Bitcoins from the fire

[Severian]

Roughly half a million years ago or more, a group of human beings somewhere learned how to use fire to their advantage. The idea appears to have caught on.

Around 10,000 years ago, other groups of human beings somewhere, perhaps in what is now Turkey, learned how to use fire to separate metals from ore. The idea also appears to have caught on.


Coins made from the metal smelted with fire first appeared three to four thousand years ago. Silver, gold, electrum, iron, copper were all made into coins by people that had the knowledge and tools to make them. The idea appears to have caught on so well that anyone that could make coins did so for centuries.

Sometime in the past millenium, people learned how to regulate the volume and velocity of the coins made from the metal smelted with fire. This is called fractional reserve banking. The idea caught on so well that hardly anyone wants to think about it anymore.

In the previous 50 years, using the metal smelted with fire, people have created integrated circuits. Because of that idea, you're reading this nonsense right now. Going out on a limb here, but it seems the idea of integrated circuits has taken hold.

On 9 January 2009, a message was attached to the first tranmission across a network using the integrated circuits made with the metal smelted with fire. The message subtly states an issue with the idea of fractional reserve banking:

https://en.bitcoin.it/wiki/Genesis_block

"The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"

Some ideas, like fire, coins and integrated circuits, are both universal and useful. Other ideas, such as fractional reserve banking, are more useful to only a small percentage of people than to the larger percentage. Burdensome ideas are meant to be and will be replaced when the tools exist to replace them.

This network, the Bitcoin network, is going to be around for as long as the internet is. Like the coins made with the metal smelted by fire, Bitcoin is an idea that springs from the materials at hand, materials that served a use before they became currency and commodity. Just as fire and metal served uses before they were combined to make coins, so cryptographic hashes and peer-to-peer computer networks have been combined to make every bitcoin that will ever exist and will exist for as long as TCP/IP packets are moving through the wires.

There's no regulating authority anywhere on Earth that can stop people from using fire or that can turn off the entire internet. If you have a hunch that you'll be able to get online next year, your bitcoins will work. There's a good chance they'll be worth around the same price or a maybe even more than they are now. But caveat emptor, as always.

It remains to be seen if our fractional reserve notes and their caveats are performing equally as well. Bad ideas don't do well in the long run. Good ideas stay around forever, in some form or another.

[hazek]

Nice post, I enjoyed it!

[Stephen Gornick]

It remains to be seen if our fractional reserve notes and their caveats are performing equally as well. Bad ideas don't do well in the long run. Good ideas stay around forever, in some form or another.

Bitcoin is the economic singularity:

In the future, books that summarize the history of money will have a line that says, “and then came bitcoin.” It is the economic singularity. And we are living in it now.

 - http://themonetaryfuture.blogspot.com/2011/06/bitcoin-is-economic-singularity.html

[hazek]

In the future, books that summarize the history of money will have a line that says, “and then came bitcoin.” It is the economic singularity. And we are living in it now.

 - http://themonetaryfuture.blogspot.com/2011/06/bitcoin-is-economic-singularity.html

Do you even understand how lucky we few out of all are to be able to already comprehend this? And I just can't wait till many are able too.

[Severian]

Nice post, I enjoyed it!

Many thanks. I gave up blogging but this is close.

Bitcoin is the economic singularity

That's my favorite description of it also.

[evoorhees]

Great post, OP.

One other important point - all those great inventions, whether fire, metals, coins, or integrated circuits - they can all be used equally for evil or for good. So too it is with Bitcoin. I wonder if, when fire was invented, the creators were shunned and scorned for the potential damage their invention could cause. I wonder if that invention was almost snuffed out, so as to ensure "disruptions" were kept to a minimum, and safety, as conceived in the years prior to the invention, remained undisturbed.

[Severian]

I wonder if that invention was almost snuffed out, so as to ensure "disruptions" were kept to a minimum, and safety, as conceived in the years prior to the invention, remained undisturbed.

"That new-fangled wheel of yours might break and then where will you be?"

-Anonymous pedestrian, ca. 4000 BC

[runeks]

I wonder if, when fire was invented, the creators were shunned and scorned for the potential damage their invention could cause. I wonder if that invention was almost snuffed out, so as to ensure "disruptions" were kept to a minimum, and safety, as conceived in the years prior to the invention, remained undisturbed.

I feel convinced that this was the case. I imagine that fire reminded people of forest fires and destruction, and when someone was found to produce it he was shunned, or even attacked, out of fear from the community. I mean, if we still, to this day, fear new inventions only for their potential for destruction, I'm sure the early humans did too. I don't know where we got it from if not from them.

It's good to see that the time we spend fearing - or perhaps laughing - at new inventions are becoming shorter and shorter though. This is without a doubt what has brought us to our current stage of evolution. I imagine this decrease in fear of the new will only continue to become weaker over time.

[kiba]

I feel convinced that this was the case. I imagine that fire reminded people of forest fires and destruction, and when someone was found to produce it he was shunned, or even attacked, out of fear from the community. I mean, if we still, to this day, fear new inventions only for their potential for destruction, I'm sure the early humans did too. I don't know where we got it from if not from them.

If he was shunned from his tribe, how will he get a woman?

[mc_lovin]

very entertaining.  i thought at the end of this, it would have been bitcoins recovered after your house burnt down.  this was a much more satisfying ending!

[Topazan]

Great post, OP.

One other important point - all those great inventions, whether fire, metals, coins, or integrated circuits - they can all be used equally for evil or for good. So too it is with Bitcoin. I wonder if, when fire was invented, the creators were shunned and scorned for the potential damage their invention could cause. I wonder if that invention was almost snuffed out, so as to ensure "disruptions" were kept to a minimum, and safety, as conceived in the years prior to the invention, remained undisturbed.

Caveman science fiction.

[benjamindees]

I read this post in the voice of Guy Pearce.

[dissipate]

It remains to be seen if our fractional reserve notes and their caveats are performing equally as well. Bad ideas don't do well in the long run. Good ideas stay around forever, in some form or another.

Bitcoin is the economic singularity:

In the future, books that summarize the history of money will have a line that says, “and then came bitcoin.” It is the economic singularity. And we are living in it now.

 - http://themonetaryfuture.blogspot.com/2011/06/bitcoin-is-economic-singularity.html

It's not quite clear to me what the author of that blog post means by the 'economic singularity', but please don't tell me you actually believe this:

We may estimate that there are somewhere between 10^4 and 10^5 users of bitcoin at present. Thus, in another 2.5 years, there will be somewhere between 10^8 and 10^10 users. Since there aren’t even 10^10 people on the planet, we may estimate that adoption will be ubiquitous in approximately three years.

Sorry, the real world doesn't work like that. There are numerous hurdles to Bitcoin's adoption that will take a significant amount of time to overcome. Yes, Bitcoin is the best currency ever invented, but people are not Borg. They do not automatically adopt a superior technology out of the gate.

[elux]

I very strongly disagree with this quote:

We may estimate that there are somewhere between 10^4 and 10^5 users of bitcoin at present. Thus, in another 2.5 years, there will be somewhere between 10^8 and 10^10 users. Since there aren’t even 10^10 people on the planet, we may estimate that adoption will be ubiquitous in approximately three years.

But I really like this quote:

In the future, books that summarize the history of money will have a line that says, “and then came bitcoin.” It is the economic singularity. And we are living in it now.

Horrible analysis, beautiful quote. Tempted to put it in my sig.


Still... Really got me thinking... (Unvetted stream-of-consciousness "crazytalk" incoming.)

This "Bitcoin" technology breaks down borders, that much is evident. It can perhaps tie together the sparsely connected economies of today into a something like a complete graph of ("totally connected") nodes (people, corporations, software agents) with no borders, no barriers between them. Only cheap, ubiquitous, instantaneous transactions for all, making the World Economy just that - a truly connected world economy. Bitcoin can unite the money networks of today into an "internet" of economies. In so doing, Bitcoin could be the real "e pluribus unum" of money.

Larry Page stated in a talk somewhere that according to some reasonable calculations Google indirectly contributed around 1% to the Gross World Product.

If Bitcoin (or what comes after Bitcoin) connects all the nodes of the world economy, it could top 1% bonus GWP.

Now, couple autonomous software agents with Bitcoin and it could well be the makings of a Hansionian growth-mode phase change (a change in the exponent of the growth rate), leading to reduced doubling times - as we already saw in the agricultural revolution, the industrial revolution - in the terms used above, it would be an economic singularity indeed.

Should I find the time to do so, I'll expand the above into a more coherent and well supported argument with examples and sources and all.

[Adrian-x]

I feel convinced that this was the case. I imagine that fire reminded people of forest fires and destruction, and when someone was found to produce it he was shunned, or even attacked, out of fear from the community. I mean, if we still, to this day, fear new inventions only for their potential for destruction, I'm sure the early humans did too. I don't know where we got it from if not from them.

If he was shunned from his tribe, how will he get a woman?

The paradigm shift happened during a very cold winter, or the shunned was a woman.

[Adrian-x]

If Bitcoin (or what comes after Bitcoin*) connects all the nodes of the world economy, it could top 1% bonus GWP.

The existing GWP would shrink by about 70%, as there would be no need for the burden of the banking sector.  Leaving that predicted 1% at over 3%

*link added just for fun.

[Roger_Murdock]

The paradigm shift happened during a very cold winter, or the shunned was a woman.

I'd say we're experiencing our own "very cold (financial) winter" right now. And I expect it to get a whole lot colder before it's over.  That can only facilitate the current paradigm shift that Bitcoin represents. (If I weren't on my phone, I'd work in some type of Eddard Stark / "winter is coming" meme photo.)