My recent article with quotes and comments was so well received, so I decided to follow it up with one on another subject, a subject being dear to us all: cryptocurrencies and the flaws of FIAT money. Some quotes will follow in the second section below, but let me first quote what I wrote myself about this as early as 2005.
From “Currency, Gold & Digital Money”, TMA05, October 2005
I will not republish the whole article here, it would become too long and some parts are simply too outdated to be of interest any longer, but I will include some rather long pieces. Let's begin with definitions – and remember that this was years before Bitcoin was presented.
From Chapter 1:
“A cashless society is a society lacking cash. All transactions are made by transfers between accounts, which can be monitored by government or some other representative of the Big Brother Society. There is zero privacy.
Digital cash is in many ways the opposite. There are no accounts, and 100% privacy.
The word "cash" is sometimes erroneously used, and can cause some confusion. Remember that assets on an account can never be cash.
Cash is not only physical bank notes and coins, they can be digital as well, as long as they share the fundamental characteristics of bank notes and coins; belonging to bearer, and transferred by being handed over.
Private currency, as opposed to national one, is not under the control of politics, and thus, if it is created to be independent of national currencies, free from political manipulation too. A system just transferring a national currency, or using units being fixed in value relative to a national currency, is no currency in itself, but a payment system.”
…
From Chapter 2:
“Almost all national currencies today are "fiat" money. They are just paper currencies made legal tender by law.
Essentially they are merely political tools, to control and govern economic activity - very powerful tools, indeed. That is why a State always tries to keep a currency monopoly within its borders. In order to break the political control of economy, the creation of private currencies is one of the first and most important steps to take.
The opposite to a fiat currency is one that is backed by a commodity - say - gold or silver. Such a currency always has a real value, since there is a value on the commodity that is backing it.
For a private currency, a backed system always involves the problem of storage of the backing commodity. It is not only costly, but it must be in a safe place. In cases of a private currency it must be a place unreachable to the greedy hands of the Big Brothers of the world.”
…
From Chapter 4:
“I have already mentioned that a backing commodity has to be stored - in a safe place. If you, as the manager of a private system, tell your customers (or users) where it is stored, Big Brother will learn it too. Then "he" will undoubtedly try to snatch it, sooner or later.
On the other hand, if you do not tell them, the credibility of your system can be questioned. Doubts of its solidity will be a hindrance to growth, and if it does not grow, it is of limited use.
A related problem is the matter of interface with other financial systems. How can you handle in-exchanges into your system, or out-exchanges from it? You must have an official procedure for this. If it is handled through the common bank system (for instance), Big Brother would be able to monitor it, and even to disturb the transactions. Both privacy and security would suffer.
Although I normally support the use of a currency backed by a solid commodity, like gold, the digital era requires digital solutions. In order to create a currency or a payment system which is private, anonymous, and safe - it cannot be backed by a physical commodity. In the ideal solution, everything must be held and managed digitally only.
The interface would remain a separate problem. To make the system safe, it ought to be closed, with no traceable official procedure for the interface with other systems at all. (There is nothing in this preventing private individuals from exchanging on a personal basis.)
This is not easy to achieve, and we do not pretend to have the ultimate solution. Instead we are trying to put our finger on some key problems.
The presently very popular gold-based systems all lack solutions to these problems. That is - I think - one reason why they will not suffice to make economic activity free from political control and coercion.
…
From Chapter 5:
“For everything involving a factor of privacy, it is normally best to use less known facilities. The most common ones will be known to Big Brother and other potential snoopers and intruders too. They will be the most abused, monitored and spied upon ones; and ultimately they are the ones most likely to be attacked.
If you use a maildrop, a bank, a webproxy, a tax haven - or almost anything related to privacy - this is a straightforward principle; but for a private currency or payment system, it is not that simple. It holds for them too, but they involve a contrary factor as well.
A currency needs a critical mass to be useful. There is no use with it, if it has only three users, or ten. It must be widely used to be practical. Preferably you should be able to receive and use your funds again without leaving the private system (out- and in-exchanges are costly and expose you to privacy risk); but if there is nobody accepting the currency, it is meaningless. In short, the system has to be just as large, well known, and high profile that it attracts all the otherwise undesirable attention.
This paradoxical situation requires a great deal from a system's safety structure - both jurisdictionally and technologically.”
...
From Chapter 6:
“One of the most crucial factors for a system is its jurisdictional structure. That is, which state's laws it falls under. Splitting everything into several different (handpicked) jurisdictions can reduce restrictions, increase security, and eliminate tax. This must be done with the greatest care and expert knowledge, because this whole area is a minefield. And the solution is not ideal, because laws change all the time. A multinational structure must at every moment be ready to adapt accordingly.
For a system without physical backing, whose only existence is digital, a suitably designed distributed system could for practical purposes place everything outside of any jurisdiction. This question is too technical to discuss further here, but at the present time it is the most promising strategy.”
Some years after this article, Bitcoin turned up as a game-changer. Let's now turn to quotes.
Quotes
Daniel Webster, 1782–1852, served two different periods as the United States Secretary of State.
"Of all the contrivances devised for cheating mankind financially, none has been more effective than that which deludes him with paper money."
(Daniel Webster)
"Now the reason given by our rulers for suppressing cash is to keep society safe from terrorists, tax evaders, money launderers, drug cartels, and other villains real or imagined. The actual aim of the flood of laws restricting or even prohibiting the use of cash is to force the public to make payments through the financial system. This enables governments to expand their ability to spy on and keep track of their citizens’ most private financial dealings, in order to milk their citizens of every last dollar of tax payments that they claim are due."
(Joseph T. Salerno, in his article "Why Government Hates Cash")
J. Orlin Grabbe (1947-2008), the creator of the later closed Digital Monetary Trust, was almost prophetic in his focus on cryptography. Here from his essay “The End of Ordinary Money”, 1995:
"At any rate, the spook spoke the truth: cryptology represents the future of privacy, and more. By implication cryptology also represents the future of money, and the future of banking and finance. (By "money" I mean the medium of exchange, the institutional mechanisms for making transactions, whether by cash, check, debit card or other electronic transfer.) Given the choice between intersecting with a monetary system that leaves a detailed electronic trail of all one's financial activities, and a parallel system that ensures anonymity and privacy, people will opt for the latter. Moreover, they will demand the latter, because the current monetary system is being turned into the principal instrument of surveillance and control by tyrannical elements in Western governments."
(J. Orlin Grabbe, The End of Ordinary Money,1995)
“Algorithmic money are systems which make use of mathematics and cryptography, not laws and legislation like legal money. Algorithmic money is therefore incorruptible as the laws of mathematics are universal across borders, and are not subject to human flaws and fragilities.”
(Amir Taaki [genjix])
“The raison d'etre of bitcoin is trustlessness.”
(Eric Lombrozo 2015)
“It is an Engineering Requirement that Bitcoin be 'Above the Law'.”
(Paul Sztorc 2015)
“Resiliency, not efficiency, is the paramount goal of decentralized, non-state sanctioned currency.”
(Jon Matonis 2015)
“It has been speculated that blocking the money stream to governments would solve the regulation of the economy and unbridled spending problems too.”
(Jon Matonis)
And finally a little humour. I once found this post at bitcointalk.com:
I tell lay people:
"These days the biggest supercomputer in the world is Bitcoin"
Whenever I do this I always feel guilty for not saying
"These days the distributed computer system with the most processing power is Bitcoin."
But if I said that, they would [...] [say]: (in a nasal, condescending tone)
"It's common knowledge that today the most powerful discombobulated hyper-processing apparatus in terms of decagigadefenestrations is, of course, the P9783.419 Microsupergigaperambulator which as everybody knows is being offered by Confusosoft as a metahypomux of the ultracombowhatsit."
So I just keep it simple.
(FormerlyAnonymous, A Forum Post at bitcointalk.org)
Copyright © 2021 Meleonymica. All Rights Reserved.
The parts from my “Currency, Gold & Digital Money”: Copyright © 2005 Meleonymica. All Rights Reserved.
Here you find all my writings about privacy & antibigbrotherism, and here about Quotes, Proverbs, and Sayings.
You find all my writings on Read.Cash, sorted by topic, here.
