Bitcoinist: When did you first hear about Bitcoin?
Daniel Krawisz (DK): That story has been told in a comic strip I made here: ‘How I First Bought Bitcoins’
Bitcoinist: What intrigues you most about Bitcoin?
DK: Bitcoin is an environment in which the abstract subjects necessary to understand it have enormous practical consequences in my own life, which is not what I was expecting when I originally pursued them.
Bitcoinist: When did you come up with the idea to start the Satoshi Nakamoto institute?
DK: My friends Michael Goldstein, Pierre Rochard, and I had been discussing the economics and design of Bitcoin in student discussion groups we had created called The Mises Circle at UT and The Cryptoanarchy Club at UT. When we engaged with the rest of the Bitcoin world, we realized that our understanding of Bitcoin was a lot stronger than we realized. We had been operating like a classroom in which we took turns presenting what we had learned to one another, and we had discussed Bitcoin as a product of the Cypherpunk tradition and in the context of other cypherpunk ideas. This was evidently not the way that most Bitcoiners thought about Bitcoin. Michael Goldstein had jokingly discussed the idea of creating a Satoshi Nakamoto Institute with one of his friends, because he knew that it would annoy his intellectual opponents to present Bitcoin in a way that emphasized the connection between its inventor and the tradition he drew upon to create it. We then gradually decided that we would all really like to take the joke one step further.
“Yet altcoins are rarely if ever presented with this premise in mind or even a sufficient awareness of the problem. Rather, altcoins are usually presented as alternatives to Bitcoin for special niches. From my perspective, someone who is attempting to sell to me a cryptocurrency as a niche product within the Bitcoin ecosystem is either someone who does not understand what he’s talking about or someone who is trying to take advantage of me by lying about my investment prospects.”
Bitcoinist: Can you tell our readers your opinion of Altcoins?
DK: The value of a currency is caused by how widely demanded it is. The reason you hold cash is because you know you can very easily get rid of it in exchange for whatever you need at any time. The interesting thing about that is the more that people want cash, the more objectively useful it is. This is what I mean by the network effect. If the network effect really is the explanation for the value of a currency, as I claim it is, then it becomes very difficult to imagine how two currencies could be in equilibrium with one another. Any trend which promoted the growth of one at the expense of the other would tend to reinforce itself: for the growth of the network inherently improves the usefulness of the currency, thus attracting more people to it regardless of the original reason that the growth took place.
I think that altcoins are networks of people who talk a lot about issues that would be moot without answers to fundamental questions about the economics of their situation, which they have consistently been unable to provide. For example, a necessary prerequisite before I would invest in a currency other than Bitcoin would be an explanation as to how it will beat Bitcoin. If you’re not even going to try to do that, then from an investment standpoint, I would say that you might as well not bother creating the altcoin at all.
Yet altcoins are rarely if ever presented with this premise in mind or even a sufficient awareness of the problem. Rather, altcoins are usually presented as alternatives to Bitcoin for special niches. From my perspective, someone who is attempting to sell to me a cryptocurrency as a niche product within the Bitcoin ecosystem is either someone who does not understand what he’s talking about or someone who is trying to take advantage of me by lying about my investment prospects. I think if someone has promoted an investment to me without being able to explain what might actually cause it to be financially successful, then that person has wasted my time, regardless of how wonderful its hash function is.
“A permissioned blockchain is an oxymoron.”
Bitcoinist: What are your thoughts on the current permissioned blockchain enthusiasm?
DK: A permissioned blockchain is an oxymoron. The whole reason that the blockchain was invented is to make Bitcoin a decentralized and anonymous system in which everyone can come to the same arbitrary consensus about the history of Bitcoin. (Bitcoin is anonymous for miners, even if it is not for buyers and sellers). The very concept of a permissioned blockchain invalidates the need for a blockchain. You could probably just use a MySQL database.
I think the bigger issue here is it’s really important to be selective about the kinds of trends you pay attention to. The Bitcoin world is full of fads and there aren’t a lot of resources being put into vetting ideas here in the way that might be found in an academic setting. I find it pretty shocking to go to conventions and meet people who are very enthused about blockchains who have never heard of a distributed hash table or Open Transactions or any kind of alternative that might be relevant to the problem they’re trying to solve. I think most of the uses that people have proposed for blockchains, other than Bitcoin itself, are pretty maladaptive.
Based on this, I think that it would be a bad use of a person’s time to try to understand and evaluate every trend that comes along because you’ll end up wasting a lot of time on convoluted ideas. If it is, in fact, the case that people can create a lot of hype over ideas that don’t make sense, then in many ways you’re better off not asking these kinds of questions. I would recommend all readers interested in being able to evaluate these things on their own to read the cypherpunk material at the Nakamoto Institute page instead of trying to understand the latest fad. The cypherpunks were not in a position to be making money by scamming people with silly ideas, so they tended to write about fundamental issues with the honest intention of creating something useful. (I am not saying that permissioned blockchains are always automatically scams, just making a general statement about the quality of a random sample of trendy ideas in the Bitcoin world.)