Bitcoin is the perfect money because it embodies all the properties and functions of money – as a store of value (SoV), medium of exchange (MoE), and unit of account (UoA) – in a way that any person or participant, anywhere in the world:
- Save without their wealth being stolen invisibly
- Spend without some big brother-like institution telling them who or what to do it with
- Accountable, check and verify what they have, when they received it and how much it is in relation to the entire stock.
Moreover, it is all possible without any kind of trusted intermediary, government regulation, prudential oversight, or “decree by the anointed.”
Perhaps the most important invention of humanity, money is the mechanism by which we measure time and energy and the medium of communication with which we work together. It is critical to the formation of a society more complex than a few hundred people, and without it we cannot scale up any division of labor, nor can we scale up any kind of production beyond our own livelihoods.
And here we are in 2020, 12 years (to this day, as of this writing) since Satoshi released the white paper, for what is probably the top money (on this planet at least).
What does this have to do with Bitcoin’s circularity?
If bitcoin is the next and last global money, then by definition (and by definition) it is is already circular. It’s a currency and a financial network that already contains all the elements necessary for a global economic system.
So it is not a matter of ‘if’ or even ‘when’, but more of progress, size and necessity.
I recently wrote an article entitled “Bitcoin and locksIn which I put forward a model for understanding Bitcoin’s long-term adoption curve, through the lens of necessity.
In it we find a simple answer to the question:
Question: “When is circularity?”
A: “As it becomes more of a necessity.”
“Necessity is not only the mother of all inventions, but also the grandmother of all change,” as the saying goes.
Major transformations like Bitcoin are progressions that are spreading through society in a memetic way. They start out imperceptibly slow, but as they gain momentum through both their own development and the decline of the old guard, they begin to accelerate exponentially.
And this is where we are in the midst of today: The fiat experiment is getting out of hand and the need to use bitcoin as a savings vehicle, payment mechanism and, at some point, an accounting system, are all rapidly accelerating.
If you look at the modern economy and the fiat money on which it depends, you realize that you can no longer accurately measure the product of your labor, keep the product of your labor, or freely and voluntarily exchange the product of your labor.
Money is no longer money in the truest sense of the word. It has become a so-called economist Stephanie Kelton would say, just “points”. Pointless, virtual, random, pointless points that one group can come up with at the expense of the rest of us, our livelihoods, and our scarce natural resources.
This is a model of the world that cannot last, in much the same way that the fool who jumps off a cliff while trying to fly thinks he has beaten gravity for the first few seconds as he moves up. If we lengthen the timescale a bit, we’ll see gravity catch up. It always catches up.
Another example of how the old guard got lost is the whole KYC / AML building and the ridiculous new mandates like the ‘Travel Rule’.
There is money so that two parties who do not know each other can exchange the product of their time and labor. “Knowing your customer” fundamentally contradicts the whole raison d’etre of money and the scale that should make it possible in society through efficient trade.
Imagine all the wasted resources being unnecessarily adhered to, knowing all your customers, reporting meaningless statistics on AML compliance, licensing, regulations and bureaucratic negotiation and lobbying.
Imagine how much more effective we could all be, and how much resources we could save and allocate to productive resources if these arbitrary prescriptions were not there.
And to add insult to injury, consider how much privacy this whole “achievement” compromises for all of the “customers” involved.
Payments and financial privacy do not get better under the existing system, they will only get worse. Savings will not protected under the existing regime, they will only worsen. The taxes demanded and extorted from you by the growing public sector will not drop,
they will only rise.
This is all why the need for Bitcoin as the foundation of a new monetary and payment network will only increase, as will the scope of its circularity. There is no alternative.
It will be driven just as much by the decline of the existing fiat system as the zero-to-one evolution of money that Bitcoin represents.
It is also worth noting that zero-to-one transformations are not always seen as “improvements” at the outset, especially with regard to networks. They are fundamentally different and require input and energy from the participant, just like the activation energy in a chemical reaction.
But as new “catalysts” emerge, and several participants find they have enough “energy” to change (if the need arises), the movement is flowing down and we reach both mass and scale, looking back to our wonder how we ever lived without it.
And so it will be with Bitcoin for decades.
Future generations free to transact globally, instantly and securely with money that is always on and imperishable will look back on this period of fiat history and wonder how some could ever have been foolish enough to think that Kelton economy, where 2 + 2 = 435, would last.