Does Jimmy Song Know What Fiat Money Is?
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On Monday, while most of the cryptocurrency world nervously watched as markets sank, an even bigger disaster was unfurling in the Mediterranean: the debate between Bitcoin and Bitcoin Cash, on the CoinsBank Blockchain Cruise. Thousands of horrified participants watched as Jimmy Song did the unthinkable: make Roger Ver look thoughtful and well-informed.
After introducing himself, Jimmy Song, one of Bitcoin’s leading evangelists, opened with the following contention:
“Bitcoin Cash is a fiat money. You may be thinking that I’m exaggerating or trolling, I’m not. I’m stating a fact….Bitcoin Cash is interventionalist, paternalistic and Keynesian befitting its corporate roots.”
This is a pretty staggering claim. Song is presumably aware that bitcoin cash coins are minted in the same way as regular bitcoins, using the same hashing algorithms and proof-of-work. The people behind it, including Jihan Wu, can break those rules about as easily as an alchemist can turn lead into gold.
The F Word
One is not expected to be at one’s best in a booze cruise matchup with Roger Ver, and Song could be excused for letting emotions get the best of him. However, if there were any suggestions that he misspoke, they were quickly dispelled when he doubled down in print:
To prove this to you, let’s look at what fiat means. According to the Merriam-Webster dictionary fiat is
- a command or act of will that creates something without or as if without further effort
- an authoritative determination
- an authoritative or arbitrary order
My contention here today is BCH is very much a money along these lines.
Argumentum ad Merriam is not the most sophisticated debating tactic, but for something as childish as the BTC-BCH dispute, perhaps the juvenile strategy is best.
Song then raised many points about the centralization of Bitcoin Cash, and Bitmain’s influence over mining and development—all somewhat accurate, but not qualities of a fiat currency. When Roger Ver raised something a bit closer to the conventional definition—the one you learn in economics class—Song replied, “that’s not what it means—it means a centralized authoritarian money.”
Needless to say, this is not how the word is usually used. Many hard currencies have been issued by centralized governments under authoritarian rules—the Pound Sterling, for example, originally referred to metal, and the Royal Mint was not run by libertarians.
Fiat Accompli?
We’d be inclined to chalk this as a win for the BCH side, but then Roger Ver kept opening his mouth:
“With fiat, with dollars or euros or yen, the government says you have to use our money, you have to pay your taxes in this money, and if you don’t we’ll lock you in a cage. That’s what fiat is.”
This is a bit closer to the mark. According to Modern Monetary Theory, fiat’s primary “use case” comes from mandatory taxes, although Ver’s meaning seems somewhat jumbled with Legal Tender. After more interruptions, Ver pulled out his ace: listing all the books he read in prison.
It’s hard to know who’s the iceberg, and who’s the Titanic here. This illustration could have gone either way – like the “debate”.
Eventually, between Ver’s interruptions and the audience’s heckling, the cowboy-hatted, business-suited Song quit the debate, to be replaced by a shirtless Tone Vays. That’s like a metaphor for the BTC/BCH divide right there.
So what is Fiat Money?
If Jimmy Song had read the very next entry in the Merriam-Webster Dictionary, he would have found the following:
DEFINITION OF FIAT MONEY
: money (such as paper currency) not convertible into coin or specie of equivalent value
By this definition, I suppose, Jimmy Song might be technically correct, since neither BTC nor BCH can readily be converted into metal. This, incidentally, is why dictionaries are not considered the most rigorous forensic resources.
But most economists agree that Proof-of-Work makes Bitcoin somewhat more than an unbacked currency. And, although Song spent the rest of the debate claiming that Bitmain is a crypto-version of the Federal Reserve, he did not assert that it could arbitrarily produce Bitcoin Cash or prevent people from mining it. This is what is meant when economists speak of money “by command.”
If there’s a lesson to be learned from the CoinsBank spectacle, it’s to treat the figureheads and spokespeople of the decentralized movement with the same skepticism as any other trusted third party.
Not only are they happy to trade insults at the movement’s expense, they’ll even go out of their way to change meanings and redefine words. Almost, as it were, by fiat.
The author is invested in both Bitcoins.
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