George Gilder talks with Nick Gillespie about Bitcoin:
Below are my notes I couldn’t help jotting down as I was listening.
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Shannon’s information theory perfectly describes how we value information on the internet, which identifies information exclusively by its surprizal.
Shannon created the perfect theory for the network layer. But Civilization requires more than bits and bytes. It requires contracts, provable facts, titles, notarization, identity.
These things cannot be accommodated on the internet. They require outside actors, like banks. The internet is full of junk, it pretends that a lot of it’s stuff is free, which of course a lie, so it’s full of lies; it’s a hustle.
The problem is you need an external networks like banks to conduct provable transactions. Bitcoin is a breakthrough in information theory that allows us, without accessing outside the network, to conduct provable, time-stamped, unchangeable transactions.
Bitcoin is the currency the internet deserves, and needs. Before Bitcoin we need to go off the internet to get money. Now the internet has native currency.
Capitalism is deflationary. Learning curves are the characteristic of capitalism; wealth is knowledge.
A neanderthal in his cave had all the material resources we have today. All advancement is an increase in knowledge. Growth is learning.
Learning is the heart of economic growth. Learning is economic growth. We learn to economize; do more with less.
Capitalism is deflationary because it always takes fewer resources to get the things we want as we learn to produce them better. About 20%-30% less for every doubling of total units sold.
Why do people fear deflation? Because governments constantly screw up economies and cause prices to go up, and blame the currency.
But will people invest in things in a system where their house, today worth $100,000, would be worth $20,000 in a decade? Who’s going to buy a house?
Wealth, everything around the house, will have increased in value, all the equipment inside will be ever better; the shell will just be a smaller part of a home’s total value.
The process by which learning pervades the economy produces a cornucopia of wealth in its wake.
Bitcoin is undergoing a market-process partly driven by speculation about what proportion of the world’s transactions it will conduct.
A mature Bitcoin, all 21 million coins mined, will ultimately turn deflationary because there will forever be more wealth created chasing after the finite number of Bitcoins.
Capitalist economics doesn’t work in our ever more zero-marginal-cost society of abundance. But money cannot be abundant in the same way goods & services are. Money has to be the foundation to prioritize and evaluate what we decide is wealth.
Time is scarce. The production of Bitcoin is rigorously regulated by the passage of time and the pursuit of irreversibility. The only thing in the Universe that’s irreversible is time.
Milton Friedman made a major error with his theory M*V=P*T (Money supply * Velocity of money = economic output). He believed Velocity was a constant, that the Money supply “ruled”, and it could be manipulated by governments to favour outcomes. We’ve since learned that Velocity is not a constant. Friedman was wrong to think economic growth requires a growth in the money supply.
If Velocity “rules”, we can rule. Bitcoin, as a currency on the internet, peer-to-peer, managed by the its participants, is the perfect libertarian solution to the money enigma.
As the internet pervades our lives, we continue to migrate away from hierarchy and towards heterarchy. Bitcoin is the perfect heterarchy currency.
Bitcoin is an infrastructure for the internet. The government can always require us to report everything we do with our Bitcoins. But because it’s autonomous, truly per-to-peer, and because it’s globally distributed, government will probably not attempt to eliminate it; they’ll more likely decide that we have to report Bitcoin activity on our tax returns.
Governments will welcome Bitcoin’s irreversible record of transactions. They will be able to see all transactions, as they are known to everyone on the network. But everyone can only know these as transactions. It’s a lot more anonymous than giving a credit card number, or the privacy one “pays” to use so many of the “free” stuff online.
There’s still so much to discover with Bitcoin. Consider how no one understood what Isaac Newton was doing during his thirty years running the British mint. There he created the gold standard, and was even a gold hacker. Newton hadn’t gone mad doing alchemy attempting to make gold from lead. He was doing the work to prove that gold couldn’t be reverse-engineered, that it was truly a resilient wealth-measuring standard that could, and did, support the British Empire. Just as Bitcoin hackers all around the world are doing today.
– Notes from George Gilder on Bitcoin –