Bitcoin is mania, pure and simple. There is nothing else there except a method for being anonymous that is not very good.

Population growth vs the gold standard. This is why Central Banking was invented. Without it, you would either be poor. (99.99% of you would.)

Bitcoin is mania, pure and simple. There is nothing else there except a method for being anonymous that is not very good. (People have found this out during their criminal trial, when evidence is presented.) It is Beanie Babies on steroids, except that your child can’t enjoy playing with crypto, and you can’t practice juggling with crypto. Crypto is tulip bulbs gone mad, except that you can’t plant and grow a pretty flower nor eat it as food. All you can do is pollute the world.

I studied cryptocurrency a decade ago. It was founded on fundamental errors of concept then, and nothing has changed. It cannot be a currency, ever, unless it is issued by a nation state that does it as a mint operation. It cannot be used in banking, because the founders did not understand how banking works — banking is virtual money. In the modern world all money is virtual money, created by debt.

The morons who created bitcoin/crypto had some toddler’s sense that money in their hand was debt on someone else’s books. So they decided that oh, my god this must be the problem and they must fix it. Nothing could be farther from sanity. That money is created by debt is why we are able to function as a society today! The gold standard was never the solution, it was the problem; see the figure below showing how the world got off the gold standard because it had to. Similarly, Central Banking was created to replace the gold reserve system because that reserve system forced depressions, and if you do the math, the reserve system forces faster and faster boom and bust cycles because credit is limited.

Left: Visualization of starting with a pile of gold, and then granting loans from it. As each loan gets deposited into a bank account, the total amount of money increases. Right: Graph of what is shown in the left hand diagram. Here we see the math. When the metal backed reserve system starts out, the curve of money creation is steep. It’s easy to get credit. But as the loan activity progresses, the system gets closer and closer to the asymptotic limit. Eventually, the system can’t create enough money to grant a loan for a perfectly viable enterprise. This forces that company into bankruptcy. Then, the system dies back to the left in a depression/recession. Eventually, the system stops its crash and there is plenty of credit again. Boom and bust.

Debt creation of money is precisely how the rubber is kept on the road in the monetary economy. The mechanism in which people (or fairly smart algorithms) decide what things are worth funding is how we keep the value of money remarkably constant. Garrett has shown the correlation between money and energy is tighter than an r² to 0.99. And energy, as we know from physics is capacity for physical work. So what Garrett found is that work = monetary value. Engineers should be able to understand this.

So how does the profession that creates most of the new value that underlays the valuation of money get fixated on shiny metal ideas of what money is? That’s a good question. That fixation was shared by Isaac Newton of all people. I think it has something to do with thinking of money as a physical substance rather than the abstract measurement device it is. Engineers like physical things. John Harvey has an excellent metaphor for money. Money is just like points in a basketball or football game. The game is the economy, and we give out points (money) for things accomplished (work). That work has to be for things the game recognizes as valuable.

Yes, I have had professors of note in computer science argue and dismiss my paper with remarks like, “You lost me at money = debt,” and refuse to go any further. Sorry, my learned ignoramuses, but this is how the world works. Read this paper by the bank of England: Money creation in the modern economy. Wake up! You are woefully uneducated. It’s like those people that say the earth is flat that you laugh at. It’s just wrong.

This, folks, is design (and to a degree rule) by learned stupidity. I use the word stupidity, because ignorance is when you simply don’t know something. It becomes stupidity when you cling to your toddler’s beliefs in how the world works and should work, and you attack those who actually know.

The False Premises and Promises of Bitcoin. I published the first version of this in 2012, and last updated it in 2018. In addition to what is in this working paper, there is the fundamental problem that without control over who connects to it, queueing theory dictates that it cannot perform well, ever. This destroys it as a viable large-scale method of quasi-anonymous wire transfer.

Charles Mackay nailed it in 1841, and humanity has not gotten any smarter. Read Extraordinary Popular Delusions and Madness of the Crowds.

Yes, I think bitcoin has had its run. This, right now, is the top. When the richest man in the world pops in for a swing at making a ton of money off the rubes and bails? It’s time to get out. Note that the same man bailed on bitcoin, and has piled into Dogecoin. You see, it is much easier for something to go from 5 cents to 100 cents, than to go from $50,000 to $1 million. Elon is no dummy. He knows it’s a mania.