Last updated on 2014.03.05
How about we just go back to wampum?
The Legislature is considering House Bill 1213, which would add tribal governments to the roster of entities to which the state Board of Economic Development can give money and create a task force to think up ways to promote business on South Dakota's Indian reservations:
Specifically, the task force shall analyze business and economic sectors and segments having potential for higher levels of success, as well as other possible approaches to improve economic conditions. The task force shall also address workforce availability, including education and skills, related demographics, salary and wage scales, and other issues affecting human resources necessary for the promotion of economic development for this segment of South Dakota's population [2014 House Bill 1213, Section 5].
I will bet you Bitcoins (because I don't bet real money) that the HB 1213 task force's recommendations for making money will not include replacing the dollar with other currencies. Unfortunately, our Lakota neighbors appear particularly susceptible to fake-money schemes.
We've seen the Lakota people exploited by the shady Free Lakota Bank and its Rand-reading, Paul-leaning profiteers. Now Payu Harris, a Pine Ridge resident, is luring his people into Bitcoin speculation:
...His tribe has just become the first native people to launch their very own cryptocurrency, MazaCoin. Harris wants to see if it’s possible to sidestep the federal government and use the tribal nation’s limited sovereignty to set its own rules on cryptocurrencies. After all, greenbacks haven’t done much for the people of Pine Ridge. If they can ditch the dollar and make MazaCoin work, Harris thinks, they could set an example for the whole world.
“I think cryptocurrencies could be the new buffalo,” he says. “Once, it was everything for our survival. We used it for food, for clothes, for everything. It was our economy. I think MazaCoin could serve the same purpose” [Jasper Hamill, "The Battle of Little Bitcoin: Native American Tribe Launches Its Own Cryptocurrency," Forbes.com, 2014.02.27].
The surest sign Harris's e-wampum is hocum? His neighbors really don't understand what he's talking about:
While lawmakers dither over how to treat this emerging currency, he wants the native reservations to work our their own rules and test Bitcoin’s “true market viability”.
His elders certainly believe in him. He has been in contact with the Treaty Council, the political group which represent the interests of Native Americans in Pine Ridge, who have “embraced the project 100 percent.”
“They told me they don’t exactly understand it, but if I did, then I should go ahead,” he continued [Jasper Hamill, "Native American Activist Wants To Swap The Dollar For Bitcoin," Forbes.com, 2013.12.19].
Trust is great, but the tribes need to help their people find ways to make money, not... make money.
Mazacoin is Monopoly money based on technobabble. Read Mazacoin's prospectus:
The feature set and algorythmic variations in MazaCoin have been carefully chosen to make MazaCoin the most useful crypto-currency in the world. With a strong emphasis on anti-deflationary measures to ensure stability of value for the purpose of wealth storage, combined with a fast blockchain and ultra-low fees for usability in transmission - MazaCoin is an ideal Crypto-Currency investment [Mazacoin.org, downloaded 2014.03.03].
Algorythmic is not a word, but fees is. Fees for usability? You think you can improve Lakota wealth and sovereignty by getting them to adopt a currency that comes with fees? Pulling a dollar out of my pocket and putting it in your hand doesn't cost me anything but that dollar. Whom do I pay to access Mazacoin electrons? How do folks on the reservation access them if they don't have Internet, or when the power goes out in Wakpala? And how do they spend Mazacoins when they go to Rapid City to visit Grandma and the cashier at Pizza Ranch asks what the heck a Mazacoin is?
The European Union established the euro to grease the wheels of commerce. Adopting a new currency might satisfy an urge on the reservation to stake a claim to independence from the Great White Father and his greenbacks, but it would throw unnecessary grit into whatever wheels of commerce reservation entrepreneurs may be able to get spinning.
The primary economic problem the tribes face is the creation of real wealth, not dabbling in new and shaky ways to denominate wealth. Lakota people need real work, not fantasy online gaming (Look at me! I'm mining Mazacoins!). Folks on the reservation need real money, not fake money.
I might be a Luddite when it comes to Bitcoins, Mazacoins or any other currency not backed by the full faith and credit of some sovereign country, but I don't trust those currencies. If I sell cattle or grain I expect to be paid in US$ and will pay any bills I owe in the same. I trust the US government a lot more than I trust the scammers and drug runners who thought up Bitcoins.
http://www.wired.com/wiredenterprise/2014/03/bitcoin-exchange/
Need I say more?
The Blindman
Amen, Nick. I don't know how a person can claim not to have confidence in the US dollar, then turn around and try to convince me to take payment in a currency backed by some guy on the Internet. For value, you might as well be offering me an Annette Bosworth raffle ticket.
For a blindman you sure have a knack for finding the truth.
Nick just so everyone else understands. In South Dakota "the truth," is ambiguous, relative, and three dimensional, among other things. It's like walking into a fun house at the fair with a hundred mirrors receiving the same visual stream of light but sending back an image that is unrecognizable from the original.
If Bitcoins couldn't keep their poop in a group what chance would a con artist from the Pine Ridge have?
I hear you have chokecherry syrup. We are honey poor, to damn much honey, here on Pass Creek. I'd trade one case of honey for whatever you could spare.
The Blindman
I don't understand this "coin" stuff. Does this mean the tribe will start printing their own money or be buying things from each other with credits that they make up ? Or do you buy these credits with real money and then trade them for goods like if they were a car-wash token or something? This seems like a scary place for anybody to invest their money.
I'm not buying that this guy has the support of any Treaty Council or any group of elders. At least he doesn't have the support of this elder.
From back in days when we first started seeing treaties broken and promises made, elders have been the most skeptical, they'll through this too.
People on the Pine Ridge are rightly skeptical, they have seen too much and too often.
Hopefully this nonsense will go nowhere, except for providing the con artist with a few real American dollars.
I read Mr. Dithmer's article. I still don't really understand it but I can't believe the Pine Ridgers could afford a $460 million dollar loss. Those people called their company MtGox. Will the MazaCoin company be called CunnyTable?
Grudz, that would be Kola koins because only a real good friend would except them as currency.
The Blindman
Here on Medicine Creek we are well supplied with chokecherry syrup. It went over well at the church breakfast a week ago. We'll have to figure out some way to swap some for your Blindman Honey.
Grudz, the tribe itself doesn't understand how Bitcoin works. That's scary.
If the tribe is thinking sovereignty, I don't know how they achieve any greater sovereignty by adopting a currency created by unelected technologists and backed by hidden algorithms and market forces beyond their control. A truly sovereign nation would issue its own currency, backed by its own full faith and credit. And frankly, while I want the tribes to grow and forge their own path, a currency backed by the full faith and credit of any current tribal government in South Dakota would not inspire confidence.
Cory,
My sources down on Pine Ridge tell me this ain't gonna happen.
Many on the reservation may not understand how Bitcoin works, but they do understand a scam.
Succinct, Roger. I like it.
BTW, I don't get Bitcoin either. I don't play video games that require payment. Not when there are so many free options.
Yikes, it looks like being the director of things like Bitcoin can be hazardous to your health.
There certainly is a lot of mistrust among this group. Bitcoin and mazacoin are currencies that you can spend over the internet or through a smart phone. It is decentralized, so there is no "director of bitcoin" or mazacoin. No one owns the company. Payu doesn't. He is just trying to get something new started that MAY be beneficial for the tribe. For that he is called every name in the book. People do bad things with dollars like buy drugs. Does that make the dollar a scam? The Fed Reserve is printing dollars out of thin air. There are a fixed amount of bitcoins, on the other hand. Give mazacoin a chance. Once a few business start accepting it, it will be just another form of payment, like a credit card. only better.
I want to respond point by point to this author's rant against mazacoin and cryptocurrency:
1. "Our Lakota neighbors appear particularly susceptible to fake-money schemes." Mazacoin has nothing to do with the Free Lakota bank. Mazacoin is not a fake money scheme. The coins are encrypted files that you can send and receive in any amounts. Its value is determined in a free marketplace. All transactions are recorded in a blockchain that can't be messed with. The blockchain exists on everyone's computer (everyone who uses mazacoin). It is decentralized so that no one owns the mazacoin network. When you convert dollars to mazacoin, neither Payu or anyone else makes money on it. The only way he could scam people is through the pre-mined coins, which he says he will use to give grants. Anyone can hold him accountable by using a blockchain explorer. All transactions are recorded and open for everyone to see. This is unlike the rest of the financial world.
2. "It must be hokum because no one understands it." Need I point out the flaw in that logic? Lots of scientific and technological innovations are not easy to understand.
3. The tribes need to figure out a way for their people to make money, not make money," as in printing fake money. You have this completely opposite. The fake money is the dollar. What is backing the dollar? Nothing, it's just paper, and no one is controlling the amount. The fed just prints and prints and its value goes down. Bitcoin is fixed at 21 million coins. Mazacoin at 4 billion coins. It is not possible to make more. If no one uses it, the price will be very cheap. If lots of people use it, the price will go up. It is fair and open.
4. I laughed out loud when I heard the criticism of fees. Yes, there is sometimes a very small fee of about 20 cents to send bitcoins or mazacoins. Ever use Western Union? They charge $50 to send $500. You can use cryptocurrencies to send money to China or all over the globe and it is still about 20 cents no matter how much money you send. Credit cards charge the receiver about 3% fees. And Payu doesn't get the Mazacoin fees, the miners get them.
5. "How will they be spent on the reservation?" Well, this one is a challenge. It has to start slowly and build momentum the way bitcoin did. There are a lot of folks doing business on the internet on the reservation and in South Dakota. There are a lot of charities asking for money. Once some start accepting mazacoin, people will begin using it little by little.
6. "We must create real wealth instead of dabbling in shaky schemes ..." Cryptocurrencies are growing around the world and sparking economic activity wherever they go. Millions of people without bank accounts can store them safely on their computers. It is easy to send them or receive them or create a business if you have something to sell.
Thanks for hearing me out.
Brian, lets just say I will not be an early adopter of Bitcoins. I'm going to give the system a few years to work out the kinks.
I dislike how people who disagree try to minimize opposing opinions by branding them a rant. It's a bad start to an otherwise informative and challenging response.
1. I will grant that Bitcoin entrepreneurs seem a little less shady than the Free Lakotah Bank schemers. We at least can identify the Mazacoin dudes, see them on the reservation. But is there really any difference between silver coins and encrypted files? Silver and encrypted coins both have value determined by the free market. But heck, coins I can at least melt down.
2. I'll grant that the value of the dollar is based on complicated economic factors that defy many common folks' understanding. But we have decades of experience showing dollars work. Nick hesitates for good reason. Why should an economically impoverished community rush to be first adopters of an unproven, unstable currency?
3. The dollar is fake? That's not what they told me at the grocery store, the gas station, the online shoe store, and the restaurant this weekend. And who really controls the value of a currency? The market? Programmers? Who?
4. The ability to send money to China seems irrelevant to reservation experience. Why lock an impoverished nation into a currency with a built-in fee when U.S. cash is free?
5-6. Tell me what the advantage is of locking up reservation wealth in a currency accepted in fewer places than the Almighty Dollar. Why add an extra barrier to building wealth on the reservation by experimenting with a less useful wealth storehouse? Is there any advantage beyond sovereignty? Sovereignty is important... but is it important enough to justify this complication?
Well, I'm glad I started a debate, even if I used some inappropriate words. While not a rant, you have to admit your article was one sided. And my response was one sided in the opposite direction. The truth is there are advantages and disadvantages to cryptocurrency, risks and benefits. One risk is you could buy coins today and they could drop to half their value by next week. There is a lot of price volatility and will be until it is widely adopted. If you hold large amounts of coins in your computer wallet, then you are an investor more than a user and you have to be aware of the risk. That said there is also risk to having all your eggs in the dollar basket. We sure have a lot of debt in this country. Deflated dollars may one day be used to pay it off.
1. Silver vs mazacoin (MZC): MZC lacks tangibility, you can't put it in your pocket. But you can't divide a silver coin into 0.23614 coins and you can't pay anyone on the Internet. You can with MZC. There are currently two businesses that accept it, but here's hoping that changes. There is value to both. Most of my money is in dollars, but I hedge it with some precious metals and crypto coins.
2 & 3: Saying the dollar is fake was an overboard comment on my part, but it was in response to you and other commenters calling mazacoin fake and a scam. The dollar is widely accepted and stable, but that doesn't make it sound. Sound money would be backed by a commodity. Unfortunately the dollar hasn't been backed by gold since the 70s and there aren't enough buyers of our debt, so the fed buys it and prints dollars. You said in the article that the Lakota shouldn't "make money" (out of thin air). I was pointing out that none other than the U.S. government does exactly that. Now MZC is not backed by anything either, but its value comes from its utility as an online payment method, it's decentralization, and it's unchangeable blockchain and number of coins. Programmers don't control the value, they can only set some parameters like the total number of coins and how often they are created. Created coins go to the miners, people who use computing power to verify transactions on the network. I like that about crypto, the new coins are distributed fairly and evenly. When the fed prints new dollars, none of us little guys get it. It goes to big financial institutions that buy and sell debt.
4-6: what can MZC do for the Indians? Well, Payu believes it can benefit them. He sees the poverty there firsthand. The relief checks come in dollars and are spent in stores around the reservation and are gone. He believes there will be more trade amongst themselves, more Indian businesses started, and more of a community feel to their lives. I don't know him, but I believe he is trying to help. I was bothered by the characterization of him as a scammer on this page. It seems to me like he has his people's best interest at heart. Otherwise he would have remained anonymous like the inventer of bitcoin did. Give him a break. MZC may work out as a good alternative to the dollar at Pine Ridge. It certainly won't replace it any time soon, but may provide a good second option.
"One-sided" is not a "rant". I'm absolutely one-sided. I'm also right. :-) More to come...
Risk: yes, there is risk in any currency. US dollars offer significantly less risk than any other currency in the world. The US dollar is backed by thef ull faith and credit of the greatest democracy in the world. Bitcoin is backed by unelected computer programmers.
I could argue that adopting and advocating Bitcoin is itself a selfish and unpatriotic action that undermines confidence in the dollar. If that's what the Indian nations want to do, well, they're entitled to take their shots at the U.S. I'm just not convinced that's the most practical way to fight for sovereignty.
More specifically:
(1) Silver vs. Mazacoin: Both are a pain. US dollars are profoundly more convenient. Nonetheless, if I have to pick between inferior currency, I can pay more people worldwide with silver than I can with Mazacoin.
(2-3) "widely accepted and stable" = "sound". It doesn't get any better than that.
Just what are the Bitcoin makers "mining"? Who is qualified to "mine" cryptocurrency? Why go to all this trouble of "mining" "algorithms"? How is cryptocurrency different from "Chamber Bucks" printed by your local businesses?
The number of US dollars placed in circulation is decided by public officials appointed by elected representatives of the people. Who governs Bitcoins? If I want, can I start creating excess Bitcoins to deflate their value?
(4-6) Whatever Payu's motivations, is his plan effective? Will his neighbors spend Bitcoins any differently from relief checks? If the spending of relief checks is a problem, how does Bitcoin replace them? The US government is not going to issue relief checks in Bitcoin. Bitcoin isn't going to provide any economic opportunities not currently available in US dollars. Paying Pine Ridge residents in computer scrip isn't going to promote more internal trade. Explain to me how the prospect of getting paid in local computer scrip makes any entrepreneur more eager to start a business than she might already be to start that business to get dollars.
"a good alternative... good second option" Tell me the practical daily benefit that anyone other than a rich currency trader or a foreign traveler gets from carrying two forms of currency. In my normal daily grocery shopping and shoe-buying, I have never, ever thought, "Rats! All I've got in my pocket is US dollars." The US dollar is so good I've never needed a second option.
You said, "The number of US dollars placed in circulation is decided by public officials appointed by elected representatives of the people." How I wish that were true! This will be my last response, and then you can have the last word. One who is "always right" should get the last word.
I am not trying to talk you out of the dollar, nor do I want to. But I don't believe it is the same thing that Madison and Jefferson knew. In their day, a dollar was a silver coin (the Spanish "thaler") and was defined as so many grains of silver. That's why the 7th amendment has a dollar amount written into it. If it didn't have a fixed value, it would be absurd to put a dollar amount in the Constitution. Congress has constitutional power to coin money, but congress gave that power away in 1913 to private bankers. The Federal Reserve is a private corporation. And they alone have full power to decide how much money to print. QE1, QE2, QE3, ..... QE4EVA. Yes, technically congress can make them stop by taking back the power that they gave away over 100 years ago, but they won't even vote for a full audit of the fed. The banker's man Harry Reid will stop that vote from coming up again even though 75% of the people are for it. The banking industry contributes so much money to congressional and presidential campaigns that very few pols will do anything more than rubber stamp their decisions. And it is a corporation of bankers, the Federal Reserve, operating in secrecy, that decides how much money is in circulation. Did you know that every dollar in circulation today is lent into existence and that bankers collect interest on it? Am I unpatriotic for speaking out against this? At least throw open your books for an audit, guys!
Some day the dollar could lose its place as the world reserve currency and then America will have to live within its means or else devalue its currency. All this borrowing and printing allows us to spend hundreds of billions of dollars each year that we don't have. And neither party cares, they just fight over what to spend it on.
Bitcoin has risk, no asset backing, price volatility, and is techno-geeky. It's not for everyone. But it is a sound technology, allows very cheap transfers of money across the world, doesn't require a bank account, limits the amount created to a hard number that can never be changed, and provides a public ledger (blockchain) that is open for anyone to see. Those are the advantanges and disadvantages. I choose to hold some, which is my right.
It's a bit tough to respond to Brian, given his "last word" preface. He's issuing a sort of "prebuttal," trying to pre-empt whatever response I give as inherently snarky or presumptuous. But I won't let word tricks like that slow me down.
You are trying to talk me out of the dollar... if I want to visit the rez. In general, you want people to adopt Bitcoin, Mazacoin, or some such alternative to the dollar, right? You're saying it is sound and in important ways superior to the dollar. We aren't just talking chocolate vs. vanilla here. The thesis under dispute is not the undebatable "I like Mazacoin!" The thesis under dispute is, "Mazacoin offers economic improvement for the American Indian communities."
I grant all the flaws of the political system you cite. Cryptocurrency producers/miners/value-setters are subject to the same flaws, the same co-opting by the rich and powerful. Probably more so, because they are not subject to election or public scrutiny.
Yes, someday the dollar could collapse. If it does, can Bitcoin survive the economic upheaval that would accompany that dollar-collapse? If I'm sitting in the middle of North America and I'm genuinely concerned about the dollar taking a dive, does cryptocurrency really offer the safest hedge? Or do I do better to hedge with gold? Or how about ammunition and vegetable seeds?
Doesn't require a bank account? It requires an Internet connection, right?