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The Underlying Problem with Young Americans For Liberty

  The Underlying Problem with Young Americans For Liberty   Derrell McIver Warning: This article includes discussion and description of sexual harassment.   “Political power is not being chummy with politicians. To effect real change, you have to threaten a politician's power.” -anonymous This is a very difficult article for me to write. Going into college, I did not know how of any political organization that shared my values of Liberty. That was until I helped in the founding of a Young Americans for Liberty chapter and became a dues-paying-member. After a brief interest in the Libertarian Party, I realized that YAL and its associated organizations were the best chance we have at seeing Liberty in politics in our lifetimes. Some people will read this article and call it “cancel culture.” That is not the intent. For that very reason, I have not included the name of the sexual harasser. Instead he will be given the name ‘John’. My goal here is to call out the leaders

Four Cornerstones of Bitcoin

Some time ago I wrote a short piece that I called "Notes on Bitcoin as a Reserve Currency" where I laid out some basic thoughts on the concept of becoming your own bank, and one of the possible side effects of that (spelled out in the title of the blog post). I then sent a link to it to Sal, because I knew I would get some great feedback on it. I was right.

Sal sent me a great reply and it helped me to further flesh out the idea and this blog entry is basically that. I tried to, foolishly, jump over the fundamentals and Sal pulled me back down to the trenches.

"Intrinsic" Value

"To a naive observer, money made out of precious metal was 'sound money' because the piece of precious metal was an 'intrinsically' valuable object, while paper money was 'bad money' because its value was only 'artificial'. But even the layman who holds this opinion accepts the money in the course of business transactions, not for the sake of its industrial use-value, but for the sake of its objective exchange-value, which depends largely upon its monetary employment. He values a gold coin not merely for the sake of its industrial use-value, say because of the possibility of using it as jewelry, but chiefly on account of its monetary utility." - Ludwig Von Mises, Theory of Money and Credit.

One of my favorite economists, if not my absolute favorite, is Ludwig von Mises (I wouldn't call myself 'An Austrian', as the cool kids say, but that's for another time). Sal is a big fan too and we both agree on the fundamentals, but we split in the weeds.

If we trace the value of Bitcoin back to its root, to try and find out where its value comes from and what makes its money (in the Misesian sense), we can boil it down to four things: Electricity, Hardware, Code, Network.

There is a lot of ways to produce electricity, the heartbeat of our civilization. How and, perhaps more importantly, where you produce Electricity is the baseline for a potential floor on price on bitcoin through the competition on what to do with the electricity. You can do a lot of things with energy and when you chose to use it for Bitcoin, you do it with the idea that it is better, or more valuable, than the other alternatives[1]. 

Even if environmentalists like to call bitcoin a waste of energy production, or misuse, we who understand subjective value theory (hopefully) knows better: Even in places where energy costs are high and catch premium prices, there's innovation in capturing left-over energy "spills" and to convert it into Bitcoin network power. 

Just as with electricity, the Hardware used for supporting the Bitcoin network could be disconnected from the network and used for something completely different. Or the machines could scale down their hardware usage for bitcoin and gets other uses scaled up as they see fit. Just as electricity has competition for its use, hardware does too. A "mining rig" can be repurposed for a myriad of tasks, but when you chose to use it for bitcoin you do it because you think it's more valuable than the others.

The last piece of the puzzle, and the thing that ties everything together, is the Code. Without being too philosophical about it, it's the code that's the core of it all. But it needs the other two to function, of course. Just as gold needs to be dug up, filtered, and made presentable via some forms of hardware and energy, the same is true for Bitcoin. 

The blockchain code is a remarkable piece of literature: It's trustless accounting features are revolutionary. The Network, that is all the machines working together to keep the integrity of the blockchain ledger intact, is perhaps the most valuable piece in the puzzle - To me at least, and it seems many people agree with me. Without the security of the network, Bitcoin wouldn't be catching the same price as it does today. 

The price for 51% attacking[2] the Bitcoin network is staggering, not even counting all the hardware you need to collect. This is because of the size of the network - To attack it, you need to outsize the entire network. There are other different types of attacks too, but many of them are nipped in the bud because of the Network (or code). JW Weatherman made an excellent piece on the different threats to bitcoin, bitcoin holders, and the network - Free to download on GitHub - called Bitcoin Security Threat Model if you are interested in reading about these sorts of things.

To be secure enough to a future reserve currency you need, well, security. The smaller blockchains are easily disrupted; Attacking LBRY for an afternoon with rented hash power would cost pocket change. You can change the code and tighten the screws, but building a network the size of Bitcoin (and continue expanding upon it) takes time. Nobody is even close to Bitcoin, which is partially reflected in the price for a coin. Or at least I'd like to think so.

What I've illustrated here is something people like Peter Schiff miss when they talk about "gold having intrinsic value, but bitcoin not". A global ledger that can not be maliciously manipulated by bad actors that don't follow the rules is valuable in itself. In fact, we can even ignore the pieces on the road there (code, hardware, and electricity) and just focus on the Network.

To reconnect with the Mises quote at the beginning: The monetary utility of Bitcoin is undeniable. It might not be in the form of P2P, in a sense, because of how the blockchain is coded. But, being a potential reserve currency is very valuable too, and perhaps even more magical than Satoshi Nakamoto intended for his project. 

Peace and Profit

- Alex Utopium



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