Bitcoin: Separation of Money and State

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by SatsJoseph

That’s me and my very deep thoughts. Give me a follow if you please.

About this text

Table of Contents

I. Austrian School of Economics, and its Relation to Bitcoin

II. Bitcoin and Time Preference

III. Bitcoin and Monetary History

IV. Bitcoin: Separation of Money and State

V. Why only Bitcoin?

Introduction

Glossary

I. Austrian School of Economics, and its Relation to Bitcoin

Why an “Austrian” school?

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Watch out for those pesky terms!

The Essence of the Austrian school

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Bitcoiners like their LTP signaling!

Prices: a Signal Transfer Network

Austrian Business Cycle Theory

Don’t forget the economy is about stuff, not money. Monetary stimulus doesn’t equal production.

Private Money

Economics, the Indispensable Framework

II. Bitcoin and Time Preference

What is Time Preference?

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Progression of time preference in a productive individual’s life. Only for illustrative purposes, not based on real data.

High time preference, its causes, and effects

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2 percent doesn’t sound like much. But over the long term, it compounds a devastating erosion of the purchasing power.

Low time preference, its causes, and effects

Time preference, gold, and Bitcoin

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Hodling by itself isn’t a sufficient LTP activity. Ongoing sat stacking is. Low time preference is demonstrated by a permanent change in one’s behavior.
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Image source: brg444

Bitcoin as salvation from degeneration

III. Bitcoin and Monetary History

Why explore the history of money?

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So let’s get down to business.

From communism to cooperation

Drachma, denarius, solidus — a thousand years of prosperity and decline

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Coin debasement in ancient Rome. Image source: Wikipedia.
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Antoninianus was a silver coin of a very short life — within 30 years, it lost almost all its silver content. What a progressive monetary policy! Image source: Wikipedia.
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Solidus under Justinian II. from year 705. Gold content 4.44g. Image source: Moneymuseum.com.

Dollar before 1913

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Pictured: an African immigrant reminisces over the American monetary history.
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Jackie Chan is as perplexed as the dear reader.

The underlying logic of monetary history: the monetary perpetuum mobile

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Bilbo Baggins contemplates keeping the money printer.

The creature of Jekyll Island

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Consumer price index in US cities, 1913–2020. Chart source: Fred.

1933: Executive order 6102

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The executive order, by which FDR nationalized the American citizens’ gold. Image source: Wikipedia.
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A dollar note from 1928. Notice the text at the bottom: “Will pay to the bearer on demand One dollar”. Dollar notes before 1933 were receipts redeemable for the real money in the form of gold (and previously also silver). Image source: Wikipedia.

1971: the mask comes off

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And what a surprise: the debt after 1971 rises fast. Chart source: Fred.

Bitcoin: the end of monetary history?

Bitcoin and risk 6102

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Pictured: dear reader when she stumbles upon conspiracy theories in an article on monetary history.

No more patches

IV. Bitcoin: Separation of Money and State

Origin and nature of the state

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A herdsman informs the farmer what’s what. 10,000 BCE, colorized.

Incentives and responsibility within the state

Oof, naughty words Tim!

Why should we separate institutions from the state?

A short history of institutional separation

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Is she behind me? I know she’s behind me. Sigh. They won’t leave me alone, not even when I ride my beloved Chubby. Image source: Wiki.
For 300 fiat bucks and 6 months of your time, you can have a BSc equivalent. Much better deal than formal schooling!
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The decline of media houses is evident from the ad revenue statistics. Facebook and Google disrupted the paper media houses; who will disrupt these giants in return?
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A fall into prosperity: over the last two hundred years, most of humanity has finally freed itself from extreme poverty.
Thanks to technology and globalization, poor countries can take advantage of the catching-up effect: they can break out of poverty in a much shorter time than it took Western countries.

The effects of monetary socialism

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Size of individual QE rounds. Source: Unchained Capital.
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Compared to 1980, the cost of storing 1 GB of data is more than a million times cheaper. Source: AIimpacts.
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Source: Wiki.
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A humor break.
An Achilles heel of MMT: the USD shitcoin has competition now.

Gold or Bitcoin?

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Balancing demand and supply for precious metals.
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Balancing demand and supply for Bitcoin.

The credit market and two phases of monetary separation

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Elon sees the future and says it won’t be gentle to gold bugs.
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Hal Finney predicts the emergence of bitcoin banks. Source: BitcoinTalk.

Bitcoinization: the future of monetary history

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Selected cases of recent bitcoinization. Bitcoinization has its own pace. The CEO of MicroStrategy, who anticipated a quick end to bitcoin in 2013, recently decided to allocate all of the company’s free funds to bitcoin.
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Hal Finney recommended Bitcoin DCA already in 2011. Source: BitcoinTalk.

An unforeseen separation

Just watch out for the splatter.

V. Why only Bitcoin?

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The end. Thank you for reading.

What is the point of blockchain?

Two demands for non-state money

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Source: Bitcoin wiki.
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Shitcoiners call this pattern the “accumulation phase.” I call it the “death phase”. Source: CoinMarketCap.com.
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Daily transaction fees on individual networks, in USD. Source: Coinmetrics.io.
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Daily block reward (newly issued units) on individual networks, in USD. Source: Coinmetrics.io.
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Block reward to transaction fees ratio for individual networks.

The problem of Ethereum? It’s shutting down.

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*Sweating Ethereum fan*

Recap: why bitcoin > shitcoin

Please note: “shitcoin” is a technical term.
Schelling point: what we agree on without the need to communicate.
Top 20 cryptocurrencies (excluding stablecoins) ranked by their liquidity (market depth). The vast majority of shitcoins is completely illiquid — a medium-sized purchase/sale significantly affects the price.

A few final recommendations

Ten Bitcoin Commandments

@SatsJoseph on Twitter

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