For the first time in the history of humanity, a technology has been created that separates money from the state once and for all. This separation of money and state is poised to transform the way we think about value and our expectations of government involvement in our financial lives, and could represent the biggest political-cultural shift since the separation of church and state.
Bitcoin cannot be created at the whim of a centralized power, taking away the ability of governments to spend wildly. It may seem utopian, but once humanity evolves towards the Bitcoin standard, the government-created boom-bust cycle, constant inflation and the ability to finance wars will be things of the past.
Will Szamosszegi is the founder and CEO of Sazmining.
Bitcoin is a native digital currency that runs on a decentralized ledger called blockchain. Unlike the Federal Reserve, which has never been audited, Bitcoin’s ledger is checked every 10 minutes by hordes of nodes around the world.
Without the ability to create money out of thin air, governments will instead have to tax their citizens directly.
Raising taxes is typically a difficult issue, even when the proceeds are expected to be used for domestic goods such as public health or education. But citizens will be highly unlikely to accept tax increases for any war that is not purely defensive. For all we know, the American adventures in the Middle East of the last two decades may not have happened if we had already adopted the Bitcoin standard.
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A Bitcoin standard will dramatically dampen the boom-bust cycle. Central banks – if they still exist – will be constrained by Bitcoin such that they will not be able to lend easy money. First of all, the only money they could create out of thin air would only be second-layer money, not bitcoin itself.
People will be skeptical about accepting any currency other than bitcoin, and therefore central banks’ customer base will be much more limited than it is now. Furthermore, even if some people accepted the second-level currency of central banks, they would have difficulty finding others who would accept it as payment.
In short, by the Bitcoin standard, creating money out of thin air and distributing it is not a viable business model.
Finally, a Bitcoin standard represents the (gradual) death of inflation. The Bitcoin supply schedule is pre-programmed such that supply will increase at a predictable, decreasing rate until there are 21 million bitcoins in circulation. At that point no more bitcoins will be mined. Assuming humanity continues to innovate, prices of goods and services will decline over time.
In other words, the purchasing power of Bitcoin will continuously increase in proportion to the amount of wealth created by humanity.
See also: The rise and fall of Bitcoin maximalism | Opinion
Thanks to Bitcoin, humanity now has technology that governments can’t ban even if they try. This might have seemed bold in 2008, when Bitcoin was first invented, but now it is too late to stop the decentralized network. Remember how China tried to ban bitcoin mining in the country, then the largest provider of network hash power? Instead it demonstrated how resilient bitcoin is. Mining thrives around the world, including as a black market in China.
Bitcoin now also has powerful allies. El Salvador and the Central African Republic have made bitcoin legal tender. North American politicians including Cynthia Lummis, Jared Polis, and Pierre Poilievre are ardent supporters of bitcoin. Bitcoin also played a significant role in the Canadian trucker protests of early 2022, as well as the ongoing crisis in Ukraine. More and more likely they will become “orange pills”, as the saying goes, referring to the orange bitcoin symbol.
While the state may not like losing monopolistic control over money, it is quite difficult to convince people that inflation is good for them and that a deflationary asset is bad for them. Therefore, for the mere personal interest of citizens, bitcoin will progressively force the State to give up control over money.
While the separation of church and state has always been imperfectly implemented, the separation of money and state will be real, total, and permanent.
