AntiBitcoin: cryptocurrency to actually replace fiat

Started by RafaelJames, Aug 16, 2022, 04:19 AM

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Traditional monetary instruments have many disadvantages, the most serious of which are often the least obvious. Therefore, people rushed to look for answers in cryptocurrency.

But for the majority, cryptocurrency (in particular, Bitcoin) did not become a replacement for the existing monetary system, but turned out to be a new way to integrate into it, a solution to old problems like the world: how to multiply and hide money from public and state supervision. That is, to bring financial transactions to an area hidden from regulatory, supervisory and tax authorities, or to invest existing funds in such a way as to increase them.

This situation no longer suits either the states that are increasingly trying to regulate cryptocurrencies, or the crypto enthusiasts themselves, who wanted to change the world for the better with the help of blockchain, and not watch how the old world co-opts cryptocurrencies, turning them to the benefit of the existing status quo: making the already rich even richer, and banks and other monetary institutions even more powerful.

The eternal problem of funds

The eternal issue of funds: the dichotomy (contradiction) of the exchange and accumulation functions. Since its invention, money can only be in one state per unit of time: either it works (participates in the cycle of exchange for goods and services in the real economy) or it doesn't. The ability of money to serve as a means of accumulation in terms of economic benefits is a bug that has become a feature for many.

Money in circulation works for the economy as a whole by stimulating the production of goods and the provision of services: secured demand creates supply. Demand is a need expressed in terms of funds.

Withdrawing money from movement works for individuals who can afford not to spend it, but to save and increase it. Individual accumulation occurs at the cost of economic activity as a whole. As if in a galley one rower suddenly discovered that if you stop rowing, then the galley goes on and on - the rest are rowing. That is, you can work, or you can not work, and if you don't work, then there may still be a feeling that the rest are working for you. The problem is that a bad example is contagious - and other rowers may want it too, until the galley is up.

It is the same with funds: as long as it is in movement, it works as an economic incentive. No, it means, from the point of view of the economy as a whole, they don't work, even if they give someone a pleasant feeling, accumulating and pouring in the exchange rate somewhere in the accounts.

The modern economy consists of two circuits: real and speculative, the so-called "monetary capitalism" against "productive capitalism". In the real economy, the fruits of labor are traded - goods and services. In the speculative - expectations. In a real economy, money is used to exchange for products (goods and services) of someone else's labor. The relationship between money and labor in this case is two-way:

    on the demand side, their presence with an economic agent correlates with his labor, spent their earnings;
    on the supply side, their value correlates with the amount of the fruits of other people's labor available for purchase.

In a real economy, the change in the money supply reflects the volume of work performed - already paid or available for purchase of labor and its products.

In a speculative economy, the money supply reflects expectations: the same labor-funds ratio, but projected into the future. That is, the connection with the real economy remains, but due to the extension into the future, it becomes less accurate, which opens up scope for speculation (assumptions). Economic cycles are measured in years, so the divide between labor and speculative exchange can be conditionally designated as the limits of the year: if the money earned by selling one's own labor and its products is spent over the next year on paying someone else's labor and its products, then they work for economic growth - funds, earned last year, provide economic activity in the next.

If the money is delayed for more than a year - that is, it is not spent on wages (wages) and its products (goods and services), then they are withdrawn from the real economy, because the turnover of work is reduced by the amount of money withdrawn from this exchange - products. In this case, it is not so important whether this money lies under the pillow or "works" in the circuit of financial capitalism, where the exchange takes place in accordance with the expectations of future growth in economic activity.

The irony is that the monetary markets are trading in the expectations of the future growth of the real economy (that in future years 10 times more Tesla cars will be produced and sold than in the previous one) with the money withdrawn from its circulation today (all the money spent on the purchase of Tesla shares are not spent on the purchase of Tesla themselves), limiting the growth of the real economy, but on the expectations of which, ultimately, speculation is built.

In other words, everyone cannot be speculators. Someone must continue to row - to work, providing value to "securities" with their labor.

When the number of such "thrifty" in the economy begins to become noticeable, it manifests itself in a certain way: inequality and poverty are growing, economic activity is falling, the middle class is shrinking, and small business is shrinking. On the example of the United States alone, it is higher than in the 1920s, and its growth is ensured by the growth of financial markets - real production has not been growing at such a pace for decades as the stock market is growing. The vast majority of the population of any country in the world and the planet as a whole is not able to save money at all or withdraw from movement any significant (exceeding annual earnings) amounts.
Whereas a small percentage of the population that controls a disproportionate share of capital that they have no need to cash out is looking for ways to maximize it and increasingly finds them in the monetary sector of the economy, pumping funds from the real economy to the speculative one in various ways - for example, through stock buybacks, reverse share buybacks, when corporations use their earnings or donations to the stock markets to buy back their own shares.

In fact, this is economic asphyxia, as if in the body one of the most intelligent organs noticed that it can not only consume oxygen supplied with blood, but also save one or more molecules in addition to each oxygen molecule used for nutrition "for later". Thus, little by little, the saturation of the blood further along the bloodstream with oxygen falls, and those who have not reached the extra oxygen molecule have problems.

In the economy, the categories of economic agents with the most elastic connection between the income ceiling and their own labor and the state of the economy are the first to notice this: the middle class and small business. For the rich, sitting on oxygen tanks, this ceiling is almost imperceptible, and the poor are so crushed by it that they are practically devoid of sensitivity to economic fluctuations, except for the most catastrophic ones. And the position of the middle class and small business primarily depends on the blood circulation of the economy. There is less money in movement - and the ceiling begins to press harder.

There is no need to scroll far through the history textbook and turn the globe in search of the nearest examples of such dynamics. To some extent, this has been with people since the invention of funds, because this is their bug: they can be exchanged, sending them further along the bloodstream of the economy, or they can not be exchanged. And it's not about the people. At the individual level, this is an unsolvable issue.
It's a bug thing. It is necessary to change money in such a way as to limit the possibility of their withdrawal from the real economy (accumulation, speculation), while maintaining their usefulness as a medium of exchange. To do this, you need to somehow leave only one side of the coin: payment, productive, by creating money that is paid, but not accumulated.

There can be many possible solutions, including non-monetary ones, and there have been attempts to create funds with a stopped accumulative function. The most famous of these is the Wörgl experiment, based on the idea of "Gesel's free funds". The idea of free money (freigeld, freigeld in German), which involves a planned depreciation over time, was proposed by the economist Silvio Gesell.
The experiment, also known as the Wörgl Miracle, was launched in the Austrian city of Wörgl at the height of the Great Depression in 1932. The mayor of the city, embodying the ideas of Gesel, issued a systematically depreciating local currency, launching processes that contradicted the state of the Austrian, and indeed most of the world's economies after 1929, when most of the world's economies plunged into the Great Depression: the unemployment rate in Wörgl fell by 25% in a year, in a bridge was built in the city, the condition of roads was improved, and investments in public services increased. However, just a year and a half later, the experiment was terminated by the decision of the Central Bank of Austria:

    The bank insisted on maintaining its legal monopoly on the issuance of money and took legal steps to stop the Wörgl experiment - despite the wealth it created, despite the benefit brought to the population of Wörgl ... In late 1933, the Austrian courts ruled in favor of the National Bank, declaring the experiment illegal .

Doesn't it remind you of anything? The historical parallels in the reaction of the financial authorities to the attempt to reinvent money "from below" in the 1930s and 2010s are hard to miss. It is not surprising if we consider the invention of the blockchain and the rise of the cryptosphere not in isolation, as a phenomenon in itself, but in the context of the centuries-old process of the formation of the present-day monetary system, both with all its strengths and the challenges it creates.

However, in the digital age, you can get something that did not work in the tube. At a minimum, it makes sense to ask: is it possible to use the magic of the blockchain in such a way as to create a monetary instrument that will work for mutual settlements, stimulating economic activity (the constant exchange of funds for goods and services), but will not allow itself to be saved, thereby preventing the outflow of money from the real economy to the speculative bubbles they inflate.

And, since the fundamental problems of funds do not dissolve in the air over time, it is worth being interested. You just need to ask good questions. The quality of the answer is a derivative of the quality of the question.

Two major problems with bitcoin

I. The main issue of Bitcoin is why spend it, if most of the options for investing Bitcoin are less profitable than the growth of its rate on its own. In the real economy, the rate of return is higher than crypto speculation for a limited number of high-risk (usually illegal) businesses. All other options for spending Bitcoin - even those that promise some kind of profit, but less than the rise in price of the bitcoin itself - automatically turn into a loss. More profitable than Bitcoin trading is most often either long-term investment in the same Bitcoin or trading in other cryptocurrencies. That is, the underlying engine of market economic activity - the desire to maximize profits - takes Bitcoin into the contour of monetary speculation, leaving it only partially in the real sector (and often in illegal forms).

Why is this a problem in terms of Bitcoin? Because, as Satoshi Nakamoto's manifesto stated, the purpose of Bitcoin was to serve as a means of payment for e-commerce - that is, it was conceived to work in the real economy.

II. Another issue with Bitcoin, with its limited supply of 21 million, is how can it replace all the money in the world? The capitalization of the world economy, even at the maximum capitalization of Bitcoin, remains about a hundred times greater: even with a trillion-dollar capitalization of Bitcoin, the capitalization of all world markets is approaching $90 trillion. But even earlier it was clear that there would be no fools to give the economy of the planet to the clever ones who were the first to mine numbers.

The deflationary nature of Bitcoin is one of the factors that predetermined its inevitable transformation into a store of value. From the first days of Bitcoin, this was and remains the main argument in favor of its popularization: that its quantity is limited and then they will rise in price, and therefore they must be mined while possible.

What was conceived as a means of payment (that is, a constant turnover) began to be valued as a store of value - and your Bitcoin as a means of payment-alternative-to-fiat broke. No Satoshi Nakamoto will get digital money if, at the first sign of demand, it is more attractive to save than to spend.

The means of payment must be inflationary. Inflation of money is one of the incentives to spend it. And everything would be fine, but human cunning is constantly inventing what to convert money into so that they do not depreciate - including Bitcoin. The irony of Bitcoin: an alternative to fiat turned into another way to accumulate it.

Antibitcoin: Infinite Democratically Regulated Currency

Why can't inflation mining be done? May this music be eternal. And the stale cryptocurrency, on the contrary, melts in the wallets of those who do not spend it.

And the blockchain provides a way to solve one of the tasks that the cryptocurrency should solve: the democratization of money, freeing them from centralized regulation by a regulator that is practically unaccountable to the people (central banks in most countries, the Federal Reserve in the USA) is exactly what the blockchain will do. The way to regulate the people's cryptocurrency can just be seen in Bitcoin - and regulate it by the people. The democratic majority, 50% + 1, should even beat the blockchain.

Accordingly, the question "How to decouple speculative value from transactional value?" is a question, nothing less than the invention of Bitcoin. At least one that will work towards the result for which it was invented. The first turned out to be defective, and instead of a trading instrument for the markets, it itself became the subject of trading, living mainly on the exchanges. This result is incompatible with the solution of the problem stated in the very first sentence of Satoshi Nakamoto's original presentation of the idea.

Constantly coming from the speculative cryptocurrency front, news diverts attention from the issue of "how to create a payment instrument after all?"

The solution to this problem - the creation of a cryptocurrency that will be sharpened for exchange and not interesting for accumulation - will solve not only the issue of Bitcoin; this cryptocurrency will solve the problem of money and become the new money. Not an alternative to fiat, but the first money in the history of money to fix its main side effect: it no longer functions as a store of value. Only as a medium of exchange. Isn't this an interesting challenge to think about the applicability of crypto? If it is solved, then the question of the need for such a decision will cease to be relevant, a question will appear for everyone who uses the "old" money: "why do you still use lead in water pipes?"

For many, the meaning of the crypt is precisely that it works independently of anyone. As an analogue of cash. But the very formulation of the problem returns to the common fundamental problem of all crypto enthusiasts, the original sin that goes back to Satoshi himself: a misunderstanding of what money is and how it actually works. However, this is not so much an IT problem as a projection of the general issue of modern theoretical economics, in which there is a "civil war" of ideas between (neo) Keynesians and supporters of the present-day theory of money (MMT), on the one hand, and (neo) classical economists - with another.

Cash is not a natural phenomenon; it does not grow on a tree. Cash is a legal means of payment issued by the state.

    If by "independence of cryptocurrencies" we mean banks and the modern financial system, then everything is correct - apart from the state, cryptocurrencies do not need to negotiate with anyone.
    If we mean "regardless of the state", then if it were possible, people would not be able to use cash. Because the state does not only issue it, it also provides an everyday opportunity to use it, including the obligation to accept it as a means of payment on the territory of the country. Without this law, all the chances of paying in cash anywhere would be equal to the chances of paying with crypto-currency - it would just have to be negotiated individually each time.

Exactly the same thing is needed to create a digital cache that will be as convenient as cash. Not a code - you can code cryptocurrencies with the same success as printing your own money on a printer. Sense without recognition by law is the same. Actually, Bitcoin now functions as your cash would function in reality, if it were not issued by the state and protected by law.

Therefore, a digital analogue of cash, like cash itself, bypassing the state is impossible. It must be a technical solution recognized by law as a means of payment. Now this is a problem (firstly, because there is no technical solution), but when it is solved, digital cash will be just as convenient, if not more convenient, than paper cash.

The main issue of stablecoins is their fundamental secondary nature to fiat. Existing stablecoins cannot become new money, because the existence of fiat ensures their functioning. They solve the problem of volatility as an integral property of bitcoin-like cryptocurrencies, but lose their main advantage - the independence of their functioning from the traditional monetary system. Stablecoins 1.0 are a patch, not a solution.

In essence, attempts to moderate the volatility of bitcoin-like cryptocurrencies by tying their price to third-party entities - goods, values, fiat, other crypto - are like trying to adapt a balloon to travel on roads by loading more sandbags into its basket so that it flies, but low — instead of inventing the steam locomotive. The reason for the volatility of Bitcoin is that, by its nature, it is a speculative instrument, analogous to stocks rather than money. This is its value, this is its weakness. Tying the rate of bitcoin-like cryptocurrencies to something deprives them of speculative value, but does not make them a full-fledged means of payment. This is a dead end direction. The solution to the issue that stablecoins are trying to solve is the creation of an anti-Bitcoin, a cryptocurrency for payments, the speculative potential of which will be minimal or absent by design - that is, there will be no source of volatility outside the normal inflation corridor, and, therefore, the need for it then compensate.

Basically, there are several methods. This can be done by tax regulation, but it is rude and impractical for a number of reasons. Ideally, the resistance to accumulation should be inherent in the new money as such, as the existing ones tend to encourage it. In a single blockchain environment, this is possible and will be possible. If not, external tools.

But the question-task, on the contrary, is specific: how to decouple speculative value from transactional value using blockchain methods?

The computer was also not immediately built. There were first attempts at computers on punched cards, on LEDs, on transistors, and only on microchips they changed the world. And each next attempt in this chain was something that was not there before, thanks to the emergence of new technology. And now the idea is to see - maybe the blockchain was created for this? From the point of view of the ambitiousness of the task, it is difficult to find another issue of money, the solution of which would be even more important from a historical point of view, than trying to untie the exchange function of money from the accumulative one, creating "pure money" - a universal equivalent, and nothing more.

Such a task will be much more ambitious than all the existing purely technical projects for the development of the cryptosphere. Their common problem is that, in most cases, progressive techies are engaged in the development of crypto projects without the participation of progressive economists.

Pure techies are let down by ignorance of the economy, so they confuse scale with stupidity, and they don't know about the really important issues of money. Economists - unfamiliarity with new technologies and general conservatism. But among those, and among others, there are exceptions.

Now, no matter what interesting issue you take, if it is not solved in a multidisciplinary way, then it is not really solved. And if, say, researchers of the present-day theory of money organize themselves with crypto geeks, whose hobby is to design new blockchains, this will probably be the peak effort possible at this stage of the progress of technology and economic science.


The funds received in the financial market is ultimately used for consumption. Today, the money spent on Tesla shares will not go towards buying a car, but in 10 years the shareholder will withdraw 11% and buy that car or two. And today, instead of him, the car will be bought by the one who withdrew the money from Apple.

In your oxygen molecule analogy, an organ saves a molecule for later, but then it spends five. The total oxygen consumption does not fall, because. the ultimate desire of an organ is to consume a lot of oxygen. That's why he puts it off a little at first.

eventually, the financial market does not affect demand negatively. A noticeable disadvantage is that this person will buy a car without working, but compulsory labor service does not provide significant long-term economic benefits for society in comparison with other societies, we have already tested that.


The author does not understand how money works. What are the true problems of funds and why the crypt, in principle, cannot replace centralized money.

Decentralization and bitcoin were just invented to circumvent inflation, so that no one could pour in a bunch of money that was not backed by anything, as the central bank can do now. Because crypto is so popular that it can be saved, and the constant deflation that is stupidly built into the system and there is no one who could seize bitcoins, well, except perhaps rectal cryptanalysis.
Yes, and this is dying little by little, real wallets are used by those who understand what a crypt is, and the rest keep funds either on services, that is, all decentralization is down the drain and it's okay not to solve it, because no one wants to store the entire database, but only part of it already step towards centralization. And so we changed the sql database to the one in the crypt, but it still lies on the same servers where sql used to be. Why did you have to start then?


It seemed to me that there would be an extremely interesting concept where the community can assign roles to participants in the network.
For instance, a bank-type smart object is created. To make it work, you need to invest a certain number of tokens into the account of a smart object. Or to vote online, or among other objects of the Bank type.

In the future, the bank may issue this cryptocurrency. In any volumes not exceeding the financial leverage established by the network.
In the future - if conditionally, after a year, the smart contract is not closed by the crypt. Then the Bank has a license - the smart object itself will be declared bankrupt. And all his money will either be withdrawn from circulation, or sold to other banks. (for instance, you can use NFT to make bindings of real estate objects in banks, and to cover the bank's debts, other Banks have the right to redeem these NFTs to cover debt obligations, as in the real world).

Adding a new bank to the system means finding consensus among 25-60% of users who are willing to sacrifice their capital to create a bank - to invest money in it. Or voting by other banks.
What I'm getting at is this whole set of speculations. In fact, if you think through all the details and little things, you can make the function of money absolutely real for banks and other structures that will be decentralized.
And they are tied to the world of cryptocurrency. It is quite possible to evaluate all derivative instruments and link them to smart contracts inside the bank, or even the user himself will be able to do them.

The problem of tax evasion is absolutely also corrected by editing the smart contract that each transaction is taxed in some way.
And if it occurs on the territory of your state, then tax funds are transferred to a smart object of the state type. This is how royalty works, for example, by the creator of NFT, when reselling their works of art. According to the smart contract, with subsequent sales, they receive a percentage of these sales.