Bitcoin is perfect money in that it embodies all of 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 does, from anywhere in the world World can:
- Save without your assets being invisibly stolen
- Spend without a big brother type institution telling them who or what to do this with
- Take into account, examine and review what they have, when they received it, and how much it is in relation to the total supply.
Furthermore, anything is possible without any form of trustworthy intermediary, government regulation, regulatory oversight, or “decree by the anointed”.
Money is arguably mankind’s most important invention and the mechanism by which we measure time and energy and the communication medium through 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 either a division of labor or any form of production beyond livelihood.
And here we are now in 2020, 12 years (to date) since Satoshi published the White Paper, which is probably the top money (at least on this planet) for that.
What does this have to do with Bitcoin’s circularity?
Well, if Bitcoin is the next and last global money, by definition (and by design) it is already circular. It is a unit of currency and a financial network that already contains all the elements necessary for a global economic system.
So it’s not about “if” or even “when”, but rather about progress, size and necessity.
I recently wrote an article called Bitcoin & Lockdowns in which I introduced 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:
Q: “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 changes,” the saying goes.
Major transformations like Bitcoin are advances that are memetically propagating through society. They start imperceptibly slowly, but when they gain momentum, both from their own development and from the deterioration of the old guard, they start to accelerate exponentially.
And that is exactly what we are right in the middle today: The runaway fiat experiment and the need to use Bitcoin as a savings measure, payment mechanism and at some point as an accounting system are accelerating rapidly.
When you look at the modern economy and the fiat money on which it depends, you find that you can no longer accurately measure the product of your labor, receive the product of your labor, or freely and voluntarily exchange the product of your labor.
Money is no longer money in the true sense of the word. As the so-called economist Stephanie Kelton put it, it has only become “points”. Pointless, virtual, arbitrary, pointless points that a group can make up for 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, much like the fool who jumps off a cliff and tries to fly believes it has hit gravity in the first few seconds while moving upwards. If we lengthen the timescale a little, we will find that gravity catches up. It alwayscatching up.
Another example of the old guard getting lost is the entire KYC / AML building and ridiculous new mandates like the “travel rule”.
Money exists so that two unfamiliar parties can exchange the product of their time and labor. “Do you know your customer” is essentially at odds with the entire raison d’être of money and the magnitude that it is supposed to make possible through efficient trade in society.
Imagine all of the wasted resources required for unnecessary compliance, know all of your customers, and report meaningless statistics on money laundering compliance, licensing, regulation, and bureaucratic negotiation and lobbying.
Imagine how much more effective we could all be and how many resources we could save and use for productive means without these arbitrary regulations.
To add insult to injury, you should think about how much data protection endangers this entire “service” on the part of all “customers” involved.
Payments and financial privacy don’t get better under the existing system, they just get worse. Savings will not be protected under the existing regime, they will only worsen. The taxes that the growing public sector has asked and extorted from you will not fall.
they will only rise.
All of this is why the need for Bitcoin as the foundation for a new currency and payments network will increase, as will the size of its circularity. There is no alternative.
It is driven as much by the demise of the existing fiat system as it is by the zero-to-one evolution of money that Bitcoin represents.
It’s also worth noting that zero-to-one transformations are not always seen as “improvements” in the beginning, especially when it comes to networks. They are fundamentally different and require input and energy from the participant, similar to the activation energy in a chemical reaction.
But when new “catalysts” emerge and various participants feel “energized” enough to change (as the need arises), the movement cascades, attaining both mass and size, and we look back and wonder how we could ever be without they lived.
And that’s how it should be with Bitcoin in decades.
Future generations, free to trade globally, instantly, and safely with money that is always available and incorruptible, will look back on this period of Fiat history and wonder how some could ever have been stupid enough to find this Kelton- To believe economics, in the 2 + 2 = 435, would take time.