Think Bitcoin™ Issue #33
Questioning Bitcoin's "inevitability;" Bitcoin in Ukraine; Bitcoin in Africa; Bitcoin in El Salvador; the Luna collapse
Hey friends, welcome back to Think Bitcoin™ for issue #33. Special welcome to the new subscribers. I’m glad you’re here. As always, if you have any questions or comments, feel free to reach out. You can also find me on Twitter (@TheWhyOfFI).
In this issue:
Long Reads: The Dangers of What You Know for Certain That May Not Be True: Bitcoin, Game Theory, and Inevitability
Content Round-Up: 2 articles, 1 set of Twitter threads, 1 documentary
Headlines: The Luna shit show
Miscellaneous: A recent podcast appearance
As always, if you find this newsletter interesting or useful, please share it with others who might find it interesting or useful, too!
Long Reads
The Dangers of What You Know for Certain That May Not Be True: Bitcoin, Game Theory, and Inevitability
“History is only interesting because nothing is inevitable.” -Morgan Housel
“That men do not learn very much from the lessons of history is the most important of all the lessons of history.” -Aldous Huxley
A couple of weeks ago on a podcast I was asked the following question: what is a risk to Bitcoin that you don’t think gets talked about enough? It was a terrific question (shout out to BTC To The People), and I want to take some time to discuss and elaborate on my answer.
I want to preface by saying I don’t necessarily think that what I’m about to describe is the single biggest risk to Bitcoin that no one is talking about. I view it as more of a prevailing blind spot or a too-easily-accepted premise. It has the potential to develop into a serious risk, however, if it saturates the discourse entirely.
If you’ve spent enough time in the Bitcoin space you’ve undoubtedly encountered, and perhaps even adopted wholesale, the belief that “game theory” compels and necessitates a thoroughly Bitcoin-ized world. There are a few different iterations of this belief, but each can be distilled down to the basic fact that Bitcoin favors early movers. When it comes to nation-state adoption, this means that the first countries to meaningfully adopt Bitcoin will reap the most outsized advantages. Observation of these advantages, among other things, inspires subsequent countries to adopt Bitcoin, which simultaneously confirms the asset’s legitimacy and raises its price. This cycle continues, as countries adopt Bitcoin with more urgency, eager to acquire it at a lower price than tardier countries. Before we know it, the world gets Bitcoin-ized, the price goes parabolic, and voila! Game theory.
There’s a more advanced macroeconomic/geopolitical version of this game theory idea, which involves the current reserve asset status of United States debt, the inherent self-defeating nature of this reality (Triffin’s Dilemma), and the de-dollarization trend that is currently underway across the world. Bitcoin’s first-mover advantage is fundamental to this version, too.
Bitcoin Twitter and the Bitcoin podcast ecosystem is replete with references to game theory, implicit in which is the idea of inevitability. “Game theory” has become such shorthand in the community that it often goes relatively unexamined and unchallenged. Folks seem more concerned with how the transition will occur and what it will look like than whether it will come to pass at all or what events/developments could preclude its perceived inevitability.
So why is this a risk? A couple of reasons.
First, it reduces Bitcoinization, an as-yet hypothetical outcome, to a single and constrained set of variables and does not account for or even consider that new variables will undoubtedly be introduced. This game is neither a stable one nor a static one. New, presently unknowable variables will emerge and some will probably fundamentally change the state of play. Parameters will evolve and devolve. Heretofore unexpected things will happen. This doesn’t mean Bitcoin won’t prevail. But it means it probably won’t prevail in the precise way the game theorists are predicting and assuming it will.
Anything of historical significance will draw to it a vast and myriad array of players and interests, each representing and adding new variables and new unknowns, rendering prior predictions, based on simpler sets of information, more prone to errors and miscalculations.
And if we’ve learned anything from history it’s that nothing is inevitable. History teaches us that many an outcome or state of being has been considered inevitable, only to prove uncertain or later be rendered impossible or unthinkable.
Marxists have been preaching the inevitability of capitalism’s collapse and the inevitability of socialism (and eventually communism) for well over a century. On any self-respecting liberal arts campus in America you will find students who still appeal to this “inevitability” (speaking from extensive personal experience). And there’s a reason for it.
Sometimes an idea is so compelling and elegant in theory, that its reification or actualization in praxis, and any challenges thereto, are less assiduously considered. We are all undoubtedly familiar with the allure of a communistic state, in theory. Few are vehemently opposed to a world in which everyone generally shares and looks after each other, a world in which each person contributes her unique gifts and abilities to the greater good and, in return, takes from the gifts of others that which she needs. And we all sing folk songs around the campfire, grow our own food, only work when we feel like it, etc. You get the idea. But the practical reification of this idea is problematic and runs into a plethora of countervailing variables, interests, and realities.
I think cultivating the idea that anything as potentially world-changing as Bitcoin is “inevitable,” is dangerous because it creates and fosters a distance between theory and praxis, a distance we should should seek to minimize. When theory overtakes praxis it tends to neutralize and transmute the theory’s practical, real-life import into an ever-receding hope, and the aforementioned distance grows too big to traverse.
The “game theory” shorthand, which almost requires an Allen Farrington-style trademark™ appended to it, also makes us complacent. If we consider our desired future inevitable, we’re collectively less likely to do the necessary, un-sexy, day-to-day work to bring it to fruition. That’s pretty basic humanity 101. And it’s why I think we need to be highlighting, celebrating, funding, and foregrounding the educators, the builders, the engineers, the creators, the policy architects, the community builders, and the legal advocates, while simultaneously spending a little less time with the professional prognosticators.
Lastly, all this game theory stuff tends to depersonalize Bitcoin, in my opinion. Bitcoin was created by people and is a tool to empower people and improve the world for the benefit of people. Appealing constantly to game theory doesn’t feel convincingly human-centered to me. It feels more like an investment thesis, which is absolutely fine. But if we really want to bridge more people to a Bitcoin world, I think we need to maintain keen and steadfast focus on the human side of Bitcoin, which is to say its potential to create a better, more equitable, more ecologically non-suicidal world. Game Theory™ empties the human element out a bit.
I’m certainly sympathetic to the game theory argument and, as I said from the outset, I do find it plausible. And I’m obviously hopeful that we do ultimately see a Bitcoin-ized world. But I absolutely don’t think it’s necessarily inevitable, and I think any suggestion of inevitability is irresponsible. We all have to do the work and keep doing the work to make it happen.
Content Round-Up
1. “Master Guantai: The Kenyan Man Making Bitcoin Multilingual & Taking it to African Tribes,” an article by Ayelen Osorio. Osorio tells the story of Guantai Kathurima, a young Kenyan man who is working on translating Bitcoin education into multiple African languages in order to help spread it to the many non-English-speaking communities in Kenya and on the African continent broadly. Osorio also thoughtfully muses about why the failures of the banking system in Kenya are readily appreciable, while similarly insidious failures and threats are discussed and noticed much less in the developing world.
Check out her Substack here.
2. Scott Wolfe’s “Bitcoin Voices” Twitter threads. Wolfe has embarked on a series of Twitter threads “to introduce a broader audience to some amazing innovators, educators, and community developers putting Bitcoin at the center of efforts to build a better world.” A common misconception (and misguided criticism) of Bitcoin is that it’s a shiny new toy for wealthy, white tech bros looking to get even wealthier. Nothing, however, could be further from the truth. Bitcoin is a global force for empowerment, and there are so many folks doing incredible work to increase both education and adoption. If you’re looking for Bitcoiners to follow on Twitter (and you should always be looking to follow more Bitcoiners on Twitter) check out these incredible people Wolfe is celebrating. As just two examples:
Speaking from personal experience, Sade’s Satoshis is an excellent children’s book, by the way. I highly recommend getting your hands on a copy if you have young kids.
Check out these talks from Diop:
3. “Currency of Last Resort,” an article by Alex Gladstein about Bitcoin in Ukraine. This piece is characteristically excellent. It’s much too long to effectively summarize but, suffice to say, it’s fascinating, moving, and enlightening. Gladstein has been chronicling Bitcoin’s use and role in various countries to advance human rights for a long time. If you’re new to his work, do a deep dive. It’s worth it.
4. “Follow the Money #1: Bitcoin in El Salvador,” a documentary by Peter McCormack about Bitcoin adoption in El Salvador. McCormack offers an admirably measured account of the Bitcoin story in El Salvador, engaging with both its fiercest proponents and its most vocal critics. He maintains a healthy skepticism toward President Nayib Bukele, who, though an advocate for Bitcoin, has also trafficked in authoritarian behavior, and reflects on his own role in all of this.
Headlines
The Luna Shit Show
A week or so ago the Terra ecosystem, comprised of the Luna token and algorithmic stablecoin, terraUSD (UST), blew up. The Luna token quite literally went to zero. I’m not here to walk through all the details of how it happened and the mechanisms involved. At the end of the day, the Luna Foundation Guard (an organization that sort of governs and supports the Terra ecosystem) had to sell several billion dollars of bitcoin to try to preserve its stablecoin’s $1 peg. Which is to say, the LFG became forced sellers of huge amounts of bitcoin at a time when macro factors and a larger drawdown in tech and growth stocks were already putting downward pressure on Bitcoin.
Bitcoin’s price, of course, fell somewhat precipitously due to these combined factors.
I think there are some bullish takeaways here. First, bitcoin has proven its liquidity as a market. Billions of dollars of forced selling in an already brutally bearish macro environment did not crash its price below previous all-time highs. Second, it’s obvious that the overwhelming majority of cryptocurrencies (and there are about 19,000 of them, per CoinMarketCap), are completely and utterly worthless, at best, and outright scams, at worst. Many of these projects, whose existence is entirely the result of the liquidity spigots being turned to full blast for the last two years, must die in order for us to evolve and transition to a world of sounder monetary policy enabled and empowered by Bitcoin. So while I absolutely do not wish financial ruin upon anyone, the sooner people realize that Bitcoin is inimitable and superior, the better.
I expect more blow-ups to occur, and I expect many folks who are harmed by these implosions to abandon the altcoin casino and see the light with respect to Bitcoin
Miscellaneous
A couple of weeks ago I was on the Bitcoin to the People podcast, which you can check out here. Thanks to @btctothepeople for the invite!
As always, thanks for reading! If you enjoyed it or found it useful, share this newsletter widely and freely!
“Civilization is in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have.” -H.G. Wells
See you in two weeks,
Logan
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DISCLAIMER: I am not investment advisor and this is not investment advice. This is not, nor is it intended to be, a recommendation to buy or sell any security or digital asset. Nothing in this newsletter should be interpreted as a solicitation, a recommendation, or advice to buy or sell any security or digital asset. Nothing in this newsletter should be considered legal advice of any kind. This newsletter exists for educational and informational purposes only. Do your own research before making any investment decisions.
© Copyright Logan Bolinger