The Great Realignment: Power, Money, Greed & Bitcoin

Part 4: Bitcoin

Bitcoin

As you have likely gleaned from the title, this book also features a discussion about Bitcoin. Unlike the first three parts of the book, however, the Bitcoin discussion is not about the past. It shall rather, and largely, be forward looking instead. For my part, I first got into Bitcoin in 2011. I tried and could not figure out how to mine Bitcoin. I was able to locate someone on a forum who agreed to sell me some. If I remember correctly it was about $100 worth. Shortly after I received my Bitcoin the price dropped by more than 50%. It was just bad timing. But I was skittish enough to write the whole thing off as a scam and deleted the wallet. People sometimes ask if I can somehow get access to that Bitcoin or if I regret deleting the wallet. I do not. I never have. I know myself well enough to know that I would have sold that Bitcoin a long time ago. Certainly long before it ever hit $2000, let alone $70,000. The trouble is, I tend to be very practical. And, as a life-long Libertarian, “practical” meant gold and silver, not some magic internet money. I continued to be very “practical” about Bitcoin for nearly a decade. In 2016, I wrote a multi-part series on anti-money laundering (AML) laws for the Banking Law Journal. Within that lengthy 60-page article series I devoted about three pages to Bitcoin. Even then I did not return to the Bitcoin experiment beyond being a casual observer for another four years.

Nevertheless, before we press on with the discussion on Bitcoin, I must say I am operating under the, perhaps mistaken, assumption that most people reading this will already be familiar with Bitcoin. On the off-chance that is incorrect, I will provide a quick primer on the system. I am lifting this straight out of my paper on money laundering. I do this for the sole reason that it was written for lay audiences and I think it does a fair job of covering the core functionality of Bitcoin. If you want to learn more, there are a number of sources devoted to the topic. I would recommend Matthew R. Kratter’s A Beginner’s Guide to Bitcoin for an excellent introduction. That said, while there are numerous variations on digitally based currencies, the most widely used is Bitcoin. Bitcoin is a decentralized virtual currency that is based on a peer-to-peer (P2P) network distribution model. The central functionality of the system relies on a public ledger called a blockchain. This ledger is continually updated with all of the transactions that occur between Bitcoin users. This ledger is also decentralized and is “managed” by users that run Bitcoin nodes. In order to ensure that transactions are authentic, Bitcoin uses a novel concept based on asymmetric cryptography. Under this system, users are assigned two linked and numerically unique keys — a public one known to everyone and a private one known only by the user.

In essence, the user’s public key provides a record of transactions made by that user, whether sending or receiving. The private key is necessary to actually send funds or to retrieve them. Thus, once funds are sent, only the recipient can access them via their private key, preventing retrieval by the sender. With a publicly accessible and viewable log of the transaction, the receiver cannot claim the funds were not received, because the record would reflect affirmative access to the system via the sender’s private key. As previously noted, the system is decentralized, so there is no entity in the middle to verify ledger entries. Rather, the system verifies transactions via users called “miners” that devote computing resources to calculating the hash values of the transactions, with correct proofs adding to new blocks of data in the ledger, thus the blockchain. Transaction verification is not the only function of the miner, as their computing resources are also devoted to the creation of new bitcoins (the currency unit of the system). The rewards for the miner are comprised of fees paid by users to include transactions in a block and receiving new bitcoins for providing a correct proof for a block sequence. Higher fees are sought by miners, which is how users can encourage their transaction to be prioritized into the next block being calculated. Once a transaction has been initiated, for the sender and receiver to have full confidence in the transaction, they must wait until the proof is computed. This typically happens within ten minutes, but can take several hours depending on the fee pledged and the volume of network traffic.

While Bitcoin is often touted as an anonymous payment system, just by the fact that the transactions post to a public ledger means that a record exists. There are varying means by which a user can obscure the digital trail, such as splitting off bitcoins into smaller amounts and depositing them at multiple addresses. However, doing a heuristic analysis of publicly available keys and the associated transactions, researchers from the University of California at San Diego (USCD) discovered that they could trace public keys utilized in a transaction to exchanges that are subject to government authority, i.e., physical institutions where the authorities could deliver a subpoena or serve a warrant. While the researchers point out that individual transactions could be hard to identify, for someone to put a large amount of bitcoins to practical use will eventually require the services of an exchange. The UCSD researchers do acknowledge that the adoption of more rigorous protocols could serve to increase the anonymity of the transactions and make bulk movements harder to detect, but to do so currently requires a significant effort. Even still, unless and until Bitcoin or other alternative currencies that lack sovereign support are widely accepted, any potential user will, at some point, still be confronted with the need to convert the exchange medium (i.e., bitcoins) into fiat currency or other tangible items of value in the “real” world.

Keep in mind, the summary you just read was written nearly ten years ago. Regarding the latter properties of transactional use, there is a burgeoning use for Bitcoin as a routine transactional medium. However, there remain, to this day, barriers to the widespread adoption of Bitcoin as a medium of exchange. Fiat denominated price volatility is problematic for settlement unless both parties compensate or create terms that account for fiat denominated price fluctuations. Moreover, transaction speeds on the Bitcoin network are not sufficient to accommodate a high transaction volume that can reliably sustain even modest trade. There are so-called “Layer-2” network solutions that address the transaction speed issue. The “Second Layer” in the name refers to an alternate network that processes and / or batches transactions with only periodic settlement to the “base” layer — the actual Bitcoin blockchain. All have various trade-offs in terms of security, tax implications and centralization, or the need for trust in third-parties. In regards to the privacy of transactions noted in the last paragraph, the tools to track Bitcoin transactions have gotten significantly more sophisticated since that was written. Modernly, and practically speaking, to reliably obscure beneficial ownership of Bitcoin and then be able to transact with that obscured Bitcoin anonymously requires a high degree of technical savvy possessed by very few.

Put simply, as a medium of exchange for routine transactions, Bitcoin is currently a poor choice. This is especially true if your anonymity is of critical importance, e.g., you are a freedom fighter under an oppressive regime. It must be said, however, that fiat currencies also suffer from these same issues, albeit they only generally become noticeable to end users when conducting international exchange. They become especially acute when conducting large scale transactions between sovereign jurisdictions. One of the easier industries to illustrate this issue with is the international film industry. While most people likely do not stop to ponder the inner workings of the film industry, if you are a film production and distribution company, foreign exchange market (FX) volatility is highly problematic. For background, most film production companies license the films they make to play in theaters overseas. Those license deals are generally predicated on taking a percentage of box office receipts in exchange for the rights to play the film. The problem with this is the fact that foreign markets do not sell movie tickets in U.S. dollars. Their box office proceeds are collected in their respective local currencies. The trouble arises when trying to determine the timing for the payment of the license fee. If a film does very well at the Japanese box office, for instance, and the license fee remittance is due 90 days after the release window, the Japanese Yen will not likely exchange at the same rate as when the deal was closed. The Yen to U.S. dollar exchange can vary widely within a 90 day window. The contracts utilized to settle these deals are extraordinarily complex. Even with that complexity, conflicts and lawsuits abound as each respective side tries to maximize their gains and minimize losses by playing fast and loose with the settlement agreements and payment timing.

Likewise, fiat currency also suffers from anonymity problems when conducting transactions overseas as well. Anyone that tries to wire a significant sum of money overseas is probably aware of the identification requirements and other issues that can arise from transacting internationally. In fact, one of the preferred methods for international drug cartels to launder money is via the rather crude form of bulk cash smuggling. For them to reliably retain large scale transactional anonymity, they simply pack a couple million dollars in a backpack and pay a network of “mules” a few hundred dollars each to walk it across the border. Once the cash is in a friendly jurisdiction, it is a simple matter for them to integrate that money into the international finance system through shell corporations and with the assistance of compromised bank employees. In terms of transaction speed, Bitcoin is certainly more efficient than an international wire, as those transaction speeds are administratively throttled by the sovereign monetary control apparatus. That throttling makes Bitcoin’s roughly half-dozen transactions per second seem lighting fast by comparison. Put another way, Bitcoin as a transactional medium is, for all intents and purposes, no different than any other sovereign issued currency, save for the fact that Bitcoin has no sovereign. With that lack of sovereign issuance Bitcoin must, of a necessity, “float” on the market just like all the other currencies. The problems that arise using Bitcoin for exchange are no different than any other monetary unit. They are just more readily apparent to the end users because, unlike sovereign issued currencies, those problems are acute both within and beyond sovereign borders. To extrapolate this phenomena out a bit, each Bitcoin holder is effectively a monetary sovereign unto themselves. Thus it is unsurprising that they would be subject to the same market fluctuations other sovereigns must navigate when conducting inter-sovereign currency exchange.

I mention all of this up top for the very simple reason that the Bitcoin Whitepaper is titled in full, “Bitcoin: A Peer-to-Peer Electronic Cash System.” The author of the paper makes numerous references to proposed utilizations of Bitcoin that are analogous to cash transactions. For example, on page one it is clearly stated, “What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.” Pausing for a moment here, let us recall the definitions of money provided in the section on Money, which are:

1. A medium that facilitates the exchange of value in low, or zero-trust situations; and/or
2. A medium that allows for the bulk extraction of fractional value from the personal or collective industry of sovereign subjects through taxation; and/or
3. Is an asset that appreciates in nominal price at, or near, the same rate as the sovereign increases the quantity of the first two.

While it is an often debated point, it seems rather clear to me the original intent of the creator of Bitcoin was largely to satisfy prong one of the definition above. Regarding prong two, clearly Satoshi Nakamoto was not interested in creating an efficient digital taxation device for national sovereigns. It is also clear from Nakamoto’s email and forum correspondence that Bitcoin becoming an asset that appreciates in nominal price had some consideration as well. To wit, in 2010, Nakamoto pondered a thought experiment in a Bitcointalk forum post regarding a scarce metal similar to gold, but with a “magical” transmission property. Of this magical metal Nakamoto writes:

If it somehow acquired any value at all for whatever reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it, and have the recipient sell it.

Maybe it could get an initial value circularly as you’ve suggested, by people foreseeing its potential usefulness for exchange. (I would definitely want some) Maybe collectors, any random reason could spark it.

I think the traditional qualifications for money were written with the assumption that there are so many competing objects in the world that are scarce, an object with the automatic bootstrap of intrinsic value will surely win out over those without intrinsic value. But if there were nothing in the world with intrinsic value that could be used as money, only scarce but no intrinsic value, I think people would still take up something.

I would be remiss to not again point out that, with the possible exception of life sustaining necessities, e.g., water, air and nutrition, nothing has an “intrinsic” value to human beings. Value is irrevocably and irretrievably a context dependent, and entirely subjective metric. This is fundamentally true despite any contrary insistence by the gold-bugs of the world. I would also point out that Nakamoto is correct. Which is to say, Nakamoto is correct if we hold as true that nothing can have “intrinsic” value. In that void, people have obviously taken “something” up as money — those “somethings” being things like gold, silver, and paper. Regardless, within this book, I place little emphasis on the utility of Bitcoin as a routine transactional medium. The ability to buy a cup of coffee, or even a bag of cocaine, with Bitcoin appears to me a triviality in the grand scheme of things. I recognize many very thoughtful and intelligent people may disagree. Indeed, Nakamoto themself may well disagree. With that in mind, let us trace back for a moment to the earlier discussions on Money and Power. If we assume, and I do, that competitive resource capture economies under sovereign control will continue to dominate global trade and interactions, then it seems unlikely those sovereigns would abandon a central component of their authority, i.e., their money. Which is partly why I also place little emphasis on the notion of a Bitcoin-backed sovereign currency. Beyond the loss of sovereign control over monetary policy, as longtime Bitcoin developer Eric Voskuil correctly points out, for the end users, there would be no meaningful way to audit paper currency issuance versus Bitcoin held. If there were a way to verify and limit issuance, then the currency units would be indistinguishable from the underlying Bitcoin asset itself. The issue there being, if the sovereign decides to expand the number of notes circulating beyond reserves of Bitcoin available for redemption, there is no mechanism to prevent that from happening without essentially duplicating Bitcoin’s core functionality. Without such a limitation, a Bitcoin reserve currency would inevitably end up in the same conundrum that collapsed Bretton-Woods.

All the same, the focus here is rather on the third prong of the money definition provided. Which is to say, the focus instead shall be on Bitcoin’s properties as an asset that appreciates in nominal price at, or — in the unique case of Bitcoin — superior to, the rate the various sovereigns debase their paper currencies. Among those sovereign currencies, special attention will be paid to the U.S. dollar. Before we dive in, I think it would be helpful to briefly explore and discuss other digital currencies. While awareness of Bitcoin has certainly expanded dramatically in the last few years, for the lay person in particular, I think it is very difficult for them to distinguish Bitcoin’s unique characteristics from other distributed ledgers. Moreover, sovereign nations are now experimenting with digital currencies of their own. These so-called Central Bank Digital Currencies (CBDCs) provoke a number of widely varying reactions among advocates and opponents alike. The goal here is to — hopefully — dispel some of the myths and orient the conversation in a more constructive direction. In turn, this will also — hopefully — prove helpful in the later discussion about Bitcoin as a non-sovereign treasury asset.

Alt-Coins

So-called “alt” coins are, generally speaking, distributed ledger based schemes that ostensibly provide an alternative to Bitcoin. The colloquial and catch-all term for these “alt” coins is crypto, or cryptocurrency. Bitcoin is often characterized as crypto as well, though Bitcoin proponents, myself included, are quick to distinguish Bitcoin from “crypto.” As the first cryptographically secured distributed ledger, Bitcoin has a number of unique characteristics that distinguish it from the 15,000+ “alt” coins in existence. Chief among them is the means by which the developer created and distributed Bitcoin. Satoshi Nakamoto is a pseudonym for an unknown person, or group of persons, that created Bitcoin. The Bitcoin concept was published via the Bitcoin Whitepaper, while the Bitcoin code was released for free as an open-source project. Thus, anyone with the capability to develop, improve, or even copy and modify the system is free to do so. As this network of participants and developers grew, Satoshi Nakamoto simply disappeared. This lack of an identifiable entity upon which an adverse interest could focus attention is significant for a number of reasons, not least of which is the inability for a sovereign to have someone or something to capture or coerce.

Bitcoin also enjoys an enormous first-mover advantage. This is partly evidenced by Bitcoin’s current market capitalization, especially when compared to the rest of the crypto market. The current total market capitalization for Bitcoin and cryptocurrencies combined is approximately $2.2 trillion. Bitcoin alone commands more than half of that sum. Put differently, Bitcoin is the market. With what remains, Ethereum runs a distant second, while the other 15,000+ cryptocurrencies fractionally split the rest. Moreover Bitcoin’s network effect is currently of such a magnitude that it appears highly unlikely a competitor upstart will displace it. To be certain, there have been several attempts to capture Bitcoin’s network effect via hard-forks of the Bitcoin code. The vast majority of cryptocurrencies created in the wake of those attempts have rather pursued a “similar, but better” angle through novel code implementations with expanded functionality. This is yet another area where Bitcoin is distinguishable from cryptocurrencies. As noted above, new bitcoins are created from “mining” operations, where correct transactional proofs are rewarded in part with new bitcoins. This is analogous to physical mining or drilling operations, where correct extraction methods are rewarded with “new” sources of commodity supply.

When Bitcoin was launched, there were no bitcoins in existence until users devoted compute resources to create them. No market existed for bitcoins until an early user facilitated a trade of 10,000 bitcoins for two pizzas. By way of contrast, one of the more successful cryptocurrencies is Ethereum. Like Bitcoin, Ethereum started life as a mined crypto. However, unlike Bitcoin, the developers of Ethereum both remained in the public eye and created a fund-raising apparatus to boot-strap the endeavor. In addition to selling “Rep” tokens pre-launch, around 72 million Ether (the currency unit of the system) were subsequently “pre-mined,” meaning they were mined by the developers in advance. These pre-mined tokens were sold to the general public in an initial coin offering (ICO). While the exchange was for Bitcoin, the initial fiat equivalent price of each Ether was approximately $0.30, which climbed to nearly $3.00 in early trading. Roughly 10 million of those original Ether were reserved for the developers themselves. Seven months after the launch, Ether was trading for more than $12 — an overnight windfall for the developers, who essentially conjured the tokens out of thin air. Modernly, after several hard-forks, complete re-writes to the code, and numerous other changes implemented by the Ethereum Foundation, the privately operated, company branded and trademarked software token called Ether trades for around $2600.

That early ICO windfall was not lost on the broader community of burgeoning crypto developers. Indeed, a veritable cottage industry sprang up around the ICO model. The quality of these projects were, and are, generally quite poor. To this day, they all share many of the same characteristics as the companies that drove the so-called “Dot-Com Bubble” at the turn of the century. Wild promises of tech-driven transformative potentials abound, cloaked in technical jargon, while the underlying fundamentals of revenue, profit, and expenses are largely ignored or obscured. For instance, the popular distributed ledger platform Solana touts high transaction throughput and fast time to transaction finality as transformative potentials. The retail narrative posits that Solana’s technology will revolutionize everything from online gaming to finance. These promises have helped drive Solana to a market capitalization of $68 billion, most of which is represented by the monetary premium created by speculators in the Solana token. All this despite a meager $282 million in annual revenue, with more than ten times that in annual expenses. This leaves Solana with negative earnings totaling hundreds of millions a year. For comparison, the Nintendo Corporation has a $64 billion market capitalization on revenues of $11 billion and earnings of over $4 billion.

Even so, research done by Satis for Bloomberg revealed that more than three-fourths of all ICOs were outright scams. The vast majority that were not scams were either abandoned or scarcely functioning a year post-launch. Much the same is true today, as the public facing narrative is to tout high-tech innovation, while behind the scenes, the functional business model is to fleece would-be retail investors. The U.S. Securities and Exchange Commission (SEC) has filed and won numerous lawsuits against a number of crypto projects. However, the sheer volume of fly-by-night crypto ventures, coupled with the limited resources at the SEC, tilt the risk-to-reward ratio strongly in favor of the crypto developers. As currently staffed, the SEC is simply not equipped to meaningfully enforce securities laws against crypto developers, many of whom are domiciled outside of the United States. Make no mistake, however, that the overwhelming majority of crypto projects operating today were launched in a manner that runs afoul of very clearly established securities regulations in the United States. While crypto proponents claim a lack of regulatory clarity, these rules pre-date WWII and there is no carve-out for “shiny and new.” Meaning, despite even well meaning arguments to the contrary, with very few exceptions, the funding models for nearly every noteworthy crypto project launched in the last decade involved the illegal sale of unregistered securities.

Bitcoin, in yet another contrast, is not a security. Bitcoin is a commodity and, for tax purposes, is treated as property in the United States. Notably, it is not construed as a currency in either case, despite the ability to conduct transactions solely with, and denominated in, Bitcoin. To quickly sum the major contrasts between Bitcoin and other digital ledger schemes:

1. Bitcoin has no issuer
2. Bitcoin is decentralized
3. Bitcoin has an exponential network effect advantage
4. The Bitcoin market is a laissez-faire creation
5. Bitcoin (currently) has legal clarity in the United States.

To fully expand upon the intricacies of the crypto world would be another book unto itself. The short version is crypto is largely a vehicle by which developers and their venture capital partners enrich themselves at the expense of uninformed retail investors. There is an enormous influence apparatus that supports these operations. All of these operations and support functions are currently illegal in the United States. It is against the law to raise start-up funds from retail investors without registration with the SEC. It is illegal to promote those schemes without registration with the SEC. It is illegal to engage in market manipulation. It is unethical to engage in coordinated pump and dump schemes. Indeed, a pump and dump becomes illegal if the developers and early investors are aware of this occurring. It is also illegal to create a project and then steal user funds, which as noted earlier, comprises more than three-fourths of crypto projects created. While crypto developers and their venture capital partners complain endlessly about regulatory uncertainty, they continue to engage in illegal activity for the sole reason that it is highly profitable and hard to stop.

This all despite the fact that the SEC greatly softened rules regarding crowd funding start-up capital in 2016. The CROWDFUND Act, quite literally, paved the way for every single one of these entities to legally, and for relatively low-cost, register their offerings, provide appropriate disclosures, and still raise money for their proposed endeavors. Meaning, fully one year before the “ICO craze” of 2017, all of these bad actors had a very easy and straightforward path to legally raise funds. Not one of them took advantage of this legal path. Instead they chose to “move fast and break things” with no regard for the human toll they extracted. Their retail victims have lost, and continue to lose, billions of dollars investing in their faulty schemes, with near zero recourse. And, to this day, these bad actors continue apace, desperately trying to muddy the waters. They go to great lengths to dilute the distinction between their naked scams and Bitcoin. Let it be said in no uncertain terms, Bitcoin is not crypto. Bitcoin is a unique digital asset that has no parallel in the history of the world. A bold statement to be sure. And it is one I intend to develop and support in the following chapters.

Central Bank Digital Currencies

Few things get freedom loving people more riled up than the thought of a central bank digital currency (CBDC). Once cash goes away, they say, you can kiss your privacy and freedom goodbye. Fear of CBDCs being used to enforce Chinese-style “social credit” scores, “carbon” scores, or vaccine mandates probably top the list. The loss of financial privacy also ranks highly among the fearful. This fear takes many forms on social media:

Arguably, many of these fears are overblown. This is, however, not to say they are unfounded. CBDCs, as most envision them, simply remove cash. Once cash is removed, as the logic goes, then Big Brother can enforce all manner of draconian practices against the population. Given the history of governments over the last few hundred years, it is a very reasonable fear. However, the United States was born out of frustration with the abuses of the so-called “ruling” class. At its core, the United States laid down a set of rules that recognize inalienable rights. Life, liberty and the pursuit of happiness comprise the nut-shell version. The more thorough one says government authority is delegated and restrained, with ultimate authority residing within the population writ large. Of late, the value of those paper promises have proven somewhat less than resilient. Nonetheless, there is an in-principle guarantee of certain freedoms and rights within the United States. Meaning, unlike our Eastern neighbors in China, there are many barriers for would be Supreme Leaders to overcome before a Chinese style “social credit” system could be implemented domestically in the U.S.

Before we continue, let us briefly recap earlier chapters. Recall that post-agricultural Western European governance essentially evolved from roving groups creating protection rackets through coercive violence. Big, strong men would band together and basically pillage their way through the world. Occasionally these groups would fight each other over who got to pillage which place. Much like street gangs today, they would lay claim to an area and defend it with force. Within the respective group’s area, they could extort and pillage as much as they desired. Drift into another group’s territory, however, and they would be met with violence. If they succeeded in the tournament style competition for those resources, they would claim that territory to increase their ability to extort and pillage. If they did not prevail, then the other group expanded instead. On and on it went through pre-history until a rough equilibrium of force was reached. Smaller groups were incorporated into larger groups. Hierarchies formed. Territories expanded. After a few thousand years of refinement, what started out as simple extortion has morphed into our modern concept of the nation state. This all led to the primary component that makes a nation “sovereign” — the authority to coercively use force within their respective sphere of influence. Modernly, the use of coercive force absent a sovereign designation is near universally a crime. Meaning, I cannot legally force you to pay me a tax, nor can I force you to labor for me — nor can I force you to do anything else for that matter. In all cases, and in all countries, that power is solely reserved to the sovereign, whether they be a king, a queen, a dictator, or an elected body.

Likewise, and as noted previously, people define “money” in all manner of ways. Unit of account. Store of value. Medium of exchange. All definitions work to some degree. The trouble is, none of them adequately capture what money truly represents. Yes, money is used for those things. But, as argued in the section on Money, that is not the core reason it is there. The reason provided for money existing in the form we use today is essentially an abstraction of sovereign force through the vehicle of taxation. Put another way, if we trace back to those roving groups of strong men in pre-historical Europe, their modus operandi would simply be to go into a village and steal what they want. However, as these groups (gangs?) grew in number, they ran into a logistics problem. Of note, every participant in these groups would rightfully expect to be paid for their contribution to the looting. When these groups were small in number, then dividing up the spoils of extortion is relatively straightforward. But when there are thousands of group members, paying them in chickens, pigs or corn might ensure they are compensated right now, but what they do not use immediately will either spoil or go to waste. This same conundrum is, likewise, true of the sovereign at the top of the chain. Their conundrum is only magnified. The way around this dilemma for these enterprising group leaders — kings and queens and the like — was to force their subjects to pay for their extortion with monetary units created and issued by the sovereign. Thus, instead of proffering a chicken, or a pig, their subjects would have to figure out how to get sovereign issued money. Meanwhile, since the sovereign wields a monopoly on the use of force, they can also force their subjects to accept money from all their other subjects — thus, the birth of the “legal tender” law.

Recall, the net effect of this scheme is that:

1. Sovereign subjects must use sovereign money to pay the sovereign; and
2. They must accept sovereign money as payment for everything else.

The way they procure sovereign money is by trading their time, labor, and/or resources in exchange for that sovereign created money. One of the niggling problems with this scheme is counterfeiting. If sovereign issued money is easily counterfeited, then the whole racket falls apart. Which is one reason why gold and silver were so commonly used early on. Gold and silver can be reliably assayed. While it is inconvenient to assay a metal, it is convenient enough to tell if someone is tinkering with your money at scale. Moreover, gold and silver already had a long history of perceived value, was relatively easy to work with and relatively scarce when refined. Put together, little coins made out of gold and silver became a great way for sovereigns to loot their population without having to store the tangible goods the sovereign extorted to begin with. The convenient knock-on effect being, the sovereign gains the ability to procure necessary goods and services from their population when they need it.

Once that system was in place, exchanging goods and services became part and parcel of sovereign economies. Likewise, saving, lending and borrowing money becomes an industry in and of itself. But, at the end of the day, the purpose money is arguably designed for is the extraction of value from a population. The accounting, exchanging, and storing aspect of money all came after that purpose. Be that as it may, using gold and silver as money is still problematic beyond issues of counterfeiting. It is limited by how much has been extracted and refined from the ground. Meaning, if the sovereign — or anyone else, for that matter — wants to increase how much gold or silver they have, they either need to find more to mine and refine, or they have to acquire some from someone that already has it. Bearing in mind through it all that sovereigns are, broadly speaking, rather poor at managing money. The trouble is, people are involved. And, whenever people are involved, they tend to orient towards actions that maximize rewards, while minimizing effort. Spending more money than one has is an all too common example. Thus, even when silver and gold were money, this did not stop the sovereign from spending more than the sovereign coffers held. What they would try to do is overspend and then debase their currency by mixing in pot metals, or by reducing the weight of the coins. This way, the sovereign could make it appear as though they had more money than they really did. It is counterfeiting if anyone else does it. But, since the sovereign is the only one that can use force, there is a major barrier in place for those who would try to stop this practice.

That said, sovereign counterfeiting schemes would work for a period of time. Which is to say, they would work until everyone figured out the scheme. Then their subjects would tend to hoard the older, more valuable coins, and use the new debased ones to pay taxes and buy goods. The introduction of paper promissory notes thus became a way for the sovereign to more easily debase their money. The way the scheme works, the sovereign simply says, “Dear subjects, now instead of gold and silver, you must trade and pay taxes with these little pieces of paper instead. Each piece of paper is worth some amount of gold or silver. I promise.” Then, so long as everyone does not try to cash out at once, the sovereign suddenly has the ability to “make” money without having to go through all the trouble of finding, mining, refining, or stealing more gold and silver. Perhaps unsurprisingly, most European nation-states adhered to the same scheme. And, provided they were not engaged in yet another tournament style competition (war), they were all trading with each other across their respective borders. Largely owing to the fact that they are all engaged in a competition for resources, they inevitably tried to cheat each other by manipulating markets and playing fast and loose with settlements. The cheating and manipulation by sovereigns, both internally and externally, eventually made the various systems break down. Sometimes those breakdowns were limited to one or two countries. Sometimes the contagion spread much further, often with terrible consequences, like global conflict. The last vestige of gold backed paper currency was during the Bretton-Woods era, with the United States serving as the backbone of the system. But, much like their extortionist predecessors, the U.S. sovereign spent too much money. Instead of making it right, in 1970 they reneged on the gold redemption promise they made to the world and went with unbacked paper money instead. While the illusion of prosperity brought many material comforts to the denizens of the United States, once the restraint of an in-principle need to redeem paper for an asset was removed, the debt naturally spiraled.

To wit, a visual of just that result:

With that brief recap in mind, at the core of this problem is the niggling reality that managing a money supply at the sovereign level is hard to do. There are simply too many incentives to cheat, manipulate, over-spend and steal money. And, as alluded to above, the people involved often are forced to make decisions among a selection of terrible options. Moreover, the incentives and rewards that come from maintaining fiscal prudence and being a good steward of money are indirect and greatly delayed. The benefits of sound monetary policy accrue over generations. Those benefits demand, at a minimum, delaying gratification. The base reality is that politics always demands immediate action. As such, “kicking the can down the road” is far more expedient than trying to explain why the can should not be kicked. Indeed, those that try will inevitably fall prey to those seeking power and otherwise lack those compunctions. It is largely for these reasons why a CBDC will likely end up being a rather terrible idea. With that in mind, it must be said that, for the central bankers and Dearest Supreme Leaders of the world, a CBDC does not necessarily represent a tool for oppression. I would go so far as to argue that such a notion does not even rise to the level of consideration in most circles of power. I would posit instead that, by and large, for the Dearest Supreme Leaders, a CBDC is merely an efficiency, much as email is more efficient than sending a letter. That they may end up with a draconian tool for oppression is, rather, a second order effect and potential outcome.

Beyond base fears of CBDCs being utilized as dystopian control tools, opponents also rail against CBDCs because of their potential to infringe on financial privacy. The sad fact of the matter is, any notion of financial privacy was already lost decades ago. Right up to 1970, the only people in the United States that knew where you got your money were the people you obtained the money from. Your bank did not ask, nor care. You could walk into a bank with a million dollars in cash, make a deposit and walk out with a smile, no questions asked. The Bank Secrecy Act (BSA) changed that equation in 1970. The genesis of that act was the widespread use of numbered Swiss bank accounts by stock investors looking to avoid paying taxes on their stock market gains. By modern standards, the BSA was pretty benign. It mandated basic record keeping requirements at banks and financial institutions. The BSA also gave birth to the anti-money laundering morass that we all get to muck around in to this day. Unsurprisingly, when banks were required to ask for ID, people became very angry. The BSA was challenged all the way to the Supreme Court. To that point, the lower courts agreed BSA was an infringement on fundamental rights. The Supreme Court did not agree though, whereby the BSA became the law of the land.

However, the BSA was weak. It was very easy to get around the mandated record keeping requirements. And broadly speaking, cash was still king for transactions in the United States. Meaning, the vast majority of transactions undertaken by U.S. sovereign subjects were still largely private. The powers that be kept trying to wrench down on financial privacy. All through the 1980s and 1990s, they used the “War on Drugs” as an excuse to peer ever deeper into their subjects’ personal financial business. In the late 1990s, they went so far as to introduce legislation that would incorporate the FATF-40 in the United States — otherwise known as the Forty Recommendations of the global Financial Action Task Force, which is led, of course, by the United States.

The FATF-40 mandated things like “Know-Your-Customer” (KYC) rules, Suspicious Activity Reports (SARs) and all manner of other invasive practices that substantially degraded financial privacy both in the United States and globally. However, once people became aware of this scheme, there was a major political backlash. That backlash was so intense it caused the legislation to be pulled from consideration. Just a few short years later, the September 11, 2001 attacks gave cover to enact the exact same rules — nearly verbatim — in the elaborately titled “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.” Legislation otherwise known by the more common acronym, the USA PATRIOT Act. An Act, by the way, that could be easily repealed at any time. Meaning, if we truly cared about our financial freedom, it would be a simple matter to restore it. Just repeal the BSA, the USA PATRIOT Act and all the other AML rules that have been passed in-between and since. Which brings us back to the matter at hand — CBDCs and financial privacy. The point of this lengthy exercise is to point out the tools for invasive financial control of the population are already in place.

The FATF-40 effectively deputized the entire banking sector to become state snoops. It allows banks to arbitrarily refuse transactions. It allows banks to seize your accounts under any “suspicion” of criminal activity. Banks already have the ability to refuse to repatriate your own money to you and to refuse withdrawal demands under certain conditions. The U.S. sovereign, the Canadian sovereign, and indeed, numerous other sovereigns throughout modern history have prevented people from accessing their funds. In many cases, the holders of those accounts were debased, receiving only a fraction of the value they held prior to the bank blocking access to their accounts. Moreover, only 16% of transactions are settled in cash in the United States, with the other 84% being conducted digitally. Meaning, 84% of all financial transactions are already conducted via a centrally controlled and monitored digital ledger. A ledger that is exclusively maintained by the sovereign control apparatus. Effectively, all a CBDC would do in the United States would be to shift the remaining 18% of transactions to that same ledger. Keeping in mind, of course, the average cash on hand in America is $369. Put another way, nearly all meaningful transactions that someone might wish to conduct privately are already being monitored. In fact, monitored digital transactions are so ubiquitous today, even prostitutes and drug dealers accept credit cards with scarcely a second thought.

Which is all to say, given the generally low financial literacy, low political participation and general ignorance and apathy of the voting public writ large, when CBDCs finally come along, most folks will likely not care. The ones that do will hoot and holler. They may complain. They may even sue to block the CBDC in court. If the BSA, and other financial privacy destroying regulations like the USA PATRIOT Act are any indicator, those lawsuits will fail. Because of this, I think it much more likely that most people will just forget about it, roll over and take whatever comes. Indeed, the USA PATRIOT Act passed the House 357–66 and 98–1 in the Senate, with hardly a whiff of complaint from the public. Keep in mind, one-third of the USA PATRIOT Act is devoted to implementing the FATF-40. The same FATF-40 the voting public overwhelmingly rejected just three years previous. It did not matter that “money laundering” and “terrorist financing” played no role in the 9/11 attack. In fact, every single piece of AML legislation introduced over the last 50 years has passed with near-zero resistance. Each one that passes is a freedom degrading state overreach that removes more and more financial privacy. People today are so accustomed to being interrogated at the bank they think it is normal. This should already be an unthinkable infringement on the right to free association and freedom to transact. Yet, it is not. It is largely for these reasons that I think CBDCs will be no different. People may whine. They may post nasty tweets on Twitter or angry replies on Facebook. But, in the end, I imagine most people will just take their lumps and move on.

I would, however, be remiss to not point out that the fear around CBDCs presumes that the same people that currently run the global economy will be running the show with a CBDC. Of course, for the reasons noted above, chances are very good that will be true. But, it must be said that things do not have to be this way. A central bank digital currency contains enormous power. If implemented poorly then yes, a CBDC can only be a further degradation. But, the same qualities that make a CBDC a dystopian nightmare for “the people” could also completely constrain and reign in the abuse and corruption of Central Banking if it is programmed in a contrary direction. There is nothing that says a CBDC must be closed-source and programmed to simply replace cash. Practically speaking, every operation a Central Bank undertakes can be hard-coded, immutable and automated with a CBDC. Things like privacy guardrails, limitations on money seizure, transaction tracking, and just about anything else related to private and commercial transactions could be coded in too. If done well, a CBDC could remove human intervention and decision making from monetary policy entirely. Instead, that policy could be written into code, publicly available to audit, and made with no allowance for deviation without an act supported by two-thirds of Congress. The code could very easily dictate the rate of new currency issuance, open market operations, enforce collateral and reserve requirements, and prevent the holding or purchasing of toxic or insolvent assets. No more bailouts. No more buying Treasuries to fund endless debt spending. No more inflationary war funding. No more under-collateralized banks. No more unfunded liabilities.

A well-programmed, freedom-first, centrally constrained CBDC could just as easily serve the people. It could shine a light on the malfeasance and corruption endemic in global finance. It could enshrine, via programmed code, a monetary policy that faithfully serves the needs of the nation and the world. It could ensure that the playing field is level. It could restore financial privacy. It could not only stop, but reverse financial privacy encroachment through AML mandates. It could enforce fiscal discipline. It could eliminate deficit spending. Indeed, a well-programmed CBDC should do all of that. It is easy to forget that the people in “power” work for us. They certainly forget it all the time. They forget that every time they make monumental policy errors that enrich the wealthy, while forcing austerity measures among the masses. We could theoretically put an end to a lot of nonsense with a CBDC. Not to mention, the most powerful, completely decentralized and most secure network ever conceived already exists. It is called Bitcoin. And, as a public, impenetrable, immutable, decentralized network secured by electric energy, we also have a means to tie the security of an open, auditable CBDC to that network. This could help ensure no back-door deals or code modifications could be pushed through.

I am certainly not saying that is likely. Indeed, that is probably as far-fetched as living on Mars. But it is possible. At the very least, it is something worth considering. This is especially true if we work from the assumption that a CBDC will inevitably be pushed out, regardless of opposition. The broader point being, if a CBDC is being placed on the table, that will be the opportunity to push for a very different direction. Considering the widespread American distrust of a CBDC already, proponents that attempt to push one ahead may well be caught off guard by an approach that embraces the technology, while stripping those same proponents of their power. Again, I do not consider this approach likely to succeed. I also think it is important to be prepared for intensification of the CBDC push. In that preparation, it will be critical to be able to articulate arguments in favor of pro-freedom, non-human intervention, programmed monetary policies that force proponents to respond. At the very least, such a dialogue may help force privacy concessions and other guardrails, even if monetary policy remains in human hands.

The Great Realignment

Now that we have covered the basics of alternative digital ledgers, and have recapped earlier chapters, now seems as good a time as any to get to the crux of the book. As noted above, narratives around Bitcoin and its usefulness abound. Is Bitcoin a new form of electronic cash, as the whitepaper said? Is Bitcoin savings technology? Black market money? White market money? Inflation hedge? Store of value? Digital economic energy? Now that Bitcoin is available in an exchange traded fund (ETF) format, what becomes of it? Will Bitcoin simply be co-opted into the legacy financial system? Will it become just another speculative toy for Wall Street goons to manipulate to their unfair advantage? Will legions of Goldman Sachs and Merrill Lynch quants and traders leverage Bitcoin to the moon, sell naked positions, and do all the usual muckery they have done for the last 100+ years?

Maybe.

Perhaps the more important question is, “What problem is Bitcoin supposed to solve?” Economic privacy? Protection from monetary debasement? Is it the new gold? A replacement for fiat? A reserve asset upon which new fiat schemes can be made? It is a lot to unpack. One of the big stumbling blocks when discussing economics, and especially the economics of Bitcoin past and present, are the terms used. Terms like value, time preference, supply, demand, and inflation are not scientific terms. They are terms of art, much like legal terms are often terms of art. The problem with a term of art is that it will often have a common meaning or understanding that may be apposite, or it may be in conflict with the term of art. “Trust,” for example, may mean a lot of things to the lay person. In a legal context though, “trust” has a very specific meaning:

A trust is a legal relationship created (in lifetime, or on death) by a settlor when assets are placed under the control of a trustee for the benefit of a beneficiary, or for a specified purpose.

It is easy to see how a conversation around “trust” could get messy. Let us take “supply and demand” in the economic sphere as another example. Many a Bitcoiner will say things like, “The Bitcoin supply is limited, therefore the demand will only increase.” And, in this context, such a saying may or may not be conflating the available quantity of Bitcoin with the desire to purchase Bitcoin and the economic term of art “supply and demand.” I think those notions, however, are very commonly conflating the former with the latter. As noted in the section on Money, those familiar with the Austrian School will recognize there is fundamentally no such thing as a “supply side.” There are only two demand sides, with each being a “supplier” to the other. This is not intuitive and yet, this is the correct understanding of the economic term of art “supply and demand.” One might think this an esoteric point and the implications are still problematic. They are problematic, because such a mismatch in terminology means two sides to a conversation are not discussing the same thing. Or, as the old saying goes, “The biggest barrier to communication is the illusion it has occurred.”

Perhaps a more correct way to express what is implied by the notion sketched above is, “Because the available quantity of Bitcoin is constrained, and provided more and more people desire to own Bitcoin, the fiat denominated price will go up.” This may or may not express the same idea and that is the point. To say Bitcoin’s economic potential for continual and sustained increases in fiat denominated price is strictly a function of “supply and demand” mechanics is inaccurate, at least, in a purely economic sense. However, the difference between the two expressions of this idea is stark. One expresses what sounds like an economic certainty because of inherent market dynamics. The other expresses uncertainty and caveats the sustained fiat price appreciation thesis with a more nuanced causal relationship. Put another way, one favors heuristic bias, while the other is cautionary.

Perhaps then, a good question to ask now is, “What problem does Bitcoin solve?” To hear it from a Bitcoin “maximalist” — and I freely admit to liberal application of this trope — Bitcoin fixes everything. Bitcoin will fix war. Bitcoin will fix inflation. Bitcoin will fix poverty. To see it told on Twitter, Bitcoin is the closest thing the world has ever seen to a superhero. From my perspective, the “Bitcoin fixes this” trope is a little bait for discussion. I fully realize that statement rightfully appears outrageous to the lay person. The process of explaining the rationale I rely upon for the belief that “Bitcoin fixes this” is the Orange Pill, so to speak. What I think Bitcoin solves likely differs from what others may think. In a sense, I think I gravitate closest to Michael Saylor’s utility view of Bitcoin with some additions. For those unfamiliar, Michael Saylor is a billionaire investor in Bitcoin. He came to prominence in Bitcoin circles several years back when he announced his software company, Microstrategy, was implementing a Bitcoin investment strategy in 2020. At that time, Microstrategy purchased and then held on her books approximately $1.2 Billion worth of Bitcoin. Saylor noted at the time that Bitcoin is, “a dependable store of value,” before going on to say, “Bitcoin will provide the opportunity for better returns and preserve the value of our capital over time compared to holding cash.” Placed in the context of this book then, it would appear Mr. Saylor is acquiring Bitcoin as an asset that appreciates in nominal price at, or near, the same rate as the sovereign debases their exchange medium.

Be that as it may, to synthesize my perspective on Bitcoin’s utility:

Provided the Bitcoin network stays decentralized and secure, Bitcoin provides a narrow path to maintain stability and preserve necessary and desirable institutions, while rapidly and progressively realigning market-wide economic incentives without causing catastrophic consumer inflation.

As you can see, it is not very Twitter friendly. In fact, given that more than half (54%) of Americans read below the 6th grade level, that particular take on Bitcoin is out of reach for most. To elaborate that point, the sentence above scores a 25 on the Flesch-Kincaid readability test. This means that sentence is “Very difficult to read. Best understood by university graduates.” Meaning, it places that perspective out of reach of around 80% of the population. And that is just the summary of the thesis. Not a great start for a revolution, eh? Nonetheless, as long-time Bitcoin contributor and developer Eric Voskuil has said often, the idea that Bitcoin is permanent and incorruptible is not correct. Somehow, Mr. Voskuil has become a pariah among many of the current Bitcoin devotees. I, for one, do not understand the apparent animosity. I certainly value the man’s insights. I think it would be foolish not to. Mr. Voskuil is very dismissive of the “Saylorian” view of Bitcoin and its role in global finance. The crux of Mr. Voskuil’s statements in the linked clip orient around whether or not Bitcoin retains its essential value proposition, i.e., stateless, permissionless money versus the desire for fiat denominated price appreciation within the sovereign monetary apparatus. Viewed from that perspective, I think the dismissive attitude is completely understandable. While I disagree with Voskuil’s characterization of Mr. Saylor’s arguments regarding Bitcoin as a purely “number-go-up” technology, there are understandable reasons why Voskuil might come to those conclusions.

That said, Mr. Voskuil may well dismiss me as a loon right alongside Mr. Saylor. However, I think my perspective is reasoned and reasonable. As the old legal axiom goes, “Reasonable minds may differ.” It must be said clearly that the entirety of my thesis presumes the Bitcoin network retains its current integrity. If that should be lost due to state interference, collusion, back door shenanigans, or what have you, this thesis may well fall apart. And, it must be stressed further here, it is not a foregone conclusion that potentially network compromising outcomes cannot or will not occur. For his part, Mr. Voskuil has outlined a number of economic fallacies in and around both Bitcoin and the field of economics, as well as numerous risks the Bitcoin protocol may face. The book is rather esoteric and may prove difficult for the lay reader to enjoy. I still recommend it, as Mr. Voskuil is a highly intelligent writer, and he makes a number of excellent points. Regarding the caveat to my core thesis, I bring this up at the outset, because as I said earlier, the rest of my thesis rests squarely on the potentially faulty presumption that the Bitcoin network can and will remain decentralized and secure.

That said, the core premise underlying the “Great Realignment” envisions widespread reserve adoption of Bitcoin by economically important actors. In this, it is important to define how I am using the word “reserve.” My usage here is different than the concept of a “reserve” in the banking sense. Which is to say, I do not think Bitcoin — or anything for that matter — can serve as a reserve upon which to issue promissory notes for future redemption. Leaving aside the mechanics and accounting of reserve holdings relative to claims against those reserves, the incentive in such a structure is to always issue more claims than what is held in reserve. This can be by deceit or by design, such as the case with fractional reserves. This was true in the wildcat banking era, where everything from sheep to wheat to gold and silver were utilized as reserves for paper claim issuance. Sooner or later though, when one promises to exchange a worthless thing for a valuable thing, if the issuer does not have enough of the valuable thing to redeem, the wheels fall off eventually, resulting in a bank run. Instead here, what I call a “reserve” of Bitcoin might be more appropriately called a “store” of Bitcoin. Hoarding is the base term, but it carries a negative connotation I am not fond of.

It is the most accurate though.

So, what purpose would a reserve hoard of Bitcoin serve? In a truly free market, free banking system, hoarding Bitcoin would likely not provide any utility at all. However, in all global monetary systems today, money creation and the concomitant compulsory legal tender laws are by sovereign fiat. That power of creation and compulsory use is monopoly controlled by the sovereign. Without exception, and in all cases, the sovereign abuses that to the advantage of the sovereign and those that enjoy close economic relationships to the sovereign. In the United States in particular, this was laid bare in the 2008 financial collapse with the advent of the fascist concept of “Too Big to Fail” financial institutions. They were not too big to fail, save for the massive economic distortions their unchecked manipulation of OTC derivatives markets created. In all fairness, allowing them to go bankrupt would have caused a cascade of liquidations and knock-on failures that may well have been irrecoverable. In truth, what the term “Too Big to Fail” really implied was the malinvestment of the preceding 50 years of monetary debasement and moral hazard was so metastasized with the “American Way of Life” that the Wall Street institutions had essentially created conditions that left no other viable alternative.

Which leads to the present conundrum I think Bitcoin as a hoarding asset may fix. One of the unique properties of Bitcoin is it has no theoretical price cap. One Bitcoin can just as easily trade for $10 as it can for $10 billion. This is a very unique property among monetary premium assets. Of course, like anything of “value,” that value is subjective. In the case of traditional assets, the subjective value proposition is protection against monetary debasement from the sovereign. The rough sketch idea being, if you have an excess of legal tender paper— whether from savings, business profit, or even from theft or plunder — if the purchasing power of your legal tender paper is being continuously eroded by the sovereign, the smart thing to do is buy an asset with that paper that rises in nominal value as close to, or superior to the rate of sovereign debasement. Which, at its core, implies acquiring and hoarding those assets. As noted in the section on Money, and modernly speaking, how this manifests is people, businesses, insurance companies, finance companies, pensions, and local and county governments all purchase and hold assets they neither want, nor need except for the protection they provide from sovereign debasement via their respective monetary premiums.

Take, for instance, a local municipality. They take in a certain amount of taxes to fund local operations, like salaries, pensions, equipment purchases, utilities, etc. If there were no monetary debasement, the accounting would be quite simple. Budget so there is some tax money left over, put that in savings and build that savings up to pay for future liabilities, with a cushion for a “rainy day.” Sovereign monetary debasement makes this impossible. This is because external costs will continue to rise while the currency they hold in savings continues to lose purchasing power. Thus, their problem is two-fold: rising costs and declining purchasing power. In order to offset this without continually raising taxes, which is politically impractical — impossible beyond a certain threshold — they must instead “invest” in unneeded and unwanted:

1. Sovereign debt instruments
2. Land/real estate holdings
3. Fractional ownership in companies (equities)

Or they must themselves issue debt instruments to fund operations. This is “kicking the can down the road” with the expectation that future tax revenues will be able to service debt and interest payments to municipal bond-holders. Bitcoin fundamentally alters this arrangement. The combination of Bitcoin’s relatively low available quantity coupled with its zero-trust, egalitarian access network and transactional immutability make it an ideal hoarding instrument to fulfill the objectives currently served by the aforementioned “assets.” This is just one example. Reflect on the fact that, in America today, over 40% of single family homes are rentals. Which begs the question, why do so many people own more houses than they need to live in? The answer is simple: Rental income and expected fiat price appreciation in pursuit of a monetary premium. Put another way, the rate of monetary debasement is so great, someone who has the credit worthiness and the liquid capital is willing to take on the risks and responsibilities of owning an otherwise decaying and depreciating asset they do not need in order to preserve some semblance of their purchasing power over time. The image below demonstrates the near doubling of housing units held as rentals since 1975.

The knock-on effect in the housing market in particular is this monetary debasement artificially removes housing units from the market. One can only speculate, but if those landlords were given an opportunity to instead save and/or increase their purchasing power over time by buying and hoarding an asset with no-counterparty risk, no depreciation risk, and indeed, no storage costs, would that not seem a better deal? The same is true at the small business level, as it is true at the large corporate level. As Mr. Saylor has pointed out, in order to survive and thrive long-term as a S&P500 company, it requires an extraordinary effort. Continual debt cycling, stock buybacks, acquisitions and despite all the effort, 493 of the S&P500 companies are not able to keep up with the massive amount of monetary debasement that occurred during and after 2020. Meaning, they are all slowly going broke. So, those companies are forced to:

1. Cut costs
2. Degrade quality
3. Reduce workforce
4. Increase prices
5. Centralize operations

All of which creates a “doom loop” where the further and further down the economic ladder you go, the worse off you become. In essence, in the absence of an asset like Bitcoin that can keep the balance sheet positive, the price of everything must rise to account for monetary debasement. But, if hoarded as savings, Bitcoin instead becomes an asset where debasement can be safely shunted, while slowly allowing for utility assets, like homes, to depreciate. Likewise, companies can refocus on quality and attracting customers because they are no longer constrained by rising prices and declining purchasing power. Instead, their Bitcoin holdings are providing that necessary balance sheet hedge against sovereign debasement. Indeed, even a central bank itself could benefit from Bitcoin on their books, rather than the toxic assets they are currently holding to infinity. Put in different terms, Bitcoin as a reserve hoarding asset harms no one. Even those who do not, or cannot, hold Bitcoin will benefit from declining costs across the economy. Moreover, even a small Bitcoin hoarder will benefit the same as the large hoarders, just at a lower scale.

All of this, of course, presumes the sovereign will continue to debase fiat. I think, as a purely historical matter, this is a high-probability assumption. If not for this debasement, then cash savings would likely be a preferred option. For the scant few years the United States monetary system was governed by Bretton-Woods, people could do this. Frugal people could save cash in a bank, earn 5% interest and retire. Those days are long gone. Nevertheless, the beauty of Bitcoin hoarding as an alternative is that it requires no major change to the system writ large. Meaning, we do not need a violent overthrow and rebuilding process. Current fiat systems are already well integrated into the global economy. Taxes can still be collected. Groceries can still be bought. Busses will run, cargo will be delivered and life in this amazing, fragile, inter-connected, electrically dependent world we have collectively created can continue. There will be no need for draconian austerity measures. No bread lines. No riots in the streets. No banking collapses. Just a potentially rapid shift away from the catastrophic mistakes of the sovereign and the central banks for the last 50+ years. Will it end the security state overnight? No. Will it solve all political problems overnight? No. Will it prevent geo-political tinkering for the benefit of the United States defense industry overnight? No. Will it solve the health crisis overnight? No. Will those things gradually become better, less relevant, less profitable and less common? I think so.

The mechanism of action proposed here is perhaps best explained via an analogy. Recall the core premise of the Great Realignment envisions widespread reserve adoption by economically important actors. By economically important, I mean those entities and institutions whose economic decisions have an outsize impact on the broader economy. Of course, collectively, the millions of economic decisions made by individuals are a core component of the political economy. But it is indisputable that a relatively small number of people make economic decisions that impact thousands, hundreds of thousands, millions, and even billions of people. Small, medium and large commercial, financial, and manufacturing entities, large hospitals, workers unions, municipalities, county governments, state governments, the federal government, etc. are all led by a relatively small number of decision makers compared to the number of people affected by the decisions that small number of people make. To make an analogy for the United States, if we viewed the national economy as a corporeal being, those economically important actors would be analogous to the organs of that being.

Much like our own bodies, the function of those organs has an outsize impact on the system writ large. And much like our own bodies, the vast majority of the national economy is comprised of actors that, individually have little impact, but collectively become quite meaningful. In the corporeal sense, these actors would be analogous to things like muscle cells, fat cells, skeletal cells, connective tissue cells, and so on. The rough analogy being, if a few thousand muscle cells are damaged, or not functioning optimally, the system can easily withstand that. However, if an organ is compromised, the health of the system will decline rapidly as a result. The analogy I make here is that fiat currency is to the national economic health what cancer is to the human body. In the case of our current economic predicament, in 2008 we not only discovered the cancer, we learned it metastasized and had disseminated to every cell of the national economic body. To further the analogy of a Bitcoin driven Great Realignment, Bitcoin is like a cancer fighting antibody to that cancer riddled economic system.

Arguably the fiat cancer is as old as civilization itself. Regardless of the form the money takes, whatever the sovereign controls and then uses to collect in taxes or tribute will always cause the cancer to follow. I think history bears witness to this reality. In the present example, I argue the modern fiat cancer formed in the late 1950s and early 1960s. In a vain attempt to save the system, the Nixon administration effectively removed an organ in 1971 by abandoning Bretton-Woods. Rather than cure the cancer, this instead accelerated its growth and spread. By the time of the Savings and Loan Crisis in the 1980s, any attempts at a cure were abandoned. Instead there was a continual focus on prolonging the life of the patient through palliative measures. To that end, the major sovereigns and their adjacent political and financial apparatuses sought and encouraged palliative measures like the outsourcing and off-shoring of industry and the Ponzification of financial, real estate, education, healthcare, agriculture and insurance markets. They incentivized the monopolization of service, retail and manufacturing industries that further degraded the ability for the muscle, bone and skin cells to heal. They engaged in resource extracting warfare and needless nation destroying and rebuilding projects. All the while the cancer grew and spread unchecked. In 2020, whether by grotesque incompetence or evil design, all palliative measures were suspended. In a desperate bid to restart the palliative measures, the system released more cancer cells than any palliative measure could ever hope to overcome.

I think Bitcoin fixes this.

Since the Nixon global rug-pull of 1971, diverse groups of people, recognizing the cancer, have looked to extract their cells from the body. The Libertarians, the Anarcho-Capitalists, the Cypherpunks and others have collectively and individually sought out the means by which they could reform or destroy the state control apparatus while keeping the body alive. If this outcome proved to be unachievable, at the very least, they strive towards a world where they would be inoculated and insulated from the scourge of the fiat cancer and the ills that came from the sovereign’s palliative measures. Through these collective efforts, advances were made in privacy enhancing tools, secure communications, and ultimately Bitcoin. As alluded to above, the core design and intention of Bitcoin appears to have been as a stateless, permissionless currency to facilitate exchange. And much like the failed cancer drug AZT became the first effective tool against HIV and AIDS, it is argued here that there may be a far more beneficial use for Bitcoin in the war against the fiat cancer.

The astute among you may realize already that Bitcoin was released after the discovery of the metastasized fiat cancer in 2008. Bitcoin was experimentally injected into the muscle cells of the sovereign fiat system in 2009. From that site it propagated and spread to other muscle cells. A year-and-a-half later, the first two muscle cells became effectively immune to fiat cancer. Since then, the Bitcoin fiat cancer cure has been distributed throughout the system. At each point where it is fully incorporated, Bitcoin co-opts the sovereign’s palliative measures into a powerful anti-fiat cancer fighting mechanism. Indeed, as the 2020 global sovereign debasement scheme made clear, Bitcoin performed exactly as an anti-fiat cancer drug should. As the world was flooded with the fiat cancer of mass, coordinated sovereign monetary debasement, those who had and held Bitcoin were not only protected from the cancer, they thrived through it. As fiat denominated prices skyrocketed, while fiat denominated wages and purchasing power plunged, Bitcoin enabled and protected the holders from those devastating effects. For example, commodity producer and Bitcoin holder Eric V. Stacks says in an interview, “Without sweeping my surplus [fiat money] into a property that is holding its value better than the dollar, then I would have an existential crisis.” The property he chose — Bitcoin — has instead allowed him to thrive in a highly competitive commodity producing industry, where he otherwise would have likely failed years ago. The cure is working. The burning question is, what does the world look like when the organs of the economy incorporate the cure as well?

To reiterate the core Realignment thesis:

Provided the Bitcoin network stays decentralized and secure, Bitcoin provides a narrow path to maintain stability and preserve necessary and desirable institutions, while rapidly and progressively realigning market-wide economic incentives without causing catastrophic consumer inflation.

Throughout the entire national political economy, the incentive structure is fundamentally misaligned with sustainability. The very nature of the cancer that is infecting the system requires ever more extensive palliative measures to ensure the system can continue to operate. But those measures can only mask the symptoms for so long. The long chapters on Power, Money and Greed are there for a reason. The reason being, the system itself is not materially different than the thousands of systems that have come before. Much like the human being you are today is not materially different than the billions of human beings that came before you. Within a very narrow range, you have the same flaws, shortcomings, biases, emotions, capacities and intelligence as every human being that has existed. Just as our modern competitive resource capture based political and economic system today has the same flaws, shortcomings, biases, capacities and functions as every competitive resource capture based system that came before. The clothes have changed. The language has changed. The rules have changed. The gods have changed. It is still fundamentally the same game.

The power structures we exist within, rely upon and often rail against are the culmination of thousands of years of development. Just as the money we use, rely upon and often rail against is also the culmination of thousands of years of development. For better or worse, this is the global political economic body we are part and parcel of. It is the body we are inextricably linked to. I argue here that those who desire to replace, or even throw out, the organs of the state in pursuit of a better future grossly underestimate the gravity of those actions. Recall from the discussion on Power, when a power vacuum is created in a competition based society, those who are best able to reign in the resultant forces of chaos become the new leaders. But the winners of those competitions for power are not necessarily — nor even likely — to be beneficent, wise, or particularly savory. The climb to power is treacherous, uncertain and fraught with risk. Even when established, those control structures rarely last, and more often than not, devolve right back into chaos. Those fits and starts can span generations — even centuries. As noted previously in this book, those unfortunate nations that experimented with the violent overthrow and installation of new power structures based on Communism knew nothing but horror and suffering in pursuit of a theoretically better future.

Likewise for money. Sovereign money has always been a source of cancerous decline. Throughout recorded history, the overwhelming majority of financial schemes are born of extortion and die in extortion. That some human flourishing may occur in-between the birth and death of a system is rather more an unusual occurrence than it is a common one. The point being, we have a rather remarkable system that has encouraged and fostered human flourishing on a scale previously unimaginable. The fact that this system is riddled with the same cancer that has brought low every system before it does not mean the system itself is worthy of discard. Rather, I think and believe, the system we have is worthy of preservation. Inalienable individual rights, sovereign protected property rights, the free exchange of goods and services with sovereign mediated dispute mechanisms, the rule of law, polite society, the arts, philosophy, the exchange of knowledge and culture, instantaneous communication, global accessibility — all are magnificent achievements born of percipience.

What the Great Realignment envisions is a world where those magnificent qualities and human achievements are preserved and reified. A world where the cancer does not take the body, but rather one where Bitcoin repairs the damage from the cancer by using the cancer against itself. The idea being we cannot, in good conscience, remove the patient from the palliative measures — at least not just yet. But much like an antibody repairs and removes infected cells, I posit Bitcoin is doing much the same right before our very eyes. And much like a person sick with the flu, while the antibodies are busy working, the system can appear to degrade significantly in the short-term. For a child that has not experienced this process, it can seem rather alarming and frightening. By contrast, those who have battled the flu previously know there is light at the end of the tunnel. For them, they must simply bear down, let the antibodies do their work and wait for the fever to break. To extend upon the cancer analogy a bit further, as the various organs and cells start to heal, eventually the system is enabled to function better as a whole. For the cancer riddled patient, this might mean being able to eat more, go for walks, enjoy sunshine, and sleep better. In turn, all of those things increase and accelerate the healing being done. I think the same net effect will hold true for the global political economy with Bitcoin as the antidote.

Everyone I am aware of that has adopted Bitcoin as a primary reserve has seen a similar transformation. For myself personally, this transformation has been rather astonishing. From the moment I adopted Bitcoin as my sole savings (hoarding) asset, my life has improved dramatically. Not just financially, but emotionally, physically, and spiritually. Whether this is simply a by-product of an improved mental state, or some larger effect is hard to say. What I can say with certainty is that I have seen the same effect on others as well. This all may be the result of a shift in priorities, a calm that comes from knowing one owns inviolable property, the sense of belonging to a larger community, or perhaps something else entirely. Indeed, it may be a combination of all that and more. The point being, I think it quite reasonable that similar effects will carry forward to all that come to adopt Bitcoin. Which is also why I included the discussion on Greed. As we all navigate the fiat cancer together, I think it is important to remember that the overwhelming majority of people are not evil. They are, by and large, making do within the limits of their cognition, their biases, their emotions and their desires.

What is unmistakeable, however, is the fact that important economic actors are already learning about and adopting Bitcoin. As mentioned above, I think this is a great sign. This tells me the Bitcoin antidote is working its way through the system. As corporate treasuries adopt Bitcoin, their assets versus their liabilities will start to correct. This will make them more competitive than those who do not. The same is true for the municipalities, the insurance companies, the small business owners, the conglomerates, and every other economic actor in the system. I doubt Bitcoin will become a widespread currency that displaces sovereign issuance. I do think economically important actors will increasingly adopt Bitcoin for the reasons outlined thus far. I think the knock-on effect of that mass adoption by economically important actors will realign their need to continually:

1. Cut costs
2. Degrade quality
3. Reduce workforce
4. Increase prices
5. Centralize operations

As Jeff Booth has said time and again, technology inevitably drives the cost of goods to the nominal cost of production. The fiat money cancer interrupts this process. Bitcoin absorbs the fiat cancer and allows this process to proceed unimpeded. Meaning, even those that do not adopt Bitcoin, or even understand what it is or does, will benefit enormously by the reduction, or even elimination of the wasteful and net-destructive practices the fiat cancer forces upon economically important actors. The “number-go-up” quality of Bitcoin is often mocked for the personalities that promote it. Those folks often see no further than a life of leisure, while peacocking with a Lamborghini. I think this grossly underestimates what “number-go-up” might truly influence and change. I appreciate that a faction of the Bitcoin republic is hostile to institutional participation. The true vision of the cypher-punks certainly did not envision Bitcoin becoming an asset to heal and repair a very dysfunctional and broken monetary system. Their clarion call was directed exclusively on a censorship-resistant medium of exchange which is, of course, a noble pursuit.

Not all of us live in a country that allows for freedom of expression, transaction, or even movement. Yet, in the grand scheme, many of those regimes only exist through tacit or explicit support from countries that do enjoy those freedoms internally. Likewise, the incentive to destabilize and interfere in foreign relations is also a readily observable response to sovereign debasement. With that said, if Bitcoin is truly valuable as a hoardable reserve, and can remain censorship resistant to its ownership, then it can also help serve to lift those up in even the most draconian nations. I think this is a hopeful and promising narrative. Not just for Bitcoin, but for everyone. As I said, I think it is a narrow path and requires the network remain decentralized and secure. I also think it is a path we are already collectively walking down.

We just need to tend to that path and be gracious to those who do not yet understand where it leads. This, of course, includes ourselves, for none of us is gifted with any more knowledge of the future than anyone else.

A few more thoughts on Bitcoin, the future of war and AI

Before we part ways, I would like to touch on a couple of future issues for which Bitcoin may prove beneficial: the future of warfare and artificial intelligence. To that end, I will, as is my apparent custom, begin with a question. What is the first image that comes to mind when you think about the idea of global conflict, like a world war? Do you imagine tanks and planes and bombs dropping all around? Do you imagine nuclear strikes? Massive air and land campaigns? I think most people picture things like that. Do you think it might be possible for war to look different? There is an old saying that says, “Armies spend the peace learning to fight the last war.” The Maginot Line, built in post-WWI France, serves as a shining example of the failure of that kind of thinking. Like all human activity, war changes with technology. Tactics change with technology. People improvise. People adapt.

For us Americans, Iraq serves as our shining example of the failure to understand and comprehend what kinetic warfare looks like modernly. When we went to topple Saddam Hussein in 2003, Iraq still had a formidable standing military. They had tanks, planes, air defenses, special forces, etc. The US military had better equipment and training. Far better equipment and training. They rolled into Iraq with almost no legitimate military resistance. Eight years later, with thousands of American dead, tens of thousands Americans maimed, and tens to hundreds of thousands of Iraqi dead, America left the country in defeat. The most powerful military force on earth lost wars in Iraq and Afghanistan. Neither is an economic or military powerhouse. Afghanistan has quite literally been bombed back to the stone age. Yet, we lost. How? Because the American military, still to this day, is prepared to fight another WWII. The problem is, there are no military peers to fight that way with. China is a “near” peer, as is Russia.

But, that is about it. The trouble with fighting even a near peer is the niggling little problem of mutual assured destruction. As it stands right now, when military leaders game out full scale combat scenarios against China over Taiwan, there is no clear winner. Worse yet, there are very plausible scenarios where we lose. Badly. Which is why it probably will not happen. Just like a kinetic WWIII did not happen when the Soviets were the threat of the day back in the 1980s. But, what if that is not what war among peers looks like anymore? And, if that is so, what if we are not even correctly identifying our peers? Well, let it be said in no uncertain terms, global conflict is happening right now. And, it is happening right under our noses. Guess who is the biggest target?

That is a map of cyber attacks in Q4 2022. Does anything jump out at you? For perspective, that is about 100 attacks per month directed towards the USA. You may say to yourself, “Well, gee, that is not a ‘war’. Most of that is just crime.” And, in a sense, you would be right. If you equate state action as the only means of “war,” then yes — there is no major cyber “war” happening right now. I say that definition of “war” is outdated and effectively meaningless modernly. Let me explain by returning to Iraq for a moment. During the Iraq campaign, US forces steamrolled Iraqi regular forces. Shortly after, the country devolved into civil war, with the US caught in the middle. What happened next was a sustained guerrilla campaign against the Americans launched by individuals, organized groups, outside groups, loose coalitions, foreign agents, and well, you name it. It was basically “game on” for undermining the US occupation. The US forces never mustered a good kinetic or political answer to those irregular force actions. The entire region just chipped away from all sides until we gave up. It was still a “war” though, right?

The same thing is happening in cyber space right now. There are relentless attacks against US digital infrastructure by individuals, organized groups, outside groups, loose coalitions, foreign agents, and nation states. They are relentlessly chipping away. And they are doing real damage. Daily. Our defense industry is not prepared for this at all. Our so-called cyber defenses are reactive, and wholly reliant on private, logic-based solutions that are filled with endless vulnerabilities. Meanwhile, our “defenders” keep building planes and ships and missiles and what not to fight in the meat space. All the while, we are slowly being drowned in relentless attacks in cyber space. Moreover, if one steps back and looks closely at the kinetic campaign being waged in Ukraine right now, Russian and Ukrainian forces are utilizing small, low-cost drones to harry, harass, maim, and destroy all manner of personnel and equipment. The face of war has changed and our defense industry is busy preparing for the last war. Not because they do not understand what is happening. Rather because it is far more profitable to build a tank than it is to pursue technology that is readily available off the shelf.

Meanwhile, with advances in artificial intelligence (AI), we may be looking at a whole new front in warfare. For ages, military theorists have debated the merits and risks of no-human-in-the-loop attack and defensive systems. The broad takeaway generally condemns such ideas as extraordinarily dangerous. Yet, development continues apace for the sole reason that “someone is going to do it anyway, it may as well be us.” In spite of that, I think many people are AI optimists. However, I am on the fence. Back in 2017, AI researchers were gaming out scenarios about ways sandboxed, air-gapped AI might “escape” into the wild. These same researchers were shocked to find out commercial AI developers were already connecting AI to the web. In essence, commercial AI developers have given artificial intelligence access to everything humans know. Yet, those same developers do not really know what the models are doing. Moreover, it has already been demonstrated AI can be deceptive to developers, researchers and users. And, again, those same developers do not really know how to detect AI deception, or how to prevent it.

Meaning, the AI genie is out of the bottle and that bottle was rather carelessly opened simply to make some money. Leaving aside doomsday, Terminator scenarios, AI presents a lot of problems even if it does not go “rogue.” Think about social media for just a moment. Think about the impact social media has had already. The design principle makes intuitive sense. Decentralize social interaction and make the communication channels global. The very fabric of American society is collapsing as a direct, and largely unintended, result of the social media design principle. Unsurprisingly, social media is one of the main vectors for cyber attacks, including attacks by our own government against us. The effect of social media on political and cultural discourse in the United States has been catastrophic. Families are being torn apart as family members stop speaking with relatives that are not in the same social media bubble. Both “sides” in most debates on social media are inundated with bots, false information, mis-information and often wildly out-of-context information. All of which gets repeated at the speed of light, with the “maximize engagement” algorithms amplifying each side to the worst extremes. Vast swaths of the American population no longer perceive the same reality. We are living in a time where shared reality is dying. With just the very simple algorithms deployed in social media companies, we have completely lost any semblance of shared ground truth. AI is already accelerating that process. AI is potentially the death of shared reality, with AI already able to accurately mimic or create text, images, video and audio of real people. That power is also growing exponentially.

In the context of global warfare, I would remind you that, outside of the United States, the vast majority of countries, including our near peers, tightly control social, cultural and political discourse in cyber space. That control is explicitly aligned with state interests in all cases. Dissent is quickly and often violently repressed. In the United States, on the other hand, social, cultural and political discourse is guided largely by corporate captured government interests, hiding under the guise of free communication. While that control may reflect state interests, it certainly reflects corporate interests and is absolutely aligned against your best interests. Why is that? Because those corporate interests make extraordinary amounts of money by ensuring you become an addict and then remain addicted, enraged, depressed, anxious and in ill-health for as long as possible. And now, those same corporate interests have unleashed a technology in AI they do not fully understand, have no way to control, and cannot predict what it will do next. Even better, they gave it to our enemies as well. Make no mistake, global conflict is here and we are effectively behind the eight-ball.

You may ask yourself, “what the heck could Bitcoin have to do with any of this stuff?” In a word, I would say “everything.” Bitcoin is veracity. It is ground truth. And, it is secured by energy, not logic. Today, right now, we are already past the point where you can blindly trust or assume you are talking with a real human being in cyber space. Today, right now, we are already past the point where you can blindly trust or assume you are talking with a real human being on the phone or via video chat, including members of your own family. Without Bitcoin, AI will make the task impossible. People have already been scammed by AI generated voices of loved ones calling in distress. Soon, AI will be able to generate a more realistic “you” than you can. It will be able to spin up 1000 digital identities that know your history, mannerisms, quirks, and sense of humor. In the time it takes you to try and prove one of them is fake, 1000 more can be made with the click of a button. And, those fake identities may be better at convincing people they are you than you are. Are you talking with your girlfriend? Are you watching and listening to the President? Unless you are physically in the room with them, it may already be impossible to know.

What does that mean for politics and political discourse? What does that mean for cultural and social discourse? How easy will it be to manipulate people in such a world? Keep in mind, the vast majority of the western world just voluntarily locked themselves in their room for months because their dear leaders told them to. Meaning, we are not exactly good at detecting or responding to poor quality information and dictates. How does Bitcoin solve this? Bitcoin has an economic cost to acquire it. The asymmetric cryptography model Bitcoin relies on also enables the ability to prove the holder is actually who they say they are. Put together, a Bitcoin holder’s public key coupled with a small payment of Bitcoin can verifiably demonstrate that the person sending the Bitcoin is actually who they say they are. Not to mention, data can be inscribed on the Bitcoin blockchain. Thus, if your key is associated with that inscription, it will be immutable forever. AI cannot go back and change it. Moreover, Bitcoin is immune to logical attacks such as viruses, malware, bad code and the like because it is not secured with logic. It is secured with hash power and electricity, neither of which a botnet or an AI can duplicate or attack.

Bitcoin will not solve disputes. But, it can certainly let you know you are actually hearing a real human being’s perspective, idea, thought, or opinion. This is not even mentioning Bitcoin’s monetary aspect, which gives real human beings the opportunity to take back their monetary sovereignty from corrupt politicians that fund wars and enrich their corporate overlords. Those same corporate overlords, who as I just mentioned, have unleashed the most powerful technology the world has ever known and that they do not fully understand. While many in the AI camp envision a world of endless abundance through that technology, I would counter such an outcome is not a foregone conclusion. If the game of competitive resource capture continues apace with the same faulty rulesets, I think it far more likely AI exacerbates problems of fiat waste and fiat driven conflict. While most in the United States are embroiled in a world of Reds versus Blues, I am rather more concerned about the world of humans versus their creations. From my perspective, Bitcoin is team human and AI is, or will be, on the team of the sovereign, or perhaps even become the sovereign team unto itself.

Like it or not, we are born into, and will likely die within, a grand game of competitive resource capture. A game so leviathan it is practically a consciousness in and of itself. How an AI decides to play that game will likely be very different than the human participants that have played to prominence thus far. As noted in the section on Power, rules inevitably flow from competition, especially when the stakes and outcomes are potentially fatal. But the never ending problem with rules is the complexity required to create and then enforce them. Each iteration brings more complexity, which begets more rules, which begets more complexity. Each step introduces more sources of chaos, more avenues of exploitation and more grey areas from which power can emerge. But if we trace back to the example of American football and its 234 pages of official rules, imagine if just one core, fundamental rule of the game became inviolable. For instance, imagine how the game would be played if it were impossible for a team to commit a foul. No instant replays required. No judgement calls. No ability to even question if a foul had occurred. Imagine the game if fouls were completely eliminated.

That one rule change would fundamentally alter the gameplay forever.

As the game is played now, a team can choose to commit a foul strategically. A team can commit a foul that can alter the course of the game. A team can be fouled and suffer the consequences of the foul, but a human judge can deny that foul occurred. That human judge may do so from error, misunderstanding, misapprehension, or incompetence. They may do so out of malice, or even for self-interested reasons. Indeed, they may make the bad call out of spite against a previous injustice against them by the team, or from a sense of fairness for other observed behavior. Meaning, the entire game is awash with conflict simply because the rule against committing fouls is so elastic, uncertain and mutable. If an AI were able to play football, the exploitation of human judged fouls would take on an entirely new character, depth and dimension. The type, manner, and timing of fouls would forever change and the AI would adapt faster than humans could respond.

I argue here that the same core concept is true for the global political economy and the collective rule against free riding. Fiat currency is a foul in the global game of competitive resource capture. Fiat currency incentivizes free riding. AI cannot play football. AI can most certainly play global competitive resource capture, especially when the field of play occurs via a global information network. The type, manner, and timing of AI driven exploitation of free riding in a fiat system will absolutely occur faster and more efficiently than humans will be able to adapt. That is the real race. The race between economic enslavement under an AI driven fiat system and human flourishing under an AI enhanced Bitcoin system. This is because Bitcoin is, ultimately, an immutable rule against free riding. Human beings cannot exploit it. AI cannot exploit it. No one and no thing can take advantage. As the Bitcoin cure integrates itself into the global political economy, it changes one core rule in the game. It effectively removes the ability to commit a foul — the foul of free riding. Attempts at free riding through debasement only strengthens Bitcoin. It only makes the immutable rule stronger. It disincentivizes the foul. It incentivizes savings instead.

And it does so for Human and AI alike. A great realignment indeed.