# Fiat Games on Bitcoin
There's a saying about standing armies in peacetime, it's generally not a good idea. Wartime emergencies are one thing, but when you have a standing army during peacetime, they generally just get in the way because, like most armies, they crave action.
If you have a perfectly virtuous military, perhaps having a standing army is fine, but given the flaws of the human condition, there's bound to be some trouble. Many a revolution started with standing armies that felt disrespected and seized power when they could.
I mention this because this dynamic is at play in the Bitcoin ecosystem, where a bunch of bored holders are starting to make trouble. They identified as Bitcoin Maximalist even as recently as a few years ago, yet got off the rails, pushing all sorts of idiocy like this ordinals/brc-20 stuff.
The problem with these people is that they crave action. They can't just sit back and enjoy the ride. They're the type that needs to always be doing something, good or bad. And let's face it, once you get that Bitcoin is sound money and have given your pitch to your friends and relatives, it's a matter of waiting things out and watching your fiat enemies float by the proverbial river. I've been in those conversations, they go around the same topics over and over again.
As a result, these people feast on news. Wow, Michael Saylor did something, or there's an ETF coming, or X or Y or Z is happening. They're all addicted to talking and rallying the troops and once you're bored of talking about the things that matter, there's a natural tendency to talk about the things that don't matter as if they were.
I blame the BUIDL movement that emphasized building something, anything. It's an understandable attitude. Surely, doing *something* is better than doing *nothing*, right?
This is the error that every politician makes and it's high time preference behavior. X just happened and so you have to do something to react, *right now*. Or Y is a problem so you do something to "solve" it. The problem with these actions is that they're usually not well thought out and good actions, the ones that provide value, require some planning and research. But for the people with the BUIDL mindset, they just go and make something regardless of whether there's a need in the market or not. And the people addicted to action love this stuff because it's new.
I'm old enough to remember the 2008 crisis and the $800B TARP bailout that came along with it. The idea was that there would be lots of "economic activity" in the form of "shovel-ready projects." 16 years later, there's very little in terms of real, useful stuff that got built from the program. Most of that money ended up in slush funds and the coffers of the Cantillon winners who magically doubled or tripled their billions in the decade or so since.
That mindset of "build whatever" is a fiat mentality. It's not "if you build it, they will come." There has to be value being added to real people and not just a good story about what's possible. And that's what we're seeing in the Bitcoin community. There's a lot of VC money floating around still and they'll put money into anything with a good story, even if it makes little sense.
The fact is, VC investment is a fiat vestige that's horribly inefficient. And the incentives around it are deeply misaligned. The VCs, even the good ones, will pump their bags. And once invested, it's very hard for them to be objective about anything and takes superhuman amounts of virtue to do what's good for Bitcoin and not for your fund. You'd hope those things are aligned, but every VC inevitably gets into the situation where they have to invest in something questionable.
And invest in questionable things they have. This has been going on since 2013 or so with "investments" on "blockchain technology" and "ICOs" and "DAOs" and "DeFi" and "NFTs" and on and on and on. They may not even be explicitly looking to scam, but that is what they inevitably do. The pump and dump nature of tokens is such that they benefit the early pre-sale investors at the cost of the public, though to a large degree, this no longer has the returns it once had.
The flavor of the day is ordinals/brc-20 and unsurprisingly, a lot of VCs, even "Bitcoin-only" VCs, are invested in one or two already. That's because this is their model. They have to invest in a lot of stuff because their hit rate is so low. And diversification necessarily means you let the foxes into your henhouse. The "investment" ends up enriching scammers like the TARP bailouts did and the stuff that gets built ends up being largely useless.
And really, that's who is addicted to action the most. It's the VCs. Unsatisfied with Bitcoin's insane returns (or lacking justification for their fund in lieu of Bitcoin's existence), they talk and talk and talk on clubhouse and twitter spaces and whatnot to pump their bags. Even if they don't have bags to push, they're always talking openly to people about what investments they should make. And because they are looking for places to put money, they become much less objective and will fall for anything with a good story.
Investing in a good story is not a bad strategy in the fiat world. The narrative wins over things that provide value as long as there's an overwhelming amount of money put in on the narrative side. And the money printer is ultimately run by humans who will put resources toward good stories because there's no hard reality of the market to deal with. In other words, you often don't have to win the market. You can win it later with some money-printer-induced advantages.
But in Bitcoin, things are a little different. We have to be a lot more choosy about what gets built because what fails is a lot of wasted time and resources. Worse, that which gets built which ends up scamming wastes even more time and resources and sets Bitcoin further back. The entire altcoin industrial complex and the billions wasted on them since 2011 are the vestiges of this build-anything mindset.
Building has been very inefficient in the fiat world and unfortunately, we're having to re-learn what it means to build something that provides value.
Back during the gold standard, Standard Oil once paid 33% in dividends in a single year. That's not price appreciation or profits, that's dividends, as in money that went straight to the shareholders in a single year. And that's not a huge outlier. Most years, they paid over 10% in dividends.
Nothing like that exists now because all profitable stuff has been arbed to death. Anything that profitable gets "investment" (read: debt) which ultimately scales the business but reduces profitability. Most businesses these days are zombies, living out a dead existence while sucking value out from everyone else through inflationary theft. And unsurprisingly, that is the state in which most altcoins currently continue.
Which brings me back to the issue of Bitcoin culture. The problem right now is that too many people build on Bitcoin the same way they build on fiat. They play by the same rules and systems which have caused the stagnation we see all around us. But as we're progressing toward a sound money world, these processes and the fiat games that they run on won't work. The building that people do will have to run on a different set of *values*, not the fiat ones like satisfying venture capital with good stories.
The sad thing is that most people would rather do something rather than nothing. The lesson of the last 11 years in Bitcoin is that building something that is hurtful is worse than useless, it's better to do nothing.
It's going to be yet another few years of waiting by the river to see the corpses of my enemies float by.
A whole lot more scamming starting that will have some serious repercussions going forward.
Is there any project that lets you zap on Nostr using Cashu/Fedi/Mercury/Liquid?
I think it'd be pretty ideal for testing the microtransactions use case for each of those L2's
Fiat world: seeking approval of authorities is the key to getting a rent-seeking job
Bitcoin world: making stuff people want is the key to making money
This is the difference in a nutshell.
I've been exploring FROST and it's pretty ideal for a t-of-n multisig for Nostr. Has anyone done anything like that? I would imagine this would be ideal for any sort of organization account that can change hands without changing the underlying secret.
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#Bitcoin Tech Talk #379
On Lincoln
----------------
Lincoln wasn't a good president. He wasn't even a mediocre president. He was a terrible president. He suspended individual rights. He massively expanded the government through money printing. He led millions of people to their deaths. All for power.
What we learn in school is that he was the great emancipator, ending slavery and winning a war that had to be won. That he was some man of genius and virtue, thrust upon the national stage at the right time to progress history.
Such is the result of the history being written by the winners. Similar hagiographies have been written about FDR and even Woodrow Wilson. But like the news, much of history is spun to manipulate us. Most of conventional history is fake and even a cursory study of what actually happened is enough to make you question how virtuous they were, and why they made the decisions they did. Almost always, you find that they were opportunistic cowards that did what would cost them least, even at the expense of the people they affected.
History is a tricky topic because the counterfactuals are always very speculative. But what we can judge is the values played out in actions taken, and in that sense, Lincoln was pretty terrible. He suspended habeas corpus, he cheated in border state elections to keep them in the union, and he massively, massively expanded the scope, power and size of government through inflationary theft.
It's hard to imagine what things were like before Lincoln, because before him, was a string of single-term Jacksonian, hard-money Democrat presidents. This was back when liberal meant being for personal liberty and that era of government before 1860 was insanely small, about 2% of the GDP. He would oversee an unprecedented expansion which would take the government to 20%.
Much of it, was, of course, because of the Civil War, and the popular narrative is that he needed to wage that war to end slavery. And yes, the issue was a major one in that era, but the elimination of slavery was more of a lucky by-product than an aim. His main goal, as he stated over and over again and as acted out in his policies, was to preserve the union, not to end slavery.
In preserving the union, he destroyed the idea that states had the right of secession, he weakened the idea of natural rights and he stole through inflation and sent many to their deaths. The centralizing of the federal government, the behemoth that we live with today began during his heyday.
The main thing that preserved his legacy was his assassination. Had a couple of battles gone the wrong way in 1863 and 1864, he wouldn't have been re-elected and he would have disappeared into the annals of history as a political amateur that lucked into the presidency in 1860 and screwed things up for 4 years. Instead, he was re-elected, assassinated and the horrific legacy of reconstruction was blamed on others. In short, he died at the right time.
There are those, of course, that will argue that Lincoln would have done things differently, and that he would have been more merciful to the south and rebuilt things as to spare them the suffering. But that's inconsistent with everything he did. Like most politicians he was a power grabber and he did what was politically expedient and not what was virtuous or right. He suspended habeas corpus (needing a reason to arrest and detain people)! He made generals do what would make him look good so he would get elected, not what would save the most lives or win the war the quickest. He created the greenback, which was a form of money printing to finance the war. And he spent an insane sum of other peoples' money through implicit and explicit taxes to "preserve the union."
Ending slavery, of course, was a big deal and in the annals of history, it's a dark mark in the history of the US that the institution survived so long. And yes, the Civil War did end it, but that wasn't the objective of the war itself.
Being Republican, he had a large Radical wing that he had to deal with and they wanted abolition, and later full voting rights for blacks. Because the south had seceded, they had the votes to pass the constitutional amendments, though only toward the end of the war when it was clear the north would win. That was a political expediency that ended up defining his legacy. But really, it's his biographers and historians of the winning side that have spun him to be a hero, when he was anything but.
The big flaw of Lincoln is that he created an unnecessary war that cost millions of lives and billions of dollars, one that set back the US by decades. Letting the south secede and revoking the Fugitive Slave Act would have ended the institution just as well, for much less cost. And this isn't idle speculation. Brazil had the second largest slave population in the 19th century that was whittled down quickly because the slaves had northern provinces where they could escape. The price of slaves dropped dramatically and soon, the institution itself was destroyed through economic means, not martial ones.
What's worse about Lincoln's legacy is that he set a precedent for federal power that brought forth the progressive era and eventually to Woodrow Wilson and FDR. The centralization of federal power began with him.
Lincoln wasn't a good president. But the history is written by the winners and they have made a secular saint out of him.
So the ETF disappointment was from the GBTC unwind which were the result of 3AC and others making leveraged bets. That makes a lot of sense to me. Still some paying for the sins of altcoins, I guess.
Never Let a Crisis Go to Waste
=========================
One of the most perplexing things about our news cycle these days is just how much of it seems urgent, all the time. X needs to be fixed now! Y will happen if we don't do X!
Sure, there's high time preference thinking involved. If X doesn't pass right now, then it may be years before it's considered again. But more than that, the perpetual crisis mode that we're engaged in makes for both an anxious and calloused citizenry.
Yet this persists, because crises allow for power capture. There are fewer questions and the urgency drowns out dissenting voices. Do you want grandma to die? Do you want Putin to destroy the world order? Do you want Al Qaeda to commit more terror attacks?
The crisis and urgency also build in a natural excuse for those in power. If they do make a mistake, which they often do, then they can always say "things were so urgent at the time and we had to do something." So seldom do they mention that it's an urgency they themselves created.
We've seen this with financial crises and even the recent pandemic. But far more potent is the threat of war. Most leaders end up doing horribly immoral things during war, even if they were committed, ethical people before. That's the nature of the beast, the lust to win trumps all.
Which is why the current year seems so ripe for abuse. There are many events that could easily devolve into crises, manufactured in one way or another by the powers that be. Economic and public health emergencies are, in that sense, the *best* we can hope for. Limited war and political revolution, about the average and world war the worst case scenario.
Yet there is good news. We don't have to let them take this power. We can slow the roll of government power accumulation. We can opt out of their authoritarian policies with protest. We can refuse to be manipulated by their propaganda. And perhaps we can avoid the inevitable suffering that comes from such power grabs.
Disappointing first day with the ETF. Maybe it was all hype.
On Spamcoin Revenue
===================
The narrative around ordinals is ever-changing, but one of the more persistent ones is about how it enables miners to have a better business. The main idea is that by subsidizing miners, the Bitcoin network is going to get stronger and more robust.
There are several problems with this argument, but let me focus on one particular aspect. The argument that spamcoins will strengthen mining companies is based on more fees. And indeed, that's true. But for it to really benefit mining companies, the revenue needs to be consistent and reliable. And the thing about these short term fee spikes is that they are anything but consistent and reliable.
Sure, you get some blocks where the fees are greater than the block reward, but that's the exception, and not the rule. They generally congregate around the hype of one thing or another. In the case of ordinals and BRC-20, they clearly spiked when Binance listed one of the tokens. It was a fickle altcoin market's coin of the month, and while it did spike fees, the fees came down a short while later.
Surprisingly, the dynamic is similar to what we've seen in energy markets with renewables like wind and solar. Like spamcoin revenue, they are both also unreliable and inconsistent, and they've added considerable variance to the business of energy. Rather than strengthening the grid, they've weakened it considerably, creating terrible mismatches of supply and demand, which inevitably result in blackouts or brownouts.
In the same way, spamcoin fee revenue has made the business of mining that much harder to predict. The revenue is not consistent or reliable, so to depend on that revenue is, from a business standpoint, a considerable risk. Any fee spike that's based on a random scammer's pump and dump is not easy to predict and leaving around extra mining capacity to take advantage of these spikes is not tenable. In other words, from a business standpoint, it makes little sense to modify a business trying to capture this intermittent, unpredictable revenue.
The thing that businesses need is consistent and predictable revenue because that's what allows them to plan and grow. A flash in the pan like spamcoins is not something that's really going to help with that. Consistent fee revenue, something that has a proven track record, is what mining businesses need to really take advantage and invest in capital goods. Indeed, when we say "fee market," that's what we mean, not these random spikes based on dishonest marketing and hype.
In the meantime, fee spikes like this are a nice little bonus, but they are more likely to create malinvestment. If a business makes that bet that spamcoin fee revenue will stay consistent for the next 4 years, they're likely to lose to a competitor that doesn't make this assumption.
We like to believe that a dollar earned is the same no matter where it comes from, but that's just not the case. If it's a dollar earned that you can't predict, it's unhelpful and perhaps even detrimental for planning. Spamcoins are in the long term not good for miners as they are so obviously hype-based. We need to dispense with unsophisticated narratives like this.
Bitcoiners are better than that.
Unnecessary drama to start the mainstream Bitcoin era.
It's going to be an interesting 15 years.
What happened with the SEC yesterday is a really good argument for Bitcoin.
Third party manipulation is so much easier when there's centralization.
On Labor and Fiat
=============
We vastly underestimate what we can do with our physical labor. I just went to build a house with Casas por Cristo in Acuna, Mexico. It's a missions trip to build homes for poor people, where all the materials are ready to build and the volunteers essentially take all the material and build a house.
What was amazing about this was that it only took three days to build with about 15 people. And a significant part of that was waiting for the concrete to dry. And that's the house from founddation to roof, electrical to windows, drywall to stucco.
While machines and fancy equipment certainly speeds things up a lot, most of what can be done is still limited by human labor. And boy, is it amazing what that's capable of. Sure, it wasn't a huge house (maybe 500 sq ft), but it was fully functioning with insulation, metal roof, windows and doors. The bathroom was an addition that could be done in another couple of days. The big thing is that so much of it could be done so quickly.
You can build houses very efficiently and quickly even if the labor isn't very experienced. Which makes you wonder, why is housing so expensive?
There's a huge premium on housing because of fiat money being such a terrible savings vehicle, but the rot of fiat money goes much deeper. The labor itself is much more expensive, and there is a significant amount of rent seeking in the form of government regulations, like building codes. There's also the fact that building is considered very blue-collar, and most people aspire to white collar work. That in itself is a cultural norm that has proliferated via fiat money. Blue collar work, the kind that builds and fixes real things with hands, is considered below the people that sit on a computer making powerpoint presentations and word documents.
Now not all white collar jobs are bad. But there's no doubt that white collar jobs have proliferated because of fiat money. Look up any bureaucracies in any large industry and you'll see that they've grown like cancer. Health care, education, military, HR, government have bureaucracies that have significantly outpaced the people that do any real meaningful work. This is definitely not market competition and it's the opposite of capitalism. It's socialism that grows steadily from the money stolen from the productive people.
Which is why my experience is such a shock. I've become so used to things taking forever to build, that when I see human labor really doing something productive, I'm shocked at how effective it is. We've been so burdened with bureaucratic overhead in almost everything we do that watching people be productive is a shock.
One of the things I look forward to in a Bitcoin world is the unleashing of labor. Our work is what builds things, but it can also be used to steal. Unfortunately, fiat money incentivizes much more of the latter and less of the former. When our work is aligned with civilization, we'll really take off.
Come for the number go up, stay for civilization go up, beauty go up, building go up.
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#Bitcoin Tech Talk #378
Technical competence has been getting worse over the last 60 years. That's what happens with fiat money.
Spamcoiners are almost all pro-change.
Money works best when it doesn't change. It would be really stupid to trade sound money for a crappy IPFS spreadsheet.
I talked to Dhruv Bansal about the Unchained origin story and the future and how it will change to be way less centralized.
https://rumble.com/v44wpv3-bitcoin-fixes-this-117-decentralized-future-with-dhruv-bansal.html
Every bull market, there are rumors of some rich sheik that's going to buy billions worth of BTC.
Maybe it happens this time.
I want to write a book to argue against altcoins and for Bitcoin, but I'm not sure it'll do anything because altcoiners don't really read.