The Bitcoin Flaw (Part 1)
The Bitcoin Flaw (Part 1)
## Meeting George Gilder
In July 2018, I had the privilege of meeting George Gilder at FreedomFest in Las Vegas. When I met him, I asked him if he might be willing to travel to Stillwater later that year to speak to our students. He graciously said “Yes” and gave me his contact info. (In November 2018, George gave a talk about Life After Google to over 400 students and faculty at Oklahoma State University.)
Reading Life after Google
A few weeks after I first met George, his new book Life After Google: The Fall of Big Data and the Rise of the Blockchain Economy was released. I immediately purchased the book and began reading it. The book details the history and projected future of what George calls the ‘cryptocosm’ (his term for the blockchain economy). I finished the book in a matter of days and found that my perspective on the intersection of freedom and technology had dramatically shifted.
From Pessimism …
Prior to reading Life After Google, I was generally pessimistic about technology as it relates to personal liberty and individual freedom. I was convinced that advances in technology would steadily squelch liberty and freedom, as governments and corporations become more and more empowered in their ability to spy and snoop on each and every one of our day-to-day activities.
To Optimism
However, after reading Life After Google, I became extremely optimistic. Gilder presented a future where decentralization of data would put the control of our private and personal lives back in the hands of individuals. In addition, recognizing the inherent foundation of trust-centered transactions upon which the cryptocosm is based, I became convinced that we are indeed entering the ‘age of entrepreneurship’ wherein more and more individuals will be their own bosses. As individuals become empowered to transact with other individuals directly (and securely) using blockchain-based technologies, the need for corporations will diminish, and the power of governments to snoop and coerce will also diminish.
One of my primary takeaways from Life After Google (although not directly stated in the book) was “Blockchain will do to Uber what Uber has done to the cab companies.” Uber is just a middleman. With secure blockchain-based transacting, who needs a middleman? Corporations that serve primarily as ‘middlemen’ will soon be a thing of the past.
The Bitcoin Flaw (Explained)
One chapter in Life After Google struck me as particularly interesting. Chapter 22 is entitled ‘The Bitcoin Flaw’. In that chapter, Gilder states that “money’s most crucial role is as a unit of account, a measuring stick of value, that makes possible transactions across time and space. … I had assumed that bitcoin’s rate of growth over the current century would accommodate the needs of the economy for a stable measuring stick. … In debates with Steve Forbes, I strongly resisted his insight that though bitcoin could serve for transactions as a store of value, it could not perform the central role of a currency as a unit of account and a measuring stick.” (emphasis added, :254)
Although Gilder was originally skeptical of Steve Forbes’ assessment, he later became convinced that “bitcoin, as now constituted, cannot be a currency [because] ... The price of bitcoin changes with demand. ... ‘No other basic unit of measure,’ whether it’s the second, the meter, the ampere, or the kilogram—‘changes in value with demand’ [quoting Mike Kendall, author of Man on the Margin]” (:255)
Bitcoin’s propensity to change in value with demand represents the essence of ‘The Bitcoin Flaw’ and, according to Kendall and Gilder, this flaw is tied to the inherently deflationary nature of the bitcoin supply curve, which prescribes a steady decrease in the incremental increases in supply, with those increases coming to a complete halt in the year 2140. That, according to Kendall (a commercial airline pilot), would be akin to someone “removing the landing strip while he is in the air.” (:256)
Gilder closes his chapter on ‘The Bitcoin Flaw’ by summarizing the opportunity it represents: “This bitcoin flaw represents a huge opportunity for other cryptocurrencies. But few of them to date … reflect any notion of a currency as a measuring stick.” (:256)
The Bitcoin Flaw (Solved?)
In Part 2 (which I hope to post later this week), I will summarize my thoughts about @proofofbrainio’s recent release of the ‘Proof of Brain’ token ($POB) and website (proofofbrain.io) and my assessment of the extent to which it might be able to solve ‘The Bitcoin Flaw’.
