Bitcoin’s immanent power struggle for global dominance

The eons of central authority

Appeal to, adherence to, servitude to hierarchical authority structures is in humanities very nature; and it’s not merely a social construct. Disparate lineages of life have evolutionarily converged on dominance hierarchy as a primary key to the survival of social organisms. It’s written in the DNA of social insects and mammals alike. Wild ants, elephants, dolphins, lions, and wolves strongly obey it; submissive tendencies have been artificially selected for and exploited mercilessly in our domestication of bees, cows, pigs, sheep, horses, etc. Evolution has programmed the adherence to authority into apes DNA, and like it or not, every healthy cell in your body runs this same code of dominance hierarchy.

Why is this the case? When convergent evolution occurs, it’s usually indicative that the result is a superior, elegant, efficient, and relatively simple solution to a difficult adaptation problem: the flagellum, the lung, the eye, the wing… Physically and ideologically the pyramid is such a structure: simple, stable, practical, powerful. It’s not an accident that Egypt’s Great Pyramids have survived ~5000 years. They remain perhaps the most magnificent testament to the power of hierarchical organizations ever constructed. Their sheer magnitudes attest to the awesome power of central authority structures. Aliens aside, what other human organization besides the almighty pyramid of authority could accomplish the grand undertaking of the Pharaoh’s pyramids?

Physically, a pyramid is the most stable above ground structure conceivable; conceptually and organizationally, a hierarchical pyramid is the most efficient, ordered, intuitive, scalable structure under which to organize groups of individuals, make high-level decision, incentivize cooperation, enforce order, and get shit done. Naturally, all human societies, from tribal to global, are firmly rooted in the hierarchical pyramid of authority ideology. Hierarchical, tiered organizational structures are so fundamental to virtually all social constructs that it was extremely difficult to even imagine any viable alternative before the emergence of peer-to-peer (P2P) networks.

The epoch of peer-to-peer

Then in the 1970s, the P2P model was conceived and utilized to great effect by protocols that in large part still form the underpinnings of the Internet: USENET (retired), SMTP (email), FTP (file transfer), and of course TCP/IP (world wide web). From the 1990s onwards after the PC revolution, other P2P protocols such as Napster, BitTorrent, and Tor continued to weaken the strangle-hold that centralized authority had on the world.

There’s no doubt that the P2P model certainly had great impact on deeply entrenched societal organizations, industries, governance, and politics. Yet the duplicitous and unbounded reproducible nature of the information transfered on these early peer-to-peer networks did not allow for much more than sharing economies. Normal information is trivially editable, copyable, transferable, and deletable, and as useful as these properties can be in other circumstances, together they make normal information useless for storing, securing, and transacting any intrinsic measure of money, trust, value, or wealth.

The dawn of Bitcoin

Then in 2009, Bitcoin (BTC) was born. By successfully imposing relative scarcity, immutability, discreetness, and ownership onto otherwise normal data via cryptography and the blockchain, the Bitcoin protocol allowed for the creation and transaction of intrinsic value through peer-to-peer networks. Said another way: Bitcoin was the first scalable, decentralized consensus network. The protocol was designed from the ground up to be a decentralized consensus network, with no central point of failure, that’s resistant to attacks meant to manipulate or takeover the network. It accomplished its attack resistance by incentivizing decentralization across its multiple levels of deployment: developers, full nodes, miners, and users. There is certainly room to improve on increasing decentralization incentivization, particularly at the full node and user levels, but as yet there’s not been a known attack that’s succeeded in hijacking the consensus mechanisms, at any level of the network. And as the developers continually improve the protocol to defend against the onslaught of attacks directed at every aspect of the network, Bitcoin becomes ever more anti-fragile.

And now the cat’s outta the bag, there’s no putting it back in. Already thousands of upstarts have forked or cloned the breakthrough technology at the heart of Bitcoin.

Historical case studies of decentralization vs. centralization

In a previous article, I discussed in detail a number of relevant, historical case studies of competition and conflict between the rival organizational structures. Consider reading it first, as much of the following is based on the conclusions drawn there.

Master and slave

Since the dawn of civilization, the relationship between the governing and governed has been one of master and slave. Master and slave relationships are the de facto global standard of governance relationships between first and third world nations, between nation states and their citizens, between banks and their customers, between employers and the employed… Perhaps you think this is hyperbole? Think again:

But first world citizens, despite being robbed as a matter of course by their banks and governments, are the lucky ones. The majority of global populations in the third world are systematically excluded from joining the ranks of the first world, so that they may be routinely exploited and stripped bare of all manner of internal resources: material, energy, human…

The history books have record over and over that its exceedingly rare for the master to willingly free his slaves, barring a bloody battle, e.g. the Exodus from Egypt, the American Civil War. Unfortunately, there will almost certainly be a violent war for global supremacy, owing to the propensity of nation states towards violent conflict. However, as discussed in the prior case studies, if a decentralized organization can succeed in defending against attacks from centralized rivals, it often triumphs over them.

The battle for global dominance

As outlined in the prior case studies, when nation states are involved in power struggles, there is high propensity for violent conflict. Usually, developed nation states prefer to exercise their monopoly on violence via their national and global fiat currency systems, in order to abstract away their violent acts; although, they are certainly not adverse to good old fashioned open warfare either. Traditional warfare is much uglier, messier, unsavory, and condemning than more subtle, palatable acts of economic warfare designed specifically to keep a nation’s citizenry impoverished and enslaved. The weapons of economic warfare are debt, inflation, interest, forfeiture, regulation, legislation, sanctions, trade agreements, embargoes, etc. Bitcoin stands up in direct defiance of the most powerful nation states and their financial institutions because it promises to undermine their most powerful and subtle weapons of oppression.

Owing to the decentralized, P2P structure of the network that specifically eliminates vulnerable, central points of failure, most of the usual pressure points, to exert their control over, are unavailable to traditional authorities, such as banks, regulators, law-makers, law enforcement, and government bodies. Increasingly, these authorities are waking up to the threat that Bitcoin poses to their bloated, corrupt, ubiquitous monopoly of control over every person born on planet Earth. They are drunk on the blood of the oppressed, but are quickly rising from their debaucherous stupors to realize their control is slowly being eroded away. Soon their disbelief will turn to anger and they will rally their armies to fight the would-be usurper for global dominance. Already the battle lines are being drawn up and the first shots fired: US senate bill S.1241 seeks to criminalize ownership of concealed BTC, China cracks down on BTC exchanges and mining, Australian banks freeze accounts associated with purchasing of BTC

Any central points of failure present in the Bitcoin ecosystem are sure to be the first casualties: the most centralized and influential exchanges, mining operations, developers, and users. But once the central points of failure are purged from the network, and the privacy and anonymity of the network has been necessarily hardened, who will the authorities attack then? Unfortunately, as the Soviet Union’s Gulag and America’s War on Terror has shown, there needn’t be any real definition of the enemy for the slaughter to continue: the enemy is whoever the authorities say the enemy is. Totalitarian superpowers must collapse from the inside out; and collapse they will.

Inclusive vs. extractive institutions

In their book, Why Nations Fail, Daron Acemoglu and James Robinson build a compelling case that the most important factor—above geography, climate, culture, religion, etc.—in determining the prosperity, stability, and longevity of a nation is its inclusive vs. extractive nature. Inclusive institutions include their citizenry in the affairs of the nation, e.g. processes of governance, politics, justice, economics, productivity, etc. When an inclusive nation prospers, so too does it’s citizens. Thus, inclusive nations incentivize innovation, production, economic growth, happiness, etc. because citizenry is empowered to directly benefit from inventions, efficiencies, hard work, etc.

In contrast, the aim of extractive institutions is to siphon off wealth from the citizenry to enrich the nation’s elites. Citizens of an extractive nation are incentivized to decreased levels of production, economic growth, happiness etc. as they are not able to enjoy the fruits of their labors as a disproportionate amount of their wealth is extracted from them. In addition, innovation is squelched, because the elites are afraid of any disruption to their absolute control.

Which type of nation do you live in? Which do you want to live in?

Bitcoin: the great equalizer?

All the nations of the world must now choose how they’ll respond to the inception of global, decentralized consensus networks, such as Bitcoin. Will they seek to crush any challengers to their authority, or will they decide to embrace the emergence of an inclusive new world order? The reactions of nations will likely come to bear on their future viability, prosperity, stability, and longevity.

Bitcoin offers everyone, particularly the world’s poorest, a tremendous opportunity to make a great leap-frog forward into the global marketplace, by altogether bypassing the restrictive and oppressive state backed banking systems. In the developed world, Bitcoin adoption seems to be largely driven (at least so far) by speculation and hype; however, in the developing world, where the majority of people have no access to banking and existing financial systems are extremely corrupt and manipulated, Bitcoin adoption is primarily driven by necessity. As a result, use of Bitcoin in the third world is skyrocketing. Here are just a few relevant news stories over the past couple months:

Meanwhile, the United States Government (FBI) has so far capitulated to selling off more than 120,000BTC, seized from deep-web illegal marketplaces such as Silk Road, for a paltry $245.3M.

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