In this episode of Bitcoin Study Sessions, Lucas and Grant continue their discussion of "Reflections on Political Economy After Bitcoin," focusing on the first essay, "What Satoshi Did" by Andrew Bailey and Craig Warmke, which explores Bitcoin's social layer, Satoshi's role in bootstrapping the network, and Bitcoin as a feral institution.
Key Topics:
Summary:
The discussion begins with an overview of the first essay in the anthology, "What Satoshi Did," which outlines three key ideas: Bitcoin's social layer, Satoshi's successful bootstrapping of the network, and Bitcoin's nature as a feral institution akin to a natural language. Bitcoin's layer one consists of the machines, protocol, and asset, while layer zero is the social layer involving people like node operators and users. The authors argue that this social layer resists easy duplication, unlike the technical aspects of Bitcoin.
Satoshi's role in bootstrapping the Bitcoin network is examined through the lens of marketing, greed, and departure. As a marketer, Satoshi made strategic decisions like choosing the name "Bitcoin," designing the logo, and launching the project through cryptography mailing lists. Tapping into the human incentive of greed, Bitcoin's limited supply, difficulty adjustment, and emission schedule motivated early adoption. Satoshi's departure from the project is crucial as they didn't sell their coins or pre-mine, allowing the network to mature and transition to a leaderless protocol. The hosts emphasize that without Satoshi's departure, Bitcoin might not have survived with its current strength.
Game theory is employed to explain how Bitcoin, as a new network, gained traction against the established financial system. Despite the psychological precedent favoring existing networks, Bitcoin's advantages for certain individuals, combined with Satoshi's visible defection and costly support, enabled the network to bootstrap from zero to one. This leads to the concept of Bitcoin as a feral institution, engineered but released into the wild, resembling a natural language due to its reliance on conventions and the increasing value it gains with more users.
The hosts further discuss how Bitcoin as an institution solves a coordination problem by establishing the Bitcoin protocol, a set of rules that people are motivated to follow to exchange value. They then dive into the comparison between a natural language like English and Bitcoin and highlight that both are reliant on sets of rules and conventions.
In wrapping up, the conversation touches on the significance of Satoshi's actions in setting Bitcoin free, akin to the founding fathers of the United States. The hosts emphasize the importance of understanding Bitcoin's social layer. They also reflect on the benefits of being part of a project where one can pass down their knowledge and skills to others. Looking ahead, the next episode will delve into Natalie Smolenski's essay, "Toward an Anthropological Theory of Money," which promises a different perspective on Bitcoin's role in society.
