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If You Melt a Telephone

Date
Mar 5, 2021
Status
Published
Topic
Digital Networks
Length
8 min

If you melt silver, you can turn your money into bullets.

If you melt gold, you can turn your money into black-market jewelry.

But if you melt a telephone, the burnt silicon on your desk is worth less than the superpower to call your cousin is Brisbane.

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It's hard to wrap our head around invisible money. But understanding the future of blockchain makes more sense when we compare it with the history of our communications technology.

Both started with confusion, doubt, and resistance. Both enable collaboration at a world-wide scale that wasn't previously possible. One is about people. The other is about value. They are just a century apart. The patterns between them add fuel to the Strauss-Howe generational theory: that history is not a linear series of happenings, but an invisible loop that we're stuck in.

The changing nature of money

When we think of money, we think of coins. Physical objects. Paper and metal objects. My younger brother used to stamp "Where's George?" onto the back of all his dollar bills before he spent them on hash browns at the elementary school cafeteria. Months later, someone in India would come across his dollar. They would enter a serial code on wheresgeorge.com to discover it's origin (in this case, a Long Island cafeteria in the suburbs). Tangible money is familiar money. Where's George was a clever mechanism to make physical money public and trackable. It was a weird prototype that ended up being just one the many features of Bitcoin and it's cousins.

The reality is, the paradigm of physical money is already mid-fade.

The US dollar has been off of the gold standard for 50 years. Our net worth is displayed to us through Chase dashboards and Venmo feeds. Gone are the days where alchemists warp coins into ammunition and pottery. To a Revolutionary War musket man, a silver coin had valuable secondary function: to save your life. To an iPhone user, a silver coin is a burden on your pocket.

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The new value of money is about network effects. What happens when a digital technology is distributed across the entirety of human culture? What are the emergent effects? It enables people to connect and collaborate in new ways, which historically, leads to dramatic redistributions of power.

A network without users

As disruptive as these technologies can be over time, they are inherently hard to understand in the early days. The network isn't there yet! Here's a 1933 quote from the New Yorker questioning the value of people having telephone's in their home:

"People admitted that telephones were ingenious contraptions and wondered just how they worked, but they no more thought of getting one of their own than the average man now thinks of getting an airplane. As a matter of fact, for a long time they were of little use in a home. Since almost nobody had them but brokers, there was no one to talk to.”

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A telephone was an investment. A three minute phone call from New York to San Francisco in 1915 was $20. That's $500 worth of value in today's economy. This doesn't include the cost of infrastructure. If you had a telephone back then, you would have to convince your friends and family to get it so your investment wasn't useless. It was a ponzi scheme. The telephone was a ponzi-scheme that grew into the Internet. It quite literally took over the entire world, and Bitcoin might do the same.

World Domination

Bitcoin "maximalists" (priests) believe in an idea called "hyperbitcoinization." The idea is that one cryptocurrency will absorb all of the world's liquid capital over the next few decades, resulting in a price of $15 million per coin. It's absurd. It's a fantasy. Is it possible?

I don't think Bitcoin is sustainable enough to capture all of the worlds value. Bitcoin is a prototype misunderstood for the real deal. It wasn't designed for scale. Similarly, telephone's weren't inherently capable enough to capture the full-world of communication. It was voice-only. It was lossy.

But the next iteration of the phone took over the world.

Computers allowed people to extend their minds and their talents into a network of machines. Computers allowed people to shoot a moving image of their face to different continents in real-time. Bitcoin might not capture all of the world's value, but it's spiritual successor will.

Rising from the Dirt

This might all sound insane, but that's because a currency has never grown from the dirt in the way that technology products and startups typically do.

We're used to a currency going from 0>1 overnight. Think of how the Euro instantly was reputable when it launched. It had boots, laws, and senators to back it. The rise of digital currencies feels like the arrival of an alien fungal species. It's going through it's own cycle of Darwinism. Thousands of shit-coins are rising, mutating, and dying as we discover which ones have value.

What we're witnessing is just another episode in how technology is disrupting a natural order that has been dominated by nation-states over the last 300 years.

Attractors

Alright, so money doesn't require government to back it. Can anything be money then? Pokemon cards? Tulips? Dogecoin? As long as we collectively agree on the same illusion, can we all agree to use Lebron James slam dunk videos as money?

My theory is that there is an "attractor" that will dictate how money evolves over the next few centuries. Over time, it will render bad money useless, leaving good money to flood the world.

Communication technology has it's own attractor: "co-presence." There is an innate human need to connect with other people across space and time. Humans will innovate endlessly until we reach teleportation, or at least, photo-realistic simulations that enable teleportation. This is why the telephone grew into the computer. This is why the Internet is destined to grow into the Metaverse. We are seeking higher and higher mediums of connection.

The attractor behind blockchain technology is democracy. There is an inherent human need to cooperate, to trust one another, to ascend above slavery and oppression and greed. Bitcoin is the biggest leap towards democracy in the last 400 years. My prediction is that Bitcoin might ultimately fail, but it's laying the groundwork for a new form of international cooperation. A digital UN? Maybe it's a step towards building the peer-to-peer network that the Internet was supposed to be. The Internet today is a system of digital serfdom, with Facebook, Google, Amazon and the likes as our feudal lords.

Bitcoin is the Magna Carta. It's the tremor before the Big Bang of liberation.

Automating Bankers and Messengers

What does a meme-stonk have anything to do with the founding fathers and telephones?

Bitcoin is leading the charge in the shift in who controls monetary policy. Historically, money was printed from condensed constellations of power. Historically, central banks have enslaved peoples and pillaged countries.

In a strange paradox, Bitcoin harnesses greed, and turns capitalism against itself. It incentives a network of strangers across the world to work together to support a financial infrastructure that nobody controls.

It's a break-through in applied mathematics. Miners are dedicating absurd amounts of electricity to rapidly guess a 256-string number that is generated every few minutes. By participating in this weird game of electronic AI Sudoku, each miner get rewarded in Bitcoin, while also maintaining a synced and encrypted version of a ledger that contains the current state of the world's value.

If Bitcoin is new to you, just think of it as a strange hybrid of Venmo, Dropbox, and the lottery.

In the future, everyone will have Bitcoin iPhone wallets, without needing to understand the intricacies of mining. It's like how most people can't truly explain how the Internet works.

The revolution is in the back-end infrastructure of money.

Bitcoin automates the role of central banks, just like the telephone automated the role of messengers.

The figures that have controlled the state of the world for centuries are being replaced by an algorithm. There is a finite amount of Bitcoins that will ever exist (21 million), and the printing schedule is pre-determined through the year 2140. Contrast that with the Federal Reserve, who in a time of crisis, is printing the global reserve currency at the pace of an African warlord.

Free Markets vs. Direct Democracy

Bitcoin is a libertarian wet dream. It's economic policy without human intervention. It's potentially very brutal, and very dangerous. It is a pure market, with no one at the steering wheel. Whatever happens, happens.

Not all cryptocurrencies are designed in this way.

Cardano is an interesting example, where people who hold the coin have the ability to vote on the evolution of the protocol. Blockchains don't have to be about completely eliminating the human touch. They can be about creating human systems where power is transparent, auditable, and merit-based.

Telephones were the first example of network effects in communication. Bitcoin was the first example of network effects in value. Just as the vision of the telephone wasn't fully realized until the advent of the Internet, the vision of Bitcoin won't be realized until government is reconstructed onto a decentralized application.

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Michael Dean

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