Sunday, 29 September 2019

Alternatives to cryptocurrency for seasteads

Frequently, cryptocurrency and blockchain technology (crypto for short) is cited as a necessity for a functioning seastead. In the long term, when or if seasteads are large enough and economically important enough to fight for sovereignty, having your very own currency makes sense.

However, Cryptocurrency works best in places with a robust internet infrastructure to back up digital transactions, and where there is a critical mass of people in an area willing to trade their goods and services for the currency. In the early days of floating hamlets though, better alternatives to crypto exist.

In this article, I state my case against early crypto adoption in seasteads and describe some alternatives. Before you get your pitchforks, remember what Joe Quirk said: "Seasteading is all about experimentation." Hopefully we'll see different approaches play out, and let the best ones thrive.

 What is cryptocurrency?


Typically*, it's digital de-centralized cash. It's decentralized because no central authority controls the supply of it. The creator of Bitcoin has no more or less ability to create more coins than any other miner. The current total supply is public knowledge, as the amount available in the future. This scarcity isn't controlled by anyone, or even everyone, but by a cryptographic protocol called blockchain. This same blockchain ensures and facilitates the transfer of bitcoin from one anonymous address to another.

This all is in contrast to centralized currency, sometimes called 'fiat', which has value because an authority like the European Union or Facebook claims it has value. Like fiat cash (and unlike other digital transactions like credit cards), transactions in cryptocurrency do not implicitly come with an identifying record of the transaction.

In summary, crypto* has three features that make it money as real as any other currency: scarcity, transfer-ability, and resistance to counterfeiting, all of which are maintained by a network of computers running an open-source protocol called blockchain.
               
* Bitcoin and its forks, in particular.
               

Why is crypto popular among seasteaders?


Seasteaders want to build permanent economies, which requires a currency, but they want maximum independence from each other and from land-based governments. The groups that have adopted crypto and the people looking to seastead have a substantial overlap: they want independence from a central authority figure, whether that figure is government or corporate. Cryptocurrency provides the independence that seasteaders crave.
               
Further, many issues with security and scalability have been tested over the last 8+ years with the original, and largest, cryptocurrency Bitcoin.


So what's the problem?


A few more small things: Bitcoin continues to experience massive swings in price compared to other currencies. Other cryptocurrencies are smaller and even less stable. A network of computers is harder to maintain at sea than on land, giving 'miners', those who make money by maintaining the cryptocurrency network, a disadvantage compared to their land-based competitors. The market cap (or rather, the open interest) of even the largest cryptocurrencies is small enough to be open to manipulation and intentional destabilization a hostile authority.
               
But the big one is that a crypto-based economy is top heavy. At the moment, there are too many people intending to make their money on crypto and not enough people willing to produce goods and services in exchange for that crypto. In developed economies, bitcoin is traded for fiat currency as if it were a stock in a company, but rarely is used as a means to purchase things. Seasteads, especially in the early days, will depend on trade with these established economies.
               
                

What could be done in the interim?


Produce commodities with similar properties (fungible, transportable, hard or impossible to counterfeit), but ones that have an intrinsic value even without the claims of a network or a central authority. Namely, core necessities like energy and food.
               

What are some alternatives?


Hydrogen. 

Figure 1 is a Hoffman apparatus. It's simple to make, and with an electrical current it converts water into hydrogen and oxygen gases. Figure 2 is a fuel cell. It converts hydrogen and oxygen into water and electrical power. Oxygen is plentiful in the atmosphere, but hydrogen almost non-existent (it's too light, and eventually 'boils' out of the atmosphere). Hydrogen gas is scarce, impossible to fake, and is immediately valuable as an energy source. It can be produced from any surplus electricity, so wind, waves, and solar power can all become passive sources of income.

 
Figure 1, a Hoffman apparatus for turning energy into hydrogen.
                

Figure 2, a fuel cell for turning hydrogen into energy.

As a basis for a currency, hydrogen has one more property that makes it good for economies; it leaks. Hydrogen gas is extremely hard to store for long periods of time. Being the smallest, lightest, molecule there is allows it to slowly leak out of most tanks. That's a engineering problem, but for an economy, it's a boon because it comes with its own incentive to be spent and not hoarded.
               
If you want to store your energy with more stability, you may instead want to produce...
               

Gasoline. 

Through air-to-fuel technology like those currently being scaled up by Carbon Engineering, you could convert carbon dioxide and electricity into gasoline. This can presumably be combined with some other activity that would otherwise release greenhouse gasses, such as the co-generation of electricity from biomass. The biomass itself could be produced cheaply as seaweed or as food waste. As a major bonus, the carbon that is released from burning the gasoline is the same carbon that was stored in the biomass, making an approximately carbon neutral alternate to mined fossil fuels.

In short, out with the dollar (and bitcoin), and in with the Kilowatt hour.

Rare earth magnets. 

For example, coltan and neodymium. These are considerably more common than precious metals like gold and silver, so they can be used for smaller values. Their content can be tested at a distance by measuring their magnetic strength instead of a much slower method like a scratch test. Also, rare earth magnets are critical for technology like consumer electronics and wind turbines, so they have an intrinsic engineering value.
               

Fiat currency. 

It's a bitter pill to swallow, but there's a lot of places that are outside of US control that use US dollars as a de-facto currency. Early seasteads could be some of these places. Using a currency already accepted by a host nation means one less barrier to trade.

Interested? Enraged? See my other articles on...

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