BCH is a fiat money
This is the text of what I prepared in my debate with Roger Ver. I wanted to post this here as a reference.
My goal today is to have a civilized debate about BTC and BCH. We’re going to have a Lincoln-Douglas style debate where each person will get to speak in turn. I’ll open and my opponent will close. The time limits will be 10 minutes each for the first round, 5 minutes each for subsequent rounds. The aim here is to be a little less Jerry Springer and a little more Supreme Court.
First, I’d like to thank the organizers of this cruise and everyone at this conference. I’d also like to thank Roger Ver, particularly for his early evangelism of Bitcoin. We may be debating today, but there is a lot that we do agree on philosophically and I admire your contributions toward the cause of liberty.
I want to start off with this statement:
Bitcoin Cash is a Fiat Money
You may be thinking at this point that I’m trolling or exaggerating. I’m not. I’m stating a fact.
To prove this to you, let’s look at what fiat means. According to the Merriam-Webster dictionary fiat is
- a command or act of will that creates something without or as if without further effort
- an authoritative determination
- an authoritative or arbitrary order
Thus, a fiat money is a money created from
- a command or act of will that creates something without or as if without further effort
- an authoritative determination
- an authoritative or arbitrary order
My contention here today is BCH is very much a money along these lines.
Now as I said before, I admire Roger for his efforts to liberate us from government authoritarianism. We are agreed on the need to be liberated from government. However, there are two ways to combat authoritarianism:
- Get a new person to be the centralized authority
- Decentralize power
BTC/BCH have different philosophies. BTC is classically liberal, anarcho-capitalist and Austrian, befitting its cypherpunk roots and is a sound money. BCH is interventionist, paternalistic and Keynesian befitting its corporate roots and is a fiat money.
BTC is decentralized hard money
Bitcoin rose out of the CypherPunk movement. BTC is all about self-sovereignty over your own money. There is no central authority, each individual runs what software they want, what features are utilized and which use cases are prioritized. In other words, bitcoin is decentralized. Bitcoin is the money for people who want property rights over their own money.
The economic philosophy is Austrian in the sense that there are no central authorities intervening in the marketplace. In Bitcoin, the market figures out solutions to any perceived problems. There is no central authority telling everyone “we know what’s best for you”, each person gets to choose based on rules that are stable and immutable.
This makes Bitcoin uncensorable and without a single point of failure or control which another entity can co-opt. There is no governance in Bitcoin because governance is another way of saying centralized control. The governance “failure” of segwit2x was in fact a demonstration of this feature. Users are sovereign over their own money. Bitcoin is unique in this regard as every other altcoin has a single point of failure or control which can be co-opted by another entity and thus users really aren’t sovereign over those tokens.
BCH is fiat money
BCH rose out of Bitmain. BCH is centralized with an elite group that determines a roadmap. They determine what will be implemented and what will not through authoritarian hard forks. These are forced upgrades, decided by a central authority, that everyone must follow to stay on BCH. These hard forks mean that at a minimum, economic incentives change.
The economic philosophy of BCH is Keynesian in that central authorities intervene to “spur innovation” or “solve problems”. The method of payment use case has been subsidized by central authorities through large blocks, despite all market signals to the contrary. My opponent says things like “transactions should be free” as if they’re entitlements. The smart contract use case has also been subsidized by central authorities, despite there being very little utility or demand for such a thing. BCH is very much paternalistic.
And this leads to power struggles like what we’re seeing now. Bitmain and Craig Wright are now fighting for control over the direction of BCH. They will probably end up splitting BCH into at least 2 coins. BCH is not a network where users are sovereign.
This makes BCH very difficult to build on unless you happen to have the central authority’s cooperation as the incentives keep changing. It’s no wonder my opponent is marketing constantly on its behalf. My opponent today, for example, spends lots of money on Bitcoin.com banners and BCH PLS shirts which can be seen at every blockchain-related conference around the world including this one.
Bitmain is the central bank of BCH. Bitmain has tried to maintain a peg to their reserve currency, BTC, and has failed. Bitmain has failed to keep the peg at 0.15 BTC, 0.12 BTC and recently capitulated the 0.1 BTC level. This is a central bank selling its reserves to keep its peg to another currency. What’s worse, much like a central bank, they’re running out of reserves and BCH will finally float on the market instead of having the artificially inflated value that it has now.
BCH is a fiat money, and their main appeal is that they’ll be better than the fiat central bankers that you already know. The promise of BCH is governance as a benevolent ruler versus granting you self-sovereignty over your own money. This is the major difference between BTC and BCH and is the reason why BCH is no different than any altcoin.
BCH has no reason for its existence
There are already lots of altcoins that do what BCH does. They, like BCH are all centralized and many are superior as methods-of-payment.
My opponent in our last debate brought up that altcoins don’t have the same history as BCH, in that the ledger in BCH has BTC’s history. But this, too, is a spurious argument. Having the same ledger merely means that there was an involuntary airdrop to the BTC holders, nothing more.
Besides, there are 74 different hard forks of Bitcoin at this moment including:
Bitcoin Gold which has a different proof-of-work, governance and a roadmap
Bitcoin Interest, which has proof-of-stake
Bitcoin Private, which has privacy and fungibility
Lightning Bitcoin which allow for ultra-fast transaction settlement
Bitcoin Clean which is supposedly environmentally friendly
There are many other non-trivial forks like Bitcoin Diamond, Super Bitcoin, BitcoinX, Bitcore, Bitcoin2x, Bitcoin File, Bitcoin Atom, Bitcoin Vote, Bitcoin World, Bitcoin Pay, Bitcoin Faith and my personal favorite Bitcoin God. That one really wants to make clear that they’re the central authority. All of them have a roadmap, non-negligible value and interesting features all while preserving the history of transactions from BTC.
Like BCH, they require us to give up our self-sovereignty in exchange. Instead of verifying, the overlords of these forks want us to trust them.
And this is the main value proposition behind every hard fork and altcoin. It’s a bet on the people in control. This is why so many of them, including BCH, spend so much money on marketing, so much money on what’s essentially propaganda. They want us to trust them and not verify anything on our own. My opponent has spent enormous amounts of money promoting BCH, doing interviews with anyone and everyone, debating anyone who will debate him, even ambushing people TMZ-style and saying things like “BCH is the real bitcoin” while continuing to hold BTC and “the flippening is inevitable” without willing to back those words up with bets. He continues to spout kooky conspiracy theories about Blockstream, Bildeberg, Gavin Andresen, Mike Hearn and private forum “censorship”. That is the behavior of a used car salesman trying to sell his wares, not someone that’s being honest.
BCH is centralized with a small group that makes all the decisions for everyone else. BCH is paternalistic in imposing particular use-cases no matter what the market says. BCH is Keynesian in intervening instead of letting normal market forces play out.
BCH is a fiat money.
Below are rebuttals I prepared
Blockstream doesn’t control Core
As someone that’s actually contributed, I can tell you that the core development process is nothing like what he describes. It’s easy to come up with kooky conspiracy theories about how BlockStream controls everything, as it makes for good storytelling. Much like Baghdad Bob, this is complete fiction made up by sore losers to protect their egos.
Look at the actual contributors. There are 2 Blockstream developers. There are developers from lots of other companies including Chaincode Labs and the MIT Digital Currency Initiative. There are even developers from companies that my opponent has invested in like Blockchain.info. The core development process is meritocratic and done by consensus. Frankly, my opponent is not a coder and is grossly mischaracterizing how Core development works.
My opponent is characterizing an open, meritocratic process as something evil because he didn’t get his way. He lost the argument and since the market couldn’t be clearer on what it preferred, he’s chosen to come up with kooky conspiracy theories to justify his losing.
I’m glad my opponent took his ideas to BCH which was more receptive. That’s what a free market is all about. But he can’t complain that because Core didn’t accept his idea, that this is evidence the process is centralized or broken. He’s ignorant of the process, he didn’t get his way, so he’s made up a theory to vilify his opponents while justifying the virtues of his position.
Much like the losers of a game complaining afterwards about the equipment, the referee or even luck, anything but their own skill, the conspiracy theorists are just being sore losers that can’t face the truth. There’s no conspiracy. The market simply doesn’t like your ideas.
Gavin Mike and Jeff couldn’t cut it
Gavin Andresen, Mike Hearn and Jeff Garzik were all contributors to Core and I am grateful for what they did. All three are still free to contribute. I suspect they don’t want to because they don’t have the clout that they once did, but that’s entirely on them for not producing, not on the Core community.
What my opponent is really objecting to is the fact that these individuals don’t have the influence they once did. Having a good reputation in the core community is not something you are entitled to for the rest of your life. Bitcoin Core is not a bureaucracy where you can coast, do very little and not get fired.
Bitcoin is a meritocracy and that means you not only have to keep doing good work, but you also have to get better as the code and developer quality improves. These three contributors simply didn’t meet the rising bar that other contributors clearly set. That was most of the reason why these three lost a lot of their reputation.
There were other contributing factors. Mike and Gavin wanted Mike to be the benevolent dictator for life. They wanted to centralize around Mike Hearn and when the rest of the community said no, Mike rage-quit. Gavin enabled a scammer like Craig Wright through technical incompetence in being unable to check a simple signature. Jeff started doing ICOs and altcoins.
Whatever the reason, they lost their clout and they are no longer contributing, though they are free to. In Bitcoin, nobody gets a position for life as in a centralized system.
What my opponent is objecting to is that Bitcoin Core is a meritocracy. You only get influence if your contributions are useful. Influence is hard to earn and easily lost in a meritocracy. The reason my opponent is unhappy about these three developers not having influence is that they’re more open to his ideas and this has reduced his influence. He’s identified this as one of the reasons he lost. He’s identified just about everything except that his ideas are bad and unwanted by the market. He can’t seem to face the prospect of being wrong.
Free Transactions are not really free
My opponent likes to talk about “free” transactions quite a bit. If he thinks he’s entitled to free transactions because they happened in the past, he’s ignorant of economics. BCH is subsidizing transactions through large blocks. Yes, it’s nice that users can get free transactions. I think anyone, if offered something valuable for free would like it, but economics is the study of the unseen consequences.
Free transactions aren’t free. Much like the food stamp program, the cost is being paid, just not by the user. If you look at the current incentives in BCH, every node on the network pays for the free transactions by having to transmit, validate and store these transactions. In other words, free transactions are a tax on every other node. This disincentivizes running full nodes, which causes users to give up even more control and creates more single points of failure, further fragilizing BCH. “Free” transactions are a BCH government subsidy being paid by other people through taxes and control.
Further, by keeping transactions “free”, this changes mining incentives. The only rewards a miner gets are mining rewards and fees. By 2028, 3 halvenings and 10 years from now, fees will presumably still be 0 and rewards will be 1.56 BCH. At current BCH prices, that is about $750 per block. This reduces the security of the network significantly. Without fees, a 6-block double-spend can then be executed for $4500. You may be able to sell a $3 coffee on BCH, but you certainly won’t be able to sell a $1000 laptop without some serious risk.
The situation only worsens as the block reward goes down over time. By 2040, block rewards will be $93 and transactions over $100 will be at risk and you’ll have to wait at least 11 confirmations before being confident of a $1000 payment. By 2060, even that $3 coffee payment will be risky as the block reward will be just $2.90. A $1000 payment will require at least 350 confirmations!
BCH has two options at this point, either give up free transactions or inflate the currency. Fiat currencies tend put themselves in a position where they must choose between entitlements and taxes (remember, inflation is a tax) and it’s clear neither will be popular.
Much like a government budget that saddles later generations with the bill, free transactions are creating an untenable situation in the future. Like welfare and social security, BCH is giving away free stuff now in exchange for much bigger problems later. “Free” transactions are a government subsidy. One group benefits at the expense of everyone else. Don’t be deceived, “free” transactions are the equivalent of BCH food stamps.
Being heard on a private forum is not an entitlement
There are a lot of people that are frustrated with r/Bitcoin and that’s why it’s not nearly as popular as it once was. That’s the free market at work.
Getting silenced sucks, but unless the one doing the silencing is the government, it’s not illegal. My opponent seems to think he’s entitled to do whatever he wants in a private forum. Does he want some central authority to say that he must be allowed to speak? Does he want to violate the freedom of assembly and force unwilling audiences to listen to him?
Once again, we have a sore loser complaining about getting kicked out. It can’t possibly be that his ideas are bad, no, there must be a conspiracy! It’s Blockstream! Bildeberg! Jewish bankers!
The forum moderators are private individuals that decided to exercise their freedom of assembly. Sorry you weren’t made to feel welcome, but that just means your ideas lost, not that there’s some kooky conspiracy.
Complaining about access is what slick salesmen say because it decreases their sales. This “censorship” is sour grapes at not having access to a private audience. Hell hath no fury like a sore loser.
Centralization leads to inflation
There have been multiple authoritarian hard forks in BCH, hard forks, or complete resets of the software created by an elite group that decides everything for everyone. Users don’t have property rights over their own money in BCH because this group controls everything.
In BCH, only the centralized power needs to be lobbied. BCH does not give users sovereignty over their own money. This is governance by fiat. Governance by authoritarian order. Interventionism instead of market driven innovation. As I’ve said, BCH is a fiat money.
Every fiat currency ever has eventually collapsed due to monetary debasement. This is due to the moral hazard that exists in fiat currency: the central authority can print more money. It’s the epitome of hubris to believe that what’s happened to every other fiat currency won’t apply to you. BCH inflation is not a matter of if, it’s a matter of when. Every fiat money inflates.
My opponent’s argument comes down to “trust us, we won’t inflate”. This has been said over and over again by every government that’s created fiat money and every single one of them has inflated their currency. Do you believe history or someone that’s clearly trying to sell you something?
BCH is Centralized
The development team for BCH is incompetent but nevertheless make choices for their entire community. The EDA was a complete disaster. Their hard fork earlier this year had a consensus bug, which is the worst possible type of bug you can have.
The governance process of BCH is centralized. There’s an elite group that decides what the users must upgrade to. They “listen” to the users, but ultimately, they make the decisions. This is evident as the governance process is not transparent at all and the “roadmap” is decided by this elite group. These people decide the hard forks in BCH and force everyone else to upgrade to them. They choose the winners and losers in the market through their choices. They’ve prioritized method-of-payment and smart contract use cases and have subsidized them.
This leads to a lot of vulnerabilities. A government can regulate them because they’ve got multiple single points of failure. A new group can come in and take over and set new policies. That’s what Craig Wright seems to be trying to do right now with Bitcoin Satoshi’s Vision!
Ask yourself, why would an obvious scammer like Craig Wright be in this community if he didn’t think he could gain something out of it? Scammers go where they can scam.
As I’ve said, there are lots of altcoins that are centralized. There are lots of other choices that are faster, more private and easier to use if you’re looking at centralized coins. BCH doesn’t add anything new.
Satoshi is not God
My opponent quotes Satoshi as if they’re the words of God. Bitcoin is about self-sovereignty and property rights over your own money, not about deifying a person. If he wants to make a Satoshi-is-God coin, more power to him, but this appeal-to-Satoshi is not logic, it’s emotional manipulation.
A lot of people don’t realize that Satoshi made some mistakes in the Bitcoin protocol. OP_CHECKMULTISIG has an off-by-one bug. So does the difficulty adjustment calculation every 2016 blocks. Satoshi mixed big and little endian all over the place. Satoshi should have added more nonce space to the block header and made the timestamp field 8 bytes.
A technically competent hard fork, by the way, would have fixed all of those things. BCH did not.
In any case, Satoshi was not this perfect person that knew everything. What my opponent is really doing is creating the impression that Satoshi would agree with him. This is a sales tactic to appeal to authority. He’s still upset that he’s not getting his way and instead of using logic, is appealing to Satoshi to give him more authority. It’s useful to have a figurehead over a centralized currency.
Users want to be sovereign over their own money. We don’t want to share property rights over our money with anyone, even Satoshi.