Recently, I’ve been thinking about the similarities between Bitcoin, and a can of shit.
Bitcoin has been around for over a decade now. Long enough for people to take the measure of it. Netscape Navigator, which basically created the Internet as we know it, was released in version 1.0 in December 1994. Think of what happened to the internet in the decade 1995-2005. Think of what happened to airplanes in the decade after the Wright Brothers’ first flight in December, 1903. In October 1947, Chuck Yeager broke the sound barrier in the X-1 rocket-propelled airplane. In January 1948, Orville Wright died.
One thing we discovered, is that Bitcoin is a pretty crappy payments system — so bad that Stripe, one of the world’s biggest payments processors, and one of the first to accept Bitcoin in 2014, recently ended its support of Bitcoin. Statistics of Bitcoin’s infrastructure requirements are a sort of joke of environmental wastage. The computers that are used to maintain the system, known as “mining,” use more electricity than the country of Austria. By one estimate, Bitcoin alone (not even counting hundreds of other, similar cryptocurrencies) consumes about half of all data center electricity worldwide.
On a per-transaction basis, a single Bitcoin transaction consumes enough electricity to power a Tesla automobile for about 2,409 miles.
Of course, all this power costs money. The Bitcoin network consumes a ton of cash.
There is a lot of variability, but it was recently about $300m/month, or $3.6 billion per year. To maintain a simple database.
This money has to come from somewhere. Bitcoin transaction fees have also been all over the place, typically between $1-$5, but recently at $13. More expensive than a stock market transaction.
Although a lot has been made of Bitcoin’s limited supply, there is an unlimited potential supply of Bitcoin-based alternatives. The software is open-source, and can be replicated at will. Hundreds of cryptocurrencies have used Bitcoin’s basic protocols, perhaps with a few minor tweaks (mostly, improvements).
So, what’s up with Bitcoin?
It occurred to me that Bitcoin has a lot of similarities with other “collectibles,” such as art; particularly, art in limited-edition series.
Artist’s Shit, or Merda d’artista in Italian, was created by Italian artist Piero Manzoni, in 1961. It was apparently created in response to his father, who owned a canning factory, and told his son that “Your work is shit.”
Manzoni created a limited edition of 90 cans. To make the point that “his shit is worth more than its weight in gold,” he originally sold his cans of shit based on the market price of gold. Since this was about $35/oz. in those days, the original price was about $37.
The most recent transaction was in August 2016, for one can at a price of 275,000 euros. This shit has handily outperformed gold, and also the SP500 since that time. It has maintained a high value over a period of nearly 60 years.
Like Bitcoin, Artist’s Shit can be easily reproduced. Any idiot can put shit in a can. But, it wouldn’t be Artist’s Shit. Because, Artist’s Shit is special.
Along the way, the people who maintain the market in Artist’s Shit — Sotheby’s, for example — have themselves made some nice coin. The casino always wins.
I think the other analogs between Bitcoin and Artist’s Shit are apparent, so I will end with a nice piece by monetary historian JP Koning, who came to a similar conclusion.
