I believe the appropriate technical term for this yield curve situation is “dumpster fire”:

I’m going to send two of my good friends a bitcoin book. They don’t really understand bitcoin and often think it’s some sort of scam. What are the best books for introducing newbies? Bitcoin standard maybe?

I was thinking Soft War because one friend is a doctor and probably used to reading thesis’s. The other friend works with heavy energy infrastructure like damns and nuclear power stations.

How did you orange pill your friends? #bitcoin #nostr

If I knew that I’d be on a list somewhere…

Gold poking around for the triple top. I expect it to eventually break out but who knows.

It’s being held down imo. The price changes certainly aren’t organic

Good morning plebs

Sunday morning cycle to start the day off. Now ease into some coffee and chill for a bit

#plebchain

As for wealth redistribution to miners. There is, say, currently 19,000,000 bitcoin in existence. There are, say, 1,000,000 people that have used bitcoin to store the value they created; you create a car, you sell the car for $30,000, you store that wealth in bitcoin. 10 minutes later, there's 19,000,006 bitcoin, there isn't a corresponding increase in people storing their wealth in bitcoin, there isn't an increase in total value of bitcoin, we have just divided off a little morsel of bitcoins value and handed it to whoever mined the block.

Yes, the miner provided a service, for which they should be entitled the transaction fees of the peoeple who sent bitcoin in that block. But they shouldn't be entitled to my wealth, my value, when I have not made a transaction. They haven't facilitated some financial service for me, I don't owe them anything, yet they have taken a sliver of my wealth through inflation, the block reward (mining subsidy).

I'm not mad at miners or anything, my point is just that this is a redistribution of wealth, it is a subsidy that holders pay for on a service that should be paid for by people making transactions. Its just, the least shitty way of initially allocating all the bitcoin into the economy, and helps prevent a 51% attack until the network grows to support mining through fees.

Let's start with the deflationary spiral. Its a long topic to understand but I'll do my best. So let's start by defining 2 different monetary systems.

System 1, commodity money: this is a system where the money is a commodity, a scarce good, like gold or bitcoin, but for the sake of simplicity I'll use gold. In this system, economic resources (land labor capital) must be expended to create new monetary units (mining for gold).

Of all the commodities in the world, silver, iron, salt, cars, plastic etc., gold is the hardest to produce more of (except for bitcoin). So, if you think about it, all other commodities will be produced in greater quantities than gold, the exchange rate of gold to any other commodity will always rise over time. This is deflationary, the value of the gold is always going up.

System 2, credit: in our current system, money is created ONLY through lending. When you get a loan to buy a house, the fed is writing that money into existence on their ledger, and loaning it to your bank for interest (this is the fed funds rate, currently 5%). The bank loans you this money for interest, usually 2-3% above what they get it for. You spend the money into the economy, paying for the land, the material, the labor for your house. The same thing happens at the government level, money is loaned into existence by the Fed to pay the governments bills, the government pays this into the economy, but they owe the fed interest.

Now, this presents a problem, because the Fed is owed more money than the total amount of dollars in the system, in fact, a lot more. So much more, that almost all debt is only serviced (paying minimum interest payments), its never paid off, its only rolled over (which can mean paying higher interest), meanwhile new debt is being accrued. In this system, the currency is always being devalued by the creation of new credit.

So to see the difference in these 2 systems, in a commodity money system, investment has to be funded through savings, there isn't a central bank that can print money into existence. In fiat the same investment is funded through credit, printed money that's owed back to the fed at interest, meaning a failed investment on the part of the bank is a real issue because they owe money up the chain. In a commodity money the bank loses their investment, but since it was funded through savings the contagion is naturally more contained.

When banks default on their loans in a fiat system, the debt hole that's created quickly spreads to other banks and the system as a whole, the money is sucked out of the system, bank runs, unemployment, depression ensue. This is the deflationary spiral, the rapid repricing of dollars because the credit bubble collapses. This effect is far more contained in a commodity money system, because money is real and doesn't get evaporated away by interest payments.

To put this into a final bit of perspective, there's less than $1T dollars, even electronic dollars. There is $32T in government debt, the banks have in excess of $2,000T (yes, you read that right) in debt exposures. When the value of the dollar rises too much (when, not if), these debts will default and the dollar chart will look like OG bitcoin pumps, the effect will be so catastrophic that everyone will call for a bailout, the final act, also known as "monetizing the debt". This is printing money to paper over losses that never existed outside of a balance sheet.

I don't know about Lyn Alden, but I have been thinking about it along the lines of what increasing the money supply means. Its biases the economy towards lending. A decrease in money supply would bias the economy saving. Both if these are deviations from a neutral currency, where there is no external influence on what you should do with your money, its closer to pure information, reacting only to market forces.

This is why we call the block reward a mining subsidy, you are actually biasing the economy towards mining in an unnatural way, you are redistributing wealth from every user towards miners. This is, in a nontrivial way, wrong, but its the least wrong way to introduce a new currency that we have.

Strictly my 2 cents.

Gm nostr

Brave isn’t perfect, but it’s miles better than Chrome

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