Bitcoin Will End the Nation State
Satoshi Nakamoto set in motion the unraveling of the nation state and the end of central banking – two closely related institutions that have directed history since history has been recorded. When we come to understand the economic and technological implications of bitcoin, we arrive at a somewhat startling yet undeniable conclusion: that bitcoin will end the nation state.
We know what happened to organized religion in the wake of the gunpowder revolution. Technological developments created strong incentives to downsize religious institutions and lower their costs. A similar technological revolution is destined to downsize radically the nation-state early in the new millennium.
– James Dale Davidson, William Rees-Mogg, The Sovereign Individual
Bitcoin as an Independent Economy
Many observers of bitcoin argue that its value needs to be pegged to a stable, conventional currency in order to assess its value. They claim that bitcoin is too volatile to be taken seriously, and thus, serves as only a novel financial innovation for moving money. What these observers’ fail to realize is that bitcoin does not need to be pegged to a national currency any more than the sun requires the gravitational pull of the earth. The sun has no concern for the deviations on the trajectory of the Earth just as bitcoin has no concern for the developments within national economies. Speculation is the only reason critics will argue that bitcoin needs to be pegged to a national unit of account, and for those actors, bitcoin cares not.
Many observers of bitcoin also argue that for the sake of adoption, bitcoin needs exchange businesses and ATMs in order to grow its user base and subsequently, its market capitalization. On top of these businesses, the conventional thinker will also argue that proper regulation needs to be enforced for the ‘good of the investor’. We certainly don’t want another episode of Mt.Gox do we? Although exchange businesses and ATMs certainly do serve to hasten the adoption process, they are not required for the expansion of the bitcoin economy. The mining process serves as the issuance authority. The miners are the employees of the network, and thus the true citizens of the bitcoin digital economy.
Bitcoin is a [Nationally] Untaxable Money Supply
Let us begin with a simple premise: you cannot levy taxes on a peer-to-peer money supply.
With bitcoin, taxation takes a voluntary, pay-for-performance role. Users are free to attach as much or as little fee to the transaction as they wish. The network miners have an incentive to give their attention to the transactions with the largest attached fee.
Bitcoin transactions are taxed by default, and increasingly, scalability of bitcoin transactions will cause an explosion in the economic velocity of money.
In his Code 2.0 manifesto, Lawrence Lessig described law as a multiplicity of factors, regulation being just one among many. Other factors include the free market, social norms, and architecture.
In the bitcoin economy the architecture is source-code. Truly, bitcoin is code as law and the blockchain represents a sort of constitution for the digital economy.
No amount of lobbying, congressional hearings, or BitLicenses will curb the adoption of cryptocurrencies in the long run. Because bitcoin is untouchable by the nation state, the lifeblood of these conventional bodies will wither and die. Increasingly, politicians will struggle to squeeze the revenue from their citizens in order to pay for the ever-bloating expenses.
When the lifeblood of the nation state (tax revenues) have run dry, that is the day we can confidently proclaim that the great empires of flesh and steel have fallen.
Bitcoin Transitions the Nature of Violence
The most dominant currency today is held in place because the authority which issues it has the greatest ability to impose and defend from physical force. The United States Federal Reserve Note is the global reserve currency not because of the nation’s unyielding belief in freedom, or the sound monetary policies of its leaders. The USD is the world currency because, as we have seen in times past, when someone threatens to detach themselves from their dependence of it, thereby compromising its position as the king, the authority disregards its own “laws” and seeks to destroy those who would attempt to disarm its dominance.
The USD is backed by military prowess.
Bitcoin, on the other hand, transcends physicality and cannot be destroyed by conventional military. In the cyber domain, the economic returns on violence transition to those who are capable of executing cyberwarfare through the medium of digital technology itself. The cyberdomain is, and will continue to be, a haven for those with the technical intellect to command a machine to their will.
Does the fact that it operates from a paradigm which is dimensions more intelligent than military force, foreshadow an inevitability where bitcoin will supersede the USD?
Because bitcoin transitions the theft of money and the issuance of money to the digital realm, the nature of violence too is placed within a context which can only be acted upon by participants who dwell in cyberspace. What kinds of violence could be imposed through financial mediums of a digital realm?
Other than theft itself, the threat of a 51% attack is still a threat with bitcoin. If a party had the ability to perform a 51% attack, not only would they be able to spend their money twice, but they would be able to cut participants off from spending their money. Such a scenario would be catastrophic for the individual who holds the majority of their net worth on a network like bitcoin, and therefore should be a focal point of cautious development.
Let us not fall into a society where the powers that be may erase our economic standing as easily as flicking off a light switch.
Another act of violence could be considered the collectivization of data on the movement, holdings, and relationship of financial information in a digital economy such as bitcoin. In our report entitled Bitcoin Is Cash Under Perfect Surveillance, we looked at the huge incentives for data mining the blockchain and the various relationships between users and spending patterns. Much like the internet of today, the bitcoin network initially presents itself as a bastion of liberty and anonymity, but is in truth destined to become the most surveillanced form of money ever to exist.
Prepare Yourself Accordingly
Everything you’ve come to know about pensions, social welfare programs, and nationality as an ideology, will be obliterated by the implications of bitcoin.
We have an emerging digital economy, which for the very first time, is able to operate independent of physical or central actors. We have a money supply which is based on the science of mathematics rather than human judgement and therefore, is dimensions more intelligent than our current economic paradigm. We have a money supply which is made impractical to tax with our current methodologies due to cryptographic technology. We have a network of financial information which transitions the nature of violence to the digital realm.
These factors combined will ensure that the nation state as it exists today will be irrevocably disrupted in a societal shift unseen since the dethroning of religious institutions during the 15th and 16th centuries. The decline of the church took hundreds of years. This time however, the difference is that the decline of nationalism will take mere decades, and unbeknownst to the masses, it is already upon us.
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