🏦 The Internet's Reserve Currency — Issue No. 94

Sometime in the next couple of days, the 630,000th Bitcoin block will be mined. In that block, and in all subsequent blocks, the miner creating it will receive 6.25 newly minted BTC, which is half of what miners have been receiving for the last four years. This is the so-called "halvening" event, and while it's happened twice in Bitcoin's history, this will be the first one since Bitcoin entered the mainstream consciousness. Link.

Tired Debates

The crypto world has been engaged in endless debates about what the halvening means for Bitcoin. Is it priced-in? (Almost certainly.) Will it cause Bitcoin's price to pump? (Probably not, but hey, I won't complain if it does.) Will security of the network be compromised if miners can't afford to operate profitably? Will fee revenue ever replace the block reward? If not, could the supply cap of 21 million coins ever be removed, or would that run counter to the very core of what makes Bitcoin what it is? And so on, ad infinitum.

Inevitably, such debates within the crypto community break along tribal lines. Hardcore Bitcoin fans take the position that is best for Bitcoin. Fans of other currencies stake out counterarguments that give their network of choice some seeming advantage. As a non-partisan in the crypto space, this devolution is tiresome and irritating.

A Pseudonymous Shadow

These kinds of debates also betray something else about the crypto world: we're still living in Satoshi Nakamoto's shadow. The pseudonymous Bitcoin creator mined the genesis block on his own computer, imprinting in it the now iconic headline: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks." Just as every block since then contains an unforgeable cryptographic link back to that message, so too has our collective conversation remained linked to that ideological inception point.

Satoshi was a cypherpunk. He saw cryptography as a tool to drive political change, and he used that tool to create a new money. He intentionally designed this new currency to contrast starkly with fiat. While the latter can be manipulated by central banks in ways he saw as irresponsible, Bitcoin has an immutable supply schedule and a hardcap. The hardcap wasn't a technical requirement. It was a choice meant to convey a message.

Satoshi thus set the tone of the discussion, and as we sit on the threshold of the third halvening, our debates remain derivatives of that initial framing. In the Ethereum community, for example, where much of the most exciting experimentation in the crypto world now takes place, an inordinate amount of effort is spent defending the "moneyness" of Ether and the legitimacy of its non-fixed supply schedule. Meanwhile, many in the Bitcoin community spend their days preaching an improbable manifest destiny: that Bitcoin will become the global reserve currency, a neo-gold hoarded by governments and that will cause the demise of fiat.

Honestly, I'm concerned our focus has become too narrow.

More Than Just Money

Before I continue, let me make something crystal clear: I have enormous respect for Satoshi Nakamoto. As an engineer, I marvel that he was able to design and implement a system so elegant and robust on the first try, one that has operated continuously for more than a decade in incredibly adversarial conditions. I'm also glad he seeded the cryptocurrency world with the cypherpunk ethos. It has served us well in many ways and will continue to do so.

My argument isn't that we should dispense with the ideological underpinnings Satoshi gave to us, but rather, that we should expand them. Here's what I mean.

We don't have to view the goal of crypto as narrowly relating to money. Decentralized cryptonetworks enable all kinds of powerful new coordination mechanisms. Of course money is at the heart of that, but it's not where things stop. We've developed tunnel vision, remaining singularly focused on Satoshi's objective. Creating digital money should be viewed as only the first step in establishing a vastly more decentralized digital world, one that's comprised of countless overlapping collections of self-sovereign communities.

Even as much as creating decentralized digital money is a key part of the big picture, we don't have to pigeonhole Bitcoin as locked in a life and death struggle with fiat. Is becoming a reserve currency held by nation states the only worthy aspiration for Bitcoin? No. Rather, we can see it as the reserve currency of the internet itself. Increasingly, I'm convinced that may be the more valuable proposition in the long run.

Digital Fault Lines

The coronavirus crisis has laid bare the rot and incompetence of our traditional institutions. Governments, health agencies, large corporations, and traditional media— all were out performed in their response by the internet's hive mind. The virus, being that it is spread through physical proximity, has also sharpened the already awkward divide between our digital and our physical lives.

Much of the world's population is now constrained to their homes, except for essential travel. Borders at all levels are decidedly less permeable than they were two months ago. Local governments have flexed their muscles to make up for the failures of central ones. The reach of our incarnated selves has contracted.

At the same time, our digital lives have been broadened. Out of necessity, lockdowns have accelerated our use of the internet for things like education, entertainment, medicine, and socialization. Those lucky enough to work remotely have also become privy to a powerful professional secret many of us have known for a while: in the internet era, one's earning potential need not be bound by one's geographic constraints.

There's a possibility that this duality will be a permanent feature of modern life. We'll have our physical lives, experienced with our close family and friends, lived under the jurisdiction of local governments, generally more permanent, limited, and slow moving. And we'll have our digital lives, lived on the internet, spanning many nebulous, bottom-up communities, comprised of many relationships both social and professional, generally more transient, unbounded, and dynamic. The two will overlap, of course, but perhaps not to the extent we once imagined. Instead we'll learn to bounce back and forth, moving between them as easily and as often as one glances down at a phone or opens up a laptop.

It's Time To Build

If the world does work out looking something like this, then I believe cryptonetworks have a huge role to play. If we don't decentralize the digital world, then that half of our lives will be lived at the pleasure of centralized pseudo-monopolies like Google, Facebook, and Twitter. That's not a future I want, and it need not be the one we accept. Nascent experiments like DAOs, decentralized social networks, censorship resistant content platforms, and protocols governed by users give us an early glimpse of another way. We should accelerate the development of these new forms of self sufficient, opt-in digital communities.

I stumbled on Bitcoin before the first halvening and became enamored. On the verge of the third, I celebrate how far things have come, but I recognize we're not nearly done. If Bitcoin is destined to be the reserve currency of the self-sovereign internet, it follows we're just getting started. Let's get to work building a free, independent, and vibrant digital universe.