Gordon has been watching the blood bath. Taking out zombies with a crowbar is easy. Economies: not so much.
We live in a time of unprecedented... well, everything. Everything is unprecedented. That's the tweet.
Except, this isn't a tweet. This is a post, so I shall push through with intention and purpose.
Today's flavor of the excuse, in the media, thus far, is that Bitcoin suddenly lost half of its value because China banned Bitcoin's use for payment solutions. I would have to say that it doesn't explain a drop that is already taking place in multiple stages, by pinning it to something that was announced after the fact. Some could speculate if it is actually causation and not just correlative, that either the CCP controls or owns directly, such a large stake of the actual coins or lorded control over miners, that they started assisting Elon's sell-off before making the announcement. Another possibility is that there are much bigger things lurking beneath the surface.
So, one question this raises, is whether something is, short and long term, a good store of value if it is not uncommon for it to lose half of its value, often... in fact usually, for unknown reasons? Another point one can easily make, is whether something can be a good store of value if it is highly centralized.
So, I am going to intertwine the two questions into a single topic.
Other than the obvious, the push over the edge for me in discussing this was a comment made, for good reasons, by someone I consider a well-earned thought leader in the crypto space; Richard Heart. Richard is a bold personality, certainly a self-promoting foul-mouthed soul who can be admired for thus far proving not to be a scam, inventing a remarkable asset, HEX, and thus far getting it right. We are starting to disagree on some important points, but for all intents and purposes (some may think the saying is 'intensive purposes'... it isn't, but from what I understand correcting spelling errors is now considered elitist anglo racist crap, and that is yet another sign of the soon extinction of our species), Richard is among the folks that I consider credible in their reasoning for every argument there is. I've also appreciated his history of being the first to admit when he was wrong and updating his opinions likewise.
Heart's single comment was an ironic "decentralized" in response to Michael Saylor announcing his acquisition of more Bitcoins from this most recent dip. It is a good point, an important one, but also I think a little misguided. Allow my incite to dig one layer deeper. Having listened to far more than my share of Richard's podcasts, interviews and discussions, one of the driving reasons for his taking an opposing side to things that involve Saylor, is that Richard does in fact side with the argument that Bitcoin uses an immense amount of energy. We often hear the whole "uses as much energy as 'x' country" which is an argument that can be used for just about anything 10X Bitcoin's scale. The energy question is one for another time and truly is best in other people's hands. But, it has been among Heart's talking points for a long time and one of the reasons he is tough on Bitcoin... again for many of the right reasons.
Another talking point that has become top of the list once again the past two weeks has been the supposed toxicity of Bitcoin maxi's. First, I have to say if you want to come down on a Bitcoin maxi community, just dip into the maxi's for other coins, and you will find Bitcoin's group the kindest, most fair, and slightly better educated as to why they think as they do, compared to some ridiculousness I observe. If you need a fast fix of this, jump in on SHIBA or Safemoon maxi's and search for a clue as to why they are there. Good luck. It's the difference between those seeking a doctoral thesis and 3rd grade.
Bringing this around, I suppose the truth is that Michael Saylor and Elon Musk are the two main forces currently determining how people FEEL about the current cycle, while underlying reasons are much more centered around investment firms, governments for or against the addition of crypto to the bank accounts of us retail commoners, how heavy the CCP's hand truly is in the operations centered in crypto, nodes and mines, and how much the government actually stores of its own. It surprises me that the community can be so short-sighted in their understanding of how well the long-term investors and HODLers in the top coin asset have remained, while a single maniacal billioniare has been intentionally manipulating the value of their asset like a cat playing with a mouse for fun. It has been blatant, and in some ways I would wonder if it has been criminal. His interaction with Saylor has again, been like Saylor's master's degree to Musk's participation trophy; extreme immaturity and flippancy that is inappropriate to the point of questioning the sanity of anyone who would follow him to Mars. The public voices of pro and con are merely a reflection of the market, but everyone IN the market is looking to these kinds of voices for guidance, or for the ill-equipped in mental faculty, just looking for a pump and dump signal, for which they will find plenty.
Decentralization is probably the most over-talked issue, belief, moral, value involved in crypto. It is one that matters, but in all honesty, one that will never be adequately resolved. There are numerous reasons, but I think the most important one is that it sounds great as an anti-govt. talking point, but in many ways it is the topic that means the very least in reality.
How are we defining centralization? I think an awkwardly large portion of the populous would have a hard time defining this at all. Among those who have read the books and memorized the talking points, they would tell you it is about censorship resistance, freedom from the middle-man in banking, beyond being banned by governments and a few other things. One has to be cautious not to start making the assumption that the word centralization means evil. It may not always be a bad thing. One simple example just to start the wheels turning. You have a bank transaction. Something goes wrong. You have a 50/50 chance that getting assistance will end in a positive result. No matter what the system is, operator or network, something is going to go wrong somewhere at some time. In those times, centralization is a little good if it can help assist you in correcting a problem. In this case, perhaps we want our blockchain decentralized, mostly in this case meaning not on a single controller's network or node, but perhaps we want our platform where we interact with the blockchain to be centralized... just enough to offer us assistance when we run into a problem.
There are numerous times where I have been glad to have positive interaction with customer support. I had a swap go bad because my browser refused to update entering the MEMO in an XRP swap- on the swap-provider's website. I was offered the best case scenario that maybe something would get resolved in 2 weeks... maybe not. In many cases, if one were left on their own to handle the move, if the user's browser was to blame it would matter very little to the blockchain... no one at Ripple or other coin would have any reason to assist really. If I were on my own with a decentralized app and no people to contact, I wouldn't even know where to look for an incorrectly transmitted transaction; would it appear in the origin coin's outgoing messaging in transactions at all? Would it even appear on XRP's blockchain, or if yes, would it show an error? In this case, I was a customer using a kyc-free swap service, and it was not my fault that their website performed improperly, whether it was my browser or their programmed interaction with it. Either way, I was a little forceful, took screen shots all along the way in anticipation that where there is a memo, there is an opportunity for error, and they got in touch with someone for me and they fixed the transaction, on-chain, and I had my transfer within an hour. That was amazing! Honestly I don't know if I even deserved that good of an outcome. These are the times where 'not your keys, not your coins' could have been an unhealthy motto. In truth, I've heard horror stories with hardware updates causing unfixable issues with hardware wallets. I've had a missed sync on one of my desktop wallets cause an impossibility to update one of my coins that I earn through this platform, and now for some random reason they appear in the wallet again. Another time a new coin had switched to a mainnet or rewarded a staking round or something, and the amount reflected in my wallet would have been worth billions of dollars instead of the $13 I had earned. A few days later they were normal, and no I didn't try to cash them out. I don't want to place that kind of spotlight on myself and knew if there was that kind of issue, it would get flagged anywhere the coins would go. Oh... it also would have been unethical!
All of this to say, that we sometimes don't think before claiming our enemies, often unaware of exactly what is supposed to make them evil.
The clever point that Richard Heart was making, is that Michael Saylor as a certain Bitcoin maximalist (if not in word, certainly in deed), is showing the ill dangers of centralization by owning an uncomfortable number of Bitcoins. Saylor's companies collectively now own more than 100,000 Bitcoins. Is this centralization? Well, let's say we are closer to 19M coins mined than 18 at this point. Let's add to that there could be as many as 2 million coins that will never be recovered from small fries to giants who may have lost or abandoned their wallets. The number is for certain at least 1 million, but whether it is as many as 2 remains to be verified by anyone. Is it a sign of centralization if one person's companies could own 0.7% of supply?
I am a human, despite being a super hero, so my logic can easily be flawed. My first philosophical point would be whether I would prefer absolute decentralization in the hands of unknown actors, most of which I despised, or whether I would prefer a perfectly globally measured network of users, miners, node-operators and HODLers who I knew, were all highly centralized, and I trusted all of their motives? So, centralized but all 100% sold on Bitcoin's benefits for humanity and future-proof design and nothing but noble souls investing heavily, or the potential that most of the decentralized network meant CCP, N. Korea, Russia, extortionists, drug lords, evil whales and bankers, investment firms who only cater to their multi-million dollar clientele etc.? I can easily make a good argument for either or both. One would make me feel better, but I believe I know the argument well enough to believe in a truly widely decentralized factor in ownership even though I know it means inclusion of all of the bad actors.
The bigger point here, though, I believe, is whether Richard is right in his assessment. Is Michael Saylor simply having the access to funds to keep investing in Bitcoin a sign of Bitcoin's centralization? I understand the argument. I mean, what if he could leverage so much money that he could keep acquiring them until he owned 1 million of the 21 million that will ever exist? Is this a good argument for the anti-scarcity model of Doge, where there will never be an issue of coins available? I personally don't think so, but I also don't trust the integrity of the Doge development team enough to guess at whether they would listen to Musk's input if he suggested with heavy-enough a hand to change that model to 1B coins in total cap. If he did so, and they did so, Doge could easily become the world standard (not by governments but by utility). As retarded as that sounds, this is the world we live in, where funny pictures and swords in games are valued as the most important assets over all other things. This is where I hand over the hat of "what do we actually deserve in a good coin" and that is for another time.
I would argue that decentalization is first and foremost not actually about who can acquire the coin on the open market. Warren Buffet has had that opportunity for a few years now. If Justin Sun had tried, and succeeded, to convince Buffet to go all in on crypto 5 years ago, Buffet easily could have acquired 2-3 million Bitcoins by now. Even less than 2 years ago a person could get 1 million Bitcoins for less than 3 billion dollars. Now, I ain't saying that's not a lot of money, but if there was a time that over the course of a year, Bill Gates could have purchased 1 million Bitcoins, Buffet could have purchased 1 million Bitcoins, and then trickling down a consortium of top investment firms and institutions could have each afforded 500,000 coins a few times over, we would eventually have shortened the length of time to a $64,900 top, but not by much. The available supply would have had to remain fairly liquid over many, many months for them to do so slowly without constantly bumping against the price. By the time there were only 8-9 million truly available to be purchased, it would have been illogical for anyone else at the top to continue trying to acquire theirs, and there would be a fast or gradual cool-off where people scared to miss the opportunity to cash in would finally relinquish some of their old HODL's while the price went down, and the other millions of coins eventually would spread much wider through the network.
The truth is, that I have maintained centralization is an illusion. If a project requires a coding team to launch or maintain a project, it is centralized, and the best one can hope for is for it to be centralized by good coders, benevolent coders who understand the purpose of the project. As long as mining is involved in a project, there will be more miners, and larger operations in certain centralized locations funded by certain independent projects. As long as there are people interested in the trade-ability or storage-value in an asset, there will be people with more money who can acquire more.
The adage of decentralization of ownership has been messaged that Bitcoin can free humanity and provide opportunity to the underserved and unbanked. While this is true, it has remained the most true at a time when the least people were interested in it. Now that serious contenders like Saylor exist, we have the trade-off in the now several-hundred-million dollar-pizzas acquired for Pizza day, versus those acquired by Saylor. We're looking at Bitcoins worth mere pennies on the dollar versus coins at an average above $20K. I would say it is logical that increasingly fewer poor people are going to own a stack of Bitcoins going into the future economy.
So now we visit the issue of centralization in banking, and as it pertains to centralized exchanges and liquidity. Whether you hate them or despise them, because no one in crypto fesses up to loving them, liquidity is equally necessary to value in stored assets as it is to trade. If an asset becomes illiquid, it loses confidence and is either dumped or loses buyer traction. Centralized exchanges provide market makers and huge numbers of investors. On the downside, the move will be towards KYC/AML and many will bow out seeking DEX only. It also opens people to the attention of hackers and then you are up to the benevolence of the platform and the degree to which they value their reputation.
There are numerous levels of centralization in the argument for and against the best projects. From consensus to permissions, numbers of nodes to how many coins can be held by the original creators. My final point is going to come right back around to Michael Saylor and whether Richard Heart is right to point to this concern of whether Bitcoin is too centralized. It is my belief that the greater answer is in Saylor's approach to the market. We do not have an evil mad-scientist presentation of Saylor as things stand. He is one individual, but his financial responsibilities represent hundreds of individuals, with assets spread across several entities. He is a man, and those he represents are all human, so the potential for ill intention abounds but as of yet is not present. The point, is that any time his benefit to the community could switch as fast as you can say "Doge".
My challenge to the idea that over-ownership is an example of centralization is this: Saylor is placing an incredible amount of intellectual energy, thought, writing, presenting and even conference-hosting into advising others to do exactly as he is doing, along with numerous similar models. He is recommending the business community to look into the benefits of adding the biggest, most valuable, longest running, arguably most productive energy-using asset as part of their corporate structure. He provides a robust list of ways in which a group can benefit from their coins. All of this suggests to me that the Saylor-effect is, in fact, to encourage businesses of all sizes, at multiple stages of growth, to invest in Bitcoin. Each version ends with a significant HODL. If his influence is spreading in the business world like it is in social media, what I see is a person who encourages a reduction in centralization if we gauge this in ownership. In addition, we see someone encouraging an increase in liquidity, with employees paid or given bonuses in Bitcoin, which allows them to store or transact as they wish.
I agree with the assertion that centralization can, and is, an issue with Bitcoin, as it is with most coin projects. I believe this is a multi-directional issue. But, I also believe certain aspects of centralization are necessary. The question is whether there is enough diversification in nodes, mining operations, and the number of coins spread across the world. I believe that we have likely survived the most important hurdles of centralization through ownership. Power always rises to the top no matter what, but the days of a single individual like Saylor coming along and owning even 20% of all the Bitcoin's in the world are probably over. Sure, someone could chase down a myriad of top-owners and trade with them something they may find a higher value to separate them from their coins, I suppose, but I believe these actions really would have needed to start prior to 2016-ish, somewhere before the last halvening, but not so early before as many coins were mined.
In the end, the truth is that we are going to find centralization at the 'center' of arguments for years to come, but there will never be a completely decentralized coin, coding team, consensus mechanism, trading exchange, or dispersal of funds. The best we can search for is a proper balance and the good will and intentions of those who create, store, and use.
And on that note, crypto Gordon Freeman... out.
