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It's interesting to see how this is playing out. Libertarians have long argued that government-issued fiat currency is a tool of state oppression. Now we have

It's interesting to see how this is playing out. Libertarians have long argued that government-issued fiat currency is a tool of state oppression. Now we have a real-world experiment demonstrating on a grand scale what happens when you create a currency by consensual fiat. I'd be interested to hear what libertarians think about this: Is Bitcoin truly the kind of currency libertarians have been advocating? Have I mischaracterized the libertarian position? What do you think about the concentration of Bitcoins in the hands of a small number of people? Where is this experiment going in the long run?

nnash 9y ago
Considering the difficulty involved in even buying bitcoin I'd have to say no. If you want to make a sizeable investment you need to hand over large amounts of personal data to an exchange. I'm talking the works; routing number, passport, proof of residency etc. I should be able to simply walk to a BTC ATM put cash in and add it to a wallet on my phone (perhaps you can in some places?). Additionally, exchanges like Coinbase are required to report any transaction over 20,000USD to the IRS. Fiat cash is much less of a PITA.
- whoopdedo 9y ago
  Or just pay more to move your money into a country that doesn't care about such things, then buy it truly anonymously. Or mine it if you have access to cheap electricity and can afford the equipment to be near the top in hashing speed. In either case, you can see how Bitcoin wealth is biased to people with lots of fiat to begin with. I question if there could be any new currency that would not suffer the same inequality.
jjaredsimpson 9y ago
Also since a large number of coins are lost the 40% number understates the size of the whales. Estimates are that 20% of coins are simply lost for good.
- vibrio 9y ago
  This is interesting but my understanding of blockchain is limited so: Aren't all transactions 'encoded' in the blockchain? If so why can't the coins be found? If not, what does the blockchain "record"?
  - dcdanko 9y ago
    Very small transaction outputs can't be used in practice because they're less than the required transaction fee.
  - drhayes9 9y ago
    If the private keys corresponding to the coins are lost then the coins are, for all intents and purposes, lost. They can't be sold, moved around, etc.
  - Spivak 9y ago
    The coins are there but since the private key for the wallet that is assigned ownership of them is lost they're effectively gone. They could in theory be 'reclaimed' with a majority of mining power but it's hard to tell if coins are lost or their owners are just idle.
- Matt_Mickiewicz 9y ago
  Up to 25% lost for good according to this source: https://letstalkbitcoin.com/blog/post/rise-of-the-zombie-bitcoins https://letstalkbitcoin.com/blog/post/rise-of-the-zombie-bit... & https://seekingalpha.com/article/4082979-many-bitcoins-lost-forever https://seekingalpha.com/article/4082979-many-bitcoins-lost-... Also many wallets are simply unspendable due to transaction costs.
drcode 9y ago
It seems like every currency is going to have a power-law distribution of holders, whether it's Bitcoin or USD. I don't see how that undercuts the libertarian desire for currencies without central control.
- soVeryTired 9y ago
  No central control assuming you ignore the mining pools.
lancebeet 9y ago
I don't understand the dilemma. Nobody is forcing you to use bitcoin and it's still an incredibly small market in the grand scheme of things. The libertarian position is (generally) that government mandated fiat currency is a tool of state oppression. No such force exists when it comes to bitcoin, and if people are unhappy with the concentration of bitcoin in the hands of a small number of people, they are free to use any other currency.
- frgtpsswrdlame 9y ago
  What's the difference between a government manipulating a currency and a cabal of wealthy individuals manipulating a currency? Or is your problem mainly that businesses have to accept dollars?
  - yock 9y ago
    It isn't illegal to circumvent the cabal by agreeing to use a different currency. The sole goal of currency is a common medium of exchange. If that common medium is being manipulated then the market will perceive that as damage and route around it.
    - frgtpsswrdlame 9y ago
      >If that common medium is being manipulated then the market will perceive that as damage and route around it. Isn't that basically the problem with bitcoin though? We can't perceive if it's being manipulated or not. E: Actually that brings up another issue for me. Wouldn't that just be a run on the currency? So the last people to get out of manipu-coins are the ones stuck holding the bag?
      - yock 9y ago
        The currency is still just a medium of exchange. If the value crashes and some are left "holding the bag" as you say, then those left holding currency could still exchange with one another. No system promises that its actors will behave morally. What we're talking about is whether or not you fundamentally believe that government can and should exert force on the market. Those of us who believe they should not don't see a perfect and moral market on the other side, we just would prefer to exchange problems of force and authority with problems of interpersonal relationships.
tachyonbeam 9y ago
I Am Not a Libertarian but a few thoughts come to mind. Bitcoin is just about as close to the libertarian ideal as you can practically get in this world. The two main flaws that I can see is that it's not as anonymous as it could be, and many governments have already imposed a number of burdensome regulations which prevent people from using bitcoin as they see fit. More anonymity would get around those regulations to some extent (not saying that I agree with doing that, it's just the pedestrian reality). WRT most of the wealth being held by a small number of people, I think it's inevitable that power structures like this arise in human societies. If you leave things unchecked, some people will acquire way more wealth than others. Doing away with regulations will likely only make that worse, not better. I'm more of a socialist, so I would prefer that we somehow limit the amount of wealth that a single individual can hold, because it gives them a tremendously unfair amount of control over the destiny of humanity as a whole.
- oreo81 9y ago
  So if someone would acquire more wealth than this "limit" you think it's okay to steal it from them? How is theft morally acceptable?
- pascalxus 9y ago
  I am a libertarian. I can tell you, for a law abiding citizen, bitcoin is no better than a dollar. You still have to pay taxes on it, report it to the IRS and it's still subject to whatever regulations the government wants to put on it, for example 10k/20k reporting requirements, etc. If the gov wants your money, they will find you, one way or another.
metalliqaz 9y ago
I have a very difficult time separating "true" libertarians with members of libertarian parties. Like people don't readily give up how pragmatic they are. On one end, there seem to be people who really yearn for pure individual freedom with no government at all. I'm pretty sure that was tried for the first 50,000 years of humanity and the results are well documented. (spoiler, for populations larger than ~100 people, your chance of ending up a king's subject is >99%) The other end doesn't seem to mean anything concrete, other than a distaste for OSHA or environmental laws. Anyway, I think most Libertarians would be cool with a handful of ultra-wealthy, because they really think they can conquer the market someday and be one of them.
- ryanwaggoner 9y ago
  I consider myself a pragmatic libertarian, which off the top of my head basically means that: 1. I believe very strongly in the sovereignty of the individual. 2. I prefer more open and incentive-driven markets. 3. I’m skeptical of governments, particularly large and powerful ones, because they’re inefficient, rely on coercion, and are too tempting as prizes to be captured for power, prestige, and wealth. However, these are all on a spectrum and I’m open to trying other points along that spectrum if they work better than our current system. I also recognize that the optimal system may be too distant from where we are today to even move towards it directly. So for healthcare for example, our system is dreadful, but I’m not sure that pure free markets would be better. But I’d strongly prefer a public option (and maybe even single payer), or a well-designed hybrid system like Singapore or Switzerland has to fully nationalized healthcare like UK. Similarly, I’m open to trying basic income, a land value or VAT instead of income tax, and other alternative systems. I’m particularly in favor of systems that are more stable and resistant to changing from the whims of the current government. I personally don’t understand how anyone who thinks the government is awesome can continue to believe that when they watch episode after episode of unchecked police brutality, or constant encroachments on civil liberties, or the entire Trump administration.
  - vidarh 9y ago
    The UK doesn't have fully nationalized healthcare. * GP surgeries (doctors offices) are private businesses, and may provide NHS services or private services. * The NHS contracts out for a growing number of services, ranging from operating whole departments (e.g. Virgin operates the out-of-hours walk in centre for non-emergency care next door to the A&E/ER at my local hospital) to cleaning. * The NHS rents out facilities to private providers, and individual NHS trusts may derive income from carrying out private work (though the proportion of this income is limited, and the revenue goes back into their budgets). This is in addition to NHS staff often renting NHS facilities to carry out private surgeries outside their normal rotation. * Dentists are mostly private and generally dentists that do NHS work also do private work, and often mix and match with the same patient (e.g. the NHS does not reimburse more expensive types of fillings, so your dentist may recommend e.g. things like porcelain veneers on visible teeth and stick to NHS options for less visible work). * Pharmacies are mostly private - the NHS mostly operates pharmacies only in hospitals etc. but they too can be privately operated. * 10% of the population have private health insurance. This is mostly "top up" insurance offering additional services or faster turnaround for non-essential surgeries etc. than the NHS. * Many types of healthcare services are mostly private. E.g. while you can get some types of cosmetic surgery on the NHS As it stands, the NHS is the most cost-effective hybrid or private system in any developed country. Too cost-effective some would say; to the point where it comes at the cost of making things more miserable for patients. But that's what you get when we pay far less than any other countries at a comparable income level.
empath75 9y ago
It'll be interesting to see what happens when a few people own 90% of the bitcoin and everyone else just sort of shrugs and starts using a new cryptocurrency, instead.
- randlet 9y ago
  This is what I don't understand. In the hypothetical case where we switch to using bitcoin won't early adopters be the only people with money? What about the 99.9(9?)% of the population who don't own any bitcoins?
  - icebraining 9y ago
    How are you thinking the switch would occur? It's not like the "old" currencies will suddenly lose their value, you'll be able to exchange them for a long time. Plus, most people don't own that much currency anyway; they either get a paycheck (which can start coming in BTC) or an asset like a house, which is valuable in any currency.
    - jerkstate 9y ago
      USD has already declined in value 3x over the past 6 weeks, compared to BTC
      - fnovd 9y ago
        Everything has declined in value over the past 6 weeks compared to BTC.
      - empath75 9y ago
        The value of the dollar has declined a few hundred percent vs the price of nvidia stock in the past year, too. I'm not really sure that sort of comparison makes sense.
    - randlet 9y ago
      When I said "only people with money" I meant "meaningful amount of money" but I can see what you're saying. I'm not sure what I'm struggling with about the concept...time for me to do some more reading / thinking.
deleted 9y ago
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Klathmon 9y ago
I'm no libertarian, but wouldn't the fact that you can buy bitcoins with traditional fiat currency throw a wrench in this being a valid experiment? Since anyone that received an "unfair advantage" with government-issued fiat can turn around and use it to get an unfair advantage in bitcoin as well?
- zardo 9y ago
  So in order for libertarian society to work as desired we first have to... evenly distribute the wealth? I don't think we'll find any libertarians taking that position.
  - deleted 9y ago
    [deleted]
  - Nuzzerino 9y ago
    Does even (or rather, less uneven) distribution of wealth imply involuntary coercion? I don't think it has to.
    - vidarh 9y ago
      The person who coined the term libertarian (Joseph Dejacques) argued that all property rights were restrictions on freedom, and for even distribution of not just wealth but income, on the basis of an ideal where maximizing liberty was the most important goal. But right-wing libertarianism prioritize property rights over liberty.
    - knieveltech 9y ago
      You assert there are conditions under which the oligarchs would relinquish some portion of their holdings voluntarily?
      - Nuzzerino 9y ago
        If the holdings were devalued on the market, does that qualify as involuntary relinquishment?
proto-n 9y ago
There's something that must be mentioned here: there are multiple visions for what bitcoin should be. Probably with much oversimplification, but as unbiased as I can be: One side wants bitcoin to be a decentralized store of value, untraceable, unseizable, a safe heaven for your wealth that's completely permissionless to use. The other side wants bitcoin to be a currency for the day-to-day life that is cheap to use, a global currency to escape the (possibly shitty) fiat issued by your state and the banking system. Basically money for "the other 6 billion people" or "the unbanked" or whoever else that needs it. The two visions don't contradict each other, however they have different priorities, and they make different technological compromises when faced with a problem (decentralized scaling). This doesn't take away anything from your question, but one has to consider this divide when looking for answers.
- mbrock 9y ago
  Multiple competing privately issued currencies is also a trope of libertarianism; people refer a lot to Hayek's The Denationalization of Money.
  - paulgb 9y ago
    I've written about why I think this is a disingenuous comparison: https://paulbutler.org/archives/stop-dragging-hayek-into-bitcoin/ https://paulbutler.org/archives/stop-dragging-hayek-into-bit...
    - mbrock 9y ago
      I don't claim that Bitcoin is a winner according to the criteria set out by Hayek, in fact it's obviously problematic as a unit of account as you explain. The various decentralized stablecoin projects (disclaimer: I'm involved with one of them, MakerDAO) attempt to create competitive currency as laid out by Hayek, using collateralization and continual supply/demand tweaks to encourage a stable market price. From that perspective, Bitcoin is indeed more like a trailblazer and a collectible precious metal, and not a serious contender for actual currency status. Still, it seems to have an important role in the ecosystem of denationalized currency.
testvox 9y ago
If they are good stewards of the money and invest it well then they will keep it and we all gain from their investments. If not they lose it and someone, hopefully more responsible will have it. In the long run the right people (those who can make profitable investments) will have control over capital.
- piva00 9y ago
  Can you clarify what is your definition of "right people" in this specific case?
- EGreg 9y ago
  How do you know being a good steward of that money doesn't mean just hoarding it and doing nothing? Bitcoin encourages hoarding while it's going up. Who knows where this runaway phenomenon will lead. At least the dollars and euros exchanged for it don't go anywhere. Bitcoin has fast become a store of value and redistribution of the world's wealth to early adopters, as any new fixed money supply would be.
clarkmoody 9y ago
Government-issued currencies usually come with legal tender laws and citizens are required to pay taxes using the government money. Since taxes are not voluntary, this creates built-in demand for the fiat money. The creators of alternative competitor-money are punished as well. The libertarian position is that human interactions should be voluntary, so the coercion problem is where libertarians find issue first. A side note here about capital controls: Bitcoin allows money to be borderless, which is natural. Capital controls are an artificial construct of the state, often used to prop up the perpetually failing fiat money. The second issue is economic. When the money supply of your currency is not constrained (by gold, or otherwise), then it inevitably inflates, often unpredictably and uncontrollably. The death of a fiat money usually has disastrous effects on the people, especially on the poor. Unfortunately, fiat money has a short lifespan, on average. The libertarian position on wealth inequality is that as long as the distribution of wealth was determined voluntarily (without state privilege, in particular), then there is no problem. Bitcoin is such a system: all participation in Bitcoin has been voluntary. Early adopters took a big risk on a fledgling technology, and some have been rewarded with handsome returns. Early writing about cypherpunk money usually mentions anonymity, which Bitcoin does not have (yet). > Where is this experiment going in the long run? Isn't that the trillion-dollar question? :-)
- Nursie 9y ago
  >> Early adopters took a big risk on a fledgling technology I can't agree with that. Early adopters really didn't take a lot of risk, they ran a mining program for a while, or bought some BTC for a few cents to a few dollars.
  - clarkmoody 9y ago
    In some countries, Bitcoin has been outlawed. Owning stuff the government doesn't like is certainly a risk. They also endured 90% drops in value from early peaks to troughs. Bitcoin could have gone to zero at any point if the system had failed. (It still could) Some invested time learning about new technology that could've gone nowhere.
    - 9y ago
api 9y ago
I'm a bit of a lower-case-l libertarian and will chime in. I don't see Bitcoin as ideal. I think its greatest weakness is that it's insanely deflationary, even worse than gold. But then again I'm not among those libertarians who dismiss the whole of Keynes or modern finance. I don't agree with Keynes on everything but he made some tremendously important observations. The big one is the velocity of money and the idea that money is a verb, not a noun. If you get this then you get 90% of the good parts of Keynes. The other issue with Bitcoin is proof of work. It's wasteful as hell (PoW also stands for proof of waste) and also inherently biases the system toward oligopoly. Proof of work is subject to industrial economies of scale, leading inevitably to consolidation. Proof of stake isn't perfect either. It's plutocratic, but then again so is proof of work since hardware costs money. It's a marginal improvement but not ideal. I don't think the ideal proof function has been discovered. It would be something that allowed anyone to "mine" with an acceptable but not excessive amount of overhead and that didn't contain strong systematic biases toward oligopoly. The ideal currency would be one that could actually do the beneficial things central banks do but without the central bank. While Bitcoin is not going to do that, I don't see that as impossible. Bitcoin is really the first viable MVP of something I've heard best described as "software defined money." Software can be programmed to do a lot of things, so maybe software defined money could be programmed to do what central banks do but without a central authority. In other words: if we can represent an ideal central bank mathematically then we can encode it into software. Imagine a currency that automatically "dropped money from helicopters" when monetary velocity fell, etc. Figuring out how to make this not game-able of course is hard as hell but it's probably solvable. My problem with central banking is political and ethical. The moral hazard is simply enormous. IMHO the Federal Reserve is a fourth branch of government and one with only minimal democratic oversight. Placing fiat currency printing directly in the hands of government is dangerous though, so you're kind of damned either way. The 2008 financial crash is a very good test case. In 2008 and the ensuing bailout years it became absolutely obvious to me that the degree to which you were saved from the crash was proportional to things like what school you went to (Ivy League, with a hierarchy there topped by Harvard and Yale) and how closely connected you were politically to the Fed and the center of the New York and Washington political power elites. (Side note: those who have never lived on the East Coast probably don't understand the school hierarchy. What school you went to determines your social caste forever. It's a major reason I now live on the West Sieeeed.) This always happens -- always -- when humans are in charge of stuff. It doesn't even require a conscious conspiracy or even a conscious sense of bias. It emerges from stuff like Dunbar's number and how humans weight things in decision making. If you are human you are racist, classist, sexist, and everything-else-ist. To claim otherwise is to be a liar or to not know thyself. Meat brains are not rational and suck at statistics. The second deeper problem with central banks is that the system of interest rate setting and money lending is inherently feudal. Central banks set a base rate but you or I cannot borrow at this rate. We have to borrow from a bank at a higher rate. The interest I pay contains a plain vanilla handout to banks in proportion to their social distance from the Fed. I understand some of the technical rationale for this but it's deeply and systematically unjust. A major side effect of this system is that every time there's a recession things like QE end up being wealth transfers to the top and in proportion to social connectedness to the Fed's governing elite. So every time the economy contracts the oligarchy is strengthened. It's easy to see the incentives this creates and they're perverse in the extreme. Top economic elites now have an incentive to mismanage the economy. So the bottom line is that I like the innovation Bitcoin represents but I see it as only an alpha proof of concept. Bitcoin as it is today is a bubble and is probably going to fail. It seems to be undergoing a deflationary collapse right now. Even if it survives this it is technically unable to scale to the size required for global monetary use. Ethereum is a little better but still not ideal, and some of the people involved seem wonky. Most ICOs seem like straight up scams, which is not encouraging. Of course fiat money systems are riddled with pink sheet pump and dumps and Ponzi schemes and other scams so I guess that's just a thing. "All mature ecosystems contain parasites." The core invention of software defined money and distributed byzantine consensus is an absolutely revolutionary innovation and is going to change the world.
pascalxus 9y ago
I don't think that Bitcoin is inherently favored by Libertarians. Ultimately, you pay the same amount of taxes on bitcoin as any other capital gain, so it's irrelevant.
spookthesunset 9y ago
One thing I never see discussed is if Bitcoin were to truly become mainstream, it would require "the mainstream" to purchase all of their Bitcoin from existing holders. In essence, all of the people who got in early get to decide who does and does not get to participate in this hypothetical Bitcoin-based future. Setting aside all the other issues with Bitcoin (scaling, energy use, volatility) it seems like this would be a major issue if Bitcoin was ever on the precipice to being considered "mainstream". People would most likely strongly object to having to go purchase bitcoin from a bunch of people who bought in early in order to continue functioning in their lives. It is one of the big, largely undiscussed, reasons I believe that Bitcoin will never truly catch on.
apeace 9y ago
Bitcoin isn't a fiat currency. It has intrinsic value in the same way that gold does, because it's fungible, divisible, transportable, impossible to counterfeit, etc. So in that sense, I think the answer to your question is yes: Bitcoin is the kind of currency libertarians have been advocating for. However, I think it's a bit early in the life of cryptocurrencies to make any evaluation about how the experiment is going. To understand why libertarians obsess over currency, I recommend one look at some history[1] instead, and see that fiat currencies have long been associated with war, oppression, and corruption. To answer your last question, I don't think cryptocurrencies will actually be used unless there is a need for them. If inflation in the U.S. becomes extreme, for example, people will naturally flood to cryptocurrencies as a better store of value and/or way of transporting value. There have already been examples of that happening in countries with currency problems, such as in 2015 when many Argentinians began experimenting with Bitcoin[2]. But for the foreseeable future, most people will probably not notice any big problems using their local currency, and so they will continue to do so. I personally don't think Bitcoin will last. Instead, another cryptocurrency will take over. Probably many will take turns over the years. [1] https://en.wikipedia.org/wiki/A_History_of_Money_and_Banking_in_the_United_States https://en.wikipedia.org/wiki/A_History_of_Money_and_Banking... [2] https://www.nytimes.com/2015/05/03/magazine/how-bitcoin-is-disrupting-argentinas-economy.html https://www.nytimes.com/2015/05/03/magazine/how-bitcoin-is-d...
tomxor 9y ago
I understand your point, but i'm not sure it applies to bitcoin anymore... it has become a trading currency, a weird sort of stock, it's not a buying currency, so I don't think your argument fully applies. At the most it applies as a storage of wealth, but not as a purchasing power, because it's completely impractical to buy actual stuff with due to transaction cost.
Chris_Jay 9y ago
I would say that wealth concentrating in a small number of hands is not a surprising outcome, nor is it a dynamic anyone with libertarian leanings can really be uncomfortable with. I'll admit I'm unpleasantly surprised by how quickly it happened. I would say that cryptocurrency has one advantage over traditional systems of money in that it governs with the consent of the governed - if the richest 4% of the cryptocurrency world become too aggressive and stifle innovation to protect their status, cryptocurrency's nature makes it very easy for the other 96% to take their ball and play elsewhere. There have been several 'hard fork' moments already (Bitcoin Cash, Ethereum Classic, etc) and what the majority of people went with was mostly determined by who inspired their confidence. I don't think Greenspan or Yellen could have gotten the majority of miners to switch to their system, that takes the confidence of the majority. So to answer your last question - I would expect the experiment to lead to a more brutal and cutthroat competition than we are used to, but I also expect the rules to be more fairly enforced, and the incentives of the rich and the rest to self-correct if they begin to diverge. I can't speak for other libertarians, but for me, finding that tradeoff worth it is what it means to be a libertarian. How clear-eyed I am about the costs I couldn't guess.
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em3rgent0rdr 9y ago
> "What do you think about the concentration of Bitcoins in the hands of a small number of people?" It should be emphasized that bitcoins don't have a fixed value (bitcoin can't force an exchange rate), and that anyone can created a competing currency (bitcoin can't force people to accept bitcoin). So although bitcoins may be concentrated, that doesn't necessarily mean that wealth is being concentrated. A lot of (non-libertarians particularly) mistakenly conflate currency with wealth.

nnash 9y ago

Considering the difficulty involved in even buying bitcoin I'd have to say no. If you want to make a sizeable investment you need to hand over large amounts of personal data to an exchange. I'm talking the works; routing number, passport, proof of residency etc. I should be able to simply walk to a BTC ATM put cash in and add it to a wallet on my phone (perhaps you can in some places?). Additionally, exchanges like Coinbase are required to report any transaction over 20,000USD to the IRS. Fiat cash is much less of a PITA.

whoopdedo 9y ago
Or just pay more to move your money into a country that doesn't care about such things, then buy it truly anonymously. Or mine it if you have access to cheap electricity and can afford the equipment to be near the top in hashing speed. In either case, you can see how Bitcoin wealth is biased to people with lots of fiat to begin with. I question if there could be any new currency that would not suffer the same inequality.

jjaredsimpson 9y ago

Also since a large number of coins are lost the 40% number understates the size of the whales. Estimates are that 20% of coins are simply lost for good.

vibrio 9y ago
This is interesting but my understanding of blockchain is limited so: Aren't all transactions 'encoded' in the blockchain? If so why can't the coins be found? If not, what does the blockchain "record"?
- dcdanko 9y ago
  Very small transaction outputs can't be used in practice because they're less than the required transaction fee.
- drhayes9 9y ago
  If the private keys corresponding to the coins are lost then the coins are, for all intents and purposes, lost. They can't be sold, moved around, etc.
- Spivak 9y ago
  The coins are there but since the private key for the wallet that is assigned ownership of them is lost they're effectively gone. They could in theory be 'reclaimed' with a majority of mining power but it's hard to tell if coins are lost or their owners are just idle.
Matt_Mickiewicz 9y ago
Up to 25% lost for good according to this source: https://letstalkbitcoin.com/blog/post/rise-of-the-zombie-bitcoins https://letstalkbitcoin.com/blog/post/rise-of-the-zombie-bit... & https://seekingalpha.com/article/4082979-many-bitcoins-lost-forever https://seekingalpha.com/article/4082979-many-bitcoins-lost-... Also many wallets are simply unspendable due to transaction costs.

drcode 9y ago

It seems like every currency is going to have a power-law distribution of holders, whether it's Bitcoin or USD. I don't see how that undercuts the libertarian desire for currencies without central control.

soVeryTired 9y ago
No central control assuming you ignore the mining pools.

lancebeet 9y ago

I don't understand the dilemma. Nobody is forcing you to use bitcoin and it's still an incredibly small market in the grand scheme of things. The libertarian position is (generally) that government mandated fiat currency is a tool of state oppression. No such force exists when it comes to bitcoin, and if people are unhappy with the concentration of bitcoin in the hands of a small number of people, they are free to use any other currency.

frgtpsswrdlame 9y ago
What's the difference between a government manipulating a currency and a cabal of wealthy individuals manipulating a currency? Or is your problem mainly that businesses have to accept dollars?
- yock 9y ago
  It isn't illegal to circumvent the cabal by agreeing to use a different currency. The sole goal of currency is a common medium of exchange. If that common medium is being manipulated then the market will perceive that as damage and route around it.
  - frgtpsswrdlame 9y ago
    >If that common medium is being manipulated then the market will perceive that as damage and route around it. Isn't that basically the problem with bitcoin though? We can't perceive if it's being manipulated or not. E: Actually that brings up another issue for me. Wouldn't that just be a run on the currency? So the last people to get out of manipu-coins are the ones stuck holding the bag?
    - yock 9y ago
      The currency is still just a medium of exchange. If the value crashes and some are left "holding the bag" as you say, then those left holding currency could still exchange with one another. No system promises that its actors will behave morally. What we're talking about is whether or not you fundamentally believe that government can and should exert force on the market. Those of us who believe they should not don't see a perfect and moral market on the other side, we just would prefer to exchange problems of force and authority with problems of interpersonal relationships.

tachyonbeam 9y ago

I Am Not a Libertarian but a few thoughts come to mind. Bitcoin is just about as close to the libertarian ideal as you can practically get in this world. The two main flaws that I can see is that it's not as anonymous as it could be, and many governments have already imposed a number of burdensome regulations which prevent people from using bitcoin as they see fit. More anonymity would get around those regulations to some extent (not saying that I agree with doing that, it's just the pedestrian reality). WRT most of the wealth being held by a small number of people, I think it's inevitable that power structures like this arise in human societies. If you leave things unchecked, some people will acquire way more wealth than others. Doing away with regulations will likely only make that worse, not better. I'm more of a socialist, so I would prefer that we somehow limit the amount of wealth that a single individual can hold, because it gives them a tremendously unfair amount of control over the destiny of humanity as a whole.

oreo81 9y ago
So if someone would acquire more wealth than this "limit" you think it's okay to steal it from them? How is theft morally acceptable?
pascalxus 9y ago
I am a libertarian. I can tell you, for a law abiding citizen, bitcoin is no better than a dollar. You still have to pay taxes on it, report it to the IRS and it's still subject to whatever regulations the government wants to put on it, for example 10k/20k reporting requirements, etc. If the gov wants your money, they will find you, one way or another.

metalliqaz 9y ago

I have a very difficult time separating "true" libertarians with members of libertarian parties. Like people don't readily give up how pragmatic they are. On one end, there seem to be people who really yearn for pure individual freedom with no government at all. I'm pretty sure that was tried for the first 50,000 years of humanity and the results are well documented. (spoiler, for populations larger than ~100 people, your chance of ending up a king's subject is >99%) The other end doesn't seem to mean anything concrete, other than a distaste for OSHA or environmental laws. Anyway, I think most Libertarians would be cool with a handful of ultra-wealthy, because they really think they can conquer the market someday and be one of them.

ryanwaggoner 9y ago
I consider myself a pragmatic libertarian, which off the top of my head basically means that: 1. I believe very strongly in the sovereignty of the individual. 2. I prefer more open and incentive-driven markets. 3. I’m skeptical of governments, particularly large and powerful ones, because they’re inefficient, rely on coercion, and are too tempting as prizes to be captured for power, prestige, and wealth. However, these are all on a spectrum and I’m open to trying other points along that spectrum if they work better than our current system. I also recognize that the optimal system may be too distant from where we are today to even move towards it directly. So for healthcare for example, our system is dreadful, but I’m not sure that pure free markets would be better. But I’d strongly prefer a public option (and maybe even single payer), or a well-designed hybrid system like Singapore or Switzerland has to fully nationalized healthcare like UK. Similarly, I’m open to trying basic income, a land value or VAT instead of income tax, and other alternative systems. I’m particularly in favor of systems that are more stable and resistant to changing from the whims of the current government. I personally don’t understand how anyone who thinks the government is awesome can continue to believe that when they watch episode after episode of unchecked police brutality, or constant encroachments on civil liberties, or the entire Trump administration.
- vidarh 9y ago
  The UK doesn't have fully nationalized healthcare. * GP surgeries (doctors offices) are private businesses, and may provide NHS services or private services. * The NHS contracts out for a growing number of services, ranging from operating whole departments (e.g. Virgin operates the out-of-hours walk in centre for non-emergency care next door to the A&E/ER at my local hospital) to cleaning. * The NHS rents out facilities to private providers, and individual NHS trusts may derive income from carrying out private work (though the proportion of this income is limited, and the revenue goes back into their budgets). This is in addition to NHS staff often renting NHS facilities to carry out private surgeries outside their normal rotation. * Dentists are mostly private and generally dentists that do NHS work also do private work, and often mix and match with the same patient (e.g. the NHS does not reimburse more expensive types of fillings, so your dentist may recommend e.g. things like porcelain veneers on visible teeth and stick to NHS options for less visible work). * Pharmacies are mostly private - the NHS mostly operates pharmacies only in hospitals etc. but they too can be privately operated. * 10% of the population have private health insurance. This is mostly "top up" insurance offering additional services or faster turnaround for non-essential surgeries etc. than the NHS. * Many types of healthcare services are mostly private. E.g. while you can get some types of cosmetic surgery on the NHS As it stands, the NHS is the most cost-effective hybrid or private system in any developed country. Too cost-effective some would say; to the point where it comes at the cost of making things more miserable for patients. But that's what you get when we pay far less than any other countries at a comparable income level.

empath75 9y ago

It'll be interesting to see what happens when a few people own 90% of the bitcoin and everyone else just sort of shrugs and starts using a new cryptocurrency, instead.

randlet 9y ago
This is what I don't understand. In the hypothetical case where we switch to using bitcoin won't early adopters be the only people with money? What about the 99.9(9?)% of the population who don't own any bitcoins?
- icebraining 9y ago
  How are you thinking the switch would occur? It's not like the "old" currencies will suddenly lose their value, you'll be able to exchange them for a long time. Plus, most people don't own that much currency anyway; they either get a paycheck (which can start coming in BTC) or an asset like a house, which is valuable in any currency.
  - jerkstate 9y ago
    USD has already declined in value 3x over the past 6 weeks, compared to BTC
    - fnovd 9y ago
      Everything has declined in value over the past 6 weeks compared to BTC.
    - empath75 9y ago
      The value of the dollar has declined a few hundred percent vs the price of nvidia stock in the past year, too. I'm not really sure that sort of comparison makes sense.
  - randlet 9y ago
    When I said "only people with money" I meant "meaningful amount of money" but I can see what you're saying. I'm not sure what I'm struggling with about the concept...time for me to do some more reading / thinking.

deleted 9y ago

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Klathmon 9y ago

I'm no libertarian, but wouldn't the fact that you can buy bitcoins with traditional fiat currency throw a wrench in this being a valid experiment? Since anyone that received an "unfair advantage" with government-issued fiat can turn around and use it to get an unfair advantage in bitcoin as well?

zardo 9y ago
So in order for libertarian society to work as desired we first have to... evenly distribute the wealth? I don't think we'll find any libertarians taking that position.
- deleted 9y ago
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- Nuzzerino 9y ago
  Does even (or rather, less uneven) distribution of wealth imply involuntary coercion? I don't think it has to.
  - vidarh 9y ago
    The person who coined the term libertarian (Joseph Dejacques) argued that all property rights were restrictions on freedom, and for even distribution of not just wealth but income, on the basis of an ideal where maximizing liberty was the most important goal. But right-wing libertarianism prioritize property rights over liberty.
  - knieveltech 9y ago
    You assert there are conditions under which the oligarchs would relinquish some portion of their holdings voluntarily?
    - Nuzzerino 9y ago
      If the holdings were devalued on the market, does that qualify as involuntary relinquishment?

proto-n 9y ago

There's something that must be mentioned here: there are multiple visions for what bitcoin should be. Probably with much oversimplification, but as unbiased as I can be: One side wants bitcoin to be a decentralized store of value, untraceable, unseizable, a safe heaven for your wealth that's completely permissionless to use. The other side wants bitcoin to be a currency for the day-to-day life that is cheap to use, a global currency to escape the (possibly shitty) fiat issued by your state and the banking system. Basically money for "the other 6 billion people" or "the unbanked" or whoever else that needs it. The two visions don't contradict each other, however they have different priorities, and they make different technological compromises when faced with a problem (decentralized scaling). This doesn't take away anything from your question, but one has to consider this divide when looking for answers.

mbrock 9y ago
Multiple competing privately issued currencies is also a trope of libertarianism; people refer a lot to Hayek's The Denationalization of Money.
- paulgb 9y ago
  I've written about why I think this is a disingenuous comparison: https://paulbutler.org/archives/stop-dragging-hayek-into-bitcoin/ https://paulbutler.org/archives/stop-dragging-hayek-into-bit...
  - mbrock 9y ago
    I don't claim that Bitcoin is a winner according to the criteria set out by Hayek, in fact it's obviously problematic as a unit of account as you explain. The various decentralized stablecoin projects (disclaimer: I'm involved with one of them, MakerDAO) attempt to create competitive currency as laid out by Hayek, using collateralization and continual supply/demand tweaks to encourage a stable market price. From that perspective, Bitcoin is indeed more like a trailblazer and a collectible precious metal, and not a serious contender for actual currency status. Still, it seems to have an important role in the ecosystem of denationalized currency.

testvox 9y ago

If they are good stewards of the money and invest it well then they will keep it and we all gain from their investments. If not they lose it and someone, hopefully more responsible will have it. In the long run the right people (those who can make profitable investments) will have control over capital.

piva00 9y ago
Can you clarify what is your definition of "right people" in this specific case?
EGreg 9y ago
How do you know being a good steward of that money doesn't mean just hoarding it and doing nothing? Bitcoin encourages hoarding while it's going up. Who knows where this runaway phenomenon will lead. At least the dollars and euros exchanged for it don't go anywhere. Bitcoin has fast become a store of value and redistribution of the world's wealth to early adopters, as any new fixed money supply would be.

clarkmoody 9y ago

Government-issued currencies usually come with legal tender laws and citizens are required to pay taxes using the government money. Since taxes are not voluntary, this creates built-in demand for the fiat money. The creators of alternative competitor-money are punished as well. The libertarian position is that human interactions should be voluntary, so the coercion problem is where libertarians find issue first. A side note here about capital controls: Bitcoin allows money to be borderless, which is natural. Capital controls are an artificial construct of the state, often used to prop up the perpetually failing fiat money. The second issue is economic. When the money supply of your currency is not constrained (by gold, or otherwise), then it inevitably inflates, often unpredictably and uncontrollably. The death of a fiat money usually has disastrous effects on the people, especially on the poor. Unfortunately, fiat money has a short lifespan, on average. The libertarian position on wealth inequality is that as long as the distribution of wealth was determined voluntarily (without state privilege, in particular), then there is no problem. Bitcoin is such a system: all participation in Bitcoin has been voluntary. Early adopters took a big risk on a fledgling technology, and some have been rewarded with handsome returns. Early writing about cypherpunk money usually mentions anonymity, which Bitcoin does not have (yet). > Where is this experiment going in the long run? Isn't that the trillion-dollar question? :-)

Nursie 9y ago
>> Early adopters took a big risk on a fledgling technology I can't agree with that. Early adopters really didn't take a lot of risk, they ran a mining program for a while, or bought some BTC for a few cents to a few dollars.
- clarkmoody 9y ago
  In some countries, Bitcoin has been outlawed. Owning stuff the government doesn't like is certainly a risk. They also endured 90% drops in value from early peaks to troughs. Bitcoin could have gone to zero at any point if the system had failed. (It still could) Some invested time learning about new technology that could've gone nowhere.
  - 9y ago

api 9y ago

I'm a bit of a lower-case-l libertarian and will chime in. I don't see Bitcoin as ideal. I think its greatest weakness is that it's insanely deflationary, even worse than gold. But then again I'm not among those libertarians who dismiss the whole of Keynes or modern finance. I don't agree with Keynes on everything but he made some tremendously important observations. The big one is the velocity of money and the idea that money is a verb, not a noun. If you get this then you get 90% of the good parts of Keynes. The other issue with Bitcoin is proof of work. It's wasteful as hell (PoW also stands for proof of waste) and also inherently biases the system toward oligopoly. Proof of work is subject to industrial economies of scale, leading inevitably to consolidation. Proof of stake isn't perfect either. It's plutocratic, but then again so is proof of work since hardware costs money. It's a marginal improvement but not ideal. I don't think the ideal proof function has been discovered. It would be something that allowed anyone to "mine" with an acceptable but not excessive amount of overhead and that didn't contain strong systematic biases toward oligopoly. The ideal currency would be one that could actually do the beneficial things central banks do but without the central bank. While Bitcoin is not going to do that, I don't see that as impossible. Bitcoin is really the first viable MVP of something I've heard best described as "software defined money." Software can be programmed to do a lot of things, so maybe software defined money could be programmed to do what central banks do but without a central authority. In other words: if we can represent an ideal central bank mathematically then we can encode it into software. Imagine a currency that automatically "dropped money from helicopters" when monetary velocity fell, etc. Figuring out how to make this not game-able of course is hard as hell but it's probably solvable. My problem with central banking is political and ethical. The moral hazard is simply enormous. IMHO the Federal Reserve is a fourth branch of government and one with only minimal democratic oversight. Placing fiat currency printing directly in the hands of government is dangerous though, so you're kind of damned either way. The 2008 financial crash is a very good test case. In 2008 and the ensuing bailout years it became absolutely obvious to me that the degree to which you were saved from the crash was proportional to things like what school you went to (Ivy League, with a hierarchy there topped by Harvard and Yale) and how closely connected you were politically to the Fed and the center of the New York and Washington political power elites. (Side note: those who have never lived on the East Coast probably don't understand the school hierarchy. What school you went to determines your social caste forever. It's a major reason I now live on the West Sieeeed.) This always happens -- always -- when humans are in charge of stuff. It doesn't even require a conscious conspiracy or even a conscious sense of bias. It emerges from stuff like Dunbar's number and how humans weight things in decision making. If you are human you are racist, classist, sexist, and everything-else-ist. To claim otherwise is to be a liar or to not know thyself. Meat brains are not rational and suck at statistics. The second deeper problem with central banks is that the system of interest rate setting and money lending is inherently feudal. Central banks set a base rate but you or I cannot borrow at this rate. We have to borrow from a bank at a higher rate. The interest I pay contains a plain vanilla handout to banks in proportion to their social distance from the Fed. I understand some of the technical rationale for this but it's deeply and systematically unjust. A major side effect of this system is that every time there's a recession things like QE end up being wealth transfers to the top and in proportion to social connectedness to the Fed's governing elite. So every time the economy contracts the oligarchy is strengthened. It's easy to see the incentives this creates and they're perverse in the extreme. Top economic elites now have an incentive to mismanage the economy. So the bottom line is that I like the innovation Bitcoin represents but I see it as only an alpha proof of concept. Bitcoin as it is today is a bubble and is probably going to fail. It seems to be undergoing a deflationary collapse right now. Even if it survives this it is technically unable to scale to the size required for global monetary use. Ethereum is a little better but still not ideal, and some of the people involved seem wonky. Most ICOs seem like straight up scams, which is not encouraging. Of course fiat money systems are riddled with pink sheet pump and dumps and Ponzi schemes and other scams so I guess that's just a thing. "All mature ecosystems contain parasites." The core invention of software defined money and distributed byzantine consensus is an absolutely revolutionary innovation and is going to change the world.

pascalxus 9y ago

I don't think that Bitcoin is inherently favored by Libertarians. Ultimately, you pay the same amount of taxes on bitcoin as any other capital gain, so it's irrelevant.

spookthesunset 9y ago

One thing I never see discussed is if Bitcoin were to truly become mainstream, it would require "the mainstream" to purchase all of their Bitcoin from existing holders. In essence, all of the people who got in early get to decide who does and does not get to participate in this hypothetical Bitcoin-based future. Setting aside all the other issues with Bitcoin (scaling, energy use, volatility) it seems like this would be a major issue if Bitcoin was ever on the precipice to being considered "mainstream". People would most likely strongly object to having to go purchase bitcoin from a bunch of people who bought in early in order to continue functioning in their lives. It is one of the big, largely undiscussed, reasons I believe that Bitcoin will never truly catch on.

apeace 9y ago

Bitcoin isn't a fiat currency. It has intrinsic value in the same way that gold does, because it's fungible, divisible, transportable, impossible to counterfeit, etc. So in that sense, I think the answer to your question is yes: Bitcoin is the kind of currency libertarians have been advocating for. However, I think it's a bit early in the life of cryptocurrencies to make any evaluation about how the experiment is going. To understand why libertarians obsess over currency, I recommend one look at some history[1] instead, and see that fiat currencies have long been associated with war, oppression, and corruption. To answer your last question, I don't think cryptocurrencies will actually be used unless there is a need for them. If inflation in the U.S. becomes extreme, for example, people will naturally flood to cryptocurrencies as a better store of value and/or way of transporting value. There have already been examples of that happening in countries with currency problems, such as in 2015 when many Argentinians began experimenting with Bitcoin[2]. But for the foreseeable future, most people will probably not notice any big problems using their local currency, and so they will continue to do so. I personally don't think Bitcoin will last. Instead, another cryptocurrency will take over. Probably many will take turns over the years. [1] https://en.wikipedia.org/wiki/A_History_of_Money_and_Banking_in_the_United_States https://en.wikipedia.org/wiki/A_History_of_Money_and_Banking... [2] https://www.nytimes.com/2015/05/03/magazine/how-bitcoin-is-disrupting-argentinas-economy.html https://www.nytimes.com/2015/05/03/magazine/how-bitcoin-is-d...

tomxor 9y ago

I understand your point, but i'm not sure it applies to bitcoin anymore... it has become a trading currency, a weird sort of stock, it's not a buying currency, so I don't think your argument fully applies. At the most it applies as a storage of wealth, but not as a purchasing power, because it's completely impractical to buy actual stuff with due to transaction cost.

Chris_Jay 9y ago

I would say that wealth concentrating in a small number of hands is not a surprising outcome, nor is it a dynamic anyone with libertarian leanings can really be uncomfortable with. I'll admit I'm unpleasantly surprised by how quickly it happened. I would say that cryptocurrency has one advantage over traditional systems of money in that it governs with the consent of the governed - if the richest 4% of the cryptocurrency world become too aggressive and stifle innovation to protect their status, cryptocurrency's nature makes it very easy for the other 96% to take their ball and play elsewhere. There have been several 'hard fork' moments already (Bitcoin Cash, Ethereum Classic, etc) and what the majority of people went with was mostly determined by who inspired their confidence. I don't think Greenspan or Yellen could have gotten the majority of miners to switch to their system, that takes the confidence of the majority. So to answer your last question - I would expect the experiment to lead to a more brutal and cutthroat competition than we are used to, but I also expect the rules to be more fairly enforced, and the incentives of the rich and the rest to self-correct if they begin to diverge. I can't speak for other libertarians, but for me, finding that tradeoff worth it is what it means to be a libertarian. How clear-eyed I am about the costs I couldn't guess.

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em3rgent0rdr 9y ago

> "What do you think about the concentration of Bitcoins in the hands of a small number of people?" It should be emphasized that bitcoins don't have a fixed value (bitcoin can't force an exchange rate), and that anyone can created a competing currency (bitcoin can't force people to accept bitcoin). So although bitcoins may be concentrated, that doesn't necessarily mean that wealth is being concentrated. A lot of (non-libertarians particularly) mistakenly conflate currency with wealth.