Introduction to Bitcoin E-Book

Florin Hilbay

• Herausgeber: Konsensus Network
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 358

Veröffentlichungsjahr: 2024

Beschreibung

"Hilbay's book is a blueprint for a different kind of future, where the world operates on one digital currency standard, beyond the control of any one country or alliance of countries, where the most valuable and technologically advanced money is something that will be accessible to anyone: a refugee or a billionaire, equally. Where foreign lenders and dictators cannot simply 'devalue' a local currency to crack the whip on local workers, or where an empire cannot force their currency to be the only one that energy producers accept. If everyone is on the same footing, Hilbay explains, then the world gets a whole lot more equal." — Alex Gladstein, Human Rights Foundation This book is about money, not making money. It is about how money arises and how it is engineered. For the most part, it is a historical survey of the characteristics of money and why these have practical consequences for all of us. The fundamental thesis of this book is that Bitcoin exhibits many of the traditional characteristics of sound money as well as the attributes of what sound money ought to be, considering the current state of our civilization and the problems humanity confronts. Simply put, it is the best form of money humans have ever had. This changes everything.

Leseprobe

Florin T. Hilbay

Foreword by Alex Gladstein

Copyright ©2023 by Florin T. Hilbay

No part of this publication may be reproduced, distributed, or transmitted in any form or by any means.

Book cover design and typesetting by Rigel dela Cruz Suarez

ISBN

978-9916-723-82-1 Hardcover

978-9916-723-83-8 Paperback

978-9916-723-84-5 Ebook

Konsensus Networkhttps://konsensus.network

for my parents, Rodrigo and Lydia for all bitcoin educators, online and offline, this work is a tapestry of your efforts for Satoshi, whoever, wherever you are, thank you.

Tyranny requires constant effort; it breaks, it leaks. Authority is brittle. Oppression is the mask of fear. Remember that. And know this. The day will come when all these skirmishes and battles, these moments of defiance will have flooded the banks of the Empire’s authority and then there will be one too many. One single thing will break the siege. Remember this: Try. —Karis Nemik

FOREWORD

Too many nations have been caught between the evils of empire and tyranny. The Philippines is, sadly, a classic case. Between foreign occupation, neocolonial resource exploitation, and corrupt dictatorship, the people of the Philippines have long suffered beneath their potential.

Riches and progress in one place has too often been at the cost of poverty and destitution somewhere else. This is a problem of course not just endemic to the Philippines but a global story, common to most of the world, from Latin America to Africa to the Middle East, known to and lived by billions of people.

Perhaps the most important tool by which imperialists and autocrats repress and control the public is money. What follows is a book about how money, far from being just a tool for control, can also be a tool for freedom, and how that can change everything for citizens of a country like the Philippines. As Florin Hilbay writes, Bitcoin is a way for people to opt out of a broken and unfair system. It’s a way for them to assert their freedoms, educate others, and become sovereign individuals.

This rings especially true for inhabitants of the global south, or citizens trapped in authoritarian regimes, who don’t have the luxury of being born into a reserve currency like the dollar; who can’t easily access a guaranteed-to-grow stock market or “risk free” government debt; who can’t pick up their phone and instantly send value to their family; who, in fact, live a life quite the contrary. Where the money they earn their wages in quickly erodes; where their currency is not accepted abroad; where bank accounts can be frozen with no warning or reason; where the best way to save might be cattle, or sheet metal.

Hilbay’s book is a blueprint for a different kind of future, where the world operates on one digital currency standard, beyond the control of any one country or alliance of countries. Where the most valuable and technologically advanced money is something that will be accessible to anyone: a refugee or a billionaire, equally. Where foreign lenders and dictators cannot simply “devalue” a local currency to crack the whip on local workers, or where an empire cannot force their currency to be the only one that energy producers accept. If everyone is on the same footing, Hilbay explains, then the world gets a whole lot more equal.

As an educator, Hilbay felt compelled to write this book. You, if we are not long after the summer of 2023 when the book first emerges, will be fortunate to be one of the first readers. You will be ahead of the curve and able to educate other people that you care about, as we move through Bitcoin’s unique and remarkable adoption phase. Never before in history has there been a time where you can have such a big impact on people’s lives everywhere.

Hilbay’s book is a wonderful contribution to this effort. May you enjoy reading it, and may you take the knowledge in these pages and spread it to others, as we build a better and fairer world.

Alex Gladstein

Human Rights Foundation

August 2023, California USA

PREFACE

What you are reading is a revised edition of a monograph published in the Philippines in March of 2023. Nearing the end of writing it, I had the sense that it could appeal to an international audience, for various reasons: it was written in English; the history of money is, in a significant way, the unacknowledged history of the world; there’s a massive global need to introduce Bitcoin from a holistic, interdisciplinary perspective. Given the nature of the subject, a book on Bitcoin is, almost by definition, directed at a global audience.

The half year since the publication of the book has allowed me to attend conferences and learn from fellow bitcoiners, expand my research, discover new tunnels in the proverbial Bitcoin rabbit hole, experiment some more at the university where I teach and serve as dean of the law school, and observe the global community of bitcoiners in action. The result is this revised edition with an additional chapter (The Path of Hyperbitcoinization), more endnotes, additional metaphors and analogies here and there, a Foreword, a new cover.

Bitcoiners generally say, “we’re still early.” They are correct, both in the sense that understanding what Bitcoin is and its adoption (through more education, better wallets, native integration with browsers, easier ability to selfcustody, merchant acceptance, etc.) still has some ways to go. Educational and technological adoption go hand-in-hand: Bitcoin can’t be that civilization-transforming meta-technology that almost nobody understands, and the mass adoption of Bitcoin is simply impossible without it being user-friendly.

There are many ways to understand Bitcoin, and reading a book is one of them. The internet is a global university with content for those with the ability to sift through its haystack of information. Nonetheless, at this stage in the life of Bitcoin—and perhaps for the next decade or two—there will continue to be an immense need for a structured presentation of this complex topic.

The book that you hold is meant to address this need. It is an academic work written in popular style. The intent, between the original and revised editions, is the same and that is to open the door to as many people as possible everywhere, to help understand this fascinating phenomenon that is bound to change everyone and everything: individuals, families, communities, organizations, nations. It is my hope that at the end of this book you, the reader, will be able to understand and hopefully share in: every bitcoiner’s excitement and optimism in this world of uncertainty and confusion; their passion and zeal to spread the word in these incapacitating and disempowering times; their equanimity and zen in an otherwise frighteningly unstable global environment.

Finally, a special shoutout to Alex Gladstein of the Human Rights Foundation for a generous Foreword that puts in context how monetary systems affect both human rights and the relations among states.

INTRODUCTION

Bitcoin Is Evil. —Paul Krugman (Nobel Prize in Economics)

Remember, all I’m offering is the truth. —Morpheus

You must unlearn what you have learned. —Yoda

The monetary network that is Bitcoin has been online since 2009 and yet so few have a sufficiently comprehensive understanding of what it is and what it does. A human rights advocate complains, “[n]early everyone has heard about Bitcoin, but only a tiny few are aware of the deep impact the digital currency is having around the world.” This is both frustrating and unfortunate, though understandable. Several reasons account for it.

First, despite its phenomenal growth, its civilizational importance, and the problems it solves, its network is still very young. Gold has been around for thousands of years and the current fiat monetary system with the United States dollar as global reserve asset is already almost a hundred years old. Bitcoin, in contrast, is only more than a decade old. It’s just about ready to disrupt the incumbents.

Second, anyone who claims to fully understand Bitcoin will soon be humbled. Bitcoin is a beast that’s difficult to tame— it is a monster of an intellectual and emotional challenge, “a child of many disciplines.” Not only does it require hundreds of hours of dedicated focus to learn what’s new; it also demands that we unlearn not a few important things about the world, some of which we hold dearly and consider crucial to our worldview. University education is not immune to this agnostic wrecking ball. A wholesale destroyer of models, it eats away at some fundamental assumptions.

It is inherently inter-disciplinary—learning the hows and whys of Bitcoin is a rabbit hole of an adventure full of long tunnels that just don’t seem to end. To the open minded, it offers a rewarding dance with ideas; to the strong-willed, it’s multiple gunshots to the head and heart.

Third, Bitcoin has been lumped together with so-called “altcoins” as part of an industry of cryptocurrencies. Bitcoin’s virtues are often falsely co-opted by the latter, while the latter’s erring ways are sometimes sadly attributed to the former. This should be expected for a technology that creates massive value, but it is dangerous not least because individuals new to the space become vulnerable to rug pulls and scams. Only time and sustained education can remedy this.

Fourth, in a sense, Bitcoin is a victim of its own phenomenal growth. That it has grown from a speculative bet on a niche project of a few computer geeks to a globally traded asset worth several hundred billion (even reaching a trillion in 2021) dollars in fourteen years also means that many of the new entrants to the space become mere traders and speculators, attracted almost solely by the price action. Many come and go as the bull and bear cycles wax and wane. This, again, is understandable. Nonetheless, its astounding success can easily distract people from taking the deep dive and understanding why Bitcoin has grown in value in the first place, and why many disregard bitcoiners’ constant reminder that the more interesting thing about Bitcoin is not its price. Bitcoin, the network, is so much more than its tradable token, bitcoin.

Fifth, many believe that Bitcoin cannot be understood if one is not a programmer or a mathematician. This isn’t true. While Bitcoin is written in computer language, it’s still fundamentally meant to solve practical and familiar human concerns related to money and power. On the one hand, it is a revolutionary technology about how human beings can store and transfer value among themselves, and across time and space. On the other hand, it most certainly invites us to a transformative meditation about the nature of power and how humans and institutions should interact with it. In short, Bitcoin is about what everybody knows is important—money—even if they have little idea about its history and the technology behind it. Or, as John Oliver put it more eloquently, Bitcoin “is everything you don’t understand about money combined with everything you don’t understand about computers.”

Nonetheless, the problems Bitcoin identifies and the solution it offers can be understood well enough with concepts and analogies that explain the code behind the technology. While there’s a steep learning curve and some of the terms are new and a few of the concepts are counter-intuitive, those who invest the necessary time to understand Bitcoin can make a reasonable judgment that it is the real deal—it is working and its promise is being fulfilled—and that its potential impact on all of us is immensely positive and awe-inspiring. It deserves to be understood. We deserve to understand it, for our own sake.

There will come a time when Bitcoin need no longer be explained as the technology matures and becomes more familiar, as more applications and use-cases are built on top of it, and as the next generation of users is simply born into its ecosystem, in much the same way nobody today needs to read a book to use the internet, email, or smartphones. Soon enough, it will become simultaneously user-friendly, widely adopted, and indispensable for all, as it is now for many in Africa, Latin America, Asia, and many others ravaged by inflation or monetary repression. For now, let us be thankful we still get to talk about the plumbing and the wiring of the system as it is being built. We are this early.

The aim of this book is to introduce some of the facets of Bitcoin for anyone curious enough about this remarkable invention/discovery. While the book is an introduction, it seeks to offer sufficiently comprehensive snapshots of the big picture at various levels of granularity. The goal is to help the reader understand what an open, permissionless, peer-to-peer, immutable, censorship-resistant, decentralized, global, digital money and payments system it is and why it matters to every human being today and in the future. It also seeks to be a guide for those intellectually and emotionally ready for the journey. I hope that along the way readers will understand why bitcoiners are so excited and hopeful about this technology, why they believe we’re at the cusp of a transformative revolution, and why many of them are willing to spend time to introduce others to it even at the risk of being pedantic.

Today, there is a growing revival of the debate over sound money, the role of banks, currencies, their relationship with the state, and how they affect people’s lives. To be sure, there was a time when this debate was the stuff of mainstream politics. Somewhere along the way, this conversation was forgotten, partly because of the remarkable growth years and the blinding asset inflation of the 20th and 21st centuries, and partly because those in charge have little incentive to let citizens know how hotdogs are made. But the ground is already shaking beneath our feet, people are feeling the pain of constantly declining real wages and/or soaring inflation, and widening inequality has become ever more apparent.

This conversation needs to happen again not because it is a cute intellectual adventure but because the pains of the stomach are inevitably felt by both the heart and mind. It is crucial for people to know that there is a fundamental cause to that pain and that nagging sense of unfairness, and they need to understand that cause. It is also important to let people know that there is already a solution: that bitcoin fixes this, as your bitcoiner friend will often insist.

When the operating system of your computer starts freezing or crashing more and more often, maybe it is time to start thinking of an update. Or maybe, an upgrade to a new system. If we think of the monetary system as a transmission mechanism (which, rather than transmitting electricity or messages, instead sends information in the form of value), or an engineered solution to the problem of transferring value across space and time and realizes that it now has a lot of problems (an inflation bug, centralization tendency, etc.), it gets easier to understand why an upgrade may be necessary. After all, money is “the oldest social network on Earth.”

No single book can explain Bitcoin. Almost like a hydra, the more puzzles you slay, the more puzzles appear. Those who start seeking answers to the question what is bitcoin? will almost certainly soon hear an echo of the question what is the matrix? It is, however, possible to provide the proper context about the many interesting problems it solves, an introduction to its colorful history, a reflection on the features of this metasubject, and point to a few solutions already built and some of the directions in which Bitcoin is heading. The reader can then choose his own adventure, one which bitcoiners have found meaningful in many ways. This is because Bitcoin is a framework for understanding the world, with explanatory power that just keeps on giving. It is a source of deep insights about energy, people, power, history, politics, justice, and so much more. Its potential to empower citizens all over the world against institutional and institutionalized abuse is a well of remarkable depth. Those who think Bitcoin is just about money are in for a surprise.

The organization of this book is fairly straightforward, beginning with recognizable issues with the current monetary order. Bitcoin is not a solution looking for a problem, but a solution to specific problems. It is therefore best to let the reader immediately know that we’re dealing with real life problems here, that it’s possible to articulate and label them individually and place them in one big box called “problems with the money.” It then proceeds to the history of money— what it is, how it developed in different eras and contexts, how it has emerged in various forms. After going through this exercise, the reader will understand why bitcoiners are fixated with answering the question what is money by urging people to go through the history of monies. The final set of chapters introduces Bitcoin—its history, its operation, its significance. Overall, the entire book can be summarized as the evolution of money.

Just for clarity, this book is about money, not making money. It is about how money arises and how it is engineered. For the most part, it is a historical survey of the characteristics of money and why these have practical consequences for all of us. The fundamental thesis of this book is that Bitcoin exhibits many of the traditional characteristics of sound money as well as the attributes of what sound money ought to be, considering the current state of our civilization and the problems humanity confronts. Simply put, it is the best form of money humans have ever had. This changes everything.

I introduce two important mechanisms to elaborate what is happening and is about to happen in the information system that makes social exchange and human organization possible: (1) the Idea Exchange Protocol and (2) the Value Exchange Protocol. The former involves mechanisms for the exchange of ideas expressed through language, while the latter involves mechanisms for the exchange of value expressed through a monetary system. These two protocols are part of the critical infrastructure that organizes human society; any transformation involving these protocols will result in paradigmatic, structural disruptions to how we thrive and survive, as well as sustain and organize ourselves. As both these protocols are currently undergoing structural transformation, so is our civilization today. This paradigmatic shift did happen before, when European society transitioned out of feudalism and into the Renaissance.

Thus, along with the internet, which has disrupted our Idea Exchange Protocol, Bitcoin is similarly disrupting our Value Exchange Protocol. It is even disrupting the internet itself, as it now begins to inspire a return towards its decentralized roots and a movement away from the dangerous path of corporate and state centralization it has taken in the last two decades. These two people-empowering disruptions in language and money, in the foundational protocols that shape humanity and civilization, could lead to abundance and flourishing—a new renaissance—when people discover new freedoms and recover old ones, find relative peace instead of constant dangers, and acquire stability grounded on fairness rather than cynicism borne of disempowerment. “Bitcoin is hope.”

As an educator and an advocate, I believe that the most important thing we can do in these early innings is to help everyone understand the evolution of money and why Bitcoin is its latest and most appropriate iteration. This book is written for everyone, the curious and the young most especially, because they are digital natives and their generation is in the best position to immensely benefit in multiple ways from understanding this technology. Once understanding Bitcoin becomes part of their education, they will act and decide accordingly, with their best interests in mind. This knowledge will connect them to what could possibly be the most important global event of their generation, if not of this century.

To be sure, understanding Bitcoin is both appropriate and necessary for the general reader considering its impact on everyday life and our material existence, and on history, politics and government, economics, banking and finance, law, philosophy, technology, to name a few subjects directly affected. On a personal note, I am floored by how Bitcoin has educated me and modified some of my foundational beliefs about many subjects the tenets of which I considered already settled or simply assumed to be true. I am therefore honored to share and present this technology to those seeking answers to important questions about money and society.

Some may find the subject matter of this book worrisome, or even strange, if not unsettling, especially in these troubled financial times. Many have heard about “crypto” scams, the allegations of a tulip mania, even charges of Bitcoin mining boiling the oceans. I sense the fear and the worry, for sure. But the choices are either to keep one’s distance or get close enough to understand this new thing, either of which is consequential: become handicapped by ignorance or spared by false knowledge, on one hand, and enlightened or burned, on the other. But one can only hope that fear doesn’t get to cloud our judgment and dampen our curiosity. As a favorite magistrate once said, “men feared witches and burned women.” In any case, please proceed with an abundance of caution. Be careful listening to people with strange ideas; you just might unlearn a thing or two, and that is always dangerous. The question is, for whom?

You may find Bitcoin invisible for now, or irrelevant to your current way of life, or are skeptical but curious, even interested but wary about the speculative fervor, or for whatever reason would prefer to have some safe distance between your hard-earned salary and this so called magic internet money. That’s perfectly fine.

I can assure you, though, that if you look closely enough, you will find something quite interesting, perhaps even inspiring. It’s a humble and humbling revolution happening all over the world—people and communities embracing Bitcoin for all sorts of reasons: Venezuelans, Turks, Nigerians, Ghanaians, Zimbabweans, Argentines escaping inflation with Bitcoin; dissidents from Russia and Canada escaping economic repression using Bitcoin; women in Afghanistan using Bitcoin to empower others against the injustices of the Taliban regime; African students and entrepreneurs excluded from mainstream payment rails using Bitcoin to pay for tuition and to export their products; New York saving the oldest working hydroelectric plant with bitcoin mining; bitcoiners electrifying a rural Kenyan village with excess hydropower using bitcoin miners; Africa’s oldest protected park using its hydroelectric power station to mine bitcoin to pay for salaries and infrastructure projects; bitcoin miners stabilizing the electric grid in Texas; bitcoin donations funding solar installations in Zimbabwe; heat from bitcoin mining warming up homes and greenhouses; bitcoin miners addressing climate change by reducing methane emissions through “clean combustion of flared gas from oilfields and landfills”; women escaping the financial clutches of a husband and of the state with bitcoin; students learning about financial sovereignty in parts of Africa, El Salvador, Southern Philippines; businesses in El Zonte (El Salvador), Boracay (Philippines), Lugano (Switzerland), and many others accepting bitcoin payments; Bitcoin’s lightning network connecting the world with low fees and instantaneous payments, helping businesses and migrant workers; digital nomads traveling the world with bitcoin wallets in their phones and twelve words in their heads as a lifeline; Jack Dorsey and armies of coders all over the world (re-)building the internet to return to its decentralized origins with Bitcoin as inspiration and native currency; thousands upon thousands of anonymous human beings opting out of a broken and unfair system, asserting their freedoms, educating others, and becoming “sovereign individuals.”

Move away and scan the horizon and you might see a rising global digital architecture with a strong bias for freedom and fairness, one that could very well be the new base layer of our civilization as it wakes up from the structural inequities of the current world order. Most of the builders of this world are young people who, instead of just being rightfully angry and cynical, are full of grounded hope and enlightened optimism because they understand and believe they now have the tools to make things better for all of us. For them, Bitcoin is a peaceful, effective, people-centered, practical, global revolution to promote material rights and freedoms.

A NOTE ON THE READING. This book is a chopsuey, a reflection on various subjects that crosses a few sacred disciplines. They all return to Satoshi’s contribution to humanity, which I try to explain here. It is also a light, perhaps entertaining, set of essays on a very serious topic that informs our view of the past, the present, and our future. Because of the novelty of the subject, there is some deliberate and necessary redundancy in a few parts. Naturally, this book is best read sequentially, chapter by chapter. If you’re feeling impatient, you might want to start with the Bitcoin chapters beginning in Chapter 8 onwards. Then I suggest you go back to Chapter 1 and move forward till the end. If you want some adventure, it’s interesting to read the book in the reverse order of chapters, beginning at the end, Chapter 16. Just have fun and take your time.

This book was written in the span of about a month, right before the holiday break in Silliman University at the end of 2022. It came as an epiphany in a dream and made me realize that this was the best way to avoid becoming that tiresome Bitcoin dude spouting off to family and friends, even acquaintances. I now understand that it is impossible to persuade people about the wonders of this technology in one sitting or over a one-sided conversation. For how does one easily convince others that strange things are happening with the world—that unsound money creates misaligned incentives and horribly distorts markets and economies; and that even stranger things are underway, or that we’re living in The Upside Down—without sounding unhinged? Having accomplished that, how does one get to the even more difficult part—convincing others that Bitcoin fixes these problems?

In a way, the book is an attempt to show everyone the rabbit hole so that instead of people being caught unawares and just tumbling down, they are able to deliberately jump into it, avoiding a hard landing. The Bitcoin universe is immense and is still rapidly expanding. Please consider this book as just a mini guided tour. If you’re interested in digging deeper or exploring the tunnels, the notes at the end of each chapter can assist you.

Extended writing is a serious matter (it’s too draining and always seems personal), but I also realize that it’s a wonderful valve for releasing ideas from a limited brain space. As for further motive, I have wanted some additional, easy-toread, big-picture reference material on the subject and hope to commit to print some personal insights I know I’ll surely forget. Finally, I hope to direct people’s focus on Bitcoin—towards how it helps make things better for everyone instead of merely egging others to “invest” in the hopes of shooting for the moon. Satoshi’s vision was to help the whole of humanity by building a boat big enough for all of us, not to incite a mad scramble over who gets in first.

Given the constraints of time and temperament, this is my best shot at integrating what I’ve learned over the past few years since I got bitten by this nasty Bitcoin bug. It reminds me of a favorite economics teacher who told me, more than two decades ago, that I had the knack for stitching together ideas picked up from here and there to build a larger framework on top of the old one. I’ve always believed her, especially during those times when I felt it wasn’t true.

Good luck, and enjoy the read.

See you on the other side.

..........................................................................................................

NOTES

“Nearly everyone has heard about Bitcoin….” For an excellent introduction to Bitcoin and its various human rights implications and applications, see Alex Gladstein, Check Your Financial Privilege, 2022.

“A child of many disciplines.” Bitcoin is unusual in many beautiful ways. For a meditation on Bitcoin that crosses various areas of knowledge, see Gigi, 21 Lessons: What I’ve Learned from Falling Down the Bitcoin Rabbit Hole, 2018.

For issues relating to money being part of mainstream politics, see Christopher Leonard, The Lords of Easy Money (How the Federal Reserve Broke the American Economy), 2022, at 9. “The politics of money used to be a charged political issue. It was once debated with the heat and passion that defined fights over taxes or gun control in 2010. Back during the presidential election of 1896, the Democratic nominee, William Jennings Bryan, made monetary policy one of his primary issues. He was a populist, and he used the topic to rile up crowds. This led to the most potent and most famous political statement ever made about American money, when Bryan proclaimed during a campaign speech, ‘You shall not crucify mankind upon a cross of gold!’ Bryan was specifically talking about the gold standard in that speech, but he was also talking about short-term interest rates and the monetary base….”

“The oldest social network on Earth.” Apparently, supposed Facebook co-inventors Tyler and Cameron Winklevoss were introduced to Bitcoin by a stranger as another social network. See Ben Mezrich, Bitcoin Billionaires, 2019.

For the view that the fiat system is engineered money, see Saifedean Ammous, The Fiat Standard, 2021.

“Bitcoin is hope.” See Robert Breedlove, Bitcoin Is Hope, at https://breedlove22.medium.com/bitcoin-is-hope-bedce21b3648. I’ve also heard prominent bitcoiner Michael Saylor declare this powerful Bitcoin mantra quite often. Both men have collaborated in Saylor & Breedlove, What Is Money, 2022.

With almost prophetic sense, the arrival of Bitcoin was anticipated. See Davidson & Rees-Mogg, The Sovereign Individual, 1997, at 24. “In the Information Age, individuals will be able to use cyber currencies and thus declare their monetary independence. When individuals can conduct their own monetary policies over the World Wide Web it will matter less or not at all that the state continues to control the industrial-era printing presses. Their importance for controlling the world’s wealth will be transcended by mathematical algorithms that have no physical existence. In the new millennium, cybermoney controlled by private markets will supersede fiat money issued by governments. Only the poor will be victims of inflation and ensuing collapses into deflation that are consequences of the artificial leverage which fiat money injects into the economy.” See also, Jack Weatherford, The History of Money, 1997, at Foreword, xiii. “The rise of electronic money will produce changes in society as radical and far-reaching as the two earlier monetary revolutions [the invention of coins, then the invention of banking] caused in their own eras. The new money will make sweeping changes in the political systems, and in the nature of class organization. Virtual money promises to make its own version of civilization that will be as different from the modern world as from the world of the Aztecs or the Vikings.”

“Clean combustion of flared gas from oilfields and landfills….” See Daniel Batten, Bitcoin Mining Can Prevent Climate Change, 2022, at https://bitcoinmagazine.com/business/bitcoin-mining-can-preventclimate-change.

“Most of the builders of this world are young people.” Thomas S. Kuhn’s remarks about the role of the young in scientific revolutions come to mind—“[a]ny new interpretation of nature, whether a discovery or a theory, emerges first in the mind of one or a few individuals. It is they who first learn to see science and the world differently, and their ability to make the transition is facilitated by two circumstances that are not common to most other members of their profession. Invariably their attention has been intensely concentrated upon the crisis-provoking problems; in addition, they are men so young or so new to the crisis-ridden field that practice has committed them less deeply than most of their contemporaries to the world view and rules determined by the old paradigm.” The Structure of Scientific Revolutions, 1996, at 144.

1THE PROBLEM

The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.

– Satoshi Nakamoto

Bitcoin is a solution. But what is the problem? Without a basic understanding of what money is in the first place, how can we expect people to know the problems associated with it? When people talk about money problems, they almost always certainly mean they don’t have enough of it or that they need more of it. However, when bitcoiners say fix the money, fix the world, what they mean is that the instrument or token that we use (Philippine Peso, United States Dollar, the Euro, the Japanese Yen, Nigerian Naira, Swiss franc, etc.) is broken; that it exhibits certain qualities that create practical problems and challenges for human beings, countries, and the world at large. In short, we live in an era of unsound money, one that results in concentrated power and manipulation, in unfairness, inequality, and injustice. This is not a theoretical claim, but a demonstrable fact.

Here is a short list of the problems associated with the current monetary system, known as the regime of fiat (Latin for let it be done) currencies or the fiat system. As you will see, these are practical issues that are experienced and confronted by human beings today, regardless of age, nationality, or gender, although felt in varying degrees. Some of these problems have persisted for ages, while others are unique to the current state of our civilization and the modern geopolitical landscape.

1. Inflation. When people complain that prices keep going up—what they experience generally as goods and services becoming more expensive—it is really the money, theirs and everyone else’s, losing its value. Most people don’t know why this happens, or vaguely assert it has something to do with the law of supply and demand, or else generally accept it as a mere sad fact of life, even as they feel like they are running on a hamster wheel. Like one famous philosopher once wondered, “something’s wrong with the world today…I don’t know what it is.”

In periods of very high inflation, when the price of basic commodities becomes too expensive for the population, a country can experience political instability and mass uprising. Local leaders, if unable to blame the opposition or some other group, can very well get ousted. Otherwise, a low and stable general inflation and expansion of the money supply is considered a given. Most economists, with wry confidence, will tell us that a steady inflation of two percent (2%) is both necessary and ideal to achieve both price stability and economic growth. Thank you.

All over the world, citizens are educated and told that they should happily accept the reality that their money— the value of their hard work—is a melting ice cube, that it is guaranteed to lose a certain percentage every year because that is simply how money works. This inherent and necessary characteristic (read: defect) of the current monetary system is painful enough in the short term. But the consequences of this system over a long-term are even more damaging because the only logical trajectory of the value of all currencies under the current system is down and to the right that is, approaching zero. Google it. Every memory of what the peso, the dollar, the naira could buy twenty, thirty, fifty years ago is a sad reminder of the slow, ongoing death of these currencies.

If this isn’t worrisome enough, most people also don’t realize (even if they experience it) that inflation is wage deflation. Money that is being debased is money losing its value; and your money losing its value is equivalent to your wages going south. Isn’t it downright unfair when your salary, the price of your labor or the value of your work goes on a discount simply because you’re passively holding money that is losing its value? It is. Just to be clear: if the monetary system mandates inflation, however low it may be, it requires that people’s wages must lose value over time, without their fault and against their will. This loss of value, a painful leakage, like a drain in energy, is transferred somewhere else. If you haven’t realized it yet, inflation is taxation.

Imagine a monetary system that doesn’t require inflation. Even better, imagine a monetary system that solves the problem of inflation and doesn’t require people to suffer from it.

2. Banking the Unbanked. Access to financial services requires having a bank account. Depending on where or who you are, this is either a privilege that arises from status (a premium for being from a developed economy, having a certain level of income, not being an enemy of government) or a disadvantage. Banking systems that provide access to loans and credit, a safe store of wealth, and a convenient way to transfer funds locally and internationally are crucial for participation in the economy, economic mobility, establishing identity, even having a sense of dignity. Inability to access this critical infrastructure will immediately handicap and impoverish you and sever your ties with the world and your loved ones.

However, creating a banking infrastructure is expensive business—offices have to be built, people need to be hired and trained, and the effort must be profitable. Without such infrastructure, people in developing nations and even poor citizens in developed ones are left with little choice and have diminished economic opportunities. They are financially stuck. The high cost of establishing, operating, and maintaining banking facilities, generally a private cost, translates to a barrier for underprivileged citizens who need access to various financial services, a problem with grave social implications.

In 2017, the World Bank reported 1.7 billion unbanked adults, a majority of whom were women. The Federal Deposit Insurance Corporation of the U.S. estimated 4.5% of U.S. households (or 5.9 million individuals) were unbanked. In the Philippines, based on a survey on financial inclusion in 2021, only 56% of the total population was banked. Separate research says it’s only 33%. In many parts of the world, the problem is just as pervasive—32% in South Asia, 45% in sub-Saharan Africa, 60% in the Arab world, 22% in Europe and Central Asia, 26% in Latin America and the Caribbean. These people suffer from an economic disability. Regardless of reasons, it is a global problem.

Imagine a monetary system where opening a bank account is as easy as downloading an app, and with the least possible barrier to accessing financial services. Imagine a monetary system that doesn’t require identification or unnecessarily obtain private information. Imagine a world where people are their own banks.

3. High Processing and Remittance Fees. Banks and payment companies are regulated entities and that means there is a considerable capital barrier to their operations. While there are (or may have been) justifications for this, a consequence is that the banking and payments industry are able to extract high fees or rent profits for their services; and because their regulated status acts as a barrier to entry, it allows them to continue extracting value in the form of service or maintenance fees, out-of-network ATM fees, transactions fees, overdraft fees, insufficient fund fees, wire transfer fees, early account closing fees, etc. Credit card processing fees can range between 1.5% and 4% per transaction. Payment processors charge transfer fees between 1% and 2% of the total amount sent. These businesses also have high operating expenses, with CEOs and managing officers that are handsomely paid, and a large number of employees on the ground.

For many individuals, a non-negligible portion of their salaries is effectively deducted in the form of remittance or transfer fees. Many migrant workers who send funds to their loved ones in the provinces or abroad have little choice but to use remittance companies that charge substantial amounts and high rates. Effectively, these are private sector deductions on income, a valuable but expensive service especially for low-income migrant workers. For businesses, accepting credit and debit card payments means having to invest in PoS (point of sale) machines, pay a percentage of the retail price of the goods and services they offer to the credit card companies, and wait days or weeks before they actually get paid because final settlement of accounts with card companies takes time. This makes operating a business inconvenient and expensive.

Imagine a payments system that is global by default, with near-zero fees, doesn’t require investment in special machines, and makes instantaneous and final settlement.

4. Monetary Repression. Especially in recent years, the financial rails of the monetary system have been used, quite gleefully even, to show disapproval of free speech and the right of assembly, and suppress varying views. The situation of the so called Canadian Truckers or the Freedom Convoy is a recent example.

In 2022, truckers carrying goods between the U.S. and Canada expressed their disagreement with vaccine mandates and COVID-19 vaccination passports. In protest, they parked their trucks on the streets of Ottawa for days. As a consequence, the Canadian government gave banks the authority to freeze the accounts of the protestors and their supporters, all of whom were ordinary citizens, and gave the banks immunity for doing so.

Another example is the attempt of Paypal to establish a Misinformation Policy through an update to its Acceptable Use Policy and impose a $2,500 fine for “the sending, posting, or publication of any messages, content, or materials,” that “promote misinformation.” Dissenters like Alexei Navalny of Russia, platforms like Wikileaks (responsible for publishing damaging information against aggressive wars and human rights abuses), and other dissenters generally face suspension, de-platforming, or some other forms of monetary repression for their political views or activities. In the case of Russia, for example, one of the immediate consequences of its invasion of Ukraine was its being cut off from the SWIFT (Society for Worldwide Interbank Financial Telecommunication) system, an act that, regardless of one’s views about Russia’s aggression, highlights the political nature of the international monetary system and how the banking system can be weaponized by governments to go after dissenters and opponents.

Imagine a monetary system that is apolitical by design, with a neutral currency that cannot be used as a tool against enemies. Imagine a form of money that can be used by friend and foe alike both in peace- and in war-time.

5. Bailouts, Bail-ins, Asset Freezes