Saturday, November 23, 2013

Prisoner's Dilemma: how greedy monarchs and captains of industry could usher in the bitcoin era

I think there's a really slim chance that anyone reading my blog doesn't already know what the Prisoner's Dilemma is.

I'll copy-paste some wikipedia stuff for you anyways:

Two members of a criminal gang are arrested and imprisoned. Each prisoner is in solitary confinement with no means of speaking to or exchanging messages with the other. The police admit they don't have enough evidence to convict the pair on the principal charge. They plan to sentence both to a year in prison on a lesser charge. Simultaneously, the police offer each prisoner a Faustian bargain. Each prisoner is given the opportunity either to betray the other, by testifying that the other committed the crime, or to cooperate with the other by remaining silent. Here's how it goes:
  • If A and B both betray the other, each of them serves 2 years in prison
  • If A betrays but B remains silent, A will be set free and B will serve 3 years in prison (and vice versa)
  • If A and B both remain silent, both of them will only serve 1 year in prison (on the lesser charge)
Because betraying your partner rewards more than cooperating with them, all purely rational self-interested prisoners would betray the other, and so the only possible outcome for two purely rational prisoners is for them to betray each other. The interesting part of this result is that pursuing individual reward logically leads both of the prisoners to betray, but they would get a better reward if they both cooperated.

The incumbent global elites have a lot to lose in a World Bitcoin Made. In a World Bitcoin Made, inflatable currencies won't be able to finance expensive wars and bailouts by stealth. In a World Bitcoin Made, central banks won't be able to set low interest rates in order to prop up business at the expense of the purchasing power of the money under your grandmother's mattress.

You should not expect to see some third world dictator changing the national currency to bitcoin out of his starry-eyed techno-utopian dreamings. You should expect him to do so in order to get rich.

Lemme explain:

Being a deflationary currency, the value of btc correlates with the amount of people holding it and using it. If 20 million new people buy in tomorrow, new bitcoins aren't automatically minted by some central issuing authority in order to accommodate the new population. The coins in distribution must be spread around, at whatever price people will sell them for. This is a price which, in such a gold rush, would skyrocket.

Now let's pretend that I run a country. It's sort of my own little slave-pen. I've already hyperinflated the currency, because who cares. I imprison people who talk about me. I really don't give a fuck about "my people", but they're useful for making me money sometimes.

I realize something: if I mandate a switch-over to bitcoin, I can get 20 million people on board overnight. In addition to the price spike that the entry of an entire country would cause for bitcoin, I'd have the ensuing tulip fever on the part of western and Chinese investors and speculators who started to scream ZOMG IT'S HAPPENING.


(1) Buy a million dollars worth of btc.
(2) Put my national economy on btc.
(3) Let the price increase 10,000% in a week.
(4) Profit.

Corporations could pull a similar move. What if Apple were to release the next big secret iThing at first for bitcoin-only? Can you imagine the press? The hype? Bitcoin would be the talk of even east Texas truckstops, my friend.

The result of moves like these in the long term, ironically, could be a significant lessening of the power of the worlds' global elites, as stealth taxes and cheap credit expensed on middleclass savings accounts ceased to be an option. In the World Bitcoin Made.

But iff'n that ain't that just the perennial the saving grace of the universe. Zero-sum logic defeats itself. There is no honor among thieves.

And so the tyranny problem tends to take care of itself.

1 comment:

  1. 1. Is this really more profitable than continuing to exploit the labor of the population?
    2. How far down can it scale?