The FIAT Standard - Saifedean AMMOUS

 

Introduction

• Bitcoin effectively combines gold's salability across time with fiat's salability across space in one apolitical, immutable, open-source package.

Chapter 2 - The Never-Ending Bank Holiday

• The Bank of England's troubles started at the dawn of the Great War. On July 31, 1914, large crowds stood outside the doors of its Threadneedle Street headquarters looking to convert their bank balances and banknotes into gold coins before the August bank holiday.

Chapter 3 - Fiat Technology

• Fiat can be defined as a compulsory implementation of debt-based, centralized ledger technology monopolizing financial and monetary services worldwide.
• The fundamental engineering feature of the fiat system is that it treats future promises of payment of money as if they were as good as present money.
• In the bitcoin network, only coins that have already been mined can settle transactions. In a gold-based economy, only existing gold coins or bars can be used to settle transactions and extinguish debt.
• In other words, the US Congress and Federal Reserve are not the only institutions capable of conjuring money from thin air; any lending organization also has the capacity to increase the money supply through lending.
• No presents goods are used in the home purchase.
• The Fed rules unilaterally over the SWIFT payments network and can prevent entire nations from joining it and settling trades with other nations.
• Lending ultimately determines the money supply, and lending levels are in turn shaped by the interest rate and Federal Reserve policy.
• All central banks back their currencies with international reserve currencies they cannot print. For most countries, this is the U.S. dollar, and for the U.S., it is gold.
• All international payments to and from a country have to go through its central bank, allowing it a strong degree of control over all of its international trade and investment activities.
• If the creation of debt were to increase quickly, the value of the national currency would decline against other currencies.
• The central bank using its reserves to purchase government bonds, thus financing the government.
• When a central bank buys larger quantities of its government's bond, the value of its currency decline, since it funds this purchases by inflating the money supply.
• The collapse of the Fiat system in 1929 ultimately gave rise to the protectionism of the 1930s, worsening the economic depression and fueling hostile nationalism.

Chapter 4 - Fiat Mining

• New money is not created when currency bills are printed, but rather whenever new debt is issued. Bill printing just turns some of the already existing money supply from digital to physical form.
• Bitcoin miners try to mine as much bitcoin as possible, but they are successfully constrained by the difficulty adjustment and a network of thousands of nodes worldwide enforcing Nakamoto's consensus parameters.
• Ludwig von Mises "The expansion of credit cannot form a substitute for capital".
• Instead of accumulating capital from savers and lending it to borrowers, fiat banking just creates new claims on existing capital and hands them out to borrowers.
• By the early twentieth century, almost all of the humanity was on a gold standard and able to solve the value of its wealth in a money whose supply increases at around 2% per year, and whose value can be reliably expected to appreciate over time.
• The best money available in the world now increases in supply by around 7% per year.
• One of the most important ways in which the measurement of the CPI (Consumer Price Index) has been manipulated is through the removal of house prices from the basket of market goods, under the pretense that a house is in an investment god, an absurd redefinition.
• Durable goods are ore likely to store value in the future, and thus they are more likely to attract store-of-value demand and appreciate. 

Chapter 5 - Fiat Balances: Universal Debt Slavery

• The Fiat monetary system leads to the proliferation of debt and the destruction of savings.
• The Fiat monetary system is:
• irreconcilable: unlike with Bitcoin, fiat assets cannot be reconciled with their full network issuance
• tentative and revocable: governments can revoke these notes any time
• negative: the total sum of all debts far exceeds the quantity of money available
• Under the fiat standard, being rich does not usually mean having fiat tokens. It rather signifies owing a lot of fiat-denominated debt, which dwarfs the amount of physical fiat and fiat in savings and checking accounts.
• It makes the most sense for individuals, corporations, and governments not to hold positive balances, as they will be devaluated through inflation, but to borrow.
• The more a society saves, the better the lives of its future generations.
• While investment is an essential part of a market economy, it is distinct from and is not a substitute for saving.
• The most important distinction between saving and investment is that investment inherently involves more risk.
• The problem with fiat is that simply maintaining the wealth you already own requires significant active management and expert decision-making. You need to develop expertise in portfolio allocation, risk management, stock and bond valuation, real estate markets, credit markets, global macro trends, national and international monetary policies, commodity markets, geopolitics, and many other arcane and highly specialized fields in order to make informed decisions that allow you to maintain the wealth you already earned. You effectively need to earn your money twice with fiat, once when you work for it, and once when you invest to beat inflation.
• It is very difficult to find investments that can beat inflation.
• The correct and successful financial strategy under the fiat standard is to constantly take on as much debt as possible, be meticulous about making all payments on time, and use the debt to buy hard assets that generate future returns.
• Irish economist Richard Cantillon described the redistributive impact of inflation as benefiting the people who receive the newly created money first at the expense of those who receive it later. In the modern fiat standard, the beneficiaries of the Cantillon effects are the borrowers, and savers are the victims.

Chapter 6 - What is Fiat Good For?

• The analytical lens of The Bitcoin Standard was salability across time, which can be understood as the degree to which a money holds its value over time.
• Most large and institutional investors use U.S government bonds as their store of value and treasury reserve asset because it is easy to liquidate large quantities without causing large movements in the market.
• Salability across times measures the ability of a good to maintain its market value in the future.
• Le ratio stock-to-flow est une mesure qui permet d'estimer la rareté de n'importe quel métal précieux en divisant le stock total déjà extrait disponible par la quantité produite actuellement. S/F = 62  pour l'or et S/F = 22 pour l'argent.
• Governments and their central banks gained unprecedented power to shape society as a direct consequence of the centralized system of international gold transportation.
• SWIFT is a messaging platform, not a platform for transferring funds. It sends payment messages to recipient banks, but it does not send the actual money.
• Under a fiat monetary system, banks issue loans and create deposits for clients many times their cash reserve.
• A bank can operate on fractional reserves perfectly fine unless and until a critical mass of its customers all come calling for their holdings.
• Inevitably, the goal of protecting the value of the cash conflicted with the goal of protecting banks from bank runs, and central banks have almost always favored the financial system at the expense of the currency's value.
• The Federal reserve Act effectively gave banks a license to create money out of thin air and a safety net to protect them from the consequences.
• By using fractional reserve banking to decouple available credit from savings, society benefits overall. At least, that is what Keynesians believe.
• In the era of modern banking, banks have abused the exorbitant privilege of government protection in several ways.
• Politicians and federal reserve officials have given life to the "too big to fail" idea by repeatedly bailing out financial institutions that engage in risky behavior.
• Investors and creditors had found a way of privatizing their gains while socializing their losses.
• The shadow banking system's ability to increase the supply of credit is hard to measure or understand, as its many organs move in different ways.
• Far money is created outside the traditional retail banking system than inside it.

Chapter 7 - Fiat life

• Why delay consumption today when you are unsure what will happen to your property tomorrow?
• The most immediate effect of the decline in the ability of money to maintain its value over time is an increase in consumption and a reduction in savings.
• Finding the right investments is difficult, requires active management and supervision, and entails risks.
• Architecture has moved from optimizing for quality and longevity for present-day cost reduction.
• They defer their costs to the future.
• The wealthy can protect themselves in these situations by holding most of their wealth in hard assets.
• When individuals witness the dissipation of their wealth, they rightly feel robbed, and they question the utility of living in a society and respecting its mores.
• What has changed is our ability to think long term and care for our future selves.

Chapter 8 - Fiat food

• The inevitable result of the expansion in the quantity of money was price increases for goods and services.
• The shortcomings of centrally planned economic decisions have been thoroughly detailed by Mises and the Austrian school, primarily in the economic context, but the logic is equally applicable to nutritional decisions.
• But in the century of fiat-powered omnipotent government, even the decision of what to eat is increasingly influenced by the actions of central governments.
• President Lyndon Johnson asked a federal bureaucrat to concoct a fraudulent health scare around perfectly nutritious food for reasons that had nothing to do with science.
• In so many matters of public policy, this pattern repeats: a sanctimonious quasi religious moral crusade demands government policies, the most important consequence of which is to benefit special interest groups.
• Those who try to avoid animal fat because of dietary guidelines will find themselves hungry more often. They need to binge (s'empiffrer) on endless doses of sugary snacks all day, junk food that contains lots of chemicals and artificial, barely edible (comestible) (or pronounceable) compounds.
• Sugar is eight times more addictive than cocaine.
• As depreciating money drives people to prioritize the present, they are more likely to indulge (céder) in foods that feel good in the moment at the expense of their future health.
• Much as economics has its Austrian alternatives, such as Mises, Rothbard, and Hoppe, nutrition also has its heroes: Price.
• The healthiest and strongest populations he found were the Inuit of the Arctic and African herders. Almost nothing about the environment and customs of those two populations is similar in any way except for their reliance almost exclusively on animals foods.
• We are beginning to see a very clear pattern emerge from people who shift their diet from one based on fiat garbage to one based predominantly on animal foods: a huge reduction in their desire for junk and ultra processed food.
• Soil, being the productive asset from which all food comes, is capital.
• Agricultural crop production, on the other hand, quickly depletes the soil of its vital nutrients, making it fallow (en jachère), and requiring extensive fertilizer input to be productive. This explains why preindustrial societies worldwide usually rotate their land from farming to grazing.
• Low time preference approaches to managing land would prioritize the long-term health of the soil, and thus entail the management of cropping along with the grazing of animals.

Chapter 9 - Fiat science

• In the United States, it's not uncommon for college graduates to carry more than $100,000 in student debt, bills they will still be paying in their thirties and forties.
• It's worth remembering that Marx's entire worldview rested on the need for governments to take over the function of credit and money creation and for a revolutionary vanguard to be in charge of all economic and social decision at large.
• In his farewell address, U.S. President Dwight Eisenhower warned his countrymen about the dangers of the emergence of a military-industrial complex, and these remarks have become fairly well known today.
• That France has low rates of heart disease in spite of consuming large quantities of meat is still viewed as a paradox by modern nutritionists, when there is nothing paradoxical about it except if one buys Keys's unsubstantiated conclusions.
• Keys also popularized the ridiculous idea that a Mediterranean diet is one low in animal fats and high in plant fats, an idea that has been used to heavily markets poisonous oils (like "heart-healthy" canola (colza) oil which no human should feed to their dog, let alone cat) 
• Teicholz shows countless sources illustrating how Mediterranean diets relied heavily on animal fats for cooking, as the basis of the diet, with olive oil used primarily for soap, lighting, skin, hair, and food dressing.
• The biggest beneficiaries from government nutritional guidance where the producers of the cheapest sources of calories and proteins: grains and legumes.
• In one of the most catastrophic scientific errors of all time, detailed thoroughly in the work of Nina Teicholz and Gary Taubes, carbohydrates (glucides) were given a free pass and became the foundational basis for nutrition while animal meat and fat, the highest quality and most nutritious food available, were vilified as the cause of modern diseases and illness.
• By separating researchers from the consequences of their research and action, fiat naturally selects for and magnify the hysterical conclusions.

Chapter 10 - Fiat fuels

• The undertone of much modern environmental hysteria is the idea that the earth left alone and free from human influence is something good and desirable for its own sake.
• The eternal adolescents of fiat want to live in modern homes, easily survive winters, travel faster than walking, use modern electronic devices and medical equipment, and have electricity on demand, but they don't want to use the substance that makes all of these possible.
• Solar energy requires highly sophisticated and expensive equipment to become usable, and that is why it remains far more expensive as a source of energy than hydrocarbons and continues to require subsidies, mandates, and subsidized fiat credit.
• The technology needed to transform wind energy into electric energy, and then store it into a battery is far more expensive than just refine oil and putting into a car engine.
• The production of electric batteries and solar panels is extremely energy-intensive. The extraction of the rare earth metals that go into them is a highly sophisticated process, requiring large amounts of power to dig deep holes into the earth.
• The only viable alternatives to hydrocarbons are hydroelectric power and nuclear power, but these are extremely limited in their scope for growth.

Chapter 11 - Fiat states

• A devaluing currency encouraged citizens to unload their local currency for foreign currencies or for foreign goods.
• The function of the central banking itself is the essence of communist and socialist thought.
• Thanks to its financing from the US Federal Reserve, the IMF is able to issue large amounts of U.S; dollar-denominated credit to central banks around the world and has performed this function continuously over the past seven decades.
• The IMF looks to maintain the role of the dollar as the global reserve currency.
• The price of gold had risen from $38 an ounce in 1971 to $800 in 1980, and there were serious concerns in Washington over the dollar's survival.
• The impact of the misery industry has been to pillage the citizens of he world's poorest countries too the benefit of their governments and the U.S. government that issues the reserve currency they use. By ensuring the whole world stays on the U.S. dollar standard, the IMF guarantees the US can continue to operate its inflationary monetary policy and export its inflation globally.
• Had kleptocrats not constantly had recourse to the IFI's endless credit lines, they would quickly bankrupt themselves until they were replaced by governments that behave responsibly and only spent less than they taxed.
• Regimes that borrowed heavily and centrally planned their economies invariably ended up with economic disaster and hyperinflation.

Chapter 12 - Fiat Cost-Benefit Analysis

• The physical infrastructure and energy needed to run the fiat monetary system are insignifiant compared to the economic, political, social, nutritional, and civilizational consequences of deploying fiat monetary technology.
• The first and most obvious cost is the wealth destroyed by the devaluation of national currencies. Every national fiat currency has devaluated in real terms almost every year since its creation. This has continuously eroded the wealth of their holders.
• With monetary inflation, rising prices indicate an increase in money supply larger than the increase in productivity.
• A world of decreasing prices would provide people with a strong reason to save for the future, and one can only imagine how much better living standards would be today had humanity not been afflicted by inflationary fiat.
• Bitcoin is far more efficient than fiat because it does not impose this form of wealth confiscation through inflation.
• Business cycles are the inevitable result of the of the manipulation of the money distorting the price of capital.
• Wasteful spending and wasteful investments are an inevitable outcome of a monetary system in which the money cannot be expected to hold its value.
• The benefit of running a payment system that allows you to mint money is extremely high.

Chapter 13 - Why Bitcoin Fixes This

• Bitcoin is money without the need for the commands or regulations of any central authority. This allows for a separation of money and state.
• Unlike gold transaction fees, bitcoin transaction fees are independent of the distance traveled and the size of the transaction.
• Sending one satoshi to your next-door neighbor costs exactly as much as sending 100,000 bitcoins, worth billions of dollars, from the U.S. to China.
• A bitcoin transaction fee of one dollar can be 100% of the price of your coffee, but it would be 0.0000001% of a billion-dollar transaction.
• This also suggest bitcoin on-chain transactions will likely be used increasingly for international money transfers rather than domestic money transfers.
• Running a bitcoin full node costs around $100-$700 as a one-time-time setup cost. It can then verify the validity of all bitcoins payments at a marginal cost per transaction that is almost negligible, as it has a small daily running cost in terms of electricity, bandwidth, and hardware depreciation.
• The current global system of gold trading has its base layer the London Bullion Market Association good-delivery bars.
• If you have the private keys, you have bitcoin. If you do not have the private keys corresponding to an address, you have a promise from someone else to deliver your bitcoin in a future block height.
• The distinction between future satoshi and present satoshis is very clear and made clearer every ten minutes a block clears, making it harder to issue unbacked liabilities. This enable a clear distinction between present and future goods, and between money and credit.
• Bitcoin offres everyone a chance to hold an asset as a store of value that does not have liabilitiess attached to it. You no longer needs others to be indebted for you to have savings. You can hold a hard asset as your savings, and the work that went into it would already have been performed in bitcoin's proof-o-work calculations. It does not require future production and repayment from the borrower to have have market value.
• By constantly devaluing the existing money supply with the creation of credit, governments are constantly robbing their citizens's futures to finance their present-day spending.
• IFI: International Financial Institutions.
• The was no World Bank, IMF, United Nations, or WTO under the gold standard, and that is likely to be the case in a bitcoin standard.
• A world financial system built around bitcoin would replace IFIs with the normal workings of the free market. There can be no global lender of last resort in that world. There can be no global bureaucracy to centrally plan the world's economies' trade and capital movement.

Chapter 14 - Bitcoin Scaling

• Increasing the block size to improve the scaling has proven highly unpopular with bit coiners because it compromises the network's decentralization and makes it harder for the average bit coiner to run a node.
• The World Payments Report statistics: the 706.6 billion transactions (in 2019, about 1.94 billion transactions per day) were specifically called "non cash transactions" for a reason: they involve intermediaries processing the payment.
• Even though it is digital, a bitcoin transaction is still a ash payment because the payment is not the liability of anyone. Bitcoin is a form of cash because only the bearer is able to dispose of it, and they can do so without the need for consent or permission of a third party intermediary.
• Bitcoin's essential quality is not that it is digital but that its transactions are free of counterparty risk.
• A look at the twelve years of bitcoin's existence clearly shows the trend toward higher-value transactions. While the number of daily transactions has grown, it is far outpaced by the increase in the value of these transactions:
  
  
  
• The common mistake that many bitcoiners make when assessing second-layer solutions on top of bitcoin is to compare them to bitcoin transactions, but the more correct comparison is with consumer payment technologies that use fiat.
• Opendime
• Multisignature custody solutions will likely also play a role in allowing for cheap second-layer payment.
• Lightning nodes open channels with one another by sending funds to a multisig address using an on-chain transaction.
• Users can observe publicly available information about the mempool (all unconfirmed transactions) to establish wether competition for block space is driving up fees and vice versa.
• Ludwig von Mises discusses how uncertainty about the future is the key driver of demand for holding money. With no uncertainty of the future, humans could know all their incomes and expenditures ahead of time and plan them optimally to avoid ever having to hold cash. But as uncertainty is an inevitable part of life, people must continue to hold money for future spending.
• The Lightning Network strongly suggest that specialized node operators will emerge to earn profits in exchange for liquidity provision. The job of banks in processing payments can be understood as the provision of liquidity. In traditional finance, they are the ones able to put up cash for payments when needed. Similarly, Lightning Network growth depends on professional management and the provision of liquidity.
• Bitcoin has produced the only reliable technology for transferring value without reliance on intermediaries, and it only manages to do a few hundred thousand of these transactions per day.
• The Schelling point can be seen as a solution, or a course of action, that people converge on without taking to each other.
• If the growth of second-layer solutions results in larger liquidity pool for bitcoin, and operating bitcoin full nodes becomes a profitable way to provide banking services, then it would financially incentivize the growth of independent nodes.
• Bitcoin does not have any competitors for trustless, automated, and censorship-resistant global clearance (autorisation). The only other asset that comes close to it is gold, whose movement is far more expensive and subject to confiscation.

Chapter 15 - Bitcoin Banking

• Banking has two core functions: holding deposits and allocating investments.
• Expecting bitcoin to end humans' demand for custody solutions is entirely unreasonable.
• Many bit coiners may want a world in which everyone gets to be their own bank, but most people do not want this any more than they want to be their own butcher, builder, car maker, or baker.
• Bitcoin cannot replace banks, but its monetary properties will lead to a banking system significantly different from one built around fiat.
• But as governments eroded the gold backing of the money over the twentieth century, the ability of bank savings accounts to keep up with inflation disappeared.
• After the coronavirus crisis of 2020 and the significant monetary intervention by governments and central banks worldwide, bond yields plummeted significantly, and investors have little choice but to take on more risk simply for capital preservation.
• Under the gold standard, the need for saving was met by the same money. But bitcoin offers a savings technology with superior salability across both time and space.
• Microstrategy is buying bitcoin to hold it on its balance sheet because it has recognized it as a superior cash reserve asset to the U.S. dollar.
• Bitcoin is digital gold, harder, stronger, faster, and smarter than any money that has preceded it.
• Bonds and stocks can no longer offer yields that beat money supply inflation, and both carry heavy risks. Real estate is highly illiquid, indivisible, and requires high maintenance costs. Gold and silver have low spatial salability, as there are no precious-metal-based banks allowed in the fiat era. They also entails heavy transaction fees with each purchase and sale. Managing a savings portfolio is an endless task of weighing a multitude of risks against potential returns for an endless variety of markets.
• As more individuals and corporations like MicroStrategy buy more bitcoin to hold as their high fluidity low-risk asset, they will demand fewer bonds and debt obligations.
• Bitcoin offers superior salability across space and time to bonds, gold, and government cash. But its main drawback is still its relative small liquidity. At the current market price of $40,000, the total market value of all bitcoin in circulation is around $800 billion. This is a sizable number that positions bitcoin among the largest national currencies, but still a drop in the bucket of the total market value of bonds, which is around $140 trillion.
• Gold was chosen as a money on the market precisely because it has no yield.
• Any system for bitcoin settlement would be far more distributed as its core than gold.
• If bitcoin continues to rise, the seigniorage benefit from monetizing debt will dissipate, as people monetize a hard asset instead. This on its own would reduce the incentive to issue debt.
• Without a lender of last resort, offering a fixed interest rate loan with a guaranteed return becomes exceedingly difficult for a bank, as there can never be a guarantee that the bank or its borrowers will not face insolvency.
• Carrying a cash balance always involves a cost and risk, and by lending, the lender is able to offload that cost and risk to the borrower, so that even receiving a 0% interest would be an improvement.

Chapter 16 - Bitcoin and Energy Markets

• Supplanting free-market economic forces as the determinant of value with political connectedness degrades and destroys the institutions and economic arrangements of society.
• To transfer the control of a certain numbers of coins from one address to another, the network requires the command of the private keys associated with the sending address, nothing else.
• This technology is what makes bitcoin a neutral, apolitical technology for money and payments.
• The automation of telephones reduced the cost of calling to an infinitely small fractions of its manual cost. Bitcoin is the implementation of this concept to international transfers and monetary policy.
• But in order for the node to be operating in consensus and synced with the network, it needs to only consider additions to the blockchain presented by miners who have solved the proof-of-work mathematical problems. Nodes can verify the validity of transactions miners want to add to blocks, as well as the validity of the proof-of-work solution, very cheaply and almost instantly. However, presenting transactions to the network is very expensive for miners, because doing so requires the solution of the proof-of-work problem, which requires mining equipment and consuming electricity.
• With every 2,016 blocks, or two weeks approximately, the time of block clearing is compared to the ten-minute optimum, and difficulty adjusts to attempt to calibrate the time to ten minutes with the average processing power that was present over the previous two weeks.
• The security model remains intact: the cost of presenting a block for the network is always close to the cost of the reward for doing so.
• The difficulty adjustment ensures the security the security of the network by ensuring the cost of mining a new block is roughly equal to the mining block reward.
• The supply of bitcoin is strictly limited and cannot respond to increase demand.
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  Bitcoin's monetary uniqueness
  
  
  
  
  
  Bitcoin price, hash rate, supply, and value secured
  
  
  
  
  
  
• Bitcoin continues to attract the most efficient producers of electricity and processing power to monetize their resources.
• Bitcoin's impact on the electricity market means that it isa voracious buyer of any cheap electricity that exist anywhere in the world.
• Bitcoin requires an ever-growing expenditure of power in order to arrive at consensus without having to trust in a single authority.
• Unlike all other uses of electricity, bitcoin does not require power to be transported to it; it can buy the power anywhere it is available and is insatiable in its demand of cheap, reliable electricity.
• The inescapable conclusion one reaches after understanding the bitcoin difficulty adjustment and the geographic mobility of bitcoin mining is that bitcoin will inevitably consume cheap, wasted, and stranded electricity, energy with zero opportunity cost.
• The entire bitcoin network collectively finds and rewards cheap, stable, efficient electricity.
• In 2019, the world produced around 173,000 TWh. Around a third of that energy is wasted, leaving humanity to consume around 117,000 TWh. The entirety of the bitcoin network currently consumes around 120 TWh, or around 0,1% of the total energy wasted in the world.
• Bitcoin isn't "consuming" the world's energy; bitcoin is providing a powerful market incentive for energy producers worldwide to increase the production of cheap energy.
• The total amount of methane that is flared and burned away every year contains 1,500 TWh of energy, which is around ten times larger than the consumption of the bitcoin network.

Chapter 17 - Bitcoin Cost-Benefit Analysis

• Intellectual arguments are very cheap, but actions are very costly.
• Bitcoin's fast rise is the return of a free market to money, and we are witnessing a superior-good rise at the expense of an inferior good.
• The amount of energy that bitcoin consumes can theoretically be estimated from its hashrate.
• The bitcoin hash rate can be estimated from the difficulty and the block time.
• Current best estimates put bitcoin's energy consumption somewhere in the range of 100-150 TWh/year.
• Bitcoin mining is a very competitive industry.
• We can understand bitcoin as an electricity-based technology for saving economic value. It takes electricity and hardware as inputs and produces savings protected from inflation and fraudulent manipulation.
• On any given day, new bitcoins are being produced and sold on the market at the predominant market price. This is the case even if the miner who mines the coins does not sell them, as they effectively buying them at the market price and holding them.
• The bitcoin asset cannot be owned outside of transactions confirmed in bitcoin blocks, which inevitably creates a market for this scarce block space. Bitcoin's difficulty adjustment algorithm ensures the scarcity of this block space (and thus the bitcoin token itself) by raising the hash power, and thus the cost, required to produce these blocks.
• The incentive structure around bitcoin ensures that miners and users can easily find a transaction fee that finances the network's security. The economic incentives of bitcoin have proven resilient enough to motivate people to spend the resources needed to keep the network secure. If bitcoin dies, it will not have died because of misaligned economic incentives  (high transaction fees). It will have died because the demand for it declined.
• If demand for bitcoin declines or disappears, then the price will likely crash and bitcoin will collapse and/or be attacked, regardless of whether the miners are being paid in inflation or transaction fees.
• The only real alternative to a bitcoin payment, as a form of hard cash whose value is not a government's liability, is the settlement of gold cash reserves, which is a hugely expensive process.
• Fiat is a manual technology, highly vulnerable to human error and exploitation. Bitcoin is a digital and mechanical, predictable technology with very high reliability.
• Le terme "luddisme" est parfois utilisé pour désigner ceux qui s'opposent aux nouvelles technologies ou critiquent celles-ci.

Chapter 18 - Can Bitcoin Fix This

• Bitcoin's continued successful operation, its ability to perform final settlement internationally without requiring oversight, and its credibility in maintaining its monetary policy over twelve years delivers a shattering blow to the worldview of this who think reality comes out of fiat. Bitcoin does not need to convince any fiat authority of its worth; it just needs to keep surviving in the free market by offering value to its users.
• Austrian economics explain that cash is held because of uncertainty. In a world of no uncertainty, where all your future income and expenditures are perfectly predictable, there is no need to ever hold cash, as you can always place your money in capital markets to earn a return, which can be liquidated at the exact time you need to spend it.
• Investment in assets that offer a yield always involves risk.
• The case for bitcoin as a cash item on a balance sheet is very compelling for anyone with a time horizon extending beyond four years.
• The world has around $90 trillion of broad fiat money supply, $90 trillion of sovereign bonds, $40 trillion of corporate bonds, and $10 trillion of gold. Bitcoin could replace all of these assets on balance sheets, which would be a total addressable market cap of $230 trillion. At the time of writing, bitcoin's market capitalization is around $700 billion, or around 0.3% of its total addressable market.
• On a functional level, bitcoin is an extremely basic technological implementation that performs a very simple and easy task: the propagation of a block of transaction data usually of & MB in size (though it can be as much as 3.7 MB) roughly every ten minutes to thousands of network members worldwide.
• While people think of democracy as the rule of the majority, it is more accurate to think of it as the rule of the organized minority.
• Chineseban on bitcoin mining only caused a short-term crash in prices and a few weeks of slower blocks, after which time bitcoin resume its normal service. Further, banning mining in China, the one country where miners were the most concentrated, led to the dispersion of mining capacity among nation-states, making the network less vulnerable to such an attack in the future.
• Most people eventually got on airplanes, not because they studied jet aviation but because they had seen and heard of airplanes operating reliably, likely for years. Similarly, people will start to trust a digital for of storage, not due to an extensive study of bitcoin and cryptography, but rather after seeing it work reliably for years for others.
• Gold currently has a far larger liquidity pool than bitcoin. The value of all above-ground gold is around $10 trillion, more than ten times the value currently stored in the bitcoin network. This very large pool of liquidity means that gold currently has more salability than bitcoin. In other words, for someone looking to buy or sell something, the probability that they will find a counterpart for the trade willing to pay or accept gold is larger than the chance of finding someone willing to pay or accept bitcoin.
• Gold will soon have a lower stock-to-flow ration than bitcoin, and it will continue to have a much higher cost of transfer.
• Central banks are the institutions that provides the services that bitcoin most closely approximates, and so they will likely remain the last to see the value of an alternative to their services.
• China, Russia, Iran, North Korea: these governments do not oppose fiat money; they just hate other governments's fiat money.
• The IMF has long banned its members from tying their currency to gold. The U.S. still has the world's strongest military and the strongest currency, and any global financial crisis that happens, while having its root cause in the dollar, is likely to only make the dollar stronger, not weaker, as happened in 2008.
• The uncertainty and short-term nature of democratic rule instills a short-term orientation in these bureaucrats, and all but guarantees that politics is a short-term power and money grab.
• The conundrum of today's central bankers is that they are at once asked to provide the accommodative monetary policy for government spending and private sector expansion, while also having to ensure savings and investments do not devaluate too much.
• The most widely held prediction about how a bitcoin economy develops usually involves the entirety of the world economy collapsing into a heap of hyper inflationary misery, similar to the one you see in Venezuela today. The dollar, euro, sterling and all other global currencies would collapse in value as their holders drop them and choose to move their capital to the superior store of value that is bitcoin.
• In Lebanon, the central bank has increased the supply of physical bills and coins by around 650% in the last two years, while the currency has plummeted by more than 90% against the U.S. dollar.
• Bitcoin does not just compete with fiat currency for cash asset demand, it also competes with fiat debt.
• By undermining the incentive to hold debt instruments, bitcoin actively combats the inflation of the fiat money supply.
• In a work of artificially low interest rates and easy fiat money that is expected to constantly devalue, individuals are likely to borrow rather than save.
• Rather than threat that can destroy fiat money, bitcoin may turn out to be the neat technological solution that allows fiat to unwind peacefully.
• An increasing share of the world's bond and stock markets is now held by central banks, and their valuation is increasingly determined by central bank fiat, with the normal workings of the credit cycle overruled through infinite quantitative easing.
• Central Bank Digital Currencies: they are superficially similar in that they are both digital, but importantly, their fundamental characteristics are stark opposites. Bitcoin makes payment clearance a mathematical and mechanical process that cannot be controlled by intermediaries, whereas CDBCs make every transaction subject to approval and reversal by the central bank.