The Future of Cryptocurrency: A Contentionist Analysis

[CoinCube]

With cryptocurrency we appear to be on at the beginnings of something entirely new. There is no denying that the technology is both novel and potentially revolutionary. Its very nature threatens the long held government monopoly on currency. We indeed live in interesting times. Today we see new cryptocurrencies released on an almost daily basis. Will any of these be valuable? Will the instigator Bitcoin retain its value? The purpose of this post is to analyze cryptocurrency using the principles of Contentionism and make informed predictions about the role of cryptocurrency in the future.  To predict the future we must first fully grasp the present. Let’s start with a look at the strengths and weakness of the future contenders.

Centralized Electronic Fiat <---> Hybrid Currency <---> Anonymous Distributed Cryptocurrency

Electronic Fiat: Reports of my death have been greatly exaggerated
Fiat currency despite its bad press has strengths as well as weaknesses. Its advantages include easily reversible transactions with the ability to go to the court system in cases of fraud or theft. Theoretically (on a purely technical basis) fiat should be a comparatively a cheap system to run without the high cost of a proof of work system. These strengths are offset by some very large disadvantages. Electronic fiat is centralized with a single point of failure. It is non-anonymous  with significant implications regarding privacy. Its largest weakness, however, is that it can be (and is) debased at will by the central issuer.

Anonymous Distributed Cryptocurrency (ADC): The bane of centralized control
Such a currency is decentralized, anonymous, and untraceable. Decentralization removes the possibility of a single point of failure. Anonymity protects privacy concerns. Such a currency would be protected from any centralized debasement efforts and be essentially untaxable. As a small predictable debasement is desirable in a currency this could be done in a decentralized fashion. These benefits come at a price. The decentralized nature of the system requires expensive proof of work computations to protect the network. This must be paid for either via monetary inflation, or transaction fees.  Transaction times must also be slower than those of a fiat system. Finally, the direct challenge to tax collection may cause governments to outlaw these in some countries. Despite this it seems very possible that anonymous distributed cryptocurrency will come to dominate the virtual economy.

Hybrid Currency Systems:  A non-anonymous coin for the physical economy
Many cryptocurrencies will try to take a middle ground and hope to retain their decentralization while falling into line with regulation. Such a system will lose anonymity while (hopefully) retaining decentralization. If decentralization can be maintained it can be taxed but it cannot be debased by a central authority.  Lack of anonymity may open up the possibility for reversal of transactions (via mandated court order). Any such Hybrid system regardless of design will be vulnerable capture and forced conversion to electronic fiat (more on this below). If it can survive centralization efforts a hybrid system may come to dominate the physical economy.

Given these features what will be the use of each of these forms of currency in the future?

Electronic Fiat: Will likely be preferred for transactions that are high risk and have a high likelihood of transaction reversal. It will also be used to pay taxes. We need only look at the preference of ASIC buyers to use credit cards and the current low price of Bitcoins on MtGox to see this.

Anonymous Distributed Cryptocurrency: Will find a home in the virtual economy. It is likely to be used for nonphysical transactions and for small transaction with a limited need for reversibility. It will also be used for the purchase of illicit goods as well as a mechanism for tax avoidance. In times of government insanity (massive taxation, unrestrained fiat debasement, extra) such currencies will offer an escape hatch for those looking to flee centralized control.

Hybrid Currency Systems:  Hybrid systems will be decentralized but lacking anonymity will be inherently venerable to centralization and government capture. Sufficient government effort can force centralization of any non-anonymous system. Government will be loath to give up the power of money printing. It will thus have a strong tendency to capture any strong hybrid system so that it can be converted into electronic fiat. A Hybrid system can only survive if this tendency is checked.

Understanding the future possibilities is facilitated by an understanding of the underlying dynamics of Contentionism in the economy. Contentionism is the realization that socialism (top-down organization) must exist, while acknowledging the cyclical failures of socialism and the necessary counter-balancing force of anarchism. The concept of Contentionism is explored in depth in the Economic Devastation thread so I will refer readers there for further explanation.  

Future currencies are likely to trifurcate into one of the three classes discussed above. Value will likewise shift based on the underlying dynamic balance in the economy. In times of debt free responsible governance, fiat will be preferred and rise in relative value.  In times such as ours cryptocurrencies are likely to dominate. Governments will have the ability to destroy any successful hybrid system via forced conversion to electronic fiat. However to do so would force much of the value stored there into anonymous distributed cryptocurrencies (beyond government reach) this fact may or may not restrain government from attempting such actions.  

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[AnonyMint]

While I assume this thread is intended to analyze more from the political and social implications (since it is in the Politics & Society forum), we can't escape from the technical discussion entirely. I will clarify technical issues as follows.

Fiat's advantages include reversible transactions with the ability to go to the court system in the event of fraud or theft.

Multi-party signature in Bitcoin and contracts in Ethereum allow for escrow and reversible transactions. The court system is orthogonal to which currency is used.

Physically it is a comparatively a cheap system to run without the high cost of a proof of work system.

Not true. We have to pay for all the bloated government, VISA fees, and debt that central banking sustains. Proof-of-work is much less expensive. And electricity use is quite low.

Regulation makes the market predictable and acts to stabilize value.

Incorrect. Regulation makes everything less predictable because fitness is stomped on, e.g. Mt.Gox fiasco caused by regulation. Rather it is the liquidity (market cap and velocity) that make a currency predictable and stable. It may be that those have always been seen together in the past, thus people conflate them. But it doesn't mean an decentralized regulation of order (i.e. Proof-of-Work) couldn't become deep and liquid and fitness isn't stomped on because the degrees-of-freedom are unlimited still, thus being stable and reliable.

Electronic fiat ... is non-anonymous with significant implications regarding privacy.

Paper fiat was anonymous but the governments are phasing it out. (which is why I believe they introduced Bitcoin)

Its largest weakness, however, is that it can be debased at will by the central issuer leading to an erosion of value.

The erosion-of-value is a very positive and necessary function. The negative of central banking is the ability to direct where the debasement goes. It is crucially important to stop conflating these two. Seems all goldbugs are stuck in this conflation.

Goldtards are oblivious to that QTM equation!

Such a currency would be protected from any debasement efforts by a central authority as well as essentially untaxable.

The small, perpetual debasement could be done decentralized because it is HIGHLY desirable. What is not desirable is a central entity controlling and directing the debasement.

Goldtards are oblivious to that QTM equation!

This must be paid for either via inflation, or high transaction fees.

You mean monetary inflation a.k.a. debasement, not price inflation (study the Quantity Theory of Money, there can be price declines during debasment if V is declining and/or Q is rising). And I already explained that is desirable. I have also explained that transaction fees are not compatible with decentralization.

Goldtards are oblivious to that QTM equation!

Transaction times must also be slower than those of a fiat system.

I believe there can be a technical solution to make them fast enough (as in seconds).

Finally, the direct challenge to tax collection will likely cause governments to outlaw these in many countries.

Analogous to making downloading copyrighted music files illegal. Yet downloading of music files is proliferating even more every day. The single most dampening factor on downloading free copyrighted music files was iTunes and Amazon offering $0.50 to $1 per song downloads.
 

Will find a home in the virtual economy. It is likely to be used for nonphysical transactions

I think this will become 50% of the global economy in 20 years.

These currencies are likely to be a thorn in the side of government for the foreseeable future.

I think government will always prefer to go for low hanging fruit. They will tax the industrial and physical economy even more aggressively, thus driving the economy to the virtual Knowledge Age economy.

Government will be loath to give up the power of money printing. It will thus have a strong tendency to capture any strong hybrid system so that it can be converted into electronic fiat. A Hybrid system can only survive if this tendency is checked.

Not just governments but also the usurist capitalists and multinational corporations which can't compete in the coming Knowledge Age.

But this doesn't mean the Hybrid system dies rather it could grow as it integrates with that economy and becomes more centralized. In fact, Satoshi and the core developers have always expected that outcome, as I have seen them say so in posts in this forum (need to go digging for the link).

Contentionism is the realization that socialism (top-down governance) must exist, while acknowledging the cyclical failures of socialism and the necessary counter-balancing force of anarchism.

I thought we agree that some top-down organization is required but I expect this to become more granular and I did not agree that centralized governance will be needed ever again at the nation-state level.

https://bitcointalk.org/index.php?topic=365141.msg4897280#msg4897280
https://bitcointalk.org/index.php?topic=355212.msg5202870#msg5202870

What I see happening is the nation-states are being destroyed by the failure of socialism then the parasites (power vacuum) will move to global scale in order to increase its economies-of-scale (for the multinational corporations in the old-world industrial economy) to remain viable while the decentralized technologies will shred the nation-states to smithereens, and the top-down controls will be innumerable number of DAO (distributed autonomous corporations/organizations) usually just a few individuals each running them, with up to millions of customers each in the global market of 7 billion.

I do think eventually science learns how to tap the thoughts of the brain, then the world government can require an implant into the body and tax thought. So the oscillation between socialism and anarchism in contentionism will still be alive.

[CoinCube]

Some of the critiques above are the result of a lack of clarity in the OP rather then disagreement. I will clarify those areas and respond to the remaining areas of possible disagreement.

Fiat's advantages include reversible transactions with the ability to go to the court system in the event of fraud or theft.

Multi-party signature in Bitcoin and contracts in Ethereum allow for escrow and reversible transactions. The court system is orthogonal to which currency is used.

Perhaps but any transaction that might needs court intervention will need to be done in a non-anonymous way. Also at least for the immediate future the courts are likely to take fiat claims more seriously. I would argue that this is a current advantage of fiat although technology and case law in the court system may undermine this advantage over time.   

Physically it is a comparatively a cheap system to run without the high cost of a proof of work system.

Not true. We have to pay for all the bloated government, VISA fees, and debt that central banking sustains. Proof-of-work is much less expensive.

Correct but that is only our present condition. In theory without all the bloated government, VISA fees, and debt (stripped of all the fat) the actual technical cost to run a lean centralized fiat currency is (theoretically) cheaper then a decentralized cryptocurrency. I will concede that this condition is nothing like the world we live in today. The point I am making here is that in theory fiat may become cost competitive again in the (probably distant) future once the waste is stripped from the system. I will clarify the OP in this area.

Regulation makes the market predictable and acts to stabilize value.

Incorrect. Regulation makes everything less predictable because fitness is stomped on.

I concede this point and will remove that comment from the OP

Its largest weakness, however, is that it can be debased at will by the central issuer leading to an erosion of value.

The erosion-of-value is a very positive and necessary function. The negative of central banking is the ability to direct where the debasement goes. It is crucially important to stop conflating these two. Seems all goldbugs are stuck in this conflation.

I meant that centralized debasement at will was the greatest negative of fiat. I will try and clarify this in the OP
Likewise for the other comments about debasement. I agree that gradual debasement over time is a necessary function for a successful cryptocurrency.

Transaction times must also be slower than those of a fiat system.

I believe there can be a technical solution to make them fast enough (as in seconds).

No one to my knowledge had developed such a solution. Until they do the statement stands on its merits.

Contentionism is the realization that socialism (top-down governance) must exist, while acknowledging the cyclical failures of socialism and the necessary counter-balancing force of anarchism.

I thought we agree that some top-down organization is required but I expect this to become more granular and I did not agree that centralized governance will be needed ever again at the nation-state level.

https://bitcointalk.org/index.php?topic=365141.msg4897280#msg4897280
https://bitcointalk.org/index.php?topic=355212.msg5202870#msg5202870

We agree that top-down organization will shrink in relative size into the future perhaps after peaking first in the next few years. We have not fully explored just how much top-down organization is optimum or how quickly it will shrink. I suspect consensus on those issues would be difficult to obtain  
However, it is the broad trends rather then the minutia that are important.

[etm]

I wonder what the future holds since there's always going to be new altcoins. Will any one coin really benefit? If one becomes too popular, then a new one is launched to try and recreate it and make some money.

[Kaligulax]

Bitcoin is awesome as an economic experiment. Anyone who just ignores it is a fool because, no matter what, we will have some valuable lessons come out of it.

There are horror stories of people having their bitcoin-to-dollar transactions held up for months by the Magic-the-Gathering-exchange or just lose by Coinbase. I don’t know what fraction of the total those represent, but without decent regulation you have to prepare for the worst case.

[AnonyMint]

I wonder what the future holds since there's always going to be new altcoins. Will any one coin really benefit? If one becomes too popular, then a new one is launched to try and recreate it and make some money.

The market will not take seriously copycat altcoins, because the vast amount of development resources will be in the serious coin that was first and done right.

Markets demand a winner, because otherwise there is no value and the entire crypto-currency concept dies.

Although the barrier to entry for a new innovative altcoin is not insurmountable as I explained, the network efforts are such that an exact copycat is not a replacement good.

Thus most (but not all) of these altcoins are just pump-n-dump schemes and (possibly ephemeral) marketing manias analogous to Beanie Babies.

There are horror stories of people having their bitcoin-to-dollar transactions held up for months by the Magic-the-Gathering-exchange or just lose by Coinbase. I don’t know what fraction of the total those represent, but without decent regulation you have to prepare for the worst case.

How to do decentralized exchange.

[AnonyMint]

Fiat's advantages include reversible transactions with the ability to go to the court system in the event of fraud or theft.

Multi-party signature in Bitcoin and contracts in Ethereum allow for escrow and reversible transactions. The court system is orthogonal to which currency is used.

Perhaps but any transaction that might needs court intervention will need to be done in a non-anonymous way. Also at least for the immediate future the courts are likely to take fiat claims more seriously. I would argue that this is a current advantage of fiat although technology and case law in the court system may undermine this advantage over time.

Parties to a crypto-currency transaction can reveal their identities if they choose to. That can be stipulated in (even) a (decentralized) contract. It is also possible to envision civil courts making decisions based on the facts without identities of who did them.

I don't see any sustainable advantage, rather just a lack of understanding and development of the feature set in crypto-currencies at this time.

Physically it is a comparatively a cheap system to run without the high cost of a proof of work system.

Not true. We have to pay for all the bloated government, VISA fees, and debt that central banking sustains. Proof-of-work is much less expensive.

Correct but that is only our present condition. In theory without all the bloated government, VISA fees, and debt (stripped of all the fat) the actual technical cost to run a lean centralized fiat currency is (theoretically) cheaper then a decentralized cryptocurrency. I will concede that this condition is nothing like the world we live in today. The point I am making here is that in theory fiat may become cost competitive again in the (probably distant) future once the waste is stripped from the system. I will clarify the OP in this area.

Emphatically disagree.

The Communists always argue ideologically that it is more efficient to not have competition. However reality has proven their ideology to be more inefficient than decentralized competition.

Have you compared the uptime and reliability of a Microsoft server versus a Linux server. The Bazaar (decentralized, open source) model trumps the Cathedral (top-down, closed source) model for large scale systems. I wrote about this having the only known positive scaling law of software engineering. Only vertical markets such as finely tuned graphical software has so far resisted the Bazaar model.

On the issue of positive scaling laws, here follows some more links to read in addition to the one above:

https://bitcointalk.org/index.php?topic=365141.msg4896314#msg4896314
https://bitcointalk.org/index.php?topic=365141.msg4906024#msg4906024
https://bitcointalk.org/index.php?topic=365141.msg4906694#msg4906694
https://bitcointalk.org/index.php?topic=365141.msg4926212#msg4926212

I will repeat again, that I see the death of the nation-state ahead. The decentralized technology makes the nation-state irrelevant and in fact all the nation-states are very corrupt because THEY MUST BE. Decentralization technology terminates their lease on raison d'état.

Transaction times must also be slower than those of a fiat system.

I believe there can be a technical solution to make them fast enough (as in seconds).

No one to my knowledge had developed such a solution. Until they do the statement stands on its merits.

I have described technically how to do it.

[AnonyMint]

I can not think of any advantage for a top-down digital ("electronic" is not correct term, as digits can be written on paper wallets) fiat. Even it would enable the criminals to take over everything.

https://bitcointalk.org/index.php?topic=455141.msg5348879#msg5348879

To all those who say that anonymity will enable illegal activities, I remind them that so did cash. So should we eliminate physical cash and move to a state controlled digital currency in order to eliminate all crime? But my prior post about the DEEP STATE, shows that the criminals control the state! Ukraine is another evidence that all nation-states are corrupt. Come on Statistards, admit you are wrong!

I am pleased to see how the forum responded to the idiotic OP about "How do we prevent money laundering and assasinations?".

The bigger the cheese, the more mice who come to feed on it. If we put control of all the money in the hands of the state, the incentive is much larger for the criminals to go capture the state. This is why we have a DEEP STATE. There is no way to legislate or make a democracy that prevents this. You have to eliminate the cheese using a decentralized technology, so there is nothing for the criminals to go after.

[CoinCube]

Physically it is a comparatively a cheap system to run without the high cost of a proof of work system.

Not true. We have to pay for all the bloated government, VISA fees, and debt that central banking sustains. Proof-of-work is much less expensive.

Correct but that is only our present condition. In theory without all the bloated government, VISA fees, and debt (stripped of all the fat) the actual technical cost to run a lean centralized fiat currency is (theoretically) cheaper then a decentralized cryptocurrency. I will concede that this condition is nothing like the world we live in today. The point I am making here is that in theory fiat may become cost competitive again in the (probably distant) future once the waste is stripped from the system. I will clarify the OP in this area.

Emphatically disagree.

The Communists always argue ideologically that it is more efficient to not have competition. However reality has proven their ideology to be more inefficient than decentralized competition.

Have you compared the uptime and reliability of a Microsoft server versus a Linux server. The Bazaar (decentralized, open source) model trumps the Cathedral (top-down, closed source) model for large scale systems. I wrote about this having the only known positive scaling law of software engineering. Only vertical markets such as finely tuned graphical software has so far resisted the Bazaar model.

This appears to be our last remaining area of disagreement.
I am not arguing that fiat currency will in a utopian (communist like future) become dominate once the inefficiency is ironed out.
My argument is that in the future centralized fiat and decentralized anonymous cryptocurrencies are likely to both exist in competitive equilibrium.

The existence of this competition will drive progress forward in both currency types. Centralized fiat systems perhaps released by a world government or trusted corporation will try to copy the best ideas from the decentralized systems while attempting to leverage economies of scale (lack of proof of work, single server). These advantages will be offset by the the inefficiencies that occur with the cathedral model, the tendencies of all centralized systems to fail, and the power vacuum. Fiat currencies that successfully exploit economies of scale while restraining their natural tendency to abuse their vested authority may survive. Fiat currencies that do not will cease to exist as people vote with their feet and move to decentralized options.

Similarly, competition will drive progress forward for cryptocurrencies. As you pointed out many of the current advantages of fiat can eventually be replicated in cryptocurrencies through innovation. Competition with fiat will drive the transaction time for cryptocurrency down over time. Decentralized cryptocurrencies will undoubtably be safer stores of value without the risk of trusting a central issuer. This safety comes at the expense of directing monetary inflation to pay for proof of work.

I can not think of any advantage for a top-down digital ("electronic" is not correct term, as digits can be written on paper wallets) fiat. Even it would enable the criminals to take over everything.

The only advantage of a top-down digital currency is that it would allow some monetary inflation to be used for purposes other than proof of work. For example, monetary inflation could be used to pay for the necessary constraints on the dynamic system (aka pay for the cost of addressing market failures until a free market solution can be found). This efficiency can only be achieved, however, in the setting of a robust decentralized alternative or the fiat system will collapse for the reasons outlined in the Economic Devastation thread.      
  

[AnonyMint]

You want to find redeeming qualities in socialism. I rather see socialism as power vacuum for the criminals to capture and no redeemng qualities whatsoever. It is a necessary evil only because the physical economy can always be taxed and controlled with force.

As I explained in my prior post, I don't even think socialism reduces crime. In fact, the police are always the last on the crime scene and the USA has more people in jail than China (which has 4 times larger population and totalitarian governance).

Physically it is a comparatively a cheap system to run without the high cost of a proof of work system.

Not true. We have to pay for all the bloated government, VISA fees, and debt that central banking sustains. Proof-of-work is much less expensive.

Correct but that is only our present condition. In theory without all the bloated government, VISA fees, and debt (stripped of all the fat) the actual technical cost to run a lean centralized fiat currency is (theoretically) cheaper then a decentralized cryptocurrency. I will concede that this condition is nothing like the world we live in today. The point I am making here is that in theory fiat may become cost competitive again in the (probably distant) future once the waste is stripped from the system. I will clarify the OP in this area.

Emphatically disagree.

The Communists always argue ideologically that it is more efficient to not have competition. However reality has proven their ideology to be more inefficient than decentralized competition.

Have you compared the uptime and reliability of a Microsoft server versus a Linux server. The Bazaar (decentralized, open source) model trumps the Cathedral (top-down, closed source) model for large scale systems. I wrote about this having the only known positive scaling law of software engineering. Only vertical markets such as finely tuned graphical software has so far resisted the Bazaar model.

This appears to be our last remaining area of disagreement.
I am not arguing that fiat currency will in a utopian (communist like future) become dominate once the inefficiency is ironed out.
My argument is that in the future centralized fiat and decentralized anonymous cryptocurrencies are likely to both exist in competitive equilibrium.

Agreed.

But the only competitive advantage of fiat is force. Period.

http://esr.ibiblio.org/?p=5044&cpage=1#comment-411923

esr on 2013-09-26 at 16:49:08 said:

>Well, yes. I would say that. Governments are based on the threat and use of force, up to and including the killing and inevitable murder of the people they claim to be the governing.

This isn’t merely a contingent property of government, it’s the essential one. Read your Max Weber: a government is, definitionally, an organization which claims a monopoly on the legitimate use of physical force (thus, a monopoly on legal murder). Political science has failed to improve on this definition since it was proposed in 1919.

The existence of this competition will drive progress forward in both currency types. Centralized fiat systems perhaps released by a world government or trusted corporation will try to copy the best ideas from the decentralized systems while attempting to leverage economies of scale (lack of proof of work, single server).

Their economy-of-scale will never be technological! (you forget my point that unlike manual labor and fixed capital investment, knowledge production isn't fungible) Rather they will still control the industrial (physical) economy. And the multinationals will gobble up everything in the physical economy, because there is way too much overcapacity from this $150 trillion debt bubble, so the largest economies-of-scale will increase the efficiencies. They will be heavily employing robotics and computer automation too, once the debt bubble bursts 2016ish.

The world government will be for the physical economy. They will try to use their control over the physical economy to maintain dominance, i.e. monopolies and force.

The Knowledge Age will run by DAOs as I explained upthread.

Fiat currencies that successfully exploit economies of scale while restraining their natural tendency to abuse their their vested authority may survive.

They won't restrain themselves. Rather the physical economy is declining, so we have a release valve. This competition (which has always existed, e.g. my point about physical cash in prior post) is what will prevent them from destroying themselves too abruptly and allow the physical economy to die over decades.

I have postulated upthread that they might eventually tap into the brain and then be able to control and tax the Knowledge economy.

This safety comes at the expense of directing monetary inflation to pay for proof of work.

How many times have I explained that there is no expense. That is the way capital is redistributed from the usurists (top 1%) back to the producers (the 99%, represented by the cpu-only miners). Refer to my upthread links which expound on how large capital is dumb and can't raise economic production as fast as small capital can.

Without debasement, we end up with the 1% aggregating all wealth and a feudal Dark Age.

Edit: I see you edited your post.

The only advantage of a top-down digital currency is that it would allow some monetary inflation to be used for purposes other than proof of work. For example, monetary inflation could be used to pay for the necessary constraints on the dynamic system (aka pay for the cost of addressing market failures until a free market solution can be found). This efficiency can only be achieved, however, in the setting of a robust decentralized alternative or the fiat system will collapse for the reasons outlined in the Economic Devastation thread.

I have never seen a market failure that the government didn't make worse.

Most people don't know we had a depression in 1919, because it was over in 2 years because the government did nothing.

Whereas everyone knows about the Great Depression which lasted for decade and ended with World War 2. Americans were eating more butter, chicken, etc after 1929 and before FDR's New Deal. Then he fucked it all up by paying people to walk on the crops to destroy them and dig holes with spoons.

I agree to Contentionism only because socialism has the force to exist, yet I can't a single redeeming quality to government.

Maybe local community government I could agree with, but even then they appear to do more harm than good.

You are free to disagree with me. It is often difficult to argue ideology, because it is difficult to falsify the effects of government on market failures.

I suppose they meant to imply a Big Mac is a bad thing, but they failed miserably. Also methane is a fuel or can be synthesized into fertilizer.

Socialists are uneconomic.

Fat (even saturated) is a good thing. Fats from processed oils not good.  Virgin coconut and olive oil the best, all the soybean oil, corn oil, etc is deadly.

[CoinCube]

You want to find redeeming qualities in socialism. I rather see socialism as power vacuum for the criminals to capture and no redeeming qualities whatsoever.

I agree that a debate on the fundamental value of socialism vs anarchism could easily degenerate into a debate of ideology with both sides taking positions that are difficult to prove or falsify. I cannot resist adding, however, that the socialist position would start with your exact same quote with the mere substitution of the word anarchism for socialism. We agree that I am more socialist-leaning and you more anarchist-leaning. I strongly suspect that if we amused ourselves with such a debate it would eventually lead us right back to where we started (Contentionism) so lets set that aside for now and focus areas of disagreement more likely to be fruitful.  
  

Physically it (fiat) is a comparatively a cheap system to run without the high cost of a proof of work system.

Not true. We have to pay for all the bloated government, VISA fees, and debt that central banking sustains. Proof-of-work is much less expensive.

Correct but that is only our present condition. In theory... (stripped of all the fat) the actual technical cost to run a lean centralized fiat currency is (theoretically) cheaper.

Emphatically disagree.
The Communists always argue ideologically that it is more efficient to not have competition. However reality has proven their ideology to be more inefficient than decentralized competition...

My argument is that in the future centralized fiat and decentralized anonymous cryptocurrencies are likely to both exist in competitive equilibrium.

Agreed.
But the only competitive advantage of fiat is force. Period.

Force is not the only competitive advantage of digital fiat (although it may be the only competitive advantage of centralized government). Fiat is not limited to government. Potentially digital fiat can also try to leverage the opportunity cost associated with monetary debasement.

You argue that there is no cost associated with the monetary debasement via proof of work because this debasement is needed to redistribute from large capital concentrations back to producers. Furthermore you correctly argue that without such debasement, we end up with the 1% aggregating all wealth and a feudal Dark Age.

I agree with your conclusion regarding the need for debasement. However, you have failed to show that such debasement must be done entirely via proof of work. If there is a competitive alternative means of debasement then there is an opportunity cost in the process of directing all monetary debasement into proof of work.

I believe digital fiat can potentially capture some market share by leveraging this opportunity cost. Let me give you a theoretical example. Hypothesize that in the future currency is dominated by a distributed cryptocurrency with proof of work and an optimal monetary debasement rate. A well run non-profit could then introduce a centralized fiat CharityCoin. This coin would undoubtedly copy wholesale most of the features of the leading cryptocurrency (as you stated the advantages of centralized economies of scale will never be techonological). CharityCoin's would have the same rate of monetary debasement as the leading cryptocurrency, but without proof of work it could redirect that monetary debasement towards different ends. Some of that debasement would have to be given back to the currency holders to compensate them for the risk of holding a centralized asset (proof of stake type system). However, if CharityCoin can run a sufficiently lean open and trustworthy organization presumably some of CharityCoin's monetary debasement could be directed to pay for the goals of the organization in this hypothetical case welfare for the destitute. Similarly other fiat coins could also exist as long as they were well run and paid the currency holders (via monetary debasement) a sufficient premium to justify the risk of holding the coin.

Proof of work will not achieve the end goal of redistribution in the short term. As long as the 1% have a cartel on the energy industry they will still be able to redirect most of the gains from a proof of work monetary debasement back to themselves. I believe that a proof of work currency system will facilitate the gradual erosion of this cartel over time but this process is likely to take decades. Until the cartel is dismantled proof of of work will not effectively perform the redistribution function and this will need to be done via socialism.

      

[AnonyMint]

You want to find redeeming qualities in socialism. I rather see socialism as power vacuum for the criminals to capture and no redeeming qualities whatsoever.

I agree that a debate on the fundamental value of socialism vs anarchism could easily degenerate into a debate of ideology with both sides taking positions that are difficult to prove or falsify. I cannot resist adding, however, that the socialist position would start with your exact same quote with the mere substitution of the word anarchism for socialism.

The difference is that only about 2.5% of the population is habitually criminal (sociopaths), thus anarchism allows them to do only 2.5% damage because it is akin to having to go personally shoot each person they want to kill, whereas socialism enables them to take 100% control top-down and they can induce the society to kill itself.

Thus for me, I take anarchism.

(I might just convince you, since you are a rational person)

We agree that I am more socialist-leaning and you more anarchist-leaning. I strongly suspect that if we amused ourselves with such a debate it would eventually lead us right back to where we started (Contentionism) so lets set that aside for now and focus areas of disagreement more likely to be fruitful.

We can try, but I am afraid the discussion of the merits of fiat devolves again. My rebuttal is that charities are corrupt too, especially as they grow larger. And a currency needs to be large (widely accepted) otherwise no one will use it. When ever we dangle the cheese of top-down control of resources, the 2.5% come sniffing around. I wrote upthread, that I might agree to localized (small scale) governance (and charity and engineering designs of new altcoins, etc, i.e. highly granular top-down controllers).

This government and bank inflicted fiasco has shown with strong likelihood that Bitcoin is not going to remain a decentralized currency. However that doesn't necessarily imply a lower price. Might grow faster with regulation and centralized control, especially until at least 2015 or so when the bail-ins (confiscations) start and regulation is instead seen more and more as a trap. For the moment, the masses are blissful frogs boiling in the pot.