Cryptocurrency: Law Language Money Morality of BTC [re: Mises Proofs DEX Competition PoX]

grarpamp grarpamp at gmail.com
Sun Apr 3 20:42:15 PDT 2022


> But if people want to know about problems with PoS, or
> anything else, they should first do some self searches...

Mises Hayek Bastiat Cantillion...

https://dergigi.com/2022/04/03/inalienable-property-rights/

Inalienable Property Rights

  The Law, Language, Money, and Morality of Bitcoin

   [9]730245 [10]<U+1F9E1>

   [11]link to the video

     Video bitcoinized by [12]RD <U+20BF>TC, based on an edit by
                         [13]Ampleforth.
    Original source: [14]An interview with F.A. Hayek (1984)

   -----------------------------------------------------------

   Law. Language. Money. The three paradigms of spontaneous
   and emergent order in society. Moral questions are at the
   root of it all:

     * Who should be allowed to speak?
     * Who should be allowed to publish?
     * Who should be allowed to have property?
     * Who should be allowed to defend said property?
     * Who should be allowed to issue and control the money?

   It might not be obvious at first, but these questions and
   their respective areas - law, language, and money - are all
   related. They are related in general, but, more
   importantly, they are intimately related in the Gordian
   knot that is Bitcoin. Allow me, at least for a moment, to
   try to untangle this knot. Hopefully, without losing the
   thread that makes all of it hang together.

   Let's begin with the last question: the issuance and
   control of money.

  Issuance and Control of Money

     Permit me to issue and control the money of a nation, and
     I care not who makes its laws.

     Mayer Amschel Rothschild

   As Hayek pointed out in the Denationalisation of Money,
   the government monopoly on the issuance and control of
   money is the root of all monetary evil.^[15]1

   If you control the money, you control the purchasing power.
   Which, in turn, allows you to control most other things.

   This is neither hard to see nor hard to understand: if you
   can dictate who gets the money, you can dictate who is well
   off and who is not. If you can decide who is allowed to
   create new money, you can decide who has to work for money
   and who gets it unjustly, with the stroke of a pen or the
   push of a button.^[16]2 If you can control the flow of
   money, you can decide who can pay, who can get paid, who
   can withdraw, who has access to their bank accounts, and
   who has access to financial infrastructure in general. In
   short: you can decide who will be deplatformed from
   society. In the most extreme cases, this is a matter of
   life and death. Who gets to eat and who must starve; who
   gets to prosper, and who must perish.

   This is why questions on the control and issuance of money
   are first and foremost ethical questions.^[17]3 It is a
   moral problem, not a technical one.

   The nature of money is as multifaceted as it is elusive.
   Without a deep understanding of money and an appreciation
   for its importance, it is very hard to understand the
   ethical quandary of money production and dissemination.

     It is well enough that people of the nation do not
     understand our banking and monetary system, for if they
     did, I believe there would be a revolution before
     tomorrow morning.

     Henry Ford

   Money can be traded for goods and services. These goods and
   services are produced and offered by strangers. The
   "stranger" part is important because money is the one thing
   that effectively and peacefully allows us to scale across
   trust barriers. With money, you don't need to trust your
   counterparty—that's the whole point. If the counterparty
   is a good friend of yours, you can rely on credit. Final
   settlement is what removes the trust barrier and allows
   societies to scale.^[18]4 Without money, human cooperation
   has to rely on credit relationships. Everyone has to
   remember who owes what to whom. Without an external
   representation of these relationships—if everyone has to
   keep all these ratios in their head—human cooperation
   can't scale beyond Dunbar's Number, resulting in a maximum
   group size of about 150 people.

   Money, however, is not only used for scalability. It is
   also used for measurement. Thus, in the grand scheme of
   things, money is a measure of what society owes you. The
   whole purpose of money is that you can redeem it for
   something else, anonymously and with final settlement.
   Again: Final settlement means that the deal is done; you
   are not indebted to your trading partner anymore. With the
   exchange of money, the exchange is final.

   Consequently, money is the life-blood of all large-scale
   economic activity. The importance of money and the free
   flow thereof can't be overstated. If we want to live in a
   free, peaceful, and prosperous society, we must not
   interfere with the issue and control of money. After all,
   as Frédéric Bastiat famously said, "When goods do not
   cross borders, soldiers will."

   Fundamentally, there are two ways to get your hands on the
   things of strangers: trade and violence.^[19]5 The
   difference between cooperation and conquest is that one
   interaction is voluntary, while the other is not. Money not
   only facilitates and scales trade, it is also used to
   express individual preferences and valuations. How much are
   you willing to spend for a certain good or service? Are you
   willing to spend money at all, or would you rather save?
   How long are you willing to hold on to your money? How much
   are you willing to invest in certain ventures? Answers to
   such questions are expressed in the language of money,
   which is why the flow of money is not dissimilar to the
   flow of information, or speech.

   This brings us to the next question. The next two,
   actually: who should be allowed to publish? And, who should
   be allowed to speak?

  Freedom of Speech (and Publication)

     Give me the liberty to know, to utter, and to argue
     freely according to conscience, above all liberties.

     John Milton

     Without free speech no search for Truth is possible;
     without free speech no discovery of Truth is useful;
     without free speech progress is checked, and the nations
     no longer march forward towards the nobler life which the
     future holds for man. Better a thousandfold abuse of free
     speech than denial of free speech. The abuse dies in a
     day; the denial slays the life of the people and entombs
     the hope of the race.

     Charles Bradlaugh

     Without an unfettered press, without liberty of speech,
     all the outward forms and structures of free institutions
     are a sham, a pretense—the sheerest mockery. If the
     press is not free; if speech is not independent and
     untrammelled; if the mind is shackled or made impotent
     through fear, it makes no difference under what form of
     government you live you are a subject and not a citizen.

     William E. Borah

   Countless philosophers, authors, thinkers, activists,
   freedom fighters, saints, revolutionaries, and religious
   leaders have made this point in the past: freedom of
   speech, the ability to speak freely without censorship, is
   absolutely essential for a free society. We must be able to
   identify and speak about problems to have a chance of
   fixing them. And, more importantly, we must be able to
   express our thoughts freely if we want to think in the
   first place.

   Sound conversations facilitate distributed cognition, much
   like sound money facilitates distributed production. And
   just like the purpose of money lies in exchange, the
   purpose of speech lies in dialogue (or dia-Logos, to use
   the Vervaekian vocabulary).

     In the beginning was the Word, and the Word was with God,
     and the Word was God. The same was in the beginning with
     God.

     Gospel of John

   There is a reason why the Logos is sacred. The divine
   Word. Speech, statements, discourse. It is discourse that
   makes the freedom of publication a necessity. After all,
   what use is your right to free speech if nobody will ever
   be able to hear you?

   The U.S. constitution got this right:

     Congress shall make no law respecting an establishment of
     religion, or prohibiting the free exercise thereof; or
     abridging the freedom of speech, or of the press; or the
     right of the people peaceably to assemble, and to
     petition the Government for a redress of grievances.

     First Amendment to the United States Constitution

   Freedom of speech. Freedom of the press. It is the first
   amendment for a reason, since it is so unbelievably
   important. If we have free speech, we have a chance at
   liberty. If we lack free speech, we have the certainty of
   tyranny.

     Freedom of speech is the great bulwark of liberty; they
     prosper and die together: And it is the terror of
     traitors and oppressors, and a barrier against them.

     Cato, Letter Number 15

     Liberty is meaningless where the right to utter one's
     thoughts and opinions has ceased to exist. That, of all
     rights, is the dread of tyrants. It is the right which
     they first of all strike down. They know its power.
     Thrones, dominions, principalities, and powers, founded
     in injustice and wrong, are sure to tremble, if men are
     allowed to reason of righteousness, temperance, and of a
     judgment to come in their presence.

     Frederick Douglass

   For all our flaws, this is the one thing we got right. The
   Logos is sacred, as it should be.

  Bitcoin is Free Speech Money

   Why is all of this important in the context of Bitcoin? As
   myself and others have argued many times before, every
   component of bitcoin is text, which makes bitcoin
   equivalent to speech. Bitcoin is Free Speech Money, both
   figuratively and literally.

   What Bitcoin's code facilitates can be understood as a
   language game, an ongoing process of publication and
   rejection.^[20]6 Miners publish blocks, full nodes accept
   or reject said blocks, users publish transactions, ASIC
   chips publish hashes of random inputs, and so on. "It is
   all text, all the time," as Beautyon^[21]7 has so
   succinctly put it. Consequently, as he points out, "it
   cannot be regulated in a free country like the USA with
   guaranteed inalienable rights and a First Amendment that
   explicitly excludes the act of publishing from government
   oversight."

   Understanding these fundamentals is important in more ways
   than one. If we mistake speech for something which it is
   not—ammunition, for example—we run into a conflict with
   the First Amendment, as the [22]Crypto Wars have clearly
   shown in the past. Because of the nature of
   information, [23]outlawing speech will always lead to
   ridiculous consequences, such as illegal numbers, illegal
   primes, illegal art, illegal books, illegal sounds, illegal
   t-shirts, and all the rest of it. It can also lead to
   dangerous consequences: if the stifled information is a
   warning signal—or some other indication that something is
   wrong—error correction can't happen.

   However, words convey meaning, as does information. And
   this meaning is and always will be disconnected from the
   form that said information takes.^[24]8 Words are pointers,
   not reality. If you outlaw a certain word, people will just
   use something else in its place, something that will convey
   the same idea, something that will have the same meaning.
   This is also why outlawing any piece of information is not
   only futile but ridiculous. Information can take on
   virtually endless forms. Consequently, by outlawing a
   certain piece of information, you automatically ban books,
   music, and all other possible representations of said
   information, which, depending on your encoding, might
   be anything.^[25]9

   We went through this in the past. The classification of RSA
   as munition led to exactly such a conflict of free speech,
   which is why t-shirts that have the forbidden information
   on them were printed in the first place: to show how
   ridiculous it all is.

   The Crypto Wars have never ended.

   This is precisely why [26]outlawing bitcoin unavoidably
   leads to thoughtcrimes, illegal numbers, illegal primes,
   and illegal speech. If publishing a certain block, nonce,
   or transaction is ever deemed illegal, the publication of
   said block, nonce, or transaction by ways of books or the
   press will be illegal too. And because all aspects of
   Bitcoin are information, having certain thoughts—such as
   12 words in your head—would be illegal too.

   Which brings us to the question of enforcement, and the
   last two questions of our initial list: Who should be
   allowed to have property? And who should be allowed to
   defend said property?

  Enforcement & Defense of Property Rights

   In the physical realm, property rights are enforced by
   violence or the prospect thereof. It doesn't matter much if
   an individual, the Mafia, or the State is the ultimate
   dispenser of this violence. The fact that there are no
   unbreakable safes, no unpickable locks, and no unbreakable
   glass—in short, no indestructible barriers—requires
   retaliation if property is violated.

   This raises the question: what exactly constitutes a
   violation of property rights? In liberal democracies, the
   "trias politica" of the state—legislative, judicial,
   executive—is what tries to answer this question and
   resolve disputes. As Bastiat put it, the law exists because
   property can be violated, not vice-versa.

     Life, liberty, and property do not exist because men have
     made laws. On the contrary, it was the fact that life,
     liberty, and property existed beforehand that caused men
     to make laws in the first place.

     Frederic Bastiat, The Law

   The fact that physical things are scarce and can be stolen
   or destroyed is what brings property rights into existence
   in the first place. Property rights are a solution to the
   potential conflict of who can use which scarce resource.

   The informational realm is very different. Information is
   non-physical; it can not be attacked or destroyed directly.
   As Wei Dai put it in his  [27]b-money proposal: "the
   threat of violence is impotent because violence is
   impossible, and violence is impossible because its
   participants cannot be linked to their [28]true names or
   physical locations."

   Information itself doesn't have a physical location. The
   nature of information is such that
   information—knowledge—can only be shared, not stolen.
   Information has non-scarcity built-in. To distribute
   information is to copy it—with perfect fidelity and
   without sacrifice. The speaker still retains his knowledge.
   Consequently, Bitcoin does not create digital information
   that can't be copied. Such a thing can never exist.

   What Bitcoin does is it creates an infinite game that
   anyone can join, a game with certain limitations. These
   limitations are not unlike the limitations in a game of
   chess. The squares on the board are scarce because everyone
   wants them to be scarce, not because they can't be copied
   or modified. We could play a different game with twice as
   many squares, but that doesn't mean that this game will be
   played. Like a game of correspondence chess, Bitcoin is a
   game of language. A game in which various players utter
   phrases to each other that are meaningful to them
   individually. Messages are passed back and forth, and
   participants do nothing but accept information they deem
   valid and reject information they deem invalid. It is
   Dialogos at its core, utilizing the nature of information
   to its advantage, as Satoshi pointed out.

     In a nutshell, the network works like a [29]distributed
     timestamp server, stamping the first transaction to spend
     a coin. It takes advantage of the nature of information
     being easy to spread but hard to stifle.

     Satoshi Nakamoto

   Let me repeat the second sentence for emphasis: Bitcoin
   takes advantage of the nature of information being easy to
   spread but hard to stifle.

   We must accept that the nature of information is very
   different from the nature of physical objects. While you
   can own an apple, you can't own a word or a number in any
   meaningful sense. If you want to exclusively know
   something, then you must not share it. You must keep it
   secret. As George Bernard Shaw so succinctly put it: "If
   you have an apple and I have an apple and we exchange these
   apples then you and I will still each have one apple. But
   if you have an idea and I have an idea and we exchange
   these ideas, then each of us will have two ideas."

   These two sentences perfectly encapsulate the problem of
   digital money. You can't double-spend an apple, but when it
   comes to information, there simply is no way
   to not double-spend it. Passing on information is
   "double-spending" said information, which, coincidentally,
   makes the idea of "digital scarcity" an oxymoron. Bitcoin
   does not solve this oxymoron; it circumvents it. The rules
   of the game make invalid information
   useless, not uncopyable. Blockspace is scarce like the
   squares on a chessboard are scarce: by social consensus on
   how the game is supposed to be played.

   The question becomes: how is the game supposed to be
   played? What are the rules of the game, and who can change
   them? Bitcoin's Blocksize War^[30]10 was about this
   question. The resolution of the blocksize wars showed one
   thing clearly: in the end, individual users define, verify,
   and enforce the rules. The full node is sovereign, as are
   the users behind said nodes.

     An apparently overwhelming economic interest group
     [wanted to change the rules]—85% of miners, many
     big-block philosophical supporters in exchanges, payment
     processors, a superficially daunting business lobby
     group—and they lost, because the market prevailed, and
     activist investors said NO. And meant it.

     [31]Adam Back

   This precedent is important if one wants to understand the
   various incentives and dynamics that secure the Bitcoin
   network. While enforcement of Bitcoin's rules is automated
   via code, what Bitcoin is and what it should be—which
   rules are sacrosanct and which rules might be changed—is
   a matter of overlap in individual perception, not dictate.
   There is no instance that is in charge of the rules. There
   are only players that want to play according to certain
   rules, and once they have a way to communicate with each
   other, the game can be played.

   It is important to note, however, that Bitcoin is an
   ongoing, infinite game.^[32]11 It started with the
   Genesis Block, and it has been and is being played by
   myriads of players ever since.

   The goal of the game is to create an indisputable past in
   an ongoing fashion, and it goes something like this:

     * Miners are rewarded with sats to create and protect the
       past
     * Nodes validate this past, creating the network that
       pays the miners
     * Users imbue sats with value

   Users, nodes, and miners are not exclusive roles. You might
   be one, two, or all three.^[33]12

   It's peaceful, I swear. Even with fiat dying on the ground.

   The question about what Bitcoin was and what the rules of
   the game have been are visible to all. Dispute arises when
   we want to define what Bitcoin is and, more importantly,
   what Bitcoin should be in the future. Rule agreement
   happens in the social layer; enforcement happens via code.

   Further, every player is in charge of his own rules. Thus,
   to introduce a new rule, you would have to convince every
   player that your rule is worthy of adoption. That it is
   better, fairer, or more fun to play with your new rule. And
   if your new rule is incompatible with the game that we have
   all played in the past, you will have to
   convince everyone—otherwise, you will split the game in
   two, creating a fork.

   By making rule validation part of the ongoing play itself,
   Satoshi managed to create a system that is verifiably
   unchanging. And because nobody is in charge, you can always
   choose to play by the original rules.

     The nature of Bitcoin is such that once version 0.1 was
     released, the core design was set in stone for the rest
     of its lifetime.

     Satoshi Nakamoto

   This is why the blocksize war was not really a war about
   block size; it was a debate about the soul of Bitcoin. A
   dialogue about Bitcoin's future, a disagreement about what
   Bitcoin is and should be.

   The debate was, in the end, resolved with a chain split. An
   incompatible rule change that—because not everyone agreed
   with the incompatible change—split the Bitcoin network,
   and its community of users, in two.

   This has happened multiple times since, and it will most
   likely happen again. It is an unavoidable consequence of
   any decentralized game. Everyone is free to play by their
   own rules. Everyone is free to fork off.

  A Strange Loop of Law, Language, and Values

   Allow me to revisit the moral questions that we outlined in
   the beginning and answer them on my behalf—which is to
   say Bitcoin's behalf, strangely enough. Because, at least
   currently, my rules—the rules that are responsible for
   enforcing the answers to these questions—are in consensus
   with the Bitcoin network.

     * Who should be allowed to speak? Everyone.
     * Who should be allowed to publish? Everyone.
     * Who should be allowed to have property? Everyone.
     * Who should be allowed to defend said property?
       Everyone.
     * Who should be allowed to issue and control the money?
       Everyone and no one.

   The answer to the last question shines light on a common
   misconception in Bitcoin: miners are not creating bitcoin;
   they are discovering bitcoin that already exists in the
   mathematical space defined by the protocol. The issuance of
   bitcoin is [34]fixed in time, not computation. It is
   pre-determined via the rules of the system and completely
   unrelated to its energy expenditure. Issuance and
   security—and transaction throughput, for that
   matter—are completely orthogonal to each other, as Pierre
   Rochard^[35]13 and others have correctly pointed out in the
   past.

   Above all, the question that is the hardest to grasp for
   those new to Bitcoin is the question of who is in charge
   of the rules, which brings us to a final, crucially
   important moral question:

     * Who should be allowed to force others to change their
       rules? No one.

   You can't force me to play by your rules because I can
   choose to play this game how I please. All I need is a way
   to listen, think, and speak. And as soon as some other
   player agrees with my version of the rules, a networked
   game can be played.

   In the end, this agreement is a question of values—moral
   values, first and foremost, but economic values too.
   Consensus arises if enough people play by the same rules.
   For this to happen, players first need to agree that the
   game is worthy of being played; that the moral values
   embedded in the game are something they value. It is
   this [36]idea-value feedback loop that brings economic
   value into existence.

   Bitcoin is so weird because it does the seemingly
   impossible: it pulls itself up from the bootstraps,
   becoming more valuable and more secure as time goes on. In
   short, Bitcoin issues bitcoin to secure itself. The network
   brings sats into existence, and it is the value of these
   sats that secures the network in turn.

   It's all interlinked. Sats only exist because the Bitcoin
   network exists. The network continues to exist because sats
   exist and have value.

   Bitcoin's core rules are "set in stone" because of the
   dynamics of this ongoing game of words and values. The
   rules are embedded and linked to the past; existing players
   value the rules of the game, or they wouldn't have joined
   voluntarily in the first place. As we shall see, value is
   linked to security, which is probably the most confusing
   thing about Bitcoin's strange loop of law, language, and
   money. If we can't rely on trust or violence, we have to
   rely on mathematics and money.

   This is why Bitcoin had to grow like an [37]organism to
   become truly resilient. Without a trusted third party, both
   value and security have to grow organically over time. This
   is why Satoshi did not welcome too much unnecessary
   attention in the early days.^[38]14 It was his
   responsibility to protect Bitcoin when it was still a
   sapling. Bitcoin is not a sapling anymore, but the same
   forces are still at play: an endless loop of words and
   values, protecting themselves by running the numbers.

  Looting the Loop

   Because Bitcoin is just information, it has to use
   information to protect other information via a process
   of hiding and binding. The confusing part in Bitcoin is
   the binding part because Bitcoin, as we alluded to earlier,
   uses economic binding in addition to the good old
   mathematical binding of public-key cryptography.

   We should remember that information can only be protected
   probabilistically, no matter what. As we have seen,
   information is non-scarce. You can have the same idea as
   someone else without stealing the idea. No matter the
   secret, in theory, you could always be lucky and guess the
   secret.

   The reason why modern cryptography works is that it makes
   use of an outrageously large search space, which makes any
   randomly chosen secret virtually impossible to guess in
   practice. We can confidently slap the label "impossible to
   guess" on it because guessing—flipping bits—requires
   time and energy. In Bitcoin, for example, the space of all
   possible private keys is so mind-bogglingly large that no
   supercomputer could ever guess it in a reasonable amount of
   time. It will always take [39]millions of years, even
   using the best computers that we could possibly build. This
   is why, practically speaking, securing information with
   strong cryptography is unbreakably secure. Given that the
   private information remains private, of course.

   Using private information is the conventional way to secure
   public information cryptographically. It is also the
   conventional way to ensure its validity and integrity.
   Someone holds a private key, and this person or entity is
   responsible for keeping the key secret. Consequently, the
   security/integrity of the encrypted/signed public
   information relies on this trusted third party.

   Here is the riddle to be solved: how can we create public
   information with similar security and data integrity
   guarantees without the use of any private information?

   Remember that money is just a ledger, a list of who owes
   what to whom. If we want this ledger to be trustworthy, it
   needs to be public and auditable. Further, we need
   strong assurances of authenticity, i.e., we need to be
   able to trustlessly verify that nobody tempered with past
   records and that the records are not made up. That's why we
   need the [40]costly signal of proof-of-work: to create a
   past that is unfathomably expensive to fake. You are bound
   to the result via the very real costs that had to be sunk
   into creating the signal in the first place.

   In Bitcoin, anyone can look at the block hash of the
   current block, 729170, and know at a glance, just by
   looking at the leading zeroes, that a lot of work—or, in
   other words: time, energy, and money—went into creating
   this string:

 0000000000000000000627b7cbed46b1184677d48fef56649ef269bc3bfc345c

   It was costly to find this number. Someone or something
   had to think very hard to be able to speak it. The reason
   why we can be so confident in the costliness of this block
   hash is that—according to the rules—its very existence
   is highly improbable. The fact that it exists and that it
   is valid is what makes it part of the ongoing game that
   all bitcoiners play. Its validity makes it accepted by the
   network, turning it into one building block of the
   timechain's past.

   Further, this building block contains all of Bitcoin's
   history. It contains a hash of the previous block, and the
   previous one contains a hash of the block that came before,
   and so on and so forth, all the way back to the Genesis
   block. This little piece of information speaks for all of
   Bitcoin's unchanging history up to the point of its
   creation. A history that you can't simply make up—you
   have to bring it into existence by rolling the dice, by
   playing the game according to its rules.

   One of the clearest thinkers when it comes to this property
   of proof-of-work is probably Adam Gibson, who wrote at
   length about this [41]reification of information. Because
   thinking requires energy, and because playing in accordance
   with the rules requires thinking, Bitcoin's blocks are
   informational constructs that behave as if they have
   concrete, material existence.

     Demanding a low entropy output from a hash function
     results in a costly signal which is very unambiguous and
     easy to verify [...] The creation of these hashes
     represents a kind of reification of information. The
     zeros in the above block hash digest are just a pattern,
     but hidden in that pattern is a real energetic raw cost,
     that can be quantified. [...] In an adversarial
     environment, one in which there are stakes, picking out
     the "real" from the "fake" means identifying signals
     which are objective, and the only signals that are
     objective are the ones that are demonstrably costly.
     [...]

     [42]Adam Gibson

   Demonstrably costly signals are the only thing that can
   publicly prove that something has happened—without the
   need of any secret information. And, more importantly,
   without the need for any keepers of this secret
   information. This is also why all good money needs to have
   unforgeable costliness, as Szabo pointed out in the past.
   Anything that doesn't have any real cost—cost that is
   immediately obvious and can be verified by anyone at a
   glance—can be trivially forged or simply made up. In the
   words of [43]Hugo Nguyen: "By attaching energy to a block,
   we give it 'form', allowing it to have real weight &
   consequences in the physical world."

   If we remove this energy, let's say by moving from miners
   to signers, we reintroduce trusted third parties into the
   equation, which removes the tie to physical reality that
   makes the past self-evident.

   It is this energy, this weight, that protects the public
   ledger. By bringing this unlikely information into
   existence, miners create a transparent force-field around
   past transactions, securing everyone's value in the
   process—including their own—without any use of private
   information.

   Here comes the part that is tricky to understand: the value
   that is protected is not only value in
   the monetary sense, but the very moral value of the
   integrity of the system. By extending the honest chain with
   the most work, miners choose to act honestly, protecting
   the very rules that everyone agrees to. In turn, they are
   rewarded monetarily by the collective that is the network.

   It is important to differentiate
   between morality and monetary value because Bitcoin
   wasn't created to make money; it was created to fix the
   money. It was created to go beyond the broken moral
   frameworks of existing monies, to bring something into
   existence that can't be captured and corrupted easily.

   This is why Satoshi chose to build a system with an
   unchanging soul. This is why the rules have been "set in
   stone" since day one. Bitcoin's consensus rules are what
   provide definitive answers to the ethical questions
   listed in the opening paragraph. Questions of money
   production, control, freedom, and sovereignty. Bitcoin
   embodies moral values; its rules define how the game of
   money should be played. Stray from these values, and you
   will destroy what made Bitcoin valuable to people in the
   first place. Break the moral code, and it will be worthless
   in the long run.

   The circular nature of Bitcoin makes everything hang
   together: the supply cap of 21 million derives from the
   full sovereignty of the user over her node. It is protected
   by a symbiotic relationship between users, miners, and the
   nodes that make up the network. Bitcoin puts the individual
   at the center, removing the need for rulers and putting
   rules in place instead.

   Bitcoin is free software, free as in freedom. As long as
   users have and make use of the [44]four essential
   freedoms inherent in free software, anyone is able to run
   the numbers and voice their individual preferences. By
   speaking their own individual truths and rejecting the lies
   of others, users can easily and cheaply pronounce
   that [45]invalid blocks need not apply.

   Likewise, miners are free to run the numbers on their end,
   providing public protection via a perfect competition that
   only requires thinking and speaking—or, in other words:
   electricity and a communications channel—to enter. Miners
   are rewarded with a currency that is internal to the
   network, which aligns incentives and makes the relationship
   symbiotic.

   In other words: the security of the public record depends
   on the value of the sats that are held in private, and the
   value of the sats depends—at least in part—on the
   security guarantees of the public record and the confidence
   in the integrity of its past and future.

   To disrupt this ongoing game in any meaningful sense, you
   have to overwhelm all honest players by expending resources
   only useful in the game itself. It is way more profitable
   to protect the system and its rules: honest play is
   rewarded, dishonest play is not. Further, any disruption
   will devalue the sats that are used to repay those who play
   the game. In addition to all of that, if a motivated
   attacker continues to disrupt the play for prolonged
   periods of time, there is always the chance of a
   large-scale user revolt, as has happened in the past. Users
   are free to change the rules ever so slightly—via a
   user-activated soft-fork, for example—which provides an
   additional layer of protection against disruption. Any
   dishonest player thus always runs the risk of losing out on
   rewards completely. Just like the mathematical binding that
   makes any guessing of Bitcoin's private information
   unfeasible, this economic binding makes any corruption of
   Bitcoin's public information unprofitable.

   Because of this, Bitcoin can be understood as "vitrium
   flexile," to use a mythical reference. The glass of Roman
   legend—a transparent substance that is virtually
   indestructible. Bitcoin creates a global vault made of this
   substance, and because it can only protect its native
   asset, it is as if this glass vault would empty itself as
   soon as someone tried to break the glass.

  Ten-tenths of the Law

   The whole point of Bitcoin is to remove humans from the
   issuance and control of money. As Szabo put it: "[Bitcoin]
   implements data integrity via computer science rather than
   via 'call the cops'". Nobody can help you if you lose
   forget your private key. Nobody can reverse a transaction
   once it is confirmed and buried beneath a couple of blocks.
   It doesn't matter who you call.

   We all know the saying that possession is nine-tenths of
   the law. Bitcoin, however, is binary. In Bitcoin,
   possession is ten-tenths of the law. And it is not
   possession in the ordinary sense.

   A private key is information, which means that possession
   is knowledge—secret knowledge. In that sense, "owning"
   bitcoin is knowing a secret. This fact is why you can hold
   bitcoin in your head. In Bitcoin, "owning" is knowing.

   However, "ownership" alone is not enough. You also need the
   corresponding public information that makes your secret
   phrase useful. After all, a [46]magic spell is only
   useful if it changes something in the real world, something
   that everyone can verify with their own eyes. In Bitcoin,
   this is the public ledger: the verifiable record of who
   "owns" what.

   Technically speaking, your private key allows you to spend
   UTXOs, which are basically the sats in your wallet. The
   secret you know allows you to craft a magic spell—a
   transaction—that will transfer your sats to someone else
   (or yourself).

   It is this interplay of public and private information that
   defines ownership and property rights in Bitcoin, and it is
   the interplay of miners, nodes, and holders that is
   responsible for the enforcement of said rights. And because
   you yourself will always be able to hold your own key, run
   your own node, and calculate your own hashes, you will
   always be able to be self-sovereign.

   You yourself can be judge, jury, and executioner in
   Bitcoin. Your rules dictate which transactions are valid
   and which are not. Your private key is all that's needed to
   create a valid transaction. Your node is all that's needed
   to validate said transactions. Your miner has the power to
   preserve the past. In Bitcoin, you truly are sovereign.

  Cryptosovereignty through Cryptoeconomics

   Because bitcoin is digital money without any central
   authority, enforcement has to happen via cryptography and
   the cost of breaking cryptography. We do not have the
   luxury of making use of various efficiencies that central
   authorities bring: removing central authority is the whole
   point.

   As mentioned previously, authority is removed via an
   asymmetry in cost. Cryptography makes it possible to
   create barriers that can not be violated by force. Such a
   barrier does not exist in the physical domain; it only
   exists in the informational domain: in the realm of
   ideas.

   Allow me to repeat an important point: Bitcoin is a
   cryptoeconomic system, so we have to differentiate between
   two types of asymmetries: cryptographic ones
   and economic ones.

   Your private information is secured by secrecy and
   strong cryptography. Your public information is secured
   by sunk costs and the incentives to be reimbursed for said
   costs. The first security guarantee is mathematical; the
   second is economic.^[47]15

   Both are rooted in the physical limits of computation. Both
   massively favor the defender, which is why—if you are
   absolutely hell-bent on using combat language—bitcoin is
   a shield, not a sword. It is indestructible bulletproof
   glass, not a gun.

     With cryptography in the digital domain there is an
     impenetrable asymmetric defense advantage. It's like
     everyone is walking around with a nuke proof personal
     force field.

     [48]Adam Back

   Your private key is secure because no amount of compute
   will ever be able to guess it. It's about physics, not
   technology, as [49]Bruce Schneier pointed out: "These
   numbers have nothing to do with the technology of the
   devices; they are the maximums that thermodynamics will
   allow. And they strongly imply that brute-force attacks
   against 256-bit keys will be infeasible until computers are
   built from something other than matter and occupy something
   other than space."

   Your UTXOs are secure because it takes an economically
   unfeasible amount of compute to change the past that brings
   said UTXOs into existence.

   All of Bitcoin's security is rooted in the fact that
   computation requires energy. The mathematical binding
   that protects Bitcoin's private keys is just way stronger
   than the economic binding that protects Bitcoin's public
   ledger, but it is very similar in nature. The main
   difference is that we can't rely on the "absolute" security
   that private keys would bring because we don't have the
   luxury of referring to a quorum that would hold this
   private information. We have to rely on game theory and
   economics.

   The game-theoretical aspects of Bitcoin are probably the
   hardest to understand because there is no way to have
   absolute proof of any security guarantee in the future. It
   is impossible to say how thick the shield has to be, to
   stick with the previous metaphor. We can not know how much
   effort a dishonest player is willing to muster. And, as
   long as the game can be played anonymously, all a dishonest
   player can do is make moves in the game itself: by speaking
   words, by providing information to other players.

  Non-Violent Play

   Here is the real innovation that Bitcoin brings: Nakamoto
   Consensus allows us to settle disputes without the threat
   of violence. Disputes are settled via a probabilistic game,
   a game of words and math, with multiple parties competing
   in their own self-interest. Once the dispute is
   settled—buried under a few blocks of provably rare
   information—it is settled for good.

   We can rely on the eventual settlement of disputes because
   of probabilities and determinism: random selection and
   deterministic computation.

   Computation, like thinking, requires energy. While the game
   might be abstract, the electrons are not. To play the
   Bitcoin game at any meaningful speed and scale, electricity
   and specialized equipment have to be used. This is no
   different than TCP/IP, one of the base protocols of the
   internet. We could run TCP/IP on [50]carrier
   pigeons—there is even an [51]official specification for
   that—but for the sake of efficiency, we use computers and
   high-speed communication networks. The same is true for
   LNP/BP—the Lightning Network Protocol, and the Bitcoin
   Protocol. We could use pen and paper to play the game, but
   it wouldn't be very efficient or very useful.

   While the physical infrastructure that is used to play
   Bitcoin more efficiently is prone to violent attacks, the
   essence of Bitcoin and the data it produces are not.
   Bitcoin is code. Bitcoin is speech. Bitcoin is text. As are
   all private keys and the public ledger that defines the
   UTXO set.

   Once the players have hashed it out—pun intended—the
   potential for violence quickly moves to the background. The
   one-way street of Bitcoin's difficulty-adjusted
   proof-of-work transmutes kinetic energy into
   intersubjective assurances that are valued by individuals,
   assurances that exclusively reside in the domain of
   information.

   Bitcoin's proof-of-work serves as a bridge between the
   world of atoms and the realm of information. This bridge
   can be built in one way and one way only: by coming up with
   information that is so unique, so preposterously unlikely,
   that certain things had to happen in the real world for
   this information to appear. The rules of the game and the
   nature of physical law allow for no other possibility.

   Because the information speaks for itself, once a valid
   block is found, we move from the domain of violence to the
   domain of ideas. The work is done, the word has been
   spoken, and as soon as this information propagates to other
   players, the cat is out of the bag. Flesh became Word, and
   words—like ideas—are bulletproof.

   It is this transformation, the "reification of
   information," as waxwing calls it, that makes bitcoin an
   inalienable right. You can hold sats in your head if you
   manage to memorize 12 words. You can play bitcoin with pen
   and paper if you are so inclined. Every aspect of Bitcoin
   can be transformed into speech.

   Because Bitcoin is speech, participating in and holding
   Bitcoin is exercising your God-given right to speak and
   think. The fact that you are using a Turing machine
   connected to a digital communications network to speak and
   think more efficiently doesn't matter. It is all text, all
   the time—communication, not violence.

   Others have written about the nuances and implications of
   the above at length, most notably Erik Cason and Eric
   Voskuil. I recommend reading their respective
   works—[52]Cryptosovereignty &  [53]Cryptoeconomics
   —in full if you want to understand said nuances and
   implications deeply.

     The code alone is sovereign. There is no exception.

     Erik Cason

   Bitcoin provides an automated framework for
   trust-minimized, digital money. It defines the rules of the
   game and makes changing these rules incredibly hard because
   new rules have to be backward-compatible and adopted
   voluntarily by its users.

   No central authority dictates the rules. You learn the
   rules, and you either agree to play the game or you don't.
   Wherever two people meet that play according to the same
   rules, the game can be played. What differentiates play
   from other things—war, for example—is that play is
   voluntary. You have to agree to it. Nobody can force you to
   play a game that you don't want to play.

   The fact that Bitcoin is a game of language is equally
   important. Speaking does not infringe on anyone else's
   rights. In a free society, you should be able to speak
   freely. In a free society, nobody should be able to force
   you to speak or dictate what you say. Even when living
   under tyranny, nobody can force you to think certain
   thoughts or take them away from you. "Thoughts are free,"
   as the German folk song goes. "No person can know them, no
   hunter can shoot them."

   [54]link to the video

   Consequently, the rights and freedoms granted to you by
   Bitcoin are independent of the rights and freedoms granted
   by the state. Bitcoin embodies your natural rights; it
   does not grant you legal rights. The part that is hard to
   grasp is the Gordian knot of interlocking incentives and
   cryptography that makes up the judge, jury, and executioner
   of the Bitcoin network. When push comes to shove, there is
   no authority: it's all you. You can be your own judge,
   jury, and executioner if you are so inclined.

   That's why "21 million" is sacrosanct. It is sacrosanct to
   me, and I will continue to play this game according to the
   rules that bring 21 million into existence. I will refuse
   to play by any rules that would lead to a change of this
   limit, just like I will refuse to play chess on any board
   that is larger or smaller than 8x8 squares. When someone
   knocks at my door and forces me to change the consensus
   parameters of my Bitcoin node, I will refuse. And if
   someone else is as stubborn as I am—given that we have a
   way to communicate—the Bitcoin network will exist.

   This, finally, brings me to the last bend of the Gordian
   knot that speaks Bitcoin's freedoms into existence:
   responsibility.

  Responsibility

     Freedom makes a huge requirement of every human being.
     With freedom comes responsibility.

     Eleanor Roosevelt

   I see it as my responsibility to exercise these inalienable
   rights and stand for the values that Bitcoin embodies.
   "Running the numbers is not a crime," as a good friend of
   mine once remarked. It is my responsibility to hold my own
   keys and run my own node. It is my responsibility
   to [55]know the rules. It is my responsibility to accept
   or refuse changes. It is my responsibility to exercise my
   right to free speech and free thought. It is my
   responsibility to buy and hold bitcoin, to use it, to imbue
   it with value.

   The freedoms that Bitcoin grants me—the freedom to
   transact, the freedom to save, the freedom to remain
   private—are a consequence of sovereign individuals all
   over the world likewise shouldering these responsibilities,
   voluntarily. They might do it out of necessity, or out of
   economic self-interest, or because they simply believe that
   it is the right thing to do; but they all do it because
   they accept the rules and believe that the Bitcoin game is
   a worthwhile game to be played. They all agree that Bitcoin
   is valuable.

   I want to emphasize again that Bitcoin is all text, all the
   time. Consequently, it is a game of thought and speech, and
   thus you don't need anyone's permission to play it. By
   holding your own keys and running your own node, you
   exercise your natural right to think (do math)
   and speak (broadcast information). It is a game that is
   most beneficial when played with others, but other players
   are not strictly necessary. I can play it alone, just like
   Satoshi did when he ran the first Bitcoin node. Playing
   alone is neither fun nor very useful, but it is and always
   will be possible. And as soon as a communication channel
   exists, a second player can join.

   In Bitcoin, the individual is sovereign. By shouldering
   these responsibilities, you, the sovereign individual, are
   saying: "My thoughts are mine and mine alone. I will speak
   freely, about whatever I want and with whom I please. It is
   my God-given right to protect myself; I will not be stolen
   from."

   Consequently, the enemies of Bitcoin are enemies of freedom
   and sovereignty. They are saying: "I don't want you to have
   these rights. I don't want you to speak freely. I don't
   want you to use your capacity to think about whatever you
   want. I don't want you to have the freedoms that this
   language game bestows upon you. I don't want you to
   transact freely. I don't want you to protect your savings."

   Yes, governments can pass laws that outlaw the use of
   Bitcoin. However, Bitcoin works the way it works precisely
   because such a ban is anticipated, not feared. Bitcoin
   nodes send and receive messages, as do miners. The fact
   that some of these messages are hard to craft is a feature,
   not a bug. It is individuals that give these messages
   value; individuals that have 12 words stored somewhere;
   individuals that believe in the core value of Bitcoin in
   the first place: financial freedom and the separation of
   money and state.

  Conclusion

   Law, Language, and Money. Out of these three, only law and
   language were allowed to evolve, as Hayek pointed out. The
   money was captured, by banks and the state alike. It is
   this capture that is at the root of all monetary evil. A
   capture too profitable to ever give up.

   Because of this capture, Satoshi knew that he could not ask
   for permission to evolve the money. He had to find a
   roundabout way that uses language to speak the Hayekian
   dream of a stateless money into existence. A money that
   creates and enforces its own set of laws:

     * You shall not confiscate.
     * You shall not censor.
     * You shall not inflate.
     * You shall not counterfeit.

   This is the essence of the laws of Bitcoin, a global and
   neutral money accessible to all. Anyone can enforce these
   laws through speaking and listening with their nodes:
   accepting valid messages and rejecting those that break the
   rules. Anyone can contribute to the cumulative shield that
   protects Bitcoin's past. Anyone can craft transactions and
   run the numbers that define the future. All that's needed
   is a way to do the math and a way to communicate with
   others.

   Anyone can play according to their own set of rules. It is
   overlap and agreement that makes Bitcoin's rules, not
   authority.

   Thanks to Bitcoin, anyone can use the asymmetric defenses
   of cryptography to their economic advantage. Asymmetry is
   at the heart of Bitcoin's security: hard to guess, easy to
   verify. Cooperation is rewarded; conflict is not. Your keys
   are private; the ledger is public. Defense is cheap;
   disruption is incredibly costly.

   It is the asymmetry in cost that gives rise to the
   cryptoeconomical game theory of Bitcoin. Peaceful and
   voluntary cooperation; mutually assured preservation.
   Sovereignty through cryptography.

   Law, Language, and Money. A healthy trifecta of these three
   is absolutely essential for a free society to flourish. If
   freedom is a value you hold in high regard, this translates
   to (1) free speech, (2) sound money, and (3) individual
   property rights. Bitcoin uses (1) to create (2) and enforce
   (3)—without the necessity of violence. After all, no
   amount of violence will ever solve a math problem, as Jacob
   Appelbaum said so beautifully.

   We, as a society, are responsible for upholding the
   sacredness of free speech. You, as an individual, are
   responsible for exercising this freedom and taking it
   seriously. In the realm of Bitcoin, this translates to
   holding your own keys, running your own node, and doing
   your own proof-of-work.

   We don't need a separate "right to send a transaction." It
   is an inalienable right in a free society, a society that
   takes free speech seriously. We don't need a law that will
   allow us to use electricity to do math more efficiently.
   After all, mining is nothing but an automated way of trying
   to find a matching random number efficiently. We don't need
   a separate "right to have a wallet." A wallet is nothing
   but a comfortable way to sign a message—a calculator if
   you will. We don't need a separate law that allows you to
   hold bitcoin. You are a free individual. You have the
   inalienable right to memorize 12 words in your head.

   Nothing of the above should ever be illegal. In a free
   society, a society that holds certain truths to be
   self-evident, none of the above should ever be outlawed. If
   the course of human history has yielded any fundamental
   insights for the optimization of human flourishing, it is
   that speech, and the free exercise thereof, is sacred. The
   Logos is sacred because the ability to speak freely is the
   fundamental prerequisite for the discovery and
   communication of Truth itself, the place from which all
   goodness emanates.

   If speech and the free exercise thereof is sacred, then
   Bitcoin is sacred, because all that Bitcoin requires of you
   is to think and to speak. Anyone is free to participate
   in this game of words and numbers; a game that embodies
   answers to various questions of ethics and morality; a game
   that is played without an ultimate end, but with absolute
   limitation: 21 million, never more. It is you that brings
   this limitation into existence: by shouldering the
   responsibility of running the numbers, by exercising your
   inalienable right to think and to speak. And through that,
   absolute Truth emerges—without the need to spill a single
   drop of blood.

   -----------------------------------------------------------

   This essay is an amalgamation of multiple chapters of my
   upcoming book [56]21 Ways. Like my first book, it will be
   published under a [57]permissive license. You can
   [58]support me in writing it.

   -----------------------------------------------------------

  Acknowledgments

     * Thanks to [59]John, [60]Max, [61]Erik, [62]Mr. Hodl,
       and [63]my patrons for their valuable feedback on
       earlier drafts of this essay.

   -----------------------------------------------------------

    1. Hayek, F. A. (2009). [64]Denationalisation of money:
       the argument refined. Ludwig von Mises
       Institute. [65]*

    2. This injustice is called the 'Cantillion Effect' and is
       especially pronounced in fiat money because fiat money
       can be printed out of thin air. For monies like gold or
       bitcoin, there is no free lunch since the money is not
       made up. One has to dig it out of the ground. The fact
       that this ground is mathematical, as is the case with
       Bitcoin, doesn't matter much. If you have to perform
       work to find new units, the money is not fiat
       money. [66]*

    3. Jörg Guido Hülsmann, The Ethics of Money
       Production [67]*

    4. Nick Szabo, Money, Blockchains, and Social
       Scalability [68]*

    5. This includes gifts since you are trading your gift for
       reciprocity, karma, a friendly society, or similar
       ideas. See Hülsmann, Graeber. [69]*

    6. Warmke, C. (2021). [70]What is bitcoin?. Inquiry,
       1-43. [71]*

    7. Beautyon (2018). [72]Why America Can’t Regulate
       Bitcoin [73]*

    8. Funnily enough, the encoding problem—the disconnect
       between the real world and the world of
       information—is at the root of the problem of digital
       money. Bitcoin solves this problem via its
       difficulty-adjusted proof-of-work algorithm, which, I
       believe, is the only way this problem can be solved.
       In Bitcoin, [74]the map is the territory. [75]*

    9. Wikipedia contributors. (2022, March 23). [76]Gödel
       numbering. In Wikipedia, The Free Encyclopedia.
       Retrieved at 730,136 [77]*

   10. Jonathan Bier (2021), [78]The Blocksize War [79]*

   11. James P. Carse (1987), [80]Finite and Infinite
       Games [81]*

   12. Shout-out to bitstein for sharing his view on
       [82]Bitcoin governance. [83]*

   13. Noded 78, [84]32:50 [85]*

   14. "It would have been nice to get this attention in any
       other context. WikiLeaks has kicked the hornet's nest,
       and the swarm is headed towards us." —[86]Satoshi
       Nakamoto [87]*

   15. Of course, even though the relationship between a
       private key and a public key is mathematical, trying to
       crack this relationship is again a problem of cost. But
       it is so outrageously difficult to get a private key
       from a public key that it is not only uneconomical, it
       is virtually impossible. [88]*

   -----------------------------------------------------------

   9. https://www.blockstream.info/block-height/730245
  11. https://dergigi.com/assets/video/hayek.mp4
  12. https://twitter.com/RD_btc
  13. https://youtu.be/9-uo-KfnkhI
  14. https://youtu.be/s-k_Fc63tZI
  22. https://en.wikipedia.org/wiki/Crypto_Wars
  23. https://dergigi.com/2021/08/02/implications-of-outlawing-bitcoin/
  26. https://dergigi.com/law
  27. https://21-ways.com/1/#b-money-wei-dai-1998
  28. https://dergigi.com/2020/07/21/true-names-not-required/
  29. https://dergigi.com/time
  31. https://twitter.com/adam3us/status/1505101863737307141
  34. https://dergigi.com/2021/01/14/bitcoin-is-time/
  36. https://dergigi.com/2019/05/01/bitcoins-gravity/
  37. https://dergigi.com/2019/08/07/proof-of-life/
  39. https://21lessons.com/15/
  40. https://reyify.com/blog/pow-a-pictorial-essay
  41. https://archive.ph/BJpZH
  42. https://archive.ph/BJpZH
  43. https://archive.ph/UsIOC
  44. https://www.gnu.org/philosophy/
  45. https://medium.com/hackernoon/bitcoin-miners-beware-invalid-blocks-need-not-apply-51c293ee278b
  46. https://21-ways.com/ch0-04-building-blocks/
  48. https://twitter.com/adam3us/status/1505087191554351109
  49. https://21lessons.com/15/
  50. https://en.wikipedia.org/wiki/IP_over_Avian_Carriers
  51. https://en.wikipedia.org/wiki/IP_over_Avian_Carriers
  52. https://cryptosovereignty.org/
  53. https://bitcoin-resources.com/books/cryptoeconomics
  54. https://dergigi.com/assets/video/die-gedanken-sind-frei.mp4
  55. https://www.youtube.com/watch?v=iik25wqIuFo
  56. https://21waysbook.com/
  57. https://dergigi.com/license/
  58. https://dergigi.com/support/
  59. https://twitter.com/johnkvallis
  60. https://twitter.com/HillebrandMax/
  61. https://twitter.com/Erikcason
  62. https://twitter.com/MrHodl/
  63. https://dergigi.com/patreon
  64. https://mises.org/library/denationalisation-money-argument-refined
  70. https://philpapers.org/go.pl?id=WARWIB&proxyId=&u=https%3A%2F%2Fcraigwarmke.com%2Fs%2FWIB.pdf
  72. https://archive.ph/yAOwZ
  74. https://dergigi.com/memeworld
  76. https://en.wikipedia.org/w/index.php?title=G%C3%B6del_numbering&oldid=1078810674
  78. https://bitcoin-resources.com/books/the-blocksize-war
  80. https://www.goodreads.com/book/show/189989.Finite_and_Infinite_Games
  82. https://twitter.com/bitstein/status/901500957862899712
  84. https://pod.link/1308074867/episode/7ba1dfec402781fa77b57359c3a6fe7c
  86. https://satoshi.nakamotoinstitute.org/posts/bitcointalk/542/


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