The Bitcoin Economy Is Circular – Bitcoin Magazine
This is an opinion editorial by Aleks Svetski, author of “The Uncommunist Manifesto,” founder of The Bitcoin Times and host of the “Wake Up Podcast with Svetski.”
Bitcoin is the perfect money. It embodies all the properties and functions of money:
- Store of value (SoV)
- Medium of Exchange (MoE)
- Unit of Account (UoA)
…and do it in a way that any person or participant, from anywhere in the world can:
- Save without having your wealth stolen invisibly
- Use without a Big Brother-type institution telling them what or with whom they are allowed to do it
- Account, audit and verify what they have, when they received it and how much it is in relation to the whole.
Moreover, this is all possible without any kind of reliable intermediary, government regulation, supervision or “decree from the anointed”.
Money is arguably humanity’s most important invention because it is a social technology, and we are by definition the social species. Money is the mechanism by which we measure or attempt to quantify complex things in both the material realm, such as time, energy, and material resources, along with things that are more metaphysical in nature, such as “value,” “reputation,” and “quality.” .”
As a result, money is not only a “measuring stick” but is also a communication network. It is a medium in which higher order cooperation is made possible.
Money is essential to the formation of a society that is more complex than a few hundred people, and without it we simply cannot scale civilization up. There would be no division of labor or any form of production beyond subsistence.
Now, here we are in 2022. About 14 years since Satoshi Nakamoto released the white paper for what has emerged as apex money (at least on this planet).
So, what does this have to do with Bitcoin’s circularity?
Well, if bitcoin is the next and last global money, then by definition (and by design) it is is already circular. It is a monetary unit and a financial network that already includes all the elements required for a global economic system.
So it’s not a question of “if”, or even “when”, but more a question of progress, size and necessity.
In 2020, I wrote an article entitled “Bitcoin & Lockdowns”, in which I presented a model for understanding Bitcoin’s long-term adoption curve, through the lens of must. And this is the answer to the circularity question:
When circularity? —> “As it becomes more of a necessity.”
“Necessity is not only the mother of all invention, but is the grandmother of all change.”
Major transformations like Bitcoin are progressions that diffuse through society memetically.
They start out imperceptibly slow, but as they gain momentum due to both their own development and the deterioration of the old guard, they begin to accelerate exponentially.
And this is what we are in the middle of today:
The fiat experiment is getting out of control and the necessity to use Bitcoin as a means of saving, payment mechanism and at some point an accounting system, everything is accelerating and converging rapidly.
When you look at modern economics and the fiat money it relies on, you realize that you can no longer:
- Accurately measure the product of your labor or the value generated in the market
- Save or preserve the product of your labor or the value generated in the market
- Exchange freely or voluntarily the product of your labor or value generated on the market
Money is no longer “money” in the true sense of the word. It has become, as Stephanie Kelton would put it; just “points”.
Source
It has become pointless, virtual, arbitrary, meaningless points that one group can settle at the expense of all other players in the game. And who are these players in the game? Well – it’s the rest of us, our livelihood and our scarce natural resources.
This is a model of the world that cannot last, much in the same way that the fool who jumps off a cliff and tries to fly thinks he has beaten gravity for the first few seconds as he moves upward.
When we extend the time scale a bit, we will find that gravity catches up. It always catch up.
Another example is the whole KYC/AML edifice, and the ridiculous new mandates like the “Travel Rule.”
Money exists so that two parties who do not know each other can exchange the product of their time and work for things each subjectively values more or less. “Knowing your customer” is fundamentally opposed to the entire raison d’être of money and the scope it should enable in society via efficient commerce.
imagine everyone of the wasted resources that go into:
- Unnecessary compliance
- Know all your customers
- Reporting meaningless statistics for AML
- License and regulations
- Bureaucratic negotiations and lobbying
Imagine how much more efficient we could all be and how many resources we could save and allocate to productive means if we weren’t forced to play this game. And to add insult to injury, think about how much privacy this whole “performance” compromises for all “customers” involved. See these two idiot companies in Australia, within a week of each other recently:
Source
Source: Author’s email
It’s wild.
Payments and financial privacy will not improve under the existing system. They are only going to get worse.
Savings will not be protected under the existing regime. They will just continue to evaporate.
This is why Bitcoin’s necessity as the foundation of a new money and payment network is only going to increase, as is the extent of its circularity.
There is no alternative.
It will be driven as much by the decline of the existing fiat system as zero to an evolution of money that Bitcoin represents.
Incompatibility
One of Bitcoin’s most important and, for many, compelling features is its incompatibility, especially with status quo or legacy money and payments.
Bitcoin is fundamentally unlike anything that exists today, and so by definition it is circular. Bitcoin can really only move over the Bitcoin network. Any bitcoin that looks like it interacts with the old system or maybe even other “crypto networks” is just paper bitcoin.
Bitcoin is only truly recognized on the Bitcoin network, and vice versa: the Bitcoin network is only useful to the extent that bitcoin can be moved on it. Bitcoin can only live on the Bitcoin network.
What more circularity could you ask for? This is not an interoperable shitcoin, or an exchange à la FTX or BlockFi, or a digital database of points. This is an entirely different beast that few understand, especially those who are arrogant or stupid enough to believe that they are somehow bigger or more significant than Bitcoin itself.
Bitcoin is as different from all other forms of payments and money as the internet is from the flag communication system created by Genghis Khan almost 1000 years ago.
It is a complete paradigm shift. It is a zero-to-one discovery and invention.
Zero to one
It’s worth noting that zero-to-one transformations aren’t always seen as “improvements” at first, especially with regards to networking. They are fundamentally different and require input and energy from the participant, much like the activation energy in a chemical reaction. But as new “catalysts” emerge, and various participants find themselves “energized” enough to change (as the necessity arises), the movement surges, gaining both mass and scale, and we look back to wonder how we ever lived without it.
This is how we will all look back on Bitcoin decades from now.
Future generations free to trade globally, instantly and securely with money that is always on and incorruptible will look back on this period of fiat history and wonder how anyone could ever have been stupid enough to think Stephanie Kelton economics , where 2 + 2 = 435, would last.
In much the same way that we now take things like electricity for granted, or the internet, or Uber or social media, for that matter, we will also take Bitcoin for granted. People laughed at the early pioneers of electricity, whether it was Nikola Tesla, George Westinghouse or even Thomas Edison. They could not fathom what we needed to use this mysterious power from God for anything other than maybe light.
The internet was the same. The “greatest minds” of the era could not imagine far beyond a fancy video and conference call medium. Some saw the potential of online commerce, but that was until about two decades in. Now it forms the backbone of almost every major industry and artery of modern civilization.
I could go on, but I think you get the point.
In conclusion, to understand Bitcoin’s circularity, you need to look at Bitcoin’s holistic functionality, through a lens of necessity and time, and you need to get a sense of the incompatibility or paradigmatic shifts that occur with a zero-to-one type of discovery or innovation (Bitcoin is a mixture of both).
Bitcoin wins in the end because it has time on its side. Bitcoin is where the puck goes.
The old system is losing because it is fighting a losing battle against entropy, and every move it tries to make to save itself is actually a move to kill itself. The inheritance system is where the puck was.
It’s over for fiat. It’s just going to take what seems like a long time to an individual, but what is really a very, very, very short time on a civilizational time scale.
What a time to be alive.
This is a guest post by Aleks Svetski, author of “The UnCommunist Manifesto” and founder of The Bitcoin Times. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc or Bitcoin Magazine.
