One other thing. For better or worse Satoshi invented an asset that has no controllers or mechanisms to damp the value spikes and dips. When a poorly designed DeFi scam uses bitcoin as it's reserve asset, and eventually goes broke, then they have to sell those bitcoin into the market. And there is no governance that can add or remove BTC from the system so the shocks are felt as they truly are, rather than having the illusion of stability.
It sounds like you want an algorithmic central bank that can set monetary policy adapting money-supply to money-demand.
Terra was explicitly advertised as a decentralized “algorithmic central bank”.
Do Kwon is a scammer, a thief, a liar and a swindler. He proved it beyond a reasonable doubt when, under the rubric of rigged “governance” that showed the true nature of POS, he commanded by central executive order the hardforking of a “decentralized” blockchain to divert value from some people to others.
That does not invalidate the “algorithmic central bank” concept which he abused—not any more than his dishonest and malicious abuse of “blockchain” invalidates the concept of a blockchain.
I have remarked before, perhaps too subtly, to the effect that Do Kwon gave central bankers, USG, et al. the biggest gift for which they could have wished. Imagine if the basic concepts in Bitcoin had been early associated in the public mind with a giant scam!
We need permissionless innovation, and continuing innovation. Decentralized, trustless, permissionless algorithmic
price stability: Can it be done?
Before Bitcoin, everyone knew that a practical implementation of a decentralized, trustless, permissionless Byzantine fault-tolerant database was an impossible fantasy. Just as there are now arguments that a stablecoin cannot exist without a
centralized backing as Tether has, a plausible argument could have been made that it is
impossible to prevent double-spends securely without a trusted central authority. Before Bitcoin, that argument would have had most people nodding their heads! Then, Satoshi invented Bitcoin. Imagine if the tenor of public discussion had been, “It is impossible—you are not allowed to do that—you are not even allowed to think about it.”
Regardless of whether or not the inventor tried just to do it anyway, Bitcoin would have been killed in its cradle. Read Satoshi’s old posts, and you will see how sensitive he was to avoid having the project snuffed out early; he even wanted Wikileaks
not to take Bitcoin donations when Bitcoin was too young.
I consider the “decentralized price-stability” problem to be ripe for research and experimentation. Numerous attempts have failed—Terra was only the biggest failure, far from the first—it was not even Do Kwon’s first failure! Is the problem intractable? Maybe. Maybe not. See the above analogy. I do not like the Do Kwon stench being smeared over the whole idea.
(For the record, I do not buy the argument that Bitcoin forever solved all possible problems in monetary theory, it is the only form of money that anybody will ever need for all eternity, thus thou shalt not think about innovating even one step further. I see that as a strawman caricature of a Bitcoiner; I am sensitive to that, since I have received my share of “Bitcoin maxi” insults. Unfortunately, I do sometimes see some people make exactly that type of an argument. I think that Bitcoin solved many problems, and systems complementary to Bitcoin could solve more problems; where altcoiners usually fall down is by attempting to compete with Bitcoin using things that can’t compete with Bitcoin. Bitcoin Envy is a thing. But by analogy, gold was never actually the only form of money in the world—even when there was essentially a worldwide gold standard.)
When a poorly designed DeFi scam uses bitcoin as it's reserve asset, and eventually goes broke, then they have to sell those bitcoin into the market.
It is a bad look to complain about use of a reserve asset as—an emergency reserve.
Even after I got liquidated and lost most of my BTC due to the LFG dump of BTC, I still did not blame them—until the point that evidence emerged to indicate: It seems that they used the BTC to give insider whales a golden parachute while Do Kwon was still promising a re-peg, then let smallholders with their life savings in UST take the plunge. Proof of malice is that a few days after Do Kwon publicly promised a re-peg, he announced his intent and his initial plan to hardfork the Terra blockchain to abandon the peg (among other badness).
If LFG only dumped the BTC to provide early exit liquidity so that insider whales could get out with their dollars (and I say this on the basis of high probability; I have not yet even tried to pass final judgment over the tangle of conflicting claims), then they weren’t even
trying to use Bitcoin as a reserve asset backstopping a currency peg! They just trashed the Bitcoin market (and caused liquidation of most of my BTC) as a means of worse scamming both UST bagholders, and LUNA bagholders whose investment was only valuable due to the peg. Such things cannot be prevented in a permissionless system—but it’s a crime, like stealing BTC is a crime even though Bitcoin
purposely has no way to grab back stolen coins.
However, taking what you said within its four corners:
If BTC cannot be sold as a reserve asset when needed, on-demand, then we need to tell people to stop buying BTC as a reserve asset. What if El Salvador has a national crisis, and they need to lean heavily on their reserves? Are they allowed to sell? If a country falls back on its gold reserves when it needs to, goldbugs don’t complain about that.
I want the world to embrace Bitcoin as a credible, reliable reserve asset. A friend of mine who hates Terra with fire thinks that Terra was attacked
only as a strategic manoeuvre to attack the whole concept of using BTC as a reserve. I wouldn’t go that far, but I actually do think that was one of several major motives.
Also, the casino nature of the "crypto" market, leads to great volitility and the association of Bitcoin as a "tech product" has it firmly in step with the Nasdaq chart at times.
Filed under, “Teach people that
Bitcoin is not a stock—Bitcoin is nothing like a stock.” It is a very large file.
Poll
