# Under the canoe

Bitcoin is now under the canoe.  Once under a canoe, there are two options.  One is a quick charge, back into the canoe, before eventual exit from the canoe.  The other is the abandon ship maneuver.  We stay under, take few long strokes underwater, and emerge upstream of the ship to burst back above the surface.

So what I'm talking about is comparing two goxing afterglows.  The goxing incidents in question are marked by the summer 2011 peak price of 32 USD/BTC, and the winter 2013 peak price of 1100 USD/BTC.

The blue line represents the former and begins at 32, and makes what I call the canoe.  You can see that the price didn't recover past the previous peak until some 650 days after the event.  The orange line continues to present day prices below 1/4 of the peak price when t=0.

There are some <100 or so days left before we are officially out of the canoe in some form or another.  Holding your breath while underwater is advisable.

# Will bitcoin help end capitalism?

How is that for a compelling title?  Well, I bet most of the currently small reader base here will not agree that it is compelling.  You will probably be tempted to say "well, no" and move on.  However you will notice that the statement has only five words, the last of which is quite vague.  This is hardly enough context to declare it a complete non starter.  More rigorously, we will see that for certain values of "capitalism", the answer is yes.  To warn you in advance dear reader, what follows is entirely a semantic discussion.  Continue only if you absolutely need to use words such as "capitalism" and "socialism" and hope to convey actual meaning amongst broad audiences by using them.

A bit of back story is in order.  A film producer friend of mine had seen me give a small demo of coin use, with some elementary school girls who transferred a few millies back and forth between themselves (using phones).  A couple years later I saw her again and she wanted to hear some more about what public coin is about.  Her quick and direct question:

"Will bitcoin help us end capitalism?"

My immediate response was to tell her that actually bitcoin is enabling capitalism to emerge for the first time.  However with a bit of reflection I later realized that this question allows us to get right to the heart of the big problems facing those who would philosophize or attempt to implement some form of capitalism or socialism, or any other related ism.  As I'm sure you've noticed, these words mean different things to different people.  The resulting communication problem can make people think they disagree on strategy and philosophy when in fact they may only disagree on semantics and syntax.

Discussions the next evening allowed one difference in the way people view these terms to emerge.  In my mind, these terms were something to apply to an architecture of organizing power over society.  Still vague, I know.  They described governance, I thought (and still think, mostly).  They describe a system of organization of labour perhaps, and division of decision making.  However I learned that another way they are viewed is as terms to describe personal philosophy.  In this viewpoint, a capitalist is one who chooses as one's guiding star in personal and business affairs a narrow view of one's financial bottom line.  This is as opposed to the view of a capitalist as one who thinks society should be organized as capitalism, in the structural sense.  To make a long story short, I learned to delineate between two of the many branches of meanings these words have.  One of them is in a structure of governance sense, and the other in a personal philosophy sense.  To some people, a "socialist" might mean someone who gave donations to a public good, participated in charity, or perhaps went around a park cleaning trash.  Perhaps someone who works on open source software projects.  To others, a "socialist" might mean a fascist or a USG shill, or someone in favour of central organization by a few people for "the greater social good".

Imagine for a second someone who fails to recognize and appreciate social capital (friends, family, colleagues, support of all kinds from other people) or natural capital (arable land, sunlight, clean air), and instead makes all decisions solely based on exchange commodity capital (cash in hand).  One might describe this person as "an imbecile", but some people would refer to this guy as a "capitalist".  Seriously.  That's what the word can mean to more people than I had thought.  "Capitalist" is a synonym with "spiritually unenlightened" for some people.

Well, we can see right away that for this kind of person, quite low on the learning curve of what is valuable in life, a little bit of knowledge will go a long way.  A bit of thinking about what bitcoin is and how to use it will doubtlessly help to "end capitalism" in the above sense.

There are a lot of other people for whom this is even simpler.  "Capitalism" is in their minds "the existing national social structure in North America as of the mid 1980s or so".  Seriously.  I mean, clearly nothing like the meaning of the word you will find in any dictionary has been implemented, but that is how they have seen the word in pop culture and that is where the meaning will stick for them.  They consider organizations such as Halliburton and Monsanto to be "capitalist", even though these organizations rely entirely on the largesse of the state on their existence, and whose representatives pretend to justify the expenditures given to the rich owners as "for the good of the people".  Seriously!  People refer to these eliminate-free-market-competition-for-us-mr-president organizations as "capitalist", I shit you not.

Perhaps you are in the camp who thinks "capitalism" is somehow the fiat economy plus the military industrial complex plus wall street.  In this case, you can be sure that bitcoin will end capitalism, even if only as a milestone marker of larger trends.

Perhaps you are in the camp where "capitalism" has something to do with "free markets", that is, with "free markets" referring to individuals being able to use markets freely.  Not as in 1000 page lists of market regulations masquerading as "free trade agreements".  In this case, bitcoin will absolutely encourage capitalism and will not in any sense end it.

Perhaps you will by now have gotten my point and also don't care.  Why?  Because "capitalist" or "socialist" is not a word you are using to convey meaning.  It's something you say while you are clubbing somebody into submission to get encouragement from your friends, to hear the sound of your own voice.  It's a name for calling the guy whose house you are burning down, because hey somebody burned down your house too.  It's for a sports rivalry yelling match, not for a rational discussion.  As long as you know that, carry on with bashing "the capitalists" (anyone you say is a capitalist) or perhaps bashing "the socialists" (anyone you say is a socialist).  I don't want to spoil your fun.  Carry on, punk bitches.

Postmortem

The above suffers several problems, some of which I can correct now.  It is hastily written, and unnecessarily abrasive.  Unfortunately, it doesn't address the title question in any detail, rather it jumps into another line of reasoning.

The line of reasoning to which I refer might be paraphrased by a Gödel quote: "If you have something to say, write an equation.  If you don't have anything to say, write an essay".  Many people take this as a statement about math, however equations can be written in any language.  This sentence is an equation.

Finally, the whole exercise strikes me now, in my infinite wisdom gained from a few more weeks of life, as a bit hypocritical.  If the point is to ask you, dear reader, to be more clear with your meaning rather than rely on ambiguous and heavily opinionated terms, then why do I draw on them myself?

# Is bitcoin inefficient?

A while ago I reported here a short list of incorrect statements about coin that we unfortunately tend to repeat.  There is one that I left off the list.  Perhaps I left it off because it deserves it's own post.

"Bitcoin is Inefficient"

We are surrounded right now by such gross inefficiencies it boggles the mind.  Inefficiencies that are motherfucking insane on a stick.

Do you see all those millions of watts of electrical energy going off into space as visible and UV light?  Don't worry about it, someone elseTM pays for most of it.

This one represents one of the worst bits of news we have to inform the our children (that's you now, if you don't know about this yet) in terms of gross mismanagement of planetary resources.  If you dare, see if you can figure out what the total percentage of all burnable hydrocarbon resources available to humanity (all generations thereof) have been lost due to this inefficiency.  Probably a pretty decent chunk of that 400ppm too.

Paid for with coinbase transactions and fees.

These inefficiencies are without exception and without possible salvation unmitigated disaster.  Massive fascist buildup on borders which crisscross the planet weigh massively on all economies and produce zero gain to productivity.  What do you think, is that efficient?

You see when you're mining, there's no way to call in sick.  There's nobody there who you can sleep with to get a raise either.  There's no "Well I know somebody who works in a giant glass building we can have lunch with, he knows Mr. SHA256 personally.  He could get you the next few blocks for your project, and slip a few extra in on the side."

Lets address some arguments directly.  Do you think mining is inefficient? Then don't do it.  There's a reason this is efficient:  if you do it inefficiently you lose.  There is no minimum amount of work required, the network adjusts.  The product is delivered to market with zero transportation costs.  There are no more inefficiencies caused by hidden production because production is publicly verifiable.

Could proof-of-stake use even less power to secure a network to the same level of value per time?  Perhaps.  It hasn't happened yet though.  However if the money supply is inflating at a fixed rate forever then we need a computer online all the time staking just to break even.  That can be seen as inefficient compared to a paper wallet.

To be fair, it could be that there is not enough context to know what was meant by efficient.  Sure, your android is an inefficient miner.  Sure, woodcoin is not an efficient database.  Mining ops where someone elseTM pays are unlikely to be viewed as efficient. VISA does not provide a unit of account so there isn't much comparison there.  You might as well compare coin to a tree, which also doesn't offer a unit of account.  Yup, show me a tree, and bitcoin looks like a coal fired steam engine.  But hey we got the most efficient boat on the ocean and you are going to compare it to a dolphin?

Is gold mining efficient?  All I'm saying is, sure nothing's perfect.  But lets do an honest appraisal of the alternatives.  Bitcoin is not exactly inefficient, is it.

# Which-way-to-carnegie-hall?

It appears that what I thought to be an unoriginal mention of uncontroversial logic may have somehow offended some folks.  My apologies if I have misspoken.  It's unlikely to be of great use to expound further, but it does give me a chance to retell a story.

The story seems unlikely to me at present, perhaps it was added to my memory by an untrusted subprogram (I can't seem to bring up a signature verification), but I will report it faithfully nonetheless.  I was in Manhattan at the time.  A woman approached and asked me:

Do you know how to get to Carnegie Hall?

Seems just too perfect doesn't it.  Anyway, I was thankfully armed with the answer.

(By the way if you aren't aware of the answer, there is no way you will "make it to Carnegie hall", for most any value of "Carnegie hall")

Practice, practice, practice!

You'll notice that I didn't say "Start out with having a G type star about 1 AU away from you", or any other number of similar statements identifying environmental factors that are part of an initial state vector which includes a high enough expectation value of her arriving at Carnegie hall.  I didn't say "80 percent nature, 20 percent nurture" or any other such nonsense.  The causative agent is practice.  Yes, there are many other things that contribute as enabling environmental factors; there always are in any cause and effect scenario.

Look, it doesn't matter how you define your N-telligence.  The mere fact that abortion exists is proof that your observable metric was not exactly caused by that thing set in stone at the moment of conception, was it.

I don't know how to spell this out for you any easier.  Do you think that "being tall" was the causative agent that made Kareem a high scoring basketball player?  If so, maybe you think we should just skip the game then and tally up the heights to see who the winners are.  I might go so far as to say it was the sky hook, but I don't want to say anything too controversial with you pansies.

If we care about intelligence of anyone in particular we are limiting the damage of television use, promoting reading, and challenging them with WTFOMG problems (for whatever WTFOMG it is you think "intelligence" is as something worth having).  Use it or lose it.  If we don't really care about intelligence, we put our kids in front of the TV and go out to derp about "eugenics" to whoever will listen in bars.  "My kids are going to be so smart.  They are inbred descendants of some dude called Steve Mumbo Jumbo who was totally like famous and stuff, and we spliced in Monsanto's new resistance to McDonald's gene".  Uh, no.  Muscles are strong because they are exercised.  It's nice you want to put the very best Cera-F wax on your downhill boards, and maybe you can name your Austrian great grandfather, but guess what - if you don't know how to ski, you are still going to suck.

Incidentally, the common answer now to today's question of the day is probably "use gps".  Have you noticed how bad we are getting at navigation and orienteering?  Oh wait, never mind that's probably genetic.  Those people who have some clue how to navigate (because they have practised)?  "Naturally talented."

Theorem 1:

The phrases "it's genetic" and "everything will be fine in the afterlife" both can be used after the initial phrases "It's OK that I suck, because" or "I'm a success for just being me, because" to yield bullshit.

Now stop googling your stats and get out there and actually practice something.

# RandomPay

Altcoin Proposal.

Randompay (ticker RND) features a revolutionary way to continually challenge and thus keep the health of your economy.  Every payment is subject to a Markov process adjustment at the mining of the block.  The payer signs a transaction as normally but the successful hash itself decides a random gaussian shift in the ledger between payer and payee which is recorded in the block chain.

Sounds crazy?  Take a closer look.

1) Encourages responsible spending.  Because you have to be able to cover some reasonable number above asking cost to participate, this means you need 2 RND (or more) to start a transaction for something marked 1 RND in price.  The risk of sudden shocks of a random offset makes one a lot more careful to have proper reserves, which one should have had anyway.

2) Encourages barter and communication.  You can see how this might make one think twice about settling in coin when one could make more efficient arrangements, which one should have made anyway.

3) Built in gambling!

Anyway, yeah.  Novelty coins.  I suppose I could cook it up for you but I'd rather you did it.  It might be worth the lulz to see an exchange try to list it.

# The four enemies of knowledge

<from Castaneda "The Teachings of Don Juan" 1968>

Sunday, 15 April 1962

As I was getting ready to leave, I decided to ask him once more about the enemies of a man of knowledge. I argued that I could not return for some time, and it would be a good idea to write down what he had to say and
then think about it while I was away.

He hesitated for a while, but then began to talk.

"When a man starts to learn, he is never clear about his objectives. His purpose is faulty; his intent is vague.  He hopes for rewards that will never materialize, for he knows nothing of the hardships of learning.
"He slowly begins to learn - bit by bit at first, then in big chunks. And his thoughts soon clash. What he learns is never what he pictured, or imagined, and so he begins to be afraid. Learning is never what one expects.  Every step of learning is a new task, and the fear the man is experiencing begins to mount mercilessly, unyieldingly. His purpose becomes a battlefield.

"And thus he has tumbled upon the first of his natural enemies: Fear! A terrible enemy - treacherous, and difficult to overcome. It remains concealed at every turn of the way, prowling, waiting. And if the man, terrified in its presence, runs away, his enemy will have put an end to his quest."

"What will happen to the man if he runs away in fear?"

"Nothing happens to him except that he will never learn. He will never become a man of knowledge. He will perhaps be a bully or a harmless, scared man; at any rate, he will be a defeated man. His first enemy will have
put an end to his cravings."

"And what can he do to overcome fear?"

"The answer is very simple. He must not run away. He must defy his fear, and in spite of it he must take the next step in learning, and the next, and the next. He must be fully afraid, and yet he must not stop. That is the rule! And a moment will come when his first enemy retreats. The man begins to feel sure of himself. His intent becomes stronger. Learning is no longer a terrifying task.

"When this joyful moment comes, the man can say without hesitation that he has defeated his first natural enemy."

"Does it happen at once, don Juan, or little by little?"

"It happens little by little, and yet the fear is vanquished suddenly and fast."

"But won't the man be afraid again if something new happens to him?"

"No. Once a man has vanquished fear, he is free from it for the rest of his life because, instead of fear, he has acquired clarity - a clarity of mind which erases fear. By then a man knows his desires; he knows how to satisfy
those desires. He can anticipate the new steps of learning, and a sharp clarity surrounds everything. The man feels that nothing is concealed.

"And thus he has encountered his second enemy: Clarity! That clarity of mind, which is so hard to obtain, dispels fear, but also blinds.  "It forces the man never to doubt himself. It gives him the assurance he can do anything he pleases, for he sees clearly into everything. And he is courageous because he is clear, and he stops at nothing because he is clear. But all that is a mistake; it is like something incomplete. If the man yields to this make-believe power, he has succumbed to his second enemy and will fumble with learning. He will rush when he should be patient, or he will be patient when he should rush. And he will fumble with learning until he winds up incapable of learning anything more."

"What becomes of a man who is defeated in that way, don Juan? Does he die as a result?"

"No, he doesn't die. His second enemy has just stopped him cold from trying to become a man of knowledge; instead, the man may turn into a buoyant warrior, or a clown. Yet the clarity for which he has paid so dearly will never change to darkness and fear again. He will be clear as long as he lives, but he will no longer learn, or yearn for anything."

"But what does he have to do to avoid being defeated?"

"He must do what he did with fear: he must defy his clarity and use it only to see, and wait patiently and measure carefully before taking new steps; he must think, above all, that his clarity is almost a mistake. And a moment will come when he will understand that his clarity was only a point before his eyes. And thus he will have overcome his second enemy, and will arrive at a position where nothing can harm him any more. This will not be a mistake. It will not be only a point before his eyes. It will be true power.

"He will know at this point that the power he has been pursuing for so long is finally his. He can do with it whatever he pleases. His ally is at his command. His wish is the rule. He sees all that is around him. But he has
also come across his third enemy: Power!

"Power is the strongest of all enemies. And naturally the easiest thing to do is to give in; after all, the man is truly invincible. He commands; he begins by taking calculated risks, and ends in making rules, because he is a master.

"A man at this stage hardly notices his third enemy closing in on him. And suddenly, without knowing, he will certainly have lost the battle. His enemy will have turned him into a cruel, capricious man."

"Will he lose his power?"

"No, he will never lose his clarity or his power."

"What then will distinguish him from a man of knowledge?"

"A man who is defeated by power dies without really knowing how to handle it. Power is only a burden upon his fate. Such a man has no command over himself, and cannot tell when or how to use his power."

"Is the defeat by any of these enemies a final defeat?"

"Of course it is final. Once one of these enemies overpowers a man there is nothing he can do."

"Is it possible, for instance, that the man who is defeated by power may see his error and mend his ways?"

"No. Once a man gives in he is through."

"But what if he is temporarily blinded by power, and then refuses it?"

"That means his battle is still on. That means he is still trying to become a man of knowledge. A man is defeated only when he no longer tries, and abandons himself."

"But then, don Juan, it is possible that a man may abandon himself to fear for years, but finally conquer it."

"No, that is not true. If he gives in to fear he will never conquer it, because he will shy away from learning and never try again. But if he tries to learn for years in the midst of his fear, he will eventually conquer it because he will never have really abandoned himself to it."

"How can he defeat his third enemy, don Juan?"

"He has to defy it, deliberately. He has to come to realize the power he has seemingly conquered is in reality never his. He must keep himself in line at all times, handling carefully and faithfully all that he has learned. If he can see that clarity and power, without his control over himself, are worse than mistakes, he will reach a point where everything is held in check. He will know then when and how to use his power. And thus he will have defeated his third enemy.

"The man will be, by then, at the end of his journey of learning, and almost without warning he will come upon the last of his enemies: Old age! This enemy is the cruelest of all, the one he won't be able to defeat
completely, but only fight away.

"This is the time when a man has no more fears, no more impatient clarity of mind - a time when all his power is in check, but also the time when he has an unyielding desire to rest. If he gives in totally to his desire to lie down and forget, if he soothes himself in tiredness, he will have lost his last round, and his enemy will cut him down into a feeble old creature. His desire to retreat will overrule all his clarity, his power, and his knowledge.

"But if the man sloughs off his tiredness, and lives his fate through, he can then be called a man of knowledge, if only for the brief moment when he succeeds in fighting off his last, invincible enemy. That moment of clarity, power, and knowledge is enough."

# Intelligence is caused by big feet; obesity by genetics

You may have some idea in your mind that things like cancer, intelligence, and obesity are in some way caused by genetics.  By the time you are done reading this post, I hope you will no longer labour under this gross misconception.

First off, repeat after me: correlation is not causation.  Go ahead, say it out loud.  You will make the same mistake again anyway, I guarantee it.  Saying it a couple times will help you make this mistake less frequently.

The canonical example is that intelligence is correlated with foot size.  It's a fact.  If you take a random sample of people and issue them with whatever kind of test you like, you will find that there is a correlation with test score and foot size.  What this means is that on average a person with larger feet is more likely to have a better score on the test.  In case you haven't figured out why this is yet, consider the case of those individuals whose feet are just a few inches long.  They don't score very well on many tests do they.  Infants can't even walk!  That's right, what's going on here is that older children are more likely to score well on tests, and at the same time they are more likely to have bigger feet.  So, lets go ahead and draw the incorrect conclusion from our study shall we?

Theorem 1:

Intelligence is caused by big feet.

This example is nice because you intuitively realize that the foot is not a crucial element of intelligence.  Perhaps you know of someone who has lost a foot or two and was still able to put some sentences together.  Perhaps you know something about the nervous system and the brain.  Whatever the case, you brought additional knowledge to the table that you were able to use in assessing our theorem and despite the hard factual evidence of the correlation, which by the way most definitely is evidence in support of the theorem, you discarded the theorem as false.  Unfortunately, it is not always so easy.

Lets consider another example.  Studies have shown that Chinese people score better on average than other people on spatial reasoning tests.  This evidence supports the following theorem:

Theorem 2

Han genetics causes superior spatial reasoning intelligence.

What do you think?  Presuming you accept the study at face value, as I do, you accept that Han genetics is correlated with spatial intelligence.  Do you therefore agree with the theorem?  Here's another bit of evidence that might help your decision: Chinese people have spent on average tens of thousands of hours studying and memorizing thousands of spatially arranged symbols.  Yeah, that might have something to do with it.  Do you think an illiterate North American born person who happens to have Han genetics but speaks only Spanish will have better than average spatial reasoning abilities?  I doubt it.

OK, lets get on to obesity and cancer.  Studies have shown that if you are obese, it is more likely than average that your genetic siblings, children, and parents are obese.  Gosh how could this be?  It must be that obesity is genetic right?  Other studies have shown that your risk of getting cancer is correlated with the amount of cancer your parents and grandparents have had.  Wow, cancer is genetic too.  Because correlation is causation.

Theorem 3:

Cancer and Obesity are genetic.

Wait a minute.  Here's a crazy idea.  Do you think obesity might have something to do with what you eat?  Uh, yeah.  Do you think maybe families might share similar diets and lifestyles?  Uh, yeah.  Not always of course, but correlations are about averages.  On average, a person is likely to eat similar stuff to what his genetic parents ate, because we tend to like Grandma's apple pie and Grandpa's cigarettes.  Sometimes we even grew up and lived our lives in the same polluted locations, fancy that.

This is fun, lets generate some more false theorems.

Some informal studies have shown that African Americans have a better sense of rhythm than other residents of North and South America.  One might find that in fact people's ability to keep a beat is correlated with the amount of melanin in the skin.

Theorem 4

The genes that regulate melanin also enable rhythmic competence.

Do you think a talented young black drummer should put credence in my theorem, or should they thank the people that played them Elmore James and J.B. Lenoir records, encouraged them to dance, and sang songs with them when they were little?  News flash: Culture is not genetic!

Since people love to pretend racist bullshit is important, I'll throw one more in here.  Some studies have shown that Jewish people score better on some intelligence tests than, who knows I never actually read this shite, Somalis or something.  Maybe Mormon US citizens.  Jewish people are not only on average better at Hebrew, but also score better on various "intelligence tests".  Well I for one believe that such tests exist which would give this result, and there may even be some people seriously dumb enough to carry out this study.  The correlation will be found, and hence the theorem:

Theorem 5

Jewish genetics cause superior intellect

My trouble with this kind of thing is not just that those believing it and preaching it are declaring their own stupidity.  Clearly, anybody who believes these theorems is an idiot, but that doesn't mean it should piss me off.  What pisses me off is that in believing these kind of theorems you are insulting your mothers.  You are insulting your culture by not giving it the credit it is due.  You are avoiding your responsibilities to pass on the parts of the culture you like, and to squash those you dislike.

Anyway, correlation is not causation.

# Bitcoin's killer app

Everyone seems to have a story about the killer app. So here's mine.

Let's start with a brief introduction. The app. The application. It's a fancy word to describe a packaged program, some software you interact with to do something or other. A program is a sequence of instructions that operates on a computer. Still with me? That's a lot of syllables I know. Maybe we should have stuck with "app". Right? Because we don't want to break userland do we. Because in the end of the day, you're an idiot, who probably can't hold more than one syllable in your mind at a time, right? Wrong! You understand fundamentally that "app" is a pop culture word that feigns technological advancement while returning to an old style of computing management that one might call "pre-browser", but you also accept that semantic arguments are sysiphean and you are willing to use whatever language is at your disposal to get the job done. And shit you'll even swipe if you have to. So lets move on.

In fact lets move right on to the part where I tell you what bitcoin's killer app is.

and the bitcoin's killer app is...

*opens envelope*

and the winner is..

bitcoin!

Commentator 1: So there you have it folks. "Bitcoin" is bitcoin's killer app.

Commentator 2: Wow what a shocker. I thought for sure it was going to be "the blockchain".

Commentator 1: Yes, or something from google or apple. They make great apps.

Commentator 2: Well, bitcoin is innovative. It has low fees.

To have a publicly verifiable unit of a account at your disposal for purposes of exchange really is the killer app. It's the whole point really. A unit of account which is not hopelessly broken due to our lack of knowledge of the total supply.  A unit of account which no party is able to fraudulently represent.

# Whither Fedcoin?

"Can you spare a FedMillie or a USDsat for a struggling blogger?  You know it's hard to get by since the Chairman reduced block rewards again."

In light of recent discussion in a Canadian Senate Committee, we bring up this tired old question.  This one is often asked in various forums by folks as they start to slowly move up the public coin learning curve.  Typically it comes up when you get to the part where you understand that public coins cannot be counterfeit.  This property is from one perspective a desirable property for exchange commodities (aka money aka currency).  So, if one were involved with a business that distributes and promotes exchange commodities, why not use this technology to make your product better?  Whither Fedcoin?  The brief discussion in the clip from the Canadian Senate floor is very similar to many that took place years ago and continues.

It came up in another forum, where I am slowly trying to continue moving up said curve.  The (snipped) conversation here began with discussion of whitelisting coin histories:
00:26:05 funkenstein_: actually that kinda makes more sense than a separate fedcoin

00:28:54 asciilifeform: an altcoin (with some form of key escrow) still seems likely imho

00:29:04 asciilifeform: (as a candidate for 'fedcoin')

00:29:51 funkenstein_: you don't have to ddos the remaining nodes.. just declare your colored coins to be worth 10x the others

00:31:05 asciilifeform: it is worth asking what usg would be trying to accomplish with fedcoin

The final question here is a great one, and answering it probably requires a lot of background I'm not prepared to go into here, such as who wears usg hats when and why.  Running a currency distribution and promotion company can be done for many motivations, but often something called "profit" can worm its way in there.

Yes, a keyed mining system (with key escrow as suggested above) in a public coin controlled by various selected individuals could allow a controlled flexible money supply without external counterfeiting, only allowing registered keyholders to add to the money supply.  I'd be happy to code that up for you by the way if you are interested.  As pointed out, this could still be in the cards.  In this system however the inflation while not capped is at least public, that is, verifiable, which is a major difference from current fiat systems in which nobody ever knows the money supply with certainty.

The other option is to go the route of fiat makers towards the end of the golden age: stamp the gold and claim it is now more valuable.  In this case fedcoin would be a "bitcoin kiddy pool" or a chunk of coloured bitcoins.   This chunk could start out on whatever peg to old fiat the issuer liked, for example 1USD per FEDsat.  The idea is that if done properly with the right advertising, one could convince the general public that these marked bitcoins which became marked in the possession of somebody wearing a government hat were worth thousands of times more value than the average bitcoin.  One could for example require them for certain payments to encourage their use, or maybe even make an "official switch" kind of like happened with French Francs to Euros.  The marking could be done with an official whitelist, signed with the FED's private gpg key.

Fun stuff don't you think?  Bank accounts could simply be switched to FEDsat unit of account, and when the men with the right hats wanted more FEDcoin they could just buy BTC on the open market and mark it.  This system would avoid the troubles of starting a whole separate coin, and could piggy back on the security of the existing network.  However, buying BTC on the open market and marking it is slightly more work than simply adding several zeroes to a number in a database.

My current opinion is that neither of these two flavors of fedcoin will ever be produced.  There is simply too much inertia in the current system to make the necessary changes to start down that course, and there doesn't appear to be the leadership required.  It's going to be hard enough to convert equity markets to noncounterfeitable standards.  Fiat ledgers are more likely to crash and burn and be reborn in the time honoured tradition of jubilee than to smoothly transition.  And the motivation is just not there.  Sometimes it seems like counterfeiting is more of a feature than a bug; if you are capable of a bit of empathetic wearing of others shoes you might be able to see why.

Further, there are thousands of public coins out there that will always be competition for these schemes, and will always be more efficient due to their lack of bureaucracy and first mover advantage.  And after all, a new course is already available with no extra work for those who are savvy enough to discover it.  Anyone who is in a position to make one of these fedcoins, and savvy enough to do so, may have other ideas for how they are going to proceed.

I have little doubt that this discussion has taken place in other places, and both these options have been considered.  They are both still on the table, but with every new coin user who starts up the learning curve these fedcoin options become less tenable.

# On Chumponomics

This post began with the title "Fiat economics".  This however seemed like too much of an oxymoron to leave in place.  "Fiat dynamics" was briefly the title as well.  In the end, I went with Chumponomics.  For relevant etymology you might want to read this.

Fiat dynamics is an odd subject to study in today's day and age (year 7, height 352k when this piece was started). It's a bit like returning to Ptolemaic astronomy. Indeed, why not place the Earth at the exact center of a set of large mechanical spheres which seem to move at arbitrary unexplained speeds?  By setting the proper speeds and axes, one can in fact explain what one sees from the Earth. You don't agree? Imagine now that the source of your employment as an astronomer required you would take such an approach. In that case, this was the obvious way to approach astronomy. One could still make very important discoveries when phrased in the language of the celestial spheres. Some of the language (such as talk of declination and right ascension on the celestial sphere) survives to this day. Similarly, though better alternatives existed, many 20th century economists were paid in fiat currency of one sort or another.  It makes sense they would phrase their economic discussion in the language demanded of them by their employers, despite its obvious shortcomings. Today fiat dynamics remains largely relevant in much of the world and historians and citizens will be picking up the pieces for a long time, so as you have already gathered, you are about to hear my take on it.

Economics (see Aristotle's "Oekonomikon") claims to be a scientific analysis of the management of the household. This includes all relevant incomes, expenditures, necessities and in more generality all goods and services which enter the household and are possible to be managed.  The "household" can of course be taken in different ways, from one's immediate person to one's family home on up to entire continents or the whole spaceship or planet.  Some of the factors involved in the household may have changed since the time of Aristotle (more energy resources, fewer slaves, for example) but the basic ideas are the same.  Food, clothing, and shelter are common examples of immediately relevant resources in household management or economics.  In so much as one would like to use precision and accuracy in describing relevant quantities to these important questions, one would like to use common units.  Many fiat paid economists choose to use a fiat unit to describe economic quantities. However, this appears to be absurd to one familiar with the physical sciences. Imagine if you will:

Alice  (about to mix something in a chemical beaker): How many grams again is the mass of 1 cubic centimeter of water at standard temperature and pressure (STP)?

Bob: Well we are given the figure of 2.15 by National institute of standards and technology (NIST) but ShadowUnits assures us it is more like 3 or 3 and a half.

Alice: We'd better wait for the official announcement from the NIST spokesman this month. If they delay on the increase in grams per liter another month we will have to adjust these numbers down for our Nature publication this summer.

Bob: Don't worry, we factored that into our budget after they upped Avagadro's number in China last year.

As you can tell, a fiat unit such as the US dollar is not a unit a reasonable person would use to describe any kind of quantity of long term importance, simply because we don't now how much of it will be around after a long time (in fact we don't know how much is around now either).  It is a unit devoid of physical definition.  It is now becoming clear to a majority of 21st century literates that any discussion of relevant economic quantities of importance (such as revenues, net worth, inherent value, prosperity, or any cost benefit analysis) which reports numbers in fiat units such as the US dollar is completely laughable.  It is chumponomics.  The reporting of relevant figures in fiat units is only done to satisfy wealthy benefactors or to continue in profiting from errors of the chumps who might believe this shite.

That being said, the question of how much fiat people do have now, and how they get it, is the heart of chumponomics.  A pair of US dollars can be seen as what lies between you and a hotel room for a night in coastal Ecuador, or ten thousand dollars can be seen as what lies between you and a hotel room for a night in a certain resort on Mykanos.  Let's just continue onwards into this realm and leave behind the ideas of household management (food, clothing, shelter, sustainable agriculture, not killing yourself, etc). Those are indeed important things (and depending on the misfortune of your current situation they may seem to depend on chumponomics) but I'm not really going to get into them now.  Let's talk fiat.

Towards a theory of chumponomics

Point of fact: chumponomics is the study of one phenomenon (and its subsidiary effects). This phenomenon can be referred to as "inflation". The proof of this is quite simple. All fiat is produced by inflation, that is, inflation of the money supply at effectively zero cost (or at least great discount) to those inflating it.  The origin of every dollar, every yuan, every euro, was that it was created out of nothing by fiat.  Thus, if we study fiat dynamics, we have as our primary function to study inflation.

Let's consider two extreme examples to begin this discussion. One I will call "perfectly balanced inflation" and the other "perfectly imbalanced inflation". In perfectly balanced inflation, the increase of the money supply proceeds exactly as a stock split. Every owner of a unit of the corporate scrip becomes the owner of two units (the exact factor is unimportant). The result is that most users of the fiat are aware immediately of the new distribution. Prices immediately go up accordingly. There is no change to the distribution of relative ownership of the total supply, but gross domestic product (GDP) has doubled.  This assumes only that one is calculating GDP in the fiat unit, not how it precisely was counted.

In the second example, we again double the money supply, but in this case give all the new scrip to one person, let's call him the king. The king being a miser, puts it all in a warehouse and spends not a penny. In this case we have doubled the money supply but the prices stay the same and the GDP is unchanged. This is an unstable arrangement. At some point, the king might be tempted to reach into the warehouse. Some employees might sneak a wheelbarrow full from the warehouse. Eventually, the stuff will start to leak out. More likely, when word gets out what will happen is the king will face insurrection. Perhaps the warehouse will be looted. This kind of arrangement is unstable because to maintain such a position one needs pay off a group of colleagues with a portion of the proceeds in order to keep them as guards for the operation.  As you can clearly tell, this is much closer to the way things were run in the fiat era.

The physicist might see at this point that what we are talking about is a diffusive process.  The pile of new fiat is like a lump of salt in a glass of water.  In the case of the water it is the motion of heat in the water and collisional and chemical effects that start to erode at the salt and begin the distribution and smooth the salinity gradient.  For the case of perfectly balanced inflation, we will have a solution of doubled local salinity throughout.  In case you hadn't noticed, chumpanomics involves continued inflation and so the system is sometimes referred to as "disequilibrium".

One could study chumpotronic diffusion as one studied spatial diffusion, and calculate for example the spatial density of fiat on the Earth's surface.  It is clear from the air that there are places where the fiat is introduced, such as London, Washington DC, and Beijing, with a higher density.  Construction projects and so-called development projects, regardless of their true economic impact (which is often negative) can be point sources of fiat inflation.  Other places await for diffusion to slowly reach them via trade.  However, calculating the relevant spatial diffusion coefficients is difficult.  The physical barriers to motion of a unit of fiat currency are not the same as those that control the movement of a salt ion.  While there are some barriers to physical motion, fiat can in fact jump across the globe.  We might therefore also be interested in an adapted theory of diffusion, not in spatial dimension but in a larger dimensional space of participants.

Fiat Diffusion

Consider the discrete fiat density vector $\phi_i$, which describes the amount of fiat controlled by the ith participant from a group of n total participants.  We can describe the evolution of this quantity with time t, first by producing a continuity equation:

##### ${\partial \phi_i \over \partial t} = \sum\limits_{k=0}^n j_{ik} + C_i$                                Eq. 1

Here we have introduced a flux term $j_{ik}$ describing the flux of fiat from the kth participant to the ith participant, and a counterfeiting source term $C_i$ describing the amount of new fiat created (or destroyed) by the ith participant.  Note that for the purposes of describing fiat dynamics it matters not at all whether the inflationary source $C_i$ is licensed or described as issuance as opposed to criminal counterfeiting.  The result is the same to the participants as long as it remains a source (or sink).  To proceed we need to describe the flux term, which we can approximate as being to first order proportional to the difference in fiat holdings between the two participants:

##### $j_{ik}= D_{ik}(\phi_i,\phi_k,\overrightarrow{r})(\phi_i - \phi_k)$                               Eq. 2

In other words, we expect fiat rich people to buy things from fiat poor people, on average, and the rate of this flow is to first order proportional to the difference in their relative holdings.  Here we have introduced a set of diffusion coefficients $D_{ik}$ which depend on the relative levels of fiat held by the ith and kth participant as well as external variables which we have lumped into the vector $\overrightarrow{r}$.  We can produce now a canonical diffusion equation for chumponomics:

##### ${\partial \phi_i \over \partial t} = \sum\limits_{k=0}^nD_{ik}(\phi_i,\phi_k,\overrightarrow{r})(\phi_i - \phi_k) + C_i$       Eq. 3

What next?

At this point it is tempting to go into which external variables affect the diffusion coefficients and to state this explicitly.  Language barriers, trade practices, and of course geographic location will all play a role in the vector $\overrightarrow{r}$ of external variables.  Also, second order effects will emerge in which the relative flow is not a linear function of the difference in holdings between participants. It is for this reason that we have explicit dependance of the diffusion coefficients on the actual amount of fiat held by the two participants for each coefficient $D_{ik}$.  However, to what end?  It is clear immediately upon inspection that an understanding of these diffusion coefficients, which could in theory explain the whole of economic interaction, is not going to allow us to calculate diddly squat.  Why?  Because we have no idea what the counterfeiting terms $C_i$ are doing.

Imagine that you are a chemist told to use the diffusion equation to calculate salinity in a large body of water.  After writing down the relevant diffusion equation, you are then told that by the way salt is being added in unknown places at unknown quantities.  Does this seem like a useful exercise to you?   No.  The only way to do well is to somehow learn what one can about the sources of salt, perhaps by paying off the salt delivery guy.  Bothering with molecular dynamics, heat, and convection, will be a waste of time.  This is the attitude of the seasoned chumponomist:  Who cares about efficiency, velocity of money, real revenues or productivity?  What matters is who you know, and how close they are to the sources.

Fiat monetary systems are only useful as chumpotrons, that is, as scams.  In terms of the global economy, or the survival of humanity and Gaia, they are a massive cement weights attached to the legs of humanity.  The only questions emerging for the educated 21st century economist are what pieces of the formalism of 20th chumponomics can survive into the 21st century and still be useful.  My guess is many.  Language is phenomenally adaptive.  Already we are using words like "accounts", "wallets", "interest", and "market capitalization" which had fiat significance, to mean slightly different things in the world of monetary systems which have public and deterministic $\sum\limits_iC_i$.  Other than that, don't waste your time with chumponomics.