A Fire Side Chat With Bitcoin
How we got here and where we're going. Let's stoke this fire.
BURIED TREASURE
Gold is distributed everywhere throughout the world. If you spend enough time and enough work digging within the invisible lines of pretty much any country on the planet you’ll eventually strike it rich.
That’s the beauty of gold; it’s permissionless to mine, and more or less evenly distributed everywhere making the difficulty to mine a fairly equitable endeavor for everyone.
Anybody who wants to, can put in the work and try their luck at mining gold for themselves, and it’s been that way for thousands of years.
If luck is on your side and you do happen to find a bit of gold, it is also fairly easy and permissionless to trade it with most anybody on the planet. And since everyone knows gold lasts a long time both physically, and metaphysically in terms of its unit integrity and purchasing power it is therefore a highly salable (read: sale-able or sell-able) item round the world.
This salability has been the case for as long as anyone can remember. And it was those core attributes that made gold the money it was for most all of human history, at least until relatively recently, since the past one hundred years or so when governments worldwide transitioned all of us, whether we liked it or not, to the new state of the art, a ledger based fiat money.
But before we get to that fiat ledger system, let’s take a moment to formalize those core monetary attributes of what made gold the money of choice for everyone on the planet for the past few thousand years:
A Permissionless network — the nature of gold was such that anyone anywhere at anytime could freely participate in, mining, trading, or holding it, without some third party authorities arbitrary permissions or licensing.
An Uncensorable network — the physical nature of gold allowed for peer to peer transactions, through hand to hand exchange, which made censorship of transactions by presidents, monarchs, popes, bosses or any other third party organization or authoritarian, nearly impossible.
A Decentralized network — the relative even distribution of gold across the planet allowed for no particular country or group to have any major advantage over another, allowing everyone everywhere the ability to participate on a more or less even footing, both in terms of mining, trading and custodianship, through each individuals efforts, their proof of work, and voluntary opt-in to the network.
Durable units — the long lasting nature of golds physical integrity, ensured that you didn’t need to worry about rot, rust, or deterioration of your own personal share of it over the long term.
Scarce units — the fact that mining more and more gold required more and more work, allowed everyone participating in the network to rest assured knowing that the metaphysical nature of gold, its purchasing power, would remain intact, over the long term, over multiple life times, indeed history has shown, over multiple millennia.
Without running the risk of beating this dead horse, we can further refine golds attributes one final step into the following most succinct fashion — gold was a permissionless, uncensorable, and decentralized proof of work network of durable and scarce physical monetary units. And if you know anything about the Bitcoin network and the bitcoin digital monetary units within that system, bitcoin has essentially identical attributes. But before we get there too, just remember, there’s a reason gold is known as buried treasure.
There’s a reason gold stopped being money for us in the modern world, and it has everything to do with that physical nature, with the weight of gold, and the inevitable path it took towards a centralized network.
It was nothing but path dependent certainty that someone would eventually find a technological advancement to digitize gold, and make it weightless for modernity. However in the advancement to digitize gold, it began with centralization and this centralization came with a heavy price. There is no free lunch.
THE SPEED OF LIGHT
You can’t zip gold through the internet, and you can’t wire gold to someone’s bank account. The only thing you can send digitally are zeros and ones, binary computer language, the electromagnetic digits of our modern computing world.
If you can’t zip gold around the world at the speed of light, you need a new form of money, a money that can keep up with the speed of modern trade, based around the global internet and telecommunications networks.
Thus the rise of “fiat currencies” and the bank ledgers and governments that formed the backbone of such currencies. Modern banking as we know of it today was our first best attempt at digitizing gold.
There is a perfectly rational reason why everyone knows the Rothschild name, but it’s not the reason you think it is. You see, the Rothschilds and their business partners were the first to marry the newly developed technology of trans-continental telegraphy with the technology of a ledger based money.
They discovered that they no longer needed to ship gold from their bank vaults in Germany to their bank vaults in England or France, or anywhere else for that matter. Instead, all they needed to do was send a message through the electroverse, that this account owes this much, that account is due some other amount, etc., etc., and voila, a non physical information based monetary ledger was born.
The precursor to Satoshi’s magic internet ledger money of the early 2000’s that we know of today was the Rothschilds magic telegram ledger money of the early 1900’s.
With ledger money, the banks no longer needed to shuffle the underlying asset, the gold, as long as everyone could be trusted not to fudge the numbers on their own internal private ledgers. And here was the rub. Ledgers are simply a tally sheet, and it is super easy to make up some numbers and pencil in more money for yourself or less for others. So how could the bankers be trusted?
Well, they couldn’t.
So they went to their governments, they lobbied for the illegalization of gold, and oversight of their banks. This way everyone would be forced into the ledger system and subject to audits, and conform to the new ledger system. Essentially the banks worked together with governments to create a permissioned and licensing based banking system with government oversight. This allowed for a closed and private banking messaging system through the newly established transoceanic telecom cables.
Through this new messaging system the banking industry could update their ledgers and do away all together with physical gold. The first half of the 1900’s across the entire planet in every country, from the United States, to Europe, to Russia, China, South America, Africa and Australia, in the span of one life time from the establishment of the 1913 Federal Reserve Bank and the 1914 British war bonds to the illegalization of gold and the closure of gold redemptions by 1971 across every country, the banks, governments and their militaries, worked together to end the thousands of years reign of gold as money, and ushered in a new form of money, a government enforced, or “decreed,” bank ledger based, “fiat” money.
In other words, through a monetary lens, World War I, was nothing more than the transition from decentralized gold money to centralized ledger money, World War II was the continuation of this process and by the end of the Fiatnam War in the 1970’s the entire world was operating on a new global fiat standard, with gold coinage a distant memory fading into the sunset as the last of its users, our great grandfathers passed on.
Now, today, when you go to the bank and take out a loan, or when you ask your bank to wire money from your account to another account, or when you are at the grocery store paying for your groceries with your debit card, what is actually happening under the hood at the banks is nothing more than text messages zapped through internet channels from one bank to another. The banks update their ledgers — you owe this much less, and your home sellers bank account, or your grocery stores bank account has that much more “money” — It’s entirely nothing more than text messages on a private network updating private ledgers.
The ledgers are “the money” and there is effectively no actual physical movement of “dollars" or “euros” or “rubles” or “yen” or ‘pesos.” Instead there is simply text messages that move at the speed of light across the internet and telecommunication rails we’ve wrapped around the globe.
With fiat money, with bank ledger money, the real problem of heavy non divisible gold was solved!
The bank ledger innovation was a massive improvement for global trade. Now, anyone anywhere could flash any amount of money across the world with the click of a button at lightning speed. But this new found portability, divisibility, and verifiability of fiat money came at a hefty price, namely centralized permissions and licensing were added, and the attributes of scarcity and durability were sacrificed.
We can formalize the attributes of the fiat money paradigm with the following summary:
A Permissioned network — you need a banking license to “mine” fiat, to create new money through lending, and you need a banking license to operate within the private text message channels that banks utilizes like VISA, ACH, SWIFT, and the like.
A Censorable network — since the banks act as trusted third parties for routing all of the “payments” (but remember the payments are nothing but computer readable text messages) between each other through private internet and telecom channels, they can stop any transaction they want.
A Centralized network — since the banks must work together not to cheat, they require oversight by singular government entities, a group with a monopoly on violence to enforce the rules so nobody steps out of line to cheat the ledger system, but because of this centralization, if the central authority is a bad guy or doesn’t like you, there is no other network to fall back on.
No Durability — although the fiat money units are non physical and simply information, because the information is held centrally at your bank branch, the bank branch could delete or alter their information and the amount of money you thought you had could change overnight at the whims of the bank or government regulators.
No Scarcity — as the regulator of the banking system, the government and the banks will often collude to create a special type of “central” bank which allows the government to have an open ended credit card, and this credit card is refinanced by the central bank every day with more credit which causes the total supply of money to increase over time faster than the amount of goods and services grow in the economy. The result of this dynamic is a loss of purchasing power for all the wage earners, savers, and pensioners, everywhere, worldwide. The governments may have well meaning intentions to purchase goods and services with increased credit but the unfortunate result is simply a redistribution of wealth from the least wealthy to the most wealthy because of how asset prices change in such an inflationary environment. In short, this is the cause of the widening wealth gap, and it’s difficult to see and understand. For centuries learned men and women have done their best to explain this unfortunate cost of the the fiat ledger money system, but before bitcoin, without a better solution, this was the heavy price to pay for divisibility, portability and verifiability of the fiat money.
Divisible units — with a digital information based ledger money, a billion dollars can be sliced into pennies and sent round the world at the same price as billions of dollars, because it is all just weightless information traveling at the speed of light, a massive technological advancement over golds poor divisibility.
Portable units — similar to the divisibility characteristic, with pure information, portability is maximized, any amount can be sent instantly, anywhere, anytime, provided the other party is able to verify and accept it according to the ledger rules and communication rules within the private banking ledger system. Another huge improvement over gold.
Verifiable units - unlike gold, which can easily be faked and costly to verify because of the need to melt the gold down to confirm the atomic structure, with an information based system, the cost to verify is near zero as computers can do it in near instantaneous time for fractions of a penny.
Fiat, or more aptly, private ledger money was a massive improvement to gold’s short comings. But as we’ve seen in the past decades since 1971, the downsides of fiat are beginning to wear thin as inflation seems to be tearing society apart across most every country on the planet with exponential debt levels pressing ever higher.
The soil of monetary evolution is riper than ever for planting. If only we could plant a new monetary seed in the proverbial soil, into the minds of those that see the determinants of gold and fiat, but also the benefits of them both.
What if we could create a public ledger system, a permissionless decentralized ledger system, where everyone would be free to enforce their own rules, and where self interested users would want to enforce the rules that most benefit them, with a fixed supply of ledger “units.” Could such a thing even be possible?
A NEW HOPE
By combining the peer-to-peer network and scarce unit characteristics of gold, with the information based characteristics of the fiat ledger technology, bitcoin creates the perfect blend of old and new.
With bitcoin we have the following characteristics:
A Permisionless network — anyone, anywhere, anytime, without permissions or licensing can mine, transact, and custody their bitcoin.
An Uncensorable network — because transactions are peer to peer, electronically through users computers, there is no middle man or third party able to stop transactions they don’t like.
A Decentralized network — each user in the network is an equitable peer, regardless of the amount of bitcoin held, sent, or received, and no matter where the user lives, what age they are, or their religious or political views. With a small cheap computer, any user, operating anywhere, can be an equitable member of the network. The Bitcoin network is entirely user agnostic. It is the most inclusive and decentralized monetary network conceived.
Durable units — every user has a copy of the public ledger, and each of these copies is audited and updated every ten minutes, making loss of information impossible. There is always someone, somewhere, with a copy of the most up to date record of who owns what, unless a meteor destroys the world, which is unlikely and moot.
Scarce units — every user is selfishly interested to keep the supply of bitcoin fixed to 21 million units. This will never change because people will never lose their self interest, lest the entire human race chooses to mass suicide themselves, again unlikely and moot.
Divisible units — as with the fiat ledger money, bitcoin is information, you can divide one bitcoin into ever smaller units to make any size transaction as the value of each scarce unit grows in time.
Portable units — bitcoin is even more portable than fiat ledger money because each user can self custody their money, allowing people to move about with memorized words in their head to transfer money across jurisdictional borders, undetected. Bitcoin is the most portable of any money every created.
Verifiable units — even more so than fiat ledger money, each user can instantly verify that the coin they are receiving is indeed real bitcoin that agrees to the rules of the protocol that they choose to voluntarily enforce.
In time, the world will come to understand these eight characteristics of what makes Bitcoin the first complete money to ever exist.
Of course, as with fiat money, there is no free lunch.
The price of speed, divisibility, scarcity, durability, and a decentralized permissionless uncensorable network is personal responsibility.
Those that are not able to handle the personal responsibility of self custody, and running their own node will be subject to the interests of others. Bitcoin will continue to be taken from those foolish enough to hand their keys to someone else for “safe keeping” whether it is through an ETF rug pull, a Coinbase rug pull, or a government enforced rug pull.
Attacks on the network will persist to the extent people do not run their own node and maintain the rules of Bitcoin that they prefer. The larger the number of node runners, and self-custodied bitcoin, the more purchasing power that accrues to the bitcoin units. The only possible option for those with self respect and personal responsibility is some form of self custody or collaborative self custody.
Everyone gets bitcoin at the price they deserve, and for some, that price is still much, much, much higher.
Stay humble. Stack sats.
Stay solvent. Add value.
Nothing stops this train. Stoke the fire.
Cheers!
When stack sats on substack? 😂😂😂