Trojan Horse Blockchain

trojan horseBitcoin is the trojan horse of the fiat monetary system and will ultimately end the state’s control of money. However this process will also compromise bitcoin’s core principals and cause for the corruption of bitcoin’s pseudonymous traits. Over the next decade as the cryptoeconomy expands its reach to become truly global, the financial system will quake as its foundation shifts from state fiat money, to decentralized digital currencies. While we should celebrate the rise of digital currencies, the full collapse of governments and global financial system is unlikely.

What we will see instead will be the horrifying metamorphosis of bitcoin into a panoptic nightmare. Bitcoin will be used by governments, bankers, and regulators to track our every purchase, and monitor all financial activity. Tainting tools will become so powerful that pretty much any bitcoin transaction will be possible to de-anonymize.

The crisis of fiat money will change not only finance and banking for the better, but the nature of governance as we know it. Bitcoin is going to be a trojan horse to the fiat banking system, and will destroy all government monopolies on this issuance of money. While bitcoin will be able to act as a check on the economic power of governments, in doing so it is also going to expose bitcoin to rigorous state regulations, and ultimately the full capturing of bitcoin as a whole system. Bitcoin may end the state’s control of money, but it may also open the path to the state’s ability to watch all financial transactions.

Inverting Bitcoin

Blythe Masters

Blythe Masters

This video at the Bank of England with Blythe Masters she speaks about what she believes to be in store for the future of bitcoin. She openly admit that the state supports her project, and that, “There will be no currency that gets around government controls.” Later the host of the program states, “There is no innovation that governments cannot seize for their own advantage…” This is followed by a discussion of the panopticon effect that bitcoin can have through tainting bitcoins and tracking their movements. All of this seems to be eluding to the capturing of bitcoin–banks and governments are working together to ‘inverting’ the blockchain to monitor all transactions.

Capturing Bitcoin

To capture bitcoin, all that governments need to do is auction off the bitcoin payment system to be regulated under the threat of force. This is already happening and companies like Coinalytics and Elliptic and providing the tools to taint and track bitcoins coming from anywhere. Effectively, this make every bitcoin highly traceable, which in turn can allow the banking system to merge with bitcoin to create a financial panopticon.

bitcoin-taintingThis new global monetary system where bitcoin will act as the rails of the financial system is magnitudes more efficient than all current fiat systems. This will create a lower general transaction cost when compared to any fiat money today, and will be the foothold that digital currencies will take to win out economically over fiat money in the long run. This is the inversion of bitcoin and will be how bitcoin will finally ‘die’ because of state compromise.

However, this is only the death of bitcoin’s body, not its soul.

Death by state and bank compromise will create the conditions for bitcoin’s core mission to be achieved through it becoming a trojan horse within their own system. This will cause for the destruction of fiat money, and will reassert the power of the purse back into the hands of the people.

There is no way that banks and financial service companies will be able to use ‘the blockchain’ (i.e. bitcoin) without also causing two other actions to happen simultaneously:

  1. The legitimization of bitcoin and other digital currencies as a global money.
  2. Exposing the legacy financial system to speculative attacks from the cryptocurrency economy, ultimately leading to a devaluation of fiat money against bitcoin and other cryptocurrencies as fiat money is displaced.

Capturing the State

If bitcoin becomes a global reserve currency, as the central bank of Barbados believes it could be, then bitcoin is forging a path towards capturing the state through the very means by which it has captured all of us: through economic means.

resistBitcoin has some flaws in regards to its privacy that should scare off neer-do-wellers and privacy advocates alike. However, these same aspects are what makes bitcoin very, very appealing to the financial world, and is the reason they will start using bitcoin as their base currency under the mantra of ‘blockchain’. The transparent nature of the blockchain offers the possibility of a totally regulated and systematized world of digital currencies that is a statist wet-dream. However, through implementing such a system, states will also lose control of their choke hold on the economy, and will eventually find it slipping through their grip entirely. The fundamental truth is that Bitcoin and other cryptocurrencies are better money than ANY form of money that we have ever seen! This is by virtue of that cryptocurrencies are not state-controlled, and cannot be state-controlled. It is plain and simple economics at the end of the day which is going to cause for bitcoin and other digital currencies to win out over fiat money.

Bitcoin has created a whole new generation of crypto-activist who see the power of digital currencies and cryptography in a way that will allow for a new fundamental form of power to exercise itself. The trojan horse is not bitcoin itself, but to see the possibility of real economic independence outside and beyond the control of the state which bitcoin enables. There is no longer any separation between politics and economics, and that is the very space in which we will make the new digital economy, and ensure our liberties through strong crypto.

Through refusing to use their corrupt money that they use for war, oppression, violence, and to keep the general population impoverished; we can force governments everywhere to respect our freedoms which our ancestors fought and died for. The state was never suppose to have economic sovereignty over us, and it is now time for us to reclaim that sacred right, and ensure it can never be taken away again. Strike against state capitalism, and reclaim your financial freedom which was never suppose to be taken in the first place!

Specialization and The Cryptoeconomy

BitcoinBitcoin and alternative digital currencies (altcoins) are much more that just simple currencies–they are a means of exchange, and the entry point into the new digital economy: the cryptoeconomy. Their development represents a technological protocol for digital ownership and economic exchange. This has far reaching ramification for both the internet and money as they both evolve to create their own new economic machine totally removed from state command economies and monetary systems.

With digital currencies acting as a new sovereign monetary force, they are facilitating the growth of a radical new sector of the digital economy that is total unregulated, and removed from the onerous regulations of all state governments. This is allowing for a proliferation of specialized ‘altcoins’ which range from useless to spectacular, each which seeks to create their own specialization within this new digital economy. While many are duds and even outright scams, there is a whole new economy being built, and many of the ideas are both huge in scope, and with the impact they want to create.

Specialization, Money, and Transaction Cost

smith ricardo

Adam Smith and David Ricardo

Adam Smith first presented the idea of specialization in Wealth of Nations. David Ricardo later expanded on this idea with his theory of comparative advantage, which is the idea that that nations should specialize in industrial production that they have distinct advantages in. Digital currencies can specialize in the same way, creating their own comparative advantage by working directly within the framework of the internet, rather then limiting themselves with anachronistic limits of state forms of money, and their laws. This, in turn, radicalizes not just money and finance, but anything to do with the internet and economics.

One of the most important economic features of bitcoin and other digital currencies is the near-zero transaction cost they have, which means that in almost all cases over an extended timetable, digital currencies will always have a lower systemic transaction cost than any form of fiat money. Thus, using bitcoin as a mode of exchange to invest in new and exciting technologies not only is quicker, cheaper, and more secure (when using appropriate security protocols!) than in the fiat economy, but also opens up a whole new world of investing opportunity that could not exist otherwise.

With digital currencies being native to the internet, unlike fiat money, they are empowered to create a totally new kind of economy which is not based on regulations and permission-seeking, but through creating totally new markets and technological opportunities. There is a plethora of new digital currencies and projects which all are using this same near-zero transaction cost to radicalize pretty much every single area of the contemporary economy through applying this technological advancement of money to their field. Each one of these project are focused on an area where the traditional economy is failing or falling short, and where a new digital version of it can change everything.

Initial Coin Offerings

ICOUsually a public offering from a company is going to take millions of dollars, lots of legal fees, and huge amounts of regulatory oversight. The massive inefficiencies and regulatory burdens of this process has locked out most people from being able to be involved in this process, and unable to reap the massive profits that can come from high-risk investing like this. Now with the ability to raise tens of millions of dollars using cryptocurrencies, almost anyone can create a public offering for just fractions of what it once cost. The most common way of doing this with crypto at this time is through an initial coin offering (ICO).

ICO are one of the most powerful modes of investing in the cryptoeconomy. Cutting through all of the red tape of investing and assuming the risks and rewards for oneself; there are huge opportunities (and scams!) that are occurring right now in the cryptoeconomy that are going to fundamentally destroy the old economy modes, in exchange for newer and better ones. The creative destruction of cryptocurrencies is changing all of the old way of investing and economic control, and imbuing that into the digital sphere.

One of the reasons that this can be done is because of the stable store of value and the unit of accounting that bitcoin provides to these new investments. Through acting as a unit of accounting, people are able to invest directly into ICOs by sending bitcoin directly, and in some cases taking their profits in bitcoin directly too. There are also several great projects being built in the Ethereum ecosystem that are taking this same approach, with profits being paid out in Ether, the currency native to the Ethereum blockchain.

Let’s take a look at just a few of the great projects that are currently being working on in the cryptoeconomy.

Ethereum

EthereumI wrote a post recently about how bitcoin is the money of the internet and ethereum seeks to be the finance of the internet. I see bitcoin as being a core stable money of the internet, like gold throughout the world for most of modern history, and ethereum as being finance for the internet.

I see a lot of ‘bitcoin 2.0’ being developed with ethereum, and a lot of amazing project are being built on top of it creating ‘Dapps’ or decentralized app. These Dapps are the applications which are going to fundamentally restructure the economy. From self-driving cars that pay for themselves and take themselves to the repair shop, to drones that will drop off your tacos once you send some bitcoin, Dapps are going to change the world.

These project range from simply dice games, to robust prediction platforms, and public offerings for decentralized companies. Much of the reason for this is the simple object-oriented programing language, Solidity, that was developed for building smart contracts in Ethereum. This allows for simple smart contract to be built in a few days, rather then the few months it would take to do the same with bitcoin.

Monero

MoneroMonero in many ways is what bitcoin originally wanted to be. Using a new kind of cryptographic protocol that is different from bitcoin, Monero provides strong anonymity that ensures that users financial information, along with their personal identity is much harder to track then it is with bitcoin. For this reason, several darknet markets have recently started supporting Monero, and Monero looks like it is trying to create its own niche within the cryptoeconomy centered around true anonymity and privacy.

I personally also like that the devs of Monero are anonymous, as I cannot imagine the state would ever let someone build a cryptocurrencys like this, and not attack them directly. Overall, Monero looks like a strong privacy-centered digital currency that could one day be the privacy currency.

Augur

AugurAugur is a Dapp, meaning that it was built on top of etheruem as a decentralized app. Augur is the first of a few different prediction market apps that seek to create a prediction platform by letting users bet on pretty much anything. You can check out more information about it here: https://www.augur.net/

FileCoin

filecoinThere are a few different projects similar to FileCoin such as Storj and Madesafe, which are all seeking to create a decentralized storage and hosting solution for the web. These are the kinds of huge, infrastructure changing, decentralizing projects which I think can radically change the internet, and in turn society itself. While FileCoin has not had an ICO yet, both Madesafe and Storj have, and they also have small limited application of the project released. These are the sort of radical project that are creating the new cryptoeconomy.

Dual Power

Through creating alternative, decentralized networks that have the same functions as more expensive, centralized, state-sanctioned networks; we are creating the conditions of dual power in order to collapse the state. It is not just the market efficiency of these systems that will do this, but the very decentralized nature of them that will come to fully challenge the power of the state, and the networks they use. Each state-sanctioned network (facebook, fiat money, ISPs, exchange markets, etc.) will come to be challenged by a non-state network, and over time, simply because of the lack of onerous regulations, and the well-placed mistrust of the state; they will come to prevail over the state-sanctioned network.

The digital age is presenting the interregnum between centralized state power, and decentralized digital power. Over the course of the next decade, states will find themselves struggling more and more with the spectre of the internet and the new forms of power it has created. As states do everything in their power to try to stomp out these new decentralized networks (particularly in more extreme ways as their power is challenged), they will come to find that they do not have power in this space. They will see the destituent power of cryptosystems, and will only be able to show their powerlessness against the immanence of systems built upon the power of mathematics, rather than the wills of men.