Jeffrey, you begin your post with the following:
“I’ve sensed for sometime that people tend to exaggerate the newness of CRYPTOCURRENCY, as if it were a technology never before imagined or experienced.... This is not true. ... For so long as humanity has existed, there has been a need to have some method of knowing of and/or documenting ownership claims. This is where BLOCKCHAIN TECHNOLOGY provides a remarkable innovation.” (my CAPS)

There it is again! That smooth, subtle and seamless transition conflating cryptocurrencies, like bitcoin, with the blockchain technology. There are thousands of blog posts and news articles about bitcoin and cryptocurrencies, but the great majority fail to clearly distinguish between the technology and the digital currency. I am as enthusiastic as anyone about the promise of the blockchain. It can securely document and transfer ownership rights to anything, such as homes, boats, stocks, bonds, artwork or gold and silver. Blockchain technology is certainly transformative and we are only in the early days.

Then the cryptocurrency comes along and says, “No, wait, here, here, transfer me on the blockchain! I’m worth something because someone used scarce computing power and energy to solve a math problem and there’s a limited number of these solutions, so scarcity = value, right?” Why is it so difficult for otherwise intelligent people to make this distinction? When Jamie Dimon or Warren Buffett call bitcoin a fraud, they certainly are not referring to blockchain technology. I am confident that they are looking at numerous ways to use blockchain to improve their businesses. They just aren’t falling for the conflation argument. In fairness, some people do try to clearly distinguish between crypto and blockchain. My point is that in most cases we should strictly confine the discussion to one or the other.

For example, when discussing valuation, allowing bitcoin to ride the coattails of the blockchain is improper, just as talking about the value of fine art, the title to which can now be transferred safely and securely using blockchain. If we’re discussing how and why bitcoin has the potential to replace the USD as a medium of exchange, let’s focus on bitcoin the thing, not the blockchain technology as the means to transmit and certify ownership of the thing. After all, that same technology can be used to document and transfer ownership rights to any potential money, including gold and silver.

I should also mention a common error of omission in discussing the future of cryptocurrencies: taxes and legal tender laws. Gain and loss on cryptocurrency transactions must be reported for U.S. tax purposes, giving cryptos the same disadvantage as gold and silver in competing with the US$ as a medium of exchange. Taxation and legal tender laws are primary hurdles to the remonetization of gold and silver, but they are equally damaging to cryptocurrencies. In some future time when these constraints are lifted, I would put my money (so to speak) on gold and silver, with ownership validated by blockchain, beating the pants off any specific sequence of 0s and 1s for the title of real money.

A few points, John. Given that blockchain technology was invented in the bitcoin white paper, the characterization of crypto riding blockchain’s coattails seems a little strange, although I understand the point.

One category of non-currency blockchain applications are private blockchains used by the big banks to settle trades, etc. I suspect this will catch on very quickly.

The other category are “blockchain startups” which I wrote about in my piece “Party like its 1999...” They blur the line between crypto currencies and non currency applications as they almost all “tokenize” some product or service they offer. As I say in my piece, they’re in for a bumpy ride in the short term, as they’ve gotten well ahead of the public’s willingness to adopt the technology. But in the long run I think we’ll see important applications.

Now as for the currencies...Jeffrey would tell you that Bitcoin doesn’t violate the regression theorem because the payment system is the thing of underlying value. I sort of disagree—at the risk of committing Austrian sacrilege I don’t really buy the regression theorem. I think gold gets its stability as money by being “God’s fiat currency”—mutual expectations of value that go way back before the dollar et al. Gold has a floor about zero because you can make pretty rings and wires; Bitcoin has a floor above zero because it’ll always be useful for crossborder payments and lack market transactions. The trouble bitcoin faces is the one I site above—is the public really ready? They may be in a decade but right now I think most people are quite happy with their fiat dollars, even if they’re badly educated about the matter

Taxation is going to be important and require nonstop political pressure.

Max, thanks for your quick reply.
I've been told that in many cases, the actual invention was not related to the inventor's original idea--- but that is not my point. Since bitcoin and blockchain are in fact separate and distinct, I'm just calling for better discipline in our dialogue about them and to stop conflating. Every article should start with "this is about blockchain" or "this is about bitcoin". One is a technology, the other is a currency.

I did not bring up the regression theorem, nor do I advocate it as a reason that gold and silver are sound money or that bitcoin is not. My argument is based on history, as outlined in any number of good books. I just finished "Money, Market and Sovereignty" by Benn Steil, which is well worth anyone's time. Your comment about gold having a floor based on "pretty things and wires" makes me think you need to re-read AIER's own standard text by Richard Salsman. https://www.aier.org/gold-a... If it were just about "pretty things and wires", I can't understand why central banks are paying to store 30,000 tons of the stuff, which only represents 15% or so of the total in storage. Some of those bankers are even buying more of the stuff! We're still digging gold out of deep tunnels, despite the fact that there is more than 60 years worth of above ground supply on hand. Show me another "commodity" where this is happening. And this, despite the fact that gold no longer serves any useful monetary function. Very curious.

As to bitcoin's ultimate value, if any, the jury is still out. I can wait.

I would say that's because it is a store of value, based on peoples' mutual expectations--but I admittedly have not read the material you suggest and will take a look.

In spite of all of the controversy already stirred up here in the comments, I think the original article makes a good point, i.e. that things that at first glance seem to have little real value (a stone, or a shell) historically have acquired utility value through human reliance on these items as purchasing media and/or store of value and/or transaction-recording media. I was unaware of the third use of such items and of the Friedman paper on the Yaps, and I find that fascinating.

I think the author of this article has a point, i.e. that human societies have used non-material (perhaps even "fiat" if we can adjust the word for the primitive context) media (memory, apparently), and it has worked at least to a degree. So I get the parallels between blockchain and this use of seemingly "valueless" items (stone and memory) as transaction-recording media. I don't think he meant to carry the idea further than that. It's simply that memory and digital recordings have something in common, which is the lack of physicality, to use a word loosely.

Whether fiat or intrinsically valueless currency can function at our level of societal sophistication and global exchange over the long run is perhaps a good question; but this is not the focus of the article.

Though the people of Yap used stone money as effectively as it could be used, it didn't seem to do them much good.

They never developed much of an economy, which is unsurprising for people who relied on what was essentially abstract fiat money.

History clearly shows that all swiftly-growing and advancing societies have used useful commodity money, not arbitrary, symbolic currency or "fiat" (whether public or private), such as was the case on Yap.

And, history also shows that when once-thriving societies eventually switch to fiat money, they almost inevitably begin to decline.

In short: Unless you are content with the level of economic development on the island of Yap, useful commodity money is the way to go.

the key word is disintermediated! short n sweet.
thx jeffrey, i saw u on boom/bust for the miami conference.

Jeffrey... No offense, but that is the most ridiculous thing that I have ever read. And I read a good bit!

"For so long as humanity has existed, there has been a need to have some method of knowing of and/or documenting ownership claims." Not true. There is no need to document an ownership claim when you simply lie down where you are and go to sleep for the night. You're not suggesting ownership, you're just sleeping. Tomorrow, you'll sleep elsewhere.

"You can hold your property (that you claim is yours) and defend it against invaders." Oh? And how did it become "yours"? By invasion, perhaps?

"Or you can go one better and develop a social consensus technology to record who owns what. This improves life for you and everyone." No, it does not. It improves life for the invader. It destroys the life of the invaded.

"This documentation can take place on stones, clay, papyrus, parchment, vellum, or databases. The problem with all of these methods is the same: centralization. If there is only one record and one record keeper, there is always uncertainty over fraud, manipulation, or decay in the record itself." My friend, there is no certainty. Blockchain doesn't provide it, nor does anything else. One big EMP burst and it's all over. A new record-keeping technology will not solve the problem of working with one's fellow man (the political problem) that is as old as man himself.

"This is a technical innovation. But it is not an innovation in how we aspire to live. There is a big difference." Indeed, sir, there is a big difference. I think that you presume that how "you" aspire to live is how "we" aspire to live.

This is a peculiar ambition, to sleep somewhere new every night. I guess it is possible...

Indeed, sir, and it is how both you and I got here. For much of man's history, there was no private property, as you mention. Of course, if you wish to make an argument in favor of private property, by all means, please do so. But let's not imply that private property arrangements are somehow "self-evidently" the only possible way of organizing our goods or that "for as long as humanity has existed" he's had such arrangements. That's simply not the case, and claims otherwise are anti-historical.

Are you suggesting we go back to our hunter-gathering past where we could “lay our head” wherever?

We're too far from nature. Way too far. If you spend a bit of time alone in the woods you'll begin to feel how far we are separated from our world. And we put separating devices (televisions, phones, etc.) between ourselves and the world constantly - as if we wish to get further away.

To the extent that settled agriculture has led to an explosion of human population, I think that it has been bad for both man and for the woods, wildlife and water that, if we would allow them, would surround us with natural beauty. Of course, difficulties come with proximity to nature. But we need not destroy all non-human life on the planet, as we are currently doing, in order to ameliorate those difficulties.

Most directly, though, my dispute was with Mr. Tucker's statement that: "For so long as humanity has existed, there has been a need to have some method of knowing of and/or documenting ownership claims." That's simply not the case. Humanity existed a long, long time prior to the need to document "ownership" claims. And some of us might even argue that it was the introduction of those ownership claims that led to the fall.

This is the second example I'm aware of where you've initiated a back and forth that really has nothing to do with the article at hand. You clearly disagree with the overall alignment of this institute, and your opinion has been noted.

Max, are you reading my comments from the beginning? Please re-read my comment that initiated this discussion. You'll see that it is a very, very direct response to Mr. Tucker's claims.

I'm not sure what you mean by "the overall alignment of this institute," but surely, you're interested in contrary opinions, no? Or do you seek an echo chamber?

I'll concede that you initially questioned Mr. Tucker's premise. I've just seen you pop up on several of our blogs, and every back and forth seems to devolve into a debate over "capitalism versus socialism". I certainly don't want an echo chamber, but I also don't want to spend all of my work day having the same conversation with you over and over again. Please email me privately at max.gulker@aier.org with any concerns.

You are quite right that I shall question premises that are blatantly and clearly false, such as the premise that "for so long as humanity has existed" he has required documentation of ownership claims, or that bitcoin allows trust "to happen in places where trust previously would not have been possible."

With due respect, may I suggest to you that it is overly general claims like these that cause the issue, and not the fact that I point out the falsehood of these claims?

My colleagues are free to respond to you, I have other items on my plate. Thank you for taking such an interest.

I am still chuckling at being called a socialist... Was Socrates a corrupter of the youth because he asked them questions about the foundations of their beliefs?