Planting Bitcoin

Sound Money (sanum pecuniam)

Foreword

Introduction

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Species

What is Money

  • Money is a primitive form of memory or record-keeping. It is the collective memory of who has the ability to allocate wealth.
  • Money, which is the representation of the work required to acquire goods and services, can also be viewed as stored energy.
  • Money is the central information utility of the world economy. As a medium of exchange, store of value, and unit of account, money is the critical vessel of information about the conditions of markets.

Species

  • Satoshi needed a way for the Bitcoin to spark itself into existence, so he coded in its DNA a fixed supply (21M Bitcoins). An increase in Bitcoin’s price inevitably leads to a corresponding increase in participants (users), security (mining), and developers. This becomes a self-reinforcing feedback loop.
  • Bitcoin’s mining function, Proof of Work (PoW) is both its metabolism and defense mechanism. Bitcoin eats energy to generate new coins and build digital walls to protect the network. PoW also makes Bitcoin anti-fragile, or in other words, as it grows larger, it becomes more resistant to attack.
  • A new Bitcoin block is found every 10 minutes, this genetic code enables Bitcoin’s cells to effectively communicate and coordinate with each other despite enormous distances. It is the internal clock that sets the metabolic rate.

Traits

*Bitcoin’s birth introduced two new traits, “Openly programmable” and “Decentralized”

Verifiable

Fungible

Portable

Durable

Divisible

Scarce

Established history

Censorship resistant

Unforgeable Costliness

Openly Programmable

Decentralized

Evolution

  1. Collectible. In the very first stage of its evolution, money will be demanded solely based on its peculiar properties, usually becoming a whimsy of its possessor. Shells, beads and gold were all collectibles before later transitioning to the more familiar roles of money.
  2. Store of value: Once it is demanded by enough people for its peculiarities, money will be recognized as a means of keeping and storing value over time. As a good becomes more widely recognized as a suitable store of value, its purchasing power will rise as more people demand it for this purpose. The purchasing power of a store of value will eventually plateau when it is widely held and the influx of new people desiring it as a store of value dwindles.
  3. Medium of exchange: When money is fully established as a store of value, its purchasing power will stabilize. Having stabilized in purchasing power, the opportunity cost of using money to complete trades will diminish to a level where it is suitable for use as a medium of exchange.
  4. Unit of account. When money is widely used as a medium of exchange, goods will be priced in terms of it. I.e., the exchange ratio against money will be available for most goods.
https://twitter.com/MustStopMurad/status/1022169639386836992

Survival and Extinction

JPM, Hong Kong Monetary Authority, December 2011

Planting Bitcoin Part 2 — Season

“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve.” — Satoshi Nakamoto

Introduction

To enjoy this article in its fullest, I recommend playing this song then continue reading. If you like this music, please follow my playlist on Spotify.

Central Banks

(There hasn’t been a year of global deflation since 1933)
The standard Roman silver coin

Early 2007

2008 Financial Crisis

“The problem had grown so big that the end was bound to be cataclysmic and have big social and political consequences” — Michael Lewis (Big Short)

January

February

March

April — June

July

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September

Contagion
(Sept 17) Treasury Secretary Henry Paulson walking after meeting with President George W. Bush

October

Debt/GDP ratios are at wartime highs. Central banks haven’t unwound their 2008 trade

“People feel like nothing in the country is working — the president, Congress, corporations.” (October 15, 2008) Reuters

October 31: Satoshi publishes the Bitcoin whitepaper

Planting Bitcoin — Soil

Boy reading “History of London” in the ruins of a bombed bookstore in London in WW2

Introduction

I’ve paired this song to “Soil” because I think it fits the feel of the piece and adds additional depth. If you enjoy listening to this, please follow my playlist on Spotify.

Cypherpunks

“Therefore, privacy in an open society requires anonymous transaction systems. Until now, cash has been the primary such system.” — A Cypherpunk’s Manifesto

Elliot Alderson, the “Cypherpunk” in the fictional show “Mr. Robot.” He joins a group that aims to destroy all debt records by encrypting the financial data of the largest conglomerate in the world, E Corp.
  • Adam Back, the inventor of hashcash, the proof-of-work (PoW) system used by several anti-spam systems. A similar PoW system is used in bitcoin
  • Nick Szabo, designed a mechanism for a decentralized digital currency he called “bit gold.” Bit gold was never implemented, but has been called “a direct precursor to the Bitcoin architecture”
  • Wei Dai, who published “b-money”, an “anonymous, distributed electronic cash system”
  • Hal Finny, who created the first reusable proof of work system before Bitcoin (And in January 2009 he became Bitcoin network’s first transaction recipient). He was also a developer of the secure communication method known as Pretty Good Privacy (PGP)
  • David Chaum, founded DigiCash (1989) as a form of centralized “electronic money” that deployed the same kinds of cryptographic protocols — public key cryptography — that support the nature of bitcoin transactions. It is often called “Chaumian eCash.”

“The Times 03/Jan/2009 Chancellor on brink of second bailout for banks” — Genesis Block

Planting Bitcoin — Gardening (4/4)

Introduction

I’ve paired this song to “Gardening” because I think it fits the feel of the piece and adds additional depth. If you enjoy listening to this, please follow my playlist on Spotify.

Early Development

“The project needs to grow gradually so the software can be strengthened along the way.” — Satoshi Nakamoto

Bitcoin GitHub history visualized up to March 27, 2014

The Gardener Leaves

Social Scalability

“Bitcoin is a social breakthrough, not a technological one” — Alex Hardy

HODLing, the Hero’s Journey

“In the beginning of a change the patriot is a scarce man, and brave, and hated and scorned. When his cause succeeds, the timid join him, for then it costs nothing to be a patriot.” — Mark Twain

“Protocols die when they run out of believers.” — Naval

‘The secret to happiness is freedom; the secret to freedom is courage’ — Thucydides

Conclusion

“Let the future tell the truth, and evaluate each one according to his work and accomplishments. The present is theirs; the future, for which I have really worked, is mine.” — Nikola Tesla

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Growth @Krakenfx . Frmr: @InterchangeHQ (acq by @Krakenfx ), Global Data/Rider Growth @Uber , First PM @Blockchain , Co-Fndr @ZeroBlock https://danheld.substack

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Dan Held

Growth @Krakenfx . Frmr: @InterchangeHQ (acq by @Krakenfx ), Global Data/Rider Growth @Uber , First PM @Blockchain , Co-Fndr @ZeroBlock https://danheld.substack