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The Fiat Standard Notes

The Fiat Standard Notes#

The debt slavery alternative to Human Civilization

Bitcoin, unlike fiat, is voluntarily adopted by its users in every instance

Fiat collapses, like poorly designed bridges, represent nothing more than the inevitable, and inexorable, result of poor engineering

bitcoin provides a big payout while you live, in the form—pricelessly—of personal sovereignty, freedom, and dignity

The fundamental engineering feature of the fiat system is that it treats future promises of money as if they were as good as present money because the government guarantees these promises.

salability across time, and the ability of money to hold its value into the future salability across space, the ability for money to move great distances in short periods of time

Fiat increasingly divorces economic reward from economic productivity, and instead bases it on political allegiance.

2. The Never Ending Bank Holiday#

On August 6, 1915 - bank of England requested Gold be paid tobank, but for withdrawals and payement of staff to be cheques and notes.

The Latin word fiat means let it be done, and in English, the term has been adopted to mean a formal decree, authorization, or rule.

On the cusp of the Great war - July 31, 1914 - crowds wanted to convert their bills into gold

the Bank of England had become accustomed to not backing all its notes with gold.

Fiat - “let it be done” - formal decree, authorization, by rule.

Value on fiat’s base layer is not based on a freely traded physical commodity but is instead dictated by authority, which can control its issuance, supply, clearance, and settlement, and even confiscate it at any time it sees fit.

Compared to gold, banknotes were easier to carry and convert into either smaller or larger denominations, and an account at an English bank allowed the depositor to make payments by checkbook anywhere in the world far faster than sending physical gold. - salability across space

From the beginning of August 1914 to the end of August 1921, the bank’s net gain totaled £62,411,000 of gold. The British government confiscated 14,684,941 ounces of gold, or around 455.2 metric tons. Today, that gold would be worth around £20 billion

At the time of writing in 2021, the Bank of England’s gold reserves stand at only 310.3 metric tons of gold.

The official gold-to-sterling exchange rate of £4.25 per troy ounce of gold, the same price set in 1717 by Master of the Royal Mint, Sir Isaac Newton

Thus was born a new science of government-sponsored financial alchemy. By controlling banks and confiscating gold, central banks could create money by fiat.

In 1934, President Franklin D. Roosevelt ordered the confiscation of Americans’ gold, buying it from the public at $35.00, effectively devaluing the dollar by 43%.

The new monetary reality was enshrined into the architecture of the nascent global financial system in 1946 with the signing of the Bretton Woods Agreement.

The new global monetary system was built around the U.S. dollar, which only other central banks could redeem for gold

But just like England in 1914, the late 1960s placed the U.S. in a gold crunch, as European central banks moved to redeem their increasingly devaluing hoard of U.S. dollars for hard gold. On August 15, 1971, President Nixon delivered the ‘Nixon shock,’ a series of government edicts aimed at containing rising inflation and unemployment.

I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold or other reserve assets, except in amounts and conditions determined to be in the interest of monetary stability and in the best interests of the United States.

3. Fiat Technology#

The fundamental engineering feature of the fiat system is that it treats future promises of payment of money as if they were as good as present money, so long as they are issued by the government, or an entity guaranteed a lending license by the government.

When a client takes out a $1 million loan to buy a house, the lending bank does not take a preexisting mature $1 million present in its cash reserves, or from a depositor’s balance at the bank. It will simply issue the loan and create the dollars that are used to pay the seller of the house.

It appears favorable to the buyer, who can buy a home without having to pay the full price up front. It appears favorable to the seller because it finances more potential buyers and bids up the price of their home. It also appears favorable to the bank, which can mine new fiat tokens at roughly zero marginal cost every time a new lender wants to buy a house. However, the transaction only works by externalizing the risk to society at large, protecting the buyer, seller, and bank from default by having the government’s currency holders effectively absorb the risk premium through the inflation of the money supply.

Network Topology#

  • 190 central bank members of the IMF
  • tens of thousands of private banks with branches

Joining the fiat network is not voluntary; it can be best likened to mandatory malware.

Every human on earth is assigned to a regional node where they must pay their taxes in their local “fiatcoin.”

Failure to pay taxes with your local fiatcoin can result in physical arrest, imprisonment, and even murder.

The fiat network is based on a layered settlement system for payment clearance. Individual banks handle transfers between their clients on their own balance sheets. National central banks oversee clearance and settlement between banks in their jurisdictions. Central banks, and a few hundred international correspondence banks, oversee clearance across international borders on the SWIFT payments network. The fiat network utilizes a highly efficient centralized ledger technology with only one full node required to validate and decide the full record of transactions and balances. That entity is the United States Federal Reserve, under the influence and supervision of the United States government.

Every currency but the U.S. dollar is merely a second-layer token, a derivative of the dollar.

The value of non-U.S. fiat money depends on its backing in the U.S. dollar and can best be approximated as the value of the dollar with a discount equivalent to the country risk.

Financial institutions mine the network’s native token—fiatcoin—through the arcane, centralized, manual, risky, and haphazard process of lending. A complex web of government rules and regulations determines how an institution can obtain the lending license that allows it to issue loans. These rules and regulations are typically promulgated by central governments, central banks, the Bank for International Settlements, or the IMF.

The closer the borrower is to the Federal Reserve System, the lower the interest rate they can secure and the more likely they are to benefit from inflation of the money supply.

Underlying Technology#

Central banks:

  • A monopoly on providing the domestic fiatcoin and determining its supply and price
  • A monopoly on clearing international payments
  • A monopoly authority over licensing and regulating domestic banks, holding their reserves, and clearing payments between them
  • Lending to its respective national government by buying its bonds

They use the international cash reserve account, for:

  • Backing the local currency
  • Settling international trade
  • Backing all bank deposits
  • Buying government bonds to finance government spending

No form of money has ever emerged purely through government fiat.

All central banks back their currencies with international reserve currencies they cannot print. For most countries, this is the U.S. dollar, and for the U.S., it is gold.

The foreign exchange industry only exists to profit from the arbitrage opportunities generated by the ever-shifting values of national currencies.

Central banks were intended to be the entities in which commercial banks would hold part of their reserves in order to settle with each other without having to move physical cash between their headquarters. CB uses reserves to provide liquidity to commercial banks.

When a central bank bank buys larger quantities of its government’s bonds, the value of its currency declines, since it funds these purchases by inflating the money supply.

A monopolist will have the perverse incentive to protect their own interests at the expense of the long-term value of their currency and, thus, the wealth of their citizens.

Governments are focred to sell their capital reserves, when individuals sell the local currencies and use the foreign currency to invest offshore. They do this to stabilise the exchange rate. This may lead the government to intriduce capital controls.

As governments restrict the ability of individuals to accumulate or move capital and goods, it becomes ever harder for individuals to accumulate capital, trade, specialize, and import advanced technologies.

At its essence, the fiat standard destroys savings and the ability to plan for the future in order to operate a payments network.

4. Fiat Mining#

Lending as Mining#

Anyone who finds a way to get other people into debt profits not only from a positive interest rate return, but also by bringing new money into existence.

All that can be achieved from credit expansion is an increase in the perception of wealth in the minds of entrepreneurs, whose ability to acquire financing drives them to think they can secure the capital resources they need.

The fact that everyone is forced to use the same inflationary monetary asset leaves everyone vulnerable to its failure and makes the financial system as strong as its weakest link.

Milton Friedman’s A Monetary History of the United States was an elaborate labor of statistical huffing and puffing whose only piece of actionable advice was not to allow the money supply to contract during banking crises.19 His central conclusion was that the Great Depression was caused by the Federal Reserve not reflating the monetary system after the 1929 stock market crash.

Gold emerged as money because of its hardness, and so it appreciated in the long run against everything else under the gold standard. Money thus tends to become more valuable in terms of real goods and services, and savers are able to enjoy more goods if they defer consumption.

When making a purchase, one does not compare the price of the good to its future expected price, but rather the price of the good is measured against the benefit that can accrue from it.

“Life is finite, time preference is positive, people want to enjoy the benefits of production in the present.

The more the money can be expected to hold its value over time, the more reliably an individual can use it to provide for their future self. The more reliably one can provide for their future self, the more they can reduce their uncertainty about the future. The less their uncertainty about the future, the less a person discounts the future, and the more they are likely to plan and provide for it. In other words, hard money is itself a driver of lowered time preference.

The introduction of fiat money stopped and reversed this seemingly inexorable progress toward ever harder money.

Fiat money enthusiasts maintain a strange obsession with a metric produced by national governments named the Consumer Price Index (CPI).

The fiat standard first destroyed the ability of individuals to save, then forced them to treat their home as their savings account

Inflation is a vector - it affects different goodsin different ways

Price depends on the cost of production and the desirability of the good.

Even through all of the monetary inflation of the past decades, the price of a can of soda, a box of cereal, or processed food has increased very little.

The cost of hiring highly skilled labor increases much faster than the quoted CPI rates.

Returns on bonds have declined along with interest rates, reducing the ability of individuals to afford retirement.

5. Fiat Balances: Universal Debt Slavery#

4 characteristics:

  • Unquantifiable
  • Irreconcilable
  • Tentative and Revokable
  • Negative


Nobody knows how much fiat exists

  • M0 - usually gives the total number of fiat tokens that have been printed into physical paper notes and metal coins that are in circulation.
  • M1 - M0 and bank checking accounts - on demand money
  • M2 - M1 + all savings deposits and certificates of deposits - not liquid money but can be liquidated quickly.
  • M3 - M2 + money market mutual funds


There is no precise way of keeping track of all liabilities, assets, and issuance, which makes financial reconciliation of the overall system impossible

Tentative and Revocable#

Most fiat balances exist on the balance sheets of government-licensed financial institutions, making them at all times revocable by the local fiat node, or the global full node, the U.S. Federal Reserve.

There is effectively no final clearance in the fiat monetary system.


Sum of all balances at any point in time is negative.

The fiat economic system is highly geared toward the creation of more debt, and fiat users are incentivized to get into debt as much as possible

Financial security, in the sense of having a stable amount of liquid wealth saved for the future, is no longer available in the current system. You will either witness the dissipation of your wealth through inflation, or you will borrow and live in the insecurity of losing your collateral if you miss a few payments. Fiat has effectively destroyed savings as a financial instrument, with enormously negative consequences.

Fiat Savings#

Saving is the deferral of consumption from the present to the future.

The suitability of money for saving increases with its hardness.

The more abundant the savings, the more individuals are likely to invest in capitalist ventures which carry the risk of loss but result in increases in productivity.

Once an individual had reached a level of savings that afforded them independence, they married, bought a house, and started a family.

Government bonds are not a useful monetary asset and cannot work as a long-term store of value because there is no effective mechanism restricting their supply from growing.

The stock index emerged as the new savings account in the post-2009 world

From a basic accounting perspective, investing is a cash outflow, while savings are held on a balance sheet.

A sacrafice in liquidity and increase in risk.

In a modern, easy-money economy, cash is trash, as every money manager knows.

Savers need to study financial assets in order to maintain the value they earned and protect it from inflation.

The devaluation of a fiat currency is usually also accompanied by credit expansion, which causes a boom-and-bust cycle

This makes it harder to have a stable cash balance and limits the ability of savers to plan for their future.

The problem with fiat is that simply maintaining the wealth you already own requires significant active management and expert decision-making. You need to develop expertise in portfolio allocation, risk management, stock and bond valuation, real estate markets, credit markets, global macro trends, national and international monetary policy, commodity markets, geopolitics, and many other arcane and highly specialized fields in order to make informed investment decisions that allow you to maintain the wealth you already earned.

You effectively need to earn your money twice with fiat, once when you work for it, and once when you invest it to beat inflation.

This arrangement has been a big boon for the investment management industry. Most money in investment accounts is held by people who would rather not take risks with it by investing but would prefer to have a store of value for the future. Without such a store of value, individuals need to hire professionals to help them meet their financial goals.

Fiat Debt#

The correct and successful financial strategy under the fiat standard is to constantly take on as much debt as possible, be meticulous about making all payments on time, and use the debt to buy hard assets that generate future returns.

Doing this successively improves your credit score and allows you to borrow at lower rates, while you store your wealth in goods that cannot be inflated as easily as fiat.

In the fiat standard, those who choose to hold positive balances are robbed as the purchasing power of their fiat is eroded by all the debt others are creating. Those who are in debt, on the other hand, get to benefit from some of the seigniorage. Not taking on debt is reckless financial irresponsibility.

The path to financial success under the fiat standard lies in acquiring hard assets. Financing these acquisitions with debt is even more profitable.

Not only is inflation likely to devalue the loan for the asset more than it devalues the asset, but as the lender and borrower are partaking in fiat mining, there is enough benefit in the mining seigniorage to make the purchase cheaper for the borrower.

Among the most effective ways to issue debt is to build a business that pivots to providing banking services to its customers, which explains why so many businesses in so many fields offer credit products to their customers. Under the fiat standard, every business model degenerates into interest rate arbitrage.

In the fiat standard, money becomes a liability rather than future security. Rather than owning dollars that you can use to pay for your future needs, you owe large amounts of dollars, and you need to work for the rest of your life to pay them back.

Fiat central banking is built on the fictional idea that devaluing currency will cause people to invest more, thus inducing more economic production. But like all coercive government interventions into markets, there is no free lunch, and the costs are paid in ways that may not appear very clear initially.

6. What is Fiat Good For?#

Salability across space#

Money is the economic solution to a coincedence of wants

Carl Menger defines salability as the degree to which a good can be brought to market without a significant loss in market price.

Selling a house is much harder than selling a 100 dollar bill

Central to Menger’s analysis of salability is the measure of the spread between the bid and ask prices for assets, where the bid is the maximum price that a buyer is willing to pay, and the ask is the minimum price that a seller is willing to take.

Fiat Spacial Salability#

SWIFT network, a cooperative society based in Belgium and owned by its member financial institutions around the world

SWIFT is a messaging system - it doesnot send actual money.

Fractional reserve banking does not magically create more capital, labor, or resources; it merely allows central banks to control the allocation of these resources rather than the productive people who own them.

Now, with a monopoly on the issuance of money, the central bank can effectively monetize the obligations of the bank and offload the risk of the banks’ reckless actions onto all the holders of the nation’s currency, not just the bank’s depositors.

Shadow banking - far more money is created outside the traditional retail banking system than inside it

Interest rate arbitrage

If you thought fractional reserve banking was complicated for bank reserves, it is nothing compared to the complexity of performing the equivalent of fractional reserve banking for all financial assets and instruments held by the shadow financial system. Stocks, bonds, commodities, and all different kinds of debt are now part of mismatched maturity lending, which effectively means the claims for ownership of these assets dwarf the assets.

7. Fiat Life#

You must sow to reap, you must work to be rewarded, and you will suffer from want by not working.

Fiat disrupts this natural order, it severs the connection between work and reward

Fiat money makes monetary reward highly dependent on political obedience and connections - not the market value to customers.

The development of money allows humans to think of the future and make plans to provide for it. The harder the money, the more reliably we can provide for the future.

In a sound money economy, the only way for a business to survive is to produce something of value to others

The requirement for survival is no longer productivity, but political acceptability and obsequiousness.

Fiat Time Preference#

As more and more people cooperate and trade within a market order, creating more economic value, and planning for the future, capital is accumulated and the productivity of work increases.

In hyperinflationary economies, fruit-bearing trees are chopped down for firewood in winter.

Deferring consumption and delaying gratification requires one to give up immediate pleasure in exchange for future reward.

Finding the right investments is difficult, requires active management and supervision, and entails risk. The path of least resistance, the path permeating the entire culture of fiat society, is to consume all your income, living paycheck to paycheck.

Fiat Architecture#

Examining the longest-lived consumption good humans have: buildings.

As industrial technology has made construction cheaper and easier than ever before, the quality of buildings worldwide has declined, along with their longevity.

Under the gold standard, homes were built to last.

Fiat Capital Destruction#

Getting into debt is attractive. The wealthy keep most of their wealth in hard assets.

When cash holds its value and appreciates, an acceptable investment will return a positive nominal return, which will also be a positive real return. Potential investors can be discerning, holding on to their cash while they wait to find the best opportunity

The destruction of wealth in savings does not magically create more productive opportunities in society, as childish Keynesian fantasists want to believe; it simply reallocates that wealth into destructive and failed business opportunities.

Religion, civic, and social norms all encourage people to moderate their immediate impulses in exchange for the long-term benefits of living in a society, cooperating with others, and enjoying the benefits of the division of labor and specialization. When these long-term benefits seem far away, the incentive to sacrifice for them becomes weaker. When individuals witness the dissipation of their wealth, they rightly feel robbed, and they question the utility of living in a society and respecting its mores. Rather than a way to ensure more prosperity for all, society appears as a mechanism for an elite few to rob the majority. Under inflation, crime rates soar and more conflict emerges. Those who feel robbed by the wealthy elite of society will find it relatively easier to justify aggressing against others’ property. Diminished hope for the future weakens the incentive to be civil and respectful of clients, colleagues, and acquaintances.

Fiat Family#

Starting a family is a low time preference decision that requires the individual to highly value the future and sacrifice for it.

With fiat’s loose supply growth resulting in continuous price increases, and savings becoming ineffective, the financial pressures of fiat have resulted in a large increase in families with two wage earners, resulting in far less time for them to spend together.

In the world in which fiat did not finance the welfare state, family was one’s only hope for surviving childhood and old age, and so everyone had a strong incentive to invest in familial relationships.

It is very common to see people extend their adolescence indefinitely and waste their youth on inconsequential nonsense, offering fleeting pleasures but little lasting security, satisfaction, or fulfillment.

Fiat is the reason you are forced into doing things you don’t want to do.

8. Fiat Food#

Easy government money, on the other hand, allows for government mistakes to accumulate and add up significantly before economic reality sets in through the destruction of the currency, which generally takes much longer.

While Baptist priests were evangelizing the evils of alcohol and priming the public to accept these restrictions, it was the alcohol bootleggers who lobbied and financed politicians to impose prohibition, as their profits from bootlegging would increase with the severity of the restrictions on alcohol sales.

The food pyramid - grains are the base.

Foods foisted on us:

  1. Polyunsaturated and Hydrogenated “Vegetable” and Seed Oils
  2. Processed corn - high fructose corn syrup - replacing sugar
  3. Soy - not an ediblecrop - used to fix the soil
  4. Low fat foods
  5. Refined flower and sugar

As depreciating money drives people to prioritize the present, they are more likely to indulge in foods that feel good in the moment at the expense of their future health.

Faustian bargain - An agreement in which a person abandons his or her spiritual values or moral principles in order to obtain knowledge, wealth or other benefits. A deal in which one focuses on present gain without considering the long-term consequences.

Junk food cravings are also a result of deep malnutrition caused by not eating enough meat.

9. Fiat Science#

Education no longer needs to meet the needs and aspirations of the student or help them succeed in life.

As funding for education becomes centralized, flowing from the government’s money printer rather than the children’s parents, the providers of education have more of an incentive to appease their funders rather than their beneficiaries.

In a free market, that accountability is enforced through customers walking out of a business and bankrupting it if it fails to meet their needs.

Money spent by parents holding schools accountable, i.e., private schools, will be far more productively deployed than fiat from government printers with no opportunity cost.

The most common misconception about modern universities is that they are private, when they are almost all reliant on government financing.

University research would also have to remain relevant to the needs of the real world in a free market with hardmoney.

Universities increasingly resemble country clubs, where students borrow money to live like aristocrats, doing little work while partying, socializing, and enjoying themselves.

What passes for science now is a mix of government propaganda, corporate advertising, make-work welfare programs for nerds, and research papers that amount to meaning-free irrelevant gibberish.

Scholars in the hard sciences are accustomed to laughing at their colleagues in the humanities, but they should remember that both of these broad fields of scholarship come from the same universities, financed by the same fiat printers, subject to the same incentive structures.

For an academic to publish in the journals that guarantee them a job, their language and methods need to be so niche, arcane, esoteric, and absurd that their work would be incomprehensible for most readers.

Academic research today is not a product of a free market; it is a product of a central plan, decided by a committee.

Any sponsor of a study can “find” the result they want by hiring enough creative researchers

Fiat Hysteria#

Academics are strongly incentivized to overemphasize risks and potential catastrophes in their work, because that significantly increases the chances of publication. More importantly, perhaps, findings that are “concerning” and “troubling” are far more likely to successfully attract more funding in the future. In fiat science, there is a very strong incentive for researchers to warn of impending calamity. If their warnings prove unfounded, they face no consequences for being wrong.

The simple reality is that without a market test, and with unlimited government fiat ostensibly dedicated to research topics in the public good, there will naturally be more funding available for scary conclusions, and the more panicky scientists are likely to thrive and achieve prominence than their more reasonably sober colleagues.

10. Fiat Fuels#

There is also a religious element to this environmentalism, based on pagan conceptions of the earth as pristine and humans as a destructive consuming force

On the contrary, human actions are what make the earth habitable for us, allowing us to survive, prosper, and flourish

Throughout the 1960s and 1970s, leading environmentalists made dire predictions of the horrific fate awaiting humanity from the depletion of resources, and as inflation increased, these environmentalists became increasingly popular

Then the pivot happened when those predictions proved bullshit:

We were no longer doomed because we were going to run out of oil and essentials; we were now doomed because we consume so much oil and essentials, and that consumption is going to destroy the atmosphere and boil the oceans.

Fiat Apolcalypse#

As funding decisions end up under the control of bureaucrats isolated from market feedback and consequences, the incentives of researchers are skewed toward publication and bureaucratic metrics and away from truth and relevance to the real world.

Carbon dioxide is a gas that is an essential component of all living creatures, and it has always existed as part of the earth’s atmosphere in trace amounts, currently at a concentration of around 418 parts per million, or 0.0418%.

Carbon dioxide is a gas that is an essential component of all living creatures, and it has always existed as part of the earth’s atmosphere in trace amounts, currently at a concentration of around 418 parts per million, or 0.0418%. Pre-industrialisation that was 0.0280%

The path to irrelevance and career suicide comes from soberly assessing the evidence and finding little cause for concern.

Thermodynamics and engineering rules cannot be altered by fiat

The intellectual brain, being largely used for insignificant entertainment purposes for most people, can contemplate insane and meaningless ideas like a modern world free of hydrocarbons, but the acting human looking to survive and thrive cannot

Whereas solar energy is plentiful, being able to concentrate it into high power is a very complex operation that requires significant investment in capital infrastructure through solar panels and batteries.

Alternate energy: None of these energy sources could be used exclusively for building and transporting the equipment that makes their own production possible

The Cost of Fiat Fuels#

As the use of unreliable and uneconomical energy sources has increased, the cost of power has begun to rise again, reversing the essential process of progress that is human civilization itself.

By mandating the use of primitive, low-power, unreliable energy sources, governments are raising the cost of all economic activity and making life more difficult.

Since there are times in which renewable energy sources will produce no energy whatsoever, and these times can coincide with peak demand, all power grids must maintain reliable power plants able to provide them with peak demand when needed or else face brownouts or blackouts.

The transformative power of hydrocarbons lies not just in the high power they deliver but also in their ability to deliver power on demand, when required, anywhere on earth, freeing humans from having to tailor their actions around the weather.

Poverty is the inevitable consequence and symptom of a lack of available power, and the only proven technologies for delivering high power on demand at low prices are based on hydrocarbon, nuclear, and hydroelectric energy.

Growth in energy consumption stoppedin 1970.

It is a remarkable feature of the modern world that airplanes today travel at slower speeds than they did in the 1970s. Commercial flight times have not only failed to get shorter; they actually take longer than they did in the 1960s.

11. Fiat States#

After Genoa, the U.S. and the British governments’ prime imperative was to get as many central banks to hold as much of their currencies as possible. This was unprecedented money printing and inflationism on a global scale.

The British and American support for national liberation movements was not purely altruistic but rather a self-interested move to create more fiat nodes in nascent countries.

The monetary standard was no longer a homogeneous money freely moving around the world wherever its owners found the best use for it. Instead, state-controlled money became a tool for increasingly omnipotent governments to finance war and totalitarianism.

The Misery Industry#

When World Bank planning inevitably fails and the debts cannot be repaid, the IMF comes in to shake down the deadbeat countries, pillage their resources, and take control of political institutions.

The GATT/WTO was built on the insane premise that a central global authority could somehow regulate the flow of trade to prevent imbalances, as if the trade flows were the cause of the imbalances rather than a symptom of monetary manipulation.

The misery industry’s fiat foundations make it so far removed from the free market that it operates in a complete vacuum of accountability and responsibility.

They are instead accountable to their donors and funders in the rich countries. As such, their actions are always driven to satisfy the demands and interests of their employees first, their donors second, and their beneficiaries last.

In free markets, any job entails significant responsibilities and accountability, but working in development organizations comes with even less accountability than working in government.

By putting a price on human lives, projects that destroy them can go ahead as long as the financial return outweighs the “cost” of these destroyed lives.

If the government owns capital goods, a market is not possible in these goods, so there will be no prices to determine the most productive uses of capital, and government will fail to allocate them in a way that meets the needs of the beneficiaries.

Capital allocation by governments cannot be compared to capital allocation by individuals. It makes little sense to think of the money that governments spend as capital investment, as it really resembles consumption more than investment. Governments and politicians spend money more on buying votes and loyalty than on investing in the future.

Instead of the brightest talents of developing countries seeking to work in a productive capacity and serve their fellow citizens, they are attracted to jobs in the misery industry and end up shuffling papers, writing reports, and conducting the studies nobody reads but that are necessary to keep the funding flowing.

In sum, the sprawling bureaucracy that is the misery industry has achieved precisely the opposite of its stated goal.

Societies that have secure property rights, free markets, and relatively open international trade have prospered and eliminated poverty the most effectively.

12. Fiat Cost-benefit Analysis#

With bitcoin, the cost for securing the network is incurred up front by miners. But the cost of operating and securing fiat, like the cost of sniffing glue, lies not in the small direct cost paid up front, but in the expensive long-term consequences.

The benefit fiat offers to humanity is that it allows for savings on moving gold for payments. The costs are incalculable. We can classify the costs of fiat into four broad categories:

  1. the destruction of holders’ wealth through inflation
  2. the destruction of the role of money in economic calculation
  3. the increased power of government to shape economy and society
  4. the increased likelihood and cost of conflict.

The benefits from fiat are primarily in the cost saving associated with moving physical gold around. The clearance, settlement, and verification of physical gold would cost somewhere in the range of 0.05–0.5%.

Every national fiat currency has devalued in real terms almost every year since its creation

Without any monetary inflation, productivity increases would translate to price decreases.

The overwhelming majority of economic value exists in the major currencies; a weighted average inflation rate should reflect this, and when calculated, we can estimate that the average fiat user has suffered a 13.72% inflation in their money supply per year.

The world’s poor have most of their wealth in money, not in financial assets. The world’s rich are the ones who hold the vast majority of the 75% of the world’s wealth that is not in fiat but in hard assets like stocks and bonds.

Bitcoin is far more efficient than fiat because it does not impose this form of wealth confiscation through inflation. Holders of bitcoin can verify the supply for themselves, and the supply is devaluing at a current rate lower than 2% per year, which is halving every four years on its way to zero, eventually.

Devaluing currency disincentivizes long-term thinking and encourages short-term focus in decision-making.

Inflationary money is that it causes losing investments to appear profitable to investors and thus attract their capital

Inflation turns money into a melting ice cube, strongly encouraging individuals to spend or invest, even if they cannot find a worthwhile purchase or investment.

The balkanization of the world’s money from one universal medium of exchange, gold, into hundreds of government tokens with limited salability across time and space


The biggest and most devastating cost of fiat lies in the mechanism it uses to achieve consensus on a global ledger: violence. Whereas gold’s monetary role was guaranteed by its physical and chemical properties, and verification of its authenticity is possible, fiat’s monetary role is entirely predicated on the authority of the issuing central bank and government.

Fiat’s proof of work relies on violence and the use of physical power to subjugate opponents in the case of disagreement. Fiat is all about “might makes right.” It rewards might with the biggest prize of them all: the accounting system for all of society, increasingly rewarding the powerful, and incentivizing humans to engage in power contests rather than economic production.

13. Why Bitcoin Fixes This#

Salability across space does not include consumer payments - we are talking about final settlement.

The mechanics of this process involve largely opaque shifts between central banks’ nonpublic ledgers. Bitcoin, on the other hand, is currently proven to carry out half a million final settlement transactions every day in a way that is transparent, predictable, and public.

Physical distance is irrelevant on internet-native money like bitcoin.

Verification is also a big cost with gold - when the Bundesbank repatriated gold from the U.S. Federal Reserve in 2020, it melted them all into new bars to verify the purity.

Seperation of Money and Debt#

Money is a present good that can be exchanged for other present goods in a final transaction which leaves the seller not reliant on the purchaser performing any future obligations. Credit, on the other hand, is a promise to deliver money in the future.

All satoshis are present goods, ready for final settlement with the next block.

With banks no longer able to pass off their maturity-mismatched debt as money, the control of the banking system is no longer a license to print money. Banking returns to being a normal business offering services to customers, rather than a monopoly money-printing operation.

You no longer need others to be indebted for you to have savings

Antifiat Technology#

The notion of government micromanaging individuals’ lives and choices was quaint before fiat.

Neutral Global Currency#

If bitcoin succeeds as a base global settlement network, the benefits would be of far greater significance than a cheaper payment network. Economic growth does not happen according to some secret, complicated, or elusive formula.

Poverty cannot be ended in absolute terms any more than ill health can be ended.

It is the consequence of individual voluntary action.

14. Bitcoin Scaling#

The naive and obvious approach to scaling simply suggests an increase in the size of blocks until they are large enough to accommodate the number of transactions needed for bitcoin to take over the world. This was the scaling approach favored by the doomed hard fork attempts Bitcoin XT, Bitcoin Classic, Bitcoin Unlimited, and SegWit2x. It was also the driver of the doomed Bcash hard fork (as well as its own even more doomed hard fork, BcashSV).

The cost of increasing the block size is the cost of running a bitcoin full node.

The number of bitcoin full nodes is the only guarantee of bitcoin’s continued decentralization and lasting immutability.

Having only a few dozen full nodes worldwide makes it relatively straightforward for them to collude to change the rules of consensus, as fiat nodes did in 1914.

Hard Money cannot stay Niche#

Could bitcoin become the monetary equivalent of the Esperanto language? A fringe group of enthusiasts using a protocol that is unintelligible to most people?

The bitcoin network scales on value not number of transactions.

Today, many bitcoin-based businesses conduct most of their transactions on their internal databases. They only use the bitcoin blockchain for final settlement to and from the business. Gambling websites, for instance, will record all bets and winnings…

Assuming market participants want superior security and a harder monetary policy, they would be willing to use bitcoin even if transaction fees are significantly higher than alternative payment solutions that rely on trusted third parties and inferior security.

Lightning Network#

  • Multisig, channel based payment network
  • Channels are opened by sending funds to a multisig address on chain
  • Offchain lightning transactions are then shared between the parties
  • Parties need not share a channel with everyone - payments can be routed
  • Routing fees are paid
  • It is important to remember that an off-chain transaction on Lightning is not as secure as an on-chain transaction

Committing a balance of bitcoin to a Lightning channel is not the equivalent of holding a cash balance. This is because the money on that channel is only useful for payment for the counterparty of the channel or others who are connected to them on the Lightning Network. It does not have the same liquidity of coins that can be spent immediately on the bitcoin network.

Since profits can be made from providing liquidity, the best liquidity decision for a particular node is not based on individual demand for liquid cash balances but rather an investment decision based on expected returns from routing fees.

In other words, the dynamics of the Lightning Network strongly suggest that specialized node operators will emerge to earn profits in exchange for liquidity provision.

Risks of second layer:

  • centralisation and collusion

15. Bitcoin and Banking#

Banking core functions:

  • holding deposits
  • allocating investments

Consumers value these services - provided they are at a lower cost and higher quality.

Individuals do not want to always have physical possession of their entire life savings because of the risk of loss or theft, and the stress that comes with it.

Any industry functions well only when a free market exists that gives consumers a choice in their providers; this choice forces providers to either care for their clients or suffer the penalty of lost customers and potential failure.

The allocation of investment is an act that cannot benefit from the automation and immutability that bitcoin provides to financial transactions.

Savings technology#

Based on hard money, the saver could reliably expect these instruments to hold their value for the future.

But as governments eroded the gold backing of the money over the twentieth century, the ability of bank savings accounts to keep up with inflation disappeared.

To store value into the future, investors had to shift to buying government bonds. The demand for bonds as savings drove the enormous bubble in government debt worldwide, far beyond what governments’ creditworthiness would support. This brought down the yields for savers, and as inflation continued, the returns on bonds could no longer keep up with it. Savers needed to take more risks with their capital to simply preserve their wealth. The stock index fund appeared as the saving vehicle of choice in the 2010s as bond yields continued to plummet and enter negative territory.

Ideally, one wants to save their cash balances in the instrument with the highest degree of salability across time and space.

Unlike fiat money, whose supply is constantly expanding, bitcoin has a predetermined and constantly decreasing supply growth rate. Unlike stocks and bonds, bitcoin has no yield, which is more suitable for a monetary role.

With Bitcoin - you don’t need dividends and yield. Fiat man does not understand this.

Individuals might initially buy bitcoin for short-term price speculation, to conduct black market transactions, or as an experimental technology in payments. Some might be ruined by the volatility in the short term. Many will quit. But bitcoin’s relentless upward trend will make the value proposition of holding bitcoin as cash clear to most holders. People who allocate a small percentage of their net worth to bitcoin will likely watch it become a progressively larger fraction of their portfolio over time. Others will notice and copy them. Financial analysts will notice the spectacular rise over time and start recommending allocations into it. This process has intensified over the last few years, with a growing number of people worldwide now saving a fraction of their paychecks in bitcoin via dollar-cost averaging, and a growing number of services dedicated to this.

Bonds and stocks can no longer offer yields that beat money supply inflation, and both carry heavy risks. Real estate is highly illiquid, indivisible, and requires high maintenance costs. Gold and silver have low spatial salability, as there are no precious-metal-based banks allowed in the fiat era.

Across the board, the quest to protect value from inflation has disconnected prices from reality.

Almost $100 trillion of bonds have been issued by government entities at the time of writing, making this arguably the largest malinvestment in human history.

Almost $100 trillion of bonds have been issued by government entities at the time of writing, making this arguably the largest malinvestment in human history.

The homogeneity of bitcoin and its lack of a yield give it a natural advantage over bonds in playing the role of money.


Market financing conditions can turn unfavorable for many reasons: monetary policy tightening, collapse of large borrowers or financial institutions, natural disasters, and wars are just some examples. When funding conditions become unfavorable, most, or all, debt obligations are valued at a discount by the market, which places financial institutions using them as their financial assets in a precarious position.

The growing monetization of bitcoin allows more people to peacefully opt out of having to hold debt as their prime treasury reserve asset and allows them a hard cash asset whose value is not contingent on future cash flows and credit risks.

16. Nitcoin and Energy Markets#

To transfer the control of a certain number of coins from one address to another, the network requires the command of the private keys associated with the sending address—nothing else. No economic, financial, political, or religious form of authority is capable of transferring coins without the associated private keys

Agreement is easy when fraud is expensive to present but cheap to reject.

When one uses bitcoin, no reliance on any particular individual or authority is required.

Solved proof of work is unforgeable costliness

Fiat proof of work: While very little cost or energy is needed to update fiat ledgers, a lot of energy is spent to acquire the ability to control that ledger in the form of political conflict and war.

With fiat as the pinnacle of monetary technology, the alternatives to U.S. global imperialism are likely to be imperialism by another country, or perpetual conflict combined with the Balkanization of monetary systems, and consequently, of trade areas, reducing the extent of trade and division of labor worldwide, with devastating humanitarian and economic consequences.

Difficulty Adjustment#

Most elements of bitcoin’s architecture are not original to bitcoin but had existed before Satoshi Nakamoto released the bitcoin white paper. Public key cryptography, peer-to-peer networks, proof of work, hashing, and Merkle trees had all been invented years before bitcoin. The genius of bitcoin was in combining them all together, and the magic ingredient that made this recipe possible was the mining difficulty adjustment algorithm.

The difficulty adjustment ensures the security of the network by ensuring the cost of mining a new block is roughly equal to the mining block reward.

inelastic supply - the supply of bitcoin is strictly limited and cannot respond to increased demand.

The difficulty adjustment also turns bitcoin into an indomitable, all-conquering positive feedback loop of economic incentives

bitcoin continues to attract the most efficient producers of electricity and processing power to monetize their resources

Ultimately, doomsday scenarios in which bitcoin fails due to a technical design glitch do not take into account the economic incentives it provides to keep the system running successfully. As long as demand for digital hard money exists, many millions of people around the world are motivated to find solutions to continue its existence

Bitcoin Energy#

All energy is ultimately free if you don’t think of the cost of channeling it to the right place at the right time at the right intensity.

The scarcity of energy, like all types of prebitcoin scarcity, is relative scarcity, whose cause lies in the opportunity cost in terms of other goods.

Mining is consistently profitable only for the miners who mine using electricity secured at rates significantly cheaper than the majority of world electricity prices. The global average price of electricity is estimated around fourteen cents per kWh.

As the difficultly adjusts upwards, miners who cannot find inexpensive electricity will start mining at a loss. As losses accumulate, these miners eventually go out of business, leaving behind only those with significantly lower cost of electricity.

Wherever energy is in high demand by residential, commercial, or industrial facilities, using that energy to produce bitcoin will carry a significant opportunity cost, as there are people who would pay to use it in their daily life to meet their needs, whereas isolated and stranded energy sources have no alternative demand, and thus carry a zero opportunity cost.

Difficulty adjustment ensures that bitcoin is only mined with the electricity sources with the lowest opportunity cost, and that incentivizes the mass of bitcoin miners to locate and use inexpensive energy.

The essential property of capital goods is to increase the marginal productivity of the producers who use them. The fisherman who catches fish with a modern trawler has a much higher hourly productivity than the fisherman using a little boat and net.

Bitcoin’s growth is the antidote to the damage caused by the growth of these fiat fuels, as it continues to offer a large bounty to anyone who can produce cheap and reliable electricity.

Reliable Power#

To operate them most profitably at capacity, the miner must have them connected at all times to reliable and stable power.

Hydrocarbon power plants are built in areas of high demand for reliable power, and that means their electricity prices are significantly higher than the five cents per kWh profitable bitcoin miners need.

The average cost of electricity from hydroelectric plants is usually in the range of three to five cents per kWh, which is ideal for bitcoin miners.

The production of oil leads to the inevitable production of large amounts of methane gas which is unprofitable to transport from remote oil fields. Oil fields usually flare, i.e., burn, this energy, but bitcoin is able to buy it on-site by installing a generator and miners.

17. Bitcoin Cost-Benefit Analysis#

As always in matters of human action, theoretical debate cannot substitute for, or overrule, the outcomes emerging from human action.

Intellectual arguments are very cheap, but actions are very costly.

The proper professional response of an economist, in this case, is to analyze where the value lies for the users. It is not to throw hissy fits declaring the network is worthless because they cannot see the usefulness, as has been the reaction of most fiat economists.

From the perspective of fiat academics, reality is wrong by not agreeing with the government-sponsored theories in their textbook.

Bitcoin Costs#


The bitcoin hashrate can be estimated from the difficulty and the block time.

By being able to buy electricity anywhere, and by allowing only the most profitable miners to survive, bitcoin only buys the cheapest electricity and does not compete for the expensive sources of electricity in high demand.

Bitcoin Benefits#

The economic value stored in bitcoin can be approximated by the market value of the total supply of bitcoin, as a minimum bound. This is because anyone holding bitcoin at that price is signaling that they value it more than they value holding its value in other currencies or assets or consuming its value by buying the consumer goods.

Securing savings.

In all markets, demand incentivizes entrepreneurs to find the most effective ways to provide the goods that people want. The costs and the methods of payment can differ widely, but if the demand exists, the goods will be supplied.

if there is demand for holding bitcoin, then demand will also exist for transacting in it, and people will pay the necessary transaction fees to get their transactions into blocks

If demand for bitcoin exists, demand for moving bitcoin will have to exist, and transaction fees will go up

Premiums for buying bitcoin in places where exchanges do not operate are even higher, and it is not uncommon for buyers on LocalBitcoins, a peer-to-peer bitcoin purchasing service, to demand and get a 10% markup.

Functionally speaking, bitcoin replaces existing technologies for saving and international money transfer.

Instead of struggling with an average 14% supply inflation rate of government monies, bitcoin offers you a fixed supply with a predictable declining supply inflation rate.

Rather than conflict and dominance, bitcoin allows the redirection of monetary energy to the development of cheap and plentiful energy for humanity.

18. Can Bitcoin Fix This#

Government control of the monetary system and scientific funding has convinced generations of economists that reality is the product of fiat edict and given them a thoroughly top-down approach to understanding the world.

Bitcoin is the world’s first digitally scarce asset and the first liquid asset with strict verifiable scarcity.

People primarily hold government bonds, as well as physical gold, real estate, and equity as a way to recreate the ability of cash to save value for the future.

So as long as bitcoin continues to operate, and its supply drops by half every four years, it is highly likely that marginal demand for it will be higher, and the marginal supply lower, than four years previously.

The world has around $90 trillion of broad fiat money supply, $90 trillion of sovereign bonds, $40 trillion of corporate bonds, and $10 trillion of gold.

Bitcoin could replace all of these assets on balance sheets, which would be a total addressable market cap of $230 trillion.

At the time of writing, bitcoin’s market capitalization is around $700 billion, or around 0.3% of its total addressable market.

Monetary status is an emergent outcome of market choice for monetary assets and not the result of economists’ theoretical appraisals of monetary properties.

Government Attacks#

The common misconception many nocoiners have about how the internet works is that all these computers need to connect to some central server in order to access the internet, but that is simply not the case. The internet does not have a central hub that distributes content; it is simply a protocol that any computer can use to connect to other computers.

There is one internet.

Government attacks on bitcoin can only happen by restricting individual and financial freedom, the pursuit of which is the best reason to buy bitcoin

Attempted bans would clearly communicate to people that the money in their bank accounts is not theirs to spend as they please; it is the government’s money, and it is limited to only government-approved uses.

China banned bitcoin mining in the country on 14 May 2021.

Price dropped from $64k to $30k…Chinese miners needing to liquidate their bitcoin holdings to relocate.

The drop in hashrate resulted in the slowest average block time for any difficulty period in bitcoin’s history, thirteen minutes fifty-three seconds per block instead of the protocol’s target of ten minutes.

As a result, the difficulty adjustment on July 3 of −27.94% was the largest downward adjustment in bitcoin’s history

Software Bugs#

bitcoin’s value proposition depends on its immutability, reliability, and complete predictability

Open source fixes this.

In other words, what ultimately protects bitcoin from software bugs is the economic incentive for its users to remove and deal with bugs as quickly as they emerge.

Most people eventually got on airplanes, not because they studied jet aviation but because they had seen and heard of airplanes operating reliably, likely for years.

Gold Standard#

Central Bank Adoption#

China, Russia, Iran, North Korea, and others may hate the U.S. dollar-based global financial system, they love having their own fiat currencies far more than they hate the dollar

Monetary Upgrade and Debt Jubilee#

Historically, hyperinflation has always been the result of a large increase in the money supply and not a sudden decline in money demand?

Bitcoin started as a voluntary decision to opt out. Now, it might be the life boat for the fiat economy’s spiral into ever-more debt slavery

In a world where the possibility of saving were available again, you would expect a growing portion of the population to be free of debt and to have enough savings to finance their expenses, as well as to finance their businesses.

In large, centrally planned, credit markets, such as those that exist under government money, capital is centrally allocated by government bureaucracies that determine who gets new capital, devaluing the capital accumulated by the productive members of society. In such a world, being productive is punished over time, and credit financing is more likely to go to those who can afford to brace the bureaucratic hoops of government credit boards. Firms grow larger to afford lawyers and PR firms to communicate their stability to creditor banks, and smaller businesses become less viable. This is why firms tended to be smaller under the gold standard, and far more smaller businesses thrived.

Speculative Attacks#

Taking loans from nations in their currency and buying bitcoin.

Central Bank Digital Currencies#

Central bankers present CBDCs as a technologically progressive step that allows for faster and more secure digital payments. However, their transformative potential for surveillance, political patronage, and economic central planning is underadvertised.

CBDCs are perhaps most devastating for the banking sector, which would increasingly get disintermediated in the pervasive relationship between government and serf.

Modern macroeconomics shares Soviet macroeconomics’ faith in the ability of high priests with PhDs to divine and optimize the working of an economy through models, metrics, and statistical analysis.

On the one hand, there is the easy money, centrally planned economy of which government, media, and academia insist you must be a part. It provides comfortable jobs secured from competition and controlled prices to ensure everyone gets their government-recommended soy, bug, and high fructose corn syrup rations, stays in a tiny home, consumes little energy, and has few or no kids to avoid burdening the planet with inconvenient inflationary pressure.

Bitcoin makes payment clearance a mathematical and mechanical process that cannot be controlled by intermediaries, whereas CBDCs make every transaction subject to approval and reversal by the central bank