One of the most interesting essays I read the past few years is this one by Paul A. Cantor, which is, surprisingly, a literary critique about a short story by Thomas Mann. Unlike most literary analyses, this one is written from a more libertarian perspective and really develops a lot of interesting ideas in light of the short story. The short story is set in Weimar Republic Era Germany and Cantor makes a literary analysis which not coincidentally includes economic aspects of that era.
The essay is worth reading in full and gives a lot of food for thought, but one particular thing that struck me is a concept he introduces which is that of a simulacrum. By definition, it’s an image or representation of something, but for the purposes of the essay, he uses the definition by Baudrillard, a French philosopher. A simulacrum is a copy, paradoxically without the original.
How can something like this exist? Usually, this is through the process of copying something real and then making a copy of a copy and then a copy of a copy of a copy and so on until there’s no resemblance to the original. A simulacra is empty, retaining the form without the soul.
As pointed out in the essay, our fiat money is a simulacrum. It begins its life as a representation of gold and for a while, it does to various degrees, but once convertibility is suspended, as it did with the dollar 50 years ago, it became a simulacrum, a copy without the original. The same can be said of altcoins, who are copies of Bitcoin who retain a semblance of the form (using blockchains) without the soul (decentralization).
What’s more interesting is that culturally, we’re seeing this effect everywhere. The essay points out how people act more like actors, who themselves are supposed to represent real people. In our day, social media interactions are on their way to becoming simulacra of real-life interactions which have mutated to the point where they don’t resemble anything real. Political correctness is a simulacrum of moral action, retaining the form, and particularly the outrage associated with moral violations, but without anything solid, being completely relative in nature.
Money’s emptying out of value, that is through debasement and loss of soundness, causes an artificiality throughout society. In other words, phony money results in phony people and phony people are more or less willing to suspend reality for the sake of getting along. The artificiality of money spreads to people and institutions like cancer, causing so much of the craziness we see today.
The good news is that we have Bitcoin and it is sound money. Even relatively safe representations like Wrapped Bitcoin, derivatives and balances on exchanges are not considered Bitcoin, because as we say, not your keys, not your coins. In other words, Bitcoin resists this turn towards fakeness.
There’s reason to believe that this will extend to other aspects of life as well. Bitcoiners tend to be more concerned with first principles and a priori thinking, than, say their fiat or altcoin counterparts. This results in a skepticism of representations and vetting claims. Trusted third parties are where artificiality grows.
The benefits of being more aligned with reality cannot be overstated. It allows for better predictions going forward and more entrepreneurship in general because perception and reality match. It allows for more rational choices based on reality instead of narratives. It discourages political machinations as objective data is more valued.
Sadly, the current trajectory seems to be making everything into simulacra. Masking was supposed to be for health safety, but it’s become a measurement of compliance. Social programs used to be about helping the poor, but it’s become a punishment and reward mechanism. The military used to be about defense, but the US hasn’t fought a defensive war in a long time.
Let’s hope that Bitcoin can turn this around.
Shinobi lays out what we really mean by Bitcoin Security. As he lays out, the concept itself is flawed because there isn’t a monolithic “Bitcoin” security, but security over each UTXO. There are obviously lots of UTXOs and each one has security related to the depth of the blocks its buried under. Furthermore, the security is dependent on both the equipment, energy and game theory around the profitability of reorganization. I thought the article made an excellent point that security isn’t a global thing, but much more granular in Bitcoin.
10xu has Bitcoin development content now in Spanish! This is aimed at the developers looking to support the Lightning ecosystem in places like El Salvador. There is obviously a lot more content in English, but I’m sure there are plenty of Spanish-speaking developers that could benefit from content like this to make more native apps. We’ve had some great apps come out of Spanish speaking countries like Muun, so this should help in developing the ecosystem.
Brink has application guidelines for developers who want grants to support the Bitcoin ecosystem. Their transparency on this process is laudable and I hope more people apply for such grants so more developers can get support. For those interested, the main criteria seems to be a track record for producing and that will likely mean bigger grants for more proven coders. This is one of many paths now available to Bitcoin developers for funding and I hope more such programs come into existence.
Lisa Neigut discusses the challenges with inbound liquidity. The post is thorough in describing the problem and the pitfalls. One thing I learned is that earning of routing fees actually destroys a little bit of the inbound liquidity as money earned that way comes out of the inbound channels. She eloquently describes methods to obtain additional liquidity and the role of the new liquidity ads feature in finding it. Overall, this is a must-read for anyone looking to be a routing node on Lightning.
Typerbole examines whether LN transactions actually have meaningful impacts on chain. Currently, LN open/close transactions only amount to 0.1% of the total on-chain fees, meaning that we’re very early in Lightning adoption. This is the highest amount it’s ever been, suggesting that Lightning usage is growing steadily. This is a metric very much worth watching, though with Schnorr, LN open/closes will not be obvious on-chain when Taproot activates.
Fountain Podcasts is a lightning network based podcast app. They have an interesting feature called Boostagrams which is described here. Basically, you can send a message to the creator of the podcast along with some lightning payment. Instead of comments on youtube videos which are free, this is a private message sent with a payment as to have natural Sybil-resistance. This is a great alternative to having ads, which pretty well nobody likes and we can come fairly quickly to a market price on what users are willing to pay for content.
Zion is a social media network built on Lightning. Bitcoin Magazine covers the platform here. This is the brainchild of JP Sears, who has a very popular YouTube channel satirizing a lot of controversial topics. It’s not a surprise that content-creators are looking for alternatives given the censorship going on with the centralized platforms, so Lightning is a very natural alternative. As you might expect, you need to run your own server in order to run Zion, though they have a hosted option. The decentralized web is starting to be built!
Bitnob is now using Lightning for remittances. They are a startup and the article covers why they made the company and how they’re changing the remittance experience. Lightning seems far better suited than on-chain payments and I really hope their idea takes off. The world, particularly people that seem most disadvantaged, are benefiting from the technology.
Economics, Engineering, Etc.
Alex Gladstein just destroys Garry Tan and his Silicon Valley view of Bitcoin in this Tweet thread. Sadly, too many VCs think they understand Bitcoin, but they are woefully unaware of the economics, technology or both. I’ve often been surprised at just how shallow many VCs’ understanding of Bitcoin are, particularly in Silicon Valley. Garry is definitely one of those and his rant against Bitcoin Maximalists was completely and utterly taken down by Alex, who gives a much more global perspective than Garry’s narrow Silicon Valley mentality.
Justin Wales argues for a more decentralized political strategy instead of just Coin Center and Blockchain Association. As he points out, when those organizations were founded in the 2013-15 era, they were meant to be industry lobbying groups with fairly limited goals. Bitcoin’s changed a lot since then and among other things, we have a lot more people that own Bitcoin. Leveraging the number of people that own it does seem like a much better strategy and a lot more resilient to attack. I’m hoping for Bitcoin-only lobbying groups to emerge as the industry evolves.
Blockstream has a new product aimed at energy production facilities to help balance their load. This product probably will make no sense to the ESG folks that have little to no understanding of how the energy grid works, but makes perfect sense for anyone in the industry. The product is fascinating in its ability to stabilize energy production. Most forms of energy have fluctuating production that doesn’t correspond with demand, so this product should help make spikes in energy production more profitable.
We know libertarians love Bitcoin, Samantha Messing makes the progressive case for Bitcoin. As she points out, Bitcoin has been taken up by minorities and poor people in the third world than the average. Interestingly, Warren’s opposition to Bitcoin is cast as a defense of the banking status quo, which Warren’s denounced. I suspect that this isn’t necessarily going to convince people like Warren as politicians are used to railing against industries that they secretly defend. That said, perhaps this argument can convince younger progressives.
Wilbrrr Wrong shows how the pound, the central bank backed fiat money, became what it is today through war. The article is great in its capturing of the history that led to the establishment of the Bank of England. War was a major driver as funding them was the impetus for much of the monetary machinations that eventually led to the central bank. I was struck by how limited tyranny was before the establishment of the central bank and how expansive that tyranny became afterwards.
Here’s what happened to the $100/student that was given out at MIT in 2014.
You may be able to pay your mortgage in Bitcoin soon.
Another week, another confused billionaire says something dumb about Bitcoin.
Another week, another exchange gets hacked.
I will be at BitBlockBoom in Dallas this week on August 26-29, Token 2049 in London, England on October 7-8 and in Atlanta for TabConf on November 4-5.
The Programming Blockchain seminar is in London, UK on October 9-10 and Atlanta, GA on November 2-3. This is a 2-day seminar for programmers to learn about Bitcoin. You can apply here. I also have a few scholarships available for those that can’t afford it.
On this week’s Bitcoin Fixes This, I talked to Bitcoin Mechanic about the punk mentality, music, finding a good place to live and the attitude of self-sovereignty. I read through last week’s newsletter which you can find here.
I talked about the new book on the Lifeblood podcast:
Unchained Capital is a sponsor of this newsletter. I am a proud advisor of this company that’s enhancing security for Bitcoin holders. If you need multisig, collaborative custody or bitcoin native financial services, learn more here.
Fiat delenda est.
... except, you've gone too far. you entirely accept "trusted, 3rd parties" in a lot of what you already do. i mean, you trust in a "3rd party" called jesus too... you don't manage, own, or control the trinity... you trust, from what you've read and experienced, that what they say is what will happen. just like bitcoin.
... don't throw the baby out with the bath water. your maximalism can get in the way of reality and make you a hypocrite. this is the way of the pharisee / sadduccees... they got too hype about one particular perspective they missed the larger frame.