Bitcoin Horror Stories

Bitcoin Dies, Moldbug ventures, perhaps sometime this year. Following a broad DOJ indictment for money laundering, targeting any and everybody remotely connected with the free currency, the “BTC/USD price falls to 0 and remains there.”

“[R]emains there” — how cute is that? Ph’nglui mglw’nafh Bitcoin R’lyeh wgah’nagl fhtagn.

Bitcoin simulates gold, and once ‘mined’ it lasts for ever. If it “falls to 0” it has to remain there, for eternity, because it can never be finished. It can die, but never be destroyed. It’s built for undeath.

‘Moldbug Monetary Theory’ attributes the value of money exclusively to speculation. If the speculators are terrorized sufficiently, BTC drops onto the flatline, and “remains there.” The market would be totally extinguished. What Mao failed to achieve, let alone sustain, USG would somehow accomplish, perhaps by exhibiting greater revolutionary ardor and ruthlessness.

Ruthlessness would certainly be necessary, for the obvious reason that flatline-BTC has zero downside risk. It’s a one-way bet that someone, somewhere, will re-animate it (“nothing is unstable” (thanks to fotrkd for the reminder)). If a genius was designing irresistible speculator-bait, zero-degree bitcoin would be hard to improve upon. It’s free, and it’s only worth nothing if the cops can secure the crypt flawlessly, and forever. Did anyone say ‘free money’?

Speculation messes with time, by bringing the future forward. If undead BTC were ever to be re-awakened, it already has been. Its economic potential flows back down the timeline, modified by a time-preference discount. The feedback becomes strange, and difficult to confidently calculate, but it works as a vitalizing charge, and the corpse unmistakably twitches. Whatever money at t0 is worth, if it’s anything at all, at t0-n it almost certainly can’t be zero.

The Necronomicon describes flatline-BTC with creepy exactitude:

That is not dead which can eternal lie,
And with strange aeons even death may die.

ADDED: An alternative take on Bitcoin and undeath from Yifo Guo, interviewed here (H/T Nick B. Steves, in this comment thread): “… the point is, the idea will never die. Even if bitcoin dies, an alternative will arise, one that addresses the vulnerability that was previously exploited. Then you get bitcoin 2.0.”

March 5, 2013admin 42 Comments »
FILED UNDER :Commerce , Horror

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42 Responses to this entry

  • northanger Says:

    Direct use value of Bitcoin
    http://blog.oleganza.com/post/42262765318/direct-use-value-of-bitcoin
    Generally, people perceive Bitcoin as currency which makes them think that the same arguments about its value apply. That is, in itself Bitcoin is some digital dust which can only have value as a monetary instrument. But that’s not the case at all.

    [Reply]

    admin Reply:

    “Bitcoin network has very interesting properties that allow you to use it not only as a currency. For example, the block chain (decentralized transaction history) is designed to be extremely hard to forge and very easy to verify. This, with some crypto features, allows it to be used for secure time-stamping, proving ownership of tangible property, decentralized DNS and new ways to sign contracts without having to fully trust any one party. … These things are not possible with any commodity-based currency (metals or paper bills), but possible and very easy to use with Bitcoin.”

    Bitcoin is God Nyarlathotep.

    [Reply]

    northanger Reply:

    @Admin
    The monster is that Bitcoin Block Chain and you really need to look at the Block Block Explorer
    http://blockchain.info/

    Bitcoin Forum quotes:

    Bitcoin has to have 0 intrinsic value in order to be freely exchangable.
    Speculation will come to an end eventually and utility will take over.
    Bitcoin is in phase 2.

    [Reply]

    northanger Reply:

    Bitcoin Block Explorer

    Posted on March 5th, 2013 at 7:41 am Reply | Quote
  • northanger Says:

    Bitcoin is supposed to flatline.

    http://www.cinestatic.com/trans-mat/Fisher/FC1s3.htm
    For Gothic Materialism, though, the flatline is where everything happens, the Other Side, behind or beyond the screens (of subjectivity) , site of primary process where identity is produced (and dismantled): the “line Outside”

    [Reply]

    Posted on March 5th, 2013 at 9:11 am Reply | Quote
  • vimothy Says:

    The idea that speculation messes with time is interesting. A famous model of currency crises has a monetary authority defending an exchange rate peg. The peg can be thought of as a price ceiling. A “shadow price” is computed as the market clearing price for the currency. At some point, given the path of the shadow price, the monetary authority will not have sufficient reserves to defend the parity of the exchange rate at the peg. So the peg will collapse. However, realising this, arbitrageurs will sell the currency sooner, causing the collapse to come earlier. However, realising this, arbitrageurs will sell the currency sooner, and so on. Continuing the process recursively, what results is that *as soon as* the market realises that the peg cannot be maintained and no later, there will be a mass exit from the currency, the collapse of the peg and a discontinous jump to the shadow price.

    In other words, in much the same way as speculation reaching down through time from the future to imbue an undead Bitcoin with new life, so too can speculation reach down through time and kill living currencies.

    [Reply]

    vimothy Reply:

    Although, if what you say is true, they can’t ever really be killed (and the currencies in the model don’t necessarily go to zero). But they can be maimed, like a zombie with its limbs hacked off.

    [Reply]

    admin Reply:

    I’m totally with you on the nonlinear tumbling out of the future. On the limb-hacking, though, my question is: How does it stay maimed? Psychological trauma?

    Down in the death (or near-zero) zone — we can call it ‘R’lyeh’ — speculative attraction explodes (as the mathematical reciprocal of zero, towards infinity). I’m not seeing the missing limn problem.

    [Reply]

    vimothy Reply:

    It’s a bit of an, ahem, speculative comment and I’m open to the idea that it’s not a particularly good analogy (e.g., the quantity of Bitcoin is fixed and not the price), but what I was thinking is that you could conceive of Bitcoin as having multiple equilibria, with one in which the price is zero (i.e., it doesn’t trade), and one in which the price explodes.

    Because Bitcoin exists in a fixed quantity, it is susceptible to these, nonlinear, time-bending feedback effects. When the price is going up, it has momentum. But when the price is gong down, it has momentum too. So the price of Bitcoin will be a process that explodes and collapses, but this is something that might happen over very large time horizons and follows an unknowable data generating process in which “nothing is unstable”, so it’s hard to know how easy it would be for humans to take advantage of this in a systematic way.

    That is, there are two future forces bearing down on the price of Bitcoin: a force that means that as soon as anyone in the future places wants to hold Bitcoin, Bitcoin is undervalued and its price explodes to infinity, and a force that means that as soon as anyone in the future doesn’t want to hold Bitcoin, Bitcion is overvalued and its price collapses to zero.

    [Reply]

    vimothy Reply:

    So, over time Bitcoin could be thought of as a binary sequence (an infinite number of Bernouli trials), alternating in an extremely random manner between death and resurrection / attractive singularity.

    Nick B. Steves Reply:

    There will be winners and losers in every monetization event. Winners are the ones who correctly predicted the future money, the earlier the better, and losers are everyone who guessed wrongly. Every asset that is in a “bubble” can be thought of as being partially monetized: tulip bulbs, gold, silver, 2006 housing to name a few. If you cannot imagine that asset being money, they you’d better sell or short it. If you CAN imagine that asset being money, then you should make a positive bet on it in proportion to some function of your estimate of that probability.

    fotrkd Reply:

    @ Nick B. Steves

    From a conservative perspective, therefore, comfort is to be found in the blatant absurdity of time-travel stories (insofar as this can be confined to a reductio ad absurdam of the time-loop structure itself, rather than spreading outwards as the index of primordial cosmic disorder). In this respect, Looper Bitcoin is a model of tranquillization… exciting enough, in any case, to distract them from the fact that their murder-fodder machine bullion-fast breeder is really a bullion fast-breeder murder-fodder machine. (http://www.thatsmags.com/shanghai/blog/view/12498)

    fotrkd Reply:

    If you cannot imagine that asset being money, they you’d better sell or short it.

    More from Twisted Times (Part 1):

    Whilst this crude time-circuit is presented as a payments system, the process described actually functions as an under-performing money-making machine. By using it, one realizes the ultimate Austrian economic nightmare by printing precious metals, because an ingot sent backwards in time is doubled, or added to its ‘previous’ instance (which already exists in the past).

    Watch out for when countries start selling their gold for bitcoins then…

    http://www.businessinsider.com/countries-by-gold-reserves-january-2013-2013-1?op=1

    admin Reply:

    @ fotrkd
    That connection is stunningly clever (needs some processing time this end …)

    Posted on March 5th, 2013 at 12:34 pm Reply | Quote
  • Nick B. Steves Says:

    All the users of Silk Road will be profoundly happy if BTC approaches 0, and if it gets to identically 0, then one lucky guy will buy up all the BTC and get all the pot. In fact, someone might step in ahead of him and take a risk on BTC at $0.000001, but… someone else (who also wants all the pot) will buy it at $0.0000015… and so on… even potheads are not that stupid, thus BTC has a price that is not near 0, and the bigger the BTC economy gets, the less likely it will approach 0… ever.

    How the hell can you drive the price ALL THE WAY TO ZERO? Hell, I’d be happy to spend $5 or $10 just to prove you can’t… And even if every American has a gun to his head to make sure he doesn’t try, can we expect the same treatment in Russia, Japan, Cayman, and Somalia?

    Speculators in a currency are affirming their belief in one or more of the following:

    1) interest rates in that currency exceed or will exceed those available in the currency they are trading away;

    2) the price of the currency sought will increase when denominated in the currency traded;

    3) spending in the currency bought is more attractive (for some reason) than in the currency traded

    In order to drive BTC to (identically) zero, you would have to disabuse millions of people of all three of these beliefs (or shoot them), and tho’ I am a firm believer in both the evil and (relative) competency of USG and its global affiliates, I don’t think they are THAT evil and THAT competent. At least not at the same time…

    On the contrary, I think TOR combined with BTC may have, largely accidentally merely by making black/grey market trading so cheap and so low risk, struck a blow that will ultimately prove fatal to Central Banking. Who ultimately will want “the World’s Reserve Currency” when they can store their wealth in a currency so hard that its mere existence was hardly imaginable a generation ago?

    [Reply]

    vimothy Reply:

    If the price of Bitcoin goes to zero, there won’t be anything for sale in Bitcoin, on or Tor anywhere else. The price of Bitcoin going to zero means that no one will exchange anything for it. As to the rest, perhaps you are right! I guess we are going to find out, by and by.

    [Reply]

    Nick B. Steves Reply:

    Well, yes that is true, but I am trying to imagine getting there, i.e., to identically 0, and it is really, really, REALLY hard to imagine. It’s like the guys in black jackets figure out exactly who at any given moment is getting ready to trade for, or use, bitcoins, and then simultaneously force demand to 0, and then keep it there. It is really easy to kill cockroaches… yet they exist and prosper. Wooly mammoths are hard (and quite dangerous) to kill, yet they do not exist. Which is bitcoin more like?

    [Reply]

    Nick B. Steves Reply:

    Watch out for when countries start selling their gold for bitcoins then…

    If monetization iss (is an only is) a market event, then the approval of a political is neither necessary nor sufficient for monetization. It is usually necessary and usually sufficient. But there are plenty of counterexamples (especially of the latter) in history.

    admin Reply:

    “I guess we are going to find out, by and by.”
    — Experiments kick speculative @ss.

    [Reply]

    admin Reply:

    @ Nick B. Steves
    I’m completely in tune with this analysis. One pedantic point I’ll throw in: No smart speculator would buy up all BTC, because to do so would deter the currency’s re-animation. There has to be a rational greed point that finds equilibrium between private BTC hoarding and the efficient distribution of incentives. A scenario for the paranoid though: the Fed buys up the whole Bitcoin stock near zero, in order to inter it forever. That strikes me as the only way it could realize the ‘remains at zero’ objective (and not, in truth, an easily imaginable one).

    [Reply]

    fotrkd Reply:

    Why does bitcoin only need to exist in one incarnation? Let the fed buy it up (encourage?) then it dies but all the miners remain tooled up… New algorithm… New currency, same end…

    [Reply]

    fotrkd Reply:

    Maybe it needs to die a few times…

    admin Reply:

    Great point.

    Posted on March 5th, 2013 at 5:16 pm Reply | Quote
  • Nick B. Steves Says:

    @ fotrkd

    Oh, I see…

    [Reply]

    Posted on March 5th, 2013 at 6:51 pm Reply | Quote
  • fotrkd Says:

    @admin; @northanger

    Bitcoin is an assembling (okay now I see it – assemblage.. Fucking previously incomprehensible deleuze)… Connecting together computing power to mine; mining in blocks… I think there’s someone else I need to talk to (assembling individuals through a chain? That’s not bitcoin related but xenosystems)… The name ‘olric’ (since corrected to first logic then optic by autocorrect) took me here earlier (when I thought I might need more identities) – http://en.wikipedia.org/wiki/Nemesis_the_Warlock#Book_One (last story book one) – I’ve never read a (sci-fi (auto: sic-if)) comic before… I haven’t found this one yet – some ur site wants me to register… Is this all completely ‘normal’ – do I just let it in? Silly question…

    [Reply]

    fotrkd Reply:

    Stratification.. Deposit in layers… Mining…

    [Reply]

    Posted on March 5th, 2013 at 11:16 pm Reply | Quote
  • sviga lae Says:

    Fugue, in E minor:

    A strange loop of speculative activity drives a phase transition of a defended price ceiling.

    ~~~

    A constitutional republic suffers death by a thousand cuts, as the present incentives to avoid weakening the Schelling fence cannot be matched to the Eldritch horrors experienced past the discounted horizon.

    ~~~

    A career activist optimises for maximum future recognition of both success and forward thinking, resulting in extreme leftism.

    The lesson seems to be that we cannot avoid the temporal reacharound from the zukunftsgeist. Plan accordingly! (TDT anyone?)

    [Reply]

    Posted on March 5th, 2013 at 11:37 pm Reply | Quote
  • fotrkd Says:

    @Nick B. Steves

    Northanger’s napster, Kazaa analogy.. It just proves it’s valuable… Bitcoin is legion?

    [Reply]

    fotrkd Reply:

    Crash, bang, crash bang… No-one will buy in again, surely? Crash bang… Bubbles hurt but they look so fun… Lets’ go again…

    [Reply]

    Posted on March 6th, 2013 at 12:54 am Reply | Quote
  • Outside in - Involvements with reality » Blog Archive » Reaction Points (#1) Says:

    […] Bitcoin Horror Stories […]

    Posted on March 6th, 2013 at 1:53 am Reply | Quote
  • fotrkd Says:

    FinCen and FATCA – bitcoin horror stories?

    http://www.forbes.com/sites/jonmatonis/2013/03/02/bitcoin-exchange-deal-repatriates-assets-to-u-s/

    Meanwhile, 1 BTC = 46.50 USD

    [Reply]

    fotrkd Reply:

    Bitcoin is disruption within supreme disruption (http://www.forbes.com/sites/jonmatonis/2012/08/11/my-answer-to-a-vcs-bitcoin-question/)

    [Reply]

    admin Reply:

    This Jon Matonis guy is seriously interesting — says great things about Forbes that he can get published there.

    [Reply]

    Posted on March 6th, 2013 at 1:49 pm Reply | Quote
  • fotrkd Says:

    Now we’re getting somewhere: http://falkvinge.net/2013/03/06/the-target-value-for-bitcoin-is-not-some-50-or-100-it-is-100000-to-1000000/

    [Reply]

    admin Reply:

    At the top of that range, there’s a US$20+ trillion equivalent BTC economy — obviously a digital anarcho-capitalist revolution (with attendant extinction of the USD a certainty). Not recommended by the Moldbuggians, of course, but something I’d find it hard not to exult in (it’s that ‘leftist’ Cthulhoid “holocaust of freedom and ecstasy” again).
    The analysis doesn’t seem especially rigorous, but it definitely exempts the Pirate Party from accusations of crypto-communism. Socio-historical phase-space is suddenly getting a whole lot more interesting …

    [Reply]

    Posted on March 6th, 2013 at 7:25 pm Reply | Quote
  • Anna Says:

    Does this matter? Hackers Pull Off $12,000 Bitcoin Heist. http://www.wired.com/wiredenterprise/2013/03/digital-thieves-pull-off-12000-bitcoin-heist/?cid=co6244884

    [Reply]

    Posted on March 7th, 2013 at 11:03 pm Reply | Quote
  • admin Says:

    The Demographics of Bitcoin

    [Reply]

    Posted on March 11th, 2013 at 1:34 am Reply | Quote
  • northanger Says:

    The Rewards Of Being White, Male And A Rule Breaker
    http://www.buzzfeed.com/annanorth/the-rewards-of-being-white-male-and-a-rulebreaker

    [Reply]

    Posted on March 11th, 2013 at 2:46 am Reply | Quote
  • AnonymousCoward Says:

    Yet more proof that Moldbug is severely overrated.

    [Reply]

    Posted on April 30th, 2015 at 2:58 pm Reply | Quote
  • Satoshi Nakamoto Night | Neoreactive Says:

    […] (The first XS Bitcoin horror story.) […]

    Posted on October 31st, 2015 at 11:50 am Reply | Quote
  • Estórias de Horror do Bitcoin – Outlandish Says:

    […] Original. […]

    Posted on February 1st, 2017 at 11:13 pm Reply | Quote
  • Ned Snark Says:

    Revisiting this entry at this time and reviewing the opinions is hilariously awesome.

    Especially that pompous ass Moldbug’s.

    [Reply]

    Posted on October 17th, 2017 at 1:38 am Reply | Quote

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