Remix,s Moments

  Bitwage has processed the world’s first Lightning payroll. The company processed a salary payment entirely on the Lightning Network, Bitcoin’s layer 2 scaling solution for fast and cheap bitcoin payments. “Bitcoin’s Lightning Network promises the ability to enable global, instant payments for almost no fees,” Bitwage said in a statement sent to Bitcoin Magazine. “Our vision for Lightning payroll is one where any user can add the wallet of their choice, get paid their salary, and immediately spend it through any merchant connected to the main network.” The firm processed two salaries as Lightning payouts. The first went to the CEO of Pan African Bitcoin-native fintech company Bitnob, Bernard Parah, and the second, to USL professional soccer player Alex Crognale. “The concept of lightning payroll means I can get paid by the hour or even by the minute,” Parah said in a statement. “Time means money, this is it.” Bitwage partnered with ACINQ, a French startup dedicated to building Bitcoin-native products and services, to help Parah secure enough inbound liquidity. ACINQ leveraged its large Lightning node to ensure the transaction was correctly processed. “As the network matures and its capacity increases, it becomes suitable for larger and larger transaction amounts, as Bitwage has demonstrated by paying a salary over Lightning,” ACINQ CEO Pierre-Marrie Padiou said in a statement. The second payroll payment turned Crognale into the first professional athlete to get paid entirely over Lightning. The defender of the United Soccer League’s Birmingham Legion used the Wallet of Satoshi, a custodial Lightning wallet, to receive his payout. “Being paid in bitcoin brings the benefits of sound money to everybody in the world, and we’re looking forward to many more people using this fast, convenient, and low-cost method of payroll,” said Daniel Alexiuc, CEO of Wallet of Satoshi. While ACINQ and Wallet of Satoshi helped the receivers in the payroll transaction, Bitwage was aided by Voltage on the sending side. The Lightning node provider facilitated the process with a dedicated node for the salary payments. “All boats rise in this situation,” Graham Krizek, CEO of Voltage, said in a statement. “Bitwage clients get a strong Lightning experience, and Bitwage can rapidly scale their offering.” Bitwage is a leading provider of bitcoin payroll services headquartered in San Francisco, California. In addition to the U.S., the company has operations in Europe, Latin America, and Asia. Bitwage offers services to employers, employees, and freelance workers worldwide.

The world is breathing a sigh of relief as things normalize after Covid-19 pandemic devastation. Governments are lifting lockdowns, restrictions are being relaxed, and the economy is slowly returning to a semblance of normality. As a result, consumer spending is on the rise. INFLATION IS ON THE RISE In April, CNBC reported that the Consumer Price Inflation in the U.S. increased 4.2% from the previous year. Additionally, in June, the consumer price index increased 5.4% from last year, the sharpest jump since the 2008 Global Financial Crisis. Excluding energy and food, the core CPI increased by 4.5, the biggest jump since 1991. Now, the big question is, what is causing the high inflation? INCREASING MONEY SUPPLY The Federal Reserve has resorted to flooding the economy with dollars to curb inflation. According to Forbes, the M2 money supply in April 2021 was $20.11 trillion, representing a 30% increase since January 2020. Too many dollars in the system reduces the currency value. In addition, there is pent-up demand — more money going after fewer products — that exacerbates the inflation problem. Remember, when the COVID-19 pandemic hit, some manufacturing plants were closed while others downsized their operation. As a result, the market has exhausted its stockpiles. Similarly, the demand for air tickets is up again. Manufacturers are working against time to match the demand. For instance, the pandemic affected car production. As a result, the cost of used cars and trucks is higher than ever before. The point is, a limited supply of goods, coupled with the expansion of dollars in the economy leads to inflation. WHAT IS THE INFLATION DEBATE IN THE U.S.? The real rate of inflation is a growing concern especially among economic policymakers. While the whole discussion could be confusing to the masses, it is of critical importance. The next course of action could result in an economic slowdown, an increase in mortgage rates, and high volatility of stock prices. For these reasons, incoming economic data will be critical for financial analysts, policymakers, and economists. According to AP News, Federal Reserve chairman Jerome Powell argues that the inflation spike is transitory, caused by the reopening economy after the pandemic. While the Federal Reserve maintains the inflation rate will average above 2% and move down after that, many economic experts hold a different view. According to Bank of America strategist, Michael Harnett inflation could rise by up to 4% and persist longer than the Fed reported. David Roche, president of the investment firm Independent Strategy, holds a similar view. He said inflation could hit 3-4% in mid-2022. This could cause a crisis in the financial market and the U.S. economy at large. According to the thinkers, Fed measurement tools aren’t in line with consumer spending. In other words, the inflation experienced by consumers is understated. Once the consumers start feeling the effects, they are likely to push for higher wages, starting a vicious inflation circle. EFFECTS ON OTHER COUNTRIES The inflation in the U.S. will not spare other countries. High inflation will make the U.S. dollar more attractive against other countries. Therefore, these countries will likely experience capital outflow as investors seek high returns. The result will be market volatility, slow economic growth, and a high-interest rate. This means countries with dollar-denominated loans will have it rough paying back their loans. In the worst-case scenario, some countries could experience a recession. Needless to say, the whole world is watching, and they want to see how far this goes. BITCOIN THE BEST INFLATION HEDGE? Inflation fears are apparent with economic contraction and government stimulus increasing the global money supply. Bitcoin has positioned itself as a perfect hedge against inflation. Unlike fiat currency, bitcoin is not regulated by the central bank. Additionally, it has a finite supply of 21 million units. This is unlike fiat currency which can be printed in large, as is happening in the United States. The decentralized nature of bitcoin makes it a perfect store of value. In addition, bitcoin proponents believe the price of virtual currency could increase as investors run from vulnerable conventional financial systems. Therefore, Bitcoin can act as a safe haven for investors. BITCOIN HEDGING SUCCESS A good hedge against inflation is an asset that increases its value over time. Bitcoin has withstood the harsh effects of the Covid-19 pandemic with relative ease. It was trading at around $5000 when the Coronavirus was recognised as a global pandemic. Nevertheless, in the last 52 weeks, bitcoin has increased 235% and many analysts that focus on predicting Bitcoin prices went this year as far as to predict that BTC will yet hit the $100,000 mark by the end of Q4 2021. Inflation has increased over the same period, and while according to Trading Economics’ U.S. inflation rates data the inflation at first was “only” 2.6% in March, it swiftly increased in April with CPI hitting 4.2%, 5% in May and finally 5.4% in June. This time bitcoin was proliferating, responding well to inflation. Therefore, investors who turned to bitcoin to hedge against inflation are smiling. We have seen institutional adoption of the cryptocurrency from companies that see massive potential in bitcoin growth. Bitcoin is also an excellent hedge against the social disruption and political instability that result from inflation. For instance, runaway inflation leads to increased uncertainty, poverty, and a lack of trust in institutions. Zimbabwe, Argentina, and Venezuela are just some of the examples. While these cases are unlikely in developed countries, it is better to be safe than sorry. Remember, Venezuela was in the past one of the richest countries in the world and look how they are doing now from an economical standpoint. Therefore, using bitcoin as a hedge against instability, broken payment systems, and control by the government is a prudent move. Usually, rising interest rates is one of the ways to curb inflation. However, many current economies are debt-ridden. Therefore, this move could have the opposite effect. As a result, the inflation rate could continue to rise even as

  College, for many, can be an experience that completes the transition from youth to adulthood. Along with the many responsibilities that come with living on your own are the freedoms to enjoy life. It can be a life-direction-changing place, for better or for worse. With these themes in mind, I spoke with Bitcoin Magazine’s very own Eli Dyer about the differences we’ve observed in young people we know outside of Bitcoin versus the young people we know who have been kissed by the orange sun. Be sure to check out the podcast, along with reading the written version of the interview below. How did you first hear about/get into bitcoin? I first heard about it and used it in 2018. I was bored in high school and doing random, degenerate stuff online to make money such as online trivia games, lending out money and gambling on Bustabit. It was attractive to me because I was under 18 so I couldn’t open up a bank account in my own name, but I could have my own Bitcoin wallet. Sadly, I didn’t go down the rabbit hole until later, during college. I saw the price going parabolic and decided to look into why people were paying $30,000 for a bitcoin. I started doing research, studying monetary history and eventually found myself on Bitcoin Maximalist Twitter with a completely new lens with which to view the world. How has Bitcoin changed your life? It’s given me a sense of urgency — stack as many sats as possible before hyperbitcoinization. It has made me more optimistic for the future. It has made me more conscious about what I spend time on. The only two finite things are my time on this earth and Bitcoin. It has made me less worried and anxious about dumb stuff, I know I’ll always have my bitcoin stack to fall back on. It’s made me happy to have found a group of people who see the world in a similar lens as I do You and I are both college aged — what differences in perspective do you see between younger Bitcoiners and young people who haven’t yet understood Bitcoin, in regards to culture and current events? I think the problem that younger people have with understanding Bitcoin is that it takes a long time to really grasp what it is, and you probably have to read a couple of books in order to really get it. It seems like people don’t really read books anymore because the dopamine from these social media apps has destroyed everyone’s attention spans; I’ve recommended “The Bitcoin Standard” to like five different people and no one has read it. Everyone is caught up with the current news and celebrities/pop culture, but to understand Bitcoin you have to take a break and zoom out and really study monetary history and how we got here and most people our age just aren’t interested enough in that. What are you most looking forward to in the Bitcoin space? More Michael Saylor-esque speculative attacks on the dollar and the number of Bitcoin maximalists increasing. Price prediction for the end of 2021, and the end of 2030? I think we’ll see new all-time highs for sure by the end of this year, my guess is that we reach $100,000, barely. By 2030, I think hyperbitcoinization will be in full swing, if it hasn’t already happened. I think 2029 is the year of hyperbitcoinization, with the block reward decreasing to 1.56 bitcoin. In terms of USD purchasing power, I believe 1 bitcoin will have the purchasing power of $10 million by then. 

  [0:07] P: Really looking forward to this one. Yeah. This is obviously Bitcoin Magazine Twitter Spaces. We do these multiple times a week, but today, we’re going to be talking about the Lightning Network and federated chamian mints and what they mean, what they are, why they’re interesting. This is a recorded conversation, and it will be released on the Bitcoin Space’s live feed, which you can find on whatever podcast app you use. It’s also published on YouTube. That’s basically why we’re here and what we’re about. Eric, you’ve been working on chamian mints. Can you give us a little bit of your backstory, who you are and why you are interested in chamian mints? [0:51] Eric Sirion: Okay. Awesome. Yeah, my background is mostly in computer science. As such, I had a keen interest in old eco-schemes. At university, I did a talk about all the development from the beginning in the 80s with chamian eco-schemes and right up to Bitcoin and all the amazing stuff like Lightning. That’s how I got an idea of being able to integrate all these different ideas. Yeah. At some point, I heard about Liquid and federations and I was like, “Why don’t we use the federation tag to implement these old e-cash ideas that allow us to have perfect privacy on Bitcoin, but perfect privacy in the eco-scheme to improve Bitcoin?” That’s where the idea came from. [1:42] P: Very cool. Very cool. Casey, you want to go next? [1:45] Casey Rodarmor: Yeah, sounds good. Yeah. I am a programmer within the Bay area. I used to be, I guess, briefly a Bitcoin core developer at Chaincode Labs a long time ago. Like Eric, I’m really interested in pre-Bitcoin forgotten knowledge. A lot of Bitcoiners don’t really know about stuff like e-cash and other weird systems that existed before Bitcoin. Often, they were pretty centralized, but they have interesting properties. My interest in chamian mints actually comes from being concerned about Lightning Network usability for normies. It’s likely that stuff like payment failures, a difficulty in managing nodes, etc., I think there’s going to be real usability challenges there, especially for just normal people. I’m very interested in federated chamian mints because they allow this very nice trade-off where you can have essentially what amounts to a posted wallet with better security guarantees than if a single actor was hosting that wallet. Yep. That’s where I’m coming from. [2:47] P: Love it. Love it. Rindell, do you want to? I’m assuming you want to stay completely anonymous, keep us all in the dark about who you are and what you’re about? [2:56] Rindell: Yeah. I’m a software engineer. At least that’s what they say. I’ve worked a lot on, I’ll call it cryptography engineering. Taking cryptographic primitives and building really big systems out of them. A lot of distributed systems work on really big systems. I’ve been talking to the people around here and in Pubnet and other event for a little while now about scaling Lightning Network in kind of two different ways. One of them is the last mile scaling in which Casey talked about a little bit. How do we have end users get a private and inexpensive and really high throughput experience without having everybody in the world have multiple Lightning channels open? I just don’t think that’s going to work, and there’s a lot of different interesting ideas there. Then another dimension is, how do we scale Lightning routing? We’ve been having a lot of conversations around what would subnetting for Lightning actually look like. When the federated chamian mints funding was announced by Blockstream, it just fell into place for me in my head. This is a really interesting new primitive in the tool box that comes with some interesting trade-offs. I think that for the leaf nodes of the Lightning graph, it’s really appealing for a bunch of reasons and there’s a lot of interesting directions that I can go in. So I’m just super excited to be digging into this. There’s like a new primitive that we can use to build really interesting stuff on top of Lightning. [4:25] P: Love it. Finally, Vivek, I’m so glad you decided to join us on stage. I know you’ve been super busy lately. Can you give everyone a brief introduction to who you are? Don’t undersell yourself or I’ll scream. [4:37] Vivek: Sure. Sure. Hi, guys. My name is Vivek. I do business development for Blockstream but have many hats. Done some MNA stuff as an analyst back in the day. Done lots of consultative sales work. Right now, these days, I’m working with Christian Decker to essentially figure out the product market fit for our green light, a Lightning node hosted solution and also working with Samson and the team on Liquid. I’m happy to be here and just participate and see what federated models we can explore and security guarantees as Casey elaborated on. [5:16] P: Love it. I think the most useful way to go about this is, I’d like us to talk about… As a group, so this is a free-for-all. Please, if anyone on stage has something to say or a comment or a thought or a question, just jump in and say it. The first thing I want to do is talk about the specific challenges. I want people to understand exactly what a chamian mint is and what it means to have a federated chamian mint system as well. I suspect that the best way to do that is to start by defining the challenges that these systems attempt to solve. What are the problems that may exist in the future that we can highlight and then talk about how the system aims to resolve those? [6:09] Rindell: Yes. Go ahead. [6:10] Eric: Yes, sure. Okay, then. I think the biggest problems Bitcoin is facing or will be facing, is privacy, which is already a concern,

  Singaporean Fintonia Group has launched two bitcoin funds for professional investors. The Fintonia Bitcoin Physical Fund purchases actual bitcoin to provide investors with direct price exposure. The Fintonia Secured Yield Fund allows bitcoin holders to obtain cash by putting their BTC as collateral. Singapore-based fund manager Fintonia Group, regulated by the Monetary Authority of Singapore (MAS), has launched a “physical” bitcoin fund and a yield fund, reported Fund Selector Asia. The offerings are geared towards professional and institutional investors seeking direct, passive bitcoin exposure and an avenue for obtaining loans on their BTC holdings. “The fund acquires ‘physical’ bitcoin, meaning we will buy the actual bitcoin [rather than] a derivative instrument on bitcoin,” said Adrian Chng, founder and chairman of Fintonia Group, per the report. The Fintonia Bitcoin Physical Fund aims to provide investors with “quick, safe, and cost-efficient” bitcoin exposure through a more convenient investment vehicle by purchasing and holding BTC directly. The manager said a “licensed and insured custodian” will hold the fund’s bitcoin. “As an MAS regulated fund manager with strict standards, we can connect with multiple exchanges and different market-makers, enabling us to find the best prices, as well as buy or sell at volume,” Chng said. “The fund also enables efficient cash or crypto transfers, resolving the challenges around moving large amounts of cash in or out of the system.” The Fintonia Secured Yield Fund, on the other hand, aims to provide bitcoin holders with direct loans. Borrowers like traders, miners, and companies holding BTC can leverage the yield fund to access cash without selling their bitcoin. “Bitcoin is an excellent form of collateral for loans,” Chng reportedly said. “It trades 24/7 and is highly liquid, with approximately $30bn to $60bn per day. If required, it can be quickly liquidated in comparison with, for example, commodities and real assets.” Bitcoin funds provide an easy, hassle-free investment experience. Investors can obtain exposure to the price of BTC by purchasing the fund’s shares from their regular broker. However, convenience comes at a cost. Only by holding bitcoin directly will an investor be able to take advantage of the financial sovereignty and freedom enabled by the Bitcoin Network.

  Cycling On-Chain is a monthly column that uses on-chain and price-related data to better understand recent bitcoin market movements and estimate where we are in the cycle. This seventh edition first addresses several on-chain and derivatives-related metrics to gauge the current bitcoin market structure. Then, it discusses two developing narratives that are introducing some fear into the market: the Mt. Gox rehab plan and the emergence of the omicron COVID-19 variant. Finally, we’ll conclude with the results of our monthly poll and the halving cycle roadmap. RETURN OF THE HASHES In June 2021, the Chinese government cracked down hard against Bitcoin, banning its mining and censoring exchanges (see COC#2). During that period, Bitcoin’s hash rate halved, creating major fear in bitcoin markets. Since the start of July, the return of that hash rate has been an absolutely stunning phenomenon, illustrated by a streak of nine consecutive positive difficulty adjustments that was just ended by a minor correction (figure 1). The return of this hash rate to the levels of prior highs is by itself a good thing, but even more so when taken into account that the age-old “China controls Bitcoin” narrative is now no longer valid. A recent report by the Cambridge Centre for Alternative Finance confirmed that China now supposedly has a (near) zero share in global bitcoin mining. EXCHANGE BALANCES KEEP DROPPING During the mid-May capitulation event that triggered a cascade of long liquidations that exacerbated the drop (see COC#1), there was a period where lots of bitcoin were deposited on exchanges. However, exchange balances resumed their downward path quickly after. Current exchange balances are at multi-year lows — we need to scroll back more than three years to identify the last time exchange balances were at these levels (figure 2). An explanation for this can be sought in improvements of both noncustodial (e.g., hardware or software wallets) and custodial (e.g., professional services that store coins for institutional investors) storage solutions. Either way, the mass exodus of coins off exchanges can be interpreted as a sign that whoever is holding those coins likely does not have the intention to sell them short term. More importantly, the lower the bitcoin supply on exchanges, the quicker exchange balances run short during periods of high demand, causing bitcoin to trade more reflexively. This is sometimes called a supply shock. THE BITCOIN SUPPLY KEEPS BECOMING MORE ILLIQUID More evidence that there is a trend that more and more bitcoin is moving into the hands of entities that are unlikely to sell can be found in Glassnode’s “illiquid supply” metric. After all, that is exactly what the metric was built for. Since most financial markets — including bitcoin — crashed hard mid-March 2020, the percentage of the circulating bitcoin supply that Glassnode classifies as “illiquid” has been going up. After a clear drop during the mid-May 2021 capitulation and cascading liquidation event that was also mentioned above, it is currently again in a rapid upward trajectory (figure 3). BITCOIN FUTURES MARKETS ARE HEALTHIER Another positive aspect when it comes to gauging the current status of bitcoin markets is that derivative markets appear to hold less downside risk than they did during the start of the year (see COC#6). Compared to early 2021, we are seeing similar levels of open interest, which is the total value of all outstanding bitcoin futures positions (figure 4, blue). Unlike then, bitcoin futures markets now have much lower funding rates (figure 4, green), which means that the market does not have the relatively extreme tendency to go (leveraged) long than it did back then. Furthermore, the percentage of open interest that is backed by bitcoin has declined from the mid-60s to mid-40s (figure 4, red). Since cash is better at holding its value during a bitcoin price dip and thus less prone to be pushed below the liquidation point where the position is auto-sold, it is a superior collateral for BTC longs. The opposite is true for shorts. If the bitcoin price soars, the collateral of BTC shorts that are cash-margined loses value on a relative basis, making shorts more vulnerable to be liquidated. Compared to early 2021, the bitcoin futures markets are, therefore, healthier. They are less tilted toward a positive bias and have a collateral structure that has less downside risk. A MEMPOOL FULL OF CRICKETS As already pointed out in COC#4 at the start of September, it has been very quiet on the Bitcoin blockchain for a few months now when it comes to transactions. The incredibly low average transaction fees that we have seen over the last few months (figure 5) are a good example of that. If there is (almost) no waiting line in front of the attraction we’re trying to get into, there’s no need to pay unnecessary high entrance fees. Figure 5: The bitcoin price (black) and seven-day moving average of the total BTC-denominated transaction fees (Source). Figure 5: The bitcoin price (black) and seven-day moving average of the total BTC-denominated transaction fees (Source). Although the cause of this is likely at least partially technical (e.g., recent Lightning and Segwit adoption, see COC#4), it is likely that another large explanation can be sought in the relative absence of retail in the current market. In COC#6, some other examples of this were described, such as the relatively low Google search trends. LTH PROFIT TAKING WAS ENOUGH TO SATIATE RECENT MARKET DEMAND Around this time in 2020, the Bitcoin blockchain was everything but a ghost town. The bitcoin price had just broken through its 2017 ~$20,000 all-time high, as the world was waking up to a buzzing hive full of cyber hornets and first-time institutional interest. As illustrated in figure 6, long-term holders were already selling parts of their positions into market strength (middle red box), but the market demand was so high that price just kept churning up. Figure 6: The bitcoin price (black) and percentage of the circulating bitcoin supply that is in the hands of long-term holders

  MicroStrategy announced that it has acquired 13,005 additional bitcoin for approximately $489 million in cash, at an average price of around $37,617 per bitcoin, including fees and expenses. The company, headed by Bitcoin bull Michael Saylor, now holds 105,085 bitcoin, acquired at an average purchase price of about $2.741 billion — averaging $26,080 spent per bitcoin. Saylor spoke at the Bitcoin 2021 conference in early June in Miami and his company owns much more bitcoin than any other publicly-traded company. The only entity known to hold more bitcoin at this point is investment manager Grayscale, with 654,885 BTC held in its bitcoin trust on behalf of investors — currently worth more than $24 billion. At the conference, Saylor reflected on the fantastic impact that Bitcoin will have on the world. “For the first time in history, we can grant property rights to seven billion people,” he said. The proceeds of MicroStrategy’s latest bitcoin purchase came from an offering of senior secured notes that the business intelligence company completed last week. Although the net proceeds of the sale amounted to approximately $488 million after expenses, it reportedly received more than $1.5 billion in orders from institutional investors. The offering, which assures a 6.125% annual interest rate, was announced two weeks ago when the bitcoin price was at a monthly low of around $33,400. But Saylor has not been involved in Bitcoin only by HODLing the asset. The CEO has become a Bitcoin evangelizer on Twitter, an account which he didn’t use much before falling into “the rabbit hole.” “#Bitcoin is a swarm of cyber hornets serving the goddess of wisdom, feeding on the fire of truth, exponentially growing ever smarter, faster, and stronger behind a wall of encrypted energy,” Saylor’s pinned tweet reads at the time of writing. In addition, Saylor has recently been involved in the Bitcoin energy consumption debate. The MicroStrategy CEO met with Elon Musk and some North American bitcoin miners in May. After the closed-door gathering, the Bitcoin Mining Council was announced and launched a couple of weeks afterward. The council, whose initial meeting was heavily criticized by some bitcoiners in the industry, is now open for any bitcoin miner to join. However, those who do are allegedly required to promote Bitcoin’s core principles of a decentralized, peer-to-peer, censorship-resistant and open-source protocol. MicroStrategy is an independent, publicly-traded analytics and business intelligence company. Its analytics platform, used by many companies worldwide, empowers MicroStrategy’s main corporate goal of growing its enterprise analytics software business. And the company’s second corporate goal is to acquire and hold bitcoin.

  BITCOIN SOVEREIGNTY: PART ONE So, you have taken the orange pill and are now going down the Bitcoin rabbit hole. You may be wondering what’s at the bottom? What is the core innovation of Bitcoin, from which all of wonderland is created? The answer may surprise you. Along your Bitcoin adventure, you will meet many fascinating characters. They will tell you Bitcoin is many things: digital gold, a store of value, digital scarcity, peer-to-peer cash, proof of work. But at the bottom of the rabbit hole, we find something even deeper, an entirely new type of property rights — an entirely new type of ownership. What we can own, and how we protect those property rights, lies at the very core of the type of society we live in, and the sovereignty we have to lead the lives we choose. If we can’t own the things that are important to us, we can’t own our own destiny, our choices are constrained, and we’re impoverished. Freedom is a very abstract term, but it is made concrete when you recognize that it means ownership. Freedom is ownership of yourself, your choices and your property. The way we operationalize freedom is through property rights. Every single human right is effectively a form of property rights. Your ability to make sure nobody attacks you, that’s ownership of your body. Your ability to decide whether or not to get a vaccination, that’s ownership of your health. Your ability to travel, to speak your mind, to create things, these are all forms of ownership of your body and mind. At the end of the Bitcoin rabbit hole is a new kind of ownership, more subtle and powerful than any we have had before. A new type of property with more powerful rights protection than any we have had before that provides us all with an unprecedented path to self-sovereignty and freedom. BITCOIN IS DIGITAL PROPERTY RIGHTS Until Bitcoin came around, there was no such thing as digital ownership. Sure, you could be on the internet, but you couldn’t own anything on it. Music? Copied. Your search history? Owned by Google. Your connections with friends? Owned by Facebook. Your opinions? Owned by Twitter and censored by Twitter. Even PayPal, which was supposedly designed to provide you with a free market in which you could buy, sell and own things, saw them reserve the right for themselves to kick you off their platform, confiscate all your funds or censor your transactions. A world without ownership is a public toilet. Nobody cares about public toilets, and they are very frequently disgusting. Everyone uses them, no one wants to keep them clean. A lack of property rights on the micro level gives you a public toilet. A lack of property rights on the societal level gives you the Berlin Wall. Berlin was split into two, almost as a natural experiment in what happens when you provide one group of people with secure ownership and leave another group without it. What happened in Germany was what happened everywhere this same experiment has been tried: People in the place with property rights became more prosperous, while those in the place that didn’t provide those rights had to build a wall to keep people in because the people didn’t own property, the people became property. THE MYSTERY OF MISSING PRODUCTIVITY GROWTH This helps us to understand a mystery. For over 25 years now we’ve had the world wide web and people were predicting that by connecting the world the internet would create phenomenal prosperity and greatly increase economic growth but instead we’ve seen economic stagnation. Wages have stagnated, economic growth has slowed and become completely reliant on money printing, just to stay above zero. The mystery is how could this be? Well, part of the answer is we married this 21st century technology, the internet, to a system of economic sophistication straight from the bronze age. Therefore, the internet owners, like Mark Zuckerberg and Jeff Bezos, are the only sovereigns — modern day pharaohs — who instead of controlling the Nile and the water streams control the servers and the data streams. This leaves you, we, us, as the serfs. The pharaohs have thrived while we have stagnated. But then there is Bitcoin, a democratic revolution for the digital sphere in the same way that Athens and Rome were democratic revolutions for the ancient world. Democratic in the original sense: Demos meaning the common political unit of the people. Bitcoin is the invention that provides a way of protecting the rights of individuals. Bitcoin is a global jurisdiction of a new kind: Providing borderless, permissionless property rights to all its censorship-resistant citizens. Permissionless because it relies on no pharaoh. Censorship resistant because no pharaoh can stop it. BITCOIN IS A NEW FLOURISHING Societies flourish when people are provided with such secure property rights and know that what they create and exchange voluntarily with others will remain theirs. Until Bitcoin, the power to protect and secure ownership rights was based on the logic of violence: Either you needed to protect yourself from violence or had to rely on governments or other powerful groups to protect those rights for you. Bitcoin created a conception of rights based not on the power of violence but on power of a different kind: the logic of cryptography, math and shared truth. It replaced violence with cooperation. That is why it’s important to take the Bitcoin rabbit hole all the way to the end so we understand what’s at stake here. Digital rights which can be enforced for all people, globally, across borders, without violence. Bitcoin, this new power, finally puts us — the individual — in the driving seat, with sovereignty over our own lives. Bitcoin also has created a newly powerful Demos, a wealthy community of Bitcoiners who together control a global jurisdiction. This gives us the opportunity and responsibility to create a new civilization, based on the free cooperation of sovereign people. Now we

  Bitcoin offers an alternative to a universal security system backed by men with guns. It creates a new model of security based on cryptographic proof that can resist unlimited applications of violence, making a bulletproof network. NOZOMI HAYASE Since it came to life in early 2009, Bitcoin has begun disrupting the world of finance. Over the years, this decentralized digital currency came to mean different things for different people. For some, it presented opportunities for prosperity, becoming the best performing asset in their portfolio. For others, this peer-to-peer cash for the internet represents a non-confiscatable digital gold that could enable financial sovereignty. For those who are concerned about civil liberty, Bitcoin’s censorship resistance and permissionlessness define it as free speech money. “Yellow Vest” protesters occupying in the streets of Paris found allies in this rebel crypto that promises to end the tyranny of central banks. As Bitcoin reached its 10-year anniversary last month, this breakthrough of computer science now further reveals its value proposition. Perhaps the fundamental ethos of this technology is hidden in the mystery surrounding the identity of its creator, the pseudonymous Satoshi Nakamoto. The genesis of Bitcoin is rooted in anonymity. Behind the mask of this Japanese character, a deeper vision of Bitcoin is found in the story of Japan, the first and only nation to experience the horror of nuclear weapons. The devastation that this country went through at the end of the World War II teaches us consequences of war and calls for people to come together for peace. This commitment to peace is embodied in Japan’s pacifist constitution, with its notable Article 9 clause that renounces war as a means to solve conflicts. In our contemporary post-Cold War world, this enshrinement of peace has shown itself to be vulnerable to international and domestic pressures to destroy it. In recent years, as North Korea’s repeated missile tests threaten stability in the Pacific region, there has been a push toward Japan’s remilitarization. Now, from the internet, Satoshi, a representative cultural survivor of atomic bombs, brings to humanity a means to secure this peace, opening a new path for us to never repeat the tragedy of the past. MONOPOLY OF VIOLENCE The weakness of the Japanese peace constitution is found in its foundation. Article 9 of Japan’s renunciation of the sovereign right of war is part of the constitution that was imposed by General MacArthur after the United States defeated Japan’s imperialism in 1945. The integrity of this model of governance called “democracy” that Japan adopted after its surrender relies on the U.S.–Japan security alliance that placed Japan under the umbrella of U.S. protection. The security and stability of this system is backed by a monopoly of violence. Its nucleus was developed during WWII by physicists working on the Manhattan Project and by the establishment of a large, armed industry that has now morphed into the military industrial complex. With creation of nuclear weapons, humanity tried to outdo the force of nature, unleashing power that could bring total annihilation of life on the planet. Around this elusive power, those who are driven by an urge for domination have created a network of security to protect their private interests. The global security state has established a secret law that violates our fundamental right to life: the right not to be vaporized or eradicated by warfare. By using the threat of weapons of mass destruction, transnational corporations engage in conquest of territory. They control world resources, with central banks printing money out of thin air and weaponizing large financial institutions like the International Monetary Fund and the World Bank. The superpower state has caused the entire world to fear an uncontrolled fission chain reaction in order to keep all nations under the thumb of its military command, imposing petrodollar hegemony. Armies of economists, legislators and regulators apply pressure to maintain monopoly of the market, putting sanctions, trade embargoes and blockades against those who challenge the legitimacy of the corporate state. CRYPTOGRAPHIC PROOF Now, in this digital age, man’s subversion of nature has come online, forming patronage networks that act like one giant computer. The internet has been effectively militarized with the penetration of intelligence agencies and the CIA cyber weapon, along with giant tech companies engaging in censorship. This occupation of cyberspace is maintained by private paying processing companies like Visa, PayPal and Mastercard controlling the flow of money, freezing assets and restricting transactions. Bitcoin offers an alternative to this universal security system backed by men with guns. It creates a new model of security based on cryptographic proof that can resist unlimited applications of violence, making a bulletproof network. Bitcoin is free software where users control the programs. Everyone can read, study and participate in the development of its code. Bitcoin is developed and stewarded by a group of cypherpunks. They are a new wave of scientists who take up moral obligations to shift the balance of power and to help individuals counter illegitimate authority derived from violence. Cypherpunks don’t conquer nature. They liberate wisdom inherent in nature by keeping its source code open. Cypherpunks write code. They try to preserve a repository of scientific knowledge that belongs to humankind and build applications that benefit all. By using cryptography for social change, they challenge a model of governance that fuels wars of aggression and surveillance capitalism. Through designing a new security based on mathematics, they aim to make the subversive state secret law obsolete. SECURITY BACKED BY NATURE Bitcoin’s core consensus algorithm is an innovation that is created through application of laws of nature. Satoshi found the force that governs nature manifested in the law of physics, specifically thermodynamics — principles concerning heat, temperature and their relation to energy. Combining this understanding of natural law with the knowledge that human nature contains the paradox of man being selfish as well as being altruistic, the creator of Bitcoin found a way to coordinate human actions to build economies of scale. Tech entrepreneur and author Andreas Antonopoulos acknowledged

  Whether it’s how people live, their ability to travel to different places or how assets are all completely digitized, the world is swiftly changing. In the cryptocurrency industry, we operate in an entirely digital format while many of us strive to maintain privacy and preserve the sovereignty of the individual. This means not only the sovereignty of one’s assets, but also the sovereignty of how you work, where you work, where you live and what you live for. My favorite book is “The Sovereign Individual” by James Dale Davidson and William Rees-Mogg. I see it as a roadmap for the blockchain ecosystem. Bitcoin is an aperture for what the book describes and where the future is going. The authors state that the cybereconomy, not China’s legacy one, could become the greatest economic phenomenon of our age. It all comes down to first principles. What does it mean to be free? What does it mean to be a sovereign individual? The idea is simple: we are each our own individual with our own identity. We can own assets, as well as opt into and out of systems as we see fit. Whether that be opting into a country, a network, a communication system, a financial service or a lending or loan system, it’s all about the individual. To be sovereign is to be able to control that, and to find that freedom and have choice. The book argues for decentralization: “Other things being equal, the more widely dispersed key technologies are, the more widely dispersed power will be, and the smaller the optimum scale of government,” the authors wrote. When I speak with regulators, and they ask about decentralization, I tell them that the real measure of decentralization is censorship resistance, not distribution. Everyone is learning here, and they definitely are still a ways off from truly understanding. In the world today, we’ve lost the ability to choose. We’re instead forced into systems. But Bitcoin unshackles the individual from forced opt-ins. It creates more choice and freer markets. In the Bitcoin industry’s pursuit of sovereignty, identity plays a critical role. Aggregating the data and the interactions one has, while keeping control of that data with the individual, would open many doors. Furthermore, what if better identity solutions could solve the privacy problem? WhatsApp has forced its users to opt into its service and fork over all of their data. That shouldn’t be a binary ask. How do users preserve their right to consent to the use of our data? How do we start aggregating all of the different data we create every day into systems or a system owned and controlled by the individual? That doesn’t mean everyone has to control all of their data, all of the time. But, at least we’d have the choice. Such as the choice to opt into or out of a country, for instance. You could theoretically port your identity out in a digital fashion. Why not? Ultimately, the more that you can distribute information, and refrain from taking everyone’s first and last names and then transferring that data everywhere, the more the individual can fully control the entirety of that data set. When we sign off on a Bitcoin transaction, that signature is a form of identity; it is a part of our financial identity. Bitcoin has driven this concept of decentralization forward. Bitcoin has changed the way people think. We’re creating a change in social consciousness. Individual sovereignty and ownership give us more choices. Sovereign individuals are the new elite. Just like Atlas wrote on BitcoinTalk so many years ago: “I am pretty confident we are the new wealthy elite, gentlemen.” Even if you don’t have your own sovereignty, while many sovereign individuals will, then countries will become like companies, and people will be able to shop between jurisdictions. Countries will have to offer attractive policies to customers, lest they pack up and move away. The possibilities of identity are endless. With decentralized technologies like Bitcoin, identities can empower the unbanked to access credit or own a piece of property with land titles. Just think, what if we could use our reputations as a new form of credit creation? Imagine a world of lending systems, not based on antiquated ways, but on the tools and indicators available to us today in a digital world. Bitcoin has spurred systems that will allow humanity to protect individual sovereignty and accelerate freedom. And that’s the Holy Grail.