Bitcoin's Department of Defense: The Case For A Global Reserve Currency With No Guns

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The country with the strongest military has historically implemented their national monetary system as the global reserve currency. This started with the Silver Drachma of ancient Athens during the 5th century BC. Next up was Rome when they issued the Gold Aureus (from 1st century BC to 4th century AD) and then replaced it with the Silver Denarius coin in the year 312 AD.

As the Western Roman Empire fell and the Eastern Roman Empire (Byzantine Empire) survived/thrived, the Silver Denarius was replaced by “Byzantine coins” or a “Gold Solidus” which was an evolved variation of the Western Roman Empire’s coinage. During the early 1000s AD, the Gold Solidus was gradually debased and eventually Emperor Alexios I Komnenos replaced it with the “hyperpyron,” a refined gold coin that had ~20% less gold.

Toward the end of the 7th century, we saw the rise of the Islamic Dinar. It wasn’t until the 13th century that the Florence Fiorino became globally dominant, which was followed in the 15th century by the Venice Ducato. Then in the 17th century, the Dutch Guilder took over as the world currency, before the 19th century ushered in the British Pound Sterling as the most important currency in the world. And the British Pound Sterling remained the global reserve currency until World War II.

It was at this time that the US dollar become the global reserve currency and it has defended that position since World War II. As I mentioned at the start of this letter, the global reserve currency was under the control of whoever was the global superpower at any given time.

This trend is about to change though.

Previously, the country with superior military firepower and tactics prevailed. It mattered who had the upper hand on land, sea, or air. But given where we are going, the bombs, bullets, tanks, ships, and fighter jets aren’t going to be nearly as important as they once were. We are moving from physical warfare to cyber warfare.

We no longer need to send troops to combat if we can attack a country’s critical infrastructure (ex: electrical grid, banking system, media publications, etc). War becomes even less necessary when we can weaponize the US dollar and cut off entire countries from the international financial system (ex: Venezuela, Iran, North Korea, etc).

There is one problem with this military, economic, and cyber strategy though — what happens if we can’t attack a country through military firepower, economic sanctions, or cyber warfare?

This may initially sound like a ridiculous question, but it isn’t. Whether we like it or not, there is a group of people (the Internet) that has created a new currency (Bitcoin) that is slowly vying for global reserve currency status. And this group of people did something counterintuitive that is currently misunderstood.

The creators of Bitcoin focused on defense, rather than offense. Instead of conceiving a plan to gain superiority by attacking other countries or currencies, Bitcoin is designed in a way to survive any known attack. You could say this strategy falls in line with the belief that “the best offense is a great defense.”

Lets look at the three main threats to a currency’s global reserve status:

  1. Military superiority — If you control the global reserve currency and your superpower status is revoked, you have historically lost global reserve status. No matter how hard nation states try, there are no individuals, companies, or physical locations to attack. No one person or group controls Bitcoin. If a nation state was to capture or kill an individual, nothing would change. If a nation state was to blow up all the mining facilities in their country, nothing would change. Simply, the decentralized nature of Bitcoin renders military superiority irrelevant.

  2. Economic sanctions — The US has done a great job defending its global reserve status by weaponizing the US dollar. Unfortunately for the world’s leading currency, there is no individual, company, or country to sanction in an effort to stop Bitcoin. No one is in control, therefore the economic sanctions are rendered irrelevant.

  3. Cyber warfare — Over the last 10 years, Bitcoin has become the most secure computing network in the world. There are hundreds of billions of dollars in incentives for someone to successfully attack the system, but no one has succeeded yet. Additionally, the network continues to get stronger every day (up 10x in hash rate over the last 2.5 years), which widens the moat of security. Because of Bitcoin’s decentralized nature, cyber warfare tactics are rendered irrelevant.

So what exactly does this mean?

Bitcoin is the first world currency that is (1) not backed by a nation-state and (2) has the ability to withstand any and all attacks by every nation-state in the world. Quite literally, the “defense first” approach to Bitcoin’s design is likely to have led us to a world where currency dominance shifts from military/economic/cyber superiority to anti-fragile superiority.

Bitcoin’s Department of Defense has no bullets, no bombs, no ships, no fighter jets, and no soldiers. It has thousands of volunteers and millions of computers around the world that are cooperating to ensure there is no single point of failure.

The world is changing quickly. Nation-states are behind the curve. And Bitcoin is the sleeping giant that is well-positioned to be the first currency to achieve global reserve status without ever having to engage in conflict.

-Pomp


The “Off The Chain” podcast has been downloaded 1,000,000+ times in 160 countries. You can listen to the latest episode with Ben Askren, UFC Fighter & BTC enthusiast here: Click here for Off The Chain podcast


THE RUNDOWN:

JPMorgan CEO Dimon Says Crypto Companies ‘Want to Eat Our Lunch:’ JPMorgan Chase CEO Jamie Dimon said he had not spoken with Facebook about the development of Libra. “But it’s very possible someone in the company did,” Dimon said. “Blockchain is real,” he said, citing his company’s foray into the space with JPM Coin blockchain. “And I think competition is real.” Read more.

BIS Starts FinTech Hub as Central Banks Look Into Crypto: The Bank for International Settlements is setting up shop to help officials embrace financial technology, who may need to speed up developing their own digital currency. The BIS announced on Sunday it was starting an innovation hub for financial technology. BIS General Manager Agustin Carstens said that “it might be that it is sooner than we think that there is a market and we have to create our own digital currencies.” Read more.

Bitfinex Hack New Twist: Two Arrested in Israel After $1.5M Moved: One of the most prominent crypto cybercrimes in recent years took a dramatic turn on June 23, when two Israeli brothers were arrested in connection with the 2016 Bitfinex hack and other crypto-related phishing attacks. Just shy of 120,000 Bitcoin were stolen in the attack back in 2016, an amount initially worth $72 million, though after Bitcoin’s meteoric rise in the summer of 2019, the value of the stolen funds now amount to around $1.4 billion. Read more.

First Blockchain Company Gets Listed on Deutsche Börse-Operated Xetra Exchange: German Blockchain-as-a-Service (Baas) provider Advanced Blockchain AG has become the first blockchain development firm to be listed on Germany’s Xetra digital stock exchange, operated by Deutsche Börse. The Xetra all-electronic trading system was founded in 1997 for use on the Frankfurt Stock Exchange, but has since expanded to over 200 trading participants from across16 European countries, as well as Hong Kong and the United Arab Emirates. Read more.

Kik Hands Off Defend Crypto Fund to The Blockchain Association: The Blockchain Association, a collective of advocates involved with the blockchain industry, has taken over the Defend Crypto fund set up by Kik. Kik — the company behind Kik Messenger and the kin (KIN) cryptocurrency — believes that the Blockchain Association “will be in the best position to objectively allocate the resources to the highest impact initiatives” and has chosen it to lead Defend Crypto. Read more.


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Season Two of the Off The Chain podcast ended on June 28th. We have now released 100+ episodes and seen more than 1 million downloads from over 160 countries around the world. Season Three will kick off on July 8th.

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