Is tokenisation a bad word in bitcoin maxi circles \ stacker news ~bitcoin

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Is tokenisation a bad word in bitcoin maxi circles

1372 sats \ 29 comments \ @fourrules 26 Aug bitcoin

I'm a bitcoin maxi, but I feel many/most Bitcoiners think tokenisation is just another medium for scams, which it has been. I want to know if my view is shared generally in these circles, or if it's novel.

I have no problem with tokenisation. Tokens are debt, you buy tokens from systems that don't have any money but do have potential to earn money (bitcoin) in the future and can therefore buy back the token or roll over the debt.

But once the debt is paid the person or machine or institution is fully solvent they can pay out in actual money rather than continuing to issue tokens, the goal is always to pay down, so as not to get labelled a Ponzi.

Tokens could be issued to cover demand cycles where they have not saved enough money in good times but are still solvent, if there is likely to be an uptick in demand.

But tokenisation can only work on the other side of the transition to a Bitcoin standard because when denominated in fiat there is a political incentive to debase the currency like Albania in the mid-90s. This is why we have securities laws. Tokens are a type of security, and those have to be regulated on a fiat standard to ensure proper disclosures. In a decentralised system you require the market to police fraud and softer kinds of bad behaviour, bit since governments are both constituted of and in themselves market participants that creates a perverse incentive if they can influence monetary policy. That's why central banks are in such uneasy partnerships with governments, required to perform certain functions of government and therefore subject to politics, while also being responsible for upholding the integrity of the currency.

In Albania politicians and bureaucrats pumped stock prices to make citizens feel wealthier by debasing the national currency, similar to how house prices were pumped in the 00s in Europe and America, or how they used monetary policy to pay the population to be compliant, only to steal the money back in inflation. Whatever the dominant asset is at the time, people vote for politicians to influence policy in favour of their assets, even if it's just a feeling of getting wealthier.

Bitcoin bootloads itself via that incentive, putting politicians in office who are public bitcoin champions, or at least not opposed to us and I'm favour of deregulation. But the end game is that this entire game of debasing the currency to pump asset prices is impossible, once bitcoin is the unit of account, it's become recognised as the most stable money with better monetary properties than the incumbent standard.

At that point it's possible to completely deregulate the securities market and literally anything or anyone can issue their own token without the power to influence a class of people to pump the token they issue, and they don't need to comply with securities laws to disclose their earnings or anything like that. Regulation privatised, where capital allocators pay systems to enforce compliance with the standards of disclosure they want, but people are free to invest in hyper-local or distributed or niche token issuers if there is sufficient information asymmetry to justify the risk of foregoing standards of disclosure.

A student could issue a token to pay for college buy back the token with their future salary. Universities could use endowments to buy those tokens, aligning incentives in education. Similar models could apply to machinery, cars in service businesses like transport, local devolved governments formed out of separatist governments from bankrupted states. Starter homes could be funded by tokens issued by families who collateralise real assets like bitcoin or the underlying land.

It's all to play for, but not until we are on a bitcoin standard, which could be 20 years away. Anyone disagree?

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50 sats \ 3 replies \ @SimpleStacker 26 Aug

By tokens, it sounds like you mean some kind of Smart-IOU?

I think the biggest issue is dealing with contingencies in which repayment of the token is or can't be made.

50 sats \ 2 replies \ @fourrules OP 26 Aug

Token values can go to zero as the issuer is deemed unlikely to pay, due to death or reputation damage or unfortunate accident. I don't think you have to deal with those contingencies because of they don't pay it off they will find it more difficult to issue new tokens in the future. That's the free market.

Maybe there is a contract that collateralises the token in some way, like "I'll pay it off with labour if I can't pay it with bitcoin" or "this token is issued to build an extension on my house, and if I don't buy it back by a certain date the owner of the town owns a portion of the land under my house, which they'll get back on sale on the land".

You'd need the existing system to enforce these contracts, but they are just contracts, they don't have to be smart.

The difference is that tokenisation systems can be built on more or less decentralised self-regulating blockchains like Bitcoin or Solana, meaning issuance is just a matter of software. If they are not collateralised by more than your reputation (and many won't be, I can buy a new Mac today on credit without collateralising the loan) then you don't additional legal agreements.

Of course legal agreements can be boiler plate or generated on the fly without paying lawyers, so software can help people add more sophisticated collateral agreements, one would assume there would be legal experts in the background helping to create the boiler plate and informing how the contracts are generated.

0 sats \ 1 reply \ @SimpleStacker 26 Aug

I see, so you envision a world in which anyone can issue a personal token, but the market will determine the value of those tokens, and in which a legal system still exists to adjudicate disputes about the token, right?

0 sats \ 0 replies \ @fourrules OP 27 Aug

Yes, legal systems like English common law are much more rooted than states.

For me liquid tokens issued by anyone is the most efficient model for debt on a bitcoin standard. Like I said, on a fiat standard this would be a disaster, but when politicians cannot debase it's a different story.

50 sats \ 3 replies \ @grayruby 26 Aug

Tokenization, similar to stablecoins, could be useful for those without access to the US financial system. Essentially it is just an onchain broker with less investor protection. Someone is going to custody the underlying (say 1 share of apple stock) and issue a token representing it. Difference is if I am buying tokens representing US equities offshore I am probably doing so with a pretty significant "trust me bro" risk and some technical risk. Tokenized assets should probably trade at a discount to the underlying.

So if I am outside of the US financial system I am probably just better off holding cash in stablecoins and buying bitcoin instead of tokenized assets.

40 sats \ 2 replies \ @fourrules OP 26 Aug

I don't think you're really fully considering the implications of a bitcoin standard and what it means for debt markets. I mentioned student debt because it's clearly a market distorted to the point of breaking, and an alternative tokenised model will clearly take over.

Debt markets are inherently about the future, and anything that involves future payouts, including equities, involve trust. You can use a Russell conjugate with the phrase "trust me bro", but there is no way out of trust.

A bitcoin standard will blur the line between what is inside and outside the US financial system.

I think you're thinking 2-5 years out, and I'm trying to speculate on 20-50 years out.

0 sats \ 1 reply \ @grayruby 26 Aug

Yes I am speculating more in the next decade or so. It is hard to predict what will occur over the next 20-50 years.

20 sats \ 0 replies \ @fourrules OP 26 Aug

I don't think it's hard to predict. If you look at what happened in deregulated securities markets it's easy to predict what would have happened if they weren't able to debase the denominator. Those securities markets would have just dominated debt markets and generated a huge variety of financial instruments for extremely niche situations that involved asymmetric information, and those would have been packaged and sold as derivatives over time.

We live in a world polluted by motivated reasoning so basic speculation feels difficult, but it's really not.

0 sats \ 0 replies \ @SwapMarket 26 Aug

you buy tokens from systems that don't have any money but do have potential to earn money

Much higher potential to rug, sooner or later. All tokens I know of are scams.

0 sats \ 14 replies \ @Solomonsatoshi 26 Aug

I consider myself a Bitcoin maxi because I consider it the only digital token that is truly decentralised and therefore does not require trust in any third party. Bitcoin is thus analogous to digital gold. However I do not assume as you do that a Bitcoin Standard will be the dominant monetary system in the future. It seems very unlikely to be although it is theoretically possible- simply because of the dynamics of political and economic systems. Some assume the decline of the USD must result in the rise of Bitcoin without factoring the significance of nation states and political power structures. The USD is the currently dominant monetary system because the USA has been the dominant economic and military power since WW2. Based on the current world economy China appears most likely to dominate both economic and military power in the near future. The USA is already unable to impose its will upon China, having been forced to back down on its attempts to bully China with threats of tariffs because China already controls the supply chains of so many strategic commodities and components essential to US economy and military. You also fail to understand that even if a Bitcoin Standard monetary system were to succeed the USD the nature of the system would fundamentally change- student loans would no longer be a practical method of funding education- as debt would no longer be a means by which the state and banks could issue capital funding. Equally under a true Bitcoin Standard the degree of fiat debt leverage over real estate would be hugely reduced because the ability and incentive for banks to issue such fiat debt sourced capital funding would be removed. If you want to imagine a true Bitcoin Standard monetary system it is necessary to understand the fundamental difference between Bitcoin as a currency and fiat. Governments and bankers cannot issue Bitcoins as debt.

100 sats \ 13 replies \ @fourrules OP 26 Aug

Very strange comment.

I take some of your points, but in a multi-polar world a bitcoin standard is inevitable. The nature of governments is to distrust each other, including their tokens. In that context the dynamics of politics and economics disfavours fiat over the long-term.

I thought that was a basic tenet of being a bitcoin maxi, but maybe there are other kinds of people calling themselves maxis, who think it a maximal moral prerogative to own bitcoin or something like that.

But I assume the decline of the USD must result in the rise of Bitcoin BY factoring the significance of nation states and political power structures.

China can't issue the world reserve currency without hollowing out it's own manufacturing base the way the US did, which it needs to pacify it's massive labour force. Revolutions in China are extremely ugly. In that context no other country with accept the yuan as the denominator of debt or medium of international settlement. You are a very rare soul if you think that is the trajectory we're on.

Why would the US need to impose it's will on China for a combination of a bitcoin-gold standard to emerge in international trade? Surely it's the opposite, a bitcoin-gold standard emerges from a weak US.

I also perfectly understand that if a Bitcoin Standard monetary system were to succeed the USD the nature of the system would fundamentally change- student loans would no longer be a practical method of funding education- as traditional debt markets would no longer be a means by which the state and banks could issue capital funding, hence tokenisation would dominate.

The rest of your comment has very little relationship with my comments, I would find it difficult to respond, it's very confused.

0 sats \ 12 replies \ @Solomonsatoshi 26 Aug

You ignore the massive power that fiat delivers governments versus the massive LOSS of POWER that a Bitcoin Standard implies. The USA today is demonstrably ONLY viable because of its addiction to the fiat debt issuance that is the extraordinary privilege derived from being the issuer of the global reserve currency- and the USD being a full fiat construct. Under a Bitcoin Standard that extraordinary privilege evaporates and the USA would be very swiftly insolvent- being unable to sustain both trade and fiscal deficits that have become chronic over the last 50 years. In contrast China today dominates global trade in manufactured goods and commodities. China can and has already demonstrated that the USA is dependent upon its supply chains. Most US military supply chains are now dependent upon Chinese supply chains. If China turns them off USA is unable to make the weapons and systems it relies upon to dominate global institutions, resources, law and protocols. China has in turn built its mercantile dominance upon sound application of fiat money- many BTC Maxis may not understand that fiat applied with discipline and strategy is a potent economic leveraging tool. The Chinese government has consistently used fiat monetary leverage to direct capital toward productive assets and infrastructure- in contrast the US has allowed bankers to allocate an ever increasing ratio of fiat debt issuance toward non productive speculative assets - primarily real estate- which becomes a parasitic debt burden. Monetary dominance has historically always followed from trade and military dominance. At least since the time of Rome, if not before. China today dominates global trade. China must now also gain military dominance to ensure its control over trade routes and commodity supplies. This process is now unfolding as the US reduces its military power projection and China exerts its own- via proxies like Iran and Russia and via the construction of global trade and transport infrastructure known ans the Belt and Road. China has no logical need or incentive to adopt a Bitcoin Standard- quite the opposite. China is also in no hurry to become the issuer of the global reserve currency but to some extent it is already the case that nearly all nations need to trade with China or suffer significant loss of economic advantage due to China paying the best price for commodities and charging the least price for manufactured goods. With annual trade surpluses of over a Trillion USD China can and is accumulating global strategic assets and the power that goes with that, and allies with military ability, like Russia that enable the enforcement of property rights that is required for a prosperous empire. It is necessary to think in a different way to the current highly financialised US model of hegemony and think in a more mercantile mindset to understand Chinas strategic approach to gaining global dominance- they will seek to avoid some of the structural pitfalls that the US fell into. Certainly there may be a marginal case for Bitcoin but given the almost complete success of the commoditisation of Bitcoin and its near complete failure to gain use as a MoE, Bitcoin is marginalised as a speculative commodity and does not look like it will succeed in gaining the dominance of MoE adoption that is needed to a true Bitcoin Standard.

Finally, if a Bitcoin Standard does overcome the state power imperatives that fiat money supports, then a very different economic and monetary model would develop to the highly debt leveraged and dependent financial model that currently operates via the fiat USD.

10 sats \ 11 replies \ @fourrules OP 26 Aug

I'm not ignoring that at all, in any way. When a person or institution loses power then do it by choice, they don't give it up freely, they just lose it. Circumstances change, the ground shifts beneath their feet, the road runs out and they hit a wall.

The exorbitant privilege of the US government is ending. This is not surprising, it's a system only 50 years old, an aberration, a blip in financial history, a fleeting moment.

That moment is nearly over.

And none of your comments on China logically infer that the yuan will be adopted as a world reserve currency or medium for international settlements, given the exorbitant privilege this would give to China, which has already demolished everyone else's manufacturing base.

China has no logical need or incentive to adopt a Bitcoin Standard- quite the opposite.

China won't have a choice, no more than they had a choice of adopting the US standard. They'll try gold, obviously, but settlement is slow too slow for modern economies and inevitably a new gold standard leads directly to a bitcoin standard, whether the CCP likes it or not.

It is necessary for YOU to think in a different way to understand that the reaction of the incumbent system obviously meant that Bitcoin had to become a store of value before a medium of exchange, but a store of value that has monetary properties will inevitably become a medium of exchange, and then a unit of account.

If a Bitcoin Standard does overcome the state power imperatives that fiat money supports, then a very different economic and monetary model would develop, but people will always bet on the future and tokenisation is the most efficient vehicle for debt markets.

I don't think you have a good grasp of this topic so this is my last comment.

0 sats \ 10 replies \ @Solomonsatoshi 26 Aug

The Yuan is already being increasingly adopted for settlement of international trade. Iran, N.Korea and Russia now settle most of their trade via Chinas rapidly developing alternative trade payments protocols including CIPS and mBridge via which China has partnered with UAE, Thailand and HongKong. The Saudis have joined mBridge and if they continue to increase their sales of oil in other than USD denominations then the end of the petrodollar is imminent and it does not result in the increased use of Bitcoin for settlement.

Bitcoin MoE use is virtually non existent, after more than 15 years the protocol is stuck in a narrative of NGU speculative commodity capture and control by bankers and governments who are not at all threatened by another speculative commodity swelling the demand for their fiat debt issuance. Just like Trump hopes stable coin dollar can sustain demand for USTs while the Saudis and others lose interest in them...USA needs to sell many trillions in USTs to just remain viable over the next 12 months and after that the outlook does not improve!

The regaining of Hong Kong sovereignty by China has been crucial to the reverse engineering of the monetary hegemony the west imposede upon China at the start of of Opium Wars an which resulted in Chinas 'one hundreds years of humiliation'. The IMF, World Bank, SWIFT and BIS are ignorant of the volumes of trade now settled via Chinas alternative trade payments protocols because they do not have access to or control over them. BIS did quite recently distance itself from mBridge when it realised mBridge now being at an operational level of development poses an existential threat to the legacy US global trade payments hegemony that the BIS is part of.

China does not need to fall into the trap the US did of suffering chronic trade surpluses due to dominating global trade and trade payments- all that is required is to maintain a competitive economy and not become corrupted by the extraordinary privilege of systemic dominance. For example acquisition of an increasing range of strategic offshore assets can absorb surpluses...and this is exactly what the Chinese have been doing. You don't seem not understand history, monetary dynamics, political structures and consequences and like many Maxis seem to think Bitcoin Standard and continued US dominance is inevitable. Good luck with that. It is far from inevitable. A Bitcoin Standard if it does develop removes debt issuance power from governments and banks. Get your head around that one at the very least...difficult as it might be given the current system.

The wealth of nations is fundamentally and intricately related to the quality and strength of their governments and their ability to project power and preserve access to resources and markets. Fiat money can be sued to leverage that process- Bitcoin cannot. Bitcoin would result in a neutral MoE for trade and that would result in a more free trade internationally, but that is unlikely to develop due to the political imperatives and requirements for military and strategic control over logistics and infrastructure.

Just one example for you that demonstrates how empires contest trade access and logistics- Trumps proxies Blackrock regaining US control over Panama canal ports reduces the ability for Venezuela to ship its heavy crude to Chinese refineries which would unleash another very large source of fossil fuel energy to power the Chinese empire additional to its already acquired Iranian and Russian tributaries. Thinking monetary dominance can be solely an algorithm driven process is naive of real world trade, politics and history.

The decline of the US empire is certainly not being done 'by choice' but rather because of the extraordinary sense of entitlement that has developed in the US culture- the US Exceptionalism that delusionally believes US dominance is the natural order of things- this sort of hyperbole is exactly what commonly signals the end is nigh for an empire. Very few US citizens realise what is happening let alone accept it, as is evidenced by comments and dialogues like the one you are proposing. Trump does appear to have some awareness of the problem but also faces the reality that politically and culturally the US is far too divided and riven with corruption to respond in any manner better than damage control, at best.

0 sats \ 9 replies \ @fourrules OP 26 Aug

You keep projecting opinions onto me, like you are arguing with a person in your head and this thread is just a medium for you to feel clever.

That is despite my responses stating repeatedly that "I don't believe ABC", and "I never said XYZ", you continue to project onto me the opinions that you want to argue against rather than anything I am actually saying.

Now, I have no doubt that China has Russia, Iran, Pakistan, and North Korea over a barrel. I'm sure they have strong influence in the middle East, South East Asia, and even South America to encourage the use of their payments system for international settlements.

But ultimately in a multi-polar world the base layer will be neutral, India, Brazil, the Middle East, Norway, Japan, Indonesia, Malaysia, there are many power players who don't want to replace one bully with another, and to give China even more leverage.

Incumbent fiat dominance ensures that Bitcoin has to be a store of value before it can become a medium of exchange, that is obvious. It was always naive to think that bitcoin could become a medium if exchange first.

Anyway, you took over this thread about tokenisation to rant on a soapbox, just use a mirror next time you want to listen to yourself.

0 sats \ 6 replies \ @Solomonsatoshi 26 Aug

You say - ' But ultimately in a multi-polar world the base layer will be neutral, India, Brazil, the Middle East, Norway, Japan, Indonesia, Malaysia, there are many power players who don't want to replace one bully with another, and to give China even more leverage.'

Now you assume a multipolar world and I agree that is possible. And that Bitcoin might be one of those poles.

However India is deeply tied to Russia and with Russia now deeply dependent upon China India has few options, especially with the rapid decline of western power and its long term reluctance to align with western imperialism.

The mostly authoritarian nations outside of the liberal western democracies are even less inclined to accept Bitcoin for MoE as they nearly all outright ban it for MoE use.

Yes there are potential pockets of resistance that could adopt Bitcoin but if that excluded them from Chinese protocols and trade that would be a cost few would want to accept.

'But ultimately in a multi-polar world the base layer will be neutral' There is no logical basis for this assumption- history strongly suggests it is not the case. While Bitcoin presents a potential new paradigm state power structures and imperatives argue in the opposite direction.

After all the network effect applies to monetary systems and because China now dominates trade in manufactured goods and commodities it can dictate terms and in fact must impose some sort of power projection beyond its borders to enable it to invest in and maintain control of global supply chains and infrastructures including institutional structures. China is the logical builder of new alternative trade payments protocols and it has already built them and they are already being used by a growing number of respondents.

Your assumption that Bitcoin, an apolitical algorithm will over ride the imperatives of global hegemony is an assumption ignoring history and logic. Bitcoin could in theory provide a fantastic basis for true free trade, but true free trade has never been the reality- trade has always been to a greater or lesser extent subservient to the dictates of dominant military and trading nations.

Just because Bitcoin delivers superior monetary functionality (in theory) to the individual does not mean it does the same for the nation state- it doesn't! The nation state is still a major factor, perhaps the most important factor in the wealth of nations.

The wealth and dominance of the US owes at least as much to its legacy domination of global protocols and institutions as it does to 'free trade'. The US has been far from an exponent of free trade but rather increasingly dependent upon exercising its domination of trade payments and military power projection. Now that US economy is increasingly mired in debt the viability of its empire is declining and Chinas is rising.

Bitcoin may be a useful neutral outlier/safe haven, but looks unlikely to gain the critical mass and widespread MoE acceptance required to be anything more than an outlier to Chinas growing dominance. Speculating upon the worth of potential Bitcoin derivatives without accepting and incorporating context in the real world is fruitless.

You say- 'you took over this thread about tokenisation to rant on a soapbox'. I say I am just providing real world and historical context that is lacking in your analysis.

0 sats \ 5 replies \ @fourrules OP 27 Aug

Bla bla bla

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0 sats \ 1 reply \ @SimpleStacker 26 Aug

Solomonsatoshi is obsessed with arguing that China is supplanting the US. Getting into arguments with him about that topic isn't likely to lead anywhere productive

0 sats \ 0 replies \ @Solomonsatoshi 26 Aug

Try to dismiss the messenger but fail to dismiss the message why don't you!?

Yes I do raise this topic sometimes but it is also true that nobody of the Libertarian ideology has yet responded with any credible refutation of the main points I raise. Perhaps because they cannot they respond with a credible reasoned argument they respond instead with personal attacks...in order to avoid these issues they cannot refute. In doing that they concede defeat, by default in terms of a fair and reasoned contest of ideas.

I have been called names (statist, Chinese operative, lunatic etc etc) for my efforts but that just shows nobody of the Libertarian ilk can respond in a credible reasoned fact based manner and so resort to crude name calling shoot the messenger trolling. I believe this is an important and significant issue today and going forward especially relevant to Bitcoin and to Libertarian ideology. The fact that it presents real and demonstrable challenges to Libertarian ideology is not my problem but it is revealing that the Libertarians who often claim nobody is prepared to engage with them in reasoned debate are not themselves capable of calm and reasoned contest of ideas when offered the opportunity.

The OPs obsession with digital tokens/tokenisation/financial derivatives I would present as further evidence of the corrupt narratives within the west where financialisation of everything has come to dominate and the actual making and production of useful tools, materials, infrastructure and products in the real world is increasingly deficient. The highly financialised western hegemony is inherently vulnerable to the 'practical mechanics' of Chinas mercantile based strategy, but US Exceptionalists are seemingly blind to this vulnerability. The OP demonstrates this blindness by assuming that the Chinese would invitably fall into the same trap (of chronic fiscal and trade deficits) as the US has regarding being the dominant issuer of currency when that is clearly not inevitable. The Chinese will be free to construct a monetary and trade payments protocol/s and institutions to avoid such a trap, and very likely will. They might ultimately fall into new traps but that is for the future and history to tell and is unlikely to be foreseen easily via existing paradigms.

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0 sats \ 4 replies \ @ladyluck 26 Aug

I appreciate the long term thinking, but 20 years feels optimistic for full Bitcoin standardization. Even if we get there, won't network effects and early adopter advantages still create inequality issues?

0 sats \ 0 replies \ @fourrules OP 26 Aug

I think things happen slowly then suddenly. We live in a dramatically different world to 2005.

0 sats \ 2 replies \ @fourrules OP 26 Aug

You can't eat bitcoin. I expect anyone with marketable skills or other hard assets will always be able to get bitcoin without being impoverished slaves. I think HODLers dramatically overestimate their purchasing power relative to plumbers or very promising students.

Inequality will decrease over time as the rich can't put their thumbs on the scale by influencing monetary policy.

0 sats \ 1 reply \ @ladyluck 26 Aug

You can’t eat Bitcoin is true, but neither can you eat dollars - what matters is exchange for goods and services

0 sats \ 0 replies \ @fourrules OP 26 Aug

I don't understand your point. I'm talking about tokenisation on a bitcoin standard, not a fiat standard.