BTC $6370.80

The Path To Greatness

by

         The Path To Greatness

Bitcoin, as a distributed and open source type of money, is destined for greatness. Like any young prodigy, its abilities can be foreseen and its potential visualized by those with a certain clairvoyance in these matters. Bitcoin is a tiger pup, stretching its limbs and jumping about. It poses no threat to its brothers and sisters, nor to any other animal in the kingdom. Bitcoin’s total market capitalization reaches only $6 billion with only $130 million in everyday transactions. Not quite the elephant in the room.

But this is temporary – for even mighty heroes begin as toddlers, unable to effect any sort of change in the world. But as they grow, their skills and attributes become more pronounced. So it is with Bitcoin: a money made for the Internet age, without forms and licenses, without gatekeepers and taxes. Bitcoin’s virtues – transparency, speed, reliability, and privacy – will carry it into the digital age as a mighty boon to the world. Both the number of users participating in the network and the technological milestones being achieved are growing. Currently, Bitcoin users on Coinbase and Blockchain.info – the two most popular wallet providers – amount to roughly four million, while remarkable solutions such as multi-signature addresses, HD wallets, and cryptographic-proof-of-reserves are being implemented in mainstream exchanges and products. Improvements in security, usability, and convertibility are developing at astonishing rates. At the same time, documentarians elate over the Rise and Rise of Bitcoin.

Just How Great Are We Talking?

As Bitcoin can be accessed by anyone with a phone or Internet connection, there are no national or geographic barriers to overcome; its network effect can thereby grow rapidly and unimpeded as users discover they can be integrated into a global economy at the touch of an app. Furthermore, the infrastructure on which Bitcoin runs is already built and is continually growing: the Internet. Mining, of course, requires the acquisition of physical hardware to verify transactions, but this can be located anywhere. An Egyptian or Swede sending Bitcoin relies on the distributed, global network of miners; perhaps the miner who verifies her transaction (by including it in a block) will be from Australia, or Belarus, or right next door. The hardware that verifies transactions is scattered throughout the world, coordinated using open source technology, and communicated over the Internet. With such financial access now open to everyone, local monies will become less relevant in people’s economic calculations. They are no longer limited to purchasing goods and services from their immediate neighborhood. Rather, international trade can develop on the individual level. One may easily purchase his toothpaste from a Japanese company, his coffee from a Brasilian collective, his watch from German manufacturers, and other countless products from around the world using the Internet and paying in Bitcoin. No more exchange fees, no more capital controls, no more account freezes, no more paperwork – just a digital keychain. Having access to seven billion trading partners on a nearly frictionless monetary system, protected by the laws of mathematics, and built on open-access programming is becoming the new paradigm. One by one, people are learning the difference between open, decentralized money and corruptible, fiat money.

The transition from the 20th century world economy – fragmented by war, inflation, and imaginary lines called borders – into a globally integrated Bitcoin economy is inevitable. The dynamics are in place; the scene is set. As Marx would describe it, the objective material conditions leading to this sort of revolutionary change are present and becoming more manifest over time. As with the emergence of any new paradigm, however, there must be growing pains: bleak, depressing times before the hero’s greatness can be actualized. These are the times in which we live. Inflation, war, corruption, and terrorism plague our societies. Global supernations are on the verge of splintering and the US has become a police state. Perpetual warfare is creating a culture of fear, where it is not implausible to imagine Iraq or Syria as the next battleground for a coming world war. Governments all over the world can routinely loot their citizens and avail themselves of their property – indirectly, by fines, fees, and the molding of banking law, but directly as well through their monopoly on money creation via central banks. Persistent, inescapable tax slavery has been the condition of man for most of our history since the discovery of agriculture. This is encapsulated by the oft-heard expression “as certain as death and taxes.” But perhaps we are nearing an end to this invisible slavery. Just as the practice of owning humans has become disgraced and endangered, so too will the practice of tending human tax farms. Bitcoin, and its future peer-to-peer descendants, radically undermine the ability for States to levy taxes, surveil economic transactions, sanction nations and ethnicities, and corrupt the powerful. Bitcoin is a tool engineered for the purpose of liberation, and its popularity in underground drug markets is catalyzing. One use case after another, Bitcoin is providing freedom for drug runners, anarchists, gamblers, sex workers, and other marginalized groups. Every niche that benefits from Bitcoin in escaping tax slavery or total surveillance adds to the strength of the network. It becomes stronger, more resilient, less volatile, and more socially acceptable to use Bitcoin in “white market” situations. If this continues, Bitcoin will consume its rivals and emerge, a la Highlander, as The One.

The Axis of Evil

Bitcoin is Pacman. It upgrades by consuming delicious and bountiful enemies – glowing ghosts. What is on Bitcoin’s plate? Why, every competing media of exchange, of course.

The aperitif are media of exchange without network effects or discernible advantages. This includes various altcoins that are simply imitations of the Bitcoin protocol with minor tweaks. Without a substantial technical value proposition, copycat altcoins will see their market capitalization drop and their users return to Bitcoin, the heavyweight champion in the cryptocurrency market. This includes bizarre debt-based systems like Ripple, demurrage currencies like Freicoin, and its own cousin Litecoin.

Next, with some alcohol in its belly, the Bitcoin network demands an appetizer. As it earns points by consuming the cherries and bananas of the commercial world, it will grow to shape a large portion of e-commerce transactions. With its latent security and privacy features, it will quickly become the online shopping money of choice. This effect will, naturally, overlap into real-world, brick and mortar establishments looking to reduce their transaction costs. Credit cards are the next target: highly vulnerable data centers will continually be raided by the unscrupulous and large retailers like Home Depot and Target will admit to the compromise of tens of millions of credit card accounts. Businesses, looking to protect themselves from cyber attacks in the future, will begin to gravitate towards natively secure systems. Credit cards are a relic from the 1950s that should never, ever have touched the Internet. This will be the first delicious food Bitcoin enjoys. The singular advantage credit cards have over Bitcoin is the already-existing physical infrastructure at the point-of-sale. Near-field communication such as Bluetooth 4.0 and permanent QR terminals will, however, level the playing field, allowing customers to spend Bitcoin with a flick of their keychain or a snap of their phone.

Beyond this lies the decadent first and second course meals of governments and central banks. Nation states around the world claim the legal right to produce money and govern it. Through central banks, they control the amount and direction of money creation, and through legal institutions, they can legislate the playing field in their own interest. Legal tender laws, tax laws, licenses for “money transmitting” and prohibitions on “money laundering” will be the weapons these Goliaths choose to wield to combat weak, pitiful David. However, as in Biblical times, it will be the shrewdness and agility of David that will win the day. Escape from taxation and surveillance will water the mouths of even the most ardent of State supporters once they experiment with the enchanted Turkish Delight.

Government-controlled fiat money, while powerful, is slow to adapt. Its advances will remain mired in committees and political houses, where men who not long ago wore powdered wigs will install new obstacles for members of the house of David. But alas – their obstacles will simply embolden us and serve little purpose but delay the inevitable: a catastrophic collapse in demand for fiat currency and hyperbitcoinization. Even the incumbent monies of nation-states cannot stand up to the might of Bitcoin. Individual nations may last longer, and may retain more of their human sheep, should they embrace Bitcoin and allow its use for taxation – but their power will nevertheless diminish considerably as a Bitcoin-only tax structure would eliminate the funding for warfare and welfare. Understanding the incentives and emotions of politicians leads one to believe they would sooner fight to the death than surrender to decentralized currency and retain their jobs a decade longer.

Dessert consists of champagne and crème brûlée with Jeffrey Tucker laughing gaily.

Looking Beyond Bitcoin

The blockchain – Bitcoin’s technological vertebrae – is a next-generation, peer-to-peer platform for exchanging ownership. All records are timestamped, protected by a competitive proof-of-work system, and distributed to all users. The possibilities are endless, but a few tantalizing implementations include: crypto-equity (digital stock issuance), peer-to-peer marketplaces, provably fair elections and gambling, decentralized exchanges, better crowdfunding mechanisms, smart contracts, smart property, and so much more. It can form the monetary base for the sharing economy, which is based on openness and decentralization. It can financially incentivize file-sharing, Tor relays, mesh-networking, and storage hosting. Currency, as Antonopoulos says, is really the first app of the Bitcoin network. The blockchain can be used to register weddings, land deeds, futures contracts and all sorts of financial derivatives, birth certification, and contractual relationships that are as of yet unimagined and impossible. Email – the first killer app of the Internet – was succeeded by instant messaging, YouTube, Wikipedia, Facebook, Google, eBay, Amazon, and a hundred life-changing technologies that could not be envisioned in 1993. Now, over a decade into the 21st century, any individual can reach millions by writing blogs and creating content, can host podcasts for free, can upload and download original music, and so much more. Look towards the spontaneous order of the Internet as the blueprint for the good Bitcoin can provide, and even then it will shatter your expectations. Just as Bitcoin itself was born from the Internet, incredible technological advancements will be born from Bitcoin.

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