Bitcoin Will End the Nation State

Jun 24th, 2015 by adminadam in articles, videos

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 cryptographic money supply through judicial authority. Bitcoin is untouchable by the nation state and can be used with a veil of cybersecrecy.

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, and accordingly, it will be taken care of by the mining network with the highest incentives rising to the top. Bitcoin transactions are taxed by default, and increasingly, high transaction fees 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 cybercurrencies 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 and programs it has conceived. 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. In our opinion, this is a day we should work unabashedly toward.

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 violence. 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 subverts 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 any nation state. In the cyber domain, the economic returns on violence transition to those who are capable of executing cyberwarfare and thefts 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 do what they want with it, rather than the original instructions it was given.

We are now left with a deeper question: 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 real 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 you off from spending your 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 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. A huge incentive presents itself for data mining the blockchain and analyzing the various relationships and patterns of spending. We wrote an article on this approaching threat, entitled The Incoming Surveillance of Bitcoin. 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 surveilled 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 completely independent of physical or central actors. We have a money supply which is based on the science of mathematics and therefore, has functionality dimensions more intelligent than our current economic paradigm. We now have a money supply which is made technically impractical to tax with our current methodologies due to cryptographic technology. We have a network of financial information which transitions the nature of violence, that of cybercrime, 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. This time, the major difference is that it will happen much more quickly, and have much more pervasive effects than almost anyone is anticipating.

Bitcoin Will End the Nation State
Written by Travis Patron
Source: notbeinggoverned.com/bitcoin-will-end-the-nation-state

2 Comments

  • why is the value of bitcoin always measured in terms of dollars or other currencies?

    • I think there are a couple of ways to address the question of why bitcoin is typically measured in terms of other currencies.

      First of all, if we recognize bitcoin as a new currency and/or asset class, then it makes sense to try to evaluate its performance by way of comparing it with other currencies. The fact that the value of one bitcoin has grown by thousands of percentage points over the last three or four years is noteworthy. We could say that speculators “demand” this information.

      Second, the network of bitcoin users is small at the moment. This means that few manufacturers, merchants, and customers can transact purely in bitcoin with each other. Certain companies like Overstock are working hard to “close the loop” by getting their suppliers to accept bitcoin, while also offering their employees the option of getting paid in bitcoin (or as any percentage of their total salaries). Additionally, they are keeping a larger percentage of the bitcoin that they take in from customers than they have in the past — as are numerous other companies — as opposed to automatically converting 100% of it to fiat money. Having reliable market rates for such automatic conversions is essential at this point.

      The third point to keep in mind is that as bitcoin’s price stability continues to improve, other merchants will start holding onto more of their incoming bitcoins, leading to a reduction in overall supply and an inflated price. For now though, the price swings necessitate automatic conversion to fiat for merchants and a “pricing” of bitcoin in USD or other currencies.

      Finally, those seeking to buy bitcoin need on-ramps to the system. Currently it makes the most sense for people to buy from other bitcoin holders with cash, or through bank transfers on exchanges. Eventually, it could be the case that you and everyone you know get paid in bitcoin. In that scenario, the need for automatic conversion services, bitcoin-fiat exchanges, and constant fiat price-tracking is greatly diminished, if not completely eliminated.