But we’re not cynical. We’ll give him the benefit of the doubt and say he just doesn’t know dick about economics. And he’s not alone. There’s a laughable trend in the Bitcoin Core circle of developers comparing Bitcoin Cash to fiat currency and saying Bitcoin (BTC) is “hard, Austrian money.” Jimmy Song popularized these tropes hoping to destroy Bitcoin Cash’s credibility by smearing it to the Libertarian community. Jimmy might think he has a wider audience but most outside the Libertarian community have never heard of Austrian economics, let alone read a book by F.A. Hayek or Ludwig von Mises. Turns out, Jimmy hasn’t either.

It’s understandable that Samson wouldn’t know what makes money valuable. And because Bitcoin has gained its value by being money, Samson doesn’t understand what makes Bitcoin valuable either - I know, bad problem to have for someone steering Bitcoin’s development. The alternative view, which many others take, is that Samson is only pretending to not understand economics; his real reason for supporting SegWit and a 1 MB block size cap is that his company, Blockstream depends on these protocol changes for revenue.

I saw this tweet recently and felt compelled to write a response. Samson Mow is the “Chief Strategy Officer” of Blockstream and one of the most influential Bitcoin Core developers. He frequently argues that Bitcoin Cash is flawed from an economic perspective. That’s interesting for two reasons. First, because Bitcoin Cash is strongly supported by Roger Ver, who is undeniably the most well-versed in economics in the entire cryptocurrency space. Second, because Samson has such a poor record of economic forecasting himself. As a leading proponent of both Segregated Witness and the block size limit, Samson is the least credible “economist” in the cryptocurrency space.

Anyway, I don’t think his campaigning has much effect - most libertarians and anarcho-capitalists in the crypto community are Dash and Bitcoin Cash fans because they recognize the importance of decentralized money to a free society.

Enough with the lies, onto the truth. Today, actual economists use the equation of exchange to model currencies and GDP. More recently, those in the cryptocurrency space have taken an interest. The equation of exchange shows the relationship between a currency and its use. For the past several decades, the St. Louis Fed has put out data on the velocity of the dollar in order to calculate GDP. In the same way, we can use velocity of Bitcoin to calculate the value of the Bitcoin economy, backing into Bitcoin’s price that way.

This article by Chris Burniske walks through the applications of MV = PQ step by step.

Bitcoin has a long history of libertarian idealism. Its early supporters congregated at Free State Project gatherings and Ron Paul rallies. Roger Ver’s Bitcoin.com sponsors Anarchapulco. Bitcoin also has a long history of people jumping with other views jumping on the bandwagon when they see the price shooting up. In the market, it translates to this cycle .

(Thanks to Cole Garner for the article and graphic)

Historically, those who’ve stayed between Bitcoin’s peaks have seen fantastic returns, in the order of 10x, not 10%. It’s happened so many times, it’s become a meme in Bitcoin: HODL, which gets its origins from this humorous forum post . Long time Bitcoin HODLers find the meme empirically true and all too relatable.

Newcomers to Bitcoin generally become interested in a bull market, but they first understand it in bear markets. The resulting phenomenon is a sort of rite of passage. There’s no universally agreed upon proverb about this, but I’d nominate this tweet by Bruce Fenton.



https://twitter.com/brucefenton/status/949062861493596161?lang=en

This market cycle though, in the era of fake news and manufactured dissent, it seems like many have skipped the fundamentals in favor of the memes. Maybe it’s just because we’re not at the bottom. The market may shake out more “nonbelievers,” those who don’t understand Bitcoin quite yet. In any case, it’s because of people pushing memes like HODL, and people like Jimmy and Samson running disinformation campaigns that many are still supporting Bitcoin (BTC) as something that it isn’t.

https://twitter.com/francispouliot_/status/1052008279176560640

The irony in newcomers supporting Bitcoin (presumably to make money) instead of Bitcoin Cash is that Bitcoin Cash has more potential for growth. Bitcoin is positioning itself as a competitor to gold. Assuming Bitcoin replaces 10% of gold reserves yields a value between $300k and $700k per BTC. Bitcoin or Bitcoin Cash replacing SWIFT transactions alone gives a value of $50 million per BTC (or BCH).

Bitcoin has become a laughingstock. People are looking at it like a Ponzi scheme. Skeptics have always felt this way, but there used to be a debate between Bitcoiners and “no-coiners”. Now Bitcoin has lost the characteristics that made it valuable in the first place.

Bitcoin Cash forked after four years of arguing for a block size limit increase, and predicting the panic of December 2017 well in advance. Contrary to the narrative of the #BCash movement, Bitcoin Cash is a community made entirely of well informed supporters who, first and foremost, understand economics. Because of the constant hate by people like Samson and Jimmy, and their NPC followers, Bitcoin Cash advocates have constructed even more sound arguments for supporting BCH.

These arguments are encapsulated by the equation of exchange. Where money gets its value is a different question. The equation of exchange tells use that money captures value through its use. Bitcoin is no longer used. Developers have been advocating holding Bitcoin as its primary use case. Calling storage ‘use’ is a semantic point, not a real one.

The original intent for Bitcoin was always to be money, hence the title of the whitepaper, Bitcoin: A Peer-to-Peer Electronic Cash System, emphasis mine. People are starting to wake up to Bitcoin Core’s monopolistic control of Bitcoin development, recognizing that Bitcoin Cash is a truer version of Bitcoin, closer to the Bitcoin whitepaper. At the same time, newcomers are recognizing Bitcoin Cash’s inherent value which stems from use as per the equation of exchange.

Now that Samson’s alignment of interests with Blockstream are clear, I expect he won’t have as much of a sway on public opinion. For Samson’s tweets to remain relevant, Bitcoin will have to effectively scale as a method of payment. Right now, that’s not one of Bitcoin Core’s big concerns.

Thankfully, Bitcoin was designed to fend off attacks, ignorant and otherwise. Part of the beauty of Bitcoin is its ability to resist attacks autonomously. It’s this autonomy that’s made Bitcoin the only successful non-sovereign currency to date. Following its lead, others have entered the currency market, creating competition between currencies. It might be said that this is in fact the first time a truly free market has ever occured. In a free market, the best product eventually gains market dominance. As such, Bitcoin Cash, or whichever version of peer-to-peer electronic cash works best as cash will win. It’s only a matter of time.

Nate Henderson (@CryptoNate12)

Wanna see more of Nate's work? Visit his personal blog EatSleepCrypto.com

Peace, Love, Anarchy,

Vote for our friend Luke Stokes for witness!