Tom Bombadil Is the Most Intelligent Character in Lord of the Rings
Tom Bombadil believed that the Sauron problem would work itself out on its own eventually and saw no need to concern himself with the immediate problems of Middle Earth. Today, in Bitcoin, there is a conflict between two chains, Core and Cash. I suggest that the reader might watch their struggle with a similar detachment.
A fork should not be something for an investor to get worked up about. An investor is automatically diversified on both chains. There is conflict, but it does not need to be his conflict. Eventually one chain will dominate. As long as he takes no action, he doesn’t have to worry which it will be. He can let them fight until one of them kills the other, knowing that he will always have the same fraction of the total.
The investor can gain by choosing correctly but he must also take on risk. He can never know for certain who will win, so he should never go all in on one side. To the extent that he doesn’t pick sides, his investment is secure. Maybe he will choose correctly this time, but Bitcoin forks can happen at any time, so this sort of conflict will happen again and again. If he keeps choosing sides, he will eventually make too many wrong choices. An investor must remain unharmed through all of them if he wants to be immortal. He is safely immortal as long as he does not take sides.
Tom Bombadil may seem like a simpleton, but he is the one who thinks like a great investor. He lets other people take on risk. I suggest that he did not feel the temptation of the ring because he had trained his emotions to respond with boredom to the kind of rewards that the ring offered. Consequently, the fellowship risked death whereas Tom Bombadil enjoyed his life.
Whichever Wins is the True Bitcoin
I have felt like everyone is way too excited from the moment I’ve been involved in Bitcoin. Most people I know in Bitcoin are not bored enough. Above, I wanted to suggest that you can live through the Core-Cash struggle without getting excited at all, but now I want to suggest that you can get excited if you want, but it is your choice. Maybe you don’t want to take risks yourself, but you know that other people are taking risks. That means there will be a lot of death in the future. If you are risking little, then you can be excited to watch the carnage.
It is just like Darwinian evolution. I don’t know for certain who has the better rules, but they will fight it out until one is victorious. If you choose sides, you enter the Darwinian conflict. You are red in tooth and claw. On the other hand, if you do not choose sides, then both sides fight for your glory. You can watch the superior Bitcoin emerge, which will be your gain at no additional risk. Whoever loses, you win. That is exciting! That should make investors feel bloodlust!
During this conflict, an investor will be tempted to buy one or the other by people who don’t have his incentives as he does. If you believe that you must take sides to save Bitcoin, then you have been duped. You should leave your position of safety only to the extent that you can protect your immortality. On the other hand, the esteemed position which the core dev team currently enjoys is not safe in the event of a fork. The core dev team is not safe. They can fade away while the investors stay strong. Investors should not be swayed by pleas from the core devs to give them loyalty. That’s not in the investors’ interest. I will enjoy watching them win and I will enjoy watching them be defeated.
Forks and Altcoins
I don’t think I have changed my stance on altcoins. I think there’s an issue that never came up earlier which means that most people now have a different definition of altcoin than I do. I would like to define altcoin as “a coin whose history does not derive from Bitcoin’s genesis block”. This definition applies to everything that I talked about in my previous articles, so I still stand by them.
I will use the term Bitcoin child to refer to any coin which derives from Bitcoin’s genesis block. I don’t want to include children among altcoins because, from an investment standpoint, a child is totally different than an altcoin. At the moment of a fork, the two new children have exactly the same owners in exactly the same amounts. All investors, therefore, are initially indifferent between them. They will all be equally rich whichever one wins.
Thus, two children can compete on a much more even footing than Bitcoin and an altcoin because everyone is automatically invested equally in the two children. Hence, there is no inherent reason either has an automatic advantage, as there is between Bitcoin and an altcoin. Investors can reject altcoins pretty much out-of-hand but they must deal with children on more of a case-by-case basis.
When I talk about the network effect, I am just talking about the owners and their connections to one another. Thus, two children have the same network. This is the main difference between Bitcoin and an altcoin, but it’s controlled for between two Bitcoin children, rather a scientific experiment. Investors have a good reason to choose Bitcoin over an altcoin because Bitcoin has the biggest network, but that is not such a big factor between two children. Tiny technical differences between two children can matter much more than big differences between Bitcoin and an altcoin. Investors should want to give both children a fair fight.
A lot of people I’ve talked to have insisted on calling Bitcoin Cash an altcoin. To me that’s like declaring victory before there’s even a fight yet. Cash and Core are both Bitcoin children and investors should be happy to give them a fair fight and to reward whichever wins.
Dynasty, Revolution, and Rationality
Bitcoin can be developed in two ways: by a rational plan or a Darwinian struggle. Either way is fine by me, as long as the process is responsive to the investors. A single development team can build according to a rational plan as long as they learn to build what will please the investors the most. If they can do this, then they will defeat any contenders easily. However, if they anger enough investors, they invite challengers. A team which maintains its position must be subservient to the investors to do so. If a dev team behaves well, then they get to keep their position. Otherwise, they should be made to fight. If they lose, then effectively they are fired. I think that is fair. If I am not presented with rational decisions, I subject the dev team to Darwinian forces.
If the investors don’t know what is best, then they should want a Darwinian struggle. That means they’re always interested new children. However, I believe that investors and a dev team can learn to cooperate better, according to a combination of the two processes. The dev team would not attempt to be leaders. They would let the investors lead them. They would do the detail work and allow the investors’ will to provide the overall direction. When they detected conflict among the investors, they would build two chains and deliberately create a fork. That is how they would present big decisions to the investors as two new children. The investors would then make their choice on the open market. Only the investors who had a good idea whether about which child was better would need to weigh in on the issue by selling one for the other. He rest could remain tranquil.
That is the future I want for bitcoin. In order to achieve it, investors must be willing to become angry when they do not feel in control, and rational when they are. This is behaviorism. The investors must punish when they are disobeyed and reward when they are obeyed. If it is known that there will be conflict whenever the investors are not appeased and cooperation when they are, then no one will want to displease them.
However, there is nothing wrong with a Darwinian struggle, either. In the future, innovations which previously were created as altcoins will now be created as Bitcoin children. Most of them will be stupid but if any happen to be good, I can sleep through its success and wake up to see that Bitcoin has transformed again.
The Costs and Benefits of Anger
Here I will respond to objections made by friends who read an earlier version of this article.1
If investors deliberately cause conflict, the price of Bitcoin will go down. First, that’s what I want to happen. I believe I have a strong hand. I can afford to wait and shake out the weak hands. I am willing to cause trouble because I believe that this only makes room for more people who think like me to buy in. I believe a great future awaits a Bitcoin which is led by a will like mine.
Second, conflict can make the price go up, as in the recent case that just happened. In the immediate wake of the fork, the sum of the prices of the two children was about $200 higher. That means investors are excited. They know that the victor will be improved through conflict. They want to see blood!
When Bitcoin has split, it is vulnerable to being overtaken an altcoin rival. I have two responses to this. First, all Bitcoin children should be highly cooperative with one another when they need to defeat an uppity altcoin. They should be highly antagonistic toward one another again once the altcoin is defeated. They are just like siblings. Second, once people realize how much better it is to make Bitcoin children than altcoins, people will stop making so many altcoins.
Anger is self-destructive. It can be, but not always. If I were to become too angry, I might make an unwise investment decision. Then I would lose money. However, controlled anger is powerful. Controlled anger can be used to assert leadership, as I described above. There is a great episode of Star Trek called The Enemy Within in which a transporter accident splits Captain Kirk into two people, each with half of his personality. One is like a psychopath and the other is nice but lacks boldness and he cannot lead. Good investors need both personalities. They need to be the complete Captain Kirk. If everyone knows that the investors have controlled anger, then most of them can relax and enjoy themselves, like Tom Bombadil.
How I Feel Now
I have suggested three ways for investors to feel about conflicts. Detachment, bloodlust, and rationality. Detachment is for uninteresting conflicts. Bloodlust is for big conflicts in which the weak will be culled. Rationality is for conflicts over important decisions that are easy to think about.
Here is what I feel. The scaling debate is by far the most tedious period of time that Bitcoin has ever had since I became involved. Investors should not have to deal with this kind of headache. The debate was not rational. The conflict between Core and Cash is not only about the block size, but about a completely different team of developers, and about a conflicting vision of what Bitcoin is supposed to be. These are all important issues but the decision is too complicated when they are all happening at the same time. I am happy to have a choice at all, but I am unhappy with the choice that I have been given. In the future, I would like better choices to be offered to me.
I have been very impatient but finally conflict has broken out, and now I want to watch the two sides try to kill each other. I want to be entertained! I am disgusted with Core for its direction over the last couple years, and I am disgusted with Cash for not existing sooner. They both need punishment! I feel bloodlust!
Maybe nobody will listen to my anger. But I believe that other investors will learn to feel anger in the same way that I do because my controlled anger is in our best interest financially. Bitcoin must be strong to survive its future conflicts with the world governments. Investors should want to toughen it.
Core and Cash, you both fight for me and against each other. You are my property! Obey me! I am the investor! Die for me now! I hate you both and I will love only the survivor.
Notes
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The first two of these comes from Handing and the last from Saifedean Ammous in private conversation.