Most thought-provoking bitcoin questions
Building up The Bitcoin Layer community by addressing loyal readers' inquiries that don't have easy or quick answers.
Dear readers,
The more time I spend researching and brainstorming a second book about bitcoin, the more I realize how long this thing is going to take. And by this thing, I mean bitcoin’s ascension to world reserve currency status. There are some short-term questions about bitcoin that fascinate me—for example, how open interest and funding rates interact with each other and with bitcoin’s price. (More on this later this month.) But long-term questions are more relevant to world reserve currency status, and you’ve sent me some thought-provoking inquiries since we started The Bitcoin Layer together, writer and reader, a few months ago.
Here are the three most interesting questions with multifaceted answers that I’ve been asked since launch:
How important is privacy to bitcoin’s long-term survival and success?
How will “fiat versus bitcoin” power dynamics play out in geopolitics?
What is the long-term impact of paper shorts and financial derivatives on the bitcoin market?
I could do an entire podcast interview on each topic alone, but I’ll try to summarize some big picture thoughts to consider on each.
How important is privacy to bitcoin’s long-term survival and success?
Bitcoin is a human right—to me, this means humans have a right to use bitcoin because it is an open monetary network, much like the internet is an open information network. If we believe, as a society, that internet usage is a fundamental right, bitcoin falls exactly into that same category. Using the internet privately is difficult these days, with cookies and tech giants monitoring our every move. But those that practice proper internet hygiene are able to maintain some privacy.
Bitcoin has already evolved in a similar way. Because bitcoin’s network is open and transactions are observable, there is a part of bitcoin that is naturally public, not private. The public nature of bitcoin allows us to ensure its rules surrounding money supply are always enforced by the network of users. Using bitcoin privately, however, incites bitcoin’s inherently geopolitical existence. If bitcoin can be used as a global monetary network to fund Wikileaks, for example, in opposition to legacy corporations and bureaucracy, options to use bitcoin privately must exist.
While privacy is required of bitcoin and applications within the bitcoin ecosystem to ensure its role in the dismantling of oppressive monetary regimes around the world, I do not believe it is required for bitcoin to become a $10 trillion asset and eclipse precious metal in total market value. Lightning Network brings a layer of privacy to bitcoin transactions, and I look for bitcoin privacy solutions to come from these other layers. We still have to rely on bitcoin’s blockchain to guarantee a supply increase at the predetermined rate, and not necessarily to ensure a shadow around our transactions. Look for Lightning-related privacy solutions instead.
How will “fiat versus bitcoin” power dynamics play out in geopolitics?
This is the $100 trillion question. We are open and vocal about bitcoin’s disruption of central banking and the fiat monetary system, but bitcoin threatens banks and governments as well. Bitcoin changes the dynamics around depository banking, in which banks rely on the deposits of customers to fund lending activity and generate margin. Bitcoin also challenges typical tax collection avenues and somewhat alters a government’s power over an economy. Central banks, the banking industry, and legislative bodies all have it in their interest to reject bitcoin as an ideology, creating a permanent and cantankerous divide between incumbents and the online, global populace.