A signaling theory model of cryptocurrency issuance and value


I would rather trust a value that depends on a polity that can enforce contracts and property rights. The same polity is likely to enforce human rights and justice. The right to something in a digital domain by secret keys does not mesh well to a physical realm where human rights don’t exist.

There is an example of people converting their wealth to Bitcoin so that they can flee to an area with better human rights and justice. The transition is away from a place with centralized power to a place with a decentralized enforcement of justice. Decentralized enforcement of justice is not bitcoin. It is human rights and a judiciary that is nicely decentralized but most certainly permissioned. At least a law degree and some ethics. People are not fleeing to libertarian paradises where only bitcoin is used. They are fleeing to Nordic countries and converting their bitcoin to local currency so they can pay rent and commute to jobs. In places where a polity cannot enforce contracts or property rights there is a risk that the people running mining equipment can have their operations physically seized by the most powerful.

I’d rather live in a society where property rights are clear and can be contracted. These contracts can have a long term value and can be exchanged digitally as currency for something in the physical world. If that physical world does not have a polity to enforce contracts and property rights, it is a much higher risk to do any physical transactions and therefore is likely to have a lower quality of life. A currency that depends on its users to maintain a fair and equitable marketplace would self reinforce the betterment of society. The skin in the game being the value of peoples holdings. People would be reluctant to reduce human rights through a reduction of property rights and contract protection if it leads to a decrease in net worth. That is one of the prime arguments in my paper. It is hidden in the section on government fiscal responsibility but is written between the lines in a subtle way.


Roland Freisler would say, die Welt ist kein Wunschkonzert.


Heute, die Welt ist ein Cryptokonzert.