Bitcoin, Currencies and Fragility - Nassim Nicholas Taleb
Taleb's "Blackpaper" Rebutal
Review of Taleb's "Bitcoin, Currencies and Bubbles"
Nassim Nicholas Taleb is an incredible thinker and writer. He often writes about the nature of complexity, randomness and a world where rare events dominate the landscape. But Taleb is an absolute disappointment on Twitter - often picking fights with Bitcoiners and other thought leaders.
Taleb recently wrote a paper talking about how bitcoin doesn't have value. I think it would be interesting to review some of his arguments from his self-proclaimed "blackpaper"
Bitcoin requires a great deal of energy - energy that could find substitutes in other computational and scientific uses
- The computational power needed will grow exponentially if the price of bitcoin increases exponentially. Once the price stabilizes as it gets fully adopted, the difficulty adjustment will ensure that energy consumption won’t continue to grow exponentially
- Who is Taleb to decide how energy should be used? Maybe I think that a world with financial inclusion is a very valuable use of energy
Gold is largely maintenance-free and cryptocurrencies require a sustained amount of interest in them
- Gold, in fact requires significant costs to maintain, i.e. verification, storage, and transport costs, all of which bitcoin significantly improves upon in that I only need a computer to store billions worth of bitcoin
- Anything in the world that is not directly related to survival requires a sustained amount of interest in them
If any non-dividend yielding asset has the tiniest probability of hitting an absorbing barrier (causing its value to become 0), then its present value must be 0
- Taleb excludes collectibles as they have aesthetic utility but he fails to exclude traditional fiat currency
- A currency note in my pocket generates no revenue. Now you may argue that you can earn interest on your fiat. But I can earn interest on my bitcoin today as well
- So either bitcoin is not a revenue yielding asset, but then neither is fiat currency, or both are revenue yielding assets.
Bitcoin has failed to become a currency because bitcoin transactions are too expensive and too slow
- That's why we got the Lightning Network ⚡
There is a conflation of “accepting bitcoin for payments” and pricing goods in bitcoin. For that the price in bitcoin must be fixed, with the conversion into fiat floating, rather than the reverse
- I can't really argue with Taleb on this as things stand today. But all currencies that weren't issued by the states need to grow organically through phases
- Those phases are Collectibles, Store of Value, Medium of Exchange and Unit of Account
- Right now bitcoin fluctuates between the first three but adoption will only increase over time. The question is whether everything in the world will be priced in bitcoin in the future. My answer is yes.
And to think that Taleb wrote the preface to Saifedean Ammous' "The Bitcoin Standard".
I couldn't possibly go for every point in one issue but if you guys want to read more about my thoughts on the rest of his blackpaper, do DM me and I will do a follow up on the next issue.