This is an editorial opinion from Wes Craik, Canadian freelance writer and host of the FINterpreter YouTube channel.
Central Bank Digital Currencies (CBDC) will soon be operational in various countries and it is important to note that they are a form of money with inherent programmability. Rules can and will be set on how these central bank liabilities can be spent. Over time, CBDCs eliminate cash and thus private exchange. They are also the most “slippery slope” we have witnessed.
In the wrong hands, the ability to program money is terrifying and will be used to serve authoritarian ends to varying degrees. Imagine China—a leading CBDC country—applying its dystopian social credit system directly to the digital yuan: allowing spending only on government-sanctioned goods and services, offering interest rates that discourage those unfavorable to the Chinese Communist Party (CCP), and provides money with expiration dates, forcing spending instead of saving.
Simply put, it’s not money; it is a lever of the central bank for economic influence and social control. It is a means of energy exchange that gives the user very little choice, which is highly undesirable and in fact somewhat antithetical to the very concept of money itself. Not to mention that these currencies will simply represent already rapidly depreciating fiat notes that actively siphon the stored life force of their users to fund government initiatives.
Fortunately, as the global population begins to fight these fundamental violations of both privacy and property rights, they will have the ability to store and transact their monetary energy using international and incorruptible money managed by rules, not rulers – Bitcoin – for the first time in history.
You can create a currency as you wish, but you cannot force people to value it. The free market has historically been the one to seek out and select a desirable currency when the old ones have failed them. People instinctively gravitate towards more robust mediums of exchange when vulnerabilities or abuses of the present manifest themselves in seriousness.
Historically, gold has been the primary monetary asset that societies have used in most cases. It is an easily recognizable and durable mineral that can be melted, separated and recovered with virtually zero loss. Gold is also relatively scarce in supply because its extraction and refining requires a huge kinetic proof of work. Its issuance is not arbitrarily dictated by a ruler or authority figure.
So gold checks a lot of the boxes! It is relatively divisible, although it certainly has its limitations. It is durable enough to transmit energy over time, and its scarcity ensures that it works reasonably well as a store of value.
However, it has a scalability problem. Gold is difficult to trade at scale and at a granular level. Both transportation and storage of gold require significant power projection capability, “In order for the return on investment not [return on investment] for confiscation [it] prove too attractive to your local [barbarian] to ignore,” as Jason Lowery puts it.
Lugging around gold coins to buy milk is cumbersome and limits the throughput of human exchange. We must note that human exchange is the basis of civilization, as it allows for an ever-increasing division of labor and specialization of crafts, which provides greater output per unit of energy expended. This is why layer 2 paper money, which is supposed to be convertible to the main asset of the economy, is a revolutionary technology. Paper notes allow for a much greater scale and detail of energy exchange between people with very little friction. This and the Medici family’s double-entry ledger system are two shining examples of money as an ever-advancing technology.
The money supply becomes toxic when the supply of these paper notes or records in private ledgers is abused and/or separated from a truly valuable underlying asset. This has historically led to hyperinflation and currency collapse.
Bitcoin is a base-layer monetary network that is scarcer than gold, with a clearly defined and immutable capped maximum supply of 21 million. It is highly divisible, instantly verifiable with zero error and durable for the rest of time. Its release schedule for the next approximately 118 years is known with certainty, after which it will never be released again. Bitcoin also has low or zero carrying costs and cannot be confiscated – even by violence – when stored properly.
Interestingly, being the first and dominant digital entity to be directly linked to proof-of-work mining, Bitcoin – the first and so far only digital commodity – is actually the lightest physical entity we’ve ever discovered, enabling permissionless transactions at speed , close to light, without an intermediary. As Knut Svanholm notes, this weightlessness technically makes Bitcoin “element zero on the periodic table.” It also makes it capable of being a major monetary asset for the digital age and beyond.
We have once again upgraded our rails of human energy exchange, but this time in a way where individual self-interest serves to promote the property rights of everyone else. By attacking Bitcoin, you simply crystallize its defenses and increase the potential energy of all its users in real terms. Michael Saylor notes that Bitcoin is “anti-fragile”. As such, it encourages cooperation rather than coercion or attempts at subversion. This mechanic is a key revelation that Bitcoin brings forth, such Lowry callsmutually assured storage.”
Bitcoin represents hope for a more just human future based on our newly discovered universal constant: 21 million.
Fix the money, fix the world.
This is a guest post by Wes Craik. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.