The Greedy Hand and Silly Coins: Adam Smith and Bitcoin
Adam Smith and Bitcoin
One of the true pioneers of modern economics, Adam Smith, is best known for his two classic works; The Theory of Moral Sentiments (1759), and An Inquiry into the Nature and Causes of the Wealth of Nations (1776). Some call him the “father of modern economics), but I like to remember him more as The Man with the “Invisible Hand”. In his book, the Wealth of Nations, Smith wrote;
“Every individual necessarily labours to render the annual revenue of the society as great as he can. He generally neither intends to promote the public interest, nor knows how much he is promoting it … He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for society that it was no part of his intention. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.”
Which means something like
If the 2nd gen biofuels, in research phase at the moment, have some major breakthroughs and are successful in developing a fuel, which is cheap in production, does not require major modifications in cars, and is HIGH IN DEMAND (used caps and bold for the extra height), will someone be ready to exploit this avenue for personal gain, but, will also be promoting the collaborative interest of the biosphere.
This analysis, seen through time, just might be the most accurate ‘calculation’ of the human psychology, but, at least on a personal level, it paints a pretty sad picture. As, if we are to agree with Smith’s theory, it would mean that;
“MAN”, as a whole, has no common goal, just individual goals of “men”.
But it does not end there. There is a flip side to the proverbial “coin”. Because if we are agreeing with Smith’s theory, we are also to assume that there would be ‘individual goals of men’ which would have personal gain for some men at the cost of collective loss of many others.
Unfortunately, this analysis, as sad as it sounds, is also true for most all individual goals, and I think, Adam Smith, was definitely aware of it, but just chose to show the shiny side of the coin.
Keeping Smith’s Invisible Hand in mind, let’s look at the latest in modern economics. With the introduction of bitcoins, in 2009, dawned the age of cryptocurrency. The currency came with ideas some would call ‘Utopian’, like transparent block chains. How long this age lasts is yet to be seen.
One of the main reasons cited by economists for the fall of bitcoins, or any kind of cryptocurrency, is a theory which is something like as follows;
Let’s assume the first bitcoins are sold at $1/ea. So, the 1st generation of cryptocurrency users buy this freshly minted coin for $1/ea.
Suppose a year from now bitcoins is priced at $500 each.
At this point, another cryptocurrency company, the Bitecoin Company comes along. With its advanced algorithms equipped with deflationary pressures, the Bitecoin Company offers to sell you bitecoins for $1/ea. Now, bitecoin is cheaper but it may buy you less on the other side of transaction as well. Nevertheless, you buy some newly minted bitecoins in hopes that it will follow similar rise as bitcoins and you can make some quick cash. Bitecoin Company does some advertising and floods the market with these bitecoins, keeping a major share with themselves of course. With people demanding to pay in bitecoins, merchants start accepting bitecoins, leading to rise in the value of bitecoin and quite naturally a fall in bitcoin value.
Let’s say the market stabilizes and both, bit and bite, are $250
But wait, Hitcoin company just released its latest hit, “the Hitcoin”, for $2. Rit, Git and Fit coins are all for $1. And this doesn’t stop till the last holy f****** shit coin hits the market. This would cause chaotic instability and loss of faith in cryptocurrency which would ultimately lead to a demand for a regulatory institution for cryptocurrency, and thus destroying the very idea of an open source currency.
Everything you want to know about the meme-based cryptocurrency, Dogecoin is a new type of crypto currency introduced on December 8th, 2013. As of February 2014, more than 40 billion dogecoins have been mined. With the approximate value of $0.00031 each, the current market cap of dogecoins is roughly over $10 million whereas that of bitcoin is well over $10 billion with only 12.25 million bitcoins in circulation. So it would seem dogecoins is not really a threat with no actual uses, at least not imminent. In fact, according to Spelunk.in’s Pinguino, “dogecoins is very, very silly, and very fun. Currently, people are mostly buying Steam games and the like with it.”
Dogecoins is nothing silly and it’s definitely not funny.
Now, this raises some serious questions about the origins and motives behind the introduction of such coins. Is dogecoins just another individual goal aimed at personal gain of few or is something more malignant? How hard would it be for the top players, or even middle and lower level players of banking to mast an attack against bitcoins by flooding the web with such “silly” coins? Why has Apple, the fingerprint data collectors of the world, banned bitcoin apps and yet let dogecoins app continue?
It is yet to be seen if these new emerging cryptocurrency devour each other in battle, killing the idea or will they somehow find peace with each keeping the other in check.
Funny, it seems the whole world is destined for such Mexican stand-offish peace, with each country having its own nuclear warheads, looking calm on the surface, but with sweaty hands holding the remote with the big red button, under the table.