Just where exactly is the Bitcoin TransNation on the Bremmer J Curve? In Carl Sagan’s Flatland it’s what is going on underneath the paper that counts.
Dave is a runner, or more accurately Dave was a runner. I loved to run. I ran everywhere and I ran fast. I won a lot of the races I ran in from the time I was four years old until I was running competitively in high school and was still getting up at 5 a.m. to run six miles when I was forty. My knees started bothering me a little bit, so I traded in running for other activities and I left the running to one of my sons. I thought I was a pretty good runner, but he’s better. He won the Ford Iron Man for North America in Lake Placid for his age group a few years back, so I like to think running runs in the family even if he’s a much better runner than I ever was.
Competitive running, like macroeconomics and monetary policy, is equal parts science and fiction. You have to have The Right Stuff, you know the Tom Wolfe test pilot physiological and mental stuff, but then you need a big dose of belief (i.e. confidence, trust, heart, courage, faith) to go along with the plan if you’re going to do nation building or body building or imploding buildings into their own footprint: (http://www.ae911truth.org/)
Winning races and creating corporations and cryptocurrencies that exceed the reach of governments isn’t a simple objective solution (although tax inversions “don’t upset us”), it’s a way of life for Kings of the burger business in our “have it your way” as long as you can afford Ian Bremmer’s End of the Free Market ticket price or are happy to get a Charlie Shrem crypto-pioneering plea deal so you can enjoy your happy meals AT a bar rather than BEHIND bars at Chez Federalis.
Going from paper fiat debt money loosely measured by Generally Accepted Accounting Principals (debits and credits) to prepaid money as a technology (the prebit) isn’t a walk in the park… it’s a marathon. To be more precise triple-entry accounting such as you find expressed in the blockchain protocol is a triathlon that is based not only in (1) the past (income statements) and (2) the present (balance sheet) but also attempts to accurately measure the potential of (3) the future (expressed as a velocity statement) through the outright establishment of resource-based measurements from the outset.
In other words, if the behavioral economists know how fast you can run and if they know you are running your fastest, then they know precisely how fast you are running now and will run now (the second now being one second after the first now). It doesn’t matter if they miss you specifically because you had a bad day on the race course, because they’re using big data and they’re tracking everyone and the numbers never lie (assuming a free choice paradigm in the participation economy rather than a free will paradigm “I chose not to run today”), just the economists and statisticians. In the blockchain, they know if you’re not running and the participation rate is a given and the penalties for refusing to participate are steep (“affordable care”) and like Dave always says, there’s no forgiveness in the blockchain.
Given all that, Dave was quite excited to read the in-depth analysis and ensuing dialogue between Barrister Patrick Byrne and Daniel Larimer CEO of Invictus Innovations and promoter of Bitshares. Patrick, while appearing to be completely qualified and extremely well-versed and entirely thorough and reasonable in his analysis seems to be missing one thing. Mr. Byrne would seem to be in search of EQUITY. You know that most egalitarian of concepts which expresses overall fairness, justness and impartiality most often manifest in ownership of shares (such as Bitshares in Bit O’Honey Candy company) or bit O’shares as Dave prefers to call them…honey. There’s just one problem with crypto anything. There’s no equity. Equity is dead and buried in the crypt like half price Christmas stockings at the other Byrne’s Bit O’verstock.com on New Years day.
In a 2-dimensional cryptoland, like Carl Sagan’s Flatland, there is no reconciliation of the third dimension. You simply can’t see it from there in Flatland any more than Mr. Byrne could see the third dimension when viewing the world through the completely understandable and GAAP glasses of any self-respecting member of London’s Bar Council and securities expert. With all due respect to Mr. Byrne’s dismissive comment regarding “paradigm shifts” in the case of Bitshares and Bitsharesx, Assets = Liabilities + Shareholders Equity simply does not apply.
To start with there are no liabilities (disclosed fees withstanding) and secondly there are no assets, at least from a Bitshares perspective, only a prepaid wager as Dave would describe it, yet unbailableinable (un-bail-able-in-able or is that un-bail-in-able). There’s certainly no two-dimensional equation built from a journal of debits and credits in the absence of Assets, so all that is left is what Dave refers to as The Prebit minus any fees that are disclosed in the offering or contractual gifting to your bitcoinesque gambler’s “bookie” as the higher level Swarms, Ethereums and Bitshares speculative promoters could fairly be characterized in my opinion.
It may help to think of it this way. Remember back when we had the read my lips axis of evil. You know countries that supported terrrrism. It was like a spreadsheet. You could put a countries weapons of mass destruction on the X axis and their odds of invasion on the Y axis. It was a simple two-dimensional paradigm, but those were the days of Lotus 1,2,3. Back then the spreadsheet was a new and exciting idea only to be perfected by Bill Gates yet still functioning today as the primary tool of primary dealers and investment bankers everywhere when it comes to modeling against the US Dollar, and Rheinhart and Rogoff’s This Time Is Different (as in our spreadsheets are wrong) was no exception, yet is Michael Woodford’s unattainable/unsustainable zero lower bound still being relied upon by Janet Yellen to taper the Fed’s ponzi without going full German negative interest rate aka “red swan” confiscation.
“Even a superpower can’t solve all of the problems alone anymore,” German Chancellor Angela Merkel says.
Preston is a smart fellow, but my sense is that he’s missing the punch line. Take this comment for example:
“Nobody is going to spend $1.00 to buy BitUSD which they will only be able to dispose of for, e.g., $0.25.”
Seems logical enough to Dave, but that was in the two dimensional world of accounting. You know where the sovereign called the shots and the primary dealer fired the shots. Well this time is different. Let’s take the Troika for example. You remember The European Central Bank, the Euro Zone and the International Monetannery Fund… those guys. Well, since when does one of the trimvirate central bank partnered with a super-sovereign government and the issuer of special drawing rights have to hire an investment banker to help them sort out their options. It’s one thing to hire a shadow banker to handle an orderly liquidation, say of failed mortgage backed securities, but it’s something altogether different to effectively let them sit in the Chairperson’s chair and call the shots and fire them too. Isn’t that corporatism with a fascist twist and isn’t that why the Fed isn’t being run by Larry Summers?
Seriously? You’re sitting on top of a huge pile of assets for what is essentially a fractional gold backed currency and you can’t even get enough wiggle room to order some ink much less fire up your presses because of the manipulation of the metals market has you trapped between a rock named Putin and a soft place politically called the shared cornerstone of the dollar known as the New York Fed/White House. You impose austerity to the point of revolt and now you’re essentially offering BlackRock the opportunity to buy you out with a payday loan (read Asset Backed Lending) that makes Preston’s 25 cents on the Bitshares dollar look like a good deal (when risk adjusted for conflict of interest divided by potential prison time).
Could Blackstone’s new Senfina “everlasting” fund be the key to managing such conflicted interests ? Who knows? BlackRock, Blackstone, Black Swan, Black Crow… nobody’s talkin’. If I was Larry Fink, I would be seriously excited about the back door that Bitshares provides for shorting the USD while providing plenty of political cover, but then again who thinks the way I do?
Then there was this spot on comment by Mr. Byrne:
“This self-referential system (Bitshares & Bitsharesx) is now one of the top 10 cryptos by aggregate market cap in the world, and rising.”
…and a few days later the eulogy of BitsharesX:
“Well I’ll be darned: BTSX BITASSET market failure after only five days.”
So, where does Dave think that Mr. Byrne is spot on and what does Dave believe is dead and buried in Mr. Byrnes cryptocrypt. First of all self-referential is exactly what Bitcoin and Bitshares and the blockchain are all about. Not just self-referential in a narcissistic way, but self-referential in an Hegelian/Heisenberg/Schrodinger/Soros/Quantumly Reflexive kind of way. And if you don’t know what Dave means by all that, then you’ve got a couple hundred blog posts that you’re going to need to read because the answer is in there…with the pony…in the library… next to the candlestick, but I’ll give you the cliff notes version and it’s fairly simple. The cornerstone of Western Civilization (think Locke, Smith, liberalism and such) is the concept of forgiveness and in the blockchain, there ain’t none.
If you don’t know what Dave means by the cornerstone, simply drive down the street in your town and I’ll be you Bitshares to USD that you won’t drive three blocks without seeing a church on the corner and that my friends is the forgiveness market for lack of a better name. The crypto movement in many ways is quite similar to The Enlightenment in that monetarily speaking it is an attack on the divine right of kings, only this time around they are crony Burger Kings (aka Warren Buffet) in search of the last bastion of positive paper-based cash flow selling grilled red meat via a merger with a Canadian donut maker bearing the offspring of a tax inversion.
Mr. Byrne’s logic is well-grounded in both the law (not Reflexive Law) and the Karl Popper’s Scientific Method, but I’m not certain that he fully understands Piketty’s plan for a tax on capital and the economic justification for such an endeavor. You see, you need a deeper understanding of Mervyn King’s divorced currency plan and just how reflexivity fits into the equation.
Here’s the crux of the matter from a blog post dated May 21, 2014 that addresses Mr. Byrne’s “no convertibility/no parity” paradigm shift… don’t you hate those words.
Mr. Byrne said: ”As a friend of mine puts it, “no convertibility, no parity.” But a synthetic dollar trading 10-20% above par? I can’t even.”
Dave on the subject of 3-dimensional parity:
Here’s what Addison Wiggin had to say last week on the subject: “And what we’ll do is we’ll set it up so that basically the very well-connected political elites always are taken care of, but everybody else is going to get screwed.”That is, there will be one conversion rate between the dollar and the new currency for the elites… and another for everyone else.” If you ask Dave, it sounds like you and Addison agree, but how exactly is Bitcoin immune from this conversion rate mechanism? It’s not. It may very well be the mechanism.
The philosopher’s choice is yours. Make it Berlin’s Two Concepts of Liberty, Jean-Paul Sartre’s No Exit from Hell is other people, or George Bernard Shaw’s London School of Economics My Fair Lady or Eddie Murphy’s nature/nurture manifest in the GI Joe with the Kung Fu grip… the drill is the same. Either the currency says “In God We Trust” on the paper, or the electrons fly around based on the trusted counterparty and for those of you who think Dave’s getting too religious on you, then what do bitcoin/crypto experts such as Matthew Green and Dan Kaminsky talk about in their free time? Well, being self-referential is being capable of making the choice to trust yourself more than trusting God which is the essence of free will. The corollary is a choice worthy of your consideration also.
If you have gotten this far in the article (my apologies for not creating a false scarcity by breaking it into a two-part post like any good publisher would do), then I don’t have to tell you that Dan Kaminsky and Matthew Green are dead serious guys when it comes to burying code in a crypt never to be seen again. It’s completely obvious that trust is a real booger. You can trust your kids, you can trust your spouse, you can trust your business partners, but when it comes to crypto we’re talking about trusting someone with your money and like I said… it’s a booger. I didn’t even mention trusting your lawyer and accountant (cough), but the fact that every debt-based fiat Federal Reserve Note that is circulating out there has those four words printed on it for a very good reason and quit blaming me for it … will ya… Dave’s just the messenger.
For now at least, a bunch of it is still paper money and whether they are partially gold-backed like a Euro or entirely backed by another round of golf and a tan suit like the U.S. dollar, you can’t trust anyone and therein lies the problem. I can hear you loud and clear, “But Dave… we have to trust the government… we have no choice… you’re being unreasonable.” When there was a G-7 (think 1980′s Lotus 1,2,3) and then the G-20 (think 1990′s MSExcel), but now to go along with Michael Woodford’s Zero Lower Bound we have G-Zero courtesy of Ian Bremmer. It’s like we went from being the world’s superpower with Ronald Reagan running the world on a Commodore 64 to Muhammed el-Erian’s multipolar world running on a smart phone without ever rebooting the system. Well, the reboot is comin’.
Whether you are attempting to find a foundation of values to bolt onto by going knee-deep into an Antal Fekete’s gold mine with Sandeep Jaitly or if you’re mourning the loss of the great Hal Finney while hoping that his cryogenic frozen strategery will work for you too and allow you to harvest the gold from asteroids along with Ray Kurzweil and the Google Planetary Resources team just in case Bitcoin’s price continues to fall, your options appear a bit limited… a) gold, b) bitcoin, c) @boredElonMusk tweeting the source code for asteroid blasting or d) life on a floating libertarian paradise with Peter Thiel.
Ian’s thesis is that we’re moving into a G-Zero world, where the corporations battle it out with the sovereigns and I think it’s pretty obvious that when the printing press operators at the ECB have to call in Larry Fink to bail them out (and Madame Lagarde with the bathwater) that we’re well on our way to… “I pledge allegiance to Goldman Sachs and the flag of the Greenwich Country Club.” Sovereign nations (China and Russia withstanding) and their private central banks are just passe’ in an Economist Magazine’s Money as a Technology world where a Cass Sunstein nudges from one economic end of the Head of the Charles macro spectrum and Samantha Powers nudges from the other/political end in a transnational United Nations pillow fight world where other bedfellows such as the audit committee board member of JPMorgan and the lead director of Morgan Stanley share the same pillow too embroidered with “B” for Bowles.
If you don’t buy Ian’s State Capitalism thesis, then buy Dave’s because Dave, like Ian, is a “rising guru in the field” at least from Dave’s dog’s perspective. Hurricane the PWD thinks Dave is a genius because I know how to open the dog food storage unit which is a reasonable facsimile of the Heisenberg Uncertainty Principle, the Observer Effect and the nature/nurture debate as played out by Eddie “Billy Ray Valentine” Murphy and Dan “Louis Winthorpe III Aykroid in the long since forgotten free market flick Trading Places. We’re fixing to trade places between paper money and electronic money once and for all and in the process, we’re going to have one form of money to satisfy daily purchases and another form to serve as a store of wealth and the twain will never meet and a key requirement for all this will be a single identity.
The Bank of England was already very kind to tell us that money comes from thin air
in their Money Creation in the Modern Economy
(http://www.bankofengland.co.uk/publications/documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf). And money market funds have sent you their notifications that your demand deposit is no longer a deposit but rather you are a creditor to the company and you’ll withdraw your money when conditions permit you to withdraw your money and not a BNY/Mellon Yellen minute sooner (i.e. gates on redemption - http://www.reuters.com/article/2014/07/23/us-sec-moneyfunds-idUSKBN0FS08E20140723). The writing is on the wall and it says the chain is attached to the block and when you submit you sir are attached to the chain.
And finally, Mr. Byrne
“No asset rises in price forever, including BTSX.”
Tell that to the guys who shorted the Zimbabwean dollar and yes there are rumblings of its return, so maybe that’s a better bet than Bitshares. If you ask Dave, the plan is the self-immolation of the dollar. It would be like the planned demolition of a building… you know… like if a huge tower fell instantly and entirely into its own footprint, only this time it’s slow motion burn overseen by Patrick Bryne in a neru jacket.
Preston Byrne continues… (emphasis Dave’s)
“To think otherwise is folly. The relevance of the issue is that BitSharesX does not benefit from protections available to users of deposit-taking banks or other financial institutions, such as guaranteed deposits or claims in insolvency. If BTSX collapses, unless the laws of economics have somehow been suspended, depositor value may evaporate without any recourse being available.”
You said it in a nutshell, but how can we translate that into both languages that the citizens of Cyprus can understand. Think of the Turkish side of money as the double coincidence of wants – say wanting a turkey sandwich and only having a good pair of running shoes to exchange for the sandwich. Then there’s the Greek side of the currency which acts as a store of wealth and it can’t be withdrawn from your Greek ATM for more than $300 per day and if you do withdraw it there’s a 75% penalty… sound familiar – yeah, it’s that same $1 bitcoin for 25 cents that you were talking about seeming so far-fetched. The laws of economics ARE being suspended… right before our very eyes… suspended cryogenic animation. It’s time to get out of your two-dimensional Bill Gates MSExcel flatland and get your Carl Sagan economics on.
They used to say the market can remain irrational longer than you can remain solvent. Well, distributed autonomous organizations are irrational on the inside and rational on the outside because they are resource-based and finite (unlike HP printer cartridges) even if the resource is million dollar power bills mining for Bitcoin. In a trustless model, the so-called “shares” are a so-called “asset” of the DAC, not the casino seat holder (Dave in the case of BitsharesX). In this manner the so-called “share” holder doesn’t have a “vote” (irrespective of Swarm) but rather a contract that is unforgiveable in a cybernetic fashion. Ashby’s law of requisite variety says only variety can destroy variety. What Tony McKenna called a “ghostly cybernetic echo” Dave simply calls the blockchain protocol whereby the map IS the territory, the receipt IS the transaction and the means tested impact of your carbon footprint on every living thing you do IS recorded and can never be erased. What would that be worth to say… our friends at The Hague or Bentonville for that matter?
A tally stick or cash accounting credit system measured the past. A cash on demand or debit system measures the present. A momentum accounting system such as the one put forth by Yuji Ijiri measures the future… based on the past and the present and a paradigm of free choice displacing the free will which underpins both property rights and the law as we knew it. In the same way that China’s capitalism is an extension of the state, the blockchain protocol and decentralized “solutions” (see Maidsafe and Ethereum) are extensions of the internet. A divide and conquer solution to the vulnerabilities of client-server, but with a new OS that isn’t Android or Apple, but rather comes from the cloud and therefore could be a bit more difficult to flip the kill switch on. Dave will call it COS (cloud operating system) in memory of DOS (disk operating system).
As far as Daniel Larimer’s assertion that Mt. Gox accounts were “robbed” by the Federal Government, I’m not sure where that one came from. As far as his suggestion that BitsharesX should provide more disclosure, I guess that’s where Ben Lawsky enters the picture.
“All banks make claims that are far less sound that BTSX makes. Namely, they claim you can withdraw your deposit on demand. They borrow short term and lend long term. They create USD on illiquid, non-fungible, collateral (housing, cars, etc) that can be just as volatile as any crypto-currency and is subject to fire, flood, weather, and owner abuse. The mechanics of BitUSD creation are far more sound than any fractional reserve bank creating USD with similar accounting principles…”
“Obviously if we had rule of law and a true free market then 100% backed IOUs in the custody of a transparently audited company would be viable and superior. Unfortunately we don’t live in that world and thus must make compromises that have different risks.”
To that I would remind Daniel about the compromises required of folks like Bernard von Nothaus and Charlie Shrem and as a final thought I would probably say that when it comes to Bitcoin, Banks and Bullets, like rapper KRS One said “You’ll never have justice on stolen land” and if I was Larry Fink, although I’d be genuinely excited about an off balance sheet way to short the U. S. dollar if it came with a Get Out of Jail Free Paulson card cause he could use that about now, but a better risk adjusted investment might be an anti-Breitbart insurance policy on Daniel Larimer. If you’re wondering why George Soros never won that Nobel prize for economics for his theories on reflexivity (or did time for a felony conviction), maybe it’s because he wasn’t a lawyer.
Dave too has been scratching his head for well over a year when it comes to all these “share offerings.” I’ve written about it many times, but possibly the one that targeted whether or not these Bit O’ Shares are genuine securities was in August of 2013 where we explored the three prong test and one of those prongs that the court considers at least stateside (and presumably Ben Lawsky will) comes from Long vs. Shultz Cattle Company:
Finally, the Court considers whether there is an expectation that profits will be derived from the efforts of the promoter or third party. The Court finds that this prong is also met.
Guys like Joel Dietz over at Swarm have done a decent job of avoiding this particular prong by stating things such as ”Swarmcorp has no plan”( http://tradewithdave.com/?p=21716). It’s tough to accuse some guy standing on the street corner jingling a cup filled with donated Bitcoins of selling securities. Then again, that didn’t stop the Feds from accusing a guy selling silver coins of competing with the government’s exclusive money franchise (http://tradewithdave.com/?p=6676) not to mention plea bargaineers such as Barrett Brown and Charlie Shrem.
Both Preston Byrne and Tim Swanson have provided extensive information and insights in regard to this issue and both of these gentlemen are more highly qualified than Dave to comment on the proposition. Then again, Dave’s got more experience for what that’s worth and making calls is no fun. Dave’s calling Bitshares and it’s narcissistic image BitsharesX a winner and I didn’t start thinking about this yesterday.
As Tim Swanson wrote:
“This is one of the reasons why people do crowdsales outside of the US — Ethereum — because you don’t want to have to interact with the current legal system in the US. The reason I mention that is because you end up opening yourselves to lawsuit because chains — like SWARM — cannot necessarily indemnify users. That’s legal terminology for being able to protect your users from lawsuits from third parties; they just do not have the money, the revenue to support that kind of legal defense.”
In my humble opinion, this is why it is so important, especially for lawyers and lawmakers to understand that in the prepaid economy based on a reliance of behavioral economics to predict outcomes, then we move from the past (credit) and the present (debit) to the future (prebit) and by doing so we move from a free market system based on caveat emptor to one based on uberrima fides and seller beware.
Dave from December 26, 2012: http://tradewithdave.com/?p=14419
Before statutory law, buyers had no express warranty ensuring the quality of the goods they purchased. Underlying the functionality of the buyer beware ethic was an even deeper idea known as uberrima fides (or uberrimae fidei) or “most abundant faith.” The very existence of the concept that a man could choose to put forth his utmost good faith by making a full declaration of all material facts relative to an insurance contract provides the sharp contrast and extreme value of a man’s honor and its manifestation in fair dealings within the ever-present threat of the reality of caveat emptor. Maybe this was your counterparty’s last transaction. Maybe the greater fool theory was coming home to roost and you were the final resting place. Maybe you bought into the nearly implausible bungling muppetry of a Goldman Sachs CEO-turned-governor-turned-senator-turned-vaporizer-turned-hedge-fund-bundler.
Under the common law, the buyer had no express warranty ensuring the quality of goods. The only requirement was under the law that the goods “be fit for the particular purpose” and or “merchantable quality.” The quantum impossibility of measuring the simultaneous subjects of intent and value were resolved by the corollary of an insurance contract based in uberrimae fidei and measured against the simple concept of a conscious expression of honor. Spend all you want on a Large Haldron Collider and like the two wanted Schrodinger cats of human consciousness (living wave, dead particle), you end up with the expression of conscious choice just like you end up with two Higgs Boson particles.
If you are a lawyer like Preston, acknowledging this ethics inversion is the equivalent of pulling a Jerry Maguire, eating two pieces of bad pizza, growing a conscious and sending a manifesto to everyone in your company that the business that you are involved in is fundamentally… well… wrong. Before you do that, or before you say Dave doesn’t know what he’s talking about, I think it’s fair to say that the law itself originated from Moses and The Ten Commandments and if we can’t agree on that, then there’s little need for discussion and you may have wasted slightly less time than Dave did writing this by reading this.
As far as Dave’s claim to no longer be under the law (but still choosing to submit to genuine authority albeit the social contract has sprung a few leaks) via forgiveness, redemption, grace and such, well that’s a swan of another color, starting black then white because red all over. You don’t have to accept Dave’s Good News of the Gospel to have a sound debate over Dave’s claim that when you move from a promissory note that declares In God We Trust (btw… God doesn’t borrow money) to one that’s based on trustless networks that you’ve turned the tables entirely on the fundamentals of economics.
It’s no fun to make calls, because if you’re right few people recognize it and if you’re wrong no one ever forgets it. Is Daniel Larimer beyond Ben Lawsky’s long arm and will Joel Dietz’ self-described “reduced confidence in integrity” survive the Swarm impending vote to issue/burn/hold and will Ethereum’s attempt to jack up the house that Bitcoin built only to rebuild it up on a foundation of ether fuel (that sounds safe… not) be successful? The point in all of this is that where we are headed equanomically there is no asset, only the velocity of the whip.
There is no reasonably accessible store of wealth (sans 75% fee), only free electronic cash flow. There are no receipts, only transactions. There is no territory, only a map. Over the past few years this looked like an economic debate, then the bitcoin cheerleading squad was stunned to discover it was a political challenge, but in the end it’s neither. This is philosophical and philosophy to Dave is theology. Submitting to the blockchain is submitting to an intractable resource-based form of justice founded on the science of scarcity.
When it comes down to it, either you believe the claim “I came that you may have life and have it more abundantly” or you believe in scarcity. If you believe that abundance equates to waste or climate change denial, I believe you are missing the point. Abundance is product of stewardship and stewardship is an acknowledgement of the sovereignty of The Creator the original source of the law, man’s inability to uphold it and subsequently of grace.
Preston & Dan on Bitshares and the X:
Run… don’t walk:
Preston on the demise of Bitshares:
Background on how uberrima fide changes everything and caveat emptor is passe’ in a prepaid equanomy:
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