Choose Your White Paper Wisely — Bitcoin Versus Credit

Choose Your White Paper Wisely — Bitcoin Versus Credit thumbnail

This opinion editorial is by Conor Chepenik. He is a contributor to Bitcoin Magazine.

Humans can be derived from other humans. We learn how to behave from our parents and then as we age, we become more critical thinkers and can rely on the opinions of others. It is crucial to choose what you think about. As the information technology revolution continues, we need people who are focused on creating new systems that promote love, liberty and freedom. I worry that the current system is populated with people who want to impose top-down control or figure out how to go viral.

But, blaming people who want to go viral is a poor argument.

“Show me the incentives and I’ll show you the outcome.” – Charlie Munger.

Some people with large online followings provide legitimate value, but the majority post half-truths in an effort to make their followers trust them. Many influencers don’t share their struggles as nobody wants to purchase a product from someone who is unhappy. Influencers must convince people that they can live a similar life to theirs by selling their products, courses, or other offerings. To fill your social media feed with people who offer real value, it takes a lot of curating. If you don’t invest the time upfront, your feed will be full of products that are similar to altcoins: cheap knockoffs. Munger may have been wrong about Bitcoin, but he was right about incentives. Social media companies want to keep people on their platforms scrolling so that they can monetize your attention. When you ask children what they want to do when they grow up, most say they want to be a social media celebrity, rather than a scientist or firefighter, astronaut, engineer, or any other profession that benefits society.

When did everything become so perverse? Although it is difficult to pinpoint the exact moment, I would argue that it all began when the Bank of England monopolized credit to finance their war efforts. This was the beginning of quantitative easing, and the creation of credit-based fiat systems. Although credit is not as good as gold and is rarely as valuable as it is, banks that act like their credit is can have devastating consequences. This has made the fiat system extremely sinister. This quote from Ammous on The Lex Fridman Podcast is a perfect example of what happens when the entity with the biggest stick starts asking for value without returning the favor:

“I call it the fiat white paper — you know in Bitcoin we have the white paper — the fiat white paper was that the Bank of England announced to all of its banks and post offices: from now on, you should not make payment in gold, and you should take payment in gold, and you should encourage all of your customers to turn in all of their gold and give them paper instead.”

Unlike gold, credit doesn’t require proof of work. As Saifedean so elegantly points out in “The Fiat Standard,” one of the first bond sales for WWI issued by the Bank of England raised less than one-third of the bonds being subscribed. The Bank of England provided two of its top officials with a line of credit, and they were able to purchase the remaining two-thirds of bonds. This was rather than stopping the war. Instead of providing actual value, the Bank of England used its monopoly over money to finance itself and continue fighting a war its citizens did not want. This top-down control has had long-lasting effects and has led to many parasites gaining wealth but not providing value.

avoiding war meme drake memetic

As most people reading this publication know, another white paper was released in 2008 that cut out parasitic middlemen. This white paper described a system that did not depend on credit but required energy to get the new currency. This system did not require third parties and allowed people trade peer-to-peer without any middlemen. This network, known as Bitcoin, has so many incentives that the network is more secure the longer it exists. It’s an incredible feat of engineering that can completely destroy the current system of credit expansion and parasites. The fiat system has led to endless wars and made investing and saving nearly impossible. Satoshi Nakamoto created inflation-proof money using open-source software.

It would be difficult to make money and not provide real value under a Bitcoin standard. The world would be a better place if you removed the incentive to align yourself with powerful government officials. There will be no backroom handshakes, because no matter how rich or powerful one is, one cannot change the rules and regulations of the Bitcoin network. In the years ahead, many will have to choose how they want their value to be stored. One system can mine new currency through credit expansion, while the other requires hardware or energy. One system allows parasites to thrive, while the other has rigid rules that can’t be changed.

Even those who live in wealthy countries see their purchasing power slowly destroyed by inflation. The only way to ensure the fiat system is maintained is through constant growth. If bitcoin is not widely adopted, the world could be plunged into a never-ending cycle war. Constant growth is not always possible and fiscal stimulus can be like crack: The first hit is great, but you need more to get the same result. If the system is unstable and everything starts to unravel, the only way to fix it is to start war. Fiat corrupts people over time. It’s not gradual corruption, but it is a slow and steady one like the fall of the dollar. Fiat is so corrupting that House Majority Leader, Steny Hoyer, declared the United States is at war with Russia. Congress did not vote to declare war. It seems that once you are in the fiat system so long, it is easy to forget that others expect you to follow the rules. This is a perfect example what a corrupt system does for those who are part of it.

Bitcoin does exactly the opposite to people. Recently, I discovered that my girlfriend was pregnant. When I heard this, the first thing that came to my mind was “Thank God for Bitcoin.” Although this sounds crazy, I was shocked to see this happen. Second, I thought “Wow, I’m going to be Dad!” I realized that I was able to have a fulfilling life by choosing low-time preferences. There is no other low-time preference than having children. There is a ton of uncertainty in the world and the only thing that seems to be guaranteed is Bitcoin adding blocks roughly every 10 minutes. Bitcoin would have made it easier for me to make the decision to become father. I’m not a math expert but I can tell that 30 trillion dollars of debt is so much money that even servicing the interest payment will be a massive challenge. As governments continue to run deficits, and spend money they don’t have, paying off the principal is becoming a distant dream. It becomes clear why the House Majority leader calls for war when you look at the math. They want a way out of their debt! Politicians want war with Russia, regardless of the many problems the United States has within its own country. The solution to the United States’ problems is not war. It is crucial that we adopt a system that does not always lead to war.

spongebob fiat system burning meme

The incentives to go to war under the fiat system are powerful right now. Rand Paul was ostracized for delaying a $40 billion package, money we don’t currently have without borrowing, to Ukraine. According to NBC News, Paul, a libertarian who frequently opposes U.S. interventions abroad, demanded language be inserted into the bill that would have an inspector General scrutinize the new spending. The reader can determine why the U.S. government would not allow an inspector General to monitor where the money is going. It is much harder to launder money if someone is watching how it is spent. It becomes more obvious that the game is rigged the more our government pushes for diplomacy over war. You don’t usually see Republicans and Democrats on the same page, but there was a big bipartisan push to give Ukraine $40 billion, and the bill got pushed through despite Paul’s effort to get some oversight into how the funds will be spent. Imagine you are playing in a football match and the referee changes the rules right after your team scores the winning touchdown. Your team loses. Imagine doing the right thing all your life: saving, paying taxes and helping the community. Then, just before retirement, the government prints trillions and changes the rules. This may seem amazing at first as your assets soar. Things quickly turn ugly when reality sets in and inflation decimates people’s purchasing power. I have witnessed fiat turn people bitter, resentful, and perilous. As a result, I have seen myself and others become more patient and loving. Bitcoin was what made it possible for me to become a father and save the life of my unborn child. I believe it can also save many other lives.

It is not fun to see people who do the right thing get upset that the system that promised them a better lifestyle ended up reducing their purchasing power. Although it’s difficult to tie quantitative easing to the second and third orders of consequences of printing money, it is clear that everyone suffers when money is devalued.

network effects in a nutshell four week m4a

Image source: FourWeekMBA

after all why not meme fed

On the other hand, the borrower has to work his whole life to get enough money to back pay the loan plus interest. It is absurd that the bank can lend money without incurring an opportunity cost, but the borrower must face many opportunities costs to obtain the same amount of money. You will need to leverage up to the teeth to pay for basic necessities such as a home or a vehicle. Keynesian economics has led us to the point that you can even finance a 15$ pizza now. It is tragic that inflation has reduced people’s purchasing power. However, financing food is not the solution. There is a white paper that won’t allow everything to be financialized.

The Bitcoin whitepaper will help you rest at night knowing that new coins will only ever be given to those who follow the rules. One system can create an infinite amount of money while the other is capped at 21 million. Your life’s worth depends on your white paper. I don’t think I have to explain to anyone who doesn’t live in a Western society the injustice of our current system. The U.S. has been exporting its inflation worldwide for a while now. It is getting to the point that even Americans are beginning to feel the inflation. While ignorance may be bliss in certain situations, it becomes clear that we need a better fiat system. It’s never too late to get out. The masses have the power, but most don’t realize it.

what gives people feelings of power meme

Ultimately, I have no problem with lending money. It is difficult to lend money when you don’t have to give up anything in order to get it. It is obvious that the ability to issue money at will without any opportunity cost has allowed tons of parasites thrive and huge amounts of capital to go unused. Human error is a problem for all people, governments, and organizations. These human errors can be corrected by the free market, but central banks can impose top-down controls to stop the market from performing its job. The Bitcoin standard will make the world a better place. People will have to give actual value to be able to lend money. Lender and borrower are less concerned about the outcome of a line credit that is granted to someone with no opportunity cost. A Bitcoin standard would mean that both the borrower and the lender would have more to lose and be more motivated to be productive with the money than to be parasitic. A decent person would rather lend money to a friend or family member, than to a random bank lending money that isn’t their money. People are often ignorant of the problems in the fiat system because of financial jargon and manipulation. Top-down controls work only when you can incentivize people into following your will. History has shown that wars end when money runs out or is worthless. Bitcoin was built from the bottom because the network’s incentives encourage people to take part at their own risk. Although no one can predict the future, it is clear that Bitcoin will prevail if we follow the incentives.


Sources

ABC News, ABC News Network, https://abcnews.go.com/Politics/senate-passes-40-billion-aid-ukraine-bill-heads/story?id=84835587

Ammous, Saifedean. The Fiat Standard: A Debt Slavery Alternative for Human Civilization . The Saif House, 2021.

Cuofano and Gennaro. Gennaro Cuofano Gennaro was the founder of FourWeekMBA, which reached more than a million students in business. “Network Effects in a Nutshell.” FourWeekMBA, 22 Mar. 2022, https://fourweekmba.com/network-effects/.

“House Democratic Minority Leader StenyHoyer (D-MD: ‘We’re at War! “.” https://youtu.be/yA6PXKYis2U.

“Igniting the Holocaust – Facing History and Ourselves: Burning Money: Hyperinflation in the Weimar Republic.” LibGuides, https://library.randolphschool.net/c.php?g=237930&p=1581974.

Litquidity. “Financing a pizza over 6 weeks: Down Bad or Savvy cash Flow Management?” Pic.twitter.com/obeebk9pnw.” Twitter, Twitter, 15 Oct. 2021, https://twitter.com/litcapital/status/1449057824236097541?lang=en.

“Rand Paul Blocks Quick Passage of $40 Billion Ukraine Aid Package.” NBCNews.com, NBCUniversal News Group, 12 May 2022, https://www.nbcnews.com/politics/congress/rand-paul-blocks-quick-passage-40-billion-ukraine-aid-package-rcna28648.

“Saifedean Ammous: Bitcoin, Anarchy, and Austrian Economics | Lex Fridman Podcast #284.” 12 May 2022, https://youtu.be/gp4U5aH_T6A. This is Conor Chepenik’s guest post. These opinions do not necessarily reflect the views of BTC Inc or Bitcoin Magazine ..

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