Money, Bitcoin and Time: Part 3 of 3

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In the ancient story of money a new chapter is being written…
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The Simple Truth about Time: Time is the ultimate resource. Its absolute scarcity bounds the entirety our stories, both as individuals and societies. With economics, we strive to use it more effectively. As the destroyer of all things and the healer of all wounds, it is the grand paradox of nature.

The Ultimate Resource [1]

Frozen Time [1]

Time Arbitrage [2,13,14]

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As telecommunication networks have become more advanced and ubiquitous, the user adoption rates of new innovations have accelerated dramatically.

Lindy Effect [4,11]

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Hard monetary technologies become more trusted over time as they offer peace of mind to their users.

Future of Regulation [1,4,5,15]

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Like the proven model of BitTorrent, Bitcoin sports a decentralized architecture that makes it highly resistant to external attack and censorship.

“This is one of the crazy things about this concept because money and speech turned out to be the same thing — money, information and math — they’re the same thing. In a Bitcoin world, I can literally write down my Bitcoin address and keys on a piece of paper and put it in a safety deposit box. It’s basically in cold storage, I could even put it in my head. I can memorize the key phrases and I could cross national borders with $1 billion in my brain. It’s a very powerful but literally mind bending concept in that sense.”

“The Federal Reserve simply does not have the authority to supervise or regulate Bitcoin in any way.”

The Long Game [1,4,16]

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Game theory shows us that adversaries will often behave contrary to their mutual best interests.
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The game theoretic properties of the monetization process encourage people to converge on a singular money.
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The Event Horizon [1,4,16]

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Reverse Bank Run [1,4,5]

A Path to Prosperity [1–16]

1. Bitcoin is first perceived as an internet toy for cryptographers (Minority Rule — Step 1)

2. Its rapid price increase makes a small group of people rich, engages free market fanatics and brings media attention. Its hyper-volatile price presents itself early (Hodlers of Last Resort — Layer 1).

3. The media, financial and tech establishments — having failed to buy Bitcoin early and benefit from its meteoric rise — denounce it as a Ponzi scheme, the MySpace of Cryptocurrencies and the greatest bubble of all time (Streisand Effect).

4. A large number of scammers jump onto the Bitcoin hype-train and create their own cryptocurrencies claiming to be superior though lacking critical qualities including decentralization, security and immutable governance. Bitcoin’s serendipitous first mover advantage, multi-sided network effects and its brand awareness fueled by the Nakamoto creation myth preserves its market dominant position.

5. Retail investors, venture capitalists and hedge funds — lacking understanding of monetary economics and applying inappropriate valuation models — invest into other cryptocurrencies, creating more noise and confusion as the prices of these altcoins increase at a rate higher than Bitcoin.

6. Well-connected venture capitalists and hedge funds are given discounts on the investments only to then dump much of what they bought onto retail investors.

7. Given their high correlation to Bitcoin and lacking utility, the world watches as the bear markets continue to wipe out more and more alternative cryptoassets as most fail to deliver any useful product, although some succeed in other market spaces. Features that are proven in the market by other cryptoassets are subsumed by Bitcoin (Decentralized Network Archetype). Bitcoin price volatility persists but annual low prices continue to ascend relentlessly (Holders of Last Resort — Layer 2).

8. Trust in Bitcoin increases over time (Lindy Effect) and its market price continues its upward yet volatile trajectory (Fractal Wave Patterns).

9. People, burned in the altcoin craze, witness and learn about Bitcoin’s undisputed superiority across all monetary characteristics, especially its hardness (Holders of Last Resort — Layer 3).

10. On the eve of and during the next bull markets, Bitcoin’s absolute scarcity and antifragile characteristics exacerbate investor FOMO (Game Theoretic Positive Feedback Loop). Some investors are inevitably caught in the subsequent Bitcoin price crash (Fractal Wave Pattern)(Hodlers of Last Resort — Layer 4).

11. Hyperinflating fiat currencies are further contributing to the adoption of Bitcoin as it becomes the only means of preserving wealth for many people, making Bitcoin a legitimate store of value. Governments scramble to try and enforce capital controls and create propaganda against Bitcoin, just like they did to gold in the 20th century. Capital controls prove to be impotent and the propaganda against Bitcoin incites internet and media narratives that regard it as a tool for freedom (Antifragility). Government dissent highlights the need for Bitcoin in the first place (Streisand Effect).

12. Investors and high net-worth individuals are convinced to allocate a small portion of their assets into Bitcoin to capture further growth, hedge against inflation and increase the risk adjusted returns of their traditional portfolios (Minority Rule — Step 2)

13. Increases in demand for Bitcoin necessarily involve a reduction in demand for fiat currencies, causing even higher inflation rates (Gresham’s Law). At great expense and effort, governments messily issue their own cryptocurrencies but fail to relinquish control over monetary policy, which makes them uncompetitive against Bitcoin (Market-Driven Natural Selection). Governments covertly attempt to attack the Bitcoin network, which only strengthens it (Antifragility). Media coverage about Bitcoin shifts towards its use as hard money (Skin in the Game) and its importance for prosperity (Hodlers of Last Resort — Layer 5).

14. Activists share the message that soft money creates social inequality (Soul in the Game) by disproportionately taxing the poorest via inflation (Cantillon Effect). This message spreads fast in a world of ever-more crashing fiat currencies and people rush to exit their local currencies for the safety of Bitcoin, triggering the first hyperbitcoinization events (Hodlers of Last Resort — Layer 6). Bitcoin mining hardware becomes commoditized and many citizens join mining pools (Decentralized Network Archetype)(Skin in the Game).

15. Central banks, in an attempt to adapt to the new conditions and hedge going concern risks, quietly start to accumulate Bitcoin as a reserve asset, consistent with their gold strategy. A former central bank employee leaks a confidential strategy document regarding Bitcoin (Soul in the Game) which triggers other central banks to begin purchasing Bitcoin, causing its price and perceived legitimacy to increase at an accelerating rate (Game Theoretic Positive Feedback Loop)(Final Fractal Wave Pattern)(Hodlers of Last Resort — Layer 7).

16. Bitcoin’s market capitalization reaches tens of trillions in US Dollar terms. Bitcoin’s volatility subsides as both its market capitalization and liquidity are larger than ever (Mature Hard Money).

17. Early Bitcoin investors are now sitting on significant unrealized gains and are willing to part with some of their Bitcoin to pay for their purchases. With its purchasing power stabilized, the opportunity cost of transacting with Bitcoin is diminished and its use as a Medium of Exchange increases.

18. With the world more digitized than ever before, people increasingly demand to be paid in Bitcoin now that it has proven to be a good store of value given its disinflationary, and later deflationary, monetary policy (Schelling Point)(Hodlers of Last Resort — Layer 8).

19. With the addition of highly performant transaction layers, Bitcoin’s use as a Medium of Exchange becomes a widespread. Bitcoin, functioning as the core of a new innovation wave called the TrustNet, is christened as a momentous innovation.

20. As more consumers and merchants become accustomed to transacting in Bitcoin, it gradually becomes used as a Unit of Account.

21. Due to the emergence of a superior, uninflatable monetary standard, people increasingly store their wealth in Bitcoin rather than fiat currencies (Minority Rule — Step 3)(Hodlers of Last Resort — Layer 9).

22. Central bank monopolies on money are described by historians as a relic of the past. Bitcoin is regarded as the catalytic innovation behind the separation of money and state. A free market for money is now the defining feature of free market capitalism (Nash Equilibrium).

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Time Will Tell

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Bitcoin accepted here: 3CiBznmvP2jXVSPR9bUWZwSNtbe9ubp36M

Synthesized Works & Further Reading

Freedom Maximalist. Bitcoin is Honest Money — stack sats here: http://bit.ly/2THg4Jg Links To All My Work: http://bit.ly/3fG91KV YouTube: http://bit.ly/321Lzm0

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