In old gaming arcades there used to be two fighting games competing for attention. One was Street Fighter, and the other Mortal Kombat. You could choose which one to play, but once you picked a console, you didn’t get to use characters from one to battle in the other.
I am reminded of this every time I end up in a Bitcoin debate.
Brett Scott is the author of "The Heretic’s Guide to Global Finance." His forthcoming book on the war on cash and the dynamics of digital money systems will be published in 2022 by Penguin Random House and HarperCollins.
I’ve become a Bitcoin critic, and when the price rises, I often find myself drawn into depressing skirmishes with crypto evangelists. They’re depressing because my opponents refuse to pick a game in the arcade.
Some Bitcoin enthusiasts are not aware they are doing this, but others are. They are presenting themselves as playing a game, but in reality it’s one that doesn’t even exist, and they are misinforming a generation of idealistic young people in the process. Let me explain and tell you why this really matters.
Imagine Bitcoin was originally a character in a game called Money Wars, but due to some dispute there’s now a breakaway game called Titans of Trading, which also features Bitcoin.
In Money Wars, Bitcoin is cast as a form of money fighting the forces of fiat currency. Will it triumph against the nefarious Federal Reserve boss-man!
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In Titans of Trading, Bitcoin is cast not as money, but rather as a rising star in the investment asset market, competing against other assets. Will it beat the dollar returns of the stock market!
In both games, you can choose to play as Bitcoin, or – alternatively – as a fighter who’s antagonistic or dismissive towards Bitcoin. For example, my (anti-Bitcoin) character in Money Wars might fight the Fed boss-man, but also think Bitcoin is a distracting annoyance they need to get through first.
Thus, in Money Wars I might try to uppercut your Bitcoin character by critiquing its deeply conservative monetary ideology. I approach, saying, “Imagine a world in which Bitcoin is money, and everyone requires it to access goods and services.”
Then I crouch low for the attack, and say: “Many people in this world need loans to buy houses or start small businesses, but because Bitcoin’s supply is so constrained, its power rises faster than the borrowers can make the income necessary for repayment. The amount of stuff they need to sell to repay a 10 BTC loan gets higher and higher every month.”
Then I unleash the uppercut with “this leaves the borrowers in ever deeper debt servitude. As money, Bitcoin would be like a form of strangulation that keeps creditors in the system in power!”
Hadouken!
Switching games
In Money Wars, the Bitcoin character might block and counterstrike by showcasing the evils of hyperinflation, but in Titans of Trading, the characters change, and so must the critique and defense combos. Here the Bitcoin character is an asset on a monetary market, and I might launch a simple jab by saying “Bitcoin is just a blank digital object held in sophisticated decentralized scaffolding. You’re just pumping it for fickle dollar gains. Why not just buy shares, which are actually anchored into the real economy?!”
Again, you can block and counter-strike by telling me how spectacular the dollar gains are, and how they’ve empowered the early holders. If you’re skilled, you might even make a sophisticated countermove, arguing that due to its movability and dollar price, the object has use for forms of barter-like countertrade. This game is fun, because we agree that your Bitcoin character is an object in a market, rather than the money that underpins a market.
It turns out that expecting to play the same game is wishful thinking, because the dominant mode of attack from crypto evangelists is the equivalent of using Mortal Kombat’s Raiden to launch lightning bolts against Street Fighter’s Ryu. They use strengths from their Titans character against weaknesses in a Money Wars opponent.
It’s typical for Bitcoiners to whinge about inflation (Money Wars), before using Bitcoin’s rising price (Titans) to argue for why it’s a “deflationary currency” (Money Wars), that will be a great savings vehicle (Titans) to empower the unbanked (Money Wars).
OMG, where to start. It’s either an appreciating asset priced in dollars (Titans) or it’s a deflationary currency used to price everything (Money Wars). Pick a game!
Of course, it’s possible that you’ve entered the arcade in a confused state, and are not aware that Money Wars and Titans are different. After all, they feature one common character. Can’t you just combine that character’s powers from both games?
No. The games are contained in separate consoles. The common character cannot jump out of one screen and into the other.
Learning to see the difference
Crypto evangelists cannot recognize the difference between an appreciating asset and a deflationary currency. Why is this?
Well, to clearly see the difference in games, we need to accept that monetary systems underpin market systems, but many people – often under the influence of standard economics – believe market systems underpin monetary systems. If you have this tendency to see money as a “good on a market,” it will become very easy for you to collapse the distinction between money and superficially “money-like” things priced in money.
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We don’t generally make this mistake in a supermarket. Despite the fact that the goods we see there are extremely diverse, they all carry the same $ symbol on their prices. We thus find it easy to distinguish between money and “all the things in the supermarket.” But if a movable digital object like Bitcoin appears before you with a dollar price, you are susceptible to placing it in some hybrid category. Because of its branding as a “coin,” you are now prone to simultaneously seeing it as “money” (even though there’s not one country in the world that has supermarkets with BTC pricing in them) and “thing priced in money.”
This is why the Bitcoin debates get so absurd. Fully grown adults are arguing that in future all goods will have BTC symbols, but in the meantime they’ll hand over dollars to someone to get it. This is how you simultaneously play Money Wars – in which all goods route through Bitcoin – and Titans, in which Bitcoin gets routed through the dollar system like an item in a supermarket.
For those of you who have been doing this, you can take consolation that a character in Titans might indeed offer forms of protection against a boss-man in Money Wars, but only if you realize that many other Titans characters can, too. Just like you can buy up farmland or rare postage stamps to escape inflation, you can buy Bitcoin to do the same.
Bitcoin is not “fighting” the U.S. dollar though. It’s fighting rare postage stamps for investment dollars, with the side effect that this might create an inflation hedge. This form of inflation hedging, in which you exit money and then re-enter it at a later date, is profoundly different to keeping a form of “deflationary” money that gets ever-more powerful relative to the goods that are routed through it.
Why the game really matters
Let’s now turn to the darkest reason for this refusal to pick a game. All the rhetoric about an anti-inflationary money system that we find in Money Wars is really a fake marketing layer for Bitcoin, and is used by its promoters to get attention to help them in their true game, which is Titans.
These promoters are the worst. Bitcoin is really just an asset that fights other assets, but they cynically package it with a messianic backstory about how it’s actually fighting the dollar. They keep bigging up this old story, because it makes the crowd cheer. But then Bitcoin gets into the ring and starts competing against shares (like GameStop) for investment dollars.
Right now Bitcoin language is like a scramble zone full of chaff designed to disorientate actual debate
It’s cunning, but cowardly, because every time someone tries to critique one of these promoters, they can switch games to “counter” any attack. I’m in Street Fighter about to uppercut them, but they disappear, reappear in Mortal Kombat, body-slam an unmanned opponent over there, and then reappear waving a victory flag.
They are deliberately spreading a mind-virus, one in which you can defeat the evil fiat boss-man whilst simultaneously raving about your dollar gains. Right now Bitcoin language is like a scramble zone full of chaff designed to disorientate actual debate, and far from this being an interesting zone of ambiguity where new realities can emerge, it’s a boring technique of equivocation, in which imprecise language is used to present one thing as another. Unfortunately, this is becoming so common that it’s disorientating a generation of young people, who are failing to learn to Street Fight.