Unpopular opinion: even post hyperbitcoinization we will have fractional reserve, credit, and inflation
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Discussion
Interesting comment — they’re not lumped together.
“Unprecedented human progress” coincided with the discovery of liquid and gaseous fossil fuels and the invention of the internal combustion engine. Our progress should be attributed to those, not fiat credit expansion.
Debt is a priority claim on an asset. Equity is a residual claim. There will always be a market for priority as there is less risk on priority claims. Therefore there will always be a credit market. The size of future credit markets, though, will be much smaller than it is today.
Coinbase is fractional reserve banking bitcoin. The more deposits they have, the easier this is. The exact % of reserves they’re holding isn’t clear but the larger share of the bitcoin market they have (with IBIT ETF, other ETFs, and MSTR they are probably over 1% of the total bitcoin supply, and a much higher percentage of the current Bitcoin issuance schedule). As the chance that there is a “run” on these coins is lower the more coins they have, they’re able to have fewer and fewer BTC on hand to meet market demands. This will only get worse with time if most new bitcoiners aren’t custodying their own coins.
Inflation is about the size of the numerator. As bitcoin is successful, that numerator is approaching a fixed 21M BTC supply cap. But if Coinbase and others are using fractional reserve banking than the paper equivalent of those coins will be higher. While this means we won’t experience as much deflation as they otherwise would, we won’t have inflation like we’ve become accustomed to - valued in $$.
IMO the biggest threat to Bitcoin is their ability to blunt NGU…which they’ll do using fractional reserve hodling and is enabled by MSTR and the ETFs not doing proof of reserves. I think it is pretty clear Coinbase is fractional reserving the Bitcoin they custody right now (at some level) and not very many of the bitcoiners on NOSTR seem to GAF…which is very confusing.
Well, a lot of things came together at that time. You could also mention the scientific method and improved machinery, the spread of the printing press, etc. Attributing it solely to fossil fuels would be as wrong as attributing it solely to any other thing, including the nature of money.
One correction: although one led to the other, gold-backed paper money is not fiat. Important distinction. I was referring only to gold-backed paper money.
We agree on everything else you mentioned. I'm also very confused by bitcoiners cheerleading for paper bitcoin held by institutions and states. NgU is important but it comes at a cost but no one seems to care.
The establishment of gold was in response to central banking, fiat money, fiat credit expansion, and so forth. The unprecedented progress preceded the discovery of liquid and gaseous fossil fuels and the invention of the internal combustion engine. The unprecedented progress followed the attempt to acknowledge and embrace, in policy, previously popularized economic laws.