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/
More information about the cypherpunks
mailing list