People create new ways of doing things. This alters incentives and shifts behaviours. Creative destruction ensues and opportunity creates new players, rules & systems.
Restrict innovation and a jurisdiction will fall behind.
There are three key markers of a disruptive innovation: 1. Born from a catalyst 2. Perceived as a toy/novelty 3. FUD from incumbents/concerned citizens
Let’s look at how Bitcoin has tracked these over time.
Satoshi’s message in the genesis block points us to the GFC and subsequent bailout of financial institutions.
The architects of the crisis would be protected from the full consequences of their actions.
Opposition to new innovation largely comes from those with the most to lose- incumbents who are invested in the existing systems or dependent on them for their income.
Here’s a helpful tool for understanding how people think about new technologies. It’s known as Amara’s Law.
Let’s take a step back and define innovation.
“Innovation is the business of turning a new device into something practical, affordable and reliable that people will want to use and acquire.” @mattwridley
Innovation is an iterative process. It’s the result of lots of tinkering, trial & error, and building on existing ideas/methods.
“the invention of Bitcoin represents the discovery of absolute scarcity, or absolute irreproducibility, which occurred due to a particular sequence of idiosyncratic events that cannot be reproduced.” -@Breedlove22
This takes us to a new paradigm. We now have a digitally-native money that is global, permissionless and operates 24/7.
“technology often changes where business value is derived from.. Digital delivery changed the rules. Information could travel much further and faster, and, as a result, it reduced the value of traditional distribution power.” @JeffBooth
Bitcoin also alters the balance of power in the social contract between individuals and jurisdictions, increasing the leverage of the individual in the negotiation.
Capital and talent will now go to where it’s treated best, inciting jurisdictional competition.
In modern human history, there here have been three major shifts in how we organize society:
Each transition has been the result of innovations that fundamentally shifted our behaviour (en masse) by offering new efficiencies and incentives
The current transition that’s underway- from the Industrial Age into the Information Age- is being ushered in as a result of its own set of remarkable innovations.
Once again we’re seeing the process of creative destruction play out as institutions of the past, designed for a different time with different rules, lose relevance.
But as mentioned earlier, the speed of change/rate of adoption is exponentially faster when the majority of the world is connected by a ‘network of networks’- the internet.
“Lightning is a new set of rules. A new protocol on top of the Bitcoin network...giving this natively-digital bearer-instrument cash finality.
The first killer app of the Lightning Network is clear as day- it's making borderless payments free and instant.” @JackMallers
“The existing monetary networks- you’ve got ACH + Visa, ACH + Square, ACH + PayPal. Bifurcated networks that exist independent from each other.
What @ln_strike is trying to achieve is ACH + the Bitcoin network- a global open monetary network.”
“We’ve set up lightning + Bitcoin infrastructure all over the world. There’s strike infrastructure that represents Central America, Ireland, UK, Australia, Canada. We’ve got all these nodes in this monetary network set up, acting on behalf of users in that geographical location.”
Speaking to @RealVision, Saylor laid out his concerns with the current rate of monetary expansion:
"I came to the horrifying conclusion that I’m sitting on a $500M ice cube that’s melting. It’s melting at 6% in a good year. Then you realize this year it’s melting at 25%."
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In an interview with @KeithMcCullogh, Saylor cautions against financial models that fail to account for the adoption of new networks:
“What happens if 10 billionaires decide to buy $1B of bitcoin each and announce it…all of your models are destroyed, completely devastated.“
1/ “When a nation's money is no longer a source of security, and when inflation has become the concern of an entire people, it is natural to turn to…other societies who have already undergone this most tragic and upsetting of human experiences.”
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2/ “The agony of inflation, however prolonged, is perhaps somewhat similar to acute pain — totally absorbing, demanding complete attention while it lasts; forgotten or ignorable when it has gone..”
3/ “In the eight years since 1913, the price of rye bread had risen by 13 times; of beef by 17. Sugar, milk, pork and even potatoes had risen between 23 and 28 times; butter had gone up by 33 times.
These were only the official prices — real prices were often a third higher”
'The Lessons of History' by Will & Ariel Durant is a masterclass in the predictability of human nature.
It teaches us what changes over time and what remains constant. Use it to guide your thinking.
“In every age men have been dishonest and governments have been corrupt.”
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1/ “Generations of men establish a growing mastery over the earth, but they are destined to become fossils in its soil.
Human history is a brief spot in space, and its first lesson is modesty.”
2/ “life is competition. peaceful when food abounds, violent when the mouths outrun the food.
We are acquisitive, greedy, and pugnacious because our blood remembers millenniums through which our forebears had to chase and fight and kill in order to survive.”
To appreciate Bitcoin's potential you must first understand why societies converge on a single form of money.
No essay argues this more convincingly than ‘Bitcoin Obsoletes All Other Money’ by @parkeralewis
"All forms of money compete with each other for every exchange."
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“Think of each individual as a potential trading partner.
As individuals adopt the common medium as a standard of value, all existing participants in the monetary network gain new trading partners...
There is mutual benefit, and ultimately the range of choice expands.”
“Money represents the collective recognition that everyone benefits from the existence of a common language to communicate individual preferences. It aggregates and measures the preferences of all individuals within an economy, at any point in time..”
A few months ago I recapped the thesis laid out by @JeffBooth in ‘The Price of Tomorrow’ explaining the effects of deflationary technology.
This thread covers the other half of the equation- inflationary money.
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1/ “It wasn’t housing itself that caused the 2008 bubble. If it hadn’t been housing, it would have been somewhere else that easy credit was flowing to. The continuing rise of debt that cannot be paid back was at the heart of the housing crises & will be at the heart of the next.“
2/ “A bubble pops when people wake up and realize that the debt can never be paid off. At that point, credit is removed—and because easy credit was the main thing causing the run-up, assets collapse.”