In Praise of Bitcoin


My go-to avatar, Ptolemy, the most famously wrong scientist ever, now with laser eyes!

One evening a few weeks ago, I was on a Zoom call with a bunch of academic, think tank and Fed economists for a Bitcoin discussion. A lot of names you'd know if you're familiar with those circles, the most famous one being Paul Krugman (who, btw, I found to be charming, genuinely open-minded, and surprisingly humble about the entire enterprise of academic economics). I had been invited to be on the anti-Bitcoin 'side' of the discussion, but they needn't have bothered. Because there was no pro-Bitcoin side.

Krugman led with a simple question - what's the use case for Bitcoin? Not a theoretical thing, but an actual use of Bitcoin to solve a problem in the real world? - which led to an hour-long, extremely earnest and altogether unsatisfying conversation about financial transfers out of Venezuela, trade settlement and securitization on a blockchain, and Taylor Swift's ability to control the scalper/resale market for her concert tickets.

All of which are real things. All of which are interesting things. All of which are good things. But none of which are what got 20 busy people on a Zoom call at 8 pm on a Thursday night.

None of which ARE Bitcoin.

Now, to be fair, there were no old-school Bitcoin maximalists on the call, or if there were, they were too intimidated to make an Austrian economics, hard money, neo-goldbug, Bitcoin-is-the-inevitable-global-reserve-currency argument in front of Paul Krugman. LOL.

But I finally couldn't take it anymore.

Is this really why we got on the phone tonight? To talk about a novel form of digital rights management? To talk about payment transfers out of authoritarian third-world countries? Are these REALLY our questions about Bitcoin?

Answer: of course not. What got these academic, think tank and government economists on the phone that night was Bitcoin trading at $50,000. The question that everyone truly cared about, but a question that everyone danced around for the better part of an hour, was this: Is there any there there in the price of Bitcoin?

To which everyone, including the supposedly pro-Bitcoin contingent, said no. Not just no, but no, no, no. The price of Bitcoin was an illusion. The price of Bitcoin was the madness of crowds. The price of Bitcoin had no connection to any fundamental economic activity, just like gold had no connection to any fundamental economic activity, and thus - to this audience - could have no inherent value by definition.

I think this is very wrong. And I'll tell you, like I told this Zoom call, why I think there is a lot of inherent value in Bitcoin.

Because Bitcoin is good art.

Or better yet, because Bitcoin is elegant and beautiful fashion, sitting at the intersection of art and commerce.

Most importantly, because owning Bitcoin has been an authentic expression of identity, an extremely positive identity of autonomy, entrepreneurialism, and resistance to the Nudging State and the Nudging Oligarchy.

I've been saying that Bitcoin is art for more than six years, from The Effete Rebellion of Bitcoin (Feb. 2015) to Too Clever By Half (Feb. 2018, my most popular note ever!) to Riding the Cyclone (June 2018) to The Spanish Prisoner (July, 2019), and it's been a very frustrating place to be. Frustrating because public stances on Bitcoin are almost immediately turned into cartoons – either you’re the grumpy grandpa “Bitcoin is worthless!” cartoon or you’re the laser-eyed cultist “Bitcoin will be the world’s reserve currency!” cartoon, with no room in between.

The value-deniers, like the Zoom crowd the other night, think I'm agreeing with them when I say that Bitcoin is art. I'm not. The true-believers think I’m trolling them when I say that Bitcoin is art. I'm not. The creation of good art is – in my opinion – what we are put on this earth to do. It is our highest calling. It is my highest praise.

There is lasting value in good art, because it is a very scarce thing and it never gets used up.

Bitcoin is itself an NFT, a unique digital art work instantiated on a blockchain. It's the most valuable NFT in the world. I don't mean a Bitcoin, obviously that's a fungible thing. I mean THE Bitcoin ... the 21 million Bitcoins that make up the Bitcoin Project. The notion that Bitcoin would ever “go to zero” is ludicrous. Good art is always worth something. But how do we measure that something … how do we put a price on the value of good art at this particular moment in time? It’s a REALLY tough question.

There are no cash flows to art. There are no fundamentals to art. There is no "use case" to art.

There is only story. There is only narrative. There is only common knowledge - what everyone knows that everyone knows - about the value of art, common knowledge that emerges from our social interaction with story and narrative.

In every respect that matters, Bitcoin IS Epsilon Theory.

The Epsilon Theory Manifesto (June 2013)

Our times require an investment and risk management perspective that is fluent in econometrics but is equally grounded in game theory, history, and behavioral analysis. Epsilon Theory is my attempt to lay the foundation for such a perspective.

So yes, I've been saying that Bitcoin is art for a long time now. But what I haven't been saying - or at least not as loudly - is that bit about identity, and that's the part that needs to be shouted today. So here it is again, this time a little louder ...

Most importantly, owning Bitcoin has been an authentic expression of identity, an extremely positive identity of autonomy, entrepreneurialism, and resistance to the Nudging State and the Nudging Oligarchy.

This, too, IS Epsilon Theory.

Clever Hans (Oct. 2017)

Trainers don’t break a wild horse by crushing its spirit. They nudge it into willingly surrendering its autonomy.

Because once you take the saddle, you’re gonna take the bit.

Why am I shouting about identity?

Because the artistic Bitcoin identity I admire and value has been subverted by the neutering machine of Wall Street and the regulatory panopticon of the US Treasury Dept.

Because what made Bitcoin special in the first place is nearly lost, and what remains is a false and constructed narrative that exists in service to Wall Street and Washington rather than in resistance.

Yes, the Nudging State and the Nudging Oligarchy strike back. They always do when it comes to money. Not with imperial stormtroopers or legislative sanction, but with golden handcuffs and administrative surveillance.

It’s not that the State and the status quo institutionalization of capital – call it Wall Street, for short – have any desire to ban Bitcoin. Why would they do that? No, far better to accommodate and swallow Bitcoin, like they have every other financial “innovation” for the past 1,000 years. Far better to neuter the censorship-resistant and anonymity-preserving aspects of Bitcoin, and turn it into another gaming table in the Wall Street casino.

In my dystopian vision, Bitcoin isn't banned or criminalized. Pfft. That's a rookie, weak State move. No, I see a future where everyone buys Bitcoin. Where you are encouraged to buy Bitcoin. Where Bitcoin is sold to you morning, noon and night. Where normie economists get on conference calls late at night because they're Bitcoin price-curious.

Except it's not really Bitcoin.

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  1. Avatar for w4x w4x says:

    Time for a good, old-fashioned hard fork.

  2. If a subscriber pays for the ET subscription with BTC through your BTCPay Server, won’t you have to report it to Sauron?

  3. Ben, Granted this article is focused on Bitcoin (sorry, Bitcoin!), but isn’t it fair to say that the developments in DeFi and protocols focused on self-sovereign data (Web 3.0) are: 1. real world use cases with real cash flows, that offer a quantum improvement in the product (financial services) offered to its users, and 2. are built on the foundation of Bitcoin’s idea of - if not taking power away from the state, then at least reclaiming some power from and offering an alternative to oligopolistic rent-seeking middlemen?

    Even assuming that KYC/AML will be enforced on all DeFi protocols (and I agree that this is inevitable), they will still offer a fundamentally better financial system to users as they redirect the rents collected by the middlemen to users of the system. So borrowers and lenders, for example, can BOTH get better financial terms in a DeFi protocol than they can in the traditional financial system. And this will be very hard for Wall St to completely co-opt and corrupt, because the ‘pure’ DeFi systems that cut out the middlemen will provide inherently better financial returns, due to the lack of the rent seekers in the middle. Let Wall St trade the tokens that power DeFi, that does not inherently corrupt what it does, or what it is about. And while the oligopolistic banks and others directly targeted by DeFi will try to fight it, Sauron will be happy as long as KYC/AML is enforced and taxes are paid.

    Sure, a KYC/AML’d DeFi system is not the purist revolution that many Bitcoin proponents dreamed of, but it is a hell of a lot better than what we have now, and the excessive focus on Bitcoin by people like Mr Krugman has blinded them to the real benefits offered by DeFi. And lets be clear, none of these DeFi developments would have happened unless Bitcoin (or even Bitcoin!) had paved the way first. So give it some credit for that.

  4. Ben,

    I suspect you are familiar with the below book by Juan Zarate, a recent architect of modernizing the FinCEN complex at Treasury and State. While my read of it was with great interest being more than familiar with aspects of AML, RICO, KYC, etc - my overall impression was one of confirming my fear the US Govt was overusing it’s power of being the world’s reserve currency and Wall Street being the center of the financial world. That fear being that we would drive not only enemies but allies to move asway form $US and Wall Street and doing so reduce our ultimate power, soft and hard - that of MONEY.

    Your latest piece on Bitcoin hits on all of this. My question for you is not weather Treasury and Wall Street are securitizing Bitcoin for the purposes to be able to “see it”, it is clear as you so elegantly point out. But rather, is there a better alternative available to the policy makers and the money traders?

    Our/your "anti-psyop campaign is necessary and compatible with above, I believe.

    Treasury’s War: The Unleashing of a New Era of Financial Warfareby Juan Zarate

    For more than a decade, America has been waging a new kind of war against the financial networks of rogue regimes, proliferators, terrorist groups, and criminal syndicates. Juan Zarate, a chief architect of modern financial warfare and a former senior Treasury and White House official, pulls back the curtain on this shadowy world. In this gripping story, he explains in unprecedented detail how a small, dedicated group of officials redefined the Treasury’s role and used its unique powers, relationships, and reputation to apply financial pressure against America’s enemies.

  5. Avatar for Kpaz Kpaz says:

    I remember being so stoked about blockchain, BTC and ETH when I first read about them and really learned what was behind crypto… and then it slowly dawned on me that it couldn’t escape the regulators forever. After the Mt Gox crash, I figured they’d sweep in and put in massive regulation and possibly even prohibitions. Failure of imagination. Art is abstraction and these proposed rules will morph and morph again as the water drains out. The more interesting and, I think unpredictable, changes will come as we get issuance of CBDC, central bank digital currencies. Serious disintermediation will happen then but the racoons will be all over it. Jamie Dimon heading up the USPS? Talk about the eye of Sauron!

  6. Avatar for bhunt bhunt says:

    Nope. We’re not a money transmitter as defined by UST.

  7. Totally get the distinction you are making between “(original) Bitcoin” and “Bitcoin™”. Totally sympathetic to your antipathy to “the State and the status quo institutionalization of capital” and the general point that governmental programs tend to expand well beyond their original justification. But I don’t think you’ve explained why you think (original) Bitcoin is “an authentic expression of identity” requires a ferocious defense and that every attempt to monitor or constrain Bitcoin needs to be ferociously opposed.

    You haven’t explained why Bitcoin enthusiasm is different from many other expressions of identity that sometimes rub people the wrong way and are sometimes weaponized against non-group members. How are your Bitcoin enthusiasts different from people who use MAGA, Antifa, extreme Second Amendment rights, extreme abortion rights, or the Yale Alumni Society as expressions of identity? How is the enthusiasm for identity politics here consistent with your concern about the widening gyre of public discussion and the huge decline in open hearts and open minds?

    Your piece fails to explain why those of us opposed to the Nudging State and the Nudging Oligarchy need to not just allow Bitcoin enthusiasts some space but need to become dedicated supporters. But your piece uses the same propaganda-based emotional good-versus-evil/everyone needs to take sides framing that dominates most manufactured political, corporate and ideological narrative that Epsilon Theory has attacked in the past, and (as you’ve pointed out) is used to promote things like “Bitcoin™”.

    You’ve argued that all of the nominal reasons for existing financial reporting requirements (money laundering, fighting terrorism etc) are complete BS, and that the only purpose these laws ever served was to Take Away All Our Freedoms. Yes these laws have serious problems, but you’ve ignored substantial evidence that Bitcoin has clearly facilitated things like drugs and arms trafficking  and industrial scale tax evasion. You’ve failed to provide evidence supporting your claim that the immediate gains eliminating them would massively outweigh the costs and risks.

    I happen to agree that the loss of privacy and autonomy driven by surveillance capitalism is a very important issue, but if fighting Bitcoin-related financial reporting requirements is now a requirement for pack membership, why aren’t the many other problems caused by surveillance capitalism given similar emphasis? Why haven’t you posted lots of major articles on Epsilon Theory attacking both the Silicon Valley (Google, Facebook) and military-industrial-homeland security assaults on privacy and autonomy?

  8. Thank you, Ben. Your article was “brave”. Lol. Seriously. It’s brave to try to make the “grey” case for Bitcoin, in between the ferocity that is team black & team white. And even braver to heap praise on it that has absolutely nothing to do with its most alluring facet… it’s price!

    To think of it as art - for me, anyway - allows all the frustrating ambiguity & debate around its “price” to melt away. It’s worth what folks will pay. Same as any other art. Simple.

    I’ve thoroughly enjoyed the show that is Bitcoin thus far; observing it’s affect on the masses. It constantly has me thinking of delusions & crowds & madness & something or other…

    I digress.

    Is it a million yet?

  9. These are thing that bothered me as well, to the extent that I kept looking for rationales that never showed up. I’m sure there’s something here that Ben is trying to get us to understand, but I simply don’t see it. The expanding intrusion of gov’t into the untouchable realm of Bitcoin was predictable from day 1; small efforts like Ben’s to stay separate from that but still utillize Bitcoin are futile, I believe. More is needed - more thought, more explanation, more comparisons — we’ve only just begun … to learn.
    But Bitcoin as Identity is a huge stretch. Gotta let that one settle in.

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