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.[^hayek]
[^hayek]: Hayek, F. A. (2009). Denationalisation of money: the argument refined. Ludwig von Mises Institute.
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.[^cantillion] 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.[^hulsmann] It is a moral problem, not a
technical one.
[^cantillion]: 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.
[^hulsmann]: Jörg Guido Hülsmann, The Ethics of Money Production
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.[^sscale] 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.
[^sscale]: Nick Szabo, Money, Blockchains, and Social Scalability
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.[^gifts] 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.
[^gifts]: This includes gifts since you are trading your gift for reciprocity, karma, a friendly society, or similar ideas. See Hülsmann, Graeber.
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.[^warmke] 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[^beautyon] 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."
[^beautyon]: Beautyon (2018). Why America Can’t Regulate Bitcoin
[^warmke]: Warmke, C. (2021). What is bitcoin?. Inquiry, 1-43.
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 Crypto Wars have
clearly shown in the past. Because of the nature of
information, 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.[^map-territory] 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.[^goedel]
[^goedel]: Wikipedia contributors. (2022, March 23). Gödel numbering. In Wikipedia, The Free Encyclopedia. Retrieved at 730,136
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.
[^map-territory]: 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, the map is the territory.
This is precisely why 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
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 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 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[^blocksize-war] 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.
[^blocksize-war]: Jonathan Bier (2021), The Blocksize War
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.
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.[^infinite-games] It
started with the Genesis Block, and it has been and is being played by
myriads of players ever since.
[^infinite-games]: James P. Carse (1987), Finite and Infinite Games
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.[^bitstein]
[^bitstein]: Shout-out to bitstein for sharing his view on Bitcoin governance.
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 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[^noded] and others have correctly pointed out in the past.
[^noded]: Noded 78, 32:50
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 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
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.[^hornets-nest] 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.
[^hornets-nest]: "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." —Satoshi Nakamoto
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 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 tampered with past records and that the records are not made up.
That's why we need the 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 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. [...]
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 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 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 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 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.[^its-all-economics]
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.
[^its-all-economics]: 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.
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.
Your private key is secure because no amount of compute will ever be
able to guess it. It's about physics, not technology, as 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 carrier
pigeons—there
is even an 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—Cryptosovereignty &
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."
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 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 21 Ways. Like my first book, it will be published under a permissive license. You can support me in writing it.
Acknowledgments
- Thanks to John, Max, Erik, Mr. Hodl, and my patrons for their valuable feedback on earlier drafts of this essay.
This article first appeared on dergigi.com.
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