These are my notes for the K5M Book Club on the book Money, by Jacob Goldstein.
The Radical Dream of Digital Cash
Jacob Goldstein starts with an important reminder: “Cash is a beautiful technology.”
Then we get start our journey with David Chaum, the inventor of digital cash, and holder of many patents.
In 1989 he started DigiCash and sadly the company went bankrupt in 1998, sold its assets to eCash Technologies, which was acquired by InfoSpace in February of 2002. With a valuation of $31 billion in 2000 the shares dropped to $2.67 by mid 2002. Ups and downs continued and they changed the name to Blucora and it now trades at $17.21 and is a tax prep company. I don’t think they care about DigiCash anymore.
Oh, and here is a PDF of his 1977 graduate thesis Computer Systems Established, Maintained and Trusted by Mutually Suspicious Groups.
“Alan Greenspan … loved to warn against excessive regulation of everything.”
In this video he says that the market works perfect when people act rationally but when people don’t act rationally you have to regulate to force people to act rationally. That sounds… crazy.
The Economist in 1998:
“Electronic money has thus turned out to be a solution in search of a problem.”
Ha! Well, the current NFT mania sure proved that wrong!
The Libertarians at the Gate
Whenever the libertarians arrive you know you’re in trouble.
I read this book, A Libertarian Walks into a Bear, last year. It’s about libertarians trying to take over a small town, and it is both what you expect and also so much worse.
I love the part where the crypto anarchists get an updated 90’s makeover when a journalist calls them “cypherpunks.”
Trust
Trust and digital money is my favorite concept to come out of crypto. The idea of an exchange being “trustless” in the sense that trust is not required to make the exchange is sort of like money, but even more so… you can trace a person down or get a refund, or sue someone with money. With crypto it’s just… THE EXCHANGE IS OVER. So the trust is pushed onto the end user, or whoever is buying, and that seems like a perfect solution if you are very technical but less good for actual humans you make mistakes.
It’s like the answer to a trust fall being, “Just don’t fall.”
Goldstein writes, “But the dream of bitcoin is that you don’t have to trust a government, or a bank, or Satoshi Nakamoto; you just have to trust the code.”
But how can a non-technical person do that? They can’t. So… yeah, it doesn’t really work to trust the code. Adoption of bitcoin is not about trust, it’s about making money. People trust the up and to the right graph of the value of bitcoin.
There are just 21 million bitcoins that can ever be created with just over 2 million still waiting to be created and an estimated 3-4 million are lost forever (“lost” bitcoin is in a wallet with no key). Satoshi’s is estimated to have 300,00o to 900,000 bitcoin locked in their wallet. One estimate puts the number of bitcoin millionaires (holding bitcoin worth $1 million USD) at around 40,000 people.
And of course if you’ve been paying attention to the NFT craze you’re aware that crypto can have an environmental impact. MSNBC reported that a study estimates that bitcoins carbon emissions are on track to equal the city of London and bitcoin could end being responsible for a two degree raise in the world’s temperature. Yikes!
Goldstein says that Ross Ulbricht, the creator of Silk Road, was tried and found guilty of drug trafficking and conspiracy to commit money laundering. The Wikipedia page says he was offered a plea deal but chose to fight in court, and then received a sentence of two life terms plus 40 years! Sure he was a libertarian, but that seems INCREDIBLY HIGH for the seven offenses he was convicted of: distributing narcotics, distributing narcotics by means of the Internet, conspiring to distribute narcotics, engaging in a continuing criminal enterprise, conspiring to commit computer hacking, conspiring to traffic in false identity documents, and conspiring to commit money laundering.
Judge Forrest said, “There must be no doubt that lawlessness will not be tolerated… ” which I find very confusing. During the trial she was doxxed and people threatened her life and she has since returned to private practice at Cravath, Swaine, & Moore.
Anyway, there is a whole doc about this called Deep Web that I guess I’m going to watch now.