Archive for the ‘Powerful Ideas’ Category

By Richard Martin

I started this Q&A chain this morning with GPT 4.0 just to see how it would do. The more I asked, and it answered, the more I went down the rabbit hole. All in all, I think GPT 4 did a pretty good job of answering my queries in a fair and comprehensive manner. My questions are highlighted in bold typeface.

WARNING! Do your own research.

NOTE: The knowledge cut-off date upon which the GPT-4.0 model is based occurred in September 2021. The model can’t answer questions about anything that happened after that point in time. Anything it reports concerning relative valuations and comparisons of advantages and disadvantages of different types of cryptocurrencies and actual tokens should be taken as out of date. I know for a fact that Solana, Cardano, and others have since crashed. Ethereum is also now operating under a Proof of Stake (PoS) protocol, which has massive implications which should be researched on their own.

None of this is meant as specific advice, much less financial advice, but it does show two things. 1) ChatGPT 4 is quite good as a means at least to start researching a topic by asking general questions and then more and more specific ones. But you still need to know something about the topic to ask relevant questions and validate the results. 2) It gives a good overview of various Bitcoin-related topics, including countering much of the misconceptions and FUD – Fear, Uncertainty, Doubt.

What are the 5 best reasons to own and use Bitcoin?

There are several reasons people may find Bitcoin attractive as an asset or for conducting transactions. Here are five of the most commonly cited reasons:

  • Decentralization: Bitcoin operates on a decentralized, peer-to-peer network, which means it is not controlled by any single entity or government. This independence from centralized authorities can offer users more control over their financial transactions and assets.
  • Limited supply and deflationary nature: Bitcoin has a fixed supply cap of 21 million coins, which can make it an attractive store of value. Its deflationary nature, in theory, protects it from inflation, making it potentially more valuable over time as traditional currencies lose purchasing power due to inflation.
  • Lower transaction costs: Bitcoin transactions can have lower fees compared to traditional banking and payment systems, especially for international transfers. This can be advantageous for both individuals and businesses, as it can reduce the cost of sending and receiving payments across borders.
  • Privacy and security: Bitcoin transactions are pseudonymous, meaning that while the transactions are recorded on a public ledger (the blockchain), the real-world identity of the users is not directly tied to their transactions. Additionally, Bitcoin’s underlying technology, blockchain, provides a secure and tamper-proof way to store transaction data, which can minimize the risk of fraud or hacking.
  • Investment and speculation: Many people see Bitcoin as an investment opportunity due to its historical price increases and the potential for future growth. As a result, they buy and hold Bitcoin in the hopes of profiting from its long-term appreciation.

It’s important to note that Bitcoin also has its share of risks and challenges, such as price volatility, regulatory uncertainty, and environmental concerns related to the energy consumption of Bitcoin mining. As with any financial decision, it is crucial to carefully weigh the potential benefits and risks before deciding to own or use Bitcoin.

What are the five best reasons not to own Bitcoin or use it?

There are also several reasons people may find Bitcoin unattractive or unsuitable for their needs. Here are five of the most commonly cited reasons:

  • Price volatility: Bitcoin’s price has experienced significant fluctuations since its inception, leading to substantial gains and losses for investors. This volatility can make it a risky investment for those who cannot tolerate large swings in value or who are seeking stable returns.
  • Regulatory uncertainty: Bitcoin and other cryptocurrencies face an uncertain regulatory environment in many countries. Governments may impose restrictions, taxes, or even bans on cryptocurrency usage, which could impact the value and utility of Bitcoin and make it difficult to use or access your funds.
  • Limited mainstream adoption: Despite the growing interest in cryptocurrencies, Bitcoin is not yet widely accepted as a form of payment by most merchants and service providers. This limits its utility for everyday transactions and makes it less practical as a currency compared to traditional fiat currencies.
  • Environmental concerns: Bitcoin mining, the process of securing the network and creating new coins, is energy-intensive and relies largely on non-renewable energy sources. This has raised concerns about the environmental impact of Bitcoin mining, contributing to climate change and resource depletion.
  • Technical complexity and security risks: The management of private keys, wallets, and other aspects of Bitcoin can be complex and confusing for those without a strong technical background. Moreover, the irreversible nature of Bitcoin transactions can lead to loss of funds if the private keys are lost, stolen, or not properly secured. Additionally, the pseudonymous nature of Bitcoin transactions, while offering privacy benefits, can also facilitate illicit activities and make it difficult to recover funds in case of fraud or theft.

As with any financial decision, it is essential to carefully weigh the potential benefits and risks before deciding to own or use Bitcoin. Understanding your own financial goals, risk tolerance, and technical expertise will help you determine if Bitcoin is right for you.

What distinguishes Bitcoin from all other cryptocurrencies?

Bitcoin, as the first and most well-known cryptocurrency, has several unique characteristics that set it apart from other cryptocurrencies. Some of these distinguishing features include:

  • Pioneer status: Launched in 2009 by an individual or group of individuals under the pseudonym Satoshi Nakamoto, Bitcoin was the first successful implementation of a decentralized digital currency. It introduced the world to blockchain technology, which underpins most cryptocurrencies today. As the original cryptocurrency, Bitcoin has a strong historical significance and a proven track record.
  • Network effect and market dominance: Bitcoin has the largest market capitalization among all cryptocurrencies and enjoys a strong network effect. This means that as more people use Bitcoin, its value and utility increase. This network effect has helped Bitcoin maintain its position as the dominant cryptocurrency and has led to greater acceptance, visibility, and liquidity compared to other digital assets.
  • Robust security: Bitcoin’s network is the largest and most secure among all cryptocurrencies. It is secured by a vast amount of computing power contributed by miners worldwide, making it extremely difficult and expensive for any attacker to manipulate the blockchain. This high level of security has helped Bitcoin maintain trust among its users.
  • Decentralization and community governance: Bitcoin has a decentralized development community, with numerous contributors working on its open-source code. While there are other cryptocurrencies that also have decentralized development, the extent of decentralization and the number of developers contributing to the Bitcoin project remain unparalleled.
  • Limited supply: Bitcoin has a fixed maximum supply of 21 million coins, which will be gradually mined over time. This limited supply is intended to make Bitcoin a deflationary currency and potentially a store of value. While some other cryptocurrencies also have capped supplies, Bitcoin’s supply limit is one of the most well-known and widely recognized.

While Bitcoin has several distinguishing features, it’s important to note that other cryptocurrencies have also introduced innovations and improvements to address specific issues or cater to particular use cases. As the cryptocurrency market continues to evolve, it is crucial to assess the unique characteristics and value proposition of each digital asset before making any investment or usage decision.

How is Bitcoin being used in novel ways to better manage energy usage?

In recent years, there have been several novel ways in which Bitcoin and its underlying technology have been utilized to better manage energy usage and promote sustainability. Some of these innovative approaches include

  • Energy arbitrage: Some Bitcoin mining operations take advantage of periods of low energy demand and excess supply, such as during off-peak hours or when renewable energy production is high. By mining Bitcoin during these times, miners can utilize the otherwise wasted energy and potentially stabilize grid demand.
  • Renewable energy integration: Many Bitcoin mining companies have started to invest in renewable energy sources, such as solar, wind, or hydropower, to power their operations. This not only helps to reduce the carbon footprint of Bitcoin mining but also promotes the adoption of clean energy technologies.
  • Waste energy utilization: Some mining operations are situated near sources of waste energy, such as natural gas flaring sites or industrial plants, to capture and use the otherwise wasted energy for Bitcoin mining. This process can help reduce the overall environmental impact of energy production.
  • Demand response programs: Bitcoin mining operations can participate in demand response programs by adjusting their energy consumption in response to grid conditions and pricing signals. This can help balance the electricity grid, reduce strain on the infrastructure, and contribute to overall energy efficiency.
  • Heat recovery: Mining Bitcoin generates a significant amount of heat as a byproduct. Some mining facilities have developed innovative ways to capture and utilize this waste heat, such as heating nearby buildings or greenhouses, which can help increase overall energy efficiency.

While these initiatives are promising, it’s important to note that the overall environmental impact of Bitcoin mining remains a concern. As the industry continues to grow and evolve, it will be crucial for stakeholders to prioritize sustainable practices and invest in energy-efficient technologies to minimize the environmental footprint of Bitcoin and other cryptocurrencies.

You should consider Bitcoin’s energy impact in comparison with other ways to produce money and conduct international finance.

When assessing the energy impact of Bitcoin, it’s important to consider its energy consumption in the context of other methods of producing money and conducting international finance. Here are some points of comparison:

  • Traditional banking and payment systems: Traditional banking and financial institutions also consume significant amounts of energy for maintaining data centers, branches, and ATMs, as well as processing transactions. While Bitcoin’s energy consumption per transaction can be higher than that of traditional payment systems, the overall energy consumption of the global banking system is much larger.
  • Central bank currency production: The process of minting coins and printing banknotes consumes energy and resources. While it’s difficult to make a direct comparison between the energy consumption of Bitcoin mining and physical currency production, it’s worth considering that cryptocurrencies like Bitcoin do not require the same level of physical resources.
  • Gold mining and storage: Gold, often considered a traditional store of value, has a considerable environmental impact due to the energy-intensive nature of mining and refining. Comparing the environmental footprint of Bitcoin to that of gold can provide another perspective on the sustainability of various stores of value.
  • Cross-border transactions: Conducting international transactions using traditional banking systems can be slow and expensive due to multiple intermediaries and currency conversions. Bitcoin, on the other hand, enables fast and relatively cheap international transactions, potentially offsetting some of its energy consumption by providing a more efficient alternative for certain use cases.
  • Energy consumption trends: As awareness of Bitcoin’s energy impact grows, the industry is increasingly focusing on adopting renewable energy sources and improving the energy efficiency of mining hardware. These trends could help mitigate the environmental impact of Bitcoin over time.

It’s important to consider the energy consumption of Bitcoin and other cryptocurrencies in the broader context of the global financial system. While Bitcoin does have an environmental impact, it’s essential to weigh its benefits, such as decentralization, borderless transactions, and financial inclusion, against the energy costs associated with traditional financial systems. Balancing these factors can help in forming a more comprehensive understanding of the overall impact of Bitcoin and cryptocurrencies on the environment and global finance.

What are the proven failings, if any, of Bitcoin?

While Bitcoin has been a ground-breaking innovation, it is not without its challenges and limitations. Some of the proven failings of Bitcoin include:

  • Scalability: Bitcoin’s transaction throughput is limited by its block size and block time, which can lead to slow transaction processing and higher fees during periods of network congestion. This limitation makes it difficult for Bitcoin to compete with traditional payment systems like Visa or Mastercard in terms of transaction volume and speed.
  • Energy consumption: As discussed earlier, Bitcoin mining consumes a significant amount of energy, raising concerns about its environmental impact. The Proof-of-Work consensus algorithm used by Bitcoin requires miners to perform energy-intensive computations, which contributes to its high energy consumption.
  • Price volatility: Bitcoin has experienced extreme price fluctuations throughout its history, making it a highly volatile asset. This volatility can be a barrier to its widespread adoption as a stable store of value or medium of exchange.
  • Usability and user experience: For many users, Bitcoin can be difficult to understand and use, especially when it comes to securely managing private keys and wallets. This complexity can be a barrier to entry for non-technical users and limit its mainstream adoption.
  • Regulatory challenges: Bitcoin and other cryptocurrencies face an uncertain regulatory landscape in many jurisdictions. Governments may impose restrictions or taxes on cryptocurrency usage, which could affect the value and utility of Bitcoin.
  • Illicit activities: The pseudonymous nature of Bitcoin transactions has been exploited for illicit activities, such as money laundering, ransomware attacks, and dark web transactions. This association with criminal activities can tarnish Bitcoin’s reputation and hinder its mainstream acceptance.
  • Centralization risk: Although Bitcoin was designed to be decentralized, mining has become increasingly centralized over time, with a small number of large mining pools controlling a significant portion of the network’s hashing power. This centralization can potentially compromise the security and decentralization principles of the network.

Despite these challenges, the Bitcoin ecosystem continues to evolve, with ongoing development efforts aimed at addressing its limitations and improving its utility. The future of Bitcoin will depend on the ability of its community and developers to overcome these challenges and adapt to changing regulatory, technological, and market conditions.

What is being done to improve its usability and user experience?

Improvements in Bitcoin’s usability and user experience are crucial for its mainstream adoption. Several ongoing efforts and developments are addressing these challenges:

  • User-friendly wallets and applications: Many wallet providers and developers are focusing on creating intuitive, user-friendly interfaces for managing Bitcoin transactions. These wallets often include features such as simplified backup and recovery processes, clear fee structures, and seamless integration with popular applications and services.
  • Layer-2 solutions: Technologies such as the Lightning Network are being developed to address Bitcoin’s scalability issues and improve transaction speeds and costs. The Lightning Network allows for the creation of payment channels between users, enabling faster and cheaper transactions off the main blockchain. This can improve the user experience for small, everyday transactions.
  • Educational resources: Numerous educational resources, such as articles, videos, and online courses, are being created to help people understand and use Bitcoin more easily. These resources aim to demystify the technology and provide guidance on best practices for securely managing Bitcoin wallets and transactions.
  • Streamlining onboarding: Many cryptocurrency exchanges and services are working to simplify the process of buying and selling Bitcoin, making it more accessible to non-technical users. This includes improving the user interface and reducing the complexity of the onboarding process.
  • Integration with existing financial services: Some banks and financial institutions are exploring ways to integrate Bitcoin and other cryptocurrencies into their existing services, such as offering cryptocurrency trading, custody solutions, or integrating Bitcoin payments into their existing payment infrastructure.
  • Merchant adoption: As more merchants and service providers accept Bitcoin as a payment method, users will find it easier to use Bitcoin for everyday transactions. This can be facilitated by payment processors and point-of-sale systems that streamline the process of accepting Bitcoin payments for merchants.
  • Open-source development: The Bitcoin development community is continuously working on improvements to the core protocol, addressing security and performance concerns, and proposing enhancements that can make the technology more accessible and user-friendly.

These ongoing efforts aim to make Bitcoin more usable and accessible to a broader audience. As the technology matures and its ecosystem evolves, it is expected that the user experience will continue to improve, potentially driving further adoption of Bitcoin and other cryptocurrencies.

How are Bitcoin’s supposed scalability issues being addressed?

Bitcoin’s scalability issues are a concern for its long-term viability and mainstream adoption. Several approaches are being pursued to address these challenges:

  • Segregated Witness (SegWit): Implemented in 2017, SegWit is a protocol upgrade that helps increase the number of transactions that can fit into a block by separating the transaction signatures from the transaction data. This allows more transactions to be processed per block, thus increasing the overall throughput of the network.
  • Schnorr Signatures: This cryptographic signature scheme can help reduce the size of transaction signatures, allowing more transactions to fit into a block. By decreasing the amount of data required for each transaction, Schnorr signatures can contribute to improved scalability and reduced fees.
  • Layer-2 solutions: These are off-chain protocols built on top of the main Bitcoin blockchain, aiming to provide faster and cheaper transactions. The most prominent layer-2 solution is the Lightning Network, which enables the creation of payment channels between users, allowing them to transact off the main blockchain. When the channel is closed, the net result of the transactions is settled on the main Bitcoin blockchain. This approach significantly improves transaction speeds and reduces fees, making Bitcoin more suitable for microtransactions and everyday use.
  • Block size and protocol optimizations: Some proposals aim to increase the block size to accommodate more transactions per block, while others focus on optimizing the Bitcoin protocol to improve its efficiency. However, increasing the block size remains a controversial topic in the Bitcoin community, as it may lead to further centralization of mining power and increase the resource requirements for running a full node.
  • Sidechains: Sidechains are separate blockchains that are interoperable with the main Bitcoin blockchain. They allow users to move their bitcoins between the main chain and the sidechain, enabling faster and cheaper transactions on the sidechain while still benefiting from the security of the main chain. Examples of sidechain projects include Liquid Network and Rootstock (RSK).
  • Future protocol upgrades: Bitcoin’s development community is actively researching and proposing additional protocol upgrades and improvements that could further enhance its scalability. These improvements may include changes to the consensus algorithm, network structure, or other aspects of the technology.

It’s important to note that addressing Bitcoin’s scalability issues is a complex and ongoing process. As the technology and ecosystem evolve, the community will continue to explore and implement solutions that can improve Bitcoin’s capacity to handle more transactions and cater to a broader range of use cases.

How do side chains work?

Sidechains are separate, independent blockchains that run parallel to a primary blockchain, such as Bitcoin or Ethereum. They are designed to enable new features, improve scalability, and facilitate faster and cheaper transactions without affecting the security and stability of the primary chain. Sidechains work by allowing users to move assets, such as tokens or cryptocurrencies, between the primary chain and the sidechain. Here’s a basic overview of how sidechains work:

  • Two-way peg: A two-way peg mechanism is used to establish a fixed exchange rate between the primary chain and the sidechain. This allows users to lock their assets on the primary chain and receive an equivalent amount of assets on the sidechain.
  • Asset transfer: To transfer assets from the primary chain to the sidechain, a user first sends their assets to a special address or smart contract on the primary chain. This locks the assets and signals the sidechain to create a corresponding amount of sidechain tokens. The user can then use these tokens on the sidechain, taking advantage of its features and capabilities.
  • Sidechain consensus: Sidechains can use their own consensus algorithms, which may be different from the primary chain’s consensus mechanism. This allows sidechains to experiment with new algorithms and optimize their performance without affecting the primary chain’s security.
  • Sidechain security: Sidechains often rely on their own network of validators or miners to secure their transactions. However, some sidechains may use more advanced mechanisms, such as merge mining or federated security models, to leverage the security of the primary chain’s network.
  • Asset redemption: When a user wants to transfer their assets back to the primary chain, they first need to initiate a transaction on the sidechain, destroying the sidechain tokens. This signals the primary chain to unlock the corresponding amount of assets, which are then returned to the user’s primary chain address.

Sidechains can provide several benefits, such as enabling faster transactions, reducing fees, and allowing for the testing and implementation of new features without affecting the primary chain. However, they can also come with their own set of risks and challenges, such as potential security vulnerabilities or the possibility of reduced decentralization.

Could sidechains facilitate Bitcoin lending?

Yes, sidechains could potentially facilitate Bitcoin lending by creating a separate, parallel blockchain specifically designed for lending purposes. This sidechain could implement smart contracts and other features that are not native to the Bitcoin blockchain, making it possible to create more sophisticated and flexible lending platforms.

Here’s how a Bitcoin lending sidechain might work:

  • Asset transfer: A user locks their Bitcoin on the main chain and receives an equivalent amount of sidechain tokens, which represent the locked Bitcoin. This process is enabled by a two-way peg mechanism, ensuring that the value of the sidechain tokens is directly tied to the value of the locked Bitcoin.
  • Smart contracts: The sidechain can support smart contracts that define the terms and conditions of the lending process, such as interest rates, loan duration, and collateral requirements. These smart contracts can automatically enforce the agreed-upon terms, reducing the need for intermediaries and making the lending process more efficient and transparent.
  • Collateral management: Borrowers can lock their sidechain tokens as collateral in a smart contract, which can automatically liquidate the collateral if the borrower fails to repay the loan as agreed. This helps to protect lenders from the risk of borrower default.
  • Interest payments and loan repayment: The sidechain can facilitate interest payments and loan repayments through its native tokens or other supported assets. Smart contracts can automate these processes, ensuring that lenders receive their interest payments on time and that loans are repaid according to the agreed terms.
  • Asset redemption: After the loan is repaid, the sidechain tokens can be transferred back to the main Bitcoin blockchain, where they can be redeemed for the original locked Bitcoin.

Using sidechains for Bitcoin lending can help to overcome some of the limitations of the Bitcoin blockchain, such as its lack of native support for smart contracts. However, it’s essential to consider the potential risks and challenges associated with sidechain-based lending platforms, such as the security and decentralization of the sidechain, regulatory compliance, and counterparty risks.

Could such lending practices lead to a kind of fractional-reserve banking?

Fractional-reserve banking refers to a banking system where banks hold only a fraction of their customers’ deposits as reserves and lend out the remaining amount. In the context of Bitcoin lending and sidechains, a similar scenario could theoretically emerge if lending platforms or intermediaries engage in practices that resemble fractional-reserve banking.

For instance, a platform could lend out more Bitcoin than they have in their reserves, using the sidechain tokens as a representation of the locked Bitcoin. If borrowers default and the platform doesn’t have enough reserves to cover the loss, this could lead to a solvency crisis similar to what can happen in traditional fractional-reserve banking systems.

However, there are several factors that could mitigate the risk of fractional-reserve banking practices in the context of Bitcoin lending:

  • Transparency: Blockchain technology allows for greater transparency in lending practices. If implemented properly, users can verify the amount of locked Bitcoin and the loans issued on the sidechain, making it difficult for platforms to engage in fractional-reserve lending without being detected.
  • Smart contracts: The use of smart contracts in lending platforms can help automate and enforce the lending terms, including collateral requirements and liquidation processes. This can reduce the likelihood of platforms engaging in risky lending practices, as the smart contracts can be designed to prevent over-leveraging and ensure that adequate collateral is maintained.
  • Decentralization: Decentralized lending platforms can help to distribute risk across a network of participants, reducing the concentration of risk in any single entity. This could make it less likely for fractional-reserve lending practices to emerge, as individual participants would have a greater incentive to manage their risk exposure carefully.
  • Regulation and oversight: As the cryptocurrency industry matures, it’s likely that regulatory oversight will increase, potentially helping to prevent risky lending practices like fractional-reserve banking. However, this will depend on the specific regulatory frameworks adopted by different jurisdictions and their effectiveness in overseeing lending platforms.

While the risk of fractional-reserve banking practices in Bitcoin lending cannot be entirely ruled out, the unique features of blockchain technology and the potential for greater transparency, automation, and decentralization can help to mitigate this risk. It will be crucial for the industry to adopt best practices and responsible lending standards to maintain the trust and stability of the ecosystem.

How do Layer-2 solutions and sidechains differ?

Layer-2 solutions and sidechains both aim to enhance the scalability and functionality of a primary blockchain, such as Bitcoin or Ethereum, but they differ in their architecture and implementation.

Layer-2 solutions:

  • Layer-2 solutions are built on top of the primary blockchain and leverage its security and decentralization properties without requiring a separate consensus mechanism.
  • Layer-2 solutions operate off-chain, meaning transactions occur outside of the primary blockchain but are eventually settled on-chain. This enables faster and cheaper transactions while maintaining the security of the primary blockchain.
  • Examples of layer-2 solutions include the Lightning Network for Bitcoin and the Optimistic Rollups and ZK-Rollups for Ethereum.

Sidechains:

  • Sidechains are separate, independent blockchains that run parallel to the primary blockchain. They have their own consensus mechanisms and can be customized to support unique features or capabilities.
  • Sidechains use a two-way peg mechanism to allow assets to be transferred between the primary chain and the sidechain. Transactions on the sidechain are processed separately from the primary chain, allowing for improved scalability and potentially faster transaction processing.
  • Examples of sidechains include the Liquid Network and Rootstock (RSK) for Bitcoin and the xDai chain for Ethereum.

In summary, layer-2 solutions work on top of the primary blockchain and focus on off-chain transactions that are eventually settled on-chain, while sidechains are separate blockchains that interact with the primary chain through asset transfers. Both approaches have their advantages and drawbacks, and their suitability depends on the specific use case and requirements of the project or application being built.

What is Tether?

Tether (USDT) is a type of stablecoin, a cryptocurrency designed to maintain a stable value by pegging it to a reserve of assets, typically a fiat currency like the US dollar. Tether, in particular, is pegged to the US dollar on a 1:1 basis, meaning that one Tether token (USDT) is intended to always be worth one US dollar. This peg is maintained by the company Tether Limited, which claims to hold reserves of US dollars in a bank account to back the circulating supply of USDT.

Tether aims to combine the stability of fiat currencies with the advantages of digital currencies, such as fast transactions, low fees, and accessibility through cryptocurrency exchanges. Since its value is tied to the US dollar, Tether is often used by traders and investors as a way to hedge against the volatility of other cryptocurrencies, park their funds during market turbulence, or quickly move funds between exchanges without having to rely on traditional banking channels.

Tether is available on multiple blockchains, including Ethereum, Bitcoin (through the Omni Layer Protocol), Tron, and others. As a result, USDT exists in different versions, such as ERC-20 tokens on Ethereum or TRC-20 tokens on Tron, but they all represent the same US dollar-pegged value.

It is important to note that Tether has faced controversies and criticism regarding its transparency, auditing practices, and the accuracy of its claims about the reserves backing the USDT tokens. Despite these concerns, Tether remains one of the most widely used stablecoins in the cryptocurrency market.

So, a stablecoin is a type of cryptocurrency? What are the others? Also explain their characteristics and advantages and disadvantages.

Yes, a stablecoin is a type of cryptocurrency. Cryptocurrencies can be broadly categorized into the following types, each with its unique characteristics, advantages, and disadvantages:

Bitcoin and Bitcoin-like cryptocurrencies:

  • Characteristics:
    • Bitcoin (BTC) is the first and most well-known cryptocurrency. Other similar cryptocurrencies, such as Litecoin (LTC) and Bitcoin Cash (BCH), are often referred to as Bitcoin-like cryptocurrencies.
    • They are primarily designed to function as digital currencies for peer-to-peer transactions.
  • Advantages:
    • Decentralized and resistant to censorship.
    • Limited supply, which can protect against inflation.
    • Wide adoption and acceptance, particularly for Bitcoin.
  • Disadvantages:
    • Scalability issues, leading to slow transaction times and higher fees during peak periods.
    • High price volatility, which can make them less suitable for everyday transactions or as a store of value.
    • High energy consumption in Proof-of-Work mining, particularly for Bitcoin.

Altcoins (Alternative coins):

  • Characteristics:
    • Altcoins are cryptocurrencies other than Bitcoin.
    • They often include improvements or different features compared to Bitcoin, such as faster transaction speeds, enhanced privacy, or different consensus algorithms.
  • Examples:
    • Ethereum (ETH)
    • Ripple (XRP)
    • Cardano (ADA)
    • Monero (XMR)
  • Advantages:
    • Potential for innovation and unique features.
    • Can address specific use cases or target particular industries.
    • Sometimes faster or more efficient than Bitcoin.
  • Disadvantages:
    • Lower adoption and acceptance compared to Bitcoin.
    • Can be more susceptible to market manipulation and price volatility.
    • Some altcoins may not have a strong development team or long-term viability.

Stablecoins:

  • Characteristics:
    • Pegged to a stable asset, such as a fiat currency or a commodity, to maintain a stable value.
    • Often used to hedge against volatility in the cryptocurrency market.
  • Examples:
    • Tether (USDT)
    • USD Coin (USDC)
    • Paxos Standard (PAX)
  • Advantages:
    • Reduced price volatility, making them suitable for everyday transactions and as a store of value.
    • Can facilitate trading and moving funds between exchanges quickly.
    • Bridge between traditional financial systems and cryptocurrencies. 
  • Disadvantages:
    • Often rely on a central authority to maintain the peg, which can introduce counterparty risk.
    • May require regular audits to ensure transparency and trust, which is not always guaranteed.
    • Susceptible to regulatory scrutiny due to their ties to traditional financial systems.

Utility tokens:

  • Characteristics:
    • Tokens designed to be used within a specific platform, ecosystem, or decentralized application (dApp).
    • Can serve various functions, such as access to a service, voting rights, or as a medium of exchange within the platform. 
  • Examples:
    • Chainlink (LINK)
    • Filecoin (FIL)
    • Basic Attention Token (BAT)
  • Advantages:
    • Can provide incentives for users to participate in and contribute to the platform.
    • Potential for value appreciation if the underlying platform or dApp gains adoption and usage.
  • Disadvantages:
    • Value and utility are often dependent on the success of the underlying platform or dApp.
    • May face regulatory scrutiny, particularly if they resemble securities.

Governance tokens:

  • Characteristics:
    • Used to participate in the governance and decision-making processes of a decentralized platform or protocol.
    • Holders can propose, discuss, and vote on changes to the platform.
  • Examples:
    • Maker (MKR)
    • Compound (COMP)
    • Uniswap (UNI)
  • Advantages:
    • Empowers users to have a direct say in the development and management of the platform.
    • Can align the interests of users, developers, and other stakeholders. 
  • Disadvantages:
    • Value can be dependent on the success and adoption of the underlying platform.
    • Possibility of low voter participation, leading to centralization of decision-making

Could a stablecoin be backed by or pegged to Bitcoin?

Yes, a stablecoin could be backed by or pegged to Bitcoin, but it would have some inherent challenges due to Bitcoin’s price volatility. A stablecoin pegged to Bitcoin would be a cryptocurrency designed to maintain a stable value relative to Bitcoin rather than a fiat currency like the US dollar.

In this case, the stablecoin’s value would fluctuate in relation to fiat currencies, as it would be pegged to Bitcoin, which is known for its price volatility. This would make it less effective as a stable store of value compared to traditional stablecoins pegged to more stable assets like the US dollar or other fiat currencies.

However, such a stablecoin could still have some use cases within the crypto ecosystem, such as providing a way to hedge against the volatility of other cryptocurrencies in relation to Bitcoin or facilitating transactions within platforms that primarily deal with Bitcoin-denominated assets.

Creating and maintaining a stablecoin pegged to Bitcoin would require a mechanism to adjust the stablecoin supply and manage reserves, ensuring that the peg remains stable despite Bitcoin’s price fluctuations. This could involve complex algorithms, smart contracts, or other mechanisms to track and adjust the value of the stablecoin relative to Bitcoin.

In summary, while it’s possible to create a stablecoin pegged to Bitcoin, it would have limited utility as a stable store of value due to Bitcoin’s price volatility. Instead, such a stablecoin would likely find niche use cases within the crypto ecosystem, where stability relative to Bitcoin is desired.

How does the Lightning Network work?

The Lightning Network is a Layer-2 solution built on top of the Bitcoin blockchain, designed to enable fast, scalable, and low-cost transactions. It achieves this by creating off-chain payment channels between users, allowing multiple transactions to occur off-chain before being settled on the Bitcoin blockchain.

Here’s an overview of how the Lightning Network works:

  • Opening a payment channel: Two parties, Alice and Bob, create a multi-signature (multisig) wallet, which requires signatures from both parties to spend its funds. They then create and sign a transaction that funds this multisig wallet on the Bitcoin blockchain. This transaction is considered the opening of a payment channel between Alice and Bob.
  • Updating the channel balance: Once the payment channel is open, Alice and Bob can make multiple transactions between them, updating the channel balance without recording these transactions on the Bitcoin blockchain. They do this by exchanging signed transactions that redistribute the funds in the multisig wallet. These transactions are not broadcasted to the network and can be updated as many times as needed.
  • Closing the channel: When Alice and Bob want to close the payment channel, they can agree on the final channel balance and sign a transaction that distributes the funds in the multisig wallet accordingly. This closing transaction is then broadcasted to the Bitcoin network and recorded on the blockchain, effectively settling the net result of their off-chain transactions.
  • Routing payments: The real power of the Lightning Network lies in its ability to route payments between users who do not have a direct payment channel. If Alice wants to send funds to Carol, but they don’t have a direct payment channel, the Lightning Network can find a path through a series of connected payment channels (e.g., Alice -> Bob -> Carol) to route the payment. This process uses a routing protocol called the “Onion Routing Protocol,” which helps preserve the privacy of transactions and allows for the efficient routing of payments.

The Lightning Network significantly improves Bitcoin’s transaction throughput, speed, and cost by allowing multiple off-chain transactions to occur before settling on the main blockchain. It also enables micropayments and cross-chain atomic swaps, further expanding the utility of the Bitcoin network. However, it’s worth noting that the Lightning Network is still a developing technology, and some challenges remain, such as liquidity, routing efficiency, and user experience.

It sounds like Layer-2 solutions, sidechains and stablecoins offer tremendous potential to build out a whole new international financial system.

Indeed, Layer-2 solutions, sidechains, and stablecoins offer significant potential to transform and enhance the international financial system. These technologies aim to address the limitations of existing blockchain networks, such as scalability, transaction costs, and volatility, while preserving the core benefits of decentralization, security, and accessibility.

Layer-2 solutions and sidechains can dramatically improve transaction throughput, speed, and cost, enabling a wide range of use cases that were previously not feasible on the base layer of blockchains. They allow for the creation of decentralized applications (dApps), financial services, and various other innovations that can interact with and complement traditional financial systems.

Stablecoins offer a bridge between the traditional financial system and the cryptocurrency world by providing a stable store of value and medium of exchange. They can be used for remittances, cross-border transactions, and a variety of other financial services, often with lower fees and faster processing times than traditional banking solutions.

Together, these technologies can help create a more inclusive, efficient, and accessible international financial system by:

  • Expanding access to financial services: Cryptocurrencies and blockchain-based solutions can provide access to financial services for unbanked and underbanked populations worldwide, enabling them to save, invest, and transact digitally.
  • Facilitating faster and cheaper cross-border transactions: By leveraging the global nature of cryptocurrencies and blockchain networks, cross-border transactions can be executed more quickly and cost-effectively than traditional methods, benefiting businesses, individuals, and the global economy.
  • Increasing financial transparency and security: The use of blockchain technology can help increase transparency and trust in the financial system, reducing fraud, money laundering, and other illicit activities.
  • Fostering innovation: Layer-2 solutions, sidechains, and stablecoins enable new business models, financial products, and services that were not previously possible, driving innovation and growth in the financial sector.
  • Enhancing financial resilience: Decentralized financial systems can provide increased resilience against single points of failure, reducing systemic risks associated with centralized institutions.

While these technologies hold great promise, it is essential to address the challenges and risks associated with their widespread adoption. This includes tackling regulatory compliance, ensuring the security and privacy of users, and fostering the development of user-friendly interfaces and applications. By overcoming these challenges, Layer-2 solutions, sidechains, and stablecoins can help build a more efficient, inclusive, and innovative international financial system.

By Richard Martin

I’m developing a new concept I call “encroachment syndrome.” I call it a syndrome as an analogy to a medical syndrome, where signs and symptoms appear together in individuals, without necessarily implying an understanding or acceptance of common etiology. I don’t mean to imply any form of medical disturbance or illness, either physical or mental. I use it merely as a metaphor.

Encroachment syndrome describes overlapping belief networks, to the effect that national and/or global elites (or other nefarious actors, usually hidden) are trying (and in some cases, succeeding) to encroach on individual rights and liberties, especially the right to earn a livelihood and to control one’s own body. Many of these beliefs appear to form networks of mutually supporting concepts, phrases, memes, narratives, stories, and explanations. They tend to overlap or appear in combination in individuals, who then tend to share these beliefs, mainly through online interactions and social media, which reinforces them and creates a community of belief.

Here is my initial take.

1. Resistance to Covid vaccine mandates. Notice I didn’t say “anti-vaxxers,” which refers to people who are against vaccines in general. Many people were inconvenienced, offended, skeptical, and/or fearful of the Covid vaccine and vaccine mandates. Many weren’t/aren’t against the vaccines if they are not obligatory and don’t threaten their livelihood. Some Covid-vaccine resisters even took the vaccines and boosters themselves as well as vaccines for other conditions. They just viewed it as a major encroachment on personal liberty and contrary to the Hippocratic Oath. I’m not saying they’re right or wrong, but that seems to be the motivating belief.

2. Against support and material/financial/military assistance of Ukraine. Individuals who promote this belief network mostly adhere to Russian talking points about how the Russian invasion of Ukraine is supposedly NATO’s fault. I won’t elaborate further, but you can read more in these articles: On Tankies and No, NATO Isn’t Responsible for Russia’s Invasion of Ukraine. This appears to stem from a fear of the war in Ukraine expanding into a world war because of US- and NATO-led support for Ukraine. I don’t think it is an irrational fear, but it appears to stem from disinformation and uninformed sharing of social media snippets and poor knowledge of history and strategy. It should be addressed by providing valid background knowledge supported by sound arguments that also address probabilities. See the following article on How to Argue Properly.

3. Supported and/or participated in the Truckers’ Convoy last winter in protest at government vaccination mandates and cross-border travel restrictions, especially as applied to Canadian truckers whose work involves driving to and from the USA. The basic issue wasn’t that people were against Covid vaccination per se, but rather the negative impacts on the truckers who chose to not get vaccinated. It was compounded by general dissatisfaction with pandemic shutdowns and the economic disruption and impoverishment this caused for many Canadians. This was all leveraged and amplified by what appeared to be Russian agitprop to exploit the situation. I wrote about this in February 2022: The Current Situation and What Is the Link Between the Russia-Ukraine Crisis and What Is Happening in Canada.

4. Anti-wokeness. Many people believe that there is an attack against traditional Western institutions and culture underway, fed by Marxist ideologues and activists. I won’t go into this more at this point, but suffice it say that I personally agree with many criticisms of wokeness. And please don’t ask me to define wokeness. Look it up for yourself.

5. Anti-globalist/anti-WEF beliefs. This is too complex to go into here, but it is also part of the syndrome. My current thinking is that it appears to stem from a deep-felt fear of losing one’s autonomy, of being infected by mind viruses, memes, and other “contaminants,” including of the physical body and the body politic. I am in the process of developing these ideas and will write more about them when ready.

6. Global financial system. The final phenomenon that is part of the encroachment syndrome I’m proposing is the belief that political and social elites control the global financial system to exploit ordinary people. Many bitcoiners fall into that category, though not all. Moreover, this appears to be a minority position. I personally hold Bitcoin as part of my portfolio and believe it has a lot of utility that will continue to develop and evolve. Here are some links about Bitcoin: Riot Platforms Brief on Bitcoin to White HouseThe Bitcoin Revolution and What It Means for Africa; and Bitcoin and “Crypto” in General: The Crux of the Issue.

I don’t mean to belittle any of these belief networks. I’m simply observing a concurrence of phenomena, many of which appear to have some grounding in fact and evidence. I don’t agree with the victory lap some of the vaccine resisters are taking right now because of conflicting scientific evidence regarding the efficacy of the Covid vaccines. It’s still too early to tell and the weight of evidence remains in favour of the vaccination campaigns. Whether the lockdowns and compulsory vaccine mandates in some institutions and organizations, public and private, were warranted, should be a matter for scientific debate and further research. This can’t be settled by social media sharing and one-upmanship.

Most of the belief networks do not yet appear to have spawned any social or political movements, but that doesn’t mean that they can’t or won’t. Also, I don’t think using a label like “alt-right,” “far right,” or “conspiracy theorists” is helpful. Such tactics result in conflict rather than understanding.

I will write more about this and related matters as my thinking develops.

By Richard Martin

I had a run in with someone yesterday on Linked In who was responding with fallacious and demonstrably false arguments to a guest blog by Quentin Innis titled On Tankies. Quentin wrote the text in frustration at the obstinacy of Western apologists of Russian aggression, terrorism, and imperialism and to provide responses to the most common “talking points” excusing Russia’s invasion and destruction of Ukraine and bullying of NATO countries.

Why did I have a run in? Simply because I too am tired of having to read and respond to uninformed and illogical statements concerning Russia’s destructiveness, aggression, threats, and coercion by individuals who can’t argue a point properly. I just can’t take these people seriously.

I admit it. I lose my cool sometimes, but that’s because claiming “moral equivalence” or spouting “what-about-isms” are a waste of time. Worse, they pollute public dialogue and debate because they are off topic, unethical, and play right into the hands of foreign powers seeking to undermine our national defence, security, and institutions.

Uninformed statements are put forth by individuals trying to debate with serious authors and experts as counterpoints to well-argued and evidenced arguments. The problem is that the so-called counterarguments or debating tactics are nothing more than rehashed talking points from Russia’s lies, threats, and misdirection. Those repeating them have not bothered to read any history by actual historians or reporting by credible, professional journalists. They just assume that what they have heard in a sound bite or a read in a tweet is true and worthy of debate. It isn’t.

For example, there is a popular, but false and uninformed “argument,” that NATO threatens Russia. There is no need to elaborate on the ignorance and stupidity of this statement further. It should be enough to read Quentin’s article or my own of 19 February 2023 on why NATO is not the aggressor, Russia is. A wannabe debater also stated that the war in Donbas is a civil war. No, it isn’t. It was instigated by Russia in early 2014 in response to the Euromaidan Revolution in Ukraine and continues as part of Russia’s invasion and war against Ukraine since then, especially since 24 February 2022. Apparently, that individual had never heard of Russia’s “little green men,” a.k.a. Wagner Group or the illegal and illegitimate annexation of Crimea by Russia in 2014.

These types of uninformed and false claims are easily refuted by doing a quick search on Wikipedia (or through other online sources, including mainstream media). For example, see Little green men: Russo-Ukrainian WarRussian occupation of Crimea; and War in Donbas (2014-2022). At the very least, reading such articles should give one pause that the situation and historical background is much more complex than can be encapsulated in sound bites and tweets. It should also cause someone to think that maybe they don’t have enough background information to make a proper assessment of the soundness of pithy catchphrases and 10-second videos on YouTube™.

But that is apparently too much work for some people. After all, why try to develop a deeper understanding of the historical and political background of a social problem when you can just repeat something that sounds clever and feeds into your pre-existing biases, cynicism, fear, and anxiety about war and conflict? I get it. War is hell, but the fact that you don’t like war and fear it doesn’t make it disappear.

Another false claim I’ve read is that, somehow, “NATO invaded Afghanistan.” It is part of a wider trend of presenting “moral equivalence” statements as serious counterarguments. In logic this is known as the “tu quoque” fallacy: Literally, “so did you!” Anyone who has children knows that the go-to defence after being caught doing something wrong or dangerous is to claim that “He/she/they/you started it/did it too/did it first.” Can we see how puerile that is?

It is a logical fallacy because it doesn’t address the proposition, logic, or evidence that is adduced by the author of the original argument. In simple terms, saying that so-and-so does it too doesn’t counter the logic or content of the author’s position. It merely deflects it in an attempt to hijack or confuse the debate. What started as a presentation of evidence and logically linked propositions leading to one or more conclusions becomes a discussion over something unrelated to the intent of the original author or one putting forth an argument.

If someone wishes to debate or discuss whether NATO “invaded” Afghanistan or not, or anything else for that matter, fine. Go ahead, state your starting position in your own article or post. Don’t contaminate others’ writings with your sophomoric tactics in an amateurish attempt at debate. Put it on your own website or blog! See if someone will take you up on it. On the other hand, if you wish to engage in genuine dialogue, debate, or commentary on an article or post with its author, you should at least try to be on point.

For instance, say someone wishes to debate the author of an article that provides reasoned arguments, with propositions, logical links, and evidence in favour of his position. The way to do that is to address the content of the text and its logic. If the original author says that Russia invaded Ukraine and provides logical arguments and evidence in favour of that position, the correct way to debate or discuss these is to provide counterevidence and genuine counterarguments. Highlighting the original author’s faulty logic or reasoning is also fair game, so long as one has valid points to make.

But showing a map of Europe that indicates the year that countries joined NATO doesn’t prove or argue in favour of NATO aggression. It may be the case that the expansion of NATO as indicated by the map is evidence of anti-Russian sentiment. But it doesn’t follow that the sentiment proves that the countries involved, or the NATO alliance, are aggressive. The opposite is the case. The eastern European countries and their citizens were and remain so concerned about Russian aggression and coercion that they asked to join NATO and were accepted by consensus of then member nations. Moreover, defensive alliances are specifically mentioned as legitimate and inhering in the right to self-defence in the Charter of the United Nations, which the Russian Federation claims to uphold.

Furthermore, one must weigh any claims within a wider political, economic, and social context. NATO was in Afghanistan to lead the International Security Assistance Force (ISAF), under a UN Security Council resolution. Russia is a permanent member of the Security Council, and could have vetoed it, but didn’t. ISAF was thus the result of a wide international consensus that assistance to the Afghanistan government was needed for a variety of reasons. In addition, there were non-NATO countries that participated in the operation.

But even if that were not the case, even if NATO had “invaded” Afghanistan, that still would not constitute a sound argument in debating someone about Russia’s war of aggression against Ukraine. That’s simply a “non sequitur,” which translates as “it does not follow.”

The final point I wish to address is about qualifications and expertise. We live in a society where everyone’s opinion on just about any matter seems to be taken seriously. The problem is this: Not everyone’s opinion is valid. There is a psychological phenomenon known as the Dunning-Kruger Effect. It states that the less some people know about a topic, the less these same people claim expertise.

The most interesting aspect about the Dunning-Kruger effect is that most people, when learning more about a topic, develop less confidence in their knowledge and expertise. They obviously realize that their initial impressions and reactions were uninformed. Then, as they acquire more and more knowledge and experience, their confidence level rises again, but never to the levels of the ignorant who claim expertise with little or no real knowledge. 

Knowledge is a universal acid; it dissolves overconfidence born of misinformation and ignorance. It also gives us humility. Socrates claimed to be the wisest man in all of Greece, not because he knew a lot, but specifically because he realized that he didn’t know everything, or even very much. This type of humility would be valuable to anyone who wishes to debate well-informed experts, who have the knowledge and practical experience to make reasoned judgments.

I will debate anyone who shows humility. Sometimes I need to be reminded of the need for humility. Whether we’re debating the Russo-Ukrainian War, pandemic policies, or anything else, these should be the bottom line. I’ll respect you, if you respect me.

by Richard Martin

I’ve started reading Jason Lowery’s master’s thesis on the national security implications of Bitcoin (Softwar: A Novel Theory on Power Projection and the National Strategic Significance of Bitcoin). I’m a little over halfway through the work, and I find that the insights I’m gaining on almost every page are mind-blowing.

This article in not intended as a full review of Lowery’s book or a critique of his thesis. My purpose is to start reacting in writing to his overall thesis and providing commentary and analysis of the insights I’ve been gaining from it. I’m inspired to do so by the impact his thesis is having on my thinking as well as those “reaction” videos that are so prevalent on YouTube®. I will address these to Jason through Linked In and Twitter, in the hope of starting a fruitful dialogue.

With the publication of Softwar, Lowery presents a novel theory on power projection in nature, human society, and the cybersphere. The latter is where Lowery gets into the national security aspects of Bitcoin. I’ve not yet gotten to that part of his thesis, so I will leave that aside for now.

With that said, there is plenty to digest in the book about power projection in nature and society and its implications for peace, security, and prosperity. In a nutshell, Lowery claims—convincingly—that power projection is fundamental to the genesis, evolution, and survival of life in general and of all organisms.

This may seem self-evident, but his formulation of what he calls “primordial economics” is compelling, as he bases it on physical power. Physical power is measured in watts, the amount of energy transformed or, alternatively, work performed in each second (1 watt equals 1 joule per second; the joule is the unit of work produced by a force of 1 newton to displace a mass by 1 meter; 1 newton is the force required to accelerate a mass of 1 kilogram at a rate of 1 meter per second per second). In other words, physical power is defined as the rate of displacement of mass over distance.

As we can see, basic physical concepts are all based on mass, energy, space, and time. Lowery equates the physical with the real. If there is no displacement of mass, or transformation of energy, then the phenomenon isn’t physical and is within the realm of human imagination and mentation, and therefore abstract. While we could possibly quibble about these conceptions, Lowery’s purpose is to advance the discussion by providing functional definitions of physical power and abstract power, and he succeeds in that respect. I will address abstract power and its relationship with physical power in a future installment of this series, as I’m still digesting it.

To survive and prosper, organisms must project power so they can acquire and consume resources while simultaneously protecting themselves from being attacked and consumed by other organisms. This is summarized in a simple mathematical expression:

BCRA = BA / CA, where

  • BCRA stands for Benefit-Cost Ratio of Attack. The higher an organism’s BCRA the greater the likelihood that it will be attacked and consumed by another organism.
  • BA stands for Benefit of Attack and represents the resource payoff for an organism of attacking or consuming the prey organism or object of consumption. The higher an organism’s BA for any given value of CA, the higher the BCRA.
  • CA stands for Cost of Attack and represents the “price” the prey organism or object of consumption imposes on attacking or consuming organisms. The higher an organism’s CA for any given value of BA, the lower the BCRA.

An organism with BCRA greater than 1 is attractive to a predator, and the higher the ratio, the more attractive it is as prey. Conversely, an organism with a BCRA between 0 and 1 is unattractive as a potential object of attack and is much less likely to fall prey to a predator trying to consume it for its resources. In simple terms, an organism with a BCRA below 1 is likely to inflict a high cost and even potential death on the predatory organism. The closer the ratio gets to 0, the higher the probability that the organism will survive attack by another organism. This is the essence of what Lowery calls “primordial economics.”

Now, I’d like to propose that Lowery’s formulation can in fact be construed as a formal statement of what Ludwig von Mises called “praxeology,” the science of human action. Mises theorized that human beings act to relieve felt uneasiness. Resources (food, water, vitamins, etc.) for energy and matter and the imperative to survive and prosper are the driving forces of human action, and life in general.

In this sense, Lowery’s primordial economics can be viewed as a more general statement of Mises’s notion of praxeology (human action), one that applies to the entire living world. Organisms must survive and thrive, and to do so they must feed and breed, and secure their existence against predators and entropy. The basis for this is power projection.

I won’t address the details of his exposition and argument, but it strikes me as a way to reconceptualize the relationship between war/politics and exchange/economics. Austrian economists, especially the more libertarian types, tend to see war/politics and exchange/economics as mutually exclusive categories. However, Mises always saw economics as being the most well-developed part of praxeology.

For Mises, praxeology is the science of human action, and economics is part of praxeology, specifically the tool to analyze market exchange (catallactics), the division of labour, and other categories of human action unhindered by coercion. This approach then undergirds the analysis of the effects of coercion—i.e., politics, violence, and war—on unhindered economic action.

The following diagram summarizes how I see the relationships between each of these concepts. Power projection includes praxeology, which includes economics, which includes catallactics (the study of market exchange).

There are implications of this conceptualization for peace, security, and prosperity. I will address these in another instalment along with other insights and reactions to Lowery’s thesis on power projection.

UNE STRATÉGIE DE LUTTE CONTRE LES MESURES ACTIVES DANS LA SPHÈRE PUBLIQUE

Richard Martin, Président, Académie canadienne de leadership et développement du capital humain

La situation

Dans nos sociétés, les individus consacrent beaucoup de temps et de ressources à regarder ou à lire des médias et des contenus en ligne. Nous ne reviendrons pas à l’époque où les choix télévisuels étaient limités et où il n’existait que quelques sources d’information (inter)nationales. Chez les jeunes générations, l’ampleur de la participation en ligne est stupéfiante par rapport aux générations plus âgées. Cela s’explique par le fait que les jeunes ne se fient pas aux sources d’information traditionnelles, “grand public”. Ils vivent dans le monde éphémère et évanescent des médias sociaux et des plateformes de contenu d’origine collective, dont la provenance et l’intention sont souvent douteuses.

Il en résulte que les jeunes sont inondés d’idées, d’idéologies et d’influences concurrentes ou contradictoires par le biais des médias sociaux, amplifiées par des influenceurs à l’association et aux intentions douteuses, des ouï-dire, des établissements d’enseignement, des organisations de la société civile, de la publicité et des différents modes de vie. Ces messages ne sont pas nécessairement (bien que beaucoup le soient) négatifs ou corrosifs pour les valeurs civiques fondamentales, bien qu’une partie importante d’entre eux offrent un récit qui ne soutient pas ou remet en question nos démocraties stables, sûres, libérales et prospères. Certains canaux et sources d’information favorisent le désordre social et la subversion dans le but de saper la résilience, la défense, les valeurs et les objectifs de l’Occident.

Les principales plateformes de médias sociaux sont les principaux (mais non les seuls) canaux permettant la promotion d’idées et de concepts qui peuvent éroder l’engagement à créer et à maintenir des sociétés pacifiques et sûres qui valorisent la liberté individuelle, la démocratie, les droits de l’homme et l’État de droit et qui sous-tendent les sociétés les plus prospères de toute l’histoire. Je crois que ces valeurs méritent d’être soutenues, entretenues et, au besoin, défendues. Cela dit, la censure et le contrôle centralisé de l’information, qu’elle soit publique ou privée, ne sont pas la solution, car ils vont à l’encontre des valeurs fondamentales de l’ordre libre, démocratique, fondé sur les règles et les droits.

La menace

Des puissances et des forces hostiles se livrent sans relâche à des opérations d’information pour saper le moral, la résilience et la détermination des nations occidentales et de leurs populations. La sensibilisation du public à cette menace et à ses effets s’est accrue depuis l’invasion de l’Ukraine le 24 février 2022, mais l’accent est mis sur la Russie, laissant d’autres acteurs étatiques et parrainés par l’État opérer relativement sans entrave sous le radar du public, des politiciens et des entreprises. D’autre part, cette prise de conscience est floue, limitée et non spécifique. Les individus et les organisations comprennent mal les intentions hostiles, les stratégies, les approches opérationnelles et les techniques, tactiques et procédures spécifiques utilisées pour atteindre des objectifs hostiles.

La menace va bien au-delà des cyberattaques, de la désinformation et de la mauvaise orientation. En fait, je prétends que nous sommes entrés dans une nouvelle phase de la guerre de l’information que j’appelle “guerre épistémologique”. L’objectif de la guerre épistémologique n’est pas seulement d’attaquer les nations et leurs populations avec des fausses informations et de la propagande trompeuses ou déroutantes qui obscurcissent plus qu’elles n’éclairent. Elle va beaucoup plus loin en lançant un assaut à grande échelle contre les facultés critiques et le jugement des nations, des populations et des dirigeants.

Les techniques sont nombreuses, mais elles visent principalement à éroder l’esprit critique en submergeant la sphère publique, en particulier par le biais des canaux et des plateformes des médias sociaux, d’informations fausses, douteuses ou contradictoires présentées sous forme d’extraits sonores, d’images, de clips vidéo et de “mèmes” Internet qui exploitent et renforcent les biais et les paralogismes cognitifs bien connus. Il s’agit notamment des sophismes non sequitur et tu quoque, des heuristiques psychologiques telles que l’effet de primauté, l’effet d’entraînement et d’autres trop nombreux pour être énumérés. L’objectif apparent est d’éroder la capacité des individus à juger ce qui est vrai et faux, qui et quoi croire, et qui soutenir. Il en résulte une attitude cynique et nihiliste à l’égard des faits, des intentions et des objectifs présentés par et pour les puissances et les forces en présence, et cela sape le soutien à une défense forte contre les intentions et les activités hostiles.

La stratégie

Les efforts visant à renforcer la résilience de la société, en particulier pour les générations futures, dépendent de la capacité à fournir des outils concrets pouvant être utilisés rapidement et efficacement pour résister, contrer et évaluer les affirmations, les preuves, les déclarations et les arguments qui constituent la base de la désinformation, de la propagande et d’autres activités d’information hostiles. Cela exige une approche rationnelle et systématique du problème, fondée sur des résultats, des produits et des méthodes clairs.

La clé d’un succès durable et à long terme dans la construction de la résistance sociétale est de se concentrer sur la génération montante de leaders actuels et potentiels qui deviendront des influenceurs, des formateurs d’opinion et des décideurs dans les domaines de la politique et de l’administration publiques, de la diplomatie, des communications, des affaires, de la finance, de la sécurité publique et de la profession des armes.

Le centre de gravité de cet effort est de développer et de diffuser une boîte à outils intellectuelle et psychologique à l’intention des jeunes leaders actuels et futurs, afin d’étayer les analyses et évaluations individuelles et collectives concernant la solidité logique et la validité des diverses affirmations, preuves, propositions, rhétorique et arguments qui sont insérés et diffusés dans le domaine public.

La meilleure façon d’équiper nos jeunes pour qu’ils résistent aux attaques féroces de la guerre de l’information et de la guerre épistémologique est de les aider à reconnaître les différents types d’activités, en vue de les reformuler selon des principes logiques pour évaluer leur probabilité et leur validité globale. De cette manière, les leaders de la génération montante seront mieux équipés pour appliquer leur propre jugement par le biais de processus et de méthodes de raisonnement éprouvés, résilients et invariants dans tous les domaines, sujets, plateformes et contenus.

© Richard Martin

A STRATEGY FOR FIGHTING ACTIVE MEASURES IN THE PUBLIC SPHERE

By Richard Martin, President, Canadian Academy of Leadership and Development of Human Capital

The Situation

Individuals in our societies spend significant time and resources watching or reading online media and content. We are not going back to the days of limited television options and a few (inter)national news sources. In younger generations, the scale of online participation is staggering as compared to older ones. This is because younger people do not rely on traditional, “mainstream” sources of information. They live in the ephemeral, evanescent world of social media and crowd-sourced content platforms, much of which is of doubtful provenance and intent.

The result is that younger people are flooded with competing or contradictory ideas, ideologies, and influences through social media, amplified by influencers of questionable association and intent; word of mouth; educational institutions; civil society organizations; advertising; and variant lifestyles. These messages are not necessarily (though many are) negative or corrosive of core civic values though an important portion do offer a narrative unsupportive or questioning of our stable, secure, liberal, prosperous democracies. Some channels and sources of information favour social disorder and subversion with the goal of undermining Western resilience, defence, values, and objectives.

Prominent social media platforms are the principal (though not exclusive) channels enabling the promotion of ideas and concepts that can erode the commitment to creating and sustaining peaceful and secure societies that value individual liberty, democracy, human rights, and the rule of law and which underlie the most prosperous societies in history. I believe these values are worth upholding, sustaining, and as required, defending. With that said, censorship and centralized control of information, whether public or private, are not the solution, as these go against the core values of the free, democratic, rules and rights-based order.

The Threat

Hostile powers and forces are relentlessly engaged in information operations to undermine the morale, resilience, and resolve of Western nations and their populations. Public awareness of this threat and its effects has increased since the invasion of Ukraine on 24 February 2022, but the focus is on Russia, leaving other state-based and state-sponsored actors to operate relatively unhindered below the radar of the public, politicians, and businesses. On the other hand, this awareness is hazy, limited, and non-specific. Individuals and organizations have little understanding of hostile intentions, strategies, operational approaches, and the specific techniques, tactics, and procedures that are used to achieve hostile ends.

The threat goes well beyond cyberattacks, disinformation, and misdirection. In fact, we believe that we have entered a new phase of information warfare which I call “epistemological warfare.” The aim of epistemological warfare isn’t just to attack nations and their populations with false, misleading, obfuscating, or confusing information and propaganda. It goes much further by launching a full-scale assault on the critical faculties and judgment of friendly nations, populations, and leaders.

The techniques are many but focus mainly on eroding critical thinking by overwhelming the public sphere, especially through social media channels and platforms, with false, doubtful, or contradictory information presented in sound bites, images, video clips, and Internet “memes” that exploit and reinforce well-known cognitive biases and fallacies. These include everything from non sequitur and tu quoque fallacies, to psychological heuristics such as the primacy effect, the bandwagon effect, and others too numerous to list. The apparent goal is to erode the ability of individuals to judge what is true and false, whom and what to believe, and whom to support. This results in a cynical and nihilistic attitude toward the facts, intentions, and objectives presented by and for contending powers and forces and undermines support for a strong defence against hostile intent and activities.

The Strategy

The effort to build societal resilience, especially in succeeding generations, depends on the ability to provide concrete tools that can be used quickly and effectively to resist, counter, and evaluate the claims, evidence, statements, and arguments that form the basis for disinformation, propaganda, and other hostile information activities. This requires a rational, systematic approach to the problem, one based on clear outcomes, deliverables, and methods.

The key to long-term, enduring success in building societal resistance is to focus on the succeeding generation of current and potential leaders who will become influencers, opinion formers and decision makers in the areas of public policy and administration, diplomacy, communications, business, finance and banking, public safety, and the profession of arms.

The centre of gravity in this effort is to develop and disseminate an intellectual and psychological toolkit to current and future young leaders to undergird individual and collective analyses and evaluations concerning the logical soundness and validity of the various claims, evidence, propositions, rhetoric, and arguments that are inserted and disseminated in the public domain.

The best way to equip our youth for resilience in the face of withering attacks of information and epistemological warfare is to help them recognize the different types of activities, with a view to reformulating them according to logical principles to evaluate their probability and overall validity. By this means, leaders of the successor generation will be better equipped to apply their own judgment through proven processes and methods of reasoning that are resilient and invariant across domains, topics, platforms, and content.

© Richard Martin

by Richard Martin

man looking at a tentacle monster that destroys the city, digital art style, illustration painting (c) grandfailure

There is a widespread belief that poverty and inequality are causes of war and aggression. It’s the other way around. War is the cause of poverty, famine, pestilence and misery.

War is caused by people who are unwilling to create valuable products and services to trade for other people’s valuable products and services. Hitler, Stalin, Mao, Maduro, etc. never worked a day in their lives.

Aggressors are thieves and bullies. They prefer to steal and murder to create their own prosperity for themselves and their supporters. Everybody else can go to hell as far as they are concerned.

© Richard Martin

Richard Martin was a career infantry officer in the Canadian Army. He now plies his trade as an information warrior and strategic advisor to leaders and decision-makers. He focuses on extracting valuable lessons and signals from chaos and noise.

By Richard Martin

For about two centuries now, the political, social, and economic “left” has been saying that they are at the forefront of progress. Whether the socialist millennium will come as a result of the inevitable forces of “History,” or by the disruptive, revolutionary, or evolutionary actions of a completely devoted proletarian vanguard, the claim has been, “We, the Socialists, are the Future!”

Socialism, in theory and practice, is the most reactionary and regressive doctrine of all. It seeks to undermine and overthrow the will of individuals who are trying to make themselves, their lives, and their surroundings better. Socialism is collectivism, and collectivism is the entire history of humanity, ever since the first Homo or Australopithecus started to climb down from the trees and walk on the open savannah.

The development of mankind is a succession of attempts by individuals to gain more and more independence in their own lives, to make decisions for themselves and those they choose to help and support. The driving force in humankind’s growth and evolution has been and will continue to be, as long as human beings have individual will, reason, and emotions, the drive to succeed and make a better life for oneself and for one’s loved ones.

Against this expression of individual will, autonomy, independence… and freedom, is arrayed a phalanx of do-gooders, busy-bodies, coercers, and autocrats. These despots will stop at nothing to impose their will and personal values on others. In its least socially destructive form, these authoritarians are willing to make the lives of their immediate neighbours, friends, colleagues, even family members a living hell. They badger and harass them into submission. They use their influence and authority, such as it may exist, to coerce those closest to them to submit to their personal will.

At the other end of the spectrum are the totalitarian psychopaths, the Hitlers, Maos, Pol Pots, Maduros, Castros, Ho Chi Minhs, and Stalins. These monsters use violence, fear, and destruction to impose their “revealed truths” onto society as a whole, through the power of the state and armed gangs. They create a rule of terror for their own profit, all the while proclaiming the noblest of aims, the freedom of the “the People.”

Whether at one extreme or the other, the goal is to interfere with the lives, the will, the happiness, the property and the freedom of others. They can’t stand to see others succeed, much less do things in their own way, using means they own, for their personal ends.

The Protestant Reformation set in motion a movement of personal freedom, will and self-determination. The Enlightenment questioned all claims of divine or “natural” authority, that the existing order is the best one possible in the best of all possible worlds. The American Declaration of Independence and the subsequent revolution have yet to be surpassed in assuring the dignity of the individual against the onslaught of do-gooders and tyrants, petty or monstrous. It is an imperfect solution, but it’s the best we have. The proof is that it has been imitated around the world, if not in deed, then in word.

We must continue to build the Radical Individualist Commonwealth. This is the commonwealth of free individuals, seeking to better their lot through personal responsibility, private property, free trade and capitalism. Anything else is conservative and, yes, reactionary.

© 2020 Richard Martin

By Richard Martin

What is the radical centre? For most people, the centre is associated with moderation. There is no real way to characterize the conventional centrist position other than to say that it eschews extremes and claims moderation. Unfortunately, most centrists tend to hold non-principled beliefs. They take a smorgasbord approach in supporting various political and economic positions. A bit from this party, a bit from that, some left, some right, maybe more or less of either. This isn’t to imply that centrists are unprincipled. My claim is merely than in most cases they don’t base their positions on well articulated principles and axioms.

There is nothing inherently wrong with that type of centrism. It’s just that it can be vulnerable when the political and social wind changes. Moreover, while conventional centrism draws on left and right policies and beliefs, most centrists would be hard pressed to express why they have decided to believe something in the political or economic sphere. It’s impressionistic and intuitive, based on what seems right at the time. I believe conventional centrists are actually mostly apolitical. They don’t adhere to political, economic and social positions from specific, well-articulated principles, which puts them up for grabs by politicians and activists of the left and right.

Instead of conventional, unprincipled, improvised centrism, I’d like to propose the concept of a Radical Centrism. To call it Radical is to say it articulates positions from clearly articulated principles or beliefs. Radical means “root.” If you have stong principles and they are well articulated with an understanding of how they influence beliefs and actions, this makes one more resilient in the face of changing opinions, political rhetoric, and even brow-beating by activists of all stripes. Furthermore, it provides a counter to confirmation bias, the well-known logical fallacy of seeking evidence to confirm an existing belief, rather than trying to determine the logical implications of one’s principles and axioms.

This is different from conventional centrism which is mostly apolitical, picking and choosing from a menu of options and positions articulated by the political Left and Right (whether moderate or extreme). On the other hand, it is Centrist because it places the Individual at the centre of things. Call it selfishness or egoism, the reality is that everyone is selfish. That’s how we exist and thrive. In other words, Radical Centrism is unabashedly individualistic.

As a matter of fact, Individualism is the number one principle and axiom of Radical Centrism. Only individuals exist. Collectives such as “society,” “race,” “class,” etc., only exist to the extent that they form patterns of behaviour and action of individuals. To quote Margaret Thatcher, “There is no such thing as society.”

This entails methodological individualism in the human sciences, such as economics, politics, ethics, etc. I could go even further and claim metaphysical individualism, but that more extreme stance is not needed to draw useful inferences and conclusions that are relevant to reasoned discourse and action.

I’ll be adding more principles over the next little while. In the meantime, feel free to comment and add your own thoughts. I’d like to get a dialogue and conversation going on this. Please refrain from emotion and rhetoric and try to keep things civil.

© 2020 Richard Martin

#radicalcentre #personalfreedom

By Richard Martin

There’s a lot of screeching and prancing about going on right now about COVID-19 numbers, mainly in the US, of course, but also in Canada and elsewhere.

I’m not saying any of the numbers are necessarily wrong. On the other hand, we don’t necessarily have the information to make a judgment about their validity. Here are some questions I’ve been asking myself, to which I don’t have the answers. If anyone does, I’d appreciate any references.

Question 1. Are they being counted in the same way in different jurisdictions? There are over 30 countries in Europe, 50 states in the US, 10 provinces and 3 territories in Canada. Are the accounting methods sufficiently similar to make useful and valid comparisons?

Question 2. What is the error margin? We’re familiar with this concept from announcements of public survey results. For instance, Gallup will say that their survey results for a specific survey are within a certain margin of error 19 times out of 20. So, they’re saying that there is a possibility of inaccuracy and that close results shouldn’t be taken as gospel truth. This kind of transparency about results is par for the course in quantitative science. Astronomers report their results with a margin of error. So do particle physicists, biologists, and chemists. Even psychologists and cognitive scientists give a margin of error. This is because error is inherent in any measurement process. It can be minimized and estimated, but never eliminated. This is the a fortiori the case for COVID-19 accounting.

Question 3. What are the relevant rates? Even assuming we had reasonably accurate and comparable numbers of infections, hospitalizations, and deaths, and they were comparable between jurisdictions, that doesn’t necessarily mean the numbers are inherently meaningful, especially as a guide to action or policy. The best example of this is that we lack the denominator in many cases to establish reasonably accurate rates: of contagion, of infection, of morbidity, of mortality.

Question 4. How “granular” are our numbers? In other words, who is spreading, who is getting infected, who is getting sufficiently ill, and who is dying? In Canada, 80 % of deaths are in nursing homes, and these mostly in Ontario and Quebec, by far the two most populous provinces. Anecdotal evidence tends to suggest that this percentage is accurate (but I could be wrong of course), but is it reasonable to compare this figure with those in other countries? Maybe, maybe not, but this is something for public health scientists and epidemiologists to evaluate. It’s probably too early to get definite answers, while generating interesting paths and hypotheses to investigate. Time will tell.

Question 5. How valid are international and interjurisdictional comparisons? I was reading a FB post this morning showing that the death rate in Canada is much lower recently than in Florida, Texas, and other US states. The graph also showed that Canada’s population is about 50% greater than either of those two states. However, Texas and Florida are also a lot more densely populated than Canada. You’re comparing two completely different geographic and demographic profiles. That’s not even taking into consideration cultural, political, economic, and social differences. We can’t simply assume that different countries and regions have similar bases for comparison, no matter how similar they may appear on the surface. A fortiori for intercontinental comparisons. They’re not devoid of interest. It’s just that they usually don’t mean what rhetorical flourishes claim for them.

These are just some questions I’ve been asking myself. I suspect others have too, although they haven’t articulated them as such. Feel free to add your own, but please refrain from conspiracy theories. If we’re going to have rational policy and action, these must be based on reason and prudence, not gut feel and wild swings of passion and emotion.

© 2020 Richard Martin