#Blockchain Wendy McElroy: Interview With Jeffrey Tucker on All Things Crypto, Part Two

Interview With Jeffrey Tucker on All Things Crypto, Part Two

Interview with Jeffrey Tucker on All Things Crypto, Part Two

Conducted by Wendy McElroy

The multi-faceted Jeffrey Tucker is an American writer who focuses on market freedom, anarcho-capitalism, and cryptotech. He is the author of eight books on economics, politics, and culture, a much-sought after conference speaker, and an Internet entrepreneur. Jeffrey is editorial director and vice president of the venerable American Institute for Economic Research, founded in 1933. His career has focused on building many of the web’s primary portals for commentary and research on liberty, and is undertaking new adventures in publishing today.

I have incredible good fortune, as Jeff has written the preface to my book “The Satoshi Revolution,” which will be published in early 2019 by bitcoin.com. Meanwhile, a rough draft of the book is available online for free, compliments of bitcoin.com. Be sure to come back for the substantially-rewritten and thoroughly-edited book. I expect there will be a forum established here for me to chat with readers and answer their questions.

To access Part One of this interview, please click here.

Wendy: I was very impressed by an article in which you argued against the idea that Misesian regression theorem invalidated bitcoin as a money. For readers, the Regression theorem claims “Any valid medium of exchange (money) has to have a previous use as something else.” Could you offer an overview of your argument?

Jeff: Mises’s argument was that the root value of money traces to a conjectural history in which the pre-money form was deployed, for example, in barter. By 1949, Mises became hardened in this view: money had to originate in barter; there is no other path. From a historical point of view, this is probably correct. But it is a theoretically misleading formulation.

To understand the theory behind the conjectural history, you have to return to Mises’s original 1912 argument. Here he is more precise. In order for something to become money, it had to have a pre-existing use value. Use value. That’s not the same thing as being used in barter trade. His point was that you can’t take a useless thing and call it money and expect it to take flight.

How can we reconstruct the history of Bitcoin to discern if this applies here? From the January 2009 genesis block until October of that year, Bitcoin’s posted dollar exchange value was exactly $0. And yet we know, because we have a perfect historical record, that there were many thousands of trades being made all these 10 months. What was happening? What was going on? This was a period in which the network was being tested by enthusiasts. What does this network do? It permits the peer-to-peer exchange of immutable information packets on a geographically non-contiguous basis using the Internet so that they can come and go without corruption or compromise.

Is this a valuable service and does it work? This is what was being tested. By October, the use value of this network had proven itself, and so we began to see the emergence of a dollar/Bitcoin exchange ratio. That is to say, Bitcoin was priced as a scarce good. We can see, then, that the conditions of the “Regression Theorem” as theory are met via the services provided by the blockchain. You can also see, however, that if an economist looking at this did not understand the payment system embedded as part of the monetary technology, he or she would be completely befuddled.

To be sure, some very smart people disagree with me. My friend William Luther is blunt about his opinion about his matter. He thinks the Regression Theorem is just wrong, so it doesn’t matter if Bitcoin is theoretically compliant. He once made the argument to me and pretty much backed me into a corner. If he turns out to be correct, I’m fine with that. What matters more, my theory or existing reality? I faced that problem in early 2013 and concluded that I had, as a matter of intellectual integrity, to defer to reality, even if it meant admitting the wrongness of my position or even that of Mises’s. Shocking, I know!

Wendy: The crypto community parallels the libertarian one, in ways both good and bad. An example of the latter is the deep personal schisms with which it is rift. You are a person who stays away from internecine battles. What advice do you have to others who wish to do the same?

Jeff: I try to stay focused on the big picture and imagine that my audience is not my friend network but rather the general public. I try to serve that readership. That means no Twitter wars. No flame wars at all. Plus, I’ve seen vast destruction spread by vicious internecine battles. I’ve seen friendships wrecked, bad theory perpetrated by virtue of ego alone, massive setbacks take place in understanding and marketing. Also, there are some people who are ideologically attached to the friend/enemy distinction. Unless they are smashing someone and hitting “the enemy” they think they are not working. It’s extremely strange how some people thrive off this posture.

To be sure, I have no trouble taking a stand, as I have when libertarians have wrongly drifted left and right. Why? I like to seek greater intellectual clarity and share my thoughts with others, in hopes that I can help others understand too. I’m not seeking saints and not looking to burn witches. I try to choose my battles carefully and stay focused on doing productive work, cooperating with anyone who thinks, writes, and acts in good faith. That’s the main thing to ask yourself, not “Who have you destroyed today?” but rather, “What kind of light have I brought to the world today?”

Wendy: Different explanations of crypto’s recent plunge in price have been advanced. Some people point to increased government regulation, especially in China and in the U.S., where the SEC is taking active steps against the crypto community. Many believe the tumble resulted from a bursting bubble that was created by surging prices earlier in 2018. Still others speak of manipulation by “the whales.” These explanations are not mutually exclusive, of course. But do you favor one over the other? Do you have another explanation?

Jeff: It’s impossible to untangle all of this, and many of the factors you name are right, but let me add another issue. The amazing bull market of 2017 was fueled by wild optimism and adoption. People in the space were ready to rock. Then this optimism was massively interrupted by a terrible realization. Bitcoin would not scale. It stopped behaving like Bitcoin and started becoming more expensive and slower than regular credit cards. To use street parlance, it sucked. It was an amazing thing to have happened. It was a true calamity. And to top it off, it was completely the fault of the guardians of the code. When the code would not adapt to broader use, the optimism turned to pessimism and we experienced a huge setback.

By the way, I’ve worked for years with people who are geniuses at code but completely stupid when it comes to the user experience. It was the tragedy of Bitcoin that it fell prey to exactly this same problem. Coders desperately desire cleanliness, zero bloat, no cruft, perfect logic. It’s an old joke in the community that a coder invites you to use his new program but all you see on the black screen is a blinking green cursor. “Of course I still have to write the user interface.”

The OCD-ish mind of coders is a great thing for some purposes but this outlook has never prevailed in the commercial marketplace. In the early 1990s, there was a great battle over word processors. Microsoft kept making Word larger and larger, puffed with cruft, and the code monkeys were screaming that this was a disaster in the making. For my own part, I hated Word in those days and completely agreed that the hard-to-use light-weight programs were better.

But guess what? The market disagreed. Moore’s Law kicked it as it always does and eventually Word destroyed the competition. Why? Because it had more features that users like. Eventually the code got clean again and now Word itself has many elegant competitors. This is the normal progression of any software with a consumer focus.

Incredibly, some people with the keys to the kingdom of Bitcoin actually came to imagine that they could develop a digital money without an efficient, consumer-focussed use case. They drove a wedge between two functions: store of value and medium of exchange. This is not how much work. One function depends on the other. The freeze in the development of Bitcoin, in the name of staying light and elegant, was a fool’s errand. During all the scaling debates of 2014-16, they dug in their heels, shouting slogans, guarding their small blocks, instead of thinking about adoption and scaling when the time came.

When the time did come, Bitcoin did not perform. It fact – and it pains me to say this – it completely flopped.

Old school Bitcoiners like me were horrified to see it all happening. It was like an old friend had become possessed. When the mempools exploded, and the miners were in a position to ration trades based on price, it would cost $20 to send $2. This was in the fall and winter of 2017. It was absolutely disgraceful, and all the more so because the newly emergent “maximalists” defended this preposterous reality, acting if as this was part of the plan all along. They were like PeeWee Herman explaining that when he fell off the bike that he “meant to do that.” They flagrantly ignored even the title of the White Paper. Then the fork came in August of 2017, as it necessarily had to. But then followed a tremendous explosion of tokens of all sorts.

I don’t regret the competition, and I think this is all a good thing. I’m not a Bitcoin Maximalist. I’m a Competition Maximalist. But the absurdities of Bitcoin’s performance could have been completely avoided with just a bit of concern for the user. I would love it if we could perform a controlled experiment and see the BTC price today if the thing had properly scaled. We can’t do that. We have the reality we have.

Privately, of course, Bitcoin Core developers will admit that this was a disaster and that scaling will eventually take place on the chain. But at this point, pride and arrogance had gotten the best of them. How long will they continue to promise the Lightning Network while showing no concern for the use case? It’s time for a bit of humility.

To be sure, the Lightning Network is super great. We run a node at the Atlanta Bitcoin Embassy. I look forward to its final stability and adoption. The problem is that this was proposed as an eventual solution to the scaling problem that currently exists. Real-time technological development has to deal with problems in real time according to the time schedule of the market rate of adoption. Markets don’t obey code architects; the reverse has to be the case. Bitcoin Core forgot that at the very point it mattered most.

Wendy: Whatever the probable explanation(s), do you have a sense of when or whether crypto markets are likely to rebound significantly? Do you have a sense of what will cause a rebound or prevent one?

Jeff: Like all enthusiasts, I do expect a turnaround. Remember that I’ve been in these markets since BTC was $14. I’ve seen wild swings and long periods of nothingness. I’m prepared for anything.

Wendy: A debate within crypto parallels one I have heard between gold bugs. That is, should one take physical possession of precious metals, or they can be stored with reputable entities. In crypto, the parallel argument is whether coins should be in private wallets with undisclosed keys, or can they be stored with exchanges that do not demand possession of the keys?

Jeff: That is an interesting parallel! I think it is a valid one. I’m disappointed with the rise of what are effectively Bitcoin Banks that now dominate the market. I’ve reluctantly concluded that there is indeed a demand for financial intermediation, even within crypto. Here is a case where my own preferences are being overridden by market choice. That said, intermediation in crypto is not going to have the problems that it does in a central banking world. We have transparency. We have clear lines of ownership. We know the difference between money and a money substitute. I don’t necessarily think that intermediation is an evil thing in the crypto world.

Wendy: Any other thoughts you’d like to share on this subject?

Jeff: I would council Bitcoiners and anyone who sees the potential of this technology to be patient. Think back to railroads and how they came to be. The headlines were all about land speculation, wildcat banks, stock fraud, bankruptcies, and crashes. The reality, in the end, was a transformed world. It was true with the Internet too. People said for years that no one could make money on the Internet. The dotcom crash of 2000 seemed to prove it. Now Internet commerce leads the world. It will be a long time before crypto becomes competitive with nationalized money, and even longer before the pundit class comes around.

The important point is that we have the knowledge. We have the technology. We know now that it is possible. It can be done. There is no longer any excuse for not turning over the production and management of money itself to the market.

Also let us not forget what matters most. Bitcoin is a technology but the goal is much more grand: a better, more peaceful, more prosperous world. I’ve seen it myself how this works. When you pull down the barriers, when you provide opportunities for people to cooperate, beautiful things happen. I see it constantly at the Atlanta Bitcoin Embassy. This is a place where people from all walks of life come together in a spirit of joyful cooperation to build the future. This inspires me more than anything else and points to the kind of future that can be built by a P2P technology. It’s a microcosm of what life in the cryptocon can be like.

Wendy: Thank you, Jeff! This has been fascinating.

[To be continued next week.]

Reprints of this article should credit Bitcoin.com and include a link back to the book


Wendy McElroy has “published” her new book The Satoshi Revolution exclusively with Bitcoin.com. However, things aren’t over yet. Every Saturday you’ll find another installment in a series of interviews about sections of the book with people like Doug Casey, L.Neil Smith, Jeff Tucker, Carl Watner…and so on. Altogether they’ll make up her new book ”The Satoshi Revolution”.

The post Wendy McElroy: Interview With Jeffrey Tucker on All Things Crypto, Part Two appeared first on Bitcoin News.

from Bitcoin News http://bit.ly/2VPVBSh Wendy McElroy: Interview With Jeffrey Tucker on All Things Crypto, Part Two

#Blockchain Wendy McElroy: Interview with Jeffrey Tucker on All Things Crypto, Part One

Interview with Jeffrey Tucker on All Things Crypto, Part One

Interview with Jeffrey Tucker on All Things Crypto, Part One
Conducted by Wendy McElroy

The multi-faceted Jeffrey Tucker is an American writer who focuses on market freedom, anarcho-capitalism, and cryptotech. He is the author of eight books on economics, politics and culture, a much-sought after conference speaker, and an Internet entrepreneur. Jeffrey is editorial director and vice president of the venerable American Institute for Economic Research, founded in 1933. His career has focused on building many of the web’s primary portals for commentary and research on liberty, and is undertaking new adventures in publishing today.

I have incredible good fortune, as Jeff has written the preface to my book “The Satoshi Revolution,” which will be published in early 2019 by bitcoin.com. Meanwhile, a rough draft of the book is available online for free, compliments of bitcoin.com. Be sure to come back for the substantially-rewritten and thoroughly-edited book. I expect there will be a forum established here for me to chat with readers and answer their questions.

Let the interview begin…

Wendy: You have written extensively on Austrian Economics and cryptocurrency. Can you sketch out how cryptocurrency fits in with that economic tradition?

Jeff: The most obvious point concerns the capacity of the market to produce money as if were a normal good and service. This is remarkable, unthinkable 20 years ago, life-changing, epic.

Governments have mostly monopolized money for a century, and have been dominant in the monetary sector for some 6,000 years. We are living through a shift now that we know for sure that monetary secession is possible and operational.

Most Austrians in the 20th century worked toward reestablishing the gold standard. That’s good, but it never happened. It was Hayek who first threw down the gauntlet: get government completely out of the realm of money and let innovation take its course.

I would say that crypto has five Austrian founding fathers: Menger for showing that money has a market origin, Mises for his warning against central banking, Hayek for coming up with the idea of radical competition in money, Rothbard for his emphasis on money as property, and Kirzner for showing how entrepreneurship can defy our existing knowledge to reveal something completely new.

Aside from money, crypto’s core tech is the best innovation in history for definitely tracing provenance, which is the documented history of trades in private property. You need a technology for this. In the ancient world, it was clay tablets. Much later it was papyrus and then parchment and vellum. Databases were a glorious innovation. But all these technologies suffered from a problem which had heretofore been insoluble: they had a central point of failure. Blockchain has fixed that.

For this reason, the innovation of crypto is even more fundamental than giving us a new form of money. It is a technology of documentation. It scientifically tracks ownership rights. It has thus given us a better way to conduct human affairs in a more peaceful and prosperous way. I suspect it will be another ten years before this point is widely understood.

Wendy: You knew and worked with Murray Rothbard for many years. What do you think his take on crypto would have been? What would you have said to him in return?

Jeff: People always ask me: what would Murray say? My answer is that Murray was always learning, adapting, reapplying principles, discovering new information, just like any great intellectual. There is not one Murray. There are many, simply because he had such an active mind. That process ended when he died in 1995. He left us an enormous legacy. I don’t think it is fair to him or his legacy for anyone to pretend that he or she has a precise fix on what he would be thinking right now about current politics.

Some people claim Murray would be wildly pro-Trump, for example, but I think it is just as likely that the experience so far with the Trump administration would have rekindled his 1960s-style loathing of rightist authoritarianism and his burning critique of revanchist politics, particularly on the trade point but also on immigration. For forty years, Murray wrote for free trade and free migration. In his last years, he wrote a few sentences that raised some doubts about migration based on the political implications. Which Murray is the true one? I think this is the wrong question. The right question is: how can we apply in our times the principles that Murray stood for in his long career?

On the matter of crypto, I will say this. Murray did not agree with Hayek on money. In fact, Murray didn’t believe that a new money could ever compete with an older money once that money has become generally accepted. He cited Mises’s theory of money’s origins to support his position. For this reason, he only approved of the path of reforming the dollar. His view of money was rather static and rationalistic, and I know this because I held that view also, for many years. I saw many attempts at private e-money fail, and this reinforced my opinion.

I’m guessing, then, that Murray would have been slow to recognize what Bitcoin achieved, just as I had been slow. I had seen digital money fail but I didn’t precisely understand why they had failed: none had solved the problem of double spending. If you get that wrong, you set up a situation in which money becomes as reproducible as anything on the Internet, which is to say it is unsound. Bitcoin solved that problem. It enabled the creation of a scarce good which has all the features of money, plus building in a payment system into the architecture itself.

Might Murray have been convinced by the evidence? If he had the right person to explain it to him, possibly yes. From 2009 until about 2014, it was actually difficult to find material written for the economist who could explain why Bitcoin was money. Most everything available was written in the language of computer science, and so economists were generally left out.

In 2013, I undertook a major effort to educate myself about cryptography, distributed networks, hashing technology, and digital ledgers. I  combined that new knowledge with my existing knowledge base and gradually came to understand. It was a big project. One of the most exciting of my life. By the time I was ready to write about it, I had not prepared myself for the reality that most economists were nowhere near the point of comprehending what this was all about.

So after I wrote my first article – February 2013, I believe – I faced a tremendous avalanche of attacks from old colleagues. I was stunned. This is a huge problem with intellectuals actually. They think they know, and so their knowledge blinds them to new understanding. It’s the opposite with the market, which is always in discovery mode. This is why Hayek constantly emphasized that a seriously pro-market economist must adopt a stance of humility and openness to the boundless creativity of the market. The market must be our teacher. The market teaches more than textbooks but you have to be willing to have a teachable spirit and look outside the window.

Wendy: What is your impression of how crypto is being received by most Austrian economists? Which ones, if any, seem particularly enthusiastic about it? Which ones seem particularly hostile?

Jeff: Many Austrians had come to misapply Murray’s own theory in the crudest possible form: no new money was ever possible. This is wrong on its face. We have countless examples of new money being produced. For example, every prison has its own money. It could be mackerel cans or ramen noodles. Doesn’t matter really. It happened in school when we were kids: people trade marbles or bathroom passes or anything as money.

The penchant to invent money flows from the needs of trade. Remember the definition of money: something acquired not for consumption but for later use in indirect exchange. There are, as Menger said, degrees of moneyness based on the range of acceptability. Something can be money in one context and just another exchangeable good in a different context. The whole concept is far more fluid than is generally supposed.

By 2013, most economists, Austrian or not, had become complacent in believing that they had money figured out. Bitcoin was just too new and bizarre for them to comprehend. I don’t think a single article from an economist had been accepted on the topic in any conventional academic journal. George Selgin, I think, was the first serious economist to write competently about synthetic money as a new form of money and payment system. Why Selgin and why not the others? I think it is because he is among the most empirically aware and institutionally curious of all the Austrians. He truly understands monetary history. He wrote an entire book on private monies in the Industrial Revolution, so he was profoundly aware of how failed public services inspire private monetary entrepreneurs.

Other Austrians just dug in their heels in those days and screamed: gold is money. Speaking as a matter of history, this is a correct statement. But the gold standard had been gradually destroyed by governments over the course of the 20th century. There are conditions under which gold could become money again, but governments and central banks don’t want that. Crypto came along as a kind of digital gold. Even the metaphors of the crypto world (think of the term mining) come from the history of the gold standard.

Another problem is the lack of technological sophistication of old-school Austrians. Many of them can’t explain why Facebook is valuable or anything else about information economics. They are too quick to observe any facet of the digital world and deem it a bubble because it is not grounded in physical things. That’s a very strange attitude for Austrians who are supposed to believe in subjective value but there it is.

I recall being completely befuddled by the tremendously dopey things that Austrians were writing in those days, even on once-respected venues. I called up one prominent writer and tried to explain crypto to him. He kept saying over and over again: “Bitcoin is not real; it is only digital.” I was having this conversation with him on Skype. I said: “Do you think this conversation is real?” He said yes. I then asked him if he understood that both the voice and the visuals were entirely digital. He just blinked his eyes in confusion. Then he went right back to writing dumb things.

These days, matters are much better. We have an entire team of economists at the American Institute for Economic Research – including people like William Luther, Max Gulker, Pete Earle, Scott Burns, Brian Albrecht, J.P. Koning, Lawrence White, J.P. Koning, Alexander Salter – who are super sophisticated on the topic of cryptocurrency and blockchain technology. They don’t all agree with each other but they get the core of it. They don’t pretend to know things they do not know.

There are still people extant whose primary objection to Bitcoin is that it is “not backed.” They still don’t understand that it is possible for the digital world to reproduce value relationships that exist in the physical world. Unless you get that intellectual, you will never understand how markets can produce and manage money in the 21st century.

[To be continued next week.]

Reprints of this article should credit bitcoin.com and include a link back to the original links to all previous chapters


Wendy McElroy has “published” her new book The Satoshi Revolution exclusively with Bitcoin.com. However, things aren’t over yet. Every Saturday you’ll find another installment in a series of interviews about sections of the book with people like Doug Casey, L.Neil Smith, Jeff Tucker, Carl Watner…and so on. Altogether they’ll make up her new book ”The Satoshi Revolution”.

The post Wendy McElroy: Interview with Jeffrey Tucker on All Things Crypto, Part One appeared first on Bitcoin News.

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