“In order understand the present, one must look into the past.”
Let history be our guide. By examining and learning from centuries of experiments in money, we can ground our understanding in something more reliable than the vicissitudes of popular opinion.
The core problem with modern banking is the entanglement of multiple obligations upon a single deposit, and the resulting interdependencies that drag otherwise unrelated industries and individuals in the wake of inevitable financial crises. The root cause of this problem is the moral hazard created by last resort lending guarantees from central banks, both implicit and explicit. Central banks are like mighty dams: they stop the annual flood, but pay for it with the deluge.
We can observe this phenomenon in the great banking crises of the past 200 years.
“Just beneath the surface lie pervasive and embedded financial risks.”
This topic can get dense very quickly, but if you take anything away from reading this, let it be a mental image of a game of musical chairs, in which citizens of the world walk happily around in a circle with one chair for every 100 people. When the music plays, anyone can occasionally take a seat if they desire. But if the music stops, 99 out of 100 people end up very disappointed.
The difference between your bitcoin and your bank account is that the former involves only one party: you, the owner. Your bank account, on the other hand, is an invisible, yet multi-layered stack of promises to pay: otherwise known as debt. Key to the disentanglement of the global financial system is a shift away from using debt as money, to using bearer instruments, like bitcoin, as money.
Envision this shift as adding chairs to the game, making it more stable, optimistic, and equitable. Think of bitcoin as a benevolent chair maker.
“The bitcoin revolution is now.”
It’s OK to be early, even if your ideas seem strange, as long as you are right. Though it’s hard to feel the ground shift beneath your feet as major changes take place, I am convinced that this is the real deal, that people around the world will make a conscious and rational decision to park a significant portion of their net worth in bitcoin over the next 10 years. In my opinion, this isn’t a strange idea at all. It’s an inevitability grounded in human nature within a historical context.
“People use banks for three reasons. Once bitcoin becomes better at all three, then the game changes rapidly.”
Convenience, security, and interest: there are no other reasons to use a bank. Bitcoin wallets tackle the first two, which have clear social and technical solutions. The third, interest, is being taken care of by geopolitical influences – negative interest rates make the 0% rate offered by bitcoin attractive by comparison.
Like ISPs broadcasting Internet connections over cell phone towers, bitcoin leapfrogs an intractable farrago of legacy banking and bringing better money directly to the people with access and inclusion for all.
“The ability to store and transfer wealth without the permission of others is a new power afforded to the individual by the grace of technology and human genius.”
The best-kept secret in money is that its value derives not from the trustworthiness of its stewards, but from the efforts that people perform in its pursuit. It is the hard work of these people, the breadwinners of the world, which bootstraps a currency to high status. Breadwinners make money. Mismanagement of the money supply only serves to distort and dishonor this motivation.
Thanks to bitcoin, the world has its first apolitical money issuance schedule. Because the supply of bitcoin is well defined and capped with a hard limit, it respects the labor of humanity in a deep and fundamental manner that cannot be overstated.
Rather than baking in failure, bitcoin is designed for success, and I hope you're equally inspired by the prospect of financially liberating the individual in this way.
[Author note: This post is a repurposed version of a previous submission]