1/ The first network which blockchains are going to impact is the network of money.
2/ Money exists to solve the coincidence of wants problem by serving as a unit of account, medium of exchange, and store of value.
3/ Coins in Lydia were a more effective form of money than random ingots because they were more divisible (representing no more than a few days labor) and standardized (so you didn’t have to measure them each time you wanted to make a trade).
4/ Better forms of money enable more social scalability. Because coins reduced the transaction cost compared to previous forms of money, they enabled new forms of commerce like the retail market.
5/ They also enabled new rights for individuals: Lydian women were far more liberated than other women of their era.
6/ Today, money is electronic. The current system of electronic money enables more transaction but requires a trusted third party to monitor your data. These institutions often don't prioritize your security and don't give you much of a say in how they do business.
7/ In computer science there are fundamental tradeoffs between security and performance. Making money digital, but keeping its control centralized in a small group of intermediaries increased its performance, but at the cost of its security.
8/ You want money to be maximally secure, and only more performant if it doesn’t affect that security. Would you rather be able to send your Weimar Republic German Marks quickly and easily as they hyperinflated or would you rather store your wealth in some other...
9/ ...currency which could not be inflated away?
10/ To scale markets around the world in a secure and fair way, we need scalable, decentralized money which requires scalable computer security. In 2009, an individual or group using the name “Satoshi Nakamoto” created the most socially scalable money in history:...
11/ ...Bitcoin.
12/ Bitcoin maximizes for security at the cost of performance. Compared to PayPal or Chase Bank, bitcoin is slower and harder to scale. This security is necessary for anything to be money.
13/ Money should be very hard for any participant or intermediary to forge. Gold has value in part because it is very difficult to mine and there is a limited amount of it so there’s no way to rapidly make more of it.
14/ A high-security electronic money also has the ability to distribute power more widely in the monetary system as we can see from Bruce Bueno de Mesquita’s Selectorate Theory.
15/ Consider the case of Bell mayor Robert Rizzo - Rizzo manipulated the elections in Bell, CA so only a few hundred people voted.
16/ Because he had a very small constituency (AKA selectorate) of voters and stakeholders, he was able to manipulate them and take advantage of the citizens of Bell to pay himself $787,000 per year as a small town mayor
17/ The lesson of Selectorate Theory and the case of Rizzo is that what matters isn’t who the individual running the system is but the distribution of the selectorate.
18/ The founding fathers of America recognized that presidents would not intrinsically better people than kings or dictators, but the system could be more fair by limiting their power with a system of check and balances.
19/ These checks and balances enlarged the selectorate, making it more difficult for presidents to act unilaterally.
20/ The larger the selectorate is, the more distributed agency and power is throughout the system which why Churchilll said “Democracy is the worst form of government, except for all the others."
21/ Because Bitcoin prioritizes security, Bitcoin is “censorship resistant.” Bitcoin achieves this security through public/private key cryptography and the economic incentives around mining.
22/ The censorship resistance of Bitcoin enlarges the selectorate of money in much the same way democracy enlarges the selectorate of political governance.
23/ Unlike electronic money held in your bank account, no one can censor or stop a Bitcoin transaction.
24/ Enlarging the selectorate of money allows individuals to have more say in the governance of money.
25/ Bitcoin represents a way for individuals to dissent from their country's monetary policy if they feel it is damaging in the long-term.
26/ Over the last hundred years or so, this role of a dissenting currency has been played by gold, but Bitcoin is better in some ways: it is less inflationary, more divisible, and easier to transport.
27/ The promise of the censorship resistant money is that it will allow individuals to define for themselves what money is, disintermediating the bankers and enlarging the selectorate and winning coalition of money.
28/ This does not make it a perfectly fair system by any means, but suggests a more equitable distribution of power than we have now.
