Bitcoin: Sovereignty through mathematics CHAPTER ONE

Sovereignty through mathematics CHAPTER ONE


All human interaction can be defined as trade. Yes, all human interaction. Every time a human being interacts with another, an exchange takes place. In every conversation we have, we exchange information with each other. Even the most trivial information is of some value to the other person. If information didn’t have any value to us, we wouldn’t talk to each other. Either what the other person says is valuable to us or we find it valuable to give information to them. Oftentimes both. At the core of all human interaction that isn’t violent, is that both parties perceive that they gain some value from it, otherwise the interaction wouldn’t have taken place at all. Civilizations begin this way. Two people finding it valuable to interact with each other. That’s all it takes. So what constitutes value? What we find valuable is entirely subjective. A comforting hug for example, probably has a different value to a two-year old than it has to a withered army general. Even the most basic action, such as breathing, encapsulates the whole value spectrum. We tend to forget that even a single breath of air can be of immense value to us under the right circumstances. A single breath is worth more than anything on the planet to a desperate free-diver trapped under ice, while worth nothing to a person with a deathwish in clean forest air on a sunny summer day. Value is derived from supply and demand, and demand is always subjective. Supply is not. Since all of our lives are limited by time, time is the ultimate example of a scarce, tradeable resource. We all sell our time. We sell it to others and we sell it to ourselves. Everyone sells their time, either through a product that took them a certain time to produce, or as a service, and services always take time. If you’re an employee on a steady payroll, you typically sell eight hours of your day per day, to your employer. If you’re doing something you truly love to do, that eight hour day still belongs to you in a way, since you’re doing what you’d probably be doing anyway, if you had been forced to do it for free. Sometimes, we sacrifice time in order to acquire something in the future. An education for instance, gives no immediate reward but can lead to a better paying, and more satisfying job in the future. An investment is basically our future self trading time with our present self at a discount. Once again, every human interaction viewed as trade. It’s rooted in physics. For every action there’s an equally big reaction. Trade is at the very core of what we are, and the tools we use to conduct trade matter a lot to the outcome of each transaction. Money is our primary tool for expressing value to each other and if the creation of money is somewhat corrupt or unethical, that rot spreads down through society, from top to bottom. Shit flows downhill, as the expression goes. So what is money, or rather, what ought money be? In order for two persons to interact when a mutual coincidence of needs is absent, a medium of exchange is needed in order to execute a transaction. A mutual coincidence of needs might be “You need my three goats and I need your cow”, or even “both of us need a hug”. In the absence of a physical good or service suitable for a specific transaction, money can fulfill the role of a medium of exchange. What most people fail to realize is that the value of money, just as the value of everything else, is entirely subjective. You don’t have to spend it. The problem with every incarnation of money that mankind has ever tried is that its value always gets diluted over time due to inflation in various forms. Inflation makes traditional money a bad store of value, and money needs to be a good store of value in order to be a good investment, or in other words, a good substitute for your time and effort over time. Bitcoin tries to solve this by introducing absolute scarcity, a concept that mankind has never encountered before, to the world. To comprehend what such a discovery means for the future, one needs to understand the fundamentals of what value is, and that we assign a certain value to everything we encounter in life, whether we admit it or not. In short, we assign value to everything we do, value is derived from supply and demand, supply is objective and demand is subjective.

Free trade emerges out of human interaction naturally and it is not an idea that was forced upon us at any specific point in time. The idea that markets should be regulated and governed on the other hand, was. Free trade is just the absence of forceful interference in an interaction between two humans by a third party. There’s nothing intrinsically wrong or immoral about an exchange of a good or service. Every objection to this is a byproduct to the current global narrative. A narrative that tells us that the world is divided into different nations and that people in these nations operate under various sets of laws, depending on what jurisdiction they find themselves in. All of these ideas are man made. No species except humans does this to themselves. Animals do trade, but they don’t do politics. Bitcoin, and the idea of truly sound absolutely scarce money, inevitably makes you question human societal structures in general, and the nature of money in particular. Once you realize that this Pandora’s box of an idea can’t be closed again by anyone, everything gets put into perspective. Once you realize that it is now possible for anyone with a decently sized brain to store any amount of wealth in that brain, or to beam wealth anonymously to any other brain in the world without anyone ever knowing, everything you were ever told about human society gets turned on its head. Everything you thought you knew about taxes, social class, capitalism, socialism, economics or even democracy falls apart like a house of cards in a hurricane. It is in fact impossible to comprehend the impact Bitcoin will have on the planet without also understanding basic Austrian economics and what the libertarian worldview stems from.

Imagine growing up in the Amish community. Up until your sixteenth birthday you’re purposely totally shielded off from the outside world. Information about how the world really works is very limited to you since internet access or even TVs and radios are forbidden within the community. Well, from a certain perspective, we’re all Amish. How money really works is never emphasized enough through traditional media or public educational institutions. Most people believe that the monetary system is somehow sound and fair when there’s overwhelming evidence to the contrary, all over the globe. Ask yourself, do you remember being taught about the origins of money in school? Me neither. I don’t believe that there’s some great, global conspiracy behind the fact that the ethics of money creation isn’t a school subject, but rather that plain old ignorance is to blame for the lack of such a subject primarily. As soon as the math-skill threshold is high enough, people seem to stop caring about numbers. The difference between a million and a billion seems lost on a depressingly large part of the world’s population. In the chapters ahead we’ll explore the pitfalls of central banking, how money pops into existence and how inflation keeps us all on a leash.

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Bitcoin: Sovereignty through mathematics CHAPTER ONE was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.

Publication date: 
05/20/2019 - 06:33