The Declaration of Financial Independence

Author: John Wang, Graphics: Bella Aharonian

The BRB Bottomline:

If the founding fathers knew about Bitcoin, they would certainly be very impressed…

---

This Fourth of July, America’s 246th birthday happens to coincide with the heart of a social movement arguably just as powerful and transformative as that which built our nation and in turn transformed the world back in 1776. That social movement is completely unique and unlike any that came before it—it is the rise and development of Bitcoin’s legitimacy as a store of value and a financial instrument. Obviously, the founding fathers’ American Revolution doesn’t match up line-to-line with Satoshi’s “immaculate conception” of Bitcoin. But, the parallels between the births of Bitcoin and the United States provide important insight into understanding the sort of cultural strength Bitcoin holds in America. Many of the tenets that served as motivation for the concept of Bitcoin and eventually contributed towards its sustained success constitute the same foundation that the United States was built on.

Decentralized America

America was built fundamentally on the key notions of independence, self-reliance, and personal accountability. As such, key units of its economic structure were initially decentralized and constructed with an emphasis on states’ rights. Essential constituents of the early American economic system—including food production, businesses, and defense—were decentralized. For one, food and other staples were produced by a hodge-podge of independent, decentralized sustenance farmers and small businesses. In addition, national defense was not conducted via a standing federal military but rather in a decentralized manner through the 2nd Amendment.

Today, what once was the decentralized nature of our nation’s economic units no longer exists. The United States is more governed now by a centralized source of power. The government’s structure is constituted of a jumbled bureaucracy with a large number of federal entities holding power over its citizens. With regards to America’s economic output, food production is controlled in an oligopoly by a handful of large corporations and then regulated by federal entities like the Food and Drug Administration. Moreover, large, centralized corporations have also risen and taken over every market at the expense of small, family-owned businesses that cannot compete and operate on the same scale—and are thus squeezed out of business. On the defense front, America has an extremely large standing military with an expansive budget stretching above $800 billion—funded by taxpayers. Meanwhile, the federal government is regulating and controlling its citizens’ ownership of personal firearms for defense.

If you just took a side in any of those issues, you’ve missed the point. People can have opinions on key issues, but economic power and money itself should be neutral and depoliticized. Everybody has their own perception as to what constitutes right and wrong—which is perfectly reasonable—but that also means that everybody thinks they’re the good guy.

If someone is against free speech, they will then need to nominate a central entity that serves as the defining authority as to what can and cannot be said. That authority might censor your enemies and political opponents one day—and you might benefit from it, or at least feel some sense of schadenfreude—but sooner or later, you’re going to be banned and censored as well. 

Federal Banking

Founding father Thomas Jefferson was strongly against a centralized federal bank controlling the nation’s monetary supply because he believed that creating a national bank was not within the scope of the federal government’s power. In fact, he believed that a federal bank was more dangerous to the rights of the American citizen than a standing national army. Jefferson maintained that discretionary policy controlling the American monetary supply via inflation and deflation could potentially deprive the American people of their property. His words ring especially true in the wake of our current administration’s fiscal and monetary policies contributing to the United States’ economic downturn. 

To visualize how bad the situation has gotten, it took the United States over two centuries to reach $7 trillion in national debt. Shockingly—or perhaps not—in the 27-month span stretching from March 2020 to June 2022, the United States’ national debt shot up by another $7 trillion. Frankly, there’s no good way out of this corner the government has backed itself into. When a country has national debt on the magnitude that the United States has right now, the only way it can squeeze itself out is by printing money and essentially debasing that debt. Unfortunately, the American citizens then suffer from collateral damage, as their assets locked in U.S. Dollars are also debased.

Critically, Jefferson believed that issuing power should be reclaimed from centralized banks and returned to the hands of the American people. If that sounds familiar, it’s because it is. Satoshi’s Bitcoin is a modern-day culmination of Jefferson’s ideals. With Bitcoin, issuing power is taken away from overreaching centralized authorities and is dispersed fairly among not just the United States’, but on a larger scale, the world’s population.

Thus, our current situation with the United States’ national debt will never happen with Bitcoin. Bitcoin is governed by a decentralized Blockchain and operated via the collective power of individual miners—each of which can stop mining at any moment at their discretion. Its monetary policy is laid out explicitly by a whitepaper and cannot be changed on a subjective basis, and certainly not by any single entity. In other words, Bitcoin is ruled by a set of well-defined, unambiguous rules, not a ruler. It’s similar to the American notion of being ruled by the Constitution, which sets forward and unambiguously delineates how the American people are to be governed—as opposed to the centralized, often dictatorial discretion of the King and Queen of England.

Satoshi’s Immaculate Conception

The founder of Bitcoin, Satoshi Nakamoto, built with his genius a beautiful, arguably perfect system and then miraculously stepped away from power. It’s not unlike how George Washington was president for eight years, during which he helped construct our nation and set precedences—and then voluntarily stepped away from office.

When people have power and enjoy its benefits, it’s hard for them to have the willpower and personal resolve to step away from it. Just like how the American Revolution was a bizarre and rare historical occurrence, the birth of Bitcoin was a once-in-a-lifetime “immaculate conception” that is extremely difficult, if not impossible, to replicate. That’s why new coins that are popping up trying to replicate Bitcoin’s success are all but bound to fail—when they are built on a foundation of pre-mines and venture capital backing, they become centrally controlled by a very small group of insiders who are loath to cede their power. 

Furthermore, Bitcoin simply has too much of a head start over its competition. Satoshi benefited from a unique and irreproducible buffer period during which the idea of a decentralized cryptocurrency wasn’t yet popularized. That buffer allowed Bitcoin to grow, spread and gain social traction, all while avoiding being co-opted and centralized in its nascent stages. Such a buffer period is no longer attainable, with the public spotlight shining on any new crypto asset. Thus, it comes with little surprise that no fork of Bitcoin has enjoyed sustained success—they are simply too late to the party and are grasping straws, while the steadfast power of Bitcoin slowly takes over their market share.

Bitcoin as a Social Movement

Opponents of Bitcoin often maintain that Bitcoin’s inherent weakness lies in the fact that it has no true use case. They, however, are overlooking a key—perhaps the most important of all—use case: a store of value. Humans have needed a store of value since the beginning of time in order to operate societies and will likely also need one until the end of time.

Moreover, Bitcoin’s opponents often underestimate the collective power of a population’s social consensus and movements. The American Revolution was far more than just a war for independence—it was a much greater social moment for the United States. It was a movement that changed how the government and its role in its citizens’ affairs were seen—a shift from an aristocratic power structure centralized among a few powerful individuals to a more populist democracy where power was allocated evenly among a population. That social movement gained traction rapidly and eventually snowballed into an unstoppable force that nothing could slow down. 

In the crypto space, there are all these new coins that seemingly come out of nowhere, each in its whitepaper claiming that it has the “killer app” implemented in its technology—but not a single one can come close to touching the sheer power of Bitcoin’s modern-day social revolution. Sometimes, all you need is a vision, a narrative, and the support of the people.

Harder, Better, Faster, Stronger

The recent cascading spiral of daisy-chained bank runs and crashes—from Terra/Luna to Celsius, to 3 Arrows Capital (3AC), to Voyager, to BlockFi, and who knows next—have only involved centralized entities. Centralized institutions that are controlled almost unilaterally by a potentially corrupt or incompetent entity are subject to failures that hurt their customers, who are often everyday citizens. 

They are subject to corruption—like in the case of Celsius, which effectively operated as a Ponzi scheme, selling customers a pipe dream, taking their hard-earned assets, and then escaping in one big rug pull. Or, they are simply subject to gross incompetence, like in the case of Voyager, who practiced absolutely terrible risk management by loaning out $650 million (over 50%) of their capital to 3AC—which ended up being insolvent—while only maintaining just over $152 million in cash reserves as a safety net. Customers are losing faith in centralized institutions’ ability to keep their assets safe when their operations are decided internally via decision processes that are not transparent. It’s the same motivation that spurred American colonists to declare independence against the British monarchy: they could no longer trust the king to treat them well and fairly.

Simply put, centralized financial institutions require customers to place their trust in the hands of a few powerful individuals—and that trust is dwindling. The chain of crashes is far from over. More institutions, whether it’s Gemini, KuCoin, or Genesis, are bound to crash and go to zero during the third and fourth quarters of 2022. In other words, Bitcoin’s social narrative and movement are only getting stronger by the day and will soon reach critical mass. The first dominos have been toppled, and there’s no stopping or going back now.

As Good as Gold

The founding fathers were also extremely high on gold and silver as currencies—the reason being, that bullion was valuable in the same ways Bitcoin is today. It isn’t issued by any central authority, meaning its value is vested in its scarcity and use-cases rather than trust for a central institution like the United States government. Gold and silver must be mined and then refined in an intensive process by the joint efforts of many individual workers and laborers—similarly to how Bitcoin is figuratively “mined” by the collective power of individual miners via the proof of work model.

The founding fathers in 1776 most definitely did not hear of the concept of a decentralized cryptocurrency like Bitcoin. In fact, if they did, they would probably not even understand the technology and computer science behind it. But, it’s safe to say that if the founding fathers were around in 2022 in the midst of this burgeoning social movement of re-centralization via cryptocurrency, they would certainly have words of praise for Bitcoin.

---

Take-Home Points

• In terms of economic output and government structure, America in 1776 was much more decentralized than it is now.
• Money should be a depoliticized, neutral currency.
• Founding father Thomas Jefferson was strongly opposed to a centralized federal bank and wanted issuing power to be returned to the American people.
• Created in an “immaculate conception,” Satoshi’s Bitcoin is a modern manifestation of Jefferson’s principles.
• Bitcoin has a substantial moat over its competitors, who cannot come close to touching it.
• The rise of Bitcoin is a powerful social movement undergirded by overwhelming public sentiment in the same way the American revolution was an unstoppable social revolution.
• The recent string of crypto crashes only adds to the narrative of Bitcoin and serves to strengthen its social movement.