Money is about credibly representing value transactions

4 minute read

If you find WORDS helpful, Bitcoin donations are unnecessary but appreciated. Our goal is to spread and preserve Bitcoin writings for future generations. Read more. Make a Donation

Money is about credibly representing value transactions

By acrual

Posted February 5, 2020

According to the Selfish Gene book, we only want to exchange value or cooperate with strangers when there is an inmediate exchange. If we postpone this exchange, we are very likely to cheat (and even in the case we are not strangers!).

We are some serious cheaters according to this fascinating book and I agree.

Unless you believe we prefer to satisfy everyone else’s needs before our own, you must necessarily agree with this book, and this is important, because it explains money very well.

If you can’t give me something I value right now (barter), I want you to prove to me that you have provided value to someone else in the past, that is, I need a prove from you that you have made a value transaction earlier.

You must, as a result, be able to represent a transaction credibly.

What would you do if you had to represent a transaction in the most “credible” way 20.000 years ago?

I suggest that if you want to cooperate with me, whenever you provide value, you get in return something that is universally very scarce, so that you can’t tamper this representation easily. Otherwise I may have the feeling that you could be cheating me and again, you and I are very likely to do so.

But that something has to be easily recognizable by me, otherwise I won’t accept it either. If you want me to accept it, you’d better get divisible items, so that you can pay me smaller values. And chances are you will only accept stuff that is cheap and easy to transport. (in Menger terms, saleable in space and scale)

If I were you, I’d only accept stuff that is extremely cheap to store, that deteriorates the least over time, because you have no idea when your needs will arise, and that could be a long time into the future. (saleable in time)

Transferring the property of this stone must not depend on third parties, because otherwise those third parties are likely to cheat as well!!

During the first transactions, you will have no way of knowing if you are representing that transaction with the right-sized stone. It may be too big or too small. You won’t have any guarantees that the rest of humanity will accept this stone and as a result, you won’t be able to size it properly until this item is universally accepted by the market so that you can compare it. You’ll be gambling and speculating that you are sizing this transaction accurately. If it costs little to store, you will try to store as much as possible of it and as a result your gamble will have little cost.

Therefore that stone will be for you both a product you will use (a medium of exchange) and speculation too.

The market will slowly realize that by being data and software, Bitcoin is “the thing” that best solves each and everyone of these requirements.

The market should also understand that things that are valued are those which are stored, not those which are used because using them means buying and selling, so supply is kept high.

Storing means buying and keeping, limiting supply as a result. If Picassos were not kept, just seen in your home and then sold next day, then their value would tend to zero, but no, they are typically kept for decades.

Even if your shitcoin is designed to cure malaria, chances are that you will sell it inmediately after being used and as a result its value will tend to zero. With a value tending to zero, it is more likely that developers will end up curing malaria with Bitcoin than with your shitcoin.

For the n-th time, block, mute everyone speaking about shitcoins/blockchains, we have to be merciless with people that insist on being either ignorants or scammers.

Small note on Statism vs Libertarianism

I got into Bitcoin with a completely statist mindset, but understanding that we are programmed to cheat made me wonder if it does make any sense to pretend that Statism is the best way to organize ourselves.

It is also hard as a result for me to take seriously people that say they understand Bitcoin, and keep defending Statist views.

If we are programmed to cheat, and throughout history we have gone through the pain of using all sorts of monies in every single civilization as a way of solving it, does it make sense to spend each others resources in something named “common good”?

Subscribe to WORDS

* indicates required