A gold bar is a partially-completed future product that objectively will enhance human life.
Sound banking is neither centralized nor a collectivist consensus, but rather individualist.
For roughly two decades straddling the last turn of the century, the so-called “Doomsday Argument” was hotly debated in peer-reviewed journals of philosophy—until my 2009 article in Philosophy of Science, a leading peer-reviewed journal in its field, decisively refuted the argument. More importantly, my article presented positive ideas toward the solving of the problem of induction. After a few favorable citations of my article shortly after publication, the debate over the Doomsday Argument fizzled. I later expanded my article into a short book, The Longevity Argument. The positive aspects of that book, minus the refutations of wrong theories, are incorporated into my treatise on epistemology, A Validation of Knowledge A New, Objective Theory of Axioms, Causality, Meaning, Propositions, Mathematics, and Induction.
Most layman, upon hearing the Doomsday Argument, could tell from common sense that its conclusion is absurd. But it was not so easy for anyone to put his finger on the flaw in the argument. Professional philosophers also had trouble pinpointing the flaw; and surprisingly, or perhaps not so surprisingly, numerous philosophers argued that the Doomsday Argument is actually right.
The same situation holds with Bitcoin. To the layman, it seems obvious that Bitcoin, a coin backed by nothing but reference to itself, is worthless and must be some kind of joke or fraud or crackpot idea. But some educated individuals, apparently too clever by half, believe the idea is a brilliant way around all the old common sense. And it is not so easy to pinpoint the flaw clearly and to explain its consequences.
This essay unequivocally debunks Bitcoin and, by extension, virtually all cryptocurrencies (with the possible exception of cryptocurrencies backed by objective assets such as gold). Ultimately, however, the main contribution offered by this essay is a pair of principles for sound money and banking.
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Introduction
In my book, Masculine Power, Feminine Beauty: The Volitional, Objective Basis for Heterosexuality in Romantic Love and Marriage, I write (2021, 159),
Transgenderism—the “T” in “LGBT”—lays bare that the LGBT movement is the most evil ideological movement in the history of the English-speaking world, because this movement advocates and practices the purest form of mindless indulgence of emotion—in the service of destroying Western civilization, poisoning the sexual potential of children, and mutilating their bodies.
Bitcoin, along with all the other cryptocurrencies backed by nothing, is the libertarian economic version of transgenderism. Bitcoin is the most irrational form of money in the history of Western civilization, because it implements the purest form of subjectivism—the mindless indulgence of emotion—in money.
Most, if not all, subjectivist theories begin with a claim that all previous ideas are also subjective, not objective. That is, before building a subjectivist system, subjectivists start by tearing down the objectivity of everything else. Transgenderism starts with the claim that there is no objective basis for the concepts “man” and “woman”—sex is “socially constructed”; “sex is a spectrum,” non-“binary”, “assigned” at birth, different from “gender”—and that therefore traditionalists about sex are just as subjective as transgender activists. Bitcoin advocacy starts with the claim that there is no objective basis for any values and any kind of money, that all forms of money are subjective.
Fiat currencies are indeed subjective, based on the whims of the governments who create them. A case in point is the U.S. dollar, which now has little backing of a real, objective asset such as gold. Bitcoin is an alternative to fiat currencies with a claimed advantage: there is a programmed limit to how many bitcoins can be created; therefore, the total supply of bitcoins cannot be inflated beyond 21 million coins.
But the creators of Bitcoin chose the wrong flaw of fiat currency to oppose. They merely opposed the creation of fiat currency without a limit. What they should have opposed is the creation of currency backed by nothing. Indeed, Bitcoin is even worse than the U.S. dollar, because Bitcoin is not backed by even a little bit of gold or any other asset of objective value.
Bitcoin addresses this problem by claiming that having no backing is actually an advantage, because even gold money is subjective; that without the encumbrance of a physical backing such as gold, Bitcoin is “pure” and “perfect” money; that Bitcoin is pure Platonic money, pure subjectivism.
Therefore, to debunk Bitcoin, this essay shows that Bitcoin’s argument against gold is absurd, that the argument commits what can be called the Morning Star fallacy. Then the essay shows that, if Bitcoin does not go to zero in the near future, then an even more disastrous outcome is in store for Bitcoin owners, and they are powerless to prevent it.
Bitcoin’s Attack on Gold: The Morning Star Fallacy
An example of the Bitcoin argument against gold was made by Robert Breedlove, a popular proponent of Bitcoin, on the Mikhaila Peterson Podcast #124 (beginning at the 59:15 mark), in response to the question, “What about the fact that you can’t use Bitcoin physically for something.” (This argument is discussed in a 2021 post of mine, and some of that text is incorporated here.)
Breedlove’s answer was essentially as follows. Gold has two kinds of function and therefore two kinds of value:
1. “Utility value,” that is, its value for use in jewelry, dentistry, computers, and the like.
2. “Marketability” or “monetary” value, that is, its value strictly as a medium of exchange—that is, its value strictly as money.
According to Breedlove, four fifths of the value of gold derives from this second value, the marketability value. Bitcoin, on the other hand, has “perfected” the concept of money and is “pure” money, because all of Bitcoin’s value inheres in its marketability value—that is, in its value as money.
In other words, according to Breedlove, the fact that Bitcoin has no “utility value” is a virtue, not a fatal flaw.
This argument by Breedlove, in favor of Bitcoin, commits a kind of equivocation that can be called the Morning Star fallacy: derived from the error of thinking that the morning star and the evening star are two distinct entities, whereas in fact they are the same entity (the planet Venus) at different stages of a causal progression.
Here is a simple example of the Morning Star fallacy: “Adults do all the work. Therefore, our society would be more productive with no children.” As ChatGPT-4 accurately explains, “In this example, the fallacy occurs in the oversimplified and erroneous reasoning that separates the population into two distinct groups (adults and children) without recognizing that these groups represent sequential stages of the same individuals’ lives.”
Here is another example: “Much more of my food is in my pantry than in my digestive system; therefore, the main use of my food is in filling my pantry. And even if my food became inedible, it would still be valuable for filling my pantry.”
Here is part of the astute analysis by ChatGPT-4 of this fallacious argument:
Analysis Using the “Morning Star Fallacy”
Conceptual Misstep:
1. Categorization and Purpose Error: The primary logical error here is categorizing the food based only on its location (pantry vs. digestive system) and concluding its purpose based on this categorization. This reasoning fails to recognize that the presence of food in the pantry is merely a transient stage — it is stored before being eaten, not as an end in itself.
2. Temporal and Functional Oversight: Similar to the error of seeing the Morning Star and the Evening Star as unrelated entities, the argument incorrectly separates the stages of food usage (storage vs. consumption) and assigns them unrelated purposes. It overlooks the actual, primary function of food — nourishment, which is a process that begins with storage and culminates in consumption and digestion.
3. Illogical Extension: The claim that food would still be valuable for filling the pantry even if inedible further compounds the fallacy. It stretches the misunderstanding by suggesting that the incidental function (storage) is more critical than the primary function (nutrition), irrespective of the food’s edible status.
Later, I asked ChatGPT the following: “Here is a more subtle example. More gold is traded as money than for non-monetary uses such as jewelry, dentistry, and industry. Therefore, most of the value of gold is derived from its use as money. If gold were replaced in its non-monetary uses, it would still retain most of its value as money. What do you think of this example?”
Again ChatGPT astutely replied, in part, as follows:
The example you provided about the use and value of gold is indeed more subtle and nuanced but still aligns well with the conceptual outline of the “Morning Star Fallacy.” This fallacy, which involves misunderstandings about different stages, appearances, or uses of the same entity being incorrectly viewed as entirely distinct, can be applied here to analyze and critique the reasoning presented.
Analysis of the Gold Example
Scenario: The scenario suggests that because a majority of gold is traded as money (in forms like coins, bars, and financial instruments), its primary value must therefore stem from this use. The argument further posits that even if gold’s non-monetary uses (like in jewelry, dentistry, and industry) were to be replaced by other materials, its value as a monetary asset would largely remain intact.
Fallacious Reasoning:
1. Oversimplification and Misclassification: The argument simplifies gold’s value dynamics by primarily classifying it under its monetary use, disregarding how its non-monetary applications contribute significantly to its overall demand and perceived value. This is akin to observing Venus at night and concluding its value only as the Evening Star, ignoring its identity and importance as the Morning Star.
2. Ignoring Interconnected Values: By claiming that gold would retain most of its value as money even if non-monetary uses were phased out, the reasoning fails to acknowledge the interconnected nature of its uses. The industrial, aesthetic, and functional values of gold (in electronics, jewelry, etc.) help sustain its desirability and trust as a stable monetary asset. This multifaceted demand underpins its monetary value, much like the different observations of Venus collectively enhance our understanding of the planet.
Later, I wrote the following to ChatGPT: “One reason I think the gold example is more subtle than the food example is that gold is non-perishable. Therefore, a gold vault can contain many years of gold inventory, whereas the inventory of food in the pantry last[s] only a few months. Also, because food is perishable, the inventory must be rotated, first in first out; therefore, owners of food are more aware of its ultimate use. In contrast, gold inventory does not have to be rotated, because it is non-perishable. Therefore, gold can remain in a vault for decades, even centuries, and it is easy to forget that such gold is valuable because it can ultimately be consumed. What do you think of that?”
Again ChatGPT “understood” the argument, replying in part as follows:
Key Differences and Their Implications
Non-Perishability and Inventory Duration:
Gold: As you noted, gold is non-perishable and can be stored indefinitely without degradation in value from physical decay. This allows for very long-term storage, potentially spanning decades or even centuries. The static nature of gold storage can lead to a cognitive disconnect where its immediate visibility or usage (as a monetary asset or vault inventory) overshadows its potential uses in other areas (like industrial applications or jewelry), which might not be as immediately apparent.
Food: In contrast, food is perishable and typically has a much shorter storage duration. This necessitates frequent turnover and use, which keeps its purpose (consumption) in constant view for those managing the inventory. The perishable nature of food makes the end-use (eating) more evident and harder to conceptually separate from its storage.
Inventory Management and User Awareness:
Gold: The fact that gold does not require rotation and can remain static in a vault contributes to it being viewed primarily as a stable store of value—a “set it and forget it” asset. This might lead to underappreciation of its role and value in active circulation or other uses, fitting the “Morning Star Fallacy” by maintaining a narrow focus on its role as a reserve asset.
Food: The necessity to rotate food supplies due to perishability means that owners and handlers are continually reminded of its consumption role. This constant interaction with the food as it moves through its lifecycle from pantry to plate reinforces the understanding of its primary purpose as nourishment.
Therefore, if gold were to lose all its non-monetary uses, it would be worthless as money—just as if food were to become inedible, it would be worthless in the pantry.
Bitcoin is not inedible food in the pantry. Bitcoin is non-perishable, freely-storable, easily-transferable, “perfect,” imaginary food in an imaginary pantry.
Why Mine Gold?
Because the above point eludes so many educated individuals, it is worth belaboring. Consider the following rhetorical question: Why mine gold?
That is, if gold is valuable as money apart from any other practical use, then why shouldn’t miners just let the gold stay in the ground un-mined, and then buy things with receipts issued on the gold in the ground?
Let’s take a numerical example. Suppose a mining company owns land containing gold, and the total cost to extract the gold and refine it into gold bars is $1,500 per ounce. (That cost is pretty low for a productive mine.) At the current price of gold, roughly $2,300 per ounce, the miner can expect a profit of $800 per ounce. But according to Bitcoin advocates, most of the value of gold—four fifths, according to Breedlove—comes from its use as money. That would mean that the current value of gold as money is more than $1,800 per ounce. Well, the gold in the ground could serve as money as well as gold bars in a vault can. In fact, the gold in the ground is more secure, because it is more difficult and more expensive to rob, steal, or confiscate. So why would a mining company give up $1,800 per ounce for $800 per ounce?
And what about gold in the ground that would cost $3,000 per ounce to extract? Such a property would be even better for a mining company, because the gold would be even more secure.
Of course, companies do mine gold, because everyone knows, at least implicitly, that un-mined gold is not valuable as money because it is not valuable as anything else. Similarly, Bitcoin is not valuable as money because it is not valuable as anything else.
A gold coin, in comparison to gold ore buried in the ground, is a partially-completed product—such as a dental crown, a non-corrosive plating of an electronic component, or a work of art (jewelry) that can last as long as the human race—that objectively enhances human life. When I pay for something with my gold, instead of with my time, I am paying a time-saver to a producer who will not have to spend his time to mine the gold as part of producing his product. By paying with gold instead of with my time, I can instead use my time for some other life-enhancing purpose.
It is because a gold coin is a partially-completed future product that it is wealth. The value of the gold coin is not subjective, but objective; the value is not based on whim, but on the factual requirements of human survival and flourishing.
To make the point even more starkly, suppose that I had a bar of gold that was encased in radioactive material, and that it would cost a billion dollars to remove the gold safely. That bar of gold would be worthless until the price of a gold bar approached a billion dollars.
But let us belabor the point even further. Suppose there were a cryptocurrency just like Bitcoin, except for one thing: it was backed by gold in the ground, at various locations around the world, with extraction costs of more than $100,000 per ounce. Such gold would be very secure, because of the high extraction cost. Would such gold then be valuable, because it had become the backing of a cryptocurrency? Of course not.
Would this new version of Bitcoin be more valuable? No, because the gold backing would be worthless until the price of gold approached $100,000 per ounce. (If cryptocurrency supporters think that Bitcoin would indeed be more valuable under such a scenario, then I have just given them an idea for a new coin to compete against Bitcoin.) Therefore, this new version of Bitcoin would still be worthless.
Bitcoin enthusiasts might argue that such a gold backing would undercut the nature of Bitcoin, because the gold might somehow be confiscated, despite the high extraction cost. But if this gold were confiscated, then the new version of Bitcoin would still be no worse off than today’s version, devoid of any backing. That is, Bitcoin as it is today is already the realization of the worst-case scenario: a currency that has lost all its backing. Recall this line from a translation of the play No Exit by Sartre: “You can’t kill me, I’m already dead.”
Therefore, Bitcoin is even more worthless than a version of Bitcoin that would be backed by gold in a worthless form. Bitcoin, by the standard of reason, is worthless.
For the best explanation I have read of what money is, see the essay “Egalitarianism and Inflation” in Philosophy Who Needs It by Ayn Rand.
Bitcoin, Libertarianism, and Subjectivism
Numerous supporters of Bitcoin are self-described libertarians (as I can confirm from personal interactions), who want to protect their property from governments and other coercive agents.
The connection of Bitcoin to libertarian subjectivism is illustrated by a pair of articles by Stephan Livera in Bitcoin Magazine, self-described as “the oldest and most established source of news, information and expert commentary on Bitcoin, its underlying blockchain technology and the industry that has been built up around it.” One article by Livera has the self-explanatory title, “Why Libertarians Should Prioritize the Bitcoin Strategy Above All Others.” In the other article, Livera writes,
we should reason from the subjective theory of value [quoting the Mises Institute]: “The value of a good is not determined by any inherent property of the good, nor by the amount of labor required to produce the good, but instead value is determined by the importance an acting individual places on a good for the achievement of their desired ends.”
Considering values subjective is an unfortunate and profound flaw of the Austrian school of economics (best exemplified by Ludwig von Mises), a flaw that libertarianism has amplified. Whether or not Austrians hold a radical notion of subjectivity, to the extent of thinking that no value is objective, many libertarians do hold such a notion, as illustrated by another passage from the same article by Livera:
Generally, when something is “backed by” something else, it implies that it somehow has the support of some other entity, like a government. Historically, people say the U.S. dollar was “backed by” gold, and people could historically redeem notes for gold, but no such thing exists with Bitcoin. So, perhaps a better question to ask is, “What’s gold backed by?” Only then are we getting to the truth of the matter: it was all subjective valuation all along. Beauty is in the eye of the beholder.
Again, the case for the subjectivity of Bitcoin begins with an attack on the objectivity of gold, just as the case for the subjectivity of transgenderism begins with an attack on the objectivity of the concepts of man and woman.
The rhetorical question, “What’s gold backed by?” fails as an argument. As explained earlier, a gold coin does not need backing, because it is a partially-completed future product that objectively enhances human life. But here is an unanswerable rhetorical question for Bitcoin subjectivists: If valuation is subjective, then why should anyone value Bitcoin?
On objectivity and subjectivity in economics, it is crucial to study the work of George Reisman along with the work of von Mises. Reisman was an outstanding student not only of von Mises but also of Ayn Rand, who identified man’s life as the objective standard of value. (See the essay “The Objectivist Ethics” in The Virtue of Selfishness by Ayn Rand.) Also see Ayn Rand (in the essay, “What is Capitalism” in Capitalism: The Unknown Ideal) on the false alternative of the intrinsic vs. the subjective:
The intrinsic theory holds that the good is inherent in certain things or actions as such, regardless of their context and consequences, regardless of any benefit or injury they may cause to the actors and subjects involved. It is a theory that divorces the concept of “good” from beneficiaries, and the concept of “value” from valuer and purpose—claiming that the good is good in, by, and of itself.
The subjectivist theory holds that the good bears no relation to the facts of reality, that it is the product of a man’s consciousness, created by his feelings, desires, “intuitions,” or whims, and that it is merely an “arbitrary postulate” or an “emotional commitment.”
The intrinsic theory holds that the good resides in some sort of reality, independent of man’s consciousness; the subjectivist theory holds that the good resides in man’s consciousness, independent of reality.
The objective theory holds that the good is neither an attribute of “things in themselves” nor of man’s emotional states, but an evaluation of the facts of reality by man’s consciousness according to a rational standard of value. [pp.21–22]
Yes, to value food in the pantry based on what it cost to produce the food, or based on some inherent or intrinsic property of the food (such as that it contains protein) apart from its relation to man, is wrong—but less wrong than to value imaginary food.
Bitcoin is Collectivist Currency
Bitcoin and other cryptocurrencies are generally described as “decentralized.” Advocates of cryptocurrencies see their cryptos as a “decentralized” alternative to “centralized” money issued by governments, and therefore immunized against control or seizure by governments and other coercive agents.
Reader beware of descriptions in words that begin with “de-” or “un-” or “non-” or the like, as in the word “decentralized.” Such words tell you one purported bad thing that the thing in question is not, but not what the thing in question is, which might be another bad thing. Yes, Bitcoin is not centralized. But what is it instead?
Consider an old-fashioned bank that is a trusted third party in transactions and that issues its own receipts—its own currency—backed by gold in its own vault. Is such a bank a centralized system? In contemporary parlance, such a bank might be called a centralized, permissioned system. But is such a bank centralized in the same way that the present U.S. system of money is centralized? From the perspective within the bank’s network, the network is centralized, but from the perspective of the bank’s network in relationship to the entire society, the network is best characterized as individualist. Each customer of this bank is free to use this individual bank and this bank’s currency, or to use a different bank and different currency. In contrast, the present centralized system requires that everyone in the U.S. recognize the dollar, which is controlled by a central government, not any independent individual bank.
Bitcoin is not centralized, but neither is it individualist. Bitcoin is a system of consensus, of collective decision-making. Each node of the system has a full copy of the Bitcoin ledger, and transactions are verified by a consensus of the nodes (entailing a great deal more work than needed by an individualist or centralized system). In other words, Bitcoin has no ruling center. Instead, it has a ruling circumference.
So Bitcoin is a one-world, collectivist currency.
How did libertarians become collectivists? Let us see.
Technical Matters Revealing Deeper Anti-Individualism
Let us examine curious technical features of Bitcoin, for what they reveal about the philosophy of Bitcoin.
Consider the passwords we all use to log in to various websites. It takes us only a few seconds to enter a password, because we know it. But for a criminal to guess the password, it could take years. Similarly, it is easier for me to sign a printed document than for a dishonest actor to forge my signature. It is easier for me to lock and unlock my safe than it is for a burglar to break into my safe.
The same is true for the general method of digital signatures of transactions, using private and public keys. It takes very little computational work to sign a transaction, but a tremendous amount of computational work to forge the signature. That is, digital signatures offer a tremendous amount of computational leverage to honest actors. Dishonest actors would have to do a tremendous amount more work to corrupt a system than honest actors had to do to secure the system.
In contrast, the “proof-of-work” method that Bitcoin uses, to create a new block in the blockchain, offers no leverage in this respect. It takes no more computational work to produce a phony block with a new proof-of-work than to produce an honest block with the original proof-of-work. This lack of leverage is the reason why blockchains such as Bitcoin consume so much energy. Honest actors must do tremendous amounts of work in order to require dishonest actors to do tremendous amounts of work to break the system.
Here is an analogy. A typical password system is like burying your treasure in some undisclosed location on your square-mile property. It takes only a little while for you to dig that one hole and cover it up. A bad guy would have to dig millions of holes before stumbling onto the right spot. But the Bitcoin blockchain is like announcing where the treasure is, and then trusting that you and other good guys can shovel dirt onto the treasure faster than bad guys can shovel the dirt off of the treasure.
Here is another curious technical feature. In a blockchain, such as Bitcoin, old blocks are made more secure by each new block of transactions appended to the chain. To corrupt a block a hundred blocks ago, bad guys would have to re-solve the proof-of-work puzzle for all the subsequent 99 blocks—a very expensive proposition. Blockchains are good for protecting the integrity of old blocks in the chain. But consider the adage, “A chain is only as strong as its weakest link.” Bitcoin is not only a journal of transactions; it also must function as a ledger of the current state of each account. If the most recent block is corrupted, then that corruption thereby corrupts the whole chain. There is little good to having a ledger of my account that was accurate for 20 years if someone can rob all my money by zeroing out my account with a bogus transaction today. Therefore, the Bitcoin network must be relentless in expending vast amounts of energy and computer time to defend against attackers. No matter how much dirt the “good guys” have shoveled onto the treasure over the past years, they must keep shoveling dirt just as fast now. And the moment that bad guys shovel dirt faster, all could be lost.
Consider one more perspective on the technical features of Bitcoin. A hallmark of an economy, especially an advanced one such as ours, is the division of labor. Each individual in an enterprise and an economy does his own specialized part of the whole job, and each individual learns to trust that certain other individuals will do their job well. I buy apples from a farmer whom I trust grows apples that are not poisonous, and so on. But in the Bitcoin blockchain, every miner does the same thing: each makes an astronomical number of guesses of the answer to the block puzzle. And each node in the network does the same verification of transactions and blocks. There is no division of labor; instead, there is massive duplication and multiplication of labor.
The foregoing shows that Bitcoin is the synthesis of four very bad ideas. First, the coins are backed by nothing. Second, the “decentralized” system is really a collectivist consensus instead of an individualist system. Third, the system uses a form of cryptography that is devoid of leverage; the good guys have to expend just as much energy as the bad guys. Fourth, the chain of blocks does not decrease the vulnerability of the current block; therefore, the exorbitant demand of energy to maintain the blockchain is unrelenting, with no division of labor and tremendous amounts of duplication of effort.
How did Bitcoin come to pile one bad idea onto the next? The answer is that is seeks to be a “trustless” system. That is, it seeks to enable banking without a trusted intermediary. Therefore, it instead places trust in a consensus.
The most fundamental error of Bitcoin is a default on the responsibility to judge individuals and to be judged as an individual. Bitcoin is a default on the responsibility to decide whom to trust and the responsibility to earn trust. Instead, Bitcoin trusts no one, and ultimately trusts everyone equally. In this way, Bitcoin is profoundly egalitarian, collectivist, anti-individualist.
Bitcoin is a system for the economically indiscriminate, the economically promiscuous. Again, note the parallel to transgenderism and, more broadly, the avowedly “polymorphously perverse” LGBT movement.
For those who are reasonably disgusted by transgenderism and the LGBT movement, and who would rather not be reminded of such sordid things, another apt descriptor for Bitcoin is “postmodern currency”: Bitcoin is for people who believe that money is whatever they believe it is.
For all of its grave flaws in the present day, the United States is still a constitutional republic that is far better at protecting individual rights, including property rights, than a democracy would be—and far, far better than a global collective, which is what Bitcoin is.
All of the exorbitant amount of work that goes into the Bitcoin network does not create a partially-completed product like gold; instead, the work is counterproductive, merely maintaining a collectivist system, which is politically inferior to an individualist system backed by gold. Whatever price Bitcoin owners buy and sell their coins to each other for, Bitcoin is not wealth. To the extent that a man owns bitcoins, he is poorer than he thinks he is.
Bitcoin Has Believers
Bitcoin has one thing going for it: believers—like believers in transgenderism, or Islam, or Christianity. And some doctors and medical institutions actually get paid to mutilate the sex organs of children; and more than a billion people believe that Muhammed is a prophet, and many individuals support mass murder in the name of this alleged prophet, and many choose to die for that cause; and more than a billion other people believe that Jesus is the son of God, and many give a tenth of their income to churches in the name of Jesus, and many sacrifice happiness on Earth for that cause. (For the record, I have written that ”Judeo-Christian Conservatives Are Today’s Main Defenders of Western Civilization,” not because of their theistic foundation, but despite that foundation, because of the infusion of the rational philosophy of Aristotle, largely through Thomas Aquinas.)
Will Bitcoin prevail for centuries, like Islam and Christianity? I think not. Islam and Christianity are only two of many cults, almost all of which are long gone. Moreover, there are various sects of these cults, as Bitcoin is only one sect of the cult of cryptocurrencies backed by nothing. But there is another issue: Bitcoin owners are an easy target for opportunists who seek something—or what they believe is something—for nothing. To understand why Bitcoin is such an easy target, let us explore several implications of the fact that Bitcoin refers to nothing.
Live by Fake Money, Die by Fake Money
In the old-fashioned banking system in a politically free economy, each bank would have its own supply of gold (or other objective asset), and could issue its own private currency backed by that gold. A startup bank would have to purchase gold from another bank or some other source in order to back its private currency. Such a startup bank would cause no increase in the total supply of gold. Therefore, there would be no decrease in the value of the gold held by any bank, and no decrease in the value of the currency issued by any bank.
But the situation with cryptocurrency is different. A startup cryptocurrency creates new currency out of thin air, as Bitcoin did. The creation of a new cryptocurrency that captures a share of the crypto market is in effect inflation of the supply of crypto money. This inflation has already happened. The nominal value of Bitcoin today (calculated as the price multiplied by the number of coins counted on the Bitcoin ledger) is only slightly more than half the nominal value of all cryptocurrencies combined. That is, despite Bitcoin’s limit on the number of Bitcoins, there has been inflation of nearly 100% of cryptocurrency, over and above the limited inflation built in to the rules of Bitcoin. Lyn Alden makes a similar point as follows:
The biggest risk for the Bitcoin network since inception is that, ever since Satoshi put all the tech pieces together to make this concept work, there are thousands of copied and altered cryptocurrencies that compete with the original Bitcoin. By existing and attracting buyers, these other coins threaten to undermine the supply limit, since although bitcoin itself is limited, if people buy into tons of cryptocurrencies, the whole space becomes very diluted.
It’s fine for there to be a handful of other viable blockchains, such as smart contract platforms and such, but when there is a huge number of competing protocols, it creates a diluted mess. But the fact that this mess exists is an inherit [sic] risk of the Bitcoin network; there’s no way to block someone from copying the open-source distributed software and creating their own version.
But this vulnerability to dilution carries another vulnerability that, to my knowledge, no one has written about. To explain this vulnerability, there is more groundwork to lay.
The connection of libertarianism to Bitcoin has been addressed above. But this article in CoinDesk, self-described as “the most trusted media, events, indices and data company for the global crypto economy,” states, “Bitcoin has attracted intense interest from conservatives and right-wingers. But activists from across the political spectrum have found their own good reasons to embrace it.” This article in Forbes last month reports, “Support for bitcoin is deeply bipartisan in the United States, and carries past ideological and party lines.”
Moreover, the software industry, including the field of artificial intelligence, is overwhelmingly Leftist, as this article illustrates, and as everyone by now should know.
The allied values of libertarians and Leftists should be no surprise. Recall these words by Ayn Rand (1972, 31):
Above all, do not join the wrong ideological groups or movements, in order to “do something.” By “ideological” (in this context), I mean groups or movements proclaiming some vaguely generalized, undefined (and, usually, contradictory) political goals. (E.g., the Conservative Party, which subordinates reason to faith, and substitutes theocracy for capitalism; or the “libertarian” hippies, who subordinate reason to whims, and substitute anarchism for capitalism.)
— 1972. “What Can One Do?” The Ayn Rand Letter. 1: 29–32.
Now consider the saga of Wikipedia. Jimmy Wales, one of the two founders, “has previously referred to himself as an Objectivist, referring to the philosophy of writer Ayn Rand.” He also “labeled himself a libertarian.” (The one time I will cite Wikipedia is regarding its founder.) Wikipedia was created on the premise that a consensus of volunteer contributors would keep its content honest. But now, two decades later, Wikipedia is completely controlled by Leftists who explicitly place their Leftism over truth—see here and here.
Now we are ready to predict the fate of Bitcoin in the near future, if it does not go to zero—as it should—in the very near future.
A consortium of egalitarians—or redistributionists, or reparationists, or universal basic incomists, or level playing fieldists, or effective altruists, or whatever they will call themselves—will form. In the consortium will be community organizers like Barack Obama (well-loved by leaders of the “tech” industry); globalist organizations like the World Economic Forum of Klaus Schwab, the Open Society of George Soros, the Bill and Melinda Gates Foundation, and the Clinton Foundation; corporations like Alphabet (Google), Meta (Facebook), Amazon, Microsoft, Apple, Blackrock, Walmart, and virtually every major multinational corporation; virtually every major university; every government adversarial to the U.S., like Russia and China, along with most of our allies; virtually every Democrat in the U.S.; and a host of others. And they will start a cloned copy—technically called a “hard fork”—of Bitcoin, with one difference: the number of coins owned by each account. The new coins will be like bitcoins, but redistributed according to some egalitarian rule. For instance, perhaps half of every account’s coin holdings will be confiscated (“taxed”), put into a pool, and then redistributed evenly among all the accounts—every year. Or perhaps every citizen in every country will be issued an anonymous account (like a Bitcoin account), and the coins in the pool will be distributed evenly among them.
Let’s call this new coin “Redistcoin.” (All the obvious names I could think of—”Equalcoin,” “Egalcoin,” “Levelcoin,” “Commiecoin”—are already taken.) A significant number of the nodes of Bitcoin—probably more than half—will leave the Bitcoin network and join Redistcoin. Large retailers such as Amazon, Walmart, etc. will announce that any of their products for sale at a Bitcoin price (if Bitcoin ever gets that far) will have the same Redistcoin price. Governments will force that requirement at every physical point of sale.
I discussed the idea of Redistcoin with ChatGPT. Here is an excerpt:
Ron
And is it true that Bicoin’s rules would be powerless to prevent such a new coin and it’s [sic] effective redistribution? That is, would the ability of Redistcoin to achieve its redistribution be essentially a function of user sentiment and regulatory policy?
ChatGPT
Yes, it’s accurate to say that Bitcoin’s rules and protocol would be powerless to prevent the creation of a new cryptocurrency like Redistcoin and its implementation of a redistribution mechanism. Bitcoin operates on a decentralized network where the protocol governs the creation and transfer of Bitcoin itself but has no authority or mechanism to control or prevent the forking and modification of its blockchain into a separate cryptocurrency with different rules.
For a significant portion of our dialogue, ChatGPT—the de facto voice of global consensus—seemed to “think” that my idea of Redistcoin was not a reductio ad absurdum of Bitcoin, but rather a worthwhile new idea. For example, here is one passage from ChatGPT:
Introducing a cryptocurrency with a built-in wealth redistribution mechanism, such as Redistcoin with partial redistribution, represents an intriguing blend of technological innovation and social policy. It would test the waters for how advanced blockchain technology could be used not just for financial transactions but also for purpose-driven social change. Whether such a currency could achieve widespread adoption would depend on a complex interplay of factors including user sentiment, market dynamics, ethical considerations, and possibly regulatory responses.
Eventually, I set the record straight, as follows:
Ron
For the record, I do not endorse a coin like Redistcoin. I presented this thought experiment to explore with you how Bitcoin is vulnerable to such a coin. As you explain, many investors in Bitcoin want to protect their wealth from manipulation of money or outright seizure of money by governments that would cause dilution and/or redistribution of investors’ wealth. Indeed, that is why Bitcoin limits the total amount of coin that can be issued, and seeks a mechanism to prevent any one institution from gaining control of the system. But the very foundation of Bitcoin–being unbacked by any asset with tangible, objective value–makes Bitcoin particularly vulnerable to just the kind of outcome that Bitcoin was intended to defend against. A new coin like Redistcoin could dilute and redistribute Bitcoin wealth without any laws being passed, without bureaucratic overreach, without violation of the rules of Bitcoin, and even without any coercion. All it would take, in principle, for Redistcoin to undermine Bitcoin is for the moral and political sentiment of the global population to favor redistribution of wealth.
Do you have any further thoughts on the above summary?
ChatGPT
Your summary captures a profound and critical perspective on the vulnerabilities inherent in Bitcoin and similar cryptocurrencies, particularly with respect to their foundational principles and the potential impacts of new cryptocurrencies like Redistcoin. Here are some further thoughts on the themes you’ve outlined:
For the entire 35,000-word dialogue with ChatGPT, see this link. (See also my 9,000-word dialogue with ChatGPT on the Morning Star fallacy.) But here is my further thought: He who tries to live by the creation of a currency backed by nothing will die by the creation of a currency backed by nothing.
The best function of Bitcoin would have been as a spoof of fiat currency, as if to say, “If the government can do something dishonest and insane—namely, have a currency backed by nothing—then so can we, but we’ll put a limit on the total amount. We’re like Islam but with a limit on the total number of virgins.” In a rational culture, Bitcoin would indeed have been seen as a spoof. In our culture, instead and for the time being, Bitcoin is like Springtime for Hitler—see here and then here.
Bitcoin owners will have their economic teeth kicked in, or something worse, by villains more savvy than they. This scene from the movie Braveheart (1995) is apt.
In seeking to escape oppression by authoritarian government, Bitcoin owners are like abused children who retreat into a collective world of make-believe. But adults have a third option: Live in reality, and deal with reality objectively.
Understand the Good
This essay has been largely a critique of Bitcoin and, more broadly, cryptocurrencies. The essay also identified a general logical fallacy: the Morning Star fallacy. But the essay also specifically applied two positive principles—objectivity and individualism—that are more important than identifying things that are wrong. Long after Bitcoin and other cryptocurrencies are gone, these principles will underlie a sound system of money and banking, as they underlie every aspect of human life.
As they pertain to money and banking, these two principles can be stated as follows:
1. A piece of sound money, such as a gold bar or gold coin, is a partially-completed future product that objectively will enhance human life.
2. A sound banking system is neither centralized (as by government) nor collectivist (like Bitcoin), but rather individualist—that is, based on trust earned by individual banks operating under the laws of a constitutional republic that defends individual rights including the right to property.