We’ve heard some suggestions to issue our own token or to use something other than Bitcoin. This article will attempt to simply explain this complex topic of why using anything other than Bitcoin is a bad idea.
Let’s start by asking: Why Bitcoin Jungle?
Bitcoin Jungle is giving the option to opt out of fiat banking, a highly complex system understood by few that comes with a deep exploitation of those who don’t understand it and / or don’t have options outside of it. Two of the most obvious pains in Costa Rica are:
* High credit card fees for merchants
* Difficulty getting cash as a tourist or resident with foreign based income
These two pains work synergistically to magnify each other. As a resident with foreign based income who has trouble getting cash, I use my credit card everywhere I go. As a Costa Rican merchant, you pay the price, between 4 – 7%. You are also subject to chargebacks.
Bitcoin Jungle solves this by creating a simple way for merchants and people to accept and spend bitcoin for free. As a resident with foreign income, it’s easier for me to get bitcoin than cash. And as a merchant, you can save significant processing fees and never worry about chargebacks again without turning away customers who don’t want to use or can’t get enough cash.
There are various other more complex reasons why Bitcoin Jungle exists, and they require a deeper understanding of the global fiat banking system in order to comprehend. In this article, I will try my best to give an easy to understand summary of just one small piece of it: Currency Debasement and the Cantillon Effect.
It’s helpful to look through the lens of the United States, because they issue the dominant reserve currency in which nearly the entire world settles trade liabilities. From 1900 – 1933, the United States was on a Gold Standard. This meant anyone could redeem their paper currency for the fixed amount of gold it represented. In 1933, Executive Order 6102 was issued, forcing U.S. citizens to surrender any gold they held for cash or face criminal charges. Simultaneously, the gold standard was broken and cash was no longer redeemable for gold. Overnight and with no warning, the currency became tied to nothing besides the faith and credit of the U.S. government. However, they continued to promise to hold enough gold in reserves redeemable to foreign governments that held U.S. treasury liabilities. And then in 1971, they reneged this promise as well, with no warning, after feeling mounting pressure from foreign nations to redeem treasury claims that they were unable or unwilling to fulfill.
So we have two instances of currency, the storage vessel for which you trade your life’s work, being seismically manipulated overnight with no warning. And the asset backing the currency transitioned from gold to military might and the threat of violence, or as some people call it, “the full faith and credit of the U.S. government.” These changes paved the way to a world of limitless manipulation. The debasement of the currency has been consistent and ongoing ever since, yet the effects are exponential and we are approaching the parabolic phase. As Satoshi said:
“The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.”
I will write another article detailing the difficult to understand implications of this on the average person’s life, but the easiest way to put it is that this debasement makes the money you work for worth less over time. A lot of people realize this, but they don’t realize how deeply this is true. They don’t realize that it’s unnecessary and allows for things like endless war, extreme wealth gaps, and exploitation of the rest of the world for a minority class primarily within the United States and other G7 nations.
To make this exploitation easier to understand, let’s pretend I get to create the currency we all use because I’ve convinced you all that I have some specialized knowledge to make our economy function better. All of my dear friends have given me so much to help me get where I am, and they are prominent businessmen. However, they have taken on excessive risk and manipulated pricing of homes through complex financial products that have catastrophically failed. I print more money because they need it, and I convince everyone that the community won’t be ok if I don’t give them the money. and they will use it to help everyone in the community with their businesses. So I give it to my friends because they do so much for me, even though they are the ones who created the problem in the first place. So now my friends get to continue creating financial products that affect the community’s ability to buy homes, energy, and food. They place large bets on these products, where the reward is massive, but the risk is zero, because I will just give their business more money when they fail.
Well your money that you saved is now worth less. Your salary is worth less, but they’ve taken billions of dollars in bonuses and profits. And this is just deeply simplifying one localized event that occurred in 2008 in the United States, but this happens all over the world in various ways. However, the United States is worth investigating because they also get to debase their liabilities to foreign governments that are forced to hold them. So they are the largest beneficiaries of this system, particularly the financial class within the United States.
Now, that’s probably enough economics and potentially confusing for the average person, so let’s move on to why Bitcoin fixes this and other crypto is either highly confused, ill-intentioned, or not trying to fix this.
So now we all understand that having a money that is redeemable for a deeper source of value is a bad idea, right? Because you have to trust the issuer of that money to make good on their claims, and history is full of breaches of that trust. Different versions of what happened in 1933, 1971, and every time the Central bank prints money have happened consistently throughout history.
So if we create Bitcoin Jungle Coin (BJC), what is the point? So that you can use BJC in this particularly small circular economy, and then redeem it for Bitcoin or Colones or USD? Bad idea. You would have to trust us, but you shouldn’t, and more importantly, you don’t need to, because we have Bitcoin.
Ok so why not allow other coins like Ethereum? First and foremost, Ethereum was never trying to be money, and while a small community within Ethereum thinks that they are, this is not the reality. Bitcoin has changed its monetary policy 0 times and never will, yet Ethereum has already changed its monetary policy several times in its short history. This is no different than what a central bank does. On top of that Ethereum is moving to Proof of Stake. This is a complex topic to understand, but this is basically the idea that the more money you have, the more power you have, and the more power you have, the more money you get in return. It is a vicious cycle of wealth gap creation that is again very similar to the financial regime of today. Ethereum was also pre-mined, meaning that a handful of people got free coins at the very beginning as an incentive to work on building it out. This is similar to an equity structure of incentives, making it effectively a security.
Securities cannot be sound money. No one would even try to suggest that they should be. You can figure out whether or not something is a security by using the SEC’s framework called the Howey Test. Hint, every successful token besides Bitcoin is a security. There are a few other commodity-like assets in the crypto space, but they are all very tiny and do not have the unique properties that made and will continue to make Bitcoin so successful.
On top of all of this, the trust model for every single alt coin is a trade off. You have to trust the founders, the issuers, and the validators. As these alt coins scale, the cost to verify becomes incredibly expensive and prohibitive.
Bitcoin is unique in that it keeps the ability for anyone to validate everything very easy and cheap, and this is important for so many reasons. It means you can use your home computer or buy a very small and cheap $150 computer to fully control and validate your money for yourself.
Bitcoin is unique in that the founder(s) remained completely anonymous and left the project permanently over 10 years ago. There is no founder or anyone in control. No one even has any idea who Satoshi Nakamoto is, or if it’s a group of people. For these reasons, there is no one to threaten or be coerced.
Everyone who uses the bitcoin network has the opportunity to have a voice and validate every single transaction easily and cheaply. This is not a property any other network that promises “more functionality” can maintain. In fact, it doesn’t even make sense for the base layer of a protocol to do everything. Look at the internet. It is deeply layered in the same way that Bitcoin was and will continue to be developed. This is for a multitude of very good reasons.
This ability of every user to have a voice and to validate each transaction makes it nation state resistant money. It is the only crypto that can not be effectively coerced, killed, or manipulated by any government or minority group. Every single other crypto comes with an oligarchy of sorts. It is the only hope for a money of the people by the people.
There are a plethora of reasons why Bitcoin is unique and stands alone in the sea of crypto, and it is far too much for a single article. Here we are just scratching the surface of a very deep topic, and future articles will address more reasons, and perhaps with more detail.
As world renowned economist F.A. Hayek said in 1984: “I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.”
Bitcoin is just that. It is something they can’t stop. It is pristine. It is unique. It is antifragile. It is irreplaceable. It is power for the individual.
Don’t trust, Verify.
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