Thoughts on the new digital age by Claudio Grass. The decentralized (r)evolution of the Internet is followed by the second part: Does Bitcoin have what it takes to become digital gold? It has taken me some time to fully grasp the potential of Bitcoin and the decentralized network. It was only when I saw the interplay of hash functions, digital signatures, peer-to-peer structures and open source development in its entirety that I realized that Bitcoin basically has what it takes to be “digital cash”. After all, it is already accepted as a private and, if not “anonymous” then at least, “pseudonymous” medium of exchange; just like government banknotes or gold. At the same time, it has the necessary historical characteristics that characterise money, provided that it is left to the market participants themselves to decide what form money should take. Money and gold From the “history of money” we learn that any form of money must be rare. In addition, it must be easy to transport, divisible and fungible. In the pre-digital world, only real goods could become money, which were already valued before. The best example of this is certainly gold – the hardest currency due to the rarity and difficulty of production in the physical world. Many also call gold a store of value, as it embodies the conservation of energy and human labour that had to be spent to laboriously extract the gold from the earth. “Bitcoin is the embodiment of Nassim Taleb’s idea of antifragility, the ability to take advantage of adversity and disruption.” – Saifedean Ammous If we now take a closer look at Bitcoin and recognize the digital world as a catalyst for free ideas, Bitcoin basically has the same characteristics. Bitcoin is also “mined”, is limited to 21 million units, can be transported digitally and peer-to-peer, and is divisible up to 100 million satoshis per Bitcoin. Bitcoin represents a mathematical code of beauty and has not been hacked to date. With each passing day, the network gains in strength and security, since the “hashing power” and the energy required to do so increases  simultaneously and the cost of attacks become increasingly more expensive. In order for Bitcoin to be destroyed, an attacker would have to spend large sums of money today without ever getting anything back. Guaranteed “pseudonymity” coupled with value A digital value that operates in a network that guarantees “pseudonymity”, thus protects constitutional privacy. It is reminiscent of the Swiss postal and telecommunications secrecy (Art. 321ter StGB), which was introduced to protect the individual from a totalitarian state. Furthermore, in the past decade people have begun to spend time and energy, on their own accordance, in order to turn Satoshi’s white paper into reality —  thus storing energy and working hours, just like in gold mining. Initially, they only traded and played with Bitcoin, until it was first exchanged, as a means of payment, for a pizza now worth 10,000 Bitcoins,thus became a monetary good. Value is ultimately always subjective — it is solely in the eye of the beholder. Since then, bitcoin and the associated network have developed excellently, as even the incentives within the network have been thought through and programmed e.g.  “proof of work“, which only allows those who first checked whether the transaction was genuine, are rewarded. A “miner” who would try to cheat this “proof of work” would never get a chance, because the verification by the innumerable nodes would expose this and the cheater would go away empty-handed. Advantages and opportunities of the internet far outweigh the disadvantages and risks The main reason was that I have always put more emphasis on the advantages and opportunities of the internet than on the disadvantages and risks. Certainly, the Internet was formerly known as “Arpanet”, a project of the US government; and HTTP was developed at CERN, a government-sponsored organization. And yet it can be said with confidence that no one saw the internet coming. Tim Berners-Lee (quasi the inventor of the WWW) himself, and he is the first to admit it, had no idea that the “World Wide Web” could become what it is today. With this I want to make it clear that the modern internet was never planned. What we call the internet is a heuristic sum, a chaotic fusion of bilateral connections or peering agreements. It is a product of voluntary interaction. Specialized protocols heuristically find the shortest path between any two points in a real decentralized mess. The Internet is the product of individual human action. It is a total sum of voluntary interaction. It is the product of decentralized intelligence and its catalyst. And most importantly, open source software is the building block of the internet. So there is no central “internet kill switch”. Also, and Satoshi Nakamoto is the best proof of this, it is possible to protect your identity if you know how to use the internet consciously. We don’t need to behead the king if we can just ignore him! You’re concerned about financial repression? Rest assured, there is always a price for physical gold, the ultimate asset store. Crypto-currencies are a superior medium of exchange. These are the two functions of money. How should capital controls be implemented in a world where Bitcoin can be safely stored in the cloud for the duration of the journey? We don’t have to behead the king if we can just ignore him. The true revolution of this age will not be a collective movement, but a sum of individual revolutions. People who sign off. If there is suddenly no longer any reason to listen to the tyrant, if his proclamations are suddenly no longer enforceable, why continue to live by them? Regardless of the violence he is able to use, the tyrant suddenly loses all competitiveness and therefore all relevance. If you wonder what the Voltaire’s of this age are like, their names are Cody Wilson, Aaron Swartz or Richard Stallman. The new philosophy of freedom, a perfect mixture between classical liberalism and the hacker culture, which we know today as  crypto-anarchism. Volaire’s intuition can be summarized as follows: “Absolute transparency for institutions, full privacy for individuals”. This philosophy is gaining in importance. Instruments are being developed that allow people to withdraw and ignore unnecessary intermediaries and tyrants. Permission-free transactions without the involvement or mediation of a third party is the future. A new awareness for individual freedom is growing, captivated by the hacker culture. People who are worried that Facebook or Google are abusing their position should remember AOL and MySpace and realize that regulation is the enemy, especially when it pretends to protect us. And when a regulation is enacted, you can count on brave and anonymous developers to suggest ways to ignore it and to nullify it. Humanity wins. The nicest thing is that we don’t know exactly how this free market of ideas will improve civilization, just as we couldn’t predict the exact impact of the printing press (or the writing before it). So pessimists have a dialectical advantage because they argue as central planners; they can describe a planned future, however wrong it may be. We, the friends of freedom, are philanthropists. We love the fact that real progress cannot be planned. Even though we cannot know which path free individuals will take, and therefore cannot predict how and when beauty will be created, we trust in the superiority of unplanned initiatives and distributed intelligence. We know that in the end it will produce a world full of splendor. Conclusion In summary, this “collaborative” creation on the internet is very meritocratic, based on individual voluntary contributions and does not use coercion or violence. It is therefore a perfect laboratory to demonstrate once again the undeniable superiority of freedom. Therefore, anyone who loves freedom should be thrilled that great innovations such as the internet, bitcoin and blockchain have been created. The decentralized “internet of Information” requires a decentralized “internet of value”. The bitcoin experiment is still young, aged 11 . Nevertheless, it has never been interrupted and with each day and each user it is becoming more robust, in contrast to the current central banking system, which is inevitably and obviously in decline. So I would like to conclude with Voltaire, who once said that there is nothing stronger than an idea whose time has come, knowing that any “excess” of centralized power will be eroded over time by decentralized technologies. The better ideas win out as surely as decentralized structures are always superior to centralized ones. * Originally published in German at CVJ.ch