Bitcoin is money, but CBDC is not. – Bitcoin Magazine
This is an opinion editorial by Wes Craik, an independent Canadian writer and host of the FINterpreter YouTube channel.
Central Bank Digital Currencies (CBDCs) will soon be operational in various countries and it is important to note that they are a form of money with inherent programmability. Rules can and will be set for how these central bank obligations can be used. Over time, CBDCs are the elimination of cash and thus private exchange. They are also the most “slippery ground” ever witnessed.
In the wrong hands, the ability to program money is terrifying and will be used to serve authoritarian goals to varying degrees. Imagine China – a leading country in CBDCs – applying its dystopian social credit system directly to the digital yuan: allowing spending only on state-sanctioned goods and services, offering interest rates that bar those unfavorable to the Chinese Communist Party (CCP) and providing money with expiration dates, forcing spending instead of saving.
Simply put, it’s not money; it is a central bank lever for economic influence and social control. It is a means of energy exchange that gives the user very little choice, which is highly undesirable and actually somewhat antithetical to the concept of money itself. This is without mentioning that these currencies will simply represent already rapidly degrading fiat notes that actively siphon off the stored life force of their users to fund government initiatives.
Fortunately, as the global population begins to grapple with these fundamental violations of both their privacy and property rights, they will have the ability to store and trade their monetary energy using international and incorruptible money governed by rules, not rulers—bitcoin—for the first time in history.
You can design a currency however you want, but you cannot force people to value it. The free market has historically been the one to seek and choose a desirable currency when old ones have failed them. People instinctively gravitate towards more robust mediums of exchange when vulnerabilities or abuse of the current ones manifest with severity.
Gold has historically been the foundational economic resource that societies have used in most cases. It is an easily identifiable and durable mineral that can be melted, split and reconstituted with virtually zero loss. Gold is also relatively scarce because extraction and refining require enormous kinetic proofs of work. The issue is not arbitrarily dictated by a ruler or authority figure.
So gold checks a lot of the boxes! It is relatively divisible, although it certainly has its limitations. It is durable enough to transmit energy over time, and its scarcity ensures that it performs reasonably well as a store of value.
However, it has a scalability problem. Gold is difficult to trade at scale and at a granular level. Both transporting and storing gold requires significant power projection capability, “to avoid ROI [return on investment] for confiscation [it] prove too attractive for your local [barbarian] to ignore,” as Jason Lowery puts it.
Carrying around gold coins to buy milk is cumbersome and limits the flow of human exchange. We must note that human exchange is the foundation of civilization, as it allows for the ever-increasing division of labor and the specialization of crafts that yield greater returns per unit of energy used. This is why Layer 2 paper money, which is meant to be convertible to the underlying assets of the economy, was a breakthrough technology. Paper notes allow for far greater scale and granularity of energy exchange between people with very little friction. This and the Medici family’s double ledger system are two shining examples of money as an ever-advancing technology.
It is when the supply of these paper notes or entries in private accounts is abused and/or detached from a truly valuable underlying asset that the money supply becomes toxic. This has historically led to hyperinflation and collapse of the currency.
Bitcoin is a basic monetary network that is more scarce than gold, with a clearly defined and immutably limited maximum supply of 21 million. It is highly shareable, instantly verifiable with zero errors and durable for the rest of time. The issuance plan for the next approx. The 118 years are known with certainty, after which no more will ever be issued. Bitcoin also has low or zero carrying costs and cannot be confiscated – even by violence – when stored properly.
Interestingly, bitcoin – the first and so far only digital commodity – the first and dominant digital object linked directly to proof-of-work mining is actually the lightest real object we’ve ever discovered, enabling permissionless transactions. at almost the speed of light without an intermediary. As Knut Svanholm notes, this weightlessness technically makes bitcoin “Element zero in the periodic table”. It also enables it to be the economic resource for the digital age and beyond.
We have once again upgraded our rails for human energy exchange, but this time in a way where individual self-interest serves to enhance everyone else’s property rights. By attacking Bitcoin, you simply crystallize the defense and increase the potential energy of all its users in real terms. Michael Saylor notes that Bitcoin is “anti-fragile”. As such, it encourages cooperation as opposed to coercion or attempted subversion. This mechanic is an important revelation that Bitcoin brings forth, one that Lowery calls”mutually assured preservation.”
Bitcoin represents hope for a more just human future based on our newly discovered universal constant: 21 million.
Fix the money, fix the world.
This is a guest post by Wes Craik. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.
