Bitcoin: The End to Fiat Serfdom
Bitcoin: The End to Fiat Serfdom
PART I: THERE IS NO SECOND BEST
PART I: THERE IS NO SECOND BEST
January 3, 2009. Satoshi Nakamoto mined Bitcoin’s genesis block, welcoming the first batch of BTC units into the world. Etched into Bitcoin’s forever folklore, a cryptic message embedded within the genesis block reads: “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks.”
April 26, 2011. Satoshi delivered what turned out to be his final public message via email to Gavin Andresen, then a Bitcoin Core developer. To date, Satoshi’s identity remains unknown — most likely, forever will be.
PART I: THERE IS NO SECOND BEST
PART II: IN DEFENSE OF PROOF-OF-WORK
PART III: THE ANTIFRAGILE TEST
PART IV: THE PATH TO ENLIGHTENMENT
PART V: A WHOLE NEW WORLD
EPILOGUE
The hero we need, but don’t deserve.
Fiat is the antithesis to credible-neutrality. There exists a definitive figurehead, the government, as the masters of its fiat holders.
Satoshi knew that for Bitcoin to stand a chance of being the world’s neutral reserve asset, he had to remove himself from the equation as soon as Bitcoin reached sufficient critical mass for its survival. For him, this was sometime in early 2011.
Unlike Ethereum and other cryptocurrencies, Bitcoin has no premine. Each unit of BTC is minted as a direct result of mining Bitcoin blocks all the way from the genesis block. Everybody obtains BTC either by mining Bitcoin blocks or buying it from the market — not even Satoshi himself has an unfair advantage.
Satoshi has gone to even greater lengths: back in the early days when he was one of Bitcoin’s principal miners, Satoshi was regularly turning his miner off when he found blocks less than 5 minutes apart, suggesting a deliberate limitation of his hash rate. While Satoshi’s total mining rewards is estimated to be roughly 1.1M BTC, had he decided to be greedy and mine with his full hash power, he could’ve easily earned 2.2M BTC — more than double the amount he has actually mined.
As a showcase of Satoshi’s true intentions, each block reward that he mined is claimed by a unique address, amounting to over 20,000 addresses in total. It is likely that Satoshi has intended these addresses to lay dormant: each of them is generated for the sole purpose of claiming Bitcoin block rewards, at a time when everyone is still coming to grasp on Bitcoin’s inner workings.
To this day, not a single cent worth of BTC from any of these 20,000 mining addresses has been moved. And the longer this continues, the more likely it is to forever remain that way.
Now, imagine if Ethereum is adopted as the global reserve asset. Vitalik Buterin, by default, will become the most influential man in the world.
The weight of his words alone as the figurehead of Ethereum is so powerful that it would be treated as gospel by the majority of Ethereum adherents. This is notwithstanding the fact that Ethereum is premined to the tune of 72 million units of ETH, in which 12 million is distributed to the Ethereum Foundation.
Most Ethereum proponents might not like this framing, but in this parallel universe, we would essentially be replacing our current fiat masters in favor of a monetary regime under our new Ethereum overlords. Nic Carter explains it best:
“Every now and again, critics bemoan the lack of a protocol-financed slush fund. But far from enhancing the prospects for these networks, these funds are a source of bickering, self-dealing and graft.
They endow the protocol-proximate individuals who control the purse strings with total discretion to direct funds to allies and friends. When it comes to monetary neutrality, projects with protocol financing are no better than the deeply politicized USD.”
—Nic Carter
Having a recognizable founder figure or entity is a bane towards credible-neutrality. For all intents and purposes, Vitalik Buterin and the Ethereum Foundation hold a hidden hand over the Ethereum network. They may claim that all EIPs are judged solely on merit, but psychological fallacies inherent to the human nature inevitably entails that “official” sources will always get the benefit of the doubt.
Vitalik or the Ethereum Foundation can practically propose an all-encompassing decades-long roadmap (i.e., the Merge, the Verge, etc.) to virtually no opposition. If Satoshi chose to remain active so that he can meddle with BIPs, there is no doubt that he will be revered in the same way as Vitalik — his words treated as gospel by the Bitcoin community, while true meritocracy goes out of the window.
The premine, Vitalik Buterin, and the presence of an “official” Ethereum Foundation — together they form the holy trinity preventing Ethereum from ever being credibly-neutral. Satoshi is adamant to not go this route — he had the foresight to consciously step out and let the Bitcoin community take the reins: no designated foundation, no appointed successor, no “official” roadmap, nothing.
“Satoshi’s anonymity was a critical component of the founder story — dev worship is dangerous thing for an open source project aiming for decentralization. Volunteers need to rely on trusting the objective reality of the code, rather than focusing on the merits of the project leader.
Additionally, the conservative de-escalation of his mining contributions, never spending any of his coins, nor using his influence for any purpose, shows that he wanted the world to make up their own mind about his project and judge it on its own terms. And unlike every other founder in history, Satoshi never cashed out.”
—Dan Held
Throughout its existence, Bitcoin has had its fair share of overzealous proponents, for whom each of them had their own self-imposed stints as Bitcoin’s torchbearer: the Winklevosses, Barry Silbert, Mike Novogratz, Jack Dorsey, Elon Musk, Nayib Bukele, Michael Saylor, and most notably, Donald Trump on his presidential campaign trail.
But the cold-hard facts remain unchanged: Satoshi is still inactive, his identity is unknown, and there is no designated “Bitcoin Foundation” nor an official spokesperson. This is why BIP debates get notoriously heated: there is no canonical source to act as the harbinger of truth, meaning that contentious disputes can’t just be mediated by “this is what Satoshi wants us to do” indoctrination.
“Bitcoin benefited from an extremely rare set of circumstances. Because it launched in a world where digital cash had no established value, they circulated freely.
That can’t be recaptured today since everyone expects coins to have value. Not only was it fair, but it was historically unique in its fairness. The immaculate conception.”
—Nic Carter
The world of fiat dances to the whims of a single entity: the U.S. Federal Reserve. There is no belligerent in the world who understood its harrowing implications better than Satoshi himself — the very reason why he created Bitcoin in the first place.
Satoshi Nakamoto’s anonymity and deliberate non-involvement, besides serving to protect himself from the subservient hand of the state (he would certainly be put in jail if his identity was known), is a prerequisite so that the Bitcoin community, as flagbearers of an aspiring neutral reserve asset, remains the only place in the world where truly unbiased decentralized meritocracy, exists.
Keep it simple, stupid.
The common people have lived most of their lives oblivious to the inner workings of fiat — the very financial system they’re subscribed to since birth.
The notion of money itself has been bastardized to such a degree that it would take the average human a lifetime just to comprehend what really goes on beneath the veils of the state. But there’s actually a pretty good reason for it: as the saying goes, where there’s smoke, there’s fire.
Money, in its purest form, is merely a means for society to solve the coincidence of wants (aka barter). Money eliminates time preference: farmers are able to sell their transient livestock to an interested party now, in exchange for a store-of-value medium that they could trade for other goods in the future.
In essence, money enables the division of labor – economic actors can focus on what they do best then trade them with each other, increasing the overall productivity of the economy. Anything else to this core function, is secondary at best.
"Civilization advances by extending the number of important operations which we can perform without thinking about them." —Alfred Whitehead
In pursuit of grander “ambitions”, late-stage fiat has lost sight of what’s truly important — the ability for money to be a reliable store-of-value. Absent this property, time preference is reintroduced: economic actors are disincentivized to specialize and trade, savers are disproportionately punished via the inflationary tax, and debt is no longer an exception, but a norm.
Everybody, from farmers to doctors to tradespeople, has no choice but to invest their savings in order to beat inflation — even if they don’t have the required skillset nor the motivation to do so. Against this backdrop, there is no surprise that politicians, bankers, and financiers have always been in a position of privilege, and have historically made up the majority of the wealthiest people in the world.
To expect every economic actor to understand geopolitics, monetary and fiscal policies, and global markets, for the sake of preserving their purchasing power, is travesty. People of all backgrounds, blue-collar and white-collar alike, deserve to have access to a neutral reserve asset to save up their hard-earned money — without needing to involve oneself with the above subject matters of expertise that are clearly beyond their specialization.
Investing should be a choice, not a necessity. People who wish to further grow their pie are free to take on additional market risk out of their own will, but people who simply want to preserve their purchasing power should also be free to not invest and just do nothing with their savings.
Humans operate under bounded rationality — the idea that rational individuals select a decision that is satisfactory rather than optimal.
“When the choices and consequences are clear and measurable, we have little problem in making optimal decisions. But when the choices are complex, consequences less clear, less measurable, we can be wildly off the mark. And real-world situations are typically of the latter type.
Put another way, humans are only rational when the math involved is relatively simple. This is the idea of bounded rationality: due to limited information and our own cognitive limitations, (for the most of us) we can only be rational up to a certain point.”
—Hugo Nguyen
Bitcoin’s very simple monetary policy lends itself kindly to the cause: it has a capped total supply of 21 million units of BTC, block reward at genesis is 50 BTC, and halvings (of the block reward) to occur once every four years.
It is not rocket science: it doesn’t take a high school education to understand it. Your grandparents, a random villager in the Global South, virtually anyone with basic arithmetic comprehension will know exactly what they’re getting into with Bitcoin.
Bitcoin is a human right. For people to have a universally accessible and credibly-neutral store-of-value upheld by immutable monetary policy, comprehensible to all.
Everyone irrespective of their background deserves peace of mind, assured of the fact that the fruits of their labor, no matter its from providing financial services or farming agriculture, will always be exchangeable for goods and services of equal value, no matter the time preference.
PART II: IN DEFENSE OF PROOF-OF-WORK
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