this post was submitted on 22 Sep 2023
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Bitcoin was created in response to this, it's even written in the first Bitcoin block ever minted "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks". The US government printed nearly a trillion dollars to bail out the banks, governments worldwide did the same as the economic crisis unfolded. People lost their jobs, their savings, all of us had our currency devalued by the massive (but necessary) money printing to stave off a total financial collapse. And the CEOs of those failed banks had the audacity to give themselves lavish bonuses with that money. It was a massive wealth redistribution. And not a single one went to prison for it. 99% of us were forced to foot the bill for the reckless actions of a vanishingly small but ridiculously wealthy and powerful portion of the population.
And unfortunately, we have had to do this again and again because of a crucial flaw in modern banking: if banks loan out money, and everybody is all loaning to each other, there will be an economic shock that comes along that causes a bank run. When that happens in an interconnected, global economy, you can't have a big bank fail, because all the other banks will fail too, and the entire financial system will outright collapse, just like it did during the great depression. The guy who realized this is ben bernacki, he won a nobel prize in economics for pointing out that much of the harm from the depression came not from the market panic but from the failure of the banking system and faith in it afterwards. You don't know his name, but you would recognize his face, he is the one that sold the bailouts to congress and the world. But he does not have a solution to this problem aside from bailouts. Constant wealth distribution trickling up to those who are already the most wealthy and powerful in the system.
Satoshi saw this and knew there was a better way, so he created a new currency system in which no one person or organization could ever have the power to just turn on the money printer like that ever again. Because the temptation is just too strong. Every empire or nation that has ever failed ended with a period of hyperinflation caused by the massive increase in the money supply. Both sides in the US civil war did it, Zimbabwe did it, Nazi Germany did it, the USSR did it, Venezuela did it, the Roman Empire did it. Every country that is at war and runs out of money to fund the war does it.We need a system which does not rely on human choices being the difference between a sound money supply and a useless one. That is what Bitcoin is. It has a fixed supply. And the only person who can spend that BTC is the one with the keys: you. And it can be accessed by anybody in any country in any economic situation so long as they have a computer or phone and internet access.
Edit: Got Bernacki's name wrong
Unfortunately, since apolitical money is not meaningful as a concept, any viable solution to ineffectual political processes must entail repairing if not reconstituting such processes within the political frame.
Gold was apolitical money for a long time. Can't just print gold.
Gold has use value. It is and has been traded for its use value, which is the same value whether or not it is designated as currency.
The decision to designate gold as currency, or a standard for currency, is political.
Thus, gold is natural, and naturally useful, and may be designated as currency politically.
Cryptocurrency has no natural or intrinsic value, no use value.
Unlike the trade of gold, the trade of cryptocurrency depends on a belief that it is currency. Yet, it is not currency, because it has not been designated as currency politically. Once the realization is made that the necessary political process to designate it as currency will never occur, the will to trade is lost.
Ethereum Classic proves this is a fantasy. There is no such thing as apolitical money. You’re trading a government who you have limited influence over for a group of programmers who you have no influence over. If something happens which hurts the programmers of your currency enough they will change the code. Just like they did with Ethereum classic.
#1. Ethereum is not designed to have a fixed supply like Bitcoin is.
#2. Bitcoin, Ethereum, or any other similar cryptocurrency can always modify the rules of its own protocol. When you do this, a "fork" is created, but if you are the only one on the fork then for all practical purposes it does not exist and you can't do anything with it. This actually happens all the time in Bitcoin when two miners discover the "next block" at the same time and is resolved automatically when the next block after that is found and things settle. A random group of programmers can't just change the code and make the whole network accept it. In order to make a successful fork, you must have widespread consensus. The difference is that the participants in the protocol (miners, stakers, and nodes) are the ones making that decision, not some elected or unelected politicians. This means the change has to benefit a broad base of users. Both Bitcoin and Ethereum have had many non-contentious upgrades (forks) which altered network protocol. A lead developer for Bitcoin or Ethereum could make a new version of the software, but if it is not adopted by the majority of the network it doesn't matter and goes nowhere. There have also been some contentious forks such as Eth Classic, Bitcoin Cash, etc none of which resulted in new coins being minted on the "main chain". The majority of users stuck on the main chain, and anybody who held BTC for example during the Bitcoin Cash fork still has that BTC, even Bitcoin cash was unable to turn on the money printer. From Bitcoin's perspective, Bitcoin Cash or any other chain that isn't the main chain is not Bitcoin, it may as well be Dogecoin. It's another network running a different protocol minting different coins. You can't spend Bitcoin Cash or Dogecoin on the Bitcoin network. Anybody who tries to fork bitcoin or ethereum faces the same problem as anybody who tries to mint their own fiat money: unless they can convince other people to accept it, it's a useless endeavor. And people using the existing chain have every incentive to reject your fork.
#3. It was not "programmers" who did the fork which created Eth Classic. It was fairly broad consensus among all network participants, mainly people who mined Ethereum and provided the network's security. Some of them didn't agree with it and kept using the old code, which became Ethereum classic. It was rather contentious, but in the long run, the "main" chain of Ethereum has become inarguably the dominant one. Nobody was harmed by the split of Eth into Eth and Eth classic I fail to see what the problem is you're pointing to.
Which is why Bitcoin in hyper-deflationary, which is a insane economic policy for any serious fiat currency. That policy can be changed in code by programmers just like lawmakers can change economic policy for national fiats. Bitcoin might be taken slightly more seriously as currency rather than a speculative asset if they removed the fixed supply. But that would hurt the existing wealthy stakeholders. Are you starting to see how this is still political?
The difference is that the law makers are in principle — though usually not in practice — supposed to represent the interests of everyone. There are no such lofty ideals on the chain. Whatever group controls the most wealth controls the chain. Its like our government in 2008 but with no pretense of serving everyone.
Ethereum programmers implemented a rollback on the chain in the code early on because many wealthy people close to the project lost money through an attack and needed to be bailed out… like the government did for Wall Street in 2008. The fact that its possible for the programmers to rollback the chain completely undermines the concept that crypto is decentralized in a way that meaningfully solves the problems it claims to. Wealthy players will exert their influence on crypto just like wealthy players did on the US dollar in 2008.
The fact that Ethereum Classic still exists demonstrates that there was not a consensus with the rollback — there was discontent with the rollback — just like people were discontent with the bailouts in 2008.
Most modern economists would agree with you. There is no correct answer here, it's mainly a matter of perspective and what you value. I would say it's mildly deflationary, the supply is fixed, it's not like 10% of the supply is burned every year or anything. We used to have the gold standard, that was essentially based on a fixed supply, the world didn't collapse, it was fine. We moved away from it for good reasons although if you asked the other countries who participated in that system about how the US went about making that transition it was of course quite contentious at the time. They trusted their national currencies to be pegged to the dollar which was pegged to gold until one day the US just said "Hey jk not anymore good luck". I'm not going to get into the weeds arguing inflationary/deflationary economics with you I was mainly just trying to correct what seems to be your misunderstanding about how Bitcoin and Eth actually work when it comes to forks etc.
I'm not making the argument that economic systems are divorced from politics or don't have political or social implications. They obviously do.
Sorry but you're just wrong about the rollback and how that works. The only reason the rollback worked is because the majority of the ethereum network nodes and miners agreed it was needed. Releasing code in an of itself does nothing, you need network consensus for it to work. If legislators write a law, that changes the fiscal policy immediately. If the Eth programmers write a protocol change into the code nothing happens until there is widespread enough consensus for the network to upgrade to that new code and fork. They have to convince the entire network to download and run that new code. This would be equivalent to having to get the entire country to vote on a new fiscal policy every time congress or the federal reserve proposed changes to it. It is wildly more democratic.
A. Pretty much how our existing economy works. B. Nodes and miners control the chain (or in Eth's case nodes, validators, and the people who stake their coins to those validators which is literally everyone who has Eth can do). They can directly vote on proposed rule changes unlike in a representative democracy where they elect people who can change those rules and in most cases the only recourse if they make bad rules is to elect somebody different next time. In Bitcoin or Ethereum you need widespread consensus among those who use the network to effect protocol changes. There have been many proposals to change Bitcoin's core protocol over the years, most of them did not succeed as they required widespread consensus which is hard to get and takes significant time. So it produces a very stable protocol (and fiscal policy) which tends to be backwards compatible.
This is like saying tulip mania was mildly deflationary. At a certain point without changing the rules of the blockchain there will never be another Bitcoin made. That is somehow supposed to represent an ever growing economy forever?… And not be hyper-deflationary? Remember… they were still making more tulips.
As long as Bitcoin remains this deflationary it will be a terrible store of value and a terrible facilitator of trade. In other words a terrible currency. And the people in charge of bitcoin — that is the people who own stakes in the network — will never want to end that because they make too much money with it being deflationary. It would be funny if some people didn’t loose a ton of money in the process.
If its not divorced from politics then what’s to stop the same or similar political situation that happened in 2008 from happening again?
Remember the thing I disagreed with was…
If the rules can be changed by someone then what’s to stop whoever that someone is from turning on the money printers on for the wealthy under the right political circumstances?
I understand how it works. I used to mine Ethereum and I’ve run both a Bitcoin and Ethereum nodes. I’ve been following Bitcoin since I saw it on slashdot in 2009.
Of course they “agreed” to give themselves a bailout. That’s no more valid of an argument than saying the US agreed to the bailouts in 2008. Other’s disagreed that’s why we still have the fork.
Randomly forking is terrible for a currency. I don’t want to wake up tomorrow and find out that my money is worth half as much because some rich assholes didn’t like some transactions. And because they own enough nodes/ASICs/GPUs/stake and are friends with the programmers on the project they can just fork me over.
Most representative democracies have direct ballot initiatives and they’re based on 1 person 1 vote. We should work to have more of that because a broad base of people generally have interests different than those with access to wealth.
In the case of crypto none that I know of base their “democracy” on a system of 1 person 1 vote but instead on how much ownership you have on the network in terms of nodes/Mines(GPU, ASICs, etc.)/stake. This is not democracy, this is a system of political power based on ownership. In other words the same system of influence at the root of the 2008 bailouts.
Yes, the people who own stakes in the blockchain are going to make very conservative decisions that protect their own wealth. The US congress chose to turn the money printer on in 2008 because that was the best way to protect their wealth and the wealth of their donors. Again… its same system of influence based on wealth and ownership that lead to the 2008 bailouts.
Ben Bernanke.
gaah fuck yes ben my bad I will edit