2016 Theme #3: The Rise Of Independent (Non-State) Crypto-Currencies

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

This week I am addressing themes I see playing out in 2016.

A number of systemic, structural forces are intersecting in 2016. One is the rise of non-state, non-central-bank-issued crypto-currencies.

We all know money is created and distributed by governments and central banks. The reason is simple: control the money and you control everything.

The invention of the blockchain and crypto-currencies such as Bitcoin have opened the door to non-state, non-central-bank currencies--money that is global and independent of any state or central bank, or indeed, any bank, as crypto-currencies are structurally peer-to-peer, meaning they don't require a bank to function: people can exchange crypto-currencies to pay for goods and services without a bank acting as a clearinghouse for all these transactions.

This doesn't just open the possibility of escaping the debt-serfdom of central and private banks--it opens the door to an entire global economy that's free of the inequality and concentration of wealth and power that is the only possible output of central bank created and distributed money.

Max Keiser and Stacy Herbert and I discuss these possibilities in The Keiser Report: Radically Beneficial World (25:43)...


Recall that central bank money is borrowed into existence, which means interest must be paid until the money is extinguished by the payment of debt.

In effect, today's wars, bread and circuses, etc. will be paid for in perpetuity by our kids, grandkids and their kids. This is debt-serfdom. The only possible output of borrowing money into existence is debt-serfdom.

Debt jubilees, no matter how well-intended, simply maintain the system of bank-issued money and debt-serfdom: dialing back the debt load from impossible to bearable does nothing but continue financial feudalism.

Just printing money and distributing it to the unemployed and working poor (known as QE for the people) also doesn't change anything structurally: printing money without increasing the production of goods and services just means the flood of new money will chase the existing pool of goods and services, generating runaway inflation (see Zimbabwe, Venezuela, et al.)

The Keynesian Cargo Cult's fetish is "demand"--meaning the "demand" created by having money in your pocket. The Keynesian Cargo Cult wrongly assumes that this "demand" will magically generate more goods and services.

If this were true, then there would be no inflation when governments such as Zimbabwe print money with abandon: this new "demand" would magically generate more goods and services.

But this Keynesian assumption is flat-out wrong. In reality, printing and distributing money does not guarantee a corresponding expansion of productive goods and services. The "magic" is misleading fantasy; the actual mechanism is much more complex than mere "demand."

The second fatal flaw in the Keynesian Cargo Cult's "solution" of printing and distributing "free money" is the money ends up funding worthless or even destructive uses: bridges to nowhere, ghost cities, needless MRI tests, worthless college degrees, and so on, in essentially limitless mal-investment and waste.

I propose instead that new crypto-currency money only be created when goods and services that are scarce in real-world communities are produced. I call this CLIME: the Community Labor Integrated Money Economy, and I describe how it works in my book A Radically Beneficial World: Automation, Technology and Creating Jobs for All.

This is the unsustainable world of bank/state issued money: crushing debt loads across the globe. This is debt-serfdom on a planetary scale.

Debt serfdom is no longer the only option - A Radically Beneficial World beckons.


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wulf's picture

When i see the word "bitcoin", I must watch this video again, just to have a good laugh... lolz


knukles's picture

Didju all know that "Free Speech Zones" confuse Obamaphone owners who roam streets in search of additional air minutes?

Stainless Steel Rat's picture
Stainless Steel Rat (not verified) Captain Debtcrash Jan 6, 2016 8:19 PM

Deflation is how Japan got there.  Cryptocurrencies only deflate, never inflate.

alphamentalist's picture

crypto inflation will happen as clone bits compete for users. bits will prove to be as lousy a store of value as paper money.

Stainless Steel Rat's picture
Stainless Steel Rat (not verified) alphamentalist Jan 6, 2016 8:30 PM

Given the hardware developed to squeeze coins out of bits, the odds that a given bit clone was pre-mined will greatly reduce the attractiveness of any clone.

stacking12321's picture

in honor of the fallen who cannot be here to say:




38BWD22's picture



If you feel that you understand BTC reasonably well, I see nothing wrong with HODLing, say, 1% of your net wealth in Bitcoin.  The loss would then be pretty limited.

It's also a great Lotto ticket.


BTW, the Powerball jackpot tonight (drawing at midnight US ET) is $500,000,000...

seek's picture

My grocery store here in podunk had a line of about 10 people waiting for P-ball tix, that explains it.

jaxville's picture

  I think bitcoin already paid off its lottery winnings to those who bought in below a buck.  Very limited prospects from here on.

bitcoinbear's picture

There's a rocket engine strapped at the back of this thing... You better get ready for launch. Because you haven't seen nothing yet. 

The Most Interesting Frog in the World's picture

I think the odds of me squeezing out a Shitcoin tonight are pretty good.

Dick Buttkiss's picture

"bits will prove to be as lousy a store of value as paper money."

Unless you are completely unbanked, then all of your money is "bits" that you don't actually own — http://allnewspipeline.com/Surprise_Surprise_Did_You_Know.php — and if you don't understand this, then good luck to you — https://www.youtube.com/watch?v=UlJku_CSyNg

logicalman's picture

BitCoin isn't money, it's currency.

There's a big difference.

I'm researching the BitCoin at the moment - hopefully with an open mind.

PMs are money and can be currency too. BC, IMHO can only be currency, never money.

Still might be worth a small investment?


Dick Buttkiss's picture

"BitCoin isn't money, it's currency."

Your mind is made up, then, and the last thing you're doing, therefore, is researching.

commander gruze?'s picture

It is made up and wrongly so. For bitcoin IS money indeed. It's a store of value as good as gold. The trouble is way too many people do not understand what "store of value" means. They think that if one puts 10 quid into gold, one will be able to cash out 10 quid later on. This is false. Gold, as well as bitcoin do fluctuate in terms of both fiat currency and other goods. For something to be store of value it means there is no third party control over it, of which most notorious example is a government or a central bank fiddling with supply. Adding more of it to the supply pool affect the value of what you already have, thus destroying its capacity to store value.

Bitcoin, like gold, resists such machinations which makes them both a store of value. Gold is easy to understand - one can't copy physical objects. Bitcoin is hard, because digital goods by default can be replicated infinitely. Limit on supply had to be artificially introduced through the blockchain data structure and surronding algorithms. The blockchain and bitcoin consensus protocol is the invention that for the first time reliably limits the amount of digital items in circulation. Since the supply is scarce it makes bitcoin money, not mere currency.

Unfortunately that's not entirely true either, for Bitcoin is more than money. It's a universal network that moves information around (as opposed to the Internet which only COPIES information around). This makes Bitcoin network a vehicle for not only money but also instruments such as stocks, bonds, deeds, legal titles, and one curious property of a protocol makes is a good fit for use as a public notary. But I'm getting way ahead of average ZH reader's cognitive capacity here.

Bendromeda Strain's picture

Of course you are onto something here - why else would someone as evil as Blythe Masters turn her attentions from precious metals to bitcoin and the blockchain. Makes perfect sense to me, and millions upon millions will walk into their own prison cells ignoring the sounds behinds them. Party on, Garth. Party on, Wayne.

asteroids's picture

Bitcoin, et al are not perfect. They can be stolen from you. Gold can be hidden, much much harder to steal that way.

zibrus's picture

It's not just a currency or payment protocol, it is actually something new called a 'blockchain' distributed authenticating system. It will be way more than just something you can buy your new ultra fast computer (alienware) from Dell online with in anticipation of receiving an Oculus.


Seriously.. The blockchain part of bitcoin is the most revolutionary part of it. Decentralized ledger systems outside any government.

BadLibertarian's picture

I've come to the conclusion that trying to explain Bitcoin to the average person is like trying to explain why the Internet and the web were going to be important back around '94 or '95. Right now, unless you work in technology and already understand the fundamental concepts inside and out - it's just too complicated for most people.

That won't always be the case, but since I didn't really feel the need to promote email or the web to anyone in the 90's, I'm doing my best to just let this happen as its going to. People will wake up and catch on in their own time, some quicker than others - same as always.

The Internet democratized the publication of information - making it harder to censor unpopular points of view, and we've seen the dramatic results of that. Bitcoin democratizes transfer of value, and that's going to wind up changing the world in much more significant ways than just the Internet or the web were able to - it's just not going to do that next week, next month, or next year. Building out the infrastructure takes a while.

Anyone who understands Bitcoin up to and including D-app platforms like Ethereum gets this - but how many people even know what Ethereum is?

zibrus's picture

Thanks BadLib... you said it much clearer than I could have. But of course... trying to get people to understand bitcoin is part of the fight. Alas, patience is a virtue. Thanks again for a well thought out post and the refernces to the internet in the 90s is spot on.

BadLibertarian's picture

Thanks, zibrus. I think you're doing well with your explanations, and I've plastered Bitcoin threads here with comments before to try to spread the word and clear up misconceptions as well, so I'm not in any way trying to denigrate what you're doing. It's a good thing - it's just a bit of a sisyphean task at this point, imo.

Initially, it seems like ZH should be a receptive audience for Bitcoin, since Bitcoin tends to be anti censorship, anti centralization, pro libertarian, and pro market-based-anarchy. But it's just too weird for people to 'grok' immediately, and when people see something they don't immediately understand, it's natural (and usually healthy) for their "scam radar" to start going off.

Sometimes I think about it like quantum mechanics. Mainstream science took years to fully get behind that idea because it was just so weird and difficult to understand. It was utterly alien compared to everything that had come before but alien or not, it worked - and that's ultimately why most scientists eventually were won over.

I expect that Bitcoin will follow a similar path. The vast majority of people will never really understand the details of how and why it works - they'll just start using it because they see that it works. But that will be a few more years down the line for most. 


zibrus's picture

Of course we are allies, not enemies. I 'Grok' what you are saying. Btw.. when do we get to Mars.


I've got my finger on the tech 'pulse' of what's going on. It should only be 1-2 more years tops, until we have a 'hardware bitcoin wallet' that looks and functions similar to a credit card. I think that is when the masses will adopt it.


But... ZH's have given tons (thousands of pounds) of good insight into the economic/political world to me that I almost feel it is only repayment, by giving some of my expertise on bitcoin back to them. It is still, at this time, a massive investment opportunity; perhaps even better than Silver =). Cheers BadLib, I hope I see more of you out here.

unicorn's picture

why dont you write some articles on cryptocurrencies here on zh? id love to read more about it. or post some good links :)

jaxville's picture

  Bitcoin is the model T of crypto currencies.  Few people today drive around in model Ts. Technology will soon evolve allowing for real alternatives that address bitcoin shortcomings.

  As I get older I tend to look at vehicles that hold my surplus labor in a different light.  I now focus on those which will clearly add to the quality of my life.  The benefits of holding gold are pretty clear.....bitcoin , not so clear.

crazytechnician's picture

bitcoin is the jet engine of money , but for many of you ignorance is bliss I suppose.

bitcoinbear's picture

 HTTP is the model T of Internet.  Few people today drive around in model Ts. Technology will soon evolve allowing for real alternatives that address HTTP shortcomings.


East Indian's picture

There are inflationary cryptos also

Stainless Steel Rat's picture
Stainless Steel Rat (not verified) East Indian Jan 6, 2016 8:44 PM

Technically they are all inflating, the ones I know about have a diminishing source.  Do those others have uniform work for more coins?

What about a pre-mined bit clone where initial distribution is audited and based on gold-exchange or labor-exchange?  The initial value would have to be agreed upon by the community.

The generating organization would have to be 100% transparent and democratically managed.

But all currencies crypto or not (like stocks, bonds, commodities, etc.) are manipulable with notes guaranteeing a future exchange of the item.

Any person or group of people could manipulate it to their advantage if the community/currency was too small.

zibrus's picture

Stainless we didn't miss the entire boat on bitcoin yet. It's going 10,000 on its next leg up.


You can absolutely sell your gold and trade your fiat into bitcoin. Bitcoin is 100% transparent and it is democratically managed by the miners.


Stocks, bonds, commodities, etc., are going to be run on blockchain tech, utilizing bitcoin primarily, but other systems like "ethereum".


Also all contractual laws as well. Bitcoin has already survived and will provide the services you speak of. It is essentially a 'global reserve currency', distributed by the people, robust by the distributed nature, transparent from the available ledger.

zibrus's picture

Look, think of it is way. Bitcoin becomes the de facto global reserve currencies. Countries, communities, whatever, can make their own local coins... Ultimately everything can trade in the bitcoin network. I could go on and on why local coins will be necessary as the number of transaction increases, but that is besides the point. Think back to how gold-notes were used instead of gold. Except this time, all the gold (bitcoin) is globally accountable and transparent and anyone can look at the 'blockchain' to see the ledger and audit any bitcoin address.

Bunga Bunga's picture

Better educate yourself before making such uninformed statements. Bitcoin inflates currently at a rate of about 8% per year. This will go gradually down over the next 20 years, but still be positive.

commander gruze?'s picture

Unfortunately, each time bitcoin is mentioned on ZH massive display of ignorance ensues.

ebworthen's picture

The Wall Street Warlocks and Brussels Bandits will not allow competition.

They control the governments and police states that will do their enforcing.

Nothing on the Internet is secure, and math won't protect you from the Goon Squads.

zibrus's picture

Won't allow competition? We won't allow them to use our network.


The government and police corrupt agents will need protection from us (bitcoiners). If they even try to transact any of their "black-op" money through our system it is all 100% tracable and there is a million-to-6billion people who are pissed off looking to hunt them down.


I double-dog dare them (corrupt gov/police) to try.


zibrus's picture

Btw, bitcoin myth pushers... I've said this before and I'll say it again. Bitcoin is 100% tracable. The ledger is readable by anyone. You have to take precautions if you don't want  your identity matched to your "wallet address".


it's the 100% tracable ledger that gives bitcoin its anti-corruption, anti-state, anti-banksters power.

ebworthen's picture

I'm with you in spirit; but you Bitcoiner's are approaching a Black Hole.

Tangible, untraceable Gold and Silver in your physical possession.

I only ring the klaxon because I like you all.

Anything on the Internet is not secure.

Please take my word for it.

zibrus's picture

It doesn't need to be secure. The whole paradigm of human existance could change. Bitcoin is one (big economic) part of the fight to take down corruption.


When robots do all the labor how is wealth created and how do you buy food? Bitcoin is a soft-landing transition tool. Gold hidden can be forgot. Gold held can be taken by force. Nothing under the heavens is secure. Please take my word for it. Bitcoin is just one attempt to fight the darkness that approaches. Every other attempt to fight is welcome and celebrated.

ebworthen's picture

Okay.  Best of luck.  Like I said...with you in spirit.

commander gruze?'s picture

Dude, stop spreading fear. The blockchain is fully transparent indeed, but there is no identity information in it. Just read the Satoshi paper. If you want to match the identity to bitcoin address you would have to do much more than just scan the ledger. Effectively, if you're running tor and use bitcoin tumblers, you're safe from doxing.

And for all of you "nothing on the Internet is secure" people - just use GPG. You'd be amazed how secure things can be.

mrees999's picture

Um...you obviously haven't heard of bitcoin paper wallets.  Very cool, check them out!





mrees999's picture

If you order some, don't forget to order the water tight baggy option. Very good to keep the mosture off so the qr code ink won't run.

Confusing to think, but you print them, protect them an all...THEN send money to the public address. Then you can keep sending money to it as long as you like. It's off-line. Put it in your safe next to your stack.





ebworthen's picture

FYI - it is their network, the Internet was founded by the M.I.C., and is controlled by it.  You can't connect = no Bitcoin.

zibrus's picture

Later in this thread there is a comment that bitcoin was created by a benevolent alien trying to see if we were smart enough to help ourselves yet or not and be ruled forever. Much better fantasy than MIC.


But ebworthen, you bring up a good point. the MIC did create the internet... and now, it is backfiring against them (that all, even in Africa will cell phones, now have access to more information than scholars only 100 years ago). Even if it was the MIC, it should backfire as well. Evil is really bad at predicting un-anticipated consequences action in a chaotic universe they only pretend to understand.

unicorn's picture

"they" could say bitcoin is terrorist-currency, as everything they dont like is a "terroristproblem" nowadays and banned really quick and powerful. . . (although there are nearly always ways around...)


goldsansstandard's picture

Maybe the smart Wall Street guys are already invested.? Do any of them have any concern for the system as it exists? The power will migrate to BC, perhaps?kCheck out Bitmarkets .com A method of trading with bit coin when there is no prior trust with the seller..
Also check out the bit coin based Visa or MasterCard by Coinbase.

zibrus's picture

Perhaps... But there are no naked shorts or derivatives. You still have to actually buy some bitcoin, before you sell them. That may change... but for now bitcoin is 1000x times less manipulative than other markets.


Even if it is only slight improvement (as opposed to paradigm shifting), it's better than nothing in my opinion.

eltxamo's picture

not really, you can short bitcoin (up to 5x) on kraken using fiat as collateral.

vega113's picture

Wait a second - is Jamie Dimon an expert in Bitcoin? Does he know what it really is? Or maybe he is just a bankster that excersies in wishfull thinking?

Bitcoin is manifestation of a real technological breakthrough. It is here - because it is possible to create digital money (don't think that money and currency is the same thing).