B2X: Don't Believe the Lies

Wether you get B2X coins in a ratio of 1 to 1 or 1 to 2, or 1 to 10, the result is the same. However, while the value of the coins obtained remains the same, the subjective values of the crypto community are severely affected. Satoshi Nakamoto was a self proclaimed libertarian and as such he would never agree to violating another's property. The B2X team with this move proves itself not only economically illiterate but also morally bankrupt.

SUMMARY

Satoshi Nakamoto is a rich man, estimates suggest that he owns over one million Bitcoins. However, since no one knows who Satoshi Nakamoto (if that is even his real name) is and since his stash has remained untouched, some people have assumed these coins as lost and therefore free to take. Several schemes have been devised to circumvent cryptographic security and get a hold of these coins with most recently the idea to fork Bitcoin and redistribute Satoshi's coins proportionally to all Bitcoin holders. Of course there's no such thing as a free lunch and so too in this case. Yes you will be getting free coins, no your portfolio will not gain (long term) value. Increasing everyone's share of the money supply and everything else staying the same means no one's wealth effectively grows. I will explain why in detail below, but intuitively this should be clear. Any other scheme to take Satoshi's coins aside from finding his private key which, unless he kept it somewhere unsafe, is cryptographically infeasible, would not leave you better off. Any scheme to touch Satoshi's Bitcoin stash will involve either (1) redistribution to everyone or (2) redistribution to not everyone (some person or group). It should be clear that the latter case will not leave you better off unless you are part of that group. In the first case we have either a (1a) proportional distribution or (1b) equal distribution. With (1a) you will end up better nor worse off and with (1b) you may end up better off if you are very poor, but many people will end up worse off.

TIME-PREFERENCE

The expression "time is money" is not just an annoying platitude. If I offer you $10 now or $10 tomorrow, you would probably take the $10 now. However, If I offer you $10 now or $20 tomorrow things get interesting. Different people will choose differently based on their personal time-preference. If my kids are starving I will take the $10, but if my belly is full and i have a place to sleep I might go for the $20 tomorrow. We see that time-preference therefore is not just an inherent quality but also a situational one. If I offer you $10 today or $1,000,000 tomorrow, but you were sure an asteroid was going to hit the earth tonight and wipe out all life, you would likely take the $10 and hit the local bar. A high time-preference is when you highly prefer time over other things. For example, someone with high time preference might take the $10 today whereas someone with low time preference might take the $20 tomorrow. The person with low time-preference is more willing to save resources and spend time, the person with high time-preference is more likely to save time and spend resources.

TIME-PREFERENCE AND WINDFALL GAINS

Why are we talking about time-preference? Because it is important to understand what effects inflation has on individual spending behaviour. Suppose you win the lottery and gain a substantial amount of money, what happens to your time-preference? All other things remaining the same, we would likely see your time-preference increase. That is, if you suddenly found your lot improved you would want to spend now rather than save for later. Conversely, if you suddenly lost a significant amount of money your time preference will increase and you will tend to save. Most people will probably have had the following experience. You check your bank account and find your balance is lower than expected, and suddenly your behaviour changes. You find yourself being more conservative with your money, spending less and saving more. You experienced going to a state of lower time preference.

But what if everyone experiences windfall gains at the same time? We can look at the two cases (1a) and (1b) as described above.

PROPORTIONAL DISTRIBUTION

In this situation, the situation the people at b2x-segwit.io want to create, everyone gains an amount proportional to the amount of Bitcoin they currently own. The scheme would be something like this. Say I own 1 Bitcoin, and the people at B2X somehow determined that there are one million ownerless Bitcoins to be redistributed. We calculate the share I hold in the total amount of circulating Bitcoins minus those unowned, and allocate to me that same share in the one million previously ownerless bitcoins. Of course there is no way for the people at B2X to actually access these coins, so I will receive 1 B2X coin plus a proportional share in the one million Satoshi B2X coins. In this situation, these windfall gains increase my time-preference and I am looking to spend more. However, since everyone gains, everyone's time-preference goes up and everyone is looking to spend more. Moreover, everyone gains proportional to what they had, so everyone's time-preference increases about the same. Accordingly, because everyone is looking to spend and not save, the value of the coin goes down proportional to the proportional increase.

Another way to look at this situation is the following. Suppose Satoshi's Bitcoins are lost forever, what does this do to the value of your Bitcoins? Likely nothing. The coins were already out of circulation and do not affect the free market process that determines the price of your coins. Satoshi's Bitcoins, for all intents and purposes, can be considered non-existant with no effect on the current market situation. Now suppose we have the power to double the supply of Bitcoin by giving everyone double what they have. What is likely to happen? Since we double the supply, all other things remaining the same, the demand is likely to halve and the price with it. We can expect the price of one Bitcoin to halve and since everyone now owns two Bitcoins for every one they had, everyone's lot stays the same. This arbitrary relabeling does not affect the value.

With all this in mind the promise the B2X fork makes to give "all BTC holders will receive not only B2X in the ratio of 1 to 1, but also a proportional number of Satoshi Nakamoto''s Bitcoins as a reward for their commitment to progress" really doesn't mean anything. The fork would be just as valuable without touching Satoshi's coins. Wether you get B2X coins in a ratio of 1 to 1 or 1 to 2, or 1 to 10, the result is the same. However, while the value of the coins obtained remains the same, the subjective values of the crypto community are severely affected. Satoshi Nakamoto was a self proclaimed libertarian and as such he would never agree to violating another's property. The B2X team with this move proves itself not only economically illiterate but also morally bankrupt.

EQUAL DISTRIBUTION

There is not much to be said about this situation. It is not only equally morally bankrupt, it is more so. Suppose we could obtain Satoshi's Bitcoins and distribute them equally to all addresses. What happens individually? In so far as the amount of Bitcoin you hold have value in accordance to what share of the total amount of Bitcoin it comprises, the value of your account rises or drops depending on wether your share increases or decreases after the distribution. To make this clear, consider the following example. There is a group of five people, and among them they have $15. The money is not equally distributed, there is one person who owns $5, the others all own $2.50. Now we come along and inflate the money supply by $10 which we distribute equally, giving everyone $2. What happens? We now have one person who owns $7 and four who own $4.50. The total amount of money is now $25. The one person used to own one third of the supply, but now owns little over one fourth. The other people used to own one sixth, but now own over one fifth each! We see that the wealth of the first person decreased, and the wealth of the other four increased! However, did we create value? No, we simply changed the distribution of it. Therefore, the value the other four have gained was taken from the first person.

Equal distribution in this way always results in taking wealth from some and giving it to others, a.k.a. theft. In this way, we are not only stealing from Satoshi Nakamoto, but we are also stealing from many other innocent people! It is worth noting that the same thing happens if we were to distribute his coins to not everyone but just someone or some small group. The Bitcoins obtained are not inherently valuable, but obtain their value from being a share of the total amount of Bitcoin in circulation. Increasing this total amount therefore equates to taking value from others, a.k.a theft, and theft is wrong.

CONCLUSION

Satoshi Nakamoto's Bitcoin stash is best left alone. Not only is stealing wrong, but any scheme of redistribution of these coins will do nothing in the best case or harm many people in the worst. No good result for everyone can be obtained by redistributitive schemes. We can conclude either one of two things about the B2X team, either they are incompetent or immoral. Either they are not aware of the economic inconsequentiality of their scheme, or they are aware and have ulterior motives. In either case it is important for everyone who benefits to realise that no one stands to gain from this scheme but the forkers. Spread the word, don't get duped.