If you tell the truth, you don’t have to remember anything ~ Mark Twain
When it comes to financial journalism, there are two ways that most individual readers consume the content they choose: they can look for consensus and become susceptible to groupthink, or they can seek various opinions and become susceptible to decision paralysis. Both of these realities exist in varying degrees, with the investment mandates or goals of these consumers typically dictating which route will be pursued. Regarding my own writing over the past year or so, I know that while I try to add value with new insights or perspectives, it is simply not always possible to say something that hasn’t been said before.
For example, if you are in the crypto space, you don’t like SEC Chairman Gary Gensler. The problem is, it is difficult to simply leave it at that. Personally, I don’t know the guy. I don’t know anyone who does, so I’m not privy to any sort of insight in regards to his thinking. It’s probably about time I stop trying to speculate as to why he hates this industry so much, because I simply don’t know the reasons for his behavior, and therefore, my writing about any of his actions only adds to the noise. This essay is hopefully different, my attempt at a truly original thought with regards to crypto, or in this case, Bitcoin specifically.
Of all the ways in which I have heard or read about Bitcoin and what it is, the one I like the most is that it is a “truth machine.” As this is one of the more philosophical ways to describe Bitcoin, it is probably the least understood. After all, in an era of palpably high inflation, it is easy to understand the possible impact of the Bitcoin protocol only allowing for the creation of 21 million Bitcoin. We can grasp scarcity, so this makes sense on a very practical level.
As it pertains to being a truth machine though, that is certainly a harder construct, but it is potentially a very important way in which to view Bitcoin, or more importantly, the network that powers it. So first, a quick, very basic overview of the players within the network:
- Developers: maintain the source code while proposing and authoring potential changes to the code
- Miners: provide the hash power that solves the math problem (Proof of Work) that ultimately provides network security
- Nodes: enforcers of the protocol rules (like referees, they ensure miners play according to the established rules
It is worth noting that nodes come in different versions (full, pruned, etc) and that exchanges should probably be viewed as nodes as well. The main point here is that there is a checks and balances approach to the network, somewhat like the Legislative, Judicial, and Executive branches of the US government.
As a “peer-to-peer” system, Bitcoin requires no intermediary or trusted third party. This is a bigger deal than most people realize at first glance. It is a “trustless” system, not because it doesn’t care about trust, but because it can mathematically prove truth. In an era of misinformation/disinformation, falling institutional trust, the idea that there is a protocol like Bitcoin lends itself to far more possibilities than just money.
hat Bitcoin consumes energy is not news, but how much energy is truth worth? If Twain’s quote above is applied to distributed ledger technology, you start to see things entirely differently. Imagine the man-hours saved if entire economies were built upon systems that created consensus rather than destroyed it?
When the US went off the gold standard in the early 70s, it became somewhat trite to assert that our dollars were now backed by the Pentagon. As e-commerce, cryptocurrencies, and metaverse applications proliferate though, the rate of return on traditional military expenditures is certainly poised to decline. While deterrence will certainly continue to play a role in national security strategy, deterrence can only do so much, as it is largely focused on maintaining the status quo, a status quo that obviously doesn’t seem all that attractive to developing nations.
The 2022 National Defense Strategy, as published by the Secretary of Defense, uses “deterrence” 167 times, and “deter” an additional 274 times. A strategy that leans this heavily on the “stick” approach, quite naturally begins to ignore, or even look down upon the “carrot” approach. Deterrence can’t produce another kWh of power here at home, doesn’t address the Belt and Road Initiative as promoted by China, and certainly doesn’t address the looming impact of the growing BRICS nations. In short, deterrence alone implies a commitment to how things were, with seemingly no plan for how things might be.
In early 2022, Louisiana Senator, Dr. Bill Cassidy, pushed a bi-partisan piece of legislation intended to “study” the impacts of El Salvador’s adoption of Bitcoin as legal tender. Of this legislation, he said,
“El Salvador recognizing Bitcoin as official currency opens the door for money laundering cartels and undermines U.S. interests. If the United States wishes to combat money laundering and preserve the role of the dollar as a reserve currency of the world, we must tackle this issue head on.”
Really? El Salvador? The smallest country in Central America poses an existential threat to the dollar’s role as the world’s reserve currency by allowing coffee kiosks to accept Bitcoin? That this piece of legislation was absurd is obvious, but it is right in line with our nation’s strategic and diplomatic posture: no carrots, all sticks.
I of course don’t know who actually created Bitcoin, but I do know this: if there really is a “truth machine” in existence, a nation that espouses personal freedom, the rule of law, and democratic values, should try its very best to protect such an asset rather than to mock or destroy it.
