Bitcoin

Can Bitcoin Become the World's Money? A Soho Forum Debate

Financial consultant John Vallis vs. George Mason University economist Lawrence H. White

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U.S. national debt held by the public is at almost $22 trillion, or about $67,000 per citizen, surpassing the country's annual Gross Domestic Product for the first time since World War Two. The Congressional Budget Office predicts that it'll reach 102 percent of GDP by the end of 2021, to 107 percent by 2031, and hit 202 percent by 2051.

The federal government's "growing debt burden would increase the risk of a fiscal crisis and higher inflation as well as undermine confidence in the US dollar," the Congressional Budget Office (CBO) concluded in its March 2021 Long-Term Budget Outlook

If the world were to lose confidence in the dollar, what could replace it— another fiat currency, gold, or bitcoin? That was the topic of a recent Oxford-style debate hosted by the Soho Forum.

John Vallis, a financial consultant and host of the Bitcoin Rapid-Fire podcast, believes that bitcoin will eventually replace governments' fiat money as the preferred medium of exchange. He argues that bitcoin's global adoption is a matter of when not if.

Lawrence H. White, an economics professor at George Mason University, is skeptical of bitcoin's future as money. He believes it may have a future as a financial asset, but isn't suitable to become a global medium of exchange. 

The debate was moderated by Soho Forum Director Gene Epstein and held before a live audience at the Porcupine Freedom Festival—better known as PorcFest—in Lancaster, New Hampshire.

Narrated by Nick Gillespie; edited by John Osterhoudt; camera by Chris Silk.

Photos: Brett Raney

NEXT: Will the Internet Destroy Cuba’s Communist Dictatorship?

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  1. Last time I checked, the bitcoin was worth about $32,000. They didn’t say how many dollars a dollar was worth. I’m going to guess that the dollar is popular enough that nobody has to look that information up.

    1. And your dollar will still be worth a dollar 10 years from now, even though it will buy a lot less stuff. Ride it to zero, nobody cares.

  2. You think a senile Biden admin that believes blacks don’t have the right to vote, that states can’t have right to work laws, that money can be printed in the trillions to spend on fake infrastructure, is going to allow another currency to take over? You are freaking dreaming if so.

    1. The thing about Bitcoin is, however, that it will make all of your transactions traceable.

      Ultimately, it will give them the ability (if not the justification) for control. Why wouldn’t the progressives want to be able to trace and control how you spend your money, what you spend it on, etc.?

      In the end, we’ll be screaming about how we should still have the right to use paper money.

      1. P.S. China has issued its own digital cryptocurrency for those reasons–so they can track every transaction. You can’t buy anything without knowing who gave the currency, who received the currency, etc. The currency is issued by their own central bank–and released internationally.

        https://www.wsj.com/articles/china-creates-its-own-digital-currency-a-first-for-major-economy-11617634118

        When the U.S. does it, they’ll issue their own crypto digital dollar before they use one off the shelf like Bitcoin. The Federal Reserve will issue it, and it will be pegged to one digital dollar to the dollar.

      2. “The thing about Bitcoin is, however, that it will make all of your transactions traceable.”

        Just because a transaction is traceable does not mean it is traceable to you. Bitcoin’s new Taproot update will make anonymity pretty strong. Indeed the main source of identification at that point will be KYC rules on exchanges. To turn BTC to dollars you ultimately need to go to an exchange who is obligated to verify your identity.

        On the other hand, if the US goes the way of countries like Nigeria or El Salvador, you won’t need to use an exchange- the dry cleaner will happily take your BTC because they can spend it as easily as a dollar elsewhere. At that point, you’ll not be as anonymous as paper cash, but you’ll be close.

        1. On the other hand, if the US goes the way of countries like Nigeria or El Salvador, you won’t need to use an exchange- the dry cleaner will happily take your BTC because they can spend it as easily as a dollar elsewhere.

          How extensive is internet in Nigeria?

          1. Pretty extensive given how many princes I am currently trying to get out of the country.

            Seriously though, I was shocked when I began researching how BTC is changing the third world. Currently 41% of the population of Nigeria can access the internet via mobile devices (and that is all you need for a Lightning network wallet). In El Salvador, there are more cell phone subscriptions than there are resident adults (because they provide phones to their kids, or have multiple phones). In other parts of Africa, cell phones are so ubiquitous that air-time minutes actually became an alt-currency. You could buy a goat from your neighbor by texting to your cell company the neighbor’s cell number and an amount of minutes to transfer to their account.

            Here in the modern, developed world, crypto is very abstract. People see it as a get rich scheme, or some fantasy anarcho-panacea. But in the developing world, it is literally changing lives. There was a great twitter thread from a group of Africans talking about how they would go buy BTC with currency, and then write down the addresses to take to other villages without connectivity, because by the time the currency would make it to the village, it would have devalued so much.

  3. I’d prefer Ethereum or Monero.

    Ethereum may prove to be especially useful, and in regards to Monero:

    “The IRS is offering what some are calling a “bounty” to those who can assist in tracing cryptocurrency transactions. Specifically, the IRS has created a pilot that will pay cash (up to $625,000) to anyone who can trace Monero”

    —-Forbes, September 2020

    https://www.forbes.com/sites/kellyphillipserb/2020/09/14/irs-will-pay-up-to-625000-if-you-can-crack-monero-other-privacy-coins/?

    It’s hard to imagine a better endorsement than that.

    Bitcoin is traceable, so it’s worse than Monero, and there’s not as much you can do with it, like Ethereum. The Basic Attention Token, for instanced, which Reason accepts as a verified content creator through Brave, is based on Ethereum. If you’re getting paid part of the advertising fees for what you see online, through your use of the Brave browser, you’re already using Ethereum.

    1. Ethereum is nice.

    2. Bitcoin’s traceability increasingly doesn’t matter. It is the entrance points to Bitcoin (Exchanges like Coinbase)- just like the entrance points to any bank- that ultimately give you away. But as the Bitcoin blockchain gets more and more economic activity, the need to use these entrance points goes down.

      Fundamentally, the blockchain merely is a list of outputs that have or have not output their balance to another outputs. When you transfer money out of Coinbase to another address, the government knows that YOU owned the money that was sent (KYC rules). But they can only guess whether the destination was your wallet, or someone else’s for some service rendered. From there, every time you spend bitcoin, you send coin to two NEW outputs- an address of the person you were paying, and then the “change” going to another address you control. Most blockchain analyses tools are designed to try and recognize and link these “change” addresses to try and identify who has custody of the bitcoin.

      However, as more economic activity goes to the blockchain, each transaction increases your ability to plausibly deny that the BTC still belongs to you. Every time you transact with equal amounts on either side of the output. Each time money goes to a lightning node address. Each time it goes to another multi-sig output. Every transaction could be the BTC leaving your custody, and so automated systems can only guess you still own it.

      In many ways, tracing BTC will be a form of quantum mathematics, where a quantity can either be your BTC or not- it is merely a probability function that only collapses when you do something that identifies you- like paying to someone who requires (and records) your ID.

      1. I should note, that even today, you can buy BTC anonymously. You can do it by dedicating your computer hardware to a mining pool (at which point you are basically converting the dollars you pay your power company into BTC in an untraceable manner). You can find people in your area that are mining and pay them cash to send you BTC. There are multi-sig services like hodlhodl and bisq that allow you to exchange your traceable ETH (or other crypto) for BTC in a way that is not traceable, or to trade Amazon gift cards for BTC.

        All of these are ways to gain plausible deniability around your BTC transactions, and that will only get easier when Taproot is complete.

        1. Some say there are even poker sites where the transfers are off-chain. Hard to track you through that.

  4. Larry White is my main man. Got into thinking about free banking and why it’s far more anarcho than a bunch of cops running around making sure banks don’t lend out your money. So of course the Anarchos hate him because he’s not parroting Rothbard.

    Some form of cryptographic currency *could* because a new specie suitable for use as money. But not Bitcoin because Bitcoin is a simulation of money, not money itself. Thus it’s suitable as a money substitute for purposes of exchange, and as a speculative investment, but as actual money. One reason is that it isn’t actually produced, but rather handed out via a processing intensive lottery.

    I know the Federal Reserve cracked down rather hard on various forms of electronic gold receipts, but some form of crypto gold receipt would be far more suitable. Ideally using the same kind of blockchain. Because the blockchain technology of Bitcoin is great, it’s the weird ass mining and pretending to be a scarce resource that’s weird.

    Okay, I’m done. Go ahead and hate now.

    1. “One reason is that it isn’t actually produced, but rather handed out via a processing intensive lottery.”

      It is produced. It is produced in return for work- specifically gathering previous chains in the blockchain, verifying them, then gathering pending transactions, minting them in a new block on the distributed ledger, signing that block with a cryptographic proof of work, and then broadcasting that to the rest of the network.

      Too many people look at the search for the cryptographic signature (mining the nonce) as some sort of abstract busy work, but it is not. It is the ritual necessary to prove that you are a participating member of a distributed network- like producing an ID at the airport. Another example is the Conch shell in Lord of the Flies- possessing the conch shell means only one entity gets to speak. In LotF, a negotiation took place to determine who had the Conch next- that negotiation wasn’t busy work, it was necessary to ensure that the Conch shell was distributed. If the kids drew lots to determine who would have the conch shell, it would be just as valid even if getting the conch was somewhat like a lottery.

      This isn’t a pure lottery, because lotteries are designed to remove more “work” (money) from the system than it pays out. The expected value of a lottery ticket is something like $.90 on the dollar. But blockchain mining is designed to ensure that the inputed work DOESN’T exceed the value. More miners raises the difficulty of mining, until the cost of mining exceeds the payout, at which point miners drop out and difficulty goes down. Depending on the price of power, your expected value for mining bitcoin can be extremely attractive.

      1. That’s not production. One does not produce a bitcoin. There are a limited number of bitcoins and at some point in the nearish future no more bitcoins will ever again come into existence. What the bitcoin “mining” does is give you more lotto tickets for when the next bitcoin is lottoed off. Not the best analogy, but it’s much better than a mining analogy. My odds of getting a bitcoin for only five minutes of mining is pretty slim compared to a massive Chinese mining complex sucking down the wattage of a minor city, but it’s still odds. It’s random. It’s essentially a lottery and your CPU cycles are the lotto tickets.

        That Bitcoin uses this busy work for useful purposes was just a clever algorithm. That it’s now useful work does not make it any less of a lottery because the payout is still random.

        1. “That’s not production. One does not produce a bitcoin. There are a limited number of bitcoins and at some point in the nearish future no more bitcoins will ever again come into existence.”

          This is non-sensical. If I have PWC come in and audit my books, and sign them saying that they are accurate, have they produced something? Perhaps not in the “tangible goods” realm of things, but they have provided a service and added value. Through their work and attestation they have provided other bystanders a proof that my books are accurate.

          The process of mining a block in a blockchain is merely a form of book-auditing mapped to a trustless network of peers. It adds value to the network specifically by solving the Byzantine General problem- creating a distributed ledger of transactions on a trustless network.

          “What the bitcoin “mining” does is give you more lotto tickets for when the next bitcoin is lottoed off. Not the best analogy, but it’s much better than a mining analogy. ”

          “My odds of getting a bitcoin for only five minutes of mining is pretty slim compared to a massive Chinese mining complex sucking down the wattage of a minor city, but it’s still odds. It’s random. It’s essentially a lottery and your CPU cycles are the lotto tickets.”

          Unless you are an idiot, the expected value of mining is positive. By joining a mining pool you get a payout no matter whether it is your cpu that “hits the number” or someone else.

          But this has nothing to do with your (incorrect) assertion that nothing is produced. The fact that there is a speculative payout doesn’t change the fact that miners get money in return for verifying transactions on a trustless network, free of central control. That is the value they are providing. And currently they get a small amount of BTC for it in the form of a reward, and in the future they will get a small (but increasingly larger) amount of BTC in the form of transaction fees.

          “That it’s now useful work does not make it any less of a lottery because the payout is still random.”

          This just shows how clueless you are. I have been mining as part of a pool for 5 years. My income (in bitcoin) has been predictable (aka the opposite of random) for that entire time. Every month I get a deposit of bitcoin that is directly correlated with my hashrate as a proportion of the pool and global hashrate. It is not random.

  5. No.

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