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home : columns : columns January 17, 2018

1/2/2018 6:46:00 PM
Something for nothing
By Craig Rullman

My grandfather warned me a long time ago that "You can't get something for nothing," which always sounded like an unassailable bit of wisdom pulled from Stonewall Jackson's Book of Maxims. But granddad wasn't around for the invention of Bitcoin.

Bitcoin, if you don't know, is a digital commodity invented by a cryptologist whose real identity - he ran under the alias Satoshi Nakamoto before handing Bitcoin off to the world - remains a mystery. In other words, he's the Wizard of Oz. And it's at least partially because of this, and other unsolved mysteries of its development, that it's hard to shake off the notion of Bitcoin as anything more than an elaborate con.

Which is also what, in 1997, many people feared about a newfangled thing called Amazon, and so missed their golden shot at umbrella drinks and private jets forever when Amazon stock eventually rocketed from $1.50 to over $1,000, where it happily resides today.

But even if, someday, we manage to dodge the flying monkeys and cruel witches and finally come dancing into the Emerald City with our Bitcoins, when we tear back the curtain to say "gotcha," absolutely no one will be there to greet us.

Stay with me on this, it's going to get weird.

A Bitcoin transforms from a nothing with no value into a nothing with imaginary value by way of Bitcoin mining.

By stringing together a bunch of computers and setting them to the task of solving mathematical equations, a Bitcoin squirts into the ether. When more and more people try to mine a Bitcoin, the equations become more difficult to solve, slowing down the birthrate of ghostly Bitcoins, which is important because the Wizard of Bitcoin arranged this whole scenario so that there can only ever be a finite number of them.

Much of the theoretical value of Bitcoin is found in the limit on how many there can ever be of a thing that doesn't really exist. You may want to read that again.

The result of all this Bitcoin mining is meant to be the invention of a new, decentralized currency. Which means it isn't controlled by a central bank, which governments will eventually come to despise because governments, as a rule, are in opposition to freedom. Governments are about control, which they won't have over Bitcoin, and which was also, by the way, the original genius behind our Constitution. But that is a different column.

This stuff is hard to wrap one's head around because, at this early stage, when it's still quite difficult to figure out what Bitcoin is, we also can't properly conceive of its ultimate potential. We can read up on it, and see what smart people say about it, but in the end they can't know either. Not even crazy John McAfee, who has announced from some bunker in the jungle that if Bitcoin doesn't climb to $500,000 within three years he will consume a portion of his own anatomy on national television.

Perhaps Bitcoin is simply a Big Two-Hearted thing. But at least in Hemingway's story, Nick Adams knew better than to wander too far downstream and lose himself in the swampier parts of the river.

What's also striking is the relationship between digital currency, whose value is based ultimately on faith, with our beliefs in God, for which faith is also required. It makes me wonder if faith in Bitcoin and other invisible commodities is the thing that will finally put the lights out on our ancient yearning for some manner of off-planet and universal divinity.

It interests me that people will believe in invisible Bitcoin, but not God, and vice-versa. I suppose there are people who do both but I haven't met one yet. And anyway, along with artificial intelligence, and the merger of robotics with human beings, we are well on our way to what Yuval Noah Harari calls the age of Homo-Deus, which is the now perceptible drive to achieve immortality through science - no God required.

I told you it would get weird.

And, of course, the dusty old dollar bill isn't backed by anything either, not any more - and even when it was backed by something more than a fevered belief in the "growth economy," Native Americans who watched gold miners cartwheeling around their sluice boxes and yelling Eureka! thought they had gone insane. You couldn't eat a yellow nugget, and the stream's real purpose was to make a home for trout.

If you are waiting for the part where Bitcoin becomes an actual something, I'm afraid you are going to be disappointed. If you scratch at the air in front of you like a cat swatting at a pen-light, you have held a Bitcoin.

Which isn't really an argument against it, I suppose. I'm personally feeling agnostic, although I can admit that investing intrigues me because the chance to own an island in the Bahamas and have star-shaped sandwiches and a Mai Tai delivered every time I ring the dinner gong wouldn't be unpleasant.

In the meantime, I'm calling for a currency in Yap Stones. These enormous limestone discs, which required about a hundred people to carry, were once used as currency in Micronesia. The idea was to quarry the stone on the island of Yap, carry it to Palau by outrigger, then park it in the sand. After that, buying something with a Yap Stone only required an oral agreement that the ownership of the stone had changed, and indeed much of the value of a Yap Stone resided in its history.

And in one instructive case, an enormous Yap Stone fell out of a canoe and sank to the bottom of the ocean. It was never seen again, but since everyone agreed it had to be there, somewhere under all that deep and dazzling blue, it was still good enough to trade for beadwork and coconuts around a campfire. What a marvelous way to do business.

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