Bitcoin maximalism has been understood positively by a few, although its idea is simple: it is more advantageous for people with a common cultural code to have a common army than to get bogged down in internecine wars, pulling developers, investors, and users from one another.
Bitcoin-maximalism seemed to have finally come to its knees, but—in light of current global events—it has an unexpected potential ally: nation-states that are threatened with death by international financial, pharmaceutical, and IT oligopoly. The original idea of Bitcoin may arise on the ground of Bitcoin Maximalism 2.0.
Competition and cultural diversity are necessary to the development of society. Economic and political boundaries between states, countries, and provinces are the backbone for every such territory.
However, over the past thirty years, the views of unification have dominated. The unipolar world order has led to an information bias. The inhabitants of the whole planet experience obstacles to free political will. Unique cultures, civilizational continents risk disappearing. In the heat of the struggle for “diversity” in terms of skin color, sexual preference, and gender, factual human diversity is under the pressure of the global standard. The crisis of value produces negative economic consequences. The planetary division of labor has made supply chains fragile. Rising prices are increasingly difficult to write off as a pandemic effect. Despite the efforts of ultra-globalists, centrifugal sentiment is growing in the U.S. and the European Union. Other countries will follow in the same vein.
The globalists’ core weapon — reserve currencies and the central banks behind them — have lost effectiveness. All fiat currencies no longer serve as money. People don’t notice it out of habit but the problems do exist. Fiat currencies are constantly depreciating. Bank deposits and money market instruments do not protect against inflation; people have no choice but to take on the risks of the stock and bond markets. Transaction controls are ubiquitous and annoying; your fiat money can be blocked or confiscated. You can’t pay remotely without interference from intermediaries, who can prohibit transactions at their discretion. The commissions are very high.
The collapse of the dollar pyramid is no longer hypothetical. The danger of the situation requires proactive thinking and creates a window of opportunity. Bitcoin seemed like a great solution at first, but it didn’t work out. Its original promise to serve as peer-to-peer electronic cash was never fulfilled. It ended up as just another speculative financial asset.
As of the end of 2021, there are only about nine million Bitcoin addresses with more than five hundred dollars worth. And if you count in people, it would probably be no more than one or two million people. Few businesses are accepting Bitcoin as payment for goods and services. It is not legal in many places. Bitcoin pioneers have failed to focus and gain critical mass. The movement has become mired in developing “alternatives” for Bitcoin and has lost momentum. Humanity has not grasped the basic meaning of Bitcoin; people’s attention has become fixated on the exchange rate. Bitcoin’s pricing is purely speculative; the number of users (not speculators) is negligible and not growing; volatility is very high. The energy cost of Bitcoin is too extreme. The carbon footprint in no way corresponds to the perceived utility of Bitcoin in society.
We need to account for mistakes and, this time, decentralize a new Bitcoin not only in the software code but also OUTSIDE the protocol. Delivering the pure peer-to-peer cash requires not only technological but also socio-cultural, if not ideological, breakthrough.
Competition Between Countries and States is Vital
Even with a significant degree of globalization, most of the economic activity of ordinary people is local or national. Most people rarely make payments abroad and receive money from abroad. People mostly get their paycheques from local businesses and buy goods from local retailers. By and large, they don’t need the idea of global money.
Any government has an uneasy relationship with the global money circulating in their territory. Patriotically-minded elites often have a wary, if not hostile, attitude toward such money; global Bitcoin is no exception. In all countries, authorities are particularly wary of cross-border payments by individuals. Such transactions could be indicative of criminal or terrorist activity.
But it is not the criminality that frightens the authorities most, but the fact that global bitcoin is convenient for ultra-globalists who seek an extreme form of cultural and economic unification that does not assume a significant role for nation-states in the future. In the global confrontation between sovereign states and the growing influence of transnational corporations, the former suffer enormous losses. Their officials are being bribed. Their citizens have alien worldviews imposed on them. They are being tracked online. Global retailers, social networks, IT giants, and brands openly plan to deprive countries of tax revenues through their own monetary surrogates.
The existence of borders is a good thing. Competition between countries is vital.
Competition is a proven, natural mechanism that has worked well in all eras. A state that abolishes competition within itself may drive its citizens into poverty. But in the international arena, it is still of value in stimulating other countries. There is the example of the USSR. The introduction of the eight-hour workday, the recognition of women’s rights, the development of atomic energy, the conquest of space, and many other things in the West are to a great extent the credit of the Soviet Union. And after the collapse of the socialist camp, the union of democratic states began to degenerate.
The erasure of political and economic borders also destroys moral boundaries. The meaning of cultural diversity is, among other things, the possibility of comparing oneself to other people, and thus the ability to look at oneself from the outside, the ability to be objective. The dominance of global cultural clichés might have seemed harmless a few decades ago, but today it has manifested itself in ugly forms.
Decentralizing Bitcoin with National and State Borders
Regional Bitcoin networks are to be implemented at the national and regional levels. The bitcoins of one individual network are to be distributed among the citizens of several neighboring states with close ties that compete for each other’s markets and economically form a potentially self-sufficient territory. Regional “walls” would inhibit a global oligopoly on the new Bitcoin, and perhaps even prevent it. Splitting Bitcoin into several autonomous territorial networks is useful in the context of the scalability problem.
Of course, the networks’ software protocol knows no boundaries. Administrative control over the creation and maintenance of particular territories is extremely difficult to organize. But it is not necessary: if we issue 80% of all coins in the first block and immediately distribute them to the inhabitants of a certain territory, the boundary of the areal will form itself. Together with the movement of people, the borders will gradually blur, but this will not eliminate the main effects of such an act of division into currency zones.
Decentralization through Mass Distribution
80% of the bitcoins of each network must be distributed for free at the outset in a defined self-sufficient area to as many people as possible, as quickly as possible, equally for everyone to the extent possible. The remaining 20% ensures the functioning of the network. A consensus mechanism that requires no energy consumption and is resistant to quantum computer attacks already exists.
There is deep economic meaning in mass distribution. People living in territories they can protect, where they produce, trade, and exchange goods and services, are the sources of money, unlike some theoretical procedures of currency issuance imposed by a handful of politicians and bureaucrats. Since bitcoins are distributed entirely to the people, those who have usually enjoyed the advantage of proximity to central banks receive no privilege.
The free distribution provides a clear legal justification for the origin of the funds. All National bitcoins initially arise by a mechanism that everyone understands.
Network structures gain value and meaning when there are a large number of nodes. When many people have the same convenient unit of account, that unit becomes money.
Usefulness for Governments and Businesses
Each territory chooses its method of initial coin distribution.
There are at least three ways to compile a database of unique living recipients. The first is physical, that is, biometrics. Some projects go this way, but in our opinion this approach is unacceptable. It is too totalitarian and too complicated. There is also the bureaucratic way, i.e. the use of official identification documents. This is also hardly feasible because of the inertia of state apparatuses. And there is a third way when user names in several large social networks are recorded at a certain date, filtered for uniqueness (for example, with BrightID), indexed in blockchain (for example, with dar.is), and used for distribution of coins.
The distribution mechanism can be combined with initiatives beneficial to the government and domestic businesses. Here are just a few examples.
- Technically, within national borders, any state has no financial constraints on spending once it has something to justify money printing. The unconditional exchange of citizens’ National bitcoins for local fiat currency is an occasion for money issuance. With National bitcoins, it is convenient to conduct earmarked funding, track the movement of budget funds, and distribute helicopter money.
- The government can use National Bitcoin to stimulate foreign demand for domestic products by guaranteeing local businesses the redemption of a certain amount of National bitcoins. Knowing that National Bitcoins are already in the hands of foreigners, entrepreneurs would be motivated to conduct marketing activities in the relevant markets. In this way, the government stimulates domestic production and increases access to foreign markets. Authorities that learn to apply National Bitcoin tools will grow their influence. People and businesses will also benefit.
- To support domestic demand, National bitcoins can be distributed in the form of rebates and cashback. National bitcoins are convenient digital cash, ideal for the consumer sector. National Bitcoin has much in common with the concept of complementary currencies. The coexistence of local and “imperial” monetary systems was the norm in antiquity and the Middle Ages. Gold coins were used for international commerce and savings, while silver, bronze, and copper coins were used for everyday local trade. There are successful examples in the twentieth, twenty-first centuries as well. Hayek’s work “Decentralization of Money” (1976) soundly advocates against monetary monopolies.
The ongoing division of the world into new zones of political influence creates competition between countries for the right to offer the world a regional reserve currency. The use of National bitcoins paired with regular currency increases the latter’s chances of becoming a reserve currency.
The undeniable advantage of local complementary currencies in times of crisis undermines the authority of the central government. That is dangerous. For example, during the crisis and unemployment of the Great Depression, the complementary currency of the Austrian city of Wörgl revived production and domestic demand. The rest of the continent continued to sink. The miracle of Wörgl inspired six neighboring cities to copy its monetary system, and Édouard Daladier, Prime Minister of France, even paid a visit to see the currency in action on the spot. It was the resounding success of the experiment. The fact that more than two hundred neighboring cities were already preparing to replicate it prompted it to be outlawed. Note that the immediate return of despair and depression served as a breeding ground for the birth of Nazism.
Consider the experience of the Swiss business cooperative WIR, which has remained in agreement with the authorities for decades since 1934. The WIR operates as a commercial credit union through which tens of thousands of small and medium-sized enterprises can access financing in the form of WIR francs at an interest rate of less than 1%. This currency CANNOT be converted into regular money or devalued. Studies by Stodder and Lietaer (2016) show that this system has a stabilizing effect on macroeconomic cycles. During economic booms, small businesses tend to prefer bank loans, and during recessions, when bank interest rates rise, they turn to WIR loans. There are other successful examples: IRTA, Sardex, RES, PuntoTRANSacciones, Banco Palmas, Bangla-Pesa.
So, the rule is: conversion must be avoided.
The system is not likely to need conversion. There are always many dreamers among enthusiasts of community and territorial currencies. They want to defeat poverty and deprivation and are critical of making money for their own sake. But the main reason to turn to National Bitcoins will be the demand side economic shock, resulting in low turnover and unemployment. Therefore, the priority is a secure parity between the local participants to buy goods from each other.
Price stability is believed to be a key factor in economic stability. Allegedly, price changes prevent people from seeing market signals and maintaining an efficient allocation of resources. In reality, however, ordinary smooth changes do not interfere with economic vision at all, but influential changes are always sudden and intractable in any case. So holding back and obfuscating only makes things worse. Trying to stabilize prices leads to more instability.
Since there is no fundamental need to restrain nominal prices, we need to accustom people to the fact that there can be many means of exchange. We are entering a multipolar world, and the habit of using many currencies certainly comes in handy. There is nothing difficult or even inconvenient about that. People have lived under such conditions for thousands of years in the past. Most of the world still lives with more than one currency in circulation.
It is necessary to build the shortest possible closed supply chains. Success awaits only those initiative groups that are strong in articulation and connection of local enterprises. They are unlikely to include technical specialists and economists, who usually focus on global markets and have a different range of interests.
Article originally publish on decentralize.today's Medium page