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Minecraft Economics: How the Nether Update uses the Subjective Theory of Value

What is an emerald worth in Minecraft?


An emerald is the currency used in the popular game Minecraft for trading with NPCs called villagers and wandering traders. Emerald ore is an extremely rare resource in the sandbox world, yet every employed villager has quite a few to trade with the player. However, players have wondered how the emerald compares with real world currency. One YouTube Video by GameTheory tried to find this answer. First, they tried to convert it by comparing the USD cost of bread with the cost of bread in the game, but found that conversion does not translate to other goods. Next they used the labor theory of value to try to determine the USD to emerald conversion, but again came up with a nonsensical conversion. Finally, they tried to assume emeralds have an inherent value in real life and work backwards to determine the in-game USD cost. After using all of these methods, they come to the accurate conclusion that it's not really possible to convert emeralds i…

Bitcoin is Dead



For an audio version of these ideas, check out this episode of my podcast, A Boy Named Pseu.

Bitcoin is dead.

Is it, now? Well, haven’t you heard? The 11 year fad of magic internet money is long over. Nobody is buying, trading, selling, or even “HODLing.” This volatile ecosystem of market booms and busts, degenerate gamblers, terrorists and drug dealers has finally bit the dust…at least that’s what the media would want you to think.

According to the Bitcoin Obituaries from 99Bitcoins.com, multiple articles have claimed that bitcoin has “died” 378 times since its genesis, and 40 times in 2019 alone!



This fear-mongering narrative has been pushed from the mainstream media, prominent figures in the crypto space, as well as my own friends. Why? Satoshi only knows. Honestly there’s nothing honest about it. Bitcoin is alive and well, and is still very much in its infancy. If you look closely, you might think this infant is gorging itself with one-up mushrooms from Mario Brothers because of the miraculous exponential growth the industry has gone through in 2019.

The goal of this article is to call out the bull against the bitcoin bull market, and use real-world examples of bitcoin’s influential and impactful livelihood.

This will be covered in 7 parts by analyzing the hypotheses that if bitcoin is dead, then

  • the Mainstream Media isn’t talking about it
  • everyone abandoned the network
  • the President didn’t tweet about it
  • Nigerians aren’t living off it
  • so is its volatility
  • it has no value proposition

Conclusion

The points above will aid in explaining how bitcoin will continue to grow in-spite of regulations and negative rhetoric which plagues the mainstream. The robust, and passionate nature of those who make up the Bitcoin Network are the ones that will carry this sovereign movement from the cradle, and beyond the grave. Bitcoin is here to stay. Let’s debunk some FUD.



If bitcoin is dead, then the Mainstream Media isn’t talking about it.

The latest claim of Bitcoin’s demise made my “Today’s News and Views” bar on LinkedIn, where a piece from The Wall Street Journal titled, “If Bitcoin Looks Like It Isn’t Trading, It’s Because It Isn’t” started making the rounds.

The piece claimed that data reported from Flipside Crypto revealed “only 14% of the 18 million bitcoins outstanding exchanged hands during the last week of November, down from more than 50% last year.”

There seemed to be an expectation of increased enthusiasm in BTC. This new interest was to stem from “old money”, seasoned investors, as journalist Flex Yang reports in Bitcoin Magazine. However, Yang claims these investors tend to favor traditional financial products like stocks, bonds or commodities. It seems they just couldn’t stomach the market volatility of BTC.

As we saw in 2019’s “Black Swan” incidents, news stories like Facebook’s launch of Libra, and China considering deploying blockchain-based state policy skyrocketed BTC prices past $10,000. Naturally however, the peak was soon followed by a dip which very well could have been the main motivation for the old-timers to start dumping their BTC, and lowering the price further as we saw in mid-December.

The piece also claimed the majority of the cryptocurrency is controlled by a relatively small group: About 8.5% of wallets hold 99% of all the bitcoin in circulation.


Anarchapulco


True, but not in the misleading way you might think. Bitcoin isn’t trading because it’s being HODL’d by purest, fan-boy (and girl) HODLers. These are the “true believers” (if you will), or as coined by Trace Mayer, “the HODLers of last resort”. These are the individuals that give bitcoin its true value as a store of value, and believe it will one day replace the current fiat financial system with the hard, sound monetary cure that is bitcoin.

In fact, an analysis from Coin Metrics reported the number of Bitcoin addresses that hold any amount of satoshis reached a new all-time high of 28,393,045 between October and November 2019, from 28,384,557 in January 2018.

Bitcoin Magazine’s Vlad Costea revealed that Coin Metrics co-founder, Jacob Franek, doubted the increase was due to a greater number of individuals withdrawing bitcoin from exchanges, but rather the opposite, “since the overall supply held by exchanges and custodians continues to increase.”

A phrase my mouth keeps running into these days is, “intellectually dishonest.” I’m not entirely sure that’s appropriate in this scenario though. It might be giving the WSJ a bit too much credit by assuming they actually understand how bitcoin works. The WSJ piece fails to take any of the above into consideration. The owners of non-custodial bitcoin wallets are most likely, predominantly HODLers. These HODLers truly understand the value and virtue of bitcoin (which we’ll get into later), and are the ones keeping it from dying.

If bitcoin is dead, then everyone abandoned the network.

By mere speculation the, WSJ piece claimed “one reason for the slowdown could be the sobering reality that creating new global monetary standards requires more than computer code.”



Yeah, they’re right…

In fact, it takes an entire network of individuals to voluntarily download the required software/client to their computer and connect to the Bitcoin Network.

In order to run a fully-validated node to ensure that each of their transactions is kosher, it takes approximately 8 hours — a couple days to download over 11 years worth of every single transaction on the ledger.

Additionally, miners have to invest in the necessary mining equipment (should they choose to partake in such a role) where ROI is not guaranteed. For more of an in-depth, yet high-level explanation on the technicalities of the Bitcoin Network, I highly recommend Yan Pritkerz’s Inventing Bitcoin: The Technology Behind The First Truly Scarce and Decentralized Money Explained.

Luckily, the growing industries that are surrounding bitcoin are commoditizing supplies and resources to mine and issue the currency. In fact, the need for efficient mining operations is incentivizing the use of renewable energy. Now, nearly 80% of the energy consumed in bitcoin mining is renewable.

Short story long, code is peanuts to the remaining requirements of a new global, monetary policy. It takes the cooperation of strangers all around the world to plug into the network while investing their own resources with the uncertainty of financial gain in return.



Despite all these tedious requirements, this miraculously never stopped anyone from joining the network that is adamantly growing as more people continue to learn about bitcoin from bull-run hypes, and bearish periods of learning, researching, and developing in the ecosystem.

What matters to these voluntary participants is that they collaboratively nurture and cultivate bitcoin’s main end-goal: provide a solution to the failed monetary policy that is the central banking cartel. Their dedication to till the soil of the decentralized, validated, trust-less currency is what helps keep bitcoin alive.

The issuing of the bitcoin currency itself and the participants that operate around it is what powers the network. But that’s only one piece of the pie. But, you know. Bitcoin is dead.

If bitcoin is dead, then the President didn’t tweet about it.

Governments have officially recognized bitcoin as a threat to the modern financial system. In an article from The Daily HODL, Congressmen, French Hill and Bill Foster, wrote a letter in September urging the Fed to “consider creating a national digital currency as the rise of crypto and projects like Facebook’s Libra threaten paper money.”

The open letter revealed the following
  • Belief that the US dollar risks getting left behind as digitization sweeps the globe and governments around the world move to modernize their monetary systems and reinvent how they transfer, distribute and create money.
  • Concerns about the status of today’s US dollar, a decidedly old instrument that is one stop in a long line of early colonial currency and paper money known as Continental currency that was first issued by Congress roughly 240 years ago.
  • Governments are facing the emergence of a massive project that can scale instantly, that can cross borders without banks and onboard a built-in userbase of billions to send money around the globe as easily as email (AKA bitcoin)
  • The revelations are forcing lawmakers to rethink how to tackle the threat to the US dollar. Instead of assuming that the technologies underpinning digital assets will suddenly disappear
  • Many are devising plans to create competitive products to mitigate the risks of obsolescence or significant loss of leverage of traditional currencies.
Dollar Vigilante 2020

To this last point, it’s inevitable that their efforts fall short. The whole point of bitcoin is to be decentralized and free from a trusted, single point of failure. While having the feds run a digital currency of their own, (to quote Hillary Clinton), “what difference does it make?”

Truthfully, there’s literally no difference because it’s not backed by a hard currency, which is why Satoshi Nakamoto created bitcoin in the first place.Unless they decide to back fiat by a crypto hard cap, we’d all be suckers to take them at their word of proposing such a solution.

Unfortunately, such news didn’t get as viral as a tweet from everyone’s favorite tangerine. The President of the United States of America himself, Donald J. Trump, tweeted that he was not a fan of bitcoin. Even if Trump doesn’t fully understand how bitcoin works, he understands well enough that bitcoin would threaten his monetary policy of keeping interest rates low and continuing trade wars with China.

However, what Trump did/didn’t say about bitcoin or how he said it is irrelevant. His tweet is a prime example of the Streisand effect, the phenomenon whereby an attempt to hide, remove, or censor a piece of information has the unintended consequence of publicizing the information more widely. The point is, if bitcoin wasn’t on your radar, it is now.

No doubt the average Joe started talking or thinking about bitcoin, even if they had no idea what it was. Regardless, now grandma and the whole world knows of its existence.

But, you know. Bitcoin is dead.




If bitcoin is dead, then Nigerians aren’t living off it.

Bitcoin is empowering the dominant medium of exchange to the masses in West Africa. How? Gift cards.

The digital asset exchange, Paxful, is outcompeting other Western exchanges by enabling thousands in West Africa (Nigerians in particular) to buy gift cards for remittance, which accounts for two-thirds of the exchange’s USD volume.

In the article “Bitcoin and Gift Cards Are Powering a Million Dollar Remittance Market in Africa,” Bitcoin Magazine’s Colin Harper revealed the following:
  • “Paxful is able to onboard financially disconnected citizens of developing countries on a level that non-P2P [over-the-counter] exchanges like Coinbase simply cannot…Paxful services trades in more than 70 currencies around the world and has made much of its traction in geographic regions that many bigger exchanges have not.”
  • Nigerians account for likely 50 percent or more of Paxful users who trade gift cards.
  • Of the roughly $65 million in gift card trades processed through Paxful in October 2019, $32.5 million of them came from Nigerians.
How exactly does this work? Harper explains:
“an African immigrant will purchase gift cards out of the country (typically from the U.S.) for cash; they will send a picture of this gift card and proof of purchase to a friend or family member back home; the recipient makes a trade on Paxful, selling the gift card (typically at a discount) for bitcoin; they then take this bitcoin and trade it for their local currency and transfer this into their bank account."


This right here proves that third world countries recognize bitcoin as actual money and that its value is legit. These people would do away with their native currency for bitcoin any day because they have lost faith in fiat.

The spirit of bitcoin is working through the people who need it most, and also works through the markets (companies/industries like start ups or exchanges) to provide the needed bitcoin. It’s a fly-wheel that keeps spinning via the momentum of supply and demand, and shows no sign of pumping the breaks any time soon.

But, you know. Bitcoin is dead.

If bitcoin is dead, then so is its volatility

Bitcoin’s volatility further demonstrates why it is not dead. By analyzing its hypersensitivity in price over time, it’s evident that bitcoin is not only resilient, but appreciates in value. This characteristic repeatedly attracts more speculators during every bull run bitcoin goes through.

The ability of bitcoin to withstand these volatile gyrations in the market is what attracts newcomers. Those few who manage to stick around after the hype-cycle become financially, and emotionally invested in bitcoin by learning the ins and outs of how and why it works. If the community is fortunate enough, these “new coiners” (or folks who have yet to buy bitcoin, as the great Nik Bhatia has coined), become evangelists, and educate “‘no coiners,” or to-be-converted skeptics. For more insight, I highly recommend reading Chapter 3 of The Little Bitcoin Book,Bitcoin’s Price and Volatility. Therefore, the volatile nature of bitcoin not only increases its monetary value, but it’s fandom as well.

In 2019 alone, companies like Unchained Capital, River Financial, Hodl Hodl, GiveBitcoin.io, BlockFi and countless others have sprouted from this network effect. This goes without mentioning the countless new books, articles, and podcasts that have hit the scene. Plus, all of which may or may not be products of employees or let alone founders of the companies.



Players from the traditional, legacy financial world are entering the bitcoin playing field.

Fidelity has job openings hiring for bitcoin miners. The CEO of Twitter himself, Jack Dorsey, has even provided grants up to $100K to bitcoin developers and companies. Dorsey is also a huge contributor to the space as a whole by being one of the firsts to have an app on the market that lets you buy bitcoin adjacent to your fiat: The Cash App. Amazing what being the CEO of Square Crypto allows you to achieve. Not to mention, he works closely with Casa.

Casa is a company which is striving to achieve developments and functionality on the Lighting Network. For the new-coiners reading this, The Lightning Network is the layer 2 solution on top of the bitcoin blockchain (layer 1) that allows for fast, cheap, and easy everyday (smaller) purchases that won’t conflict with the competitive real estate for larger settlement payments on the blockchain.

The Lightning Network alone has had multiple improvements in 2019. Developer implementations like advancements on multisig, new proposals such as taproot, AMPs, and Easypaysy, are just a few new innovations that provide faster, user-friendly payments. Many of these innovations have been rolled out and companies like Casa, Breez, Zap, and many others have seized the opportunity to operate their business on the network’s new infrastructure and provide use cases.

As demonstrated above, this boom-bust price effect attracts new investors and companies alike. After learning of bitcoin’s unusual and unique characteristics, new entrepreneurs seek the opportunity to work within the space. Many are fortunate to reap from the benefits both during the hype cycle, (The Bull Period), and even after the hyper cycle (The Bear Period).

The Bear Period in particular, can be seen as the “building” period. This is when the industry as a whole grinds as individual companies, entrepreneurs, and single content creators do their R&D on bitcoin, share their work to inform the fanbase and greater public, release products, etc. Over the years, crypto in general (especially with 2017’s ICO boom), bitcoin incentivizes opportunists to profit off solutions they create. Such competitive alternatives and solutions like privacy such as Monero, or on-chain atomic swaps from Decred, may even be useful to bitcoin’s functionality. So if bitcoin is dead, so is the entire crypto industry.


Anarchapulco 2020 | Life Unchained

Products such as hardware and software like, wallets, nodes, new client updates etc. allow the community to grow the network by joining the network. New products become featured or sponsored in content from the variety of mediums like podcasts, press releases from blogs announcing new protocol updates to the Lightning Network, or BIP proposals, etc. It’s almost like a self-shilling bitcoin family revolving door. Man, I love capitalism!

Critics of the mainstream fail to recognize the unique traits of bitcoin in-depth. Speculators and journalists who publish articles of FUD, slandering its characteristics like volatility, ironically breathe life into bitcoin merely by giving it the time of day. It’s this very same self-sustaining volatility which commands bitcoin’s contagious network effect. This network effect impacts culture and governments, whose impact in turn moves the market, and comes full circle by keeping its nature volatile. Speculators, laborers, tradesmen, career politicians, entrepreneurs, and professionals of all kinds then become incentivized to flex their monetary muscles as they recognize opportunity in the industry.

But, you know. Bitcoin is dead.

If bitcoin is dead, then it has no value proposition.

Bitcoin’s mere existence is its greatest marketing campaign. As we’ve covered above, the characteristics it possesses naturally creates interest, appeal, profit, controversy, and grief. Any of these sums that get spread amongst the public serves as a proxy-marketing mouth piece that breathes life into bitcoin. The result? The best PR bitcoin could possibly ever ask for. Only, bitcoin never asked in the first place. Such PR is eloquently demonstrated in an article by Thomas Kuhn, CFA of Mine Digital. In his piece Why Bitcoin Is Not Failing, it’s clear to see that bitcoin’s life is legitimized by analyzing certain value propositions it possesses.

Unforgeable Costliness


Bitcoin’s construction is based off of the Philosophy of Monetary Value. Simply put, this theory claims monetary value is a thing that exists, and is the same theory Nick Szabo used when he created Bit Gold. Such value should come with unforgeable costliness.


Gold in itself is the best real-world, tangible example of this theory. Everyone agrees gold is very high in value. This value is demonstrated through its durability, scarcity, difficulty and costliness to obtain, and nearly impossible to counterfeit.

A primary catalyst of bitcoin’s value is the Halvening, (also spelled as halving) or the moment when Bitcoin’s block subsidy gets cut in half, roughly every four years. The halving is a crucial feature of bitcoin because it maintains its fixed inflation rate.

Like gold, bitcoin is a scarce asset. It's capped with a 21 million supply, which also contributes to its volatile nature. Yes, there will only be 21 million bitcoin created in all existence.

Thus, this increases its monetary demand and emphasizes its store of value. Plus it looks pretty. As Nick Szabo states in the Bit Gold White Paper.

“Precious metals and collectibles have an unforgeable scarcity due to the costliness of their creation. This once provided money the value of which was largely independent of any trusted third party…Thus, it would be very nice if there were a protocol whereby unforgeably costly bits could be created online with minimal dependence on trusted third parties, and then securely stored, transferred, and assayed with similar minimal trust. Bit gold.”

This missing protocol is what Satoshi Nakamoto’s Gold 2.0 needed, and achieved.

Proof-of-Work


The construction of the Bitcoin network itself creates and sustains its life. This is done through bitcoin’s security system, Proof-of-Work. The proof of work system was originally created by one of the original Bitcoin Core contributors, Adam Back.



In May of 1997, Back created the Denial of Service Counter-Measure solution, Hash Cash. The protocol was originally proposed as a mechanism to throttle systematic abuse of un-metered internet resources such as email, and anonymous remailers.

The first reference of proof-of-work can be analyzed in the Hash Cash White Paper published on 1st August 2002 as, “the hashcash CPU cost-function computes a token which can be used as a proof-of-work.”

In layman’s terms, Back’s big idea behind proof-of-work was to make someone pay a price for coercively sending you unsolicited internet usage like spam mail, or any form of a DoS/DDoS attack.

You don’t have to be a romantic to see that the relationship between the technological innovations of Szabo’s Bit Gold and Back’s Hash Cash is a match made in heaven. In order to create such “unforgeably costly bits” and to keep them as such, you need the process of mining that digital gold to be really expensive. Plus, it’s got to be equally expensive (if not more) to undo all that hard work from the get-go. Ergo, that’s what Proof-of-Work is for. And believe me, it’s totally worth it, because we say so.

Bitcoin’s value proposition and its source of life was perfectly articulated by Dan Held in an interview on the Honey Project. Held explains that price doesn’t necessarily follow security, so much as security follows price.

“What breaths life into bitcoin is the shared allusion that we all have; that it has value. It’s our belief that its genetic code is really good. It’s our belief that the traits it has as money give it a fighting chance. And so us believing that together by storing our money that was fiat currency (like dollars and Yen and Euros) by taking that money which is a representation of our time and energy, (because we had to expend either or to earn it)…when we store that [time and energy] in bitcoin’s ledger, we give it power. And that power essentially builds that wall.”



In his piece, Khun further griefs that:

“the will that some parties have for the technology to fail is bizarre, bordering on the crazy. It is not analysis, they write as if their opinion carries weight into the essence of the established idea, that it might affect the mechanics of Bitcoin and that they themselves could perhaps will it into destruction with their focused mind and needy, damaged reputation.”

Clearly, the opposite has been demonstrated. The fact people want bitcoin to fail proves its very existence. In a way, their efforts are their own proof of work (or failure rather). They can’t fight it without legitimizing its value.

But, you know. Bitcoin is dead.

Conclusion


Bitcoin incentivizes innovation and prosperity. By analyzing real-world use cases, it’s clear that it provides hope to those during the most hopeless of times. It allows us to think clearly, be scrappy, crafty, and live as sovereign individuals.

The improvements and needed solutions for the network signal entrepreneurial opportunity to voluntary market participants, and developers who may or may not be new to the scene. These individuals are willing to take the risk of diving into the uncertain, (yet very certain) space for financial, educational, and spiritual growth.

Bitcoin embodies the power of free-markets and the natural human incentive to retain one’s sovereignty. So long as individuals strive to be free, bitcoin will have a long, fruitful life.


So why isn’t bitcoin dead? Simple. People like it.



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