When Nick Szabo invented BitGold in 1998, his family had recently immigrated from Hungary after experiencing a severe financial crisis. The value of his family’s combined wealth dwindled due to the instability, or negative volatility, of their governments dollar. Karl Popper writes that Heraclitus and Plato, went through a similar ordeal, as well as the modern author Nassim Taleb. Suffering through these periods of social strife or change profoundly affects ones philosophical development.

Notably, with Plato, he became obsessed with a ‘Theory of Forms or Ideas’. Within this concept, our world acts as a pureed soup and the raw ingredients represent the purest of Form. Put another way, our reality is muddled in decay and we as a society should seek the unchanging, timeless truth, or one could say ‘Make Athena Great Again’. The important concept here is to recognize, as an individual, Plato is mid transition from a position of high importance to one of lower importance, and thus projects his circumstance upon humanity at large: we were born perfect, each deviant choice breeds unbound decay.

What does philosophy have to do with Bitcoin?

Philosophy is the cornerstone upon which every culture throughout world history has been built, including Bitcoin. Bitcoin has been promoted as a global tool to reduce the volatility experienced from the collapse of sub-state governments. A similarly stated philosophical stance promoted within Bitcoin is that change is inherently destructive. This stance is so prominent within the culture of Bitcoin, that those who advocate for a changing society are censored from participation in social discourse.

Plato and his followers once banned the square root of 2 as an irrational and devilish construction: a threat to societal order. His philosopher kings were to guide masses toward a more safe and sound science. Likewise with Bitcoin, there is a similar promotion of wise and meritorious programmers who are to make decisions for and guide the others. These programming kings are raised upon high to school us away from a natural tendency for disorder and decay.

What is stability, sustainability, and economy?

Many persons become confused upon the concept of stability, or localize it into terms such as ‘the US dollar’ — but this is mere relativism, not perfection. Economy can be defined as inputs and outputs, or to convert into the positive, a growing economy is one in which inputs exceed outputs.

This sounds simple enough, at first. Each of us as an individual must create more worldly good then we destroy: day to day, decade to decade. Sadly, however, that is not enough, for it is predicted for each of us to die — and if this is all we become capable of performing then our race or line of man will die off with us, completely. To sustain our race we must breed, and thus must produce more new wealth than we, our parents, our children, our ill, and their caretakers destroy: day to day, decade to decade.

Simply put, one can interpret this as earning five times the income necessary to sustain oneself. While this might appear high at first, we also must realize that decay or lack of creation is the natural state of things. Thus, like a rocket ship exiting the earth’s atmosphere, we must exert energy to build; knowing any setback along the way may jettison us until an eventual crash. So in this concept of stability, we say that being significantly over prepared reduces the likelihood of a short term failure leading to catastrophe.

The Economic stability of Nassim Taleb

Ever since the time of Adolf, societies have (seemingly) been plagued with speculators. Elon Musk recently denounced negative speculators as a threat to American business. The concept here is two fold: first, that foreign investors extract local creation and secondly, that foreign investors profit from local suffering. The concept of war profiteers is nothing too new, though unsightly to speak of. George Soros, a Jew, notably choose to set aside any sentimentality he had to his people when faced with the decision of joining the resistance or the oppression.

This sort of abstract, nihilistic, and largely negative view on economic life is hard for parents and people of faith to conceive without jarring emotion. Many live as though life is being made better, as if the world is improving — they holistically disagree with Plato, and instead hold the view that each generation is a better, a more perfect form (just as they view themselves as better societal guardians than the amalgamation of their fathers and mothers), and so on.

But continued progress, or a perception of progress, is unsustainable. Setbacks are inevitable. Some children become bad adults, some societal movements create disastrous consequences, and sometimes we make evil. While the odds of creating evil as opposed to good might not be 50:50 if our intent is to create good, but yet we must recognize the we are not omniscient. On any given day, we may work toward evil, either knowingly or unknowingly, to little or no consequence.

In contrast, when it comes to betting upon the outcomes of children, we can recognize that the parent is perhaps unduly biased in favor and a prison guard against. Likewise is the case with foreign speculators. Locals tend to excessively bet in support of their creations, regardless of objective analysis, and if done to an extreme extent, this can entice foreigners into running interference for extreme profits. Depending upon circumstance and emotions, these extreme negative bets can occassionally receive odds of 100:1; so goes our blindness to remembering a past mistake.

Nassim Taleb profited from the catastrophe of the U.S. housing crisis or bubble. Year by year the housing bets paid off more and more, until finally it burst. With each new birth of profits, the odds against ever laying a bad egg grew more and more disproportionate to an objective reality. By the time the final bets were placed, years into the formation, the long-shot odds to payoff became incredible.

We emotionally reject the reality of failure, and our short time upon earth clouds our objectivity when evaluating events that outlive generations.

Taleb concludes similarly to Plato that truth is unknowable. Yet, converse to Jewish faith, or that of Heraclitus, he does not exert the existence of an invisible hand leading us to salvation. In a more modern interpretation, one promoted by Jesus, Taleb might argue that questioning, doing, and pruning is sufficient to discover progress. The contrast here against traditional dogma is both that consequence is unknowable and that change creates wisdom.

Put plainly in economic terms, one should bet for and against themselves, simultaneously. Profit from extreme good and extreme bad. That betting for an unchanging economy is foolish, and excessive attachment to one’s own methods is arrogant.

In short, stability is created from profiting from both the good and the bad, not from preventing bad, nor from blind faith in galactic design for man’s benefit. Instead, we are cosmic objects, of no more consequence than that which we make ourselves.

Boring, more about Bitcoin!!

Fine, fine, you win this time =)

Bitcoin mints 650,000 coins per year, cutting to 325,000 in 2020, and in half every four years thereafter. What many forget is that someone new must buy each and everyone of these new coins. In one respect, you can perceive these new coins as new children. The parents of Bitcoin (the holders) must earn enough to not only sustain themselves, but also to care for each of their new children, and future children. Over the next 6 years, this is to be about 2,600,000 coins or $26,000,000,000 at a consistent $10,000 valuation.

Thus, we can say that the combined incomes of holders over 6 years must exceed $26 Billion, or resources must be acquired from foreign investment. In Bitcoin they call this memeing, but is little different from marketing or culture building. Expanding the culture sustains growth, without the requirement of continued investment from prior holders.

However, there is a trick to this. It involves carefully constructed, yet simple to execute, mathematical problems to simultaneously reduce volatility while also reducing costs. And the technique is quite simple, really.

Tell me. I am ready.

If one removes the love of money, of bitcoin, of themselves, of society, one is freed to act independently, against the world. One becomes free to bet in favor of, and against, the actions in which he partakes simultaneously; like routinely betting against oneself in pool. Taleb might call this the magnificent man. A man who is triumphant in both defeat and victory, and one who acts without concern of outcome, the antifragile.

Let’s return back to the small: there are 2.6 million Bitcoins to be produced over a 6 year period. If the price of a Bitcoin today is $10,000, how many must be sold and repurchased to prevent a dramatic decline in U.S. dollar valuation due to having an excess of children?

If 2.6 million Bitcoins are sold for $10,000, and these funds are fully allocated toward the repurchase of coins at $5,000, than in effect the parent has fully funded the cost of future children, for a period of 6 years. The math works like this:

2.6 million Bitcoins x $10,000 = $26 Bil

2.6 million Bitcoins x $5,000 = $13 Bil

5.2 million Bitcoins x $5,000 = $26 Billion

So in this instance, assuming volatility or change, we can prevent negative volatility of more than 50% by selling some portion of coins, and using said funds to repurchase at a lower value.

But let’s go deeper

After 2024, Bitcoin will mint 650,000 coins in the subsequent four years. Thus to prevent a 50% decline in valuation, one needs only sell 650,000 coins.

But this is not the responsibility of one man, but many.

All of us in fact. All those that hold Bitcoin.

So as before where 2.6 million coins were sold to prevent a 50% decline, in a coordinated system selling twice as many could prevent a 33% decline. What is interesting here is the ratio of active holders to the birth of children. The more children, the more active holders required to participate, etc. until at some point one runs out of parentage to guard the system.

Yet, the converse is exceptionally true as well. Let’s journey into the distant future, 2040, where Bitcoin will be minting a mere 10,000 coins per year, with 20.9 million coins outstanding. In a situation such as this, it takes a mere fraction of 1% to consume the entire expense of all future children, perpetually preventing a 50% decline due to new births. If 1 million coins continued to act in unison, negative volatility could be reduced to 1%.

And therein lies the great promise of Bitcoin. Negative volatility, in a sense, becomes mathematically reduced every four years, until eventually prior holders significantly outweigh all future costs.

At such time, one might expect for the value of a Bitcoin to become appropriately priced, so that there is little to expect from gains or losses — until a new challenger emerges, revealed by time. For no matter how astutely we steer the ship, the winds of time blow wickedly, all the same — yet persist, we must. Godspeed.

If you enjoyed this writing, you might also enjoy the Bitcoin 1776 White Paper, written by the same author, with more attention focused to blockchain technology: challenges and opportunities. We are conducting an experiment in which we’ve reduced the amount of coins from 21 million to 17.76 million, increasing BTC ownership of our coin from 82% to 96%. Add more, we have compartmentalized our governance process to reduce federalized risks. Lastly, 151,375 coins will be set aside to sell and rebuy our coins at explicit price points, reducing both negative and positive volatility. To learn more, or participate, please visit our community at www.reddit.com/r/bitcoin1776 . Thank you!

One last note about concentrations

Aside the birth of children, another economic cost is excess concentration of ownership or wealth. This problem is double sided — one in which personal wealth is overly represented by a particular asset (such as Bitcoins), and another where one entity controls an excessive amount of the economic output, in particular the generation of new coins.

In other blockchains, this is a foundation. A foundation may have 100% of their assets invested into their own coin, and own 35% of their coins initial stock. As persons and foundations seek to express their wealth by way of vehicles, houses, travel, and rents, and as they have only coins, they must therefore sell these coins at a time of their choosing. In such a circumstance, one could say the foundation is giving birth to 35% of the coins, even within a system without any inflation or new minting.

Thus, it is best to have coin owners who have an appropriate amount of coins, considering the totality of their asset pool. A rich man ‘on paper’ is a liability to a collective system, where as a rich man (or robust man) who is rich in a variety of ways, presents no unusual risks.

With Bitcoin, the greatest risk here is the centralization of wealth generated from new coin creation. As 2.6 million coins are to be created over 6 years, if these economic outputs become funneled into one individual or company, then they must both sell to vary their wealth, or likewise could come to own a significant portion of the output, making growth vastly benefit themselves more than others.

While perfect economic distribution of wealth is unnecessary for a successful economy, the greater the perceived distribution the easier it is to earn the affection of new participants. No one clamors for diamonds to become a new source of financial currency, because supply is significantly cornered by the De Beers family. Likewise, it is important to distribute wealth, at least somewhat, to prevent an entity from being excessively incentivized to manipulate markets over long periods. The risk here can be generalized as ‘fair play’, but could also be characterized as a cultural manipulation risk. Which is to say the condition where creating exuberance or despair benefits a private collective significantly more than society at large.

Don’t love the blockchain. Use it.

In temperance and with moderation.

Welcome change, and fear nothing —

for the future is uncertain, yet still you are here.