Thread by @KyleSamani

0/ The thread in which I argue that global state free should *not* start as SOV, then be used as MOE, and ultimately become UOA

It should actually be backwards

1/ First, some history

How did money come to be? Many, including Szabo, have postulated that money started as a collectible

nakamotoinstitute.org/shelling-out/

2/ The other common theory is that people realized there was a double-coincidence of wants problem (e.g. how do I trade my shoes for your lettuce, if you don't want my shoes).

And so because they realized this, they picked something to be money, to solve this problem

3/ But actually, both of these theories are wrong

To understand why, we need to ask the question, what is money?

4/ Per Sapiens, money is just a story. A shared delusion. Money becomes valuable because we think it's valuable

5/ In Debt: The First 5,000 Years, Graeber walks through the actual origins of money, and explains it in a Sapiens-like context

en.wikipedia.org/wiki/Debt:_The…

6/ Many other animals, from monkeys to bats to insects, demonstrate the idea of doing favors for one another.

However, it's never the case - except for humans - that animals do favors for one another if they haven't met and already built a relationship

7/ Most animals don't have *that* many things they can do for one another. That is, they can scratch one another's back (literally), but monkey's aren't making shoes for one another

8/ So most animals never faced a problem of exchange ratios. That is, they never had to figure out how many back-scratches a berry is worth

9/ Through this lens, it becomes clear that money started not as a collectible, but as a form of debt: as a way to track favors owed between one another.

Ironically, the first money was not a commodity money, but debt money. Counter intuitive historical quirk

10/ Humans quickly realized that different favors were worth different amounts of value. It's unclear how tribes made those relative value decisions, but they almost certainly had to have since we know they did use shells and other forms of scarcity as money

11/ Regardless, as you think about the bottoms-up mechanics, early monies actually started off as a MOE - as a way to repay favors - and then quickly assumed the role of UOA - as a way to track relative value of favors.

12/ As people learned the basic mechanics of money - namely that more is better - then eventually money became recognized as an SOV as people recognized an ever increasing need to transport favors owed into the future

13/ Or said another way, when the aggregate value of all the wealth the wealth in the world is $10, there is no SOV because there is effectively no V.

Money had to start as an MOE and UOA to become a real SOV

14/ Which leads us to unforgeable costliness

Many of the earliest monies were not unforgeably costly. That is, people could find some shells, inflate the money supply, and reduce everyone else's purchasing power

15/ Eventually, people settled on gold and silver as being both unforgeably costly and durable

But this doesn't change the mechanics around how money actually came to be - as a way to track and repay favors

16/ Given the historical facts, why then do Bitcoin maximalists propose the exact opposite?

17/ Because the Bitcoin maximalist narrative is logically coherent

If something starts as a collectible, and eventually starts to attain value, it becomes an SOV. And once it's there, it's rational to hoard because you think it will be worth 100x or more in the future.

17a/ only eventually, as BTC starts to assume its full potential, does it make sense to sell, AKA being used as an MOE

And after enough people use it as an MOE for enough things, it eventually becomes a UOA

18/ This argument is rational. It makes sense.

It just doesn't line up with the historical adoption of money

19/ But this doesn't necessarily mean that we should over-index on the past in thinking about how to build a money for the future

The path the world took - money as MOE and UOA well before SOV - made sense when there was no money at all

20/ Now, we already have monies, so the path forward may look very different

Given that we already have monies, what can we expect to be different?

21/ Well, people already have a UOA (fiat). And indeed, even in Bitcoin land, people for the most part denominate transactions in fiat, and use BTC as the MOE

22/ But what happens when you don't have a good UOA? What if you live in Argentina or Venezuela?

Then the thing that that *becomes* most money is the one you can use as money

23/ If we revisit my post, Paths to $100T, we can rationally make arguments for both paths in the context of the above

multicoin.capital/2018/03/15/pat…

24/ On one hand, the SOV hypothesis makes sense - we already have fiat, and wee just need to displace fiat, and to do so the lens of competition is one of being maximal unforgeable costliness

25/ On the other hand, the utility hypothesis makes more sense to get people to actually use the thing as money, especially in instances in which people's UOA is failing

26/ Overall, both still seem plausible. But the compounding effects of the utility hypothesis are much stronger, as I outlined here

multicoin.capital/2018/05/09/on-…

27/ Excited to see how this all plays out!

{fin}