On the Origins of Money and Bitcoin

Recent textual analysis done on the original bitcoin whitepaper leads down interesting paths.

“I started from the Bitcoin whitepaper published in late 2008, and proceeded to run reverse textual analysis – essentially, searching the internet for highly unusual turns of phrase and vocabulary patterns (in particular places which you would expect a cryptography researcher to contribute to), then evaluating the fitness of each match found by running textual similarity metrics on several pages of their writing. [This] led me rather directly to several articles from Nick Szabo’s blog.”

This analysis appears in a post dated 1 December 2013 on the WordPress blog Likeinamirror.

Here is some of the evidence he cites:

Content-neural terms:

  • Repeated use of “of course” without isolating commas, contrary to convention (“the problem of course is”)
  • Expression “can be characterized”, frequent in Nick’s blog (found in 1% of crypto papers)
  • Use of “for our purposes” when describing hypotheses (found in 1.5% of crypto papers)
  • Starting sentences with “It should be noted”(found in 5.25% of crypto papers)
  • Use of “preclude” (found in 1.5% of crypto papers)
  • Expression “a level of “ + noun  (“achieves a level of privacy by…”) as a standalone qualifier

Content-bearing terms that have common synonyms in the field and thus could easily have been expressed in a different way:

  • Expression “timestamp server”, central in the Bitcoin paper, used in Nick’s blog as early as January 2006
  • Repeated use of expression “trusted third party”
  • Expressions “cryptographic proof” and “digital signatures”
  • Repeated use of “timestamp” as a verb

While this does not necessarily imply that Nick Szabo “is” Satoshi Nakamoto, at a minimum, it is strong evidence that significant parts of the writing in the whitepaper entitled bitcoin.pdf came from his keyboard. Moreover, it seems clear that he was one of the key thinkers contributing CPU-time to what eventually evolved into today’s cryptocurrencies.

Nick Szabo’s comments on the origins of money are worth reading. He writes:

Hardly anybody actually understands money. Money just doesn’t work like that, I was told fervently and often. Gold couldn’t work as money until it was already shiny or useful for electronics or something else besides money, they told me. (Do insurance services also have to start out useful for something else, maybe as power plants?) This common argument coming ironically from libertarians who misinterpreted Menger’s account of the origin of money as being the only way it could arise (rather than an account of how it could arise) and, in the same way misapplying Mises’ regression theorem. [This] even though I had rebutted these arguments in my study of the origins of money, which I humbly suggest should be should be required reading for anybody debating the economics of Bitcoin.

On a related note, Nick Szabo’s blog http://unenumerated.blogspot.com contain plenty of intriguing thinking on a wide range of topics.

Thanks to David Gilbert at the IB Times for publicizing this.

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An Under-Appreciated Power of Media

Michael Parenti once wisely remarked: You may believe that the media do not control WHAT you think; but one thing is clear, they certainly have an overwhelming impact on what you think ABOUT.

It seems to me that this is a vastly under-appreciated power of media. Take this past year’s bitcoin price run-up. Would this have happened without the blanket media coverage it received all around the world? The answer is obvious.

At the same time, it is worth noting what media tend to talk little about: causes. Endless about of print is devoted to what is happening now. Maybe even some is devoted to speculation about the future of phenomenon X. Little space is devoted to context – putting phenomenon X in a causal historical framework.

Two recent phenomena from the China context come to mind: One is the floating pigs incident this past spring. The other is the excitement about so-called pollution levels – the now infamous “Air Quality Index“. This index has been around for quite a while, but the attention has not. This year the topic is so “hot” that air filters are all sold out and a new word has entered into everyday speech: “wùmái” (雾霾), meaning something like smog (i.e. smoke + fog – very accurate in this case, as we shall see). Is the air any better or worse this year than last? It doesn’t seem too different to me, but in any case, the media won’t help you much to get an answer to that question.

I’ll leave the floating pigs incident for another time, though that is also worth more than a footnote, since it is a prime example of this same phenomenon and ultimately goes back to yet another case of “unintended” consequences of government meddling. Well, what about that supposedly “polluted” air we are breathing, full of fine particulate matter? Wouldn’t it be a relevant question to consider WHERE all those fine particles floating around in the fall months come from? For those who have bothered to ask (and there are admittedly a few), the primary source seems clear: burnt-off agricultural refuse, particularly wheat stalks, so-called jiēgǎn (秸秆). Though burning them is illegal, the fact is that burning is not only cheaper than paying someone to cart the stuff off, but it also produces useful ash fertilizer. In decades past this was less of an issue, because farmers tended to burn off the refuse slowly to provide heat for their homes and fire for their hearths. Now most have switched to natural gas instead, leaving a big pile of unloved wheat stalks behind.

There is likely more to this story worth telling, but I’ll leave it at that for the moment. In any case, though ash from burnt off wheat stalks may not be the most healthy thing in the world, is it a fair guess that the public reaction would be quite different if the source of those feared particles were better known?

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The Importance of Caring

What happens to a person when he ceases to care about his or her fate? What happens to groups?

In his book Descartes’ Error, Antonio Damásio makes a strong case that emotions are the mechanism which helps translate the survival urge into good decision-making. He figured this out by observing people whose damaged brains for various reasons no longer supported those “emotional” circuits. Many of these unfortunate people were able to calmly observe and analyze their own demise without any concern for themselves and their fate. They essentially became bystanders to their own ongoing demise.

Why did this happen? Because they just didn’t care. In a way, one could say that they lacked a sense of self-ownership.

I see the same phenomenon all the time in the corporate world. Where people with a sense of ownership are not present, often nothing gets done. Things stagnate and decay. Obvious tasks are left undone. Often literally dust settles over everything and the “non-owners” present watch as the decay proceeds. The staff may have the know-how to make a difference, but they lack the motivation.

Of course in a way this is obvious. What is perhaps less obvious is that this is the exact same mechanism which drives living creatures to survive and flourish – or not.

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Genetics of Character Type

As Carl Jung rightly pointed out, many a mother with multiple children can tell you that each one had its own particular “character” from very early on.

This is because all humans – and probably all mammals as well, for that matter – are born with certain innate propensities. Carl Jung, Katherine Briggs, Isabel Myers, Aušra Augustinavičiūtė and others noticed this and tried to classify those propensities. Later on less careful observers mixed this all with the concept of personality, which leads to all sorts of confusion, because personality is a related concept but not all the same thing. This is another long topic which I had better not attempt to tackle here.

The point is that it seems clear that these propensities we observe are basically digital – i.e. on/off lights. There are no obviously observable “grey zones”. Sure, plenty of pundits don’t agree, but that’s mostly because they insist on mixing up the concepts of personality and character. With such muddled concepts they are not likely to learn anything useful at all, so best not to waste much time on them.

The challenge I want to touch on here is to identify what actually causes these on/off settings. Though genes are certainly not the only possible explanations, they are the most common cause for such phenomena. And – now we actually have at least one candidate! The candidate gene that is the so-called Rs4680 gene, also known as Val158Met. With one exception, each chromosome comes in pairs, so normally humans will have two each, of which one may or may not be dominant. The Met-Met combo is classified as “tendentially more exploratory”, while the Val-Val combo is the opposite. Could it be a “P-J” gene? Given the fact that testing does not seem to indicate that either the Met or Val type is dominant, it doesn’t seem like a good match for an on/off scenario. Nonetheless, this is just the kind of link we need to identify, so it’s definitely a topic worth following. There are two useful discussions of it here:


There is also a highly technical article in Nature, but it’s not too easy to understand:

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Why Street Vendors Matter

Street vendors are part of the fabric of Chinese life, and there is no indication that this is going to change. For consumers, they substantially enhance quality of life. For the street vendors themselves, it represents both their livelihood and independence. Easy access to self-employment (in the sense of a 个体户), i.e. the ability to freely sell, trade and provide one’s services, is a basic prerequisite for a functioning free market. Without it, people degenerate into mere human resources who may or may not be needed by government and other large employers in the formal economy. For the most part, this works. For those willing to put up a small amount of capital, small shops can be rented at a low cost and taxation is both limited and fixed. For those unable or unwilling to put up capital, however, street vending – usually unlicensed – is a crucial pressure release valve. Downside: The street vendors must deal with the chengguan.

These chengguan do the opposite. They waste society’s resources and reduce quality of life. In fact, they are without a doubt the most hated representatives of the Chinese government, a fact reaffirmed by the reaction to the recent execution in Shenyang of Xia Junfeng, an abused street vendor who killed his tormentors. Virtually no-one in the blogosphere expressed sympathy with the dead chengguan.

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Statism & Violence

In today’s statist age, the right to self-defense is very easily forgotten. It is also forgotten that violence is a trademark of a statist society. The more statist the society and outlook of the inhabitants, the more violence is the result. Not only is violence employed by the state and its minions, but for lack of a better problem-solving mechanism tendentially also by the state’s subjects. Instead of encouraging cooperation and civilized interactions, the statist society suppresses a wide range of activities and encourages all sorts of uncivilized behavior (such as blackmail).

This correlation applies not merely to countries – i.e. supposedly sovereign political entities – but also to far smaller entities, such as a city, region or other area.

Case in point – the recent “Silk Road” website takedown and related arrest of Ross Ulbricht. The background is well documented here:

FBI agents gained Ulbricht’s trust online and got him to agree to arrange a beating and murder, false proof of which the agents then staged in photos they sent to Ulbricht. The supposed extortionist, with the screen name FriendlyChemist, seems to have been a fiction created by the Feds. Plus, according to the White Rock, British Columbia, Canada, records there is no record of a murder corresponding to the name Ulbricht passed on to the fake hitmen or any murders corresponding with the supposed date of the murder. So the thieving former employee did exist but was never beaten up or murdered, while the extortionist was just an FBI ruse. The Feds were playing Ulbricht from the start.

The article’s author Gary Gibson continues:

I have to take a moment here to inspire outrage and bile in the comments section and defend Ulbricht’s actions. The non-aggression principle we regularly talk about here is not pacifism. One owns one’s actions and their consequences and sometimes private, violent reprisal will be the morally sound result of one’s actions if one deigns to aggress against others. Someone who is threatening to ruin the lives of thousands of people by turning them over to the state in an attempt at extortion is one who initiates aggression and who deserves what they have coming. You should lose about as much sleep over the death of such an extortionist as you would an armed gunman who stuck up the wrong (heavily armed) victim. I see Ulbricht as protecting the lives of thousands of his customers as well as his own interests as best he could in the black market conditions created by prohibition. Of course, the FBI doesn’t agree.

You might say that beatings and murder are no way to resolve disputes…but that’s exactly the kind of violent dispute resolutions state prohibitions force people to enact in the black markets! Prohibition cuts black markets off from non-violent, legal or reputable arbitration systems. Silk Road was an attempt to make the underground free markets as free of the state-spawned violence that infects them in the world of actual street corners and turf wars. In a bit of irony, the state’s agents had to invent a fictional extortionist to lure Silk Road’s operator into the gangster hit. Mind you, the people who are offended that such a libertarian person would privately pay for violence to defend himself are the same kind of people who have no problem with their stolen tax dollars funding the explosive dismemberment of hundreds of thousands of foreign innocents their governments deem [to be] acceptable collateral losses.

I think Gary pretty much sums up the matter.

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What Makes A Government Legitimate?

Or: The CFR Takes Hans-Hermann Hoppe Mainstream

As M. Rothbard pointed out, no government can long survive without the support or at least the grudging toleration of the majority of the ruled. On this account the fortunes of quite a few Western “democratic” governments are looking shaky. Those of China’s non-democratic overlords by contrast seem far more solid.

Non-democratic rulers are often decried as being illegitimate. Li Shimo (Eric X. Li) at TED points out that if legitimacy is defined as the [majority] approval of the ruled (obviously a debatable point), then the current Chinese government would appear to be one of the most legitimate anywhere in the world.

This speech goes back to an article which Mr. Li published in the CFR magazine Foreign Affairs in January 2013 entitled “The Life of the Party – The Post-Democratic Future Begins in China“. Full text is here: http://www.viet-studies.info/kinhte/FA_LifeOfParty.htm. Take note of the publisher.

Here is an excerpt:

Westerners assume that multiparty election with universal suffrage is the only source of legitimacy. I was asked once, “the Party was not voted in by election, where is its source of legitimacy?” I said, “how about competency?”

We know the facts: In 1949 when the Party took over, China was mired in civil wars and dismembered by foreign aggressions; average life expectancy was 41. Today, it is the second largest economy in the world, an industrial powerhouse, and its people live in increasing prosperity.

Pew Research polls Chinese public attitudes. These are the numbers in recent years, and they have been largely consistent in the last couple of decades:

Satisfaction with the general direction of the country – 85%
Those who report significant progress in their lives in the past five years – 70%
Those who expect the future to be better – a whopping 82%

Financial Times survey of global youth attitudes just released:

93% of China’s generation-Y are optimistic about their country’s future!

If this is not legitimacy, I’m not sure what is.

In fact, according to the Pew poll, Chinese have more confidence in their leaders and future than any other country surveyed.

Li Shimo concludes the speech with the following observation:

… the era of their dogmatic universalism is over. Let us stop telling people, and our children, there is only one way to govern ourselves and a singular future towards which all societies must evolve. It is wrong, it is irresponsible, and worst of all, it is boring. Let universality make way for plurality. Perhaps, a more interesting age is upon us. Are we brave enough to welcome it?

The speech transcript in original and Chinese translation is here: http://www.guancha.cn/li-shi-mo/2013_06_19_152386_s.shtml

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