Avainsana: Bitcoin

  • Reviewing “Defending Bitcoin” by Luke de Wolf

    Reviewing “Defending Bitcoin” by Luke de Wolf

    Bitcoiners in the Nordics and readers of the BTCHEL newsletter The Nordic Node know full well that the Nordics are crazy-full of incredible Bitcoin authors. Kalle Rosenbaum, Ioni Appelberg, Morten Søberg etc, etc.


    When Defending Bitcoin by our in-house security expert and BTCHEL programming master Luke de Wolf was published back in June, we ran a Nordic Node issue and an exclusive Q&A-type interview with him about the book. What was most astonishing was how quickly it had all come together: idea-to-print in about six months. The book has been incredibly successful, with endorsements and mentions by Jeff Booth, Lyn Alden, Lawrence Lepard and more, and has sold about 500 copies!

    At the same time, I wrote a (slightly more critical) book review for Bitcoin Magazine’s Print magazine where my book review columns (“Book’s Books”) have more of an elegant and/or ranty feel to them.

    Today, I release that one online — all 1,700 words of it! Bear with me!




    The book is for sale at the Bitcoin Infinity Store (for BTC) and Amazon (dirty fiat) and most online places… if you’re in Lugano for Plan B Forum this week, it’s available there as well!


    This review ran in Bitcoin Magazine Print, in the Quantum Issue (#42), the mentioning of it here was a condition for republishing. It was written in June, at the height of the BIP-110 drama and before the fork failed.




    Whenever someone comes out claiming to save Bitcoin, it’s always unclear exactly from whom or from what, and whether the saving is all that very useful; a new moron with a savior complex, scaling a Dunning-Kruger curve, is born every minute.


    Luke de Wolf’s Defending Bitcoin isn’t like that — at least if you can stomach Chapters 11 and 12, where his hard-hitting and controversial opinions about Bitcoin Core and “spam” transactions reside.


    The book itself is comprehensive, interesting, refreshing, impeccably written, and with a competent rendition of Bitcoin as money. It comes with an extremely slick promotional website at defendingbitcoin.com that the author promises to keep updated in the fast-changing landscape of software and security breaches.

    De Wolf’s unique niche is his professional background in industrial control systems (ICS) — the kind of software and informational processes that safeguard societal-level, critical infrastructure. Think power plants and gas pipelines, water systems or telecommunication. He treats Bitcoin as the society-critical infrastructure that it is, or at least will be (“Bitcoin isn’t a factory or a pipeline, but like them, it has to keep running, no matter what”, page 86).


    The introductory Bitcoin explainer is a bit rushed: unnecessary for the Bitcoin crowd and probably not detailed enough for the corporate security folks de Wolf is trying to sway. Still, it’s very competently done: correct, succinct, relevant — no qualms in recommending this book for an interested newcomer. 


    Laying out the framework for how to think about cybersecurity fundamentals (Ch 3) and ICSs (Ch 4) before moving on to the specific threat surfaces that apply to Bitcoin, grounds the mental models de Wolf uses. It’s balanced and careful, and both novel and surprisingly relatable to most Bitcoiners: “Ask yourself what you’re protecting, what it’s worth, and how much friction you’re willing to tolerate to defend it. That decision is yours” (page 63).

    The core of his framework is layered defenses and appropriate tradeoffs against multifaceted threats — “expected value” and “marginal costs vs marginal benefits” echo through my economics-trained head. Every additional defense comes with costs in creating it and upholding it, and the inconveniences in operating it. That makes the risk evaluation subjective, too: We may disagree over how risky we think a given threat is (and, separately, we may thus disagree over the protection costs worth incurring). You could spend an organization’s entire operating budget on solving increasingly marginal threats; at some point, it’s just not worth it anymore:

    “Cybersecurity is all about tradeoffs. The goal is to pick the right level of protection so that nothing gets compromised, without the protection itself getting in the way or costing too much” (page 53)

    In the more meaty chapters, filled with actionable lists and to-dos enough to take up several people’s full-time occupations, he’s definitely overwhelming said newbies… “Defending” Bitcoin, the network (as well as your own private keys) isn’t and can’t reasonably be a full-time commitment. For the sake of delivering a comprehensive treatment, it’s admirable that the author includes all this, but it’s also terrifying. All the ways in which I can go wrong…

    Hyperbolic Contradictions Won’t Rug the Spammers


    The arguments for either side of the broad schism running through Core-Knots, arbitrary data, mining (template) centralization, and node settings are presented competently and succinctly, only occasionally misleading. To de Wolf’s credit, they’re portrayed miles better than the often performative mudslinging we’re used to from Twitter or conference stages. This is the best possible version of the argument; whatever your stance on quantum, Bitcoin Core, Knots, or nonmonetary data on Bitcoin, Defending Bitcoin is the bright, shining star for considering these themes.

    De Wolf definitely goes too far at times, and he’s repeatedly too shilly for Knots and OCEAN.

    He plays fast and loose with “fungibility”, implying that anything impinging on one UTXO’s interchangeability with another undermines its use as money: “[I]f ‘clean’ Bitcoin spends freely while ‘tainted’ Bitcoin gets stuck in limbo, it stops working as money” (page 207). Gold and fiat, two rival monetary systems, have performed their monetary functions reasonably well, even with quite a lot of obstacles to their global fungibility.

    It’s true that Bitcoin’s don’t trust, verify ethos is meaningfully different than “every other monetary system [where] someone else decides what’s valid.” But it’s hyperbolic to conclude that unless a user runs a node, “everything above it works from a lie” (page 225). There’s a sliding scale of trust, the ease with which you could verify transactions and keys via other means and, in consequence, the vast number of unconnected, somewhat-trusted people around.

    De Wolf’s rundown of Ordinals, NFTs, and the OP_RETURN debacle happens in Chapter 11 (ironically, since some would consider these themes pretty bankrupt…). He admits that these “unwanted” components of Bitcoin are impossible to stop: “It’s always been possible to embed data on Bitcoin” (page 250), that “Bitcoin’s technical properties mean that anyone can embed arbitrary data through known means at any time” (page 263), and that “voluntary filtering alone can’t solve it” (page 263). He nevertheless spends the entire chapter assembling all the reasons nonmonetary data on Bitcoin is bad (“an abuse of a monetary network”, page 265), and recommends users running Knots to ever-so-marginally prevent these transactions relaying across the network: “Relay filtering through Knots is a preventative control that stops spam from propagating through your node” (page 265), and “Mining on a spam-filtering pool or with your own template is the surest way to keep non-financial data out of blocks” (page 264).

    The fact that these efforts are individually expensive and inconvenient, yet practically achieve nothing, should not detract from the noble fight against spam: 

    “In cybersecurity, we don’t stop putting up defenses just because an adversary is hard to stop. It may be impossible to completely stop arbitrary data on Bitcoin, but it’s absolutely possible to slow it down, force it into more difficult or more expensive vectors, and generally to repudiate it as a legitimate use of Bitcoin” (pages 262-63).


    De Wolf paints himself into a corner by admitting repeatedly that arbitrary data is impossible to stop, but that somehow it’s still incredibly important that you — yes, you! — do everything in your power to microscopically close this devastating hack.

    In these more controversial chapters, he straddles the line between dispassionate analyst and activist with a cause. The calls to individual action, no matter how minuscule or impotent, are entirely detached from the careful balancing of costs and benefits from the early portions of the book. “[D]on’t let convenience override the integrity of the system you’re protecting” (page 254), he writes, forgetting that “Low-impact things that don’t matter much aren’t worth considering” (page 55). 

    In critiquing Core changes, he writes that “Bitcoin isn’t an engineering project with a single set of design goals” (page 283) — a statement in stark contrast with the money-only, Bitcoin “maximalism” thesis that runs through the book. The segments attacking “arbitrary data abuse” as “unauthorized non-process traffic flooding the Level 0 network” (page 256) seem pretty clear on what Bitcoin is supposed to be and for whom it works.

    Every sort of counterargument here relies on what Bitcoin intends, what Satoshi meant for Bitcoin to be, and what the ultimate purpose of the network is. We can disagree about the answers to these questions, but the point is that they’re subjective, ambiguous, and mostly unanswerable — meaning that arguments based on an interpretation of what Bitcoin is supposed to be become just that: hypothetical, subjective conjectures.

    In the name of countering spam/inscriptions/unwanted data, getting rid of consensus-valid transactions isn’t worth it. I suspect de Wolf reluctantly understands that — which is why his recommendations boil down to tame, virtue-signaling individual-level actions. Feeling good, not doing (much?) good.

    “Whether BIP 110 specifically is the right vehicle to address arbitrary data remains an open question. I’m clear in my position that arbitrary data is not good for Bitcoin, but changing the consensus rules in a way that breaks existing functionality is a drastic step” (page 293).

    In an altogether characteristic moderation, he relaxes his position with a look to chain splits — the nuclear option making most drastic proposals to counter “spam” not worth it. 

    What annoys me the most is the presumption that arbitrary data is infinitely profitable, thus is (or will) crowd out bitcoin’s monetary use — an existential plague rather than a mostly harmless phenomenon at the, uh, uncharted backwaters of the unfashionable end of the western spiral arm of the Galaxy…

    “Spammers aren’t using Bitcoin as money. Rather, they’re using it as a way to generate value for themselves through the data they embed. It’s worth it to them to pay the fee to get their data inscribed on Bitcoin, and presumably they expect to make their money back” (page 260).

    Call me blue-eyed, I just don’t believe there’s a constant, ever-lasting demand for worthless digital junk. Besides, in manias and bubbles, that sort of leaning-against-the-wind never works — in part because people (irrationally) hoping to profit from peddling nonsense think they’ll profit so much that whatever tiny obstacles you place in their path are but a nuisance. The kicker is that they won’t; thus, the existence of a final sucker.

    The security assessment that the book constitutes, complete with ratings and urgency, is terrifying but also probably long overdue for a leaderless monetary project. It’s admirable that the author created a comprehensive, actionable guide for all the ways you can defend B(b)itcoin. But “Defending” Bitcoin, the network and your own stash, can’t reasonably be a full-time job. What was supposed to be an exit from a part-time investment job outperforming inflation became, implicitly, a part-time technical job staying up to date in software maintenance, running a Lightning node, juggling multisig keys for self-custody assurance, running multiple node implementations, and constructing block templates from your solar-powered BitAxe. 

    The final, optimistic takeaway is that this deep dive made de Wolf see Bitcoin as more resilient than he first supposed. Despite outlining dozens of threats, across AI and quantum and spammers and poor key management and colluding miners and faulty privacy and hostile governments, de Wolf’s “assertion is that Bitcoin has held up remarkably well” (page 383). The downside is that we are its security team.

    It’s a beautiful summary of a painstaking journey, with lots left to do. The repeated emphasis on balancing convenience and security lingers.

    SELECTED QUOTES:

    • “In every system I’ve ever worked on, the most common failure wasn’t a sophisticated attack. It was a human mistake” (pages 389-90).
    • “In 2017, Core had defended Bitcoin’s monetary properties against outside pressure. In 2025, it was telling the community that disagreement would have to express itself somewhere else” (pages 280-81).
    • “Quantum threatens the cryptographic assumptions that protect keys and secure mining. AI threatens the human and economic layer around the protocol, from development and social engineering to mining economics” (page 360).
    • “The protocol doesn’t defend itself. People defend it through the choices they make about what software to run, what development to fund, and what behavior to tolerate” (page 298).
  • Iceland and Using Inflation as the Release Valve

    Iceland and Using Inflation as the Release Valve

    The Danish economist Lars Christensen recently visited our beloved little nature island, to speak at the Open Day for the Icelandic Financial Services Association. Having observed and analyzed markets for decades — he famously warned about the overheating and imbalances in the economy before the 2008 meltdown — and returning to Iceland again and again, he had a few interesting things to say about this exceptional and exceedingly rich, yet dysfunctional economy.


    Christensen made quite some noise in local media, too, but then spent a full hour on his Makropuls podcast (in Danish) discussing the groundhog-day phenomenon in Icelandic political-economy matters:

    “Iceland isn’t primarily a Nordic economy”
    – Lars Christensen


    For all of us Nordic aficionados, we should realize that the Icelandic economy operates fundamentally differently from the more mature, developed (and diversified!) Nordic economies. We are not the same… and actually not in a good way.


    While a little bit of a spicy take, it’s true in the very nature of what we produce here. This tiny island nation has several elements of all the Nordic countries, but none of the mature, balancing, and stabilizing economic safeguards that make those economies work reasonably well. Iceland is also the (annoyingly rich) little brother who hasn’t figured it out yet. “It’s a globally exposed economy” — tourism, fish, aluminum, data centers — all of which become a modern version of a raw-commodity exporting third-world nation: a complete price taker, walloped around by an ocean of capital inflows and outflows into hot sectors that might not be thriving next year: “It’s an economy where many factors can easily become destabilizing.”


    As Lars explained both in the podcast and in a feature with Morgunblaðið, an Icelandic business news outlet, Iceland really shouldn’t have a money of its own: money wants to be one, so every existing fiat currency fights against monetary gravity for its existence. While all, or most, have some rationale for their arrangements and certainly play some national-identity function, the Icelandic króna has neither:

    “Icelanders very much want currency stability and… I don’t think I’ve ever been to a country with so much love to for their country and so much hate for their own currency as in Iceland.”


    Plus, given the primary extracting nature of the Icelandic economy and the dysfunctional economic institutions — centralized wage negotiations without internalized consequences; a weak, flaccid and always-accommodating central bank — to patch up the boom-and-bust swings that characterize commodity trades, Seðlabanka Íslands is forced to perform too much of the stabilizing, countervailing balancing act.

    Translated from the Vísir interview,

    “Christensen says Denmark has learned from inflation and economic difficulties in previous decades: government, business and unions must take joint responsibility. In Iceland, he sees more conflict between factions and the same disputes repeating themselves. He points out that Icelanders are good at standing together when the national teams compete in handball and football. He would like to see more of that solidarity in the fight against inflation and a greater willingness to understand the perspectives of others.”


    In the podcast episode, Christensen outlined this political-economy conundrum further:

    “What happens in Iceland all the time is the distributional troubles of finding 100 krónur on the street… somebody finds it, and now what? Who gets the gains? Who gets to keep the windfall?”


    Basically: “One sector, be it fishery or aluminum smelters or data centers or tourism, takes off and someone makes a ton of money. The constant political conversation in Iceland becomes: who received something they shouldn’t have had, and how should those things be (re)distributed?”

    “I’m not too worried about the Icelandic economy. It’s doing very well, apart from inflation.” (Vísir)

    …which is sort of the point of his monologue.

    “The Icelandic economy is too small for its own good,” and inflation becomes the central bank’s only way out in facing the aggressive, centralized labor agreements that push for high wage increases unsupported by economic fundamentals. And because there’s been great price inflation in past years, the next round of negotiations include even stronger demands for wages to compensate for the loss of purchasing power. The other Nordic countries fixed this runaway wage-price spiral in the 1970s and 1980s, usually through a combination of local wage determination, pegging the currency, or forcing the unions to internalize the unemployment externality of their too-aggressive actions. But Iceland has had none of that.

    Compare Norway, another Nordic raw commodity exporter. What you do in Norway is take all the oil revenue, collect it in a pot — invested in the oil fund — and take only a small portion into the Norwegian government’s coffers. The extreme rise and fall of the global petroleum business becomes less of a concern in Norway’s economy proper, with the fund and its amassed savings offering a countercyclical buffer. “Norwegians,” explained Christensen, “are able to decouple their great natural resources revenue from what they call onshore Norway.”


    Importantly, the Norwegians counteract the Dutch disease of an overvalued currency hampering their own productive capacities by having this gigantic fund constantly sell kroner to invest in assets denominated in foreign currencies. This, the Icelanders can’t do — or at least, have chosen not to do. It’s not the same singular raw commodity dominating exports year after year (varying between tourism, housing boom, data centers, aluminum, fishery), so levying an appropriate resource tax becomes trickier and less transparent. (Plus, the small-size, rent-seeking nature — some might say “corrupt” — of the political and economic elites, make that arrangement gameable and pretty impossible to achieve.)


    Building up a similar sovereign wealth fund to counteract booms and stabilize or support the economy during busts could be a great way to alleviate Seðlabanka Íslands’ singular response function: inflation as the release valve.

  • Ioni Appelberg and Abundance Through Scarcity: Civilization and Space

    Ioni Appelberg and Abundance Through Scarcity: Civilization and Space

    The first time I read Ioni Appelberg’s great Abundance Through Scarcity was in a D.C. hotel restaurant at the height of the last bull market. It felt celebratory and appropriately lifted my gaze from the depravity of that lost, despicable, politicized city. Money is civilization; civilization is energy; energy propels us forward, technically, and outward, spatially. Our destiny is to become a space-faring nation — or to perish.


    Because I’m different, the times are different, and Ioni actually updated and revamped the book this year (meaning the book itself is different), it’s hard to tell exactly why reading Abundance this time around is an altogether different experience.

    It still has the same lift-your-goddamn-gaze flavor. It’s still obsessed with space and human civilization — quite often the Roman one. It still celebrates money as this insane, improbable, incredible cooperative device between humans. It’s the silent patchwork/bind knitting us together as a species, as a civilization, as the economic collaboration that is the world economy. That the cover is a Bitcoin-clad Astronaut battling a space storm on some far-off planet is strange and unconventional, until you realize that Ioni is obsessed with humans — as a global civilization — becoming a space-faring species.


    But fiat, and its increasingly broken and collapsing institutions, were not meant for the space age. “Fiat currency evolved for a different world,” (p. 227) i.e., our national (often centrally directed) economies, where coordination horizons remain short. For bigger, solar-system endeavors, we need something else:

    “Trying to run a planetary civilization on institution-bound money is like trying to stream video over a fax machine. The infrastructure is not built for what we are trying to do.” (p. 227).


    Then again, Bitcoin with its ten-minute block times would struggle as intergalactic or even galactic money: It’s too slow, the light years of distance between planets and solar systems in our galaxy too vast. Mars, let alone the moon, will probably resort to their own chains.


    The Most Important Thing Satoshi Gave Us


    Scarcity. True, unfakeable, unrivalled scarcity: “scarcity that does not depend on geology or engineering. Mathematical scarcity” (p. 103). Up until Satoshi unleashed Bitcoin on the world, everything digital was infinitely copiable. Nothing (but immediately accessible, material things) was truly ownable. The white paper’s great disruption was

    “…a side effect of making one thing abundant that had previously been scarce: the ability to move value without permission” (p. 150).


    What I saw this time reading the revamped Abundance was an urgency I didn’t notice last time. We are running out of time.


    The rhetorical twists he uses hit like gut punches. Voyager, the hopeful satellites we (“we”) sent out at the peak of the space race, were filled with human language, whale songs, art, and some small collection of the best of what we are. Sent out for an unknown future and improbable meeting, it “keeps going, unchanged, because it was built at a moment when civilization still believed in tomorrow….

    We are the ones who stopped.”


    Abundance is mostly a hopeful book, the way Ioni strikes me as a hopeful, kind soul. It asks the reader to lift their gaze and consider human life and existence on a larger scale, on a longer time frame, doing something more important than your everyday life. And if it hits right, it asks the reader to work diligently for civilization’s success and thriving instead of its decline.  

    It’s also a doomerist, terrifying story — reminding us that what we’re doing here in Bitcoinland is much more important than number-go-up or preserving wealth from the value erosion that is money printing and inflation.


    Bitcoin is here and works, but the wider public remains mostly ignorant of it — if not outright hostile. This is the sort of goldbug/black-pilled/Austrian doomerism I can get behind… fiat can, if not thrive and flourish, muddle through much longer than anyone thinks reasonable.


    This has to work soon, or else (Western) civ is quite rapidly circling the drains.


    Abundance through scarcity sounds like a contradiction — until you realize that some (most?) of the greatest things humanity ever achieved happened by taking away rather than adding; adding by subtraction. Via Negativa. Or, in the overarching metaphor of the book itself: Michelangelo saw — so goes the apocryphal story, anyway — his masterpiece marble sculpture “David” in a piece of inferior block, rejected by everyone else as unsuitable for crafting anything. Just take away everything that isn’t David.


    Toward the very end of the book, Ioni speculates once more on the great filtering and the Fermi paradox (which I was told recently by someone working for NASA, was haphazardly written on a napkin and should be considered accordingly) that “Perhaps the Great Silence is filled with worlds that mastered energy, computation, and intelligence, yet never learned how to endure” (p. 245).

    “The record persists, waiting to see whether it will become the backbone of a conversation across thousands of generations, or a root or in the ruins of another failed ascent” (p. 246).


    This week, you’ll find Ioni giving a lecture on Bitcoin and longevity on Friday exclusively for the OG stage, and be part of the main stage panel session on “Sauna, Meat, and Sun: Bitcoin meets Biohackers” on Saturday.

  • Bitcoin Isn’t Money, Says Representative for the Fiat-Issuing Riksbank

    Bitcoin Isn’t Money, Says Representative for the Fiat-Issuing Riksbank

    No explanation, no analysis, no evidence needed.

    In a speech Wednesday at the Ekonomiska museet in Stockholm, Anna Seim (deputy governor of the Riksbank, Sweden’s central bank) spoke at length about money. Her intricate description of the banking system is good and insightful — though not for the reasons you’d expect — and Bitcoiners can learn a lot from it about the monetary system we’re here to supplant.

    What She Said About Bitcoin Was Both Shocking and Astonishing

    Bitcoin is so unimportant to the establishment that it can be denounced by mere words.

    After briefly describing the three functions of money we’re used to from economics textbooks and Bitcoin books alike — medium of exchange, store of value, unit of account; though, interestingly, she inverts the order by putting store of value at the top — she brushes bitcoin aside in one short sentence.


    Introducing the topic by saying that the digital-money split between private and public institutions is heavily discussed these days, she doesn’t want to talk about bitcoin, “Because it can’t be classified as money according to any of the three criteria above.”

    Anna Seim, “What is money?” Sept 9, 2026 (p. 7/8), speech at Ekonomiska museet in Stockholm.

    Fiat and its money-printing mechanism she then describes expertly and at length: bank money is just made up, created when banks make loans; fiat money is backed by nothing but confidence in the central bank and the wider economy; central banks are tasked with keeping pricing rising “at a moderately high level.”


    Straight from the horse’s mouth:

    “Fiat money has no intrinsic value but derives its value from being accepted as a medium of exchange”


    Money’s underlying “commodity” has gone from gold to confidence; “it contains information about with whom value is to be found, and how much.”

    She brings up an exciting paradox in the use of money, using the age-old economics example (harking back to Adam Smith) of a baker selling bread. He’s paid with money, which functions as evidence that the baker has contributed something valuable to society; he can go on and use the money in exchange for other goods and services.

    While money is a record-keeping device — a record of past value created and supplied (see, for instance, the classic article in monetary economics, ‘Money is Memory’) — it also allows you to forget its history: The next guy in the monetary line doesn’t need to know what good or service the previous person supplied the current holder.

    “The money itself is enough evidence of value.”


    …or at least, that’s how money is supposed to work. In the age of KYC (know-your-customer) and excessive (yet impotent) anti-money laundering efforts, permissioned money in the banking system certainly does not forget its history. (Bitcoin doesn’t really do this either, as evidenced by the recent hacks/heists and the very public movement of funds.)

    What makes money work in the end is all about trust, she admits. “New types of money, new technologies and new issuers mean we must find new ways of establishing and maintaining that trust.”

    True. And that trust is betrayed, repeatedly. Satoshi said so at the start (Letters 10:15-18), and we’re saying so right now.

  • Deep Monetary Economics in Oslo’s Satoshi Talks

    Deep Monetary Economics in Oslo’s Satoshi Talks

    Bitcoinpolitisk Institutt, or Bitcoin Policy Norway, organized a neat panel session at its events in Oslo’s Litteraturhuset last week. The Satoshi-samtale (“Satoshi talks”) is recorded and released as a podcast, worth listening for a deep dive into the monetary economics of Bitcoin.


    For years, BPI has put on semi-regular events in Oslo and this one doesn’t disappoint. Two guests from the banking system (Jan Ludvig Andreassen, the chief economist at Eika, and Arne Kloster, special adviser to Norges Bank) provided their views, with BPI’s Ole Emil Augland offering critical and, occasionally, quite critical, Bitcoin-oriented commentary.


    Across topics that included the intricacies of the consumer price index, how inflation works through the economy, and how it relates to money printing, the panelists meandered toward what the point and purpose of a monetary system is. At the end, Arne gave us the most succinct conflict of visions involved between bitcoin and fiat:

    “There’s a trade-off between stability and flexibility, and the monetary system we have today is very flexible but it comes with some risks, whereas a monetary system that’s closer to the old-fashioned gold standard is more stable but won’t perhaps contribute to economic growth in the same way.”


    Here’s the consumer price index graph that Arne presented, based on research and statistics from Norges Bank, and which provided backdrop to the overall conversation:

    Consumer Price Index (CPI), Norway, 1516-2003
    Norway, CPI 1516-2003, long historic time series. Source: Norges Bank.

    Briefly going through that history, Arne suggests that “inflation is, in a way, a phenomenon of war; it’s when lots of money is printed to finance soldiers’ pay, food, canons… war is expensive.”

    And what he brought to weigh on the subject was a very standard remark among the economics profession: What can be even worse than inflation is the price level change variability, “because that makes economic planning difficult.” Stable inflation is manageable since you know that the purchasing power of your money will fall by a particular, credible amount (i.e., the 2% creed), but when the change in money’s worth is unpredictable, money quickly loses its coordinating role and the monetary system turns into chaos.


    Jan Ludvig interjected that household wealth has transformed greatly in the last four decades in Norway, where real estate is concerned. It used to be mostly owned by institutions, but from around 1985 Norway experienced “a historic transfer of value from institutions to households, which also meant that changes in property prices meant so much more than they used to. But they’re not part of the money supply!” Which they probably should, Jan Ludvig suggested.  

    In a beautifully phrased remark by Ole, about the downsides of calculating a consumer price index, we learn that just because a computer improved in raw, objective power (e.g., RAM, memory, speed), statisticians make an error in assuming that the economic value of the item has increased in proportion.

    “They can’t say that ‘yes, the price should be 12,000 instead of 11,000 […] they’re trying to calculate objectively something that is subjective, that is value.”


    You can learn more about Bitcoin Policy Norway (“Bitcoinpolitisk Institutt Norge”) and their work via BPINorge.no.

    Norway's Parliament, Stortinget, overlaid with Bitcoinpolitisk Institutt Norge's frontpage and slogan: Vi formidler kunnskap om hvordan Bitcoin påvirker økonomi og samfunn
    A view of Norway’s parliament, Stortinget, as seen on Bitcoin Policy Norway’s front page.