Subverting the Technocracy. Bitcoin Tech Talk Issue #222

This past week has been interesting to say the least. Not only did we see a storming of the Capitol, but we saw an unprecedented reaction against it. Many people linked with the protests have been kicked off of Twitter, Facebook and Instagram including the likes of our sitting president. What’s more, the competitor to Twitter, Parler, has not only been de-platformed from both the Google and Apple App stores but also is being kicked off of AWS.

It’s one thing to say “go build your own platform,” it’s another to coordinate to shut a the other platform down. In other words, we’re starting to see tech companies play a prominent role in politics. They are a technocracy that controls access to the masses and never has it been more obvious that they intend to exercise the power they have.

Whatever your thoughts on these maneuvers, it’s obvious it’s aggressive. What’s interesting is that this aggression is only possible because of the trust that these companies have accumulated over their lifetimes. Nobody would be on Twitter or Google had they not built compelling platforms at an ultra-competitive price of free. Indeed, this is at the root of the problem. They got to where they were because they gave away their product for free to gain people’s compliance. Compliance, in other words, was the price of their services.

This compliance is very useful for a variety of reasons, including the ability to shape public opinion, but as those people who are being kicked out are finding out, it’s been misplaced. How did free services end up in tyranny?

One of the most enlightening conversations I’ve had in the past few years was with one Thae Young Ho, the highest ranking North Korean defector ever. I had the privilege of talking with him about why North Korea was so successful in fooling its people despite their brutality. He explained to me the secret: free stuff. He explained that the NK government gave away free health care, free education, free housing and guaranteed jobs as a way to gain popularity. Of course, none of these things were really free. They depended on the citizens doing what the regime wanted. Compliance, in other words, was what the NK people paid in exchange for these “free” things and that resulted in the NK regime adding rules that were more tyrannical.

You can see where I’m going with this. There are no truly free services and the quicker we realize that, the better off we’ll be. We will always be paying with our compliance to essentially arbitrary dictates. As Mr. Thae explained to me, there’s something sacred about a market transaction. It’s fair exchange and binds both parties to deliver. Free makes it difficult to complain. A market transaction creates competition and that allows either party to walk away should the exchange not be satisfactory.

In other words, to subvert the technocracy, we’re going to have to start paying for these services. I know what your objection is going to be. No one will want to pay for something they get for free. Don’t be so sure. I’m certain that there’s a lot of people willing to pay for messages from Donald Trump. It’s certainly less than 80M people, but it’s not 0, either.

And this is where Bitcoin comes in. We need a trustless payment system to make such internet transactions possible. And this is where Lightning has tremendous potential, in subverting the technocracy. You get what you pay for, even if that payment is in compliance.

Bitcoin

AJ Towns has a post on his priorities as a core developer in 2021. His main insight is that security has to scale with price, which I agree with. His main focuses are for core development are modularization and p2p network. The first makes analyzing the vulnerabilities much easier as the pieces are smaller. The second is an important part of the network’s decentralization. The post is worth reading in full as there’s a lot of good analysis of what could potentially attack Bitcoin and how a developer thinks about mitigating such things.

Jarol Rodriguez has a guide on how to test release candidates for Bitcoin Core. Adam Jonas has an article on why that’s important. His argument is that for technical people that don’t want to go through the sometimes painful process of getting in a pull request, this is an excellent way to add value to Bitcoin. The guide is thorough and is step-by-step and tells you what to look for. I imagine a good QA engineer could automate the whole thing. (Hint, Hint)

Nick Neumann of Casa has an article on how private keys empower individuals. The explanation in the article for what private keys are is worth enough to read the article. The significance of private keys and what it means for our freedom is another reason. There’s some promotion of their product at the end, but it’s pretty tasteful and makes more sense in the context of the article.

Useful around this time are answers to all the FUD and Dan Held has a response to all of them. This is a good thing to keep bookmarked for the arguments that are inevitably coming over the next 12 months or so. I’m interested in thinking about what new arguments we’ll see this time around, but the ones from the previous cycles are all there.

Lightning

Strike is expanding globally! It looks like they’re taking their learnings from the Strike app in the US and using it for remittances. Strike is taking the role of payment processor to another level with their fantastic product allowing spenders to use the spending currency and the recipients to receive in their store of value. This would seem to make perfect sense for remittances as the recipients are often the people that are suffering from inflation. I’m looking forward to how this changes the equation in third world countries where stores of value are few and far between.

Economics, Engineering, Etc.

Stephan Kinsella is an amazing thinker and this piece blew my mind. The article was written over a decade ago, but the conclusions from it are truly profound. Essentially, he argues that social order from legislation is inherently unstable and argues for a more decentralized way of creating laws through judicial decisions such as English common law. His argument is that law created through many smaller decisions is much more robust than laws passed by legislatures which constantly change. Historically, this has much precedent in Roman Law, English Common Law and Law of the Merchant and it’s strikingly similar to how Bitcoin operates. Given the civil unrest and societal upheaval we seem to be going through, Bitcoiners would do well to think through some of these issues.

This article on mining hash rate by country has some surprising conclusions. The speculation from the article is that China now has less than 50% of all global hashing power and that US and Canada are quickly catching up with a combined total of over 20%. More surprising is Iran showing up at 8% of global hashing power. There are opportunities in Kazakhstan and Russia for significant mining expansion which might make their respective percentages go up as well. The hard part is that mining equipment is a bit hard to come by as this story points out.

Phil Geiger has an article on who moved coins in 2020 in his HODL waves article. The main insight from the article is that coins that haven’t moved in over a year have started to move as this bull market started. He also detects a big capitulation around November 2018, which in turn was held by much stronger hands.

Skybridge has launched a Bitcoin fund. They are charging 0.75% as a management fee, which looks really cheap compared to something like GBTC charging 2%. This comes on the heels of VanEck applying for yet another Bitcoin ETF. I’m going to guess that the GBTC premium is going to significantly diminish in the next year or so. If you are holding some, you might want to convert to on-chain Bitcoin as the prices are probably going to converge.

MicroStrategy has published its 2020 annual letter. The letter reads like an Austrian economics textbook that takes Bitcoin into account and worth reading for that reason. It’s hard to remember sometimes how normies think, and this is an excellent way to talk about the topic in a rational way. Similarly, Obi points out that the unbacked fiat dollar is only 50 years old this year while Bitcoin is 12 and that the contrast between them couldn’t be more stark. Bitcoin is about 1/4 of the age of the fiat dollar and in 26 years, it will be half the age of the fiat dollar should the dollar still exist.

Podcasts

My new book making the moral argument for Bitcoin is out! I did Stephan Livera’s podcast with Robert Breedlove to talk about this book and I also did Ben Askren’s Funky Crypto Podcast to talk about this book.

My podcast will start season 2 starting this week and I have a humdinger of an episode with Preston Pysh about investing on deck. That one is going to be a fun one so don’t miss it when it drops Thursday.

My other books are here.

Fiat delenda est.