The Blockchain Apocalypse

(Alternative Title: First they came for the Dimwits and I said nothing because I wasn’t a Dimwit, then they came for the Midwits and I said nothing because I wasn’t a Midwit…)

You might have heard about the Blockchain. A new technology that makes peer to peer transaction possible. I am here today to tell you the profound impacts this technology will have on your life. I believe the world as you know it will change so profoundly that new ways of co-existing in society will have to be found.

First some historical context. The Agricultural revolution made civilization and cities possible. People had to organize to build granaries and people had to organize to guard the granaries. Governments were created with bureaucrats. Banking, insurance, finance, and exchanges grew up to service the needs of people in the marketplace.

Almost every discovery and innovation since the agricultural revolution has enhanced the power of central government. The Industrial Revolution centralized people in cities and gave government fearsome weapons to project power.

The Internet revolution made the Surveillance State possible. All financial transactions, all communications are now monitored for the sake of security. Since the late 1960’s Operation Echelon has recorded your every phone call, text message, social media post, etc. — every electronic communication you have every participated in is stored in memory and accessible. Orwell’s Big Brother has been created and monitors us almost ubiquitously. With the internet it became possible for the state to control vast areas of our lives, almost without our knowledge or noticing.

The government, the financial institutions, and private corporations are staffed by people we can classify as “Trusted Intermediaries”. These people are the gatekeepers of the system. Their job is to verify identity, verify data, perform simple judgments, and enter data. A loan officer is an example of a “Trusted Intermediary”. They verify your identity, they verify your financial information, their identity allows them to access a computer system where they enter your information and a computer program makes the real decision. The Blockchain renders the majority of this effort obsolete. I will explain how.

The Blockchain is a system that solves the problems of identity and trust. There are three facets of trust and money

1) Trust of safety — you must be sure no one can remove your money without your knowledge. While there have been a lot of hacks that have stolen cryptocurrencies it has been websites, phones, and untested wallets and contracts to blame. If you have a website with a wallet address and the website gets hacked and the wallet address replaced it is not “cryptos” fault. Also trusting untested contracts with millions of dollars is a formula for loss. Crypto is, if properly done, as safe or safer than online banking because there is no way to seize your account. If you have your own wallet a cryptocurrency is immune to government control. (unless they torture you for your wallet password of course)

2) Trust of issuance — you must be sure no one can arbitrarily create money. Bitcoin and other cryptos usually have hard rules about inflation rates. No authority can create more. With the wizardry of Quantitative Easing and zero interest rates the cryptos beat fiat currencies hands down on this facet.

3) Trust of correctness — a cryptocurrency consists of a cytologically signed, distributed general ledger that contains the entire history of the currency from creation. This history is agreed upon by a “Proof” method. Bitcoin has a “Proof of Work” where electricity is consumed and massive computational power is invested. With Proof of Work coins a consensus election is held as every block is created to agree on the history.

A “Proof of Stake” system such as what Ethereum is moving to is where people use the concept of a “Bonded Validator”. Each Proof of Stake coin is like a bond — you buy a coin and that “magic coin” allows you to validate transactions on that network. The coins can be lost if you try to present a false version of the transaction history.

These (and other) “Proof” methods allow a system where everyone may be trying to steal but since it is trust-less the competing interests of the “Miners” (Proof of Work)” or “Minters” (Proof of Stake) create an accurate version of the ledger history. You do not need a “Trusted Intermediary” such as a bank. The software assumes bad actors and accounts for their attacks. This concept when put into cryptocurrencies and smart contract systems like Ethereum is going to make tens of millions of people obsolete.

In the present world identity is tried to trust. We only give our money to “Trusted Intermediaries” to perform tasks we want. The Blockchain is a trustless system so there is no need to tie identity to trust. Where we now only trust banks and financial institutions on the Blockchain we will trust verified, tested code. A peer to peer transaction will need no “Trusted Intermediaries”.

A “Smart Contract” system like Ethereum can be thought of as a planetary computer system. Anyone from anywhere can interact anyone else and a contract will execute. It is trust-less border-less and global in nature. People who have the cognitive ability to create code on these systems will have a great advantage — they can sell to the entire world without anyone being able to stop them.

It might be the ultimate triumph of Libertarianism — they can’t win at the ballot box but a technology like the Blockchain erases distance and borders. This could usher in an anarcho-capitalist future of voluntary association. The future might be laissez-faire whether you want it or not.

In Canada, where I live, we have a merit based immigration system. We import professionals and the middle class, not the working class. The working class consists of mainly White natives. These are people of I.Q. between 85 and 100 who were diligent and conscientious enough to show up and perform repetitive motion factory jobs. Most of these jobs have gone to Asia. Most of the jobs that are left require at least basic verbal, written and math skills. There are still drivers (car, truck, forklift etc.) and waitstaff but these jobs do not pay anywhere near what factory jobs paid. Economic opportunities for a great deal of people were taken away,

These people did not disappear. After the lost their last job and their unemployment ran out they went on welfare. Since welfare is a pittance and being disabled makes you more money these people developed chronic pain disorders, started taking opioids, and qualified for disability insurance as pain wracked drug addicts. Now once functional people not only live on permanent money, but they need doctors and drug counselors and social workers to support them — the worst of both worlds.

Now with the Blockchain removing the need for trust and artificial intelligence performing better than people on repetitive mental tasks job opportunities for people with I. Q.s of 95 to 110 will disappear. Unless you are dealing with people (serving them food, retail, etc.) or being creative there will be limited opportunities for employment. Are the majority of people going to go on disability insurance as pain wracked addicts?

The newspapers used to have a near monopoly on the distribution of information. Then television competed with newspapers then the internet competed with them both. Now they are massively diminished in profitability, power and prestige. How we deal with the dislocations created by the disintermediation of the financial industries will define our future. Finding solutions to this problem may be made harder by the disintermediation of government as I will describe.

Every modern government requires a fiat currency and a central bank to manage the currency. A modern government seems to need vast amounts of debt to function. It must be able to Quantitative Ease and create trillions of dollars worth of fiat currency of thin air.

Here are the uses of money and how fiat and cryptos stack up:

Traditional use: Store of Wealth — The American dollar is worth less than 2% of what it was worth at its creation. No fiat currency has ever succeeded in the long run. Some people only consider gold money because gold is a store of wealth — it is scarce and you put effort into mining it. Cryptos are similar stores of wealth. Their number and creation rate is certain. There is effort put into mining Proof of Work coins and there is risk minting Proof of Stake coins. You may not believe lines of code have value but ask yourself what value does gold have?

Conclusion: Cryptocurrencies beat fiat currency hands down as a store of wealth.

Traditional use: Unit of Transaction — Presently fiat currencies are far better unit of transactions than cryptos but the cryptos are catching up. Fiat currencies are accepted everywhere in their country of issue. Cryptos are accepted internationally at a few places. The number of places accepting cryptos goes up continually however. And I would like to point out you can send millions of dollars to anyone else anywhere on earth with cryptos for a very small fee almost instantly.

Conclusion: Fiat currencies are better units of transaction but cryptocurrencies are gaining.

Traditional use: Unit of Account — If you know the history of accounting you know that the replacement of single-entry accounting with double entry accounting enabled modern finance and commerce. A Blockchain can be thought of as triple-entry accounting with the immutable ledger being the third entry. A crypto is obviously better. If there is any hope in this it is that the Blockchain will enable entirely new concepts and industries. Double entry accounting got us this complicated system, triple-entry accounting will allow a new level of complexity.

Conclusion: Cryptocurrencies are an entire dimension better than fiat as a unit of account.

Modern Use: System of Control — With the advent of computers and the internet governments have built the ability to track every financial transaction. Cryptos (if properly encrypted) can defeat the best efforts to track transactions. If a cryptocurrency like Monero becomes the money of choice governments lose the ability to track transactions. Monero strives to be untraceable, and is constantly innovating more privacy.

There are mathematical constructs call ‘zero-knowledge proofs’, that when successfully implemented in cryptocurrencies will truly make them private and untraceable since no (zero) information ‘leaves’ these transactions.

People who work online and sell digital goods can exit the taxing powers of central governments. When enough people exit the system the system crashes.

If a sovereign government were to implement a Blockchain digital currency it would gain the ability to track all monetary transactions forever. If the population adopts a encrypted cryptocurrency the government loses the ability to track financial data. This will be a great struggle of competing interests that will cause great turmoil in the future.

Conclusion: Cryptocurrencies can be either a better system of control if implemented by a sovereign or cryptocurrencies can cause sovereigns to lose control. Either way cryptocurrencies are superior to fiat.

I think cryptocurrencies are like pythons wrapped around fiat currencies. With each breath out the grip tightens. When the Chinese yuan last devalued numbers of Chinese exited the fiat currency system for cryptocurrencies. In Venezuela use of bitcoin is terrorism carrying a 17-year sentence but it is still used. Since cryptocurrencies have better characteristics than fiat currencies every hiccup in the fiat currency system will find more and more people exiting this fiat system for cryptos.

I think fiat currency will end slowly at first, then all at once.

First they came for the dimwits and I said nothing because I wasn’t a dimwit. (the repetitive manual labor jobs of the working class)

Then they came for the halfwits and I said nothing because I wasn’t a halfwit. (the repetitive mental task jobs)

I have already seen globalism and automation destroy the ability of the working class to support itself. I did not say nothing, I spoke up but my, and similar voices were drowned out. Now it looks like the majority of people will become obsolete. And the same technological revolution that made tens of millions obsolete also destroyed the currency and in many ways the very concept of being able to tax and govern.

I believe the Blockchain apocalypse will strain the ability of humanity to find a solution. As governments and the finance industry fail they will not be looking for solutions to new problems but to maintaining their power by maintaining the current fiat currency system. Anarchy and charges of terrorism and treason will reign. As each currency fails cryptos will be ready to take their place. Cryptos that are everywhere and nowhere at the same time. No president to threaten, no C.E.O. to arrest, no computer to unplug.

The Ethereum-like smart contract systems of the future will be a global computer no one can shut off. Bitcoin or something similar will last as long as the internet. Try as hard as they can a government is now in the process of selling buggy whips as more and more cars drive the roads. Cryptocurrencies are a superior product in most ways to our present fiat system. The gains to be made by the ability of the whole plant to transact on a smart contract system like Ethereum will ensure its survival.

Ancient Romans had the problem of too much money and too little work also. Their public spaces were places of beauty, their building were masterpieces built so well many last to this day. Our present world is utilitarian, it is built at the cheapest cost with little regard for aesthetics. Perhaps if we use our surplus to employ the sculptor, the stone mason, the wood carver we can find a way to gainfully employ enough people society won’t destabilize.

Others may believe in Universal Basic Income as a solution. I think paying people to do nothing is a bad idea — they don’t spend their leisure time making poetry and art, they just mostly get into drugs and trouble. My idea is to bring back an appreciation of beauty and nature and pay people for their art. People need structure and the feeling they are working towards something and I think we must find a way to give them that.

Neither a Universal Basic Income or bringing back beauty made be the answer. The answer might be somewhere else but I know we need to start developing solutions while we still can.

Good luck to you and yours in the future. I hope this helps prepare you.