A dose of perspective and context in the world of Bitcoin

What does the fox say? 🦊

Proof-of-Take (#009): a dose of perspective and context in the world of Bitcoin

Welcome to Proof-of-Take. The separation of Money and State, enabled by Bitcoin, will happen in our lifetime. It will be one of the most important developments in the history of civilization. This is on-par with inventions like the printing press, antibiotics, and the internet. By the end of it, we may even be able to explain what a blockchain is.

As always, nothing below is investment, legal, or relationship advice.

"Bitcoin will change us more than we’ll change Bitcoin”

Marty Bent

This quote is trippy to ponder. Bitcoin calls into question our view of everything. Spending, society, and money itself. Money makes the world go round, and Bitcoin is changing money.

Bitcoin is also changing me. It’s turning me from a fox 🦊 into a hedgehog 🦔.

I love the book Superforecasting by Phil Tetlock. It’s about making predictions — why they matter, why most people are so bad at them, and how we can be better.

He starts by exposing a truth that most of us know. Celebrity TV pundits and media personalities blow a lot of hot air. They make bold but unfalsifiable predictions. Heads they win, tails you lose.

And when pressed to make tangible predictions, “they’re no better at making predictions than a dart-throwing chimpanzee.”

From there, Tetlock explains the world can be split into two types of people: foxes 🦊 & hedgehogs 🦔:

“The fox knows many things, but the hedgehog knows one big thing.” 

—Greek Poet Archilochus, (~660 B.C.)

A hedgehog (like the pundits above) sees & explains the world through one big issue. They insist on their views, and rarely change (even when proven wrong). They’re idealogues who can only see reality through their preferred theory of the world.

Hedgehogs have a hammer, and everything is a nail.

Hedgehogs are everywhere. These are the people who trace EVERYthing back to ONE BIG thing: science, democracy, religion, the patriarchy, capitalism, or technological innovation. It’s the pundit on TV who confidently explains that “It’s the economy, stupid” — even when it’s not.

Foxes, on the other hand, are different. They use interdisciplinary knowledge and adapt their approaches according to real circumstances. They coldly self-assess and criticize whenever necessary. They recognize the complexity of our world and rely more on observation and less on theory.

Superforecasting clearly favors foxes. Foxes are better forecasters.

I’ve long considered myself a fox. With a background in poker, “rationality,” & self-improvement, it appealed to me. A fox has the intellectual virtues I strive for. Who wouldn’t want to be humble, open-minded, analytical, gritty and successful? It hits every Silicon Valley aphorism—Fail fast, Strong beliefs, weakly held & keep your identity small:

Credit Suisse Research, Mauboussin & Callahan.

Updating your beliefs based on new information seems like a winning formula for business & life. As a fox, being wrong is okay since you’re not too attached to a particular position. Failing is an opportunity to learn.

After all:

Meanwhile, for a hedgehog, being wrong about your one big thing is an existential threat to your identity. You have your eggs in one basket, and risk a major “blow-up.”

But a funny thing happened to this fox. Bitcoin is turning me into a hedgehog.

Superforecasting paints foxes with a rosy brush, but there are legitimate criticisms as well. The most notable comes from Nassim Taleb, author of the Black Swan.

As a reminder, Black Swans are rare events that:

  1. Are unpredictable in advance

  2. Are deeply impactful

  3. Seem predictable in hindsight.

Black Swans are the events that define history. They are the things that humanity will still care about 100 years from now. Things like the fall of the Roman Empire, Pearl Harbor, the rise of the Internet, and September 11th.

For Taleb, improving our Superforecasting on non-Black Swan events would be great. Except that such improvements are a waste of time. These events don’t matter. And the events that do matter can’t be predicted. Foxes, according to Taleb, are winning at the wrong game.

Taleb prizes slugging percentage (how far you hit the ball) over batting average (how often you hit the ball).

More and more, Bitcoin is becoming my one big thing. I view almost everything from political events to my paycheck through Bitcoin-tinted glasses. Bitcoin really, REALLY matters. I’m becoming a Bitcoin Hedgehog.

Like a true fox though, I’m try to self-assess. What are the best parts of each school of thought? Can I be both?

This is confusing and disorienting, but I remain confident in one thing:

Bitcoin, the reinvention of money, is a Black Swan. Bitcoin will change us more than we change Bitcoin. Bitcoin comes around once in the history of a civilization.

And I’m grateful to be alive for it.

Thanks for reading! If you loved (or hated) this post, please forward it and share on social media 🙏. I’d also like to hear what you think about it. Hit me up on twitter @canthardywait

P.S., for those of you wondering why my twitter handle has a 🦊 & a 🦔, now you know.

Sources & Further Reading:












Dale Carnegie was totally wrong.

Proof-of-Take (#008): a dose of perspective and context in the world of Bitcoin

Welcome to Proof-of-Take. The separation of Money and State, enabled by Bitcoin, will happen in our lifetime. It will be one of the most important developments in the history of civilization. This is on-par with inventions like the printing press, antibiotics, and the internet. By the end of it, we may even be able to explain what a blockchain is.

As always, nothing below is investment, legal, or relationship advice.

Dale Carnegie famously wrote How to Win Friends and Influence People

Dale Carnegie famously said:

Be more concerned with your character than with your reputation, for your character is what you are, while your reputation is merely what others think you are.”

And now, Dale Carnegie is famously, utterly wrong.

Character is important. But reputation is everything.

This may have been good advice before the information age. But the game has changed. There are three ingredients rendering this advice is wrong, each uniquely enabled by the internet.

The Black Mirror Effect

The internet has uniquely enabled us to measure, track, and permanently record reputation. This manifests in everything from a Yelp review, to your Uber score, to China’s new dystopian “social credit scoring.”

I name this “The Black Mirror Effect” due to an episode of the series taking place in a world where reputation literally is everything. Everyone has their own personal Uber rating — for every single interaction. People walk around constantly rating each other. From your best friend, to the ticketing agent at the airport.

In the show, a world of “highly rated” and “lowly rated” people emerges, with the high status people prohibited from accessing things like public places and airplanes. We’re not so far off from this world.

Today, your reputation permanently follows you, like a shadow. And governments, companies, and other people stand ready to weaponize it against you if it suits their needs.

The New Prestige Economy

A good reporters say follow the money. A good social psychologist says follow the prestige. People everywhere, particularly young adults, chase prestige like nothing else. Prestige can be a competition of who has the most beauty, athleticism, intellect or money.

According to Jon Haidt, as examined in his new book The Coddling of the American Mind, a “New Prestige Economy” driven by “callout culture” has emerged in certain pockets of society — namely college campuses.

In his words: “It emerged in ~2013. In the New Prestige Economy you gain prestige by calling out others. Accusing them of racism, sexism, homophobia, islamophobia, or some other form of bigtory… If we have an economy of prestige where I gain prestige by these callouts, there’s an cost imposed on the people I accuse, which doesn’t effect me.”

Nassim Taleb would call this problem: no skin in the game. In economics it’s called an externality. So we have a new economy with negative externalities. Just like companies who pollute rivers — they don’t directly bear the cost, so they increase their activity too much — past the optimal point for society as a whole.

Note that this economy too is uniquely enabled by the internet. Information is now ubiquitous and everyone has access to instant, mass communication. Sending a tweet, forwarding an email, or leaving a review on ratemyprofessor.com is trivial.

*I will of course make the MASSIVE caveat here that heinous actors who perpetrate crimes against people should be called out. Whistles should be blown. However, I think Haidt has hit on something more nuanced.*

(Here’s a good podcast with Haidt and Sam Harris further discussing this topic)

The Court of Public Opinion always gets its pound of flesh

The hallmark of the US justice system is built on the principle of “innocent until proven guilty.” We have this so that everyone enjoys “due process” under the law. It’s in the Constitution.

The hallmark of the Court of Public Opinion, is the opposite. You’re guilty until proven innocent. And the Court of Public Opinion plays judge, jury, and executioner.

Declaring someone guilty (aka destroying their reputation) without due process is bad enough. However, the court of public opinion routinely demands punishment for the crime. And they have a thirst for blood.

Typically, demanding that someone be immediately fired from their job is a good start for a crime committed in the court of public opinion. In some cases, only full exile from society would satisfy the bloodlust.

Again, this is uniquely enabled by the internet. Via social media, the court of public opinion is able to publicly twist corporation’s arms to take swift action.

My caveat above applies here. However, I’m not convinced that process (trial by social media) or outcome is fair crime. Regardless, this is our new reality. You’ve been warned.

There are many examples of this of the years, but here’s an interesting book on the topic.

Dale Carnegie’s advice, that character is more important than reputation, now sounds quaint. And entirely wrong.

How would Dale survive in China’s social credit system? Or on a modern college campus? Or on trial in the court of public opinion?

Thanks for reading! If you loved (or hated) this post, please forward it and share on social media 🙏. I’d also like to hear what you think about it. Hit me up on twitter @canthardywait. This post was inspired by a twitter conversation with my friend Sar

Crypto Shenanigans™: a new framework for scams

Proof-of-Take: a dose of perspective and context in the world of Bitcoin (#007)

Welcome to Proof-of-Take. I believe the separation of Money and State, enabled by Bitcoin, will happen in our lifetime. It will be one of the most important developments in the history of civilization. This is on-par with inventions like the printing press, antibiotics, and the internet. By the end of it, we may even be able to explain what a blockchain is.

As always, nothing below is investment, legal, or relationship advice.

Crypto is suffering from a “fake news” problem.

No, I’m not referring to the baseless FUD (Fear, Uncertainty, and Doubt) that people like Nouriel Roubini and Paul Krugman are spreading.

The problem is how we use certain words.

Words matter. And some words get so weaponized and distorted from their original intent that they lack any meaning whatsoever.

In today’s political climate, it’s the term “fake news.”

In Bitcoin, it’s the term “scam.”

Below, I’ll discuss why “scam” needs a precise definition, the history and misuse of the term, and propose a new framework and term, Crypto Shenanigans™, to describe some of the acts we see.

You can barely dip a toe into Crypto twitter without seeing the word “scam.” Folks use it to describe everything from actual Ponzi Schemes to Venture Capital firms to merchants who accept bitcoin.

You may be thinking, “yeah, people play fast and loose with the word scam, so what?”

The problem boils down to two factors: reputation and asymmetry.

As we’ll see below, the original meaning of a “scam” was a deliberate act. A “scam” is perpetrated by a “scammer.” Being labeled a “scammer” is like getting a very bad review on Yelp — the target suffers reputational harm. And reputation is everything.

To quote the prescient 1988 Crypto Anarchist Manifesto, a Bitcoin equivalent of the Federalist Papers:¹

In the age of the internet, reputations will be of central importance, far more important in dealings than even the credit ratings of today.

Which brings us to asymmetry. On the internet, reputational attacks are asymmetric: they’re easy to commit and difficult to defend. It takes almost 0 effort to lob accusations that get seen be millions of people. And this can be done using an anonymous avatar that doesn’t stake a real-world identity to the accusation. So while calling someone a “scammer” can take 15 seconds, no proof, and no risk (skin in the game), successfully rebutting that accusation can cost massive amounts of time and money. There are many recent high profile examples of people’s reputation (and lives) being dismantled via internet mobs². Expect this trend to continue.

Today, reputation is both more important and more fragile than it’s ever been. We must be precise on the meaning of a “scam.”

The Anatomy of a Scam

So then, what is a scam?

The dictionary defines “scam” as using dishonest methods to acquire something of value.

Under US Law, a scam is not formally defined. You can’t be sued or jailed for committing a “scam.” The closest unlawful acts are “fraud” or “misrepresentation.”

And yet, regulators use the term scam everywhere!

Here’s a page from the SEC website designed to educate investors³

Here’s FINRA, Wall Street’s self-regulating entity, discussing scams⁴

What exactly is the difference between a scam and merely a bad investment? After all, the SEC was created to protect investors from scammers, not themselves.

For a “scam” to be punishable as an unlawful act like fraud, it generally require two things. First, the scammer must have knowledge or intent to commit the act. Second, the information conveyed in the scam has to be “material” (aka important). If you were an investor, would that particular fact matter?

Make no mistake, this is an extremely high burden of proof. Proving actual knowledge or intent is the highest standard in our legal system, and materiality is entirely subjective and depends on the particular facts at hand.⁵

So “scam” is not a legal term, but it’s widely used & accepted by the SEC, FINRA & Crypto twitter. Contrast this with other words. If I call someone a murderer, a drug-dealer, or a jay-walker, it’s pretty clear what act they’ve committed. Call someone a scammer, and I’m all like:

The state defines laws—not morals. And often the link between the two is tenuous. After all, there are plenty of things that are lawful but unethical (cheating on a significant other, berating the waitstaff, ghosting someone on a dating app, or most types of lying) and plenty of things that are unlawful, but perfectly ethical (smoking weed, jaywalking, and the infamous “sodomy laws.”⁶) These so-called victimless crimes are preposterous. If an act has no intended victim, it shouldn’t be a crime.

Taking back the power

Betting on the state to coherently define a “scam” is a losing proposition.

Therefore, I propose we take back the power, and clarify what people mean when they call something a scam.

Acts described as scams usually fall into one of three categories.

Category 1: Deliberate fraud

Category 2: Crypto Shenanigans™

Category 3: Literally everything

Category 1 is the most morally and legally culpable — and consistent with the original meaning of a scam. Categories 2 and 3 are more nuanced. I describe each below, with a focus on Crypto Shenanigans™— a new term I’m proposing here.

Category 1: Deliberate Fraud

There is little controversy in describing Category 1 acts as scams. These actors provably and knowingly deceived others for their own enrichment. Category 1 acts are the closest to the original meaning of scam (deliberate fraud). Some examples:

Pump and Dump: In a pump and dump, the perpetrator deliberately spreads false and misleading information about an asset to cause a price increase (the “pump”), then sells the asset at a higher price to unsuspecting rubes (the“dump”). In Crypto, this infamously happens on the messaging app Telegram.⁷

Exit Scam: Here, a “promoter” launches a new project based on a promising idea; then raises funds via cryptoassets from various investors, usually via crowdsale (ICO); the promoter then pretends to work on the project for a time; and then they disappear with the crypto, leaving the investors holding the bag. Importantly, crypto transactions are basically irreversible, so possession is 10/10ths of the law. When the coins are gone, they’re gone.⁸

Ponzi Schemes & Pyramid Schemes: These scams pay profit to earlier investors by luring in new investors, who in turn are promised profits by recruiting even dumber money. Compare this business model to, you know, actually creating & selling something of value. Think Bernie Madoff, but with a token.⁹

Dishonest Exchanges: There are many examples here, with Mt. Gox being the most famous. Exchanges are basically banks, so behavior like lying about account balances, solvency, and whether it’s been hacked can have grave consequences. These acts are punishable by law and can cause ‘bank runs’ — where all customers rush to get their money out at the same time. Imagine a fire in a crowded movie theater with everyone running for the exits. The best defense against dishonest exchanges is to never, ever, store your cryptocurrency on an exchange.

Category 1 Scams can be punishable under US civil and criminal law. You don’t want to be a Category 1 Scammer.

Category 2: Crypto Shenanigans

Describing Category 2 acts as “scams” feels inappropriate, as they’re not necessarily illegal or even unethical. They’re more like shady or sketchy behavior that makes your skin crawl. These are more “bad looks” than “bad acts.” So we need a new term. I’ll call it Crypto Shenanigans™. These are moral hazard problems, which create interesting ethical dilemmas and gray areas. Each case is unique, and facts matter. The below acts warrant deeper exploration than this post, but I’m hopeful that identifying them can spark a productive conversation.

Why Privacy Matters (Proof-of-take #006)

Proof-of-Take: a dose of perspective and context in the world of Bitcoin

I have some bad news: you’re currently a prisoner. So am I. And the worst part is, we don’t even know it. Modern surveillance is our warden.

Privacy in most parts of our lives has been chipped away. We’re constantly being surveilled.

  • Some of this happens through straight-up, “1984” style government surveillance: The Patriot Act, the modern banking system and Edward Snowden / NSA.

  • Some of it happens by tech companies: Google stores your search history, Facebook profits from your data, and Ashley Madison records all of your infidelities 🍆.

  • And some of it happens via changing cultural norms. We’re in the age of oversharing. It’s expected for people to put their entire family albums on Instagram, their thoughts on Twitter, and not uncommon for emails and texts to show up on the front page of the New York Times.

So, what’s the big deal? You might be thinking “Yeah, I don’t love that the NSA is spying on me, and that Google and Facebook know everything about me, but I’m harmless, so I’m okay with it.”

This mindset is dangerously misguided. Because it has the logic exactly backwards. You’re not agreeing to surveillance because you’re harmless, you’re harmless because you’re being surveilled.

Today, we live in a Panopticon. The Panopticon was a surveillance invention from the 1700s designed for prisons. It’s an enormous tower at the center of the prison where those in power could, at any moment watch any inmate. Although they couldn't watch all inmates all the time, the inmates couldn’t see into the Panopticon, so they never knew if they were being watched or even when. They rationally assumed they were always being watched.

Science tells us that if somebody knows they’re being watched, their behavior changes. Today, we’re always being watched watched. So today, behavior is always being changed. And the worst part is that this happens subconsciously— we don’t realize this is happening.

I can’t say it any better than this TedTalk on Privacy by Alan Greenwald. If you remember one thing from this post, remember this:

Surveillance creates a prison in the mind that is a more subtle and effective means of fostering compliance with social norms or with social orthodoxy. It’s much more effective than brute force could ever be.

When we live in surveillance, we subconsciously decide that certain behavioral choices are off-limits, without even knowing we’re making that choice.

Whenever voting season gets close, a social pressure emerges. People proudly don their “I Voted” stickers, and those who don’t vote are often chastised by those who did. Sayings like:

  • “It’s your democratic duty to vote”

  • “People died so you could vote”

  • “What if everyone thought like you?”

I’m not here to argue with any of the above. But what if the energy channeled into promoting voting was instead channeled into privacy? Like voting, privacy is essential for our democracy, freedom of expression, and inalienable rights. And while we vote (or don’t) every two years, we need, and (surrender), our privacy every. single. day.

So what does this have to do with Bitcoin? Well, everything. Bitcoin is the love child of the 2001 Patriot Act and the 2008 Financial Crisis. Financial surveillance is one of the government’s most powerful tools. Everything from political donations to medical purchases is viewable by those in power. And as paper cash dies out, and all money becomes digital, that power grows exponentially. Bitcoin offers an alternative.

I’ll end on a more hopeful note from the TedTalk:

Humans are social creatures. We crave companionship, approval, and love from others.

But equally essential to what it means to be a free and fulfilled human being is to have a place that we can go and be free of the judgmental eyes of other people.

Thank you for reading! Like it? Hate it? Still processing it? Please share it with a friend or enemy, and tell me why I’m wrong. Let’s continue the conversation; the best way to reach me is on Twitter — I’m @CantHardyWait.

Bitcoin: The Separation of Money and State (Proof-of-take #005)

Proof-of-Take: a dose of perspective and context in the world of Bitcoin

Welcome back to Proof-of-Take:

It’s been a while, sorry I ghosted you 👻. I was having trouble finding time & energy to write detailed posts. I’ll try to send more frequent, shorter, and informal ones.


I have a confession. Initially, when I set out to write this newsletter, I said it would be about “cryptocurrency and blockchain technology.” I lied.

I want to be honest with you, and honest with myself. My thinking has evolved: I’m interested in Bitcoin, and Bitcoin alone. Why?

The separation of money and state is the most important problem for civilization to be working on right now. And Bitcoin gives us the best chance at that.

The Founding of the United States gave us the separation of church and state. It was a radical idea at the time, and codified into the US Constitution. Bitcoin gives us the separation of money and state. It was a radical idea at the time, and codified into the Bitcoin Source Code.

The United States was an insane experiment. Previously, government and religion were joined at the hip. Today, we view government and money the same way.

The power to say “what is money” and then print is an immense privilege and responsibility. With this power, governments can ditch their accountability to the public (adios “Democracy”) and royally screw over their citizens.

Lack of Accountability: Printing money means the government doesn’t need to tax us each year to pay for things like trillions of dollars in military spending. Must be nice. Worse, the US low-key uses the banking system as a 4th branch of government. The government decides who can be a bank. The government tells banks what transactions to allow. The government can snoop on a bank’s customers. And if the bank flinches at any of this, the government can threaten to revoke its license. This effects things like Wikileaks, but also weed companies 🌲, sex workers 🍆, and others operating in legal gray areas.

Screwing its Citizens: We don’t need to look far to see what happens when government money policy goes haywire. Just google “Hyperinflation” and Argentina, Germany, or Zimbabwe. Throughout history, if you had the bad luck of being born in a place that mismanaged the money policy, your wealth could be completely destroyed.

Where does Bitcoin come in?

To be clear, we won’t get multiple attempts at the separation of money and state. We have one chance, and it’s Bitcoin.

We got one shot at creating the internet, and it’s left many people disappointed. There’s a small group of tech companies who own our data, sell it to the highest bidder, and decide who gets to exist online. Imagine trying to reinvent the internet? It’s a project so ambitious that it borders on lunacy.

Decentralized, distributed money has the same risks and ambition. We must get it right the first time for a couple of reasons. First, money has “network effects.” It’s more convenient to use one currency. So whichever money wins, we’ll be stuck with it for a while. Second, if this decentralized experiment fails, then people will never trust anything like it again. A reputation takes a lifetime to build up and one catastrophic bug to destroy. Bitcoin is no different.

So, why Bitcoin over all the others?

We’ll dive deeper next time.

Thank you for reading! Like it? Hate it? Still processing it? Please share it with a friend or enemy, and tell me why I’m wrong. Let’s continue the conversation; the best way to reach me is on Twitter — I’m @CantHardyWait.

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