- which is what the cryptocurrency advocates are looking to do. We first need to determine and agree upon what policies we want and look at how technology may - or may not advance those policies. Moreover we also shouldn't allow the advocates behind a new technology drive the way in which it is implemented in an unfettered fashion. Technology is a tool and can be used for good - or bad. On the flip side just because we may reject the uses of a technology - in this case advocates for cryptocurrency looking to replace sovereign nations with sovereign individuals (if that is accurate), doesn't mean we just reject the technology. There may be perfectly sound and just applications we want to pursue. For example there may be sound applications of the blockchain technology that underlies cryptocurrencies. And, with the right policy controls, there may be sound applications for the currencies themselves. All that to say that in cases like this- policies, processes and governance must come first.
BG, "we cannot let technology drive policy". In a more perfect world perhaps that might be true. In our world, technology definitely drives policy. Consider such diverse things as containerized freight, microchips, and mRNA vaccines. The impact on policy has been considerable. Please do not infer from my comments my position on BTC. I really don't have one.
PS - I agree, currently technology, and more importantly technologists are driving policy because of the lack of leadership. Technology is a tool, it can have a positive impact on society or a negative one -as we have all seen. There is no question that the development of new technologies have policy implications - but that doesn't mean we should let the technologists and business interests behind it - drive how it it impacts policy directions. We need to develop new ways to get ahead of that. The Atlantic Council GeoTech Center is attempting to do that. It is worth looking at what they are doing. https://www.atlanticcouncil.org/programs/geotech-center/
For me, the hesitancy of "investing" in Bitcoin has to do with who stands behind it? In the case of the dollar, I have the US government standing behind me if bad actors, etc., victimize me. Who would help me if defrauded using Bitcoin currency?
Great article, Bari. I love reading your articles. I first heard of you on Megyn Kelly's podcast when you were her guest. I've been a subscriber and follower ever since.
Keep it up.
You're daft if you think that the US government, in its present incarnation, believes in property rights.
This article is better than Mr. Srinivasan's, but as with Balaji's piece, I find it frustrating that little of it is really relevant to the question of whether or not Bitcoin is a good thing for the world. Mr. Green pokes holes in the tactics of Bitcoin evangelists, which is all well and good but ultimately beside the point; he suggests that we should be worried that certain countries hostile to the West are heavily involved in Bitcoin, but never tells us what exactly they could do to harm us with their Bitcoin processing power. I agree with him that the starry-eyed utopianism of writers like Mr. Srinivasan (which strongly reminds me of the silly techno-libertarian idealists of the '90s) is highly clueless, but I don't feel he's really made a strong argument here as to why Bitcoin is actually a danger rather than merely another silly fad.
These arguments have been thrown at Bitcoin since the beginning. The author is being dishonest to begin with in reference to Thiel. Thiel was making the point, that the US Treasury should be BUYING BITCOIN, because China may be doing it already.
Thiel IS PRO BITCOIN. (see the video on his thoughts)
Bitcoin is a threat to ALL FIAT, but the Dollar is the world's reserve currency, so it has the most to lose. Thiel also said the EURO was China's hope to take down the dollar, so it is not limited to Bitcoin. Theil is warning the USA that China, Russia and others are embracing crypto. THe USA needs start moving or will be left in the cold.
Also, Bitcoin mining is now moving to using renewable energy, so the energy argument is weakening. Using excess methane from Oil patches for mining is more economical and climate positive, for example.
But most importantly Bitcoin is a decentralized network that is controlled by NO ONE. Bitcoin doesn't care if you believe in it. There will only be 21 million produced. It doesn't care if you buy it. Its supply, unlike the US Dollar is finite. And the Treasury is printing dollars out the gazoo, much like Venezuelan money printing.
Munger and Warren Buffet are in their 90s and will not live to see Bitcoin be "stopped" .. and neither will we.
I fight the greed in me (https://www.biblehub.com/john/3-30.htm) yet still have that feeling I should have joined the pump and dump of Bitcoin. Glad I didn’t after reading your article. Your explanation of the memetic warfare employed to exploit greed is wisdom. Bravo
I was just having this discussion with some people, one of whom was arguing that Bitcoin's utility for "cancellation of debt" was not nearly as good as USD, but then went on to argue that Bitcoin is a better "repository of value" than USD because of QE and inflation. His "repository of value" argument struck me as completely wrong because the only thing Bitcoin has going for it in that regard is its scarcity whereas USD has a central bank and monetary policy coordinated with and backed by the U.S. government. My argument was that the intrinsic value of USD comes from trust in U.S. laws and regulations, whereas the value of Bitcoin comes only from the confidence that investors have in it. As such, it is the dictionary definition of a confidence game. I hadn't even considered that the majority of Bitcoin computations happen in nations that are hostile to the U.S. Since most of what I was going on was intuition, it is good to read an analysis confirming my suspicions by someone who knows what the heck he's talking about.