Our Money Problems Aren’t Technology Problems, They Are Monetary Policy Problems

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To investors,

One of the biggest misconceptions about Bitcoin is that it will win because of the technology. This couldn’t be further from the truth. Money doesn’t have a technology problem. It has a monetary policy problem.

Every fiat currency in the world today has the same structure. They are all backed by a government. They have no peg to an underlying commodity. These currencies are slowly debased away through inflation. The rate of debasement is set and controlled by a centralized entity that is run by a small group of humans. The citizens of a country are generally required to trust this group of people with the sustainability and value of their currency.

But unfortunately, history has shown us that every currency ultimately fails when it is debased away. You can only reduce the value of something for so long. Historically this was the only mechanism for money. Why? Because central banks are not actually optimizing for the sustainability of a currency, but rather for the governing of an economy.

A currency is an important part of an economy, but it is not the economy. In fact, in the eyes of central bankers, the currency is a tool that can be manipulated in the effort to manage an economy. Since this is true, it is not hard to see why the humans who run a central bank could be wrong, biased, emotional, or ineffective at doing their jobs.

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So why is Bitcoin important then? Why doesn’t the technology really matter that much?

The current issues with money are not a technology problem. They are a monetary policy problem. And thankfully, Bitcoin fixes these problems in a very novel, verifiable way.

Bitcoin is designed with an artificially capped supply. There will only ever be 21 million Bitcoin created. Each time one is lost or destroyed, they are gone forever. This makes the macro design of Bitcoin deflationary. We can’t create more of them, but we can see a total supply reduction over time.

And then we have the supply schedule. Rather than creating more and more money out of thin air, Bitcoin requires an incredible amount of investment and work to be done to produce Bitcoin. This is the mining process. There is no backroom deals. No small group of individuals who lick their finger and stick in the air to determine how much money to print. Bitcoin relies on math. Cold, hard facts.

These facts around the supply schedule call for a disinflationary supply. This means that 50 Bitcoin were distributed every ~10 minutes at first. Four years later, that dropped to 25 Bitcoin every 10 minutes. Then to 12.5 another four years after that. And in May 2020, we will see a third drop from 12.5 to 6.25 Bitcoin every ~10 minutes.

Deflationary structure with a disinflationary monetary supply schedule. No group of humans having private meetings to determine what happens next. Just a fully transparent, decentralized system that can be verified by anyone at any time.

Central bankers aren’t dumb. They know digital currencies are better than the current versions. This is why they are going to digitize all the fiat currencies. There will be a digital dollar. A digital euro. A digital yuan. And so on and so on. But the technology problems of money are dwarfed by the monetary policy problems.

Central banks are directly responsible for the ever widening wealth inequality gap in the United States and abroad. But remember, their job is not to manage wealth equality, nor is it to manage the sustainability of a currency. The central bankers job is to manage the economy and they have actually done a pretty good job of that over the last 10-12 years.

But like most things in life, not all good things can last forever. The central banks can’t debase our fiat currencies infinetly. At some point they will have to change their monetary policies or a superior monetary policy will rise to global reserve status.

My bet is that they won’t change. They can’t change. The innovator’s dilemma is too strong. They are addicted to what they have. Which opens the door for Bitcoin. The differentiated monetary policy will become attractive to the masses over time. This is not going to be an overnight success story. Almost nothing ever is.

Bitcoin continues to do what it was built to do — survive. And if Bitcoin can survive for long enough, the monetary policy will become a magnet that no one will be able to resist.


This installment of Off The Chain is free for everyone. I send this email to our investors daily. If you would also like to receive it every morning, join the 40,000 other investors today.

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Blockchain Pioneer Caitlin Long to Build Crypto Bank in Wyoming: The U.S. may soon get its first dedicated bank for digital assets. A Wyoming corporation founded by blockchain legislative champion and Wall Street veteran Caitlin Long is preparing to apply for a special purpose depository institution (SPDI) charter with the state’s division of banking. The future bank is called Avanti, which means “forward” in Italian, and will be focused solely on providing regulated services for digital assets, Long announced Monday. Read more.

Justin Sun Bought Steemit. Steem Moved to Limit His Power: The people who run the Steem blockchain executed a reversible soft fork Sunday, stopping one of the largest piles of tokens from voting. The move comes days after Justin Sun’s Tron Foundation acquired Steemit, the blockchain’s most prominent app. The protective measure is a striking one in the cryptocurrency space and illustrates some of the thought-provoking realities of delegated governance. Read more.

Secretive Digital Fiat Project Emerges With New Partner as CBDC Chatter Grows: As central bank digital currencies march into view, a privately-run version of digital fiat is adding a key tech partner. Utility Settlement Coin, the blockchain-based payments system involving commercial and central banks, will be working with ConsenSys-backed startup Adhara. Adhara was behind Project Khokha, which used enterprise blockchain client Quorum to see how zero-knowledge proofs performed with the South African Reserve Bank. Read more.

Diginex Steps Closer to Backdoor Nasdaq Listing as SEC Approves Merger: Blockchain services firm Diginex is closer to listing on Nasdaq after the Securities and Exchange Commission approved its bid to merge with publicly traded 8i Enterprises Acquisition Corp. on Friday. The $276 million deal will now be put before 8i’s shareholders for approval at a March 20 special meeting. If accepted, the merger will allow Diginex, a private company based in Hong Kong, to bypass many of the usual regulatory barriers associated with launching an initial public offering and be listed on the Nasdaq Stock Market in what’s known as a backdoor listing. Read more.

‘Crucial’ for Central Banks to Consider Digital Currencies: Bank of England Exec: The Bank of England’s (BoE) chief cashier, Sarah John, said it is “crucial” central banks research digital currencies so they can strike a balance with private issuers. John said it was “really important” BoE and other central banks considered whether digital currencies could form the basis of a new payment system and, if so, “quicken the pace” on determining how to regulate the new asset class. Read more.

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Sam Parr is the Founder and CEO of The Hustle, a new age media company that uses email to deliver information to young people. This was a really fun interview that was filled with educational tips on building a company, while also having Sam tell a number of WILD stories throughout the episode. You will really enjoy this one 🙂

In this conversation, Sam and I discuss:

  • Why he launched The Hustle

  • How he gained over 1 million subscribers so quickly

  • What makes a great email newsletter

  • Getting fired from Airbnb the day before he was supposed to start

  • Why great entrepreneurs usually bet on themselves

  • How he partied with Ross Ulbricht, the founder of Silk Road

  • What it took to accidentally raise money from Tim Ferris

I really enjoyed this conversation with Sam. Hopefully you enjoy it too.


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Nothing in this email is intended to serve as financial advice. Do your own research.

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