TL;DR- This turned out way longer than I expected. Skepticism of Bitcoin among solarpunks is understandable, but things aren't as bad as they seem.
I'm neutral on the defederation issue here. I am overall mildly hostile to Monero, and also mildly against defederation without a strong reason (such as being EH, grad, or HB). However, I would like to address the idea that Bitcoin (specifically) and proof-of-work are antithetical to the interests of solarpunks.
To lay all my cards on the table:
I don't really consider myself a solarpunk, so this is a bit of an outsider perspective. I think solarpunk is kind of cool, but it's also new to me.
I'm here to lurk (and maybe participate) in the anarchism community. I've been an anarchist for a long time (almost 20 years), mostly centered on mutualism. I've also been interested in alternative currencies (digital and otherwise) since before Bitcoin existed.
I do have a financial stake in Bitcoin, but not any other cryptocurrencies. I sincerely do not believe my commentary in general has any effect on the price of bitcoin, and especially not when addressing such a small audience. I am not looking to convince anyone here to buy anything.
I have been heavily interested in Bitcoin almost since it's creation, and as a result have a pretty deep level of knowledge about it. I want people to understand Bitcoin both because I enjoy sharing my obsessive interests with others, and because knowledge is power and power should be widely distributed. The latter part goes double for anarchists, because I want anarchists to be well-informed in order to help the anarchist project succeed.
For the purposes of my argument, everything bad that is said about altcoins (non-Bitcoin cryptocurrencies) is true. Some of them can maybe be generously described as "honest experiments that are likely to fail". The rest are varying degrees of scammy, up to and including "intentionally planned as a scam from the start". Monero is probably one of the lesser offenders in this regard.
Also, I'm presuming that at least some people here see some value in the existence of decentralized digital currency. If you think money is inherently bad and that humanity should abolish it completely, then obviously through that ideological lens Bitcoin is all downside with no benefit. The only thing that I can do to change your mind is to convince you to change your lens, and that's outside of the scope of this discussion.
This is admittedly the weakest part of my argument. Even if one accepts that the existence of a decentralized digital currency might be beneficial, the energy consumption of proof-of-work is still a real cost, and the benefit needs to outweigh that cost. I think it will become a clear net benefit in the future, but right now things are more hazy and theoretical, as Bitcoin has not yet been fully adopted, nor is its development "finished".
Why use proof of work anyway? Because it's the only way that we've found so far to make a hard decentralized digital currency. Non-hard currencies involve trusting someone else, and that someone can be leaned on by governments, can be robbed, or can be a scam artist themselves. Trust is a necessary part of being a social animal, but it is also useful to reduce the degree to which you are at the mercy of others, particularly when money is concerned.
Proof-of-stake is not a suitable replacement for proof of work. It compromises the security properties of the system, and it introduces a wealth-concentrating mechanism. Stakers are rewarded in proportion to the amount of currency that they have. This literally bakes capitalism into the system. See the next section for more on this.
Perceptions of Bitcoin's current and future energy consumption tend to be overblown. Yes, it uses more electricity than entire (small) countries. However, that currently amounts to under 0.5% of global energy consumption, and it peaked at under 1% in 2022 (see here and here).
Environmentally-focused skeptics tend to assume that Bitcoin's energy consumption will continue to increase without limit. This is dependent on the "deflationary spiral" idea that the price of bitcoin will also continue to increase without limit. Both are incorrect.
Yes, there is a hard cap on the amount of bitcoins that will be produced, which makes it a deflationary currency. Yes, this will result in more saving ("hoarding") and less borrowing when compared with the inflationary currencies that we use now. Yes, that means there will be less investment due to the lack of cheap credit. However the "spiral" part is nonsensical on its face. Bitcoin is not some economic black hole that we'll throw all of our economic resources into until we starve to death. Besides, from an environmental perspective, less investment should be a good thing.
Without the "line goes up forever" aspect of the deflationary spiral, the argument for runaway energy usage falls apart as well. Bitcoin will use an (eventually) stable, likely small percentage of our global electricity output. If we're generating that electricity from sustainable sources, we'll be fine. If we remain stuck on fossil fuels, we'll choke to death on carbon even without Bitcoin in the mix.
There is a silver lining to this aspect of Bitcoin as well. It's to at least some degree incentivizing renewable energy deployments. There are lots of areas that have "stranded" renewable energy, in that they're a good place to harvest electricity, but there's no one nearby to use that electricity, and no power transmission infrastructure to carry it to populated areas. Previously, smelting operations would be set up in these areas to turn bauxite into aluminum. However, Bitcoin mining has significantly lower overhead. You can set up solar/wind/hydro, ship in Bitcoin miners, and make some money off of it without having to run long-distance power lines right away. Once the lines are built, or once some power consumers set up nearby, the mining rigs can be sent off to some other site.
Let's be clear. Capitalism is not money. Capitalism is not market exchange. Capitalism is not "line goes up".
Capitalism is a system of state-granted privileges for owners of capital. Some of these privileges were intentionally implemented, and some likely came about by accident, but they all have the effect of transferring wealth from the working class to the owning class. The state primarily does the bidding of the capitalists. Even though much of the world is ostensibly democratic, when there are policy disagreements between the working class and the capitalist class, the capitalists generally get their way.
The capitalist class does not want "anarcho"-capitalism. It does not benefit them. The state already works for them. Without the state, they lose their privileges. Without their privileges, they eventually lose their wealth, as their megacorporations are incredibly inefficient.
This is not a defense of "anarcho"-capitalism. At best, ancaps are confused. If they were to destroy the state, they would allow the capitalist class plenty of opportunity to recreate it. (And of course, the worst of them are outright mask-off fascists.)
Bitcoin is not capitalism, even if ancaps tend to like it. Bitcoin is not issued by any government. It doesn't require the use of the banking system that they control. They cannot use it to manipulate the economy. They cannot freeze anyone's Bitcoin wallet, nor can they seize bitcoins that are properly protected. The degree to which adoption of Bitcoin diminishes the state's abilities is a matter of debate, but it does impose some real constraints. And in constraining the state, it also constrains the capitalist class. Issuing money is also seen as one of the reasons we "need" governments, so the existence and adoption of Bitcoin deals a blow to that as well.
In the previous section, I mentioned that proof-of-stake introduces a wealth-concentrating mechanism. Proof-of-work, on the other hand lacks this. Unlike with PoS currencies, holding bitcoins does not grant you more bitcoins.
If you want to gain bitcoins through mining, you need to purchase specialized equipment to do so. If done properly you can recoup the dollar cost of the miners, but they aren't likely to produce as many bitcoins over their useful lifetime as you would have gotten from just using the dollars to buy bitcoins directly.
Even in terms of dollar return, you can't just keep buying more miners to gain more dollars compound-interest style. The return on Bitcoin mining always approaches the cost of miners + electricity + labor. There is no guaranteed profit margin.
As for people getting rich off of buying bitcoins, I'm not aware of any indications that there's been a particular order in which the various socioeconomic strata have invested. The early adopters were largely not already rich, as far as I know. A fair number of "old money" types have been skeptical of Bitcoin. Of course, one does need to have at least some amount of disposable income to invest in the first place. Some technical inclination also helps. It may just be a case of "the middle class get rich" rather than "the rich get richer".
Also note that as I touched on in the previous section, the line won't go up forever. The price will reach equilibrium once Bitcoin reaches its "final" adoption level, wherever that happens to be.
I'm not sure if this point is being directed at Bitcoin specifically, or just at cryptocurrencies in general in this thread and in the article that poVoq linked. I'll address it briefly anyway. (The previous two sections are the more important ones.)
Many Bitcoin skeptics have described it as a Ponzi scheme or pyramid scheme. If you read about what these schemes actually are, and read about what Bitcoin is, it should be obvious that it's not a match. Bitcoin isn't centrally controlled, so there can't be anyone filling the role of Ponzi or of the directors, at least not for the entire system. It's certainly possible to run such a scheme using bitcoins, but that's true of any currency.
When pressed, these skeptics will usually say something about how everyone invested in Bitcoin is just looking for some group of "greater fools" to pump the price up so that they can make their exit. Like, sure, maybe some people are like that, but to claim that it's some coordinated scam across all of Bitcoin just sounds like a ridiculous conspiracy theory. There are plenty of people that have had ample opportunity to exit profitably and just... haven't?
Being more charitable, these folks largely see Bitcoin as having no future ("it's a bubble"). If everyone is eventually going to get tired of Bitcoin and give up on it, that does make it a really bad investment. That doesn't make it a scam, though.
Anyway that's enough words, I need to sleep. -_-
I may or may not respond if people want to argue over this. Not something I have a ton of patience for these days. If you're genuinely curious and want to pick my brains though, feel free.
I appreciate the effort you put into this post. I welcome this kind of discussion, and I hope this will contrast with the kind of bad-faith hucksterism that typically comes from grassroots cryptocurrency sales initiatives.
I’ve also watched bitcoin and cryptocurrency with interest since the days it cost thousands to buy a pizza. I suspect you may be able to teach me some things, but I also think there are some things you are missing.
Many Bitcoin skeptics have described it as a Ponzi scheme or pyramid scheme. If you read about what these schemes actually are, and read about what Bitcoin is, it should be obvious that it’s not a match. Bitcoin isn’t centrally controlled, so there can’t be anyone filling the role of Ponzi or of the directors, at least not for the entire system. It’s certainly possible to run such a scheme using bitcoins, but that’s true of any currency.
Pre-mining Scams
The structure of bitcoin-style cryptocurrencies is perfect for Ponzi schemes. The first aspect of these schemes is the concept of pre-mining; Before a new currency, bit it Monero, Ethereum, or Shitcoin#02314 is released to the public, its founders create a large cache of currency with little work because they own all of the mining rigs at that point and aren’t competing with anyone. They then hype the fuck out of their coin, usually advertising that people buying the coin that they’ve mined are getting in at the ground level. Once they’ve sold all their coin, the value flatlines, the scammers disappear with their fiat currency, and then start another scheme with a new name. 99% of altcoins don’t survive this phase.
Even Bitcoin started out with a significant portion of the total cache pre-mined by Satoshi Nakamoto. The halving of bitcoin awards privileges early adopters, and Nakamoto was the earliest. He hardly spent any of it before he stopped participating in Bitcoin development in mid-2010. It is widely speculated that he is dead, but rumors that he might have moved 50 of the 750,000 to 1,100,000 bitcoins held in his wallets are blamed for the crash in May 2020. The uncertainty lead to a $6.5-billion drop in Bitcoin’s market capitalization.
Pump and Dump Scams
You rightly identified bitcoin as deflationary - that in addition to market forces that can raise or lower its value, the money supply is designed to grow at a diminishing rate, halving roughly every four years. For comparison, the dollar is printed with the intention to match the demand for bills in circulation, plus inflate at a slow and predictable rate. This encourages re-investment and discourages money hoarding. The principles behind this are based on the lessons learned from economic mistakes during the great depression.
This makes bitcoin attractive as a store of wealth, but its value derives from its use as currency. While there are over 19 million bitcoins minted, only a small portion of those are ever in circulation. This allows people or cartels with large amounts of bitcoin to have extremely large influence in the supply available and thus the price. This is a weakness that plagued the early stock market, and lead to the formation of regulations and the FTC. No such institution exists for cryptocurrency, making all deflationary crypto a choice medium for pump and dump scams.
I'm going to reply to both of your replies in this part of the thread, because I don't want to split this up 3 ways. 5000 character limit is really annoying here. -_-
I appreciate the effort you put into this post. I welcome this kind of discussion, and I hope this will contrast with the kind of bad-faith hucksterism that typically comes from grassroots cryptocurrency sales initiatives.
I'm down to discuss a bit more, though I may also wander off because very ADD.
I’ve also watched bitcoin and cryptocurrency with interest since the days it cost thousands to buy a pizza.
This is good to hear. I find that a lot of times, people that are skeptical of {thing} tend to also not be particularly informed about {thing}, due to a relative lack of interest. I also just don't like to see stuff that I consider promising abandoned to the right. I'm glad you're still keeping track of it even if you're skeptical.
I suspect you may be able to teach me some things, but I also think there are some things you are missing.
In terms of what you've brought up, I think it's more that we weigh things differently. I also tend to be biased more towards optimism than pessimism.
Trying to objectively evaluate the gaps in my knowledge here: I'm a software developer, and I've dug through Bitcoin Core's code a little bit, but not extensively. I'm not particularly well informed about more recent developments, like the Taproot upgrade. My deep dives into Bitcoin stuff tend to correlate with price rises and overall excitement in/around the Bitcoin community (because ADD). During the doldrums I tend to drift off. I was heavily involved in the "Block Wars", so I've got a pretty decent understanding of the Segwit upgrade and the debate and events surrounding it. My understanding of the internals of the Lightning Network is weaker than I'd like. I kind of get the HTLC stuff, but I have no fucking idea how payment routing actually happens. "Economic" arguments tend to make sense to me, though I have basically zero formal education in the subject.
I also have a definite "because it's cool" bias.
Pre-mining Scams
I would definitely categorize pre-mining as shady, though not necessarily an outright scam. I know that a number of altcoins do disclose ahead of time the amount by which they're pre-mined and what purposes those funds will be used for. I dislike these arrangements, and think they're yet another good reason to stay away from those altcoins, but it doesn't qualify them as a scam. It becomes a scam if the pre-mine isn't disclosed, or if the pre-mined funds are spent in a manner contrary to what buyers had been led to believe.
Pre-mining is also not a Ponzi scheme. A Ponzi scheme involves a scammer holding money on behalf of investors, drawing from the held funds to make payouts that give the appearance of productive returns whiling lying about the actual balances held, and then running away with the money once they've tricked enough investors.
When you buy cryptocurrency tokens, it's an exchange. The dollars you pay are not held in your name by the creator of the cryptocurrency. Those dollars are not yours anymore. Instead, you have the tokens, which may rise or fall in value. You are not being promised any returns. If the cryptocurrency you bought is part of a pre-mining scam, at some point the creator will sell their stake, reducing the value of your tokens. You were scammed by being lied to about the properties of the thing you bought, but that is not the same thing as a Ponzi scheme.
As for Bitcoin, Satoshi did everything right in this regard that they realistically could. They released the design on a public mailing list in advance of launching the system. They embedded a recent newspaper headline in the first block to prove that it couldn't have been created before that headline was written. So in that sense, Bitcoin isn't pre-mined.
However, as you allude to, they were "shouting into the void" by themselves for a while, and amassed a sizeable number of coins. There is debate about how much of the early coins actually belong to them. Hal Finney was also known to be involved fairly early on. In any case, whoever created Bitcoin almost certainly has a large number of coins. It's not unreasonable to be concerned about, but I don't think it's right to lump it in with pre-mined altcoins, and calling it a scam is too much of a stretch.
Being deflationary doesn't make an asset a good target for a pump-and-dump scam. PnDs are best executed on assets that are low-valued enough that you can easily force the price up or down using the funds that you have available to you. Being deflationary causes an asset to leave this territory sooner.
Bitcoin is not a good target compared to altcoins, and as far as I'm aware PnD scammers have largely moved on to those. Bitcoin also has a culture around it that is resistant to the PnD scams. The general advice given to people that are new to Bitcoin (after "only invest what you can afford to lose") is to dollar-cost-average by investing fixed amounts at fixed intervals, to avoid trying to time the market, and not to panic about large price movements. Following those rules makes one immune to the PnD scam. Newer people are less disciplined about following them, but over time the group of "core holders" continues to grow.
This makes bitcoin attractive as a store of wealth, but its value derives from its use as currency.
"Store of wealth" is one of the uses of currency. People tend to get worried that Bitcoin isn't being used as a medium of exchange as much as they think it should, but there isn't actually a problem there. As Bitcoin's value grows, it's price will become more stable. This gradually makes it a worse growth investment, but a better medium of exchange and unit of account.
While there are over 19 million bitcoins minted, only a small portion of those are ever in circulation.
Nearly all of them can potentially enter circulation though, and with very little advance notice. If the order books on the exchanges get wiped out and the price starts spiking wildly upward as a result, those non-circulating coins will start to move.
The principles behind this are based on the lessons learned from economic mistakes during the great depression.
I don't think we should value the lessons of mainstream economic analysis too highly, as they take the existence of the state for granted. Maybe this one is a point in favor of the communists, but I'm not ready to concede it just yet.
Society advances through infrastructure, and while the Solarpunk project requires different infrastructure than what is currently planned, it still requires resources.
Fair point, I wasn't thinking about the infrastructural retooling aspect.
I do think "more saving" is a point in favor on the anti-capitalist side, though. People that have savings are less inclined to tolerate shitty employment arrangements, and more able to go on strike or start their own ventures.
Bitcoin hucksters would prefer they spend it on Bitcoin, with the promise that it might make them more money for less effort by sitting in the blockchain doing nothing.
As I touched on in my other reply, Bitcoin won't be a growth investment forever. Once it reaches the point of maximum adoption, any further increase in value should be relatively slow. Going from slightly inflationary to slightly deflationary will have some effect, but I don't think it'll be as severe as you're implying.
Popularity -> Energy -> Scarcity
The income from fees is something that can we can change by adjusting the block size. Doing so requires broad consensus among Bitcoin's users, but it can be done. The main question is how much mining is needed to keep the network secure against a 51% attack.
If things were to get dire, we could even end the block subsidy early through the same mechanism. While consensus between users is needed, such changes can actually be pushed through against the will of the majority of miners.
It sounds like you have more technical experience with cryptocurrency than I do. I think I understand the economics side a little better, though I admit I’m not an expert. I’m sure a more professional economist would have a conniption based on how I’m using some terminology and concepts.
Why is Deflation Bad for Currency?
‘Inflationary’ and ‘deflationary’ as adjectives are usually applied by economists to government fiscal policy, not to currency itself. Since cryptocurrency fiscal policy is usually set in code when it is released, and reaching consensus required to change it is rare, I think it’s kind of appropriate to label cryptocurrency with these adjectives, but I realize it’s also confusing. I’ll do a better job of explaining it, because our differing understandings of this concept are going to be a problem if I don’t.
Money, like all commodities purchased with money, responds to supply and demand. The more money available in an economy, the less that money is worth with regard to other commodities. When the value of money with regard to other commodities goes down (more dollars, less eggs) this is called inflation. When the opposite happens, (less dollars, more eggs) this is called deflation.
During most of history, money was linked to precious ore. There wasn’t a lot of academic economics going on back then, but this meant that the rate at which ore was mined and minted determined the base of a civilization’s currency supply. Argentarii, Priests, and Metalsmiths offered credit, usually some multiple of the actual amount of precious metals they had on hand. Rulers debased their printed coins with non-precious metals. But these methods of increasing supply had drawbacks, so available ore was king.
The policy of letting the availability of precious metals have a direct influence on the money supply continued until very recently. I want to be clear - granting government (I use the term loosely here because the FED, Bank of England, and most other national analogues are technically not a branch of government, but are so intertwined to make the distinction irrelevant) control of the money supply gives it another tool of power, and I’m not happy about that. But giving control of the money supply to the rate of strip mining, conquest, and trade policy is still government-involved, and in many ways worse.
I bring this up because the same economic thinkers who championed Bitcoin are the ones who think a return to the days when money was pegged to the gold standard is a good thing. They’re wrong. Even without the other problems associated with using precious metal as currency, having a money supply that does not adapt to market conditions creates forces that re-enforce hierarchical structures, and privilege the capitalist class over the working class. It gives power to bankers, and removes power from debtors.
The primary use of money is as a medium of exchange. In cases where money retains its value with regards to other commodities or increases in value over time, it can be used as a store of wealth. But money that is a good store of wealth is bad for use as a medium of exchange. “Good money” slowly loses value over time; slow enough not to cause a panic to spend it, but enough to encourage spending it rather than hoarding it. In order to save money, it must be placed in a bank with an interest rate higher than the rate of inflation. The bank then uses that money to issue debt, and it goes back into the economy.
Inflation takes some of the edge off of debt - interest rates are decreased when the inflation rate is factored in. Consider what happens when the opposite is true; not only does the total debt increase over time, but the money to pay the debt becomes more and more scarce, both increasing the value of what is owed and making it difficult to pay in a reasonable time. While inflation has an effect on real wages, raising the minimum wage and negotiating salary increases compensate for this effect. It is difficult for banks to renegotiate contractual agreements on long-term loans in the same way.
Being able to save wealth without banks might be considered a benefit of deflation, but something much worse happens. Working people generally need to spend most of the money they earn, and only a small fraction of a rich person’s income is needed for life’s necessities. When it becomes beneficial to hold on to money, the capital class can easily reduce spending, but those with less money are forced to continue to spend, leading to a pattern that collects more and more of the money supply in the hands of the rich. Because banks and the wealthy are incentivized to hold on to money, less infrastructure is built, loans are harder to get, and the amount of jobs available and total economic activity decreases. This is called a contraction, and a period of economic retraction is called a recession. When a recession becomes really bad, it’s called an economic depression.
It is no mistake that decoupling the dollar from precious metals coincided with the lessons of the great depression. People lost faith in the political order, revolutions occurred in Russia and Germany, and many turned to fascism. The tight coupling of banks and government is no mistake, as they rely on each other for stability. If we built a society based on a fiscal policy that allowed the currency of exchange to significantly deflate, it would fall into economic depression and revolution also.
Bitcoin is Bad Exchange Currency
Bitcoin, unlike precious metals, derives its value from its ability to be used as an exchange currency. I’ve explained why it’s a terrible candidate for that use. Like starving people during the gilded age, the primary people using bitcoin for exchange when it is more valuable to hold are the ones who have little choice in the matter - people with no safer way to get illicit items and victims of ransomware gangs.
I call Bitcoin deflationary because it was designed from the start to encourage deflation, but even cryptocurrency like Dogecoin, where the monetary supply is designed to increase exponentially, can increase in value if demand for it is high enough. Cryptocurrency will never replace government money so long as it doesn’t improve on its ability to avoid periods of deflation or hyperinflation. In order to do this it needs to respond to market conditions, scaling the money supply when population and economic activity changes.
As it stands, the monetary supply of bitcoin may be increasing with each minted block, but it is also tempered by the amount of bitcoin ‘burned’ - people losing their keys, or dying with no-one inheriting access to their account. This is the best scenario for Satoshi’s million, for example. It’s difficult to gauge the amount of bitcoin that can come into play even when it is in highest demand due to this ambiguity.
Since 19 of the 21 million coins have already been minted, and the rate of minting new coins is slow and predictable, the independent variable for Bitcoin’s value is not supply, but demand. Ending the minting of new coins will not cause stability in the price - its price will still fluctuate with demand. Population is projected to grow long past 2040, when Bitcoin will stop minting. Take an absurd and simple model of the world where the entire population uses bitcoin: an increase in the population means the same amount of coins for more people, resulting in deflation, a predictable economic depression, and the collapse of that society unless it adopts a better monetary system.
I think I understand the economics side a little better, though I admit I’m not an expert.
Possibly. I do have some familiarity, though it's more with "political economy" than economics proper. I don't usually have much patience for dry nonfiction books, though articles and long essays are fine. As a result, my knowledge here is less coherent and more shallow.
Why is Deflation Bad for Currency?
I broadly acknowledge your points here, and I don't have a full rebuttal, though I'm not yet prepared to change my mind on the issue. I'm just going to respond to the points where I have something to say.
‘Inflationary’ and ‘deflationary’
I do understand inflation and deflation, and it doesn't seem like there's been any misunderstanding thus far. There's supply inflation and price inflation. Central banks use supply inflation and deflation to influence the economy. Increase supply to encourage investment when the economy gets sluggish, decrease supply to rein in price inflation.
While inflation has an effect on real wages, raising the minimum wage and negotiating salary increases compensate for this effect.
Wages haven't actually kept up with productivity, though. Arguably it would be better to have real wages increase by default through deflation, and make employers deal with negotiating pay cuts. That way inaction favors the (hopefully unionized) workers and squeezes the employer, instead of the other way around. This may give worker co-ops a competitive advantage in retaining experienced workers, whereas employers may be inclined to fire workers when pay cut negotiations fail.
Your claim about the US having abandoned the gold standard around the great depression didn't sound quite right to me, as I remembered we were on the Bretton Woods system until 1971. It turns out there was indeed a gap in the 30s though.
In looking at the chart on the Bretton Woods article, I remembered that the decoupling of real wages from productivity (article) also started in the 70s. I wonder if there's any connection. I know that Reaganomics was a thing, but that would have started in the 80s. (I promise I'm not doing a conspiracy theorist "ah ha!" thing here, the correlation may be entirely coincidental, but may also be worth further investigation.)
Because banks and the wealthy are incentivized to hold on to money, less infrastructure is built, loans are harder to get, and the amount of jobs available and total economic activity decreases.
This is a result of the credit monopoly. If we can break that, then the supply of credit should expand as needed, and the effects of deflation of the unit of account should be limited.
As one way to help with that, I've got some ideas for a friend-to-friend credit network inspired by the Lightning Network and the original (pre-shitcoin) RipplePay. (No blockchains involved, it's not a cryptocurrency.) The core of it would be a simple app for tracking lending among friends (for example, Alice pays for lunch for her and Bob, and they note this in the app instead of exchanging cash). It would also allow routing in order to make "IOU" payments to friends-of-friends(-of-friends, etc) where no direct trust relationship exists. This could then be used as a sort of community currency. My ideas are still kind of half-formed, I need to look more into the details of how the Lightning Network works, as well as how the shitcoin version of Ripple works to see if they have any ideas worth stealing.
The one thing that does bother me that I can't answer in a satisfactory fashion is that compared to an inflationary currency, deflation imposes a hard floor on the effective interest rate of lending. If the currency deflates at a rate of 2%, and you get a zero-interest loan, the real value of your debt is still increasing by 2% per year. I assume there's some level of need for actual hard currency that's relatively stable in the long term, and that people can't just use credit exclusively. "My friends owe me money" is not a great way to store one's life savings, after all.
Cryptocurrency will never replace government money so long as it doesn’t improve on its ability to avoid periods of deflation or hyperinflation.
Quibble: Hyperinflation typically only happens due to government mismanagement of their currency, and not as a result of regular market forces.
As it stands, the monetary supply of bitcoin may be increasing with each minted block, but it is also tempered by the amount of bitcoin ‘burned’ - people losing their keys, or dying with no-one inheriting access to their account.
The effect of this should be minimal once infrastructure around and knowledge of Bitcoin becomes more fully developed.
Ending the minting of new coins will not cause stability in the price - its price will still fluctuate with demand.
My point was that the current level of instability, with 2000% increases and 80% drops, is only a result of the low current level of adoption, combined with uncertainty over whether Bitcoin is going to be the global currency to replace all others, or a fad that is going to die out. Once the "final" level of adoption is reached, you wouldn't leave your money "sitting in the blockchain" in hopes of a big return. It'd be more like having your money in treasury bonds. Some return, sure, but fairly unexciting.
Take an absurd and simple model of the world where the entire population uses bitcoin: an increase in the population means the same amount of coins for more people
Annual population growth from 1950 to the present (the era for which we have good numbers, I assume?) topped out at 2.24% in 1964. We're currently at 0.88%, and projected to go negative in the 2080s. I assume it won't be negative forever, but figure maybe 1-2% annual price deflation over the long run?
What do?
Shifting gears a bit. Let's say for the sake of argument that the deflation thing is actually very bad. Maybe not catastrophically bad, but at least bad enough that we should prefer that Bitcoin does not succeed.
What alternative do we, as anarchists, offer to the world? Besides anarcho-communism, that is. I'm skeptical of it as a totalizing vision, and a lot of people just won't go for it.
I assume that in a post-state society:
There will be some kind of hard currency that is widely but maybe not exclusively used
The world will standardize on a single unit of account, probably the aforementioned hard currency
People will remain at least moderately self-interested
Let's say that all of the other altcoins were obliterated, and that only Bitcoin and Dogecoin remain. Dogecoin would be the better option for society as a whole, due to the supply inflation. However, for individuals it's preferable to only accept Bitcoin and refuse to accept Dogecoin (Thiers' law). Dogecoin is unlikely to catch on because of this, even if we ignore Bitcoin's first-mover advantage.
What other good alternatives are there? I don't think "anarcho central banking" would be viable.
Your claim about the US having abandoned the gold standard around the great depression didn’t sound quite right to me, as I remembered we were on the Bretton Woods system until 1971. It turns out there was indeed a gap in the 30s though.
Your memory is correct - though I did mean to communicate that it was the lessons learned during the great depression that lead to the end of the gold standard, not that those lessons were immediately absorbed. Constraining the money supply is so good for the rich, naturally they’d argue that the societal collapse it correlated with was just a fluke, and use their considerable political power to bring it back. But when black people organized militias and poli-sci students demonstrated considerable organic chemistry knowledge, visions of a return to the revolutionary chaos of the last cycle weighed heavier on the scales than even the economic demands of the war.
McCarthy, Nixon, and the Vietnam War
In looking at the chart on the Bretton Woods article, I remembered that the decoupling of real wages from productivity (article) also started in the 70s. I wonder if there’s any connection. I know that Reaganomics was a thing, but that would have started in the 80s. (I promise I’m not doing a conspiracy theorist “ah ha!” thing here, the correlation may be entirely coincidental, but may also be worth further investigation.)
That’s an interesting hypothesis. You could test it by finding the data during the period the dollar was first allowed to float after the great depression, and see if a similar decoupling happened. My suspicion is that it has more to do with McCarthy’s witch trials of labor radicals during the JFK era and Nixon’s subsequent war on unions and unionization.
The Bretton Woods break and the decoupling of wages to productivity are possibly related in the form of the Vietnam war though. It’s difficult to fund an ever escalating war when your monetary supply is constrained (1971); and once a war ends (1973), there’s a shock to wage negotiating power as tens of thousands of former soldiers return to the labor market. The already hollowed-out union movement explains the inability of workers to recover from the shock and the rest of the graph.
Ranum’s Law
Wage stagnation is a social problem which requires a social solution: organizing labor. Any technical solution that is not directly supportive of the social project is unlikely to be effective at resolving this specific problem. For example, some governments have done away with political minimum wage struggles by legislating regular recalculations based on inflation data. But this encourages labor complacency and wages in these countries have also not scaled with the vast increases in productivity. As I’ve claimed earlier, the benefit of constraining the money supply for the rich outweighs any benefit it could have for the poor and middle class.
Hyperinflation Quibble Quibble
I’ve used arguments based on very simple models, because its easier to use them to illustrate points that remain true when more complex models are applied. Economics as a science is deeply criticized for its lack of predictive power, and part of this is due to the tendency to treat it as the mathematical discipline of the analysis of rational actors. It is germane that the greatest recent advancements in economic theory come from outside the discipline, like Daniel Kahneman in psychology or David Graeber in anthropology.
Hyperinflation is usually associated with government mismanagement of their currency, but its important to remember the real reason is people’s lack of faith in the government management of their currency. Since currency functions on irrational human trust, any hyperinflation event is a product of both psychology and mathematics. Hyperinflation in the Weimar Republic was caused by taking enormous debt meant to be paid by winning a war, and then dramatically losing that war. Overprinting money acerbated the situation, but I believe it was a primitive attempt by government to actively manage the situation using the economic tools as they understood them, rather than self-interested corruption as is often the case. Nothing they could have done in the treasury could change the fact that the war department had very publicly gone all-in on a losing bet. Calling this economic mismanagement ignores that Germany had earlier followed this sequence of events in the previous conflict in which it ended the victor, with predictably positive results for German ledgers. The subprime mortgage crisis, on the other hand, was clearly a result of private self-interest and corruption. It could have lead to much worse results, but I contend that preserving confidence in the government’s willingness and ability to maintain the stability of the market, more than any actual solution the government provided, prevented a larger financial catastrophe. Bitcoin is subject to this vulerability also, for example the price collapse I mentioned earlier that occurred over rumors that Nakamoto was finally going to pull the rug.
WanderingDuck(x) = y
Having confidence that the market will never act to stabilize itself is not the same as market confidence. My example using growing population and fixed currency proves a point, but things are obviously more complicated than that, and in ways that make the problem even more intractable than the simple example implies. Looking at stock price history and forex graphs, it is obvious that market trends have so many inputs that the resulting output is impossible to model mathematically. Wars, natural disasters, crop failures, disease outbreaks, economic bubbles, and other large sources of economic uncertainty will not suddenly cease once the last Bitcoin is minted. A worldwide currency of exchange that can’t adapt to market changes will only acerbate the problems caused by the unpredictable.
Retiring on “My friends owe me money”
A soldier stationed in Hong Kong during the British mandate learned a fascinating truth about money from Cantonese merchants. Used to writing checks on his account in England, he was shocked to see another patron paying for supplies using a check he had written six months prior to pay a bar tab. It had been covered in Chinese writing indicating dozens of other merchants had endorsed the check, each using it as a medium of exchange in turn. He had accidentally minted his own hard currency.
It it useful to frame money as a commodity, but it is also possible to frame it as tokens of debt. An IOU from cacheson may be a less attractive source of exchange than a proper US dollar amount, but fortunes change, and an IOU from a trusted friend is more useful than a Dogecoin or a Biafran Pound. According to the credit theory of money, people can just use credit exclusively, because that’s what most people are already doing when they use fiat currency.
There’s an aspirational and infrapolitical argument against traditional cryptocurrency here: retirement savings are a relatively recent invention. In pre-banking societies, people relied on their community to look after them in their old age. The social debt wasn’t precisely quantified, but the implied communal economy relied just as much on trust. The capitalist system thrives by atomizing individuals and consolidating corporations. Trust between banks is subsidized, and trust between people is undermined. Bitcoin in its idealized form is a tool for a market based on competition rather than collaboration. Its zero-trust architecture mirrors a zero-trust vision of society. I feel the same as you in that I wouldn’t retire with the expectation that gratitude from the people I have helped would meet my needs either, but if society evolved to the point where that was a realistic option, that would be an anarchist achievement.
I don’t think criticisms need to be coupled with solutions, but eventually solutions are necessary. I think your question is sincere, but you may be more qualified than I am to answer it. I can only offer you some of my half-baked thoughts on the subject.
One notion that I don’t totally endorse, but think might be interesting as a point of reference is Duniter. In southwest France a small community built an implementation pronounced “June” and written Ğ1. It still technically operates on Proof-of-Work, but most of the devices minting coins are old laptops and raspberry pis. There’s little incentive to mine besides communal spirit, and its nerf version of mint competition removes the energy escalation usually associated with that consensus mechanism. Instead of awarding newly minted coin to the victor of the algorithmic contest, coin is distributed to every wallet individually in a process similar to a Universal Basic Income scheme that they call “Universal Dividend.”
It has survived for over five years without a single 51% attack due to the true basis of consensus security, their web of trust. Each new wallet must be authorized by at least two other wallets. Using technology designed for cryptographic email authentication, they are able to enforce personhood of each wallet and prune branches of bad actors. They implemented a craigslist style digital market from the start, and though it seemed more vibrant when I investigated it several years ago, you can still find garage-sale classics like homemade jam, second-hand clothing, and used books on offer.
Some of my criticisms still apply here. While the minting mechanism is designed to grow with the community, I don’t think any algorithmic function can be complex enough to match the irrational forces that drive serious markets. It has never grown past a digital flea market, and with such low stakes it’s difficult to draw any compelling lessons from its survival. It does seem to have inspired another universal basic income style digital currency started for pedal-powered delivery collectives in Germany called Circles which I know even less about. In addition to my crypto-based concerns, I tend to view UBI schemes as last-ditch efforts by the capitalist class to preserve capitalism, and messages like the following don’t inspire confidence in these solutions to create anarchy. https://joincircles.net/wp-content/uploads/2020/11/text.webp
Despite my reservations, I’m significantly less concerned about anarchists experimenting with this kind of currency, given its cooperative intentions and community-oriented architecture. Since there’s less incentive to expand, if they had a presence on the Fediverse, I suspect their members would be much more tolerable too.
I’m impressed you’re familiar with RipplePay in its previous incarnation. It makes sense in a capitalist mode of production that a startup for a trust-based digital token would pivot from trust between individuals to the much more lucrative trust between financial institutions. IIRC, I discovered the concept of hawaladar networks through their white paper. The idea is that any two merchants can act as nodes in a grassroots money wire service, based on their mutual trust. Money can be transferred long distances by simply communicating the sums and recipients, and then paying out of the local cache. Each exchange is kept in a each merchants’ ledger, and since traffic flows both ways, sums often cancel out. Actual transportation of goods or currency is only occasionally required to settle trade imbalances, and could be done without national currency, using their value in marketable products instead. Since networks often involve more than one merchant, reckonings can be handled semi-locally, with long-distance debts balanced as individual remittances ripple through the network.
An anarchist digital exchange currency could follow similar lines. You would be able to establish mutual lines of credit with friends and associates, and set different credit limits for individuals or different groups of people, possibly scaled by how far separated they are within your web of trust. People who have trouble demonstrating the trustworthiness needed to participate in the network could still use the system for exchange by making a non-digital loan to someone acting as a trusted node on the network. It would be reasonable to grant access for the entire amount of the loan to comrades with poor financial savvy, and charge an access fee to everyone else.
Software to run it could be based on the ActivityPub protocol, and proven local rings of trust could federate with each other forming regional, national, and global networks of remittance. Bankruptcies could be handled humanely, with people who are close nodes on the network covering the debt and forgiving the debtor, while revising their credit access in accordance with the reason for the default.
A network with this structure side-steps the problems associated with growing currency algorithmically because currency is created and annihilated according to the needs and limits of people within the network. The money supply can grow to the collective credit limit of the network, and at the same time shrink with degrowth without leaving surplus currency and causing panic. A shock capable of destabilizing the network would have the same effect on a comparable fiat currency system. As added security, node operators could establish individual value caches so the failure of a single node they connect with does not propagate across the network. It’s similar to central banking in the way that nodes federate, trade resources, and insure themselves, but there is not a central institution that sets interest rates, and all loans are interest-free. With enough of the population participating it has emergent democratic qualities.
Mutual projects could be funded by people giving unilateral IOUs to the organizers. Funds could be transferred swiftly to good causes, in spite of government blockades. In an anarchist mirror of Visa cutting off payment to Wikileaks, the networks could defederate from instances connecting landlords or police, and individuals could refuse to be used as an exit node or remittance path, limiting the total credit available to them.
While national currency might be convenient to start such a network, denomination of value could just as easily be pegged to some standard unlikely to be manipulated by capitalists. For example, 200 units could be said to be the equivalent of one nice new mid-range bicycle, or about $400 in US currency. A single unit could then be called a centicycle. Fractional units would be milicycles. If you’re Canadian, half a bicycle could be a looncycle. Since the amount is referential, it would not lead to bicycle hoarding, the way the gold standard creates metal scarcity or bitcoin creates energy scarcity. Debts in the system could be paid with whatever cash or physical good anyone on a node in the network is willing to accept as worth some fraction or multiple of a bicycle.
While it would be possible to accumulate enough of other people’s debt to stop working and retire, the ultimate goal of such a system would be that the structure of the network inspires people to crowd-fund enough mutually beneficial free infrastructure that the need for labor itself would become scarce. People acting as nodes on the network could use the forged mutual bonds of trust as a starting point to form unions and organize coops. People empowered by newly discovered democratic control of their economic lives would find confidence to throw off the shackles of liberal democracy. Those who don’t want or are not able to work would still be able to relax in their fully automated solarpunk luxury communism while those working would need to put in less than a day a week to meet the basic needs of societal maintenance.
Whoops, I may have gotten a little carried away there. I hope some of that is useful, it seems you may be on track towards a more technically feasible solution of your own. But the takeaway is this: fuck Monero.Town. Defederating might be the first step on a path to solarpunk luxury communism :)
So I've read all of your reply, but at this point I feel the need to wrap this up. I need to get back to working on other things besides writing internet essays. XD
You've given me some things to think about. Maybe I'll bump up the priority on my credit network project. Thank you for the conversation. :)
That was a really fascinating read from you two, thank you both for engaging so thoughtfully with each other on a topic I’m not very familiar with. There’s so many little threads of information sprinkled in there to research and learn more about. Really wonderful stuff.
Also @Five (let me know if that @ or ping or whatever works, I’ve tried pinging people like that a few other times but they never responded, so I never know if it actually sends the message to your inbox).
Thanks PF - I’ve received pings from people using @Five in the past, but obviously I don’t know how many I haven’t received. I didn’t see this one until I manually reviewed the comment thread. I wonder if the ping and the reply cancelled each other out.
Yes, there is a hard cap on the amount of bitcoins that will be produced, which makes it a deflationary currency. Yes, this will result in more saving (“hoarding”) and less borrowing when compared with the inflationary currencies that we use now. Yes, that means there will be less investment due to the lack of cheap credit. However the “spiral” part is nonsensical on its face. Bitcoin is not some economic black hole that we’ll throw all of our economic resources into until we starve to death. Besides, from an environmental perspective, less investment should be a good thing.
Less investment should be a good thing when it comes to oil development, but when money is not re-invested in a capitalist society, the result is increased scarcity. In the absence of bitcoin, a middle-class person might chose to spend their surplus money on a bicycle, building a chicken coup, or learning a new skill. Bitcoin hucksters would prefer they spend it on Bitcoin, with the promise that it might make them more money for less effort by sitting in the blockchain doing nothing.
Society advances through infrastructure, and while the Solarpunk project requires different infrastructure than what is currently planned, it still requires resources. If we are going to create a society of abundance, building it on a currency that thrives on scarcity is a non-starter.
Popularity -> Energy -> Scarcity
Without the “line goes up forever” aspect of the deflationary spiral, the argument for runaway energy usage falls apart as well. Bitcoin will use an (eventually) stable, likely small percentage of our global electricity output. If we’re generating that electricity from sustainable sources, we’ll be fine. If we remain stuck on fossil fuels, we’ll choke to death on carbon even without Bitcoin in the mix.
If the Bitcoin system survives until 2040, it will reach a maximum of 21 million coins. Once minting new blocks is no longer rewarded with new coins, continued minting is expected to be funded by transaction fees. That does not mean the energy usage will stop, or even plateau. The energy use of bitcoin is related to the demand for Bitcoin. The more demand, the higher the value in dollars. The higher the dollar value, the greater dollar value return for mining it. The more value for mining, the more mining rigs will come online. The more rigs, the more energy is used.
Currently bitcoin is used for niche markets, and is not widely adopted. If the crypto-bro dreams of mass adoption were realized, like the primary currency of a world-wide solarpunk society, demand would skyrocket and energy use would spiral out of control. Using 1% of the world’s energy is a huge number, but is minuscule when compared to the amount needed in that scenario.
We had a small semi-unsceduled down-time of the XMPP, Movim and Wiki today. The plan was to just quickly add another SSD to the server, but this caused some unexpected issues with one of the network interfaces. Took slightly longer to fix, but the server is back in working order now 👍
I had to check, but I had !climate blocked since … ever? Never missed it, but the occasional discussions around it seem to show it’s not the most agreeable place on this instance.
It is just a result of its size in terms of subscribers and upvotes (which makes it hit the top of the all feed on other large instances). Any such large community on Lemmy attracts a lot of very low quality comments.
That’s correct. We don’t expect or want SLRPNK to conquer the social media market, or even Lemmy. It wasn’t long ago that user engagement and active users was in decline across the Threadiverse since the all-time highs of the Reddit exodus. The numbers we’re seeing now suggest that SLRPNK, at least, has hit an inflection point, and we’ve been slowly growing over the last couple of months.
In my mind, this is the best possible scenario. Sudden, explosive growth puts intense stress on both the software and communities; there are still open software issues that have not been closed that were revealed the last time this happened. Continued decline suggests that at some point we will not be able to maintain critical mass, and the Threadiverse project will fail. Modest, incremental growth allows people time to improve and adapt the software, and develop the community management skills that are the reason people come here. I look forward to the day when the Fediverse unseats corporate media as the social media ecosystem of choice, but I don’t think this iteration of our section of the Fediverse is ready to do that yet.
It’s worth considering the rise of the Apache web server. It was significantly worse than the Microsoft web server that was the industry standard, in most ways but one - it was free and open source. Its name is a pun on the term patch-y, a description of the patchwork improvements and bug fixes that it received from coders across the world. It continued to grow in popularity with hobbyists and specialists, but that didn’t register on the market share surveys. But at some point, the collection of patches became undeniably better than the market leading software. That’s the point when the ‘takeoff’ became visible.
The features that made that possible are also true of the Threadiverse softwares. They’re free and open source. They are attracting new contributors who are adding life to the community and features to the software. The tools are improving with time, and we have a critical mass of members who find the existing infrastructure sufficient enough to spend their time here. I think that’s what is needed for one day the software and community quality to be undeniably better than anything that corporate media can muster.
It’s self-hosted on a refurbished older Xeon with 64gb ram. We recently upgraded it, so performance wise we should be good for a while, but I’d rather help other people set up their own Lemmy instances than continue scaling up the hardware to accommodate much more users.
We are just storing them on a SSD raid, nothing fancy. But yes, the image storage can get relatively big and most Lemmy instances that run on VPS or similar use additional S3 compatible object storage for that. For our instance the space required is currently at about 100GB, although I think we can do some clean-up on that.
The image storage backend Pict-rs can do some image conversion to reduce file-size and you can also limit the maximum file-size people are allowed to upload (here it is 5mb). This makes the growth somewhat manageable.
There are some upcoming changes in Lemmy that will allow proxying images similar to how other Fediverse software does it, but that will increase image storage requirements even further.
In general it is not that hard to run a Lemmy instance, but once it federates quite well the system requirements are maybe a bit higher than what people expect. Running it on a small ARM SBC is definitely not something that will work for long.
Nah personally I feel like I would rather donate to a community server(s) or something, I feel like the bigger the group of us on an instance, the more we can afford to put our heads together and think further ahead
This is the most fediverse thing I’ve heard in a while. I do love the solarpunk ethos, and it would be neat to see other small instances popping up along similar themes. Kind of like “family instances.”
I’m instance admin curious, but must admit that the obligations of moderating, protecting against evildoers, and fear of csam, keep myself – and I’m sure many others – from starting our own.
I think it would be great to have some non-english Solarpunk themed instance, especially a Brazilian one.
In general, I think more localised options, like city or region based instances are the much better idea over large general instances like Lemmy.world.
As for running instances, I think right now the biggest entry barrier is the image storage requirements. The main Lemmy dB is also relatively big, but it can fit on a typical medium sized VPS. S3 compatible image storage is finniky to set up and most providers sadly have hidden cost traps built into them.
Maybe a shared S3 storage option for Lemmy admins based on this project: jortage.com would be cool to have (preferrably in central Europe, near the cheap VPS hosts). It could also include image scanning via the Lemmy-safety project.
Personally I set up our server so that we wouldn’t need something like this, but I would be willing to help setting this up if some group of instances would be interested in running such a shared storage back end.
I’d rather help other people set up their own Lemmy instances than continue scaling up the hardware to accommodate much more users
With that in mind, I’m pretty close to pulling the trigger on my own instance, but I keep thinking of more questions/concerns like handling CSAM getting federated to your instance, etc.
Is there a good spot around here to discuss this stuff, where maybe my questions have already been answered?
Yeah, this is pretty new. Lets see how it works out.
I have set up something similar but maybe with more focus on instance admins over here: groups.f-hub.org/fedi-admin-guild/(not really used that much though. I think I’ll open signups this weekend; maybe that helps).
Thank you for your work on this! Wikis are a really handy addition to communities, so it’ll be nice having the etherpad to let us all collaborate together.
I used that some years ago and it was kinda neat, but it seems abandoned and might not work any more. But I might try it out sometime now that we run both.
Edit: Etherpad switched to a new Oauth based API access methode that the (unmaintained) Dokuwiki plugin does not support, so for now this will not be possible unless someone updates the plugin.
Question for the admins: Have you folks been following the development of Sublinks at all?
Sublinks, crafted using Java Spring Boot, stands as a state-of-the-art link aggregation and microblogging platform, reminiscent yet advanced compared to Lemmy & Kbin.
It features a Lemmy compatible API, allowing for seamless integration and migration for existing Lemmy users.
Unique to Sublinks are its enhanced moderation tools, tailored to provide a safe and manageable online community space.
I’m very intrigued by this project, as moderation tools don’t seem to be much of a priority for the Lemmy devs. But I’d love to hear an admin’s perspective.
To be fair, Lemmy has two main developers working on a volunteer basis on the website frontend, website backend, android client, an activitypub framwork, and the documentation website - all released with FOSS licensing.
Perhaps there are specific moderation tools that you can list here along with github issues if available? Then, we can either upvote/help with the issues, or create them if needed.
I am aware of Sublinks, but I am not really sure how that will help with moderation issues. IMHO there are two main issues for now: A: lack of some moderation tools in the frontend and B: lack of good interoperability between the Lemmy backend and the Pictrs image storage.
While a monolithic Sublinks that includes image storage would probably help with B it seems like that could be more easily solved than re-writing the entire backend. For A, Sublinks seems to have at best a long term plan and helping frontend projects like Photon seems to be more promising to me.
But that is just my personal impression and I am probably missing some relevant piece of the puzzle.
Unrelated to that: Java is even worse than Rust from a sysadmin perspective (can’t really comment from a developer perspective), so I doubt server admins (me included) will be happy to switch to Sublinks on technical grounds.
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