Episode Transcript
[00:00:00] Speaker A: Three days later, as fog burned off the water, Hukoy's relatives moved upriver in narrow canoes. Faces were darkened with charcoal, not for concealment so much as resolve. They carried bows of yew, quivers of reed, arrows tipped with obsidian, and long knives at their waists.
The best in Bitcoin made Audible I am Guy Swan and this is Bitcoin Audible.
Nick Szabo has written his first article in like almost a decade and it
[00:00:53] Speaker B: is short, but it is really good
[00:00:56] Speaker A: and there is one line in it
[00:00:58] Speaker B: that I want to devote the commentary to after this read. Welcome back to Bitcoin Audible everybody.
[00:01:05] Speaker A: I am Guy Swan, your host and narrator for today. I am the guy who has read more about bitcoin than anybody else you know, the proof is in the podcast we are on read 943 today and
[00:01:20] Speaker B: and we are getting back into a
[00:01:22] Speaker A: piece by Nick Szabo. We haven't read a Szabo piece in some time now and this is actually
[00:01:27] Speaker B: posted on the Jan3 blog or website and Jan3 is with Samson Mao and their crew and they're building Aqua Wallet, which is actually a really fantastic wallet by the way. It's got liquid lightning and bitcoin basically
[00:01:43] Speaker A: all in one and if I'm not
[00:01:45] Speaker B: mistaken, actually all transfers are shifted over.
[00:01:49] Speaker A: I think your balance is held in liquid by default.
[00:01:52] Speaker B: That could be different. I haven't used it or haven't like actively looked at it in a while.
I probably have a little bit of and I think they even have USDT or some sort of dollar stablecoin on liquid, which is pretty cool. It's actually a fantastic wallet if you haven't used it. But he posted this article and there's
[00:02:11] Speaker A: a couple of lines in particular that
[00:02:13] Speaker B: I really want to hit because this I just think this gets at the heart of so many ideas or concepts behind economic theory about money and I think do such a good job of just in a very short form drives the point home to understand where it
[00:02:35] Speaker A: is that money came from.
[00:02:36] Speaker B: And one of the most important things that I have stressed I don't know how many times on this show, but he says it very simply and very beautifully towards the end of this podcast and or excuse me, towards the end of the read and I'll hit it in the commentary after. But with that I want to go ahead and just jump right in to Nick Szabo's piece real fast. A shout out to Bitbox.
[00:02:58] Speaker A: They now have the Bitbox O2 Nova.
[00:03:01] Speaker B: I've always been a huge fan of the Bitbox. They really do have an elegant and simple design.
[00:03:06] Speaker A: And their new model, the Nova, will
[00:03:07] Speaker B: work on all of the mobile devices. So it's iPhone, iPad, and Android. Check it out. I have a discount code and an
[00:03:14] Speaker A: affiliate link with right down in the show notes.
[00:03:17] Speaker B: All right, let's dive into today's article from the Jan3 blog and it's titled
[00:03:26] Speaker A: the Fabric of Desires by Nick Szabo Mist hung low over the Klamath river, softening the redwood shadows into wavering shapes. At first light, word passed quietly between houses. A canoe had been stolen in the night.
It belonged to Hue Koi, a fisherman of standing whose family's claim to a bend in the river stretched back beyond memory. The canoe was not just wood it was access to salmon to trade to standing among men.
By midday, Huay Koi's kin had named the culprits a small group from upriver led by a man named Pei Nol, who had long disputed fishing rights along that stretch.
Some call it money, some call it other things. Many don't know what to call it and just ignore it as falling between
[00:04:18] Speaker B: the cracks of today's financial categories.
[00:04:21] Speaker A: Whatever you call it, it's older than markets.
Long before any efficient marketplace existed, people faced recurring high stakes transactions, tribute, inheritance, compensation for injury or death, reparations, bride price.
Such crucial life events often arrive without warning in the form of a death, a crime, a conquest, a marriage.
What is sometimes called money. What we shall, due to its oldest forms being partly alien to us, call collectibles distills and stores value, a desire shared across the vagaries of time and individuals with terse symbolism. Such objects can also communicate persistent rights and obligations. But the main function of collectibles is usually storing and on certain crucial occasions, transferring value, stitching together desires and events in space and in time.
Three days later, as fog burned off the water, Hukoi's relatives moved upriver in narrow canoes. Faces were darkened with charcoal, not for concealment so much as resolve. They carried bows of yew, quivers of reed, arrows tipped with obsidian, and long knives at their waists.
The problem is finding something the intended beneficiary would want. Whenever, unpredictably, the event happens, the moment arrives.
That unpredictable event might be somebody else's desires, an exchange, but it often is instead a crucial event that calls for, among other responses, transfer of wealth. To stitch together the separated times and places of desires and events, an object must above all be be a good store of value.
The objects best suited to perform such stitching are the most durable, divisible, and trust minimized among all objects Peoples before the ages of metal could make. Shells optimized these properties.
The economist Karl Manger argued that money emerged from barter markets. He was correct to theorize that money, what we call collectibles, emerged naturally from the difficulty of matching desires to what one has available to transfer.
But collectibles predate markets by tens of thousands of years. The problems they solved included the transfer of wealth during crucial life events, not just desires for goods and services, and were older and more important than the problem of inefficient trading.
They landed near Panal's village at dawn. A dog barked, someone shouted. Then the air snapped with the sound of bowstrings.
Arrows struck the walls of plank houses thudded into posts, shattered against stones. One man fell near the waterline, clutching his thigh. Another staggered back with a shaft through his shoulder. Painal himself emerged with a shield of elk hide, calling for his men to hold their ground.
The many needs to stitch together desires and events in time and space, along with the ability to do so with durable and trust minimized objects, leads to cultures evolving something that carries value across time and space. Objects valued by some for practical or even superficial reasons can evolve into objects deeply valued by all in a culture for their stitching ability.
The clash lasted less than an hour. By evening, the talking began. Elders and skilled speakers met on a gravel bar between the villages, a place neutral enough to hold anger without igniting it. The wounded were named. The canoe was discussed. Voices rose, then steadied. Each side counted its losses not only in blood but in standing. Each fact carried weight.
At last Panal spoke differently. He did not yield the argument, but he shifted its ground. He offered payment, not as admission of guilt but as a way to end the matter.
From a deerskin bundle, his relatives brought out strings of dentalium shells. Long, pale, carefully graded by length and perfection, they gleamed softly in the fading light.
Shells and, much later, precious metals strung into necklaces for safe storage and easy division, stitched together events and desires not because any leader decreed them valuable, but because their scarcity and their durability made them perpetually ready and on hand when struck.
Everybody came to find that valuable. Many other kinds of durable and trust minimized. Objects have evolved into collectibles, but shells were the most common.
On a gravel bar between the two villages, shells were measured against forearm tattoos and counted aloud. Longer shells for the injury, additional strands for the insult, a final measure for the disturbance of peace.
Huay Koi's family conferred in low voices the amount was not small. It acknowledged harm without surrendering pride. Finally, Wei Koy lifted the strings so all could see and nodded. The canoe was returned. The reparations had been paid. The war was over.
[00:09:44] Speaker B: Marriage is a moment of promises and
[00:09:46] Speaker A: transfers, of alliances, of risks, of.
[00:09:50] Speaker B: Of futures.
[00:09:51] Speaker A: In most traditional cultures, when two families negotiated a marriage, what changed hands was not merely property, but alliance, risk, expectation, and obligation across generations. The bride price or bride wealth was a recognition that something of irreplaceable value was moving from one kin group to another, and that this movement created obligations which needed to be embodied in something tangible, something that could not be argued away or forgotten. Collectibles served this purpose because people of a culture valued them. Everyone in Yoruk society, for example, knew what a dentalia shell of a given length and quality was worth.
A death arrives, the body cools, Tools, ornaments, names, roles of authority, rights and obligations of many sorts were needed to persist in the next generation.
Hopes and fears for the departed soul and grief by and for the living deprived of their loved one arrive right alongside conflict over these rights and obligations to simplify, to satisfy, to reduce the chances of conflict. The best thing to leave behind is not the tools of one's particular life, but rather what everyone wants. The collectibles valued by all the wounded were treated by their respective shamans, and their families expressed their gratitude to these holy women in Dentalia shells. In the season that followed, Penal sold his claim to the disputed fishing site outright. Denominated, as usual in Dentalia. The same shells that had ended the violence now completed the transaction the violence had been about.
It is not markets that made money possible.
It is collectibles, which we now call money, that make markets possible.
For a good store of value, the liquidity of markets is nice to have. It is not essential. Money is instead essential for efficient markets. The most important arguments being made for bitcoin today are probably over a hundred millennia old collectibles which when used in today's markets we call money, can take many of the desires people have throughout life, along with its hardest problems and greatest opportunities, death, conflict, marriage, and make them virtually coincide, stitch them together in time and space.
They transfer value across space and time from one set of events and desires to another.
All right, that wraps up the piece.
[00:12:34] Speaker B: Fantastic little write up by Nick Szabo always has a way with his explanations and I love the little interspersed story to just kind of show demonstrate its purpose in a very visceral way. Anybody who's listened to the show for any amount of time knows that I just absolutely love a good hint or touch on a story like a real story, not a, not a simple explanation. I think it portrays the reality of the situation much cleaner because you know, it's one thing to explain how something is derived from a market and use a bunch of jargon. It's another thing to understand in practical reality in and occurrences that actually happened, events that actually occurred.
How did these things play a role?
[00:13:31] Speaker A: What role did they play?
And there was one line in this
[00:13:35] Speaker B: that I have tried to hit on so many different times.
And this is about as succinctly and
[00:13:41] Speaker A: cleanly as you can put it.
Quote it is not markets that made money possible.
It is collectibles, which we now call money that make markets possible.
[00:13:57] Speaker B: I cannot stress this more stringently.
[00:14:03] Speaker A: We've referenced back to Carl Menger and
[00:14:06] Speaker B: the age old explanation that people give all the time that money arose from
[00:14:12] Speaker A: the problem of barter.
[00:14:15] Speaker B: And then there is also the idea of, you know, Mises and the regression theorem that essentially money always went back to some specific thing with some specific utility that had liquidity in the market. But this actually doesn't stand up to
[00:14:32] Speaker A: the test of history from actually looking
[00:14:34] Speaker B: at how markets evolve.
[00:14:36] Speaker C: And the thing is you can't have markets. They don't actually work.
[00:14:41] Speaker B: They're so barter is so inefficient that
[00:14:44] Speaker C: it's not even a real market.
[00:14:46] Speaker B: It doesn't arise out of barter being really efficient.
[00:14:49] Speaker C: Barter never becomes a market or a real system of any consequence at all until you have a medium and it makes perfect sense. A market is literally built on and is only possible because of inter exchange liquidity. The, the ability and the volume of exchange between different goods such that you can actually maintain, you can create a
[00:15:14] Speaker B: price and you can create agreements that aren't just instantaneous isolated agreements, but that there's some sense of larger picture of value.
[00:15:24] Speaker C: It is explicitly in the trillions of individual communications and individual exchanges that the,
[00:15:32] Speaker B: the sense of value, intersubjective value, value that is spread out amongst everyone, like what's the average so to speak, than
[00:15:40] Speaker C: it even arises in the first place.
Which means it's dependent on something with enough liquidity to actually make a market take place at all. Otherwise it's not a real market. All exchanges or any exchanges are personal and isolated. They're specific to you and the person you know, or they're a debt between you and someone else in your village or tightly within your own culture. And bridges between communities and cultures are essentially non existent.
[00:16:10] Speaker B: And this is What I've said about a free market as well is the
[00:16:14] Speaker C: idea of a free market is about
[00:16:17] Speaker B: genuine market signals where there is no systemic manipulation, where the independent exchanges and independent valuations of all of the participants actually drive the direction and the valuations.
[00:16:33] Speaker A: And in the market itself.
You cannot have a free market without
[00:16:39] Speaker C: sound money, because sound money is the only thing that enables to market to
[00:16:44] Speaker B: actually communicate those valuations.
[00:16:46] Speaker C: If you don't have that, you don't actually have a market. And if you don't have actual market information, you can't possibly have a free
[00:16:55] Speaker B: market because it just, it begs the
[00:16:57] Speaker C: question as to what is the market? How do you actually maintain the rules of the market?
You have to have a set of rules for exchange, for valuation, for a monetary medium, for a base. Or no market can even exist, let alone a free market, whatever that might even mean.
[00:17:14] Speaker B: In the absence of any legitimate market signal being able to spread through, it
[00:17:19] Speaker C: just, it just becomes inefficient.
[00:17:20] Speaker B: It just becomes one that cannot sustain
[00:17:22] Speaker A: large groups of people.
[00:17:23] Speaker C: And that's why millions of people usually starve. And it's just kind of a matter of time. Consequences of fiat money are not arbitrary or, you know, 50, 50, they, they are universally one. There's, there's one consequence, there's one way that the money dies. There is one direction that the money goes. If you can corrupt the money, you will destroy the society because there is no market that can be sustained on top of it. The soundness of the money comes before
[00:17:56] Speaker B: the existence and the security and the
[00:17:59] Speaker A: fragility or the anti fragility of the market itself.
[00:18:03] Speaker B: And note, I think a lot of people will probably see this in the context of like, oh, store of value versus medium of exchange. And I think that's the wrong way to think about the argument that Szabo is making here.
It's that store of value comes before medium of exchange makes any sense.
As I've said again dozens of times, I don't even know how many times on this show.
The evolution or the adoption of money
[00:18:32] Speaker C: is a path dependent thing. And for something to exchange value, it
[00:18:38] Speaker A: must first store it.
[00:18:39] Speaker C: It doesn't make any sense for the second market to ever actually evolve if the first one isn't settled.
[00:18:46] Speaker A: It is the liquidity of a store of value asset and the capacity to
[00:18:52] Speaker C: exchange it that enables it to become
[00:18:55] Speaker B: a medium of exchange.
[00:18:57] Speaker C: But it can't be a medium of exchange and it certainly can't be a unit of account until it has enough
[00:19:03] Speaker A: liquidity as a store of value. This is why, despite the fact that
[00:19:07] Speaker C: fees on the bitcoin network are still
[00:19:09] Speaker B: one satoshi per V byte on a regular basis. And there has been no indicator like we've talked forever about, you know, when bitcoin's this price, fees will be this
[00:19:19] Speaker C: price or whatever, whatever that I still
[00:19:21] Speaker B: don't think that I'm still not bearish on the idea of Bitcoin being used
[00:19:28] Speaker A: for exchange, even though there is no
[00:19:30] Speaker B: hard data to suggest that fees will just keep going up until, you know, the security of the network is dealt
[00:19:37] Speaker C: with because we simply aren't in the
[00:19:39] Speaker B: medium of exchange phase.
[00:19:41] Speaker C: And I think there will be a
[00:19:43] Speaker B: quote unquote phase shift in how Bitcoin is used in the, in the main Bitcoin infrastructure and what is being done with it. And I don't know when that occurs, but I think it's intuitive that that is an inevitable occurrence and it will probably screw up everything. We'll have built so much infrastructure around one type of use or one way of expectation about the network that so much of it will break or our
[00:20:12] Speaker A: assumptions will break about it. Like it will be insanely disruptive when it occurs.
[00:20:16] Speaker B: And this is why I think fee
[00:20:18] Speaker C: spikes are actually good.
[00:20:20] Speaker A: Because they are stress tests to what
[00:20:22] Speaker B: I believe will eventually be the norm, so to speak. And I could be wrong and this conversation could change drastically based on the data that occurs maybe in the next 10 year period. But I still see that there's a natural evolutionary step in the market of bitcoin that feels inevitable to me.
And it doesn't seem, it doesn't counter that narrative or that mental model to me for the situation to have been the way that it has been for as long as it has been. Because the mental model doesn't really rely on any particular time frame. And I think there's always that simple reality that we overestimate what will happen in the next year and greatly underestimate what can happen in 10 years.
So anyway, great piece.
Fantastic little story throughout that I thought was just a really fun structure. And I'm glad to see Zabo writing again because I'm a huge fan of his work. His blog, Unenumerated. We've done many, many pieces by Nick Szabo. I've read many, many more that I don't have in audio. And honestly, which I should have in audio. Probably the best resource there is, the Nakamoto Institute, shout out to those guys.
And they're actually in some really, really interesting projects right now, believe it or not, on archiving and becoming like A very explicit y' all should check out. In fact, I might. Damn, this one might actually be worth doing a show on, because I had a really interesting conversation at bitblogboom about what they are doing.
And I might hit back up Carlos from Simple Proof and Goldstein and really kind of dig into what's happening over at the Nakamoto Institute because there's some really, really cool stuff and there's a fascinating little, I guess, quote, unquote play or idea about how they're extending themselves into an official archive role and what that means from a.
From the context of literally archivists and librarians and historians and stuff all over. Because it's not. It's not. So it's not really the simplicity of, oh, we just. We're just becoming certified in a thing. It's actually far more expansive and far more interactive with other people in that space than I had realized something like that might be, because they essentially have the opportunity to establish an entirely new standard for what good archiving is, particularly
[00:23:11] Speaker A: in the digital age with.
[00:23:13] Speaker B: In the era of AI and the era of, you know, fake news everywhere and all of that stuff.
There's actually. There's actually a really fascinating unlock that I think they're on to something and they've been doing things quietly that I hope they'll start being public about very soon. But it's a. It was a fascinating conversation and kind of opened up some doors and windows that I had never really considered of.
Oh, there's this. You know, there's these other.
[00:23:42] Speaker A: There's all these little worlds that have their own standards and their own ancient
[00:23:47] Speaker B: histories and ways of doing things that have been established for a long time. And bitcoin plays a role in so many that we just kind of dismiss. We're like, oh, well, it's a. It's finance, right? It's investment, it's savings. And we forget just how many different things Touch are touched by the bitcoin technology. And having an independent time chain like this, actually great opportunity to shout out the Time Chain Summit. Hope to see you guys in Colorado. I will be there. I will be giving a presentation. So shout out to anybody who is going. If you're not going and you're going to be in the area, definitely do. I will try to have the link to that in the show notes. If you haven't gotten tickets and you want to go, let's hang out. I'll see at the Time Chain Summit. And on that note, I have to
[00:24:32] Speaker C: prepare and I have to get a
[00:24:34] Speaker B: couple more episodes done. So we will close this one out. Thank you so much for listening. A shout out to Jan3.
Another fantastic shout out to Bitbox, the Bitbox 02 and the Bitbox 02 Nova, their latest edition that works with all mobile platforms.
[00:24:49] Speaker C: Natively.
[00:24:50] Speaker B: Super stoked. Fantastic little hardware wallet. And I have a discount code right down in the show notes just for you guys. And with that, I will catch you on the next episode of Bitcoin.
[00:25:02] Speaker A: Audible. Follow me.
[00:25:04] Speaker B: Follow Nick Szabo, follow Jan3, follow Bitbox. And until next time, I am Guy Swan. And that is my two sats.
[00:25:30] Speaker A: There's always a story.
[00:25:31] Speaker B: It's all stories, really.
[00:25:33] Speaker A: The sun coming up every day is a story.
Everything's got a story in it. Change the story, change the world.
Terry Pratchett, A Hat Full of Sky.
