• The article examines the different ways in which fiat money has led to terrible incentives at the individual, corporate and national levels.
• It provides historical context by talking about the Bretton Woods Agreement from 1944.
• It explains how this agreement established a new monetary world order with an indirection of gold redemption and how it led to currency being backed by other currencies rather than gold.
The Incentives of Fiat Money
Fiat money has had a major impact on the global financial system, leading to numerous negative incentives for individuals, corporations and governments alike. This article looks at those negative incentives in more detail, starting with some historical context.
Bretton Woods Agreement
The Bretton Woods Agreement of 1944 was a pivotal moment in setting up what later became known as „a new monetary world order“. The agreement was an attempt to address issues from World War I (WWI) such as reparation payments and loopholes around the then re-established gold standard that had caused so much havoc across economies and eventually led to World War II (WWII). As returning to pre-WWI gold standards were too difficult for countries accustomed to central banking monetary control, a new level of indirection of gold redemption was proposed instead.
Gold Backed Currency
Prior to WWI, most currencies were backed by gold and could be exchanged directly at banks. For example, one ounce of gold could be exchanged for $20.67 USD or £4.25 GBP respectively. Gold-backed currency meant foreign exchange was easy and stable since it was tied directly to an asset that held its value – i.e., gold – making it scarce. The advent of central banking changed this as some central banks began printing their own money without backing it against an actual asset like precious metals such as gold or silver. This resulted in inflationary pressures as more money entered circulation without any real assets behind it creating a devaluation in the purchasing power of fiat currency over time due to increased supply relative to demand – essentially meaning each dollar is worth less over time due to inflationary pressures caused by central banks printing more money than is necessary thus driving down its value relative to other assets like precious metals or commodities such as oil or foodstuffs whose supply remains static relative to demand regardless of market fluctuations..
Global Fiat Money Incentives
As a result of these changes brought about by Bretton Woods, governments have become increasingly dependent on their own national fiat currencies backed by other nations‘ reserve currencies instead of relying on their own assets such as precious metals or commodities like oil or foodstuffs for wealth preservation purposes – essentially meaning that if one country’s currency devalues relative to another’s reserve currency then all other countries will suffer from decreased purchasing power when dealing with said nation’s goods & services even though they may not be actively engaged in any form of trade with them directly – this is known as ‘currency wars’ where nations compete against each other through competitive devaluation policies in order gain competitive advantage over rival nations . Additionally, international debt obligations can only be paid back using either US dollars or euros – no other currency is accepted – thus forcing those countries who owe debts into using either USD or EURO reserve currencies even if they would prefer not using them due their potentially weaker value relative alternative available options..
By incentivizing nations into relying solely on reserve currencies such as USD & EURO alongside actively engaging in ‚currency wars‘ through competitive devaluation policies like quantitative easing (QE), Bretton Woods effectively created global financial incentives which favor certain countries while disadvantaging others based solely upon their ability/inability access certain types reserve currencies– ultimately leading us towards a future where economic inequality between nations increases further whilst political unrest spreads globally unless something drastic happens soon .
•Fiat money gives governments the ability to become more authoritarian through welfare/warfare states and surveillance/police states.
•Central banking allows governments to circumvent the usual trade-offs of sound money by running deficits on their budget with minimal consequence.
•The power of fiat money has created an unprecedented destructive power in governments over the last 100 years, leading to tyrannies and oppressive regimes.
Fiat Money and Government Authority
Fiat money is a type of currency that is created and backed by government order, rather than commodity or gold reserves. It gives governments the ability to control economic activity through central banking, allowing them to spend without constraint beyond what would be possible under sound money. This has resulted in an increase in government authority and power over the last century, leading to oppressive regimes and tyrannies around the world.
At the individual level, fiat money has resulted in higher time preferences due to ubiquitous debt and lack of savings vehicles. This encourages people to live for today rather than plan for tomorrow, which can have devastating consequences for their long-term financial health.
At the company level, fiat money has encouraged larger companies that replace families as sources of communal support and economic stability. These artificial structures create zombie-like societies where individuals are unable to reach their highest potentials without relying on corporate entities.
Nation State Level Incentives
At the nation state level, fiat money has given rise to authoritarian regimes through welfare/warfare states and surveillance/police states. The unchecked power of these governments has led to untold destruction over the last century as they use their monetary powers for ill purposes such as oppression and tyranny on an unprecedented scale.
The incentives created by fiat money have had a profound effect on our lives at all levels – from individuals up through nation-states – resulting in higher time preferences, artificial communal structures and oppressive regimes around the world. It is essential that we understand these incentives if we are ever going to move towards a better future with sounder monetary policies that will benefit us all instead of just those in power
• BlueWallet, a Bitcoin wallet with apps in both the iOS and Android stores, is ending its custodial Lightning wallet service by April 30, 2023.
• Users are requested to remove funds from their BlueWallet custodial Lightning wallets as soon as possible.
• Regular BlueWallet Bitcoin wallets and self-custody Lightning wallets will not be impacted by this change.
BlueWallet Announces End of Custodial Lightning Wallet Service
Sunsetting of Lndhub Node
BlueWallet has announced that it will end its custodial Lightning wallet service by April 30, 2023 due to the availability of more mainstream services offering scalable solutions. This means that creating new or refilling existing Lightning wallets on LndHub node will no longer be possible.
Request to Remove Funds From Wallets
Users are requested to remove funds from their BlueWallet custodial Lightning wallets as soon as possible before the cut off date. Regular BlueWallet Bitcoin wallets and self-custody Lightning wallets will not be impacted by this change.
Availability of Lndhub Software
Lndhub will still be available as a software and self-hosted solution which users can connect to their own LndHub from BlueWallet or other software that supports the LndHub API specification.
Benefits for Bitcoin Users
This news may sound like bad news but it ultimately benefits bitcoin users as going forward, BlueWallet will only support self-custody solutions which is a good thing for both bitcoin and BlueWallet users.
Overall, while this move signals an end to custodial blue wallet lightning services, there are still plenty of options available for users who wish to take full control over their funds with self-hosting solutions such as lndhub software.
Overview on Digital Wallets
• There are two types of wallets: custodial and non-custodial.
• Custodial wallets give control of the private key to a third party, while with a non-custodial wallet, you have full control.
• Custodial wallets can be used more easily but come with certain risks such as asset loss during bankruptcy or wallet freezing.
Custodial wallets allow users to store their bitcoin without having to manage their own private keys, thus providing convenience in exchange for relinquishing control over the assets. By trusting a third party to safeguard your private key, you are exposed to certain risks, including potential asset loss during bankruptcy or wallet freezing by the custodian at their discretion.
Benefits of Using Custodial Wallets
Using a custodial wallet is convenient as all that is required to transact is logging into the wallet with a username and password, and then inputting the public key of the intended recipient; furthermore, if you forget your password there is often an option to reset it.
Drawbacks of Using Custodial Wallets
As stated previously, by relinquishing control over your assets to a third party you are exposed to risks such as asset loss during bankruptcy or wallet freezing at the discretion of said custodian. Additionally, due to its centralized nature any security breaches could lead to significant losses for all parties involved.
In contrast with custodial wallets, non-custodially held Bitcoin provides users full control over their digital assets without exposing them to any additional risk associated with relying on a third party service provider. These types of wallets require users create and store their own private keys which can be done using hardware solutions like Ledger nano S or through software solutions such as Electrum Wallet . While this may provide added security when compared with other options available in the market place it also adds complexity which could potentially deter some users from utilizing it fully.
• This is an opinion editorial by Mark Goodwin which discusses the difference between ordinal and cardinal numbers as it relates to Bitcoin.
• Ordinals is an open-source project from Bitcoin developer Casey Rodarmor that uses an arbitrary but sensible framework for tracking the lineage of individual satoshis using ordinal numbers.
• The Bitcoin network assigns each satoshi a unique ordinal number at block issuance, with 100,000,000 satoshi groupings conventionally being referred to as „a bitcoin.“
What are Ordinal and Cardinal Numbers?
Ordinal numbers denote rank or position in a system, while cardinal numbers tally how many units of something there are. In bitcoin terms, the chain’s block height would be an ordinal number – the 10th block – whereas the amount of satoshis in a transaction fee would be a cardinal number, 1000 sats.
Ordinals Project by Casey Rodarmor
Ordinals is an open-source project from Bitcoin developer Casey Rodarmor consisting of two distinct parts; Ordinal Theory and Inscriptions. Ordinal Theory is an arbitrary but sensible framework for tracking the lineage of an individual satoshi using an ordinal number it acquired at issuance. At current difficulty, miners use this reserved but otherwise empty input as extra nonce space for hashing.
The Bitcoin network is a series of peer-to-peer databases, full of integers that contain the current state of the protocol. You can think of ordinal theory as a conceptual social lens for all the numerical data presented in bitcoin’s blocks. By making (cc: arbitrary) rules for viewing how individual satoshis are theoretically distributed after a bitcoin transaction, Ordinal Theory simply suggests a singular perspective to interpreting Bitcoin, explained in its Index.
Every satoshi is given a unique ordinal number as early as the candidate block, starting from 0, and will continue until counting up to just below 2.1 quadrillion, with 100,000,000 satoshi groupings conventionally being referred to as „a bitcoin.“ This number is set at block issuance regardless of any successful miner completing blocks thereafter.
In conclusion, understanding the difference between ordinals and cardinals when it comes to Bitcoins can help developers better understand how transactions take place on their blockchain platform and track how individual Satoshis are distributed within transactions more efficiently using Ordinals project created by Casey Rodarmor .
• Twitter is reportedly preparing for payments and bitcoin could be included in the mix.
• Elon Musk has expressed interest in integrating crypto into the platform’s payments vision.
• Twitter applied for regulatory licenses across the U.S., indicating their intention to facilitate payments on its app.
Twitter Prepping For Payments
Twitter is reportedly prepping for payments, with bitcoin potentially being a part of its payment vision. According to a Financial Times report, Elon Musk is open to adding BTC and other cryptocurrencies to his social media platform’s payment system.
Fiat First, Crypto Later?
The stated goal of this „super app“ vision is prioritize fiat currency transactions first, but its future likely includes the alternative payment method of cryptocurrency. Twitter has already applied for regulatory licenses across the United States, signaling their intention to begin facilitating payments through their app in the near future.
Bitcoin Acceptance History
This would not be the first time that one of Elon Musks‘ businesses have accepted Bitcoin as payment; Tesla electric vehicles previously accepted bitcoin as payment before retracting due to concerns about renewable energy sources. Despite no firm plans yet, Musk has firmly reiterated since his takeover of Twitter that he wants it to become more multifunctional and serve as a “super app” – an idea which could benefit from cheaper, faster payments using something like the Bitcoin Lightning Network.
Tipping Tested via Lightning Network
Twitter recently tested tipping users through Jack Mallers‘ Strike application using Bitcoin’s Lightning Network – allowing users to add their own Bitcoin address directly receive tips sent by others on the network.
It appears that Twitter is taking steps towards integrating cryptocurrency into its platform – while there are still many regulatory hurdles ahead and no official plans in place yet, it remains possible that we may see some form of crypto transaction capability on the platform in the near future
- New Hampshire Commission on Cryptocurrencies and Digital Assets: Governor Chris Sununu created the commission to explore how Bitcoin mining operations could be integrated into a statewide energy plan. The report suggests that this would have positive impacts such as contributing to a more stable grid, more sustainable generation projects, and lower costs for consumers.
- Texas Work Group On Blockchain Matters: Members of the Texas legislature were recommended to make bitcoin an authorized investment for the state, while giving tax incentives to local BTC miners.
- „Well Regulated Cryptocurrency Market“: Both reports indicate that further research into Bitcoin is necessary, and they suggest regulation to protect consumers.
New Hampshire Commission on Cryptocurrencies and Digital Assets
Governor Chris Sununu created the New Hampshire Commission on Cryptocurrencies and Digital Assets in February 2022 via executive order. The commission was tasked with exploring how Bitcoin mining operations could be integrated into a statewide energy plan. Results from the commission suggest that this would have positive impacts such as contributing to a more stable grid, more sustainable generation projects, and lower costs for consumers.
Texas Work Group On Blockchain Matters
A separate report titled „Texas Work Group On Blockchain Matters“ was released by members of the Texas legislature. The report recommends making bitcoin an authorized investment for the state, while providing tax incentives to local BTC miners. This indicates that states are beginning to consider the benefits of embracing bitcoin technology.
„Well Regulated Cryptocurrency Market“
Both reports indicate that further research into Bitcoin is necessary, and they suggest regulation to protect consumers. Appendix B written by New Hampshire’s Bureau of Securities Regulation notes that „a well regulated cryptocurrency market provides consumer protection, and trust in the market which is a boon to investors, the general public, and businesses alike“.
„State Of Financial Services Innovation“
Governor Sununu’s executive order calls for New Hampshire „to remain an excellent jurisdiction to attract the highest quality banking and financial businesses“. This indicates an intention of continued inquiry into how states can integrate cryptocurrency technologies such as Bitcoin in order to become leaders in financial services innovation within the United States.
„Advocacy For Continued Inquiry“
It is important for those who are involved in or associated with state legislatures or who are part of Bitcoin ecosystem communities advocate for continued inquiry into how states can integrate these new technologies responsibly. Without proper inquiry it will be difficult for states like New Hampshire or Texas lead other American governments towards widespread adoption of cryptocurrencies such as Bitcoin.
• In the United States, we primarily have a private healthcare system where if you have the money, you can purchase healthcare services from any service provider.
• The problem in America isn’t a lack of healthcare providers; it is how healthcare services are paid for.
• Patients are typically hit with surprise bills months later and may not have the money to pay the balance, resulting in difficulty for healthcare providers to find qualified staff.
Access to healthcare is essential to long-term health, and the way it is provided varies from country to country. In the United States, we have a private healthcare system. Those with money can purchase services from their chosen provider, and those without are provided with government-provided health insurance.
The issue with the private healthcare system in America is not the lack of providers, but instead the way services are paid for. When visiting the doctor, the patient hands over their health insurance card and pays a copay, but it is unknown how much they will end up spending in the end. The doctor’s office will then send a claim to the health insurance company which is usually paid out months later. Unfortunately, the patient may not have the money by that point to pay the remaining balance.
This leaves patients in a difficult spot, as they are hit with unexpected bills they have not budgeted for and healthcare providers are having difficulty finding qualified staff. This is a serious issue that needs to be addressed as it affects the health of individuals as well as the economy. Solutions such as providing more transparency on costs, creating more affordable options, and increasing government assistance are all possible approaches that should be explored.
• Bitcoin’s Genesis block established a manifesto that sought to restore accountability and antifragility through a monetary system based on sound money.
• The distributed network of nodes running the Bitcoin protocol would enable individuals to take up the reins of their financials.
• The message engraved in the Genesis block serves as an anchor to the physical world and as a testament to Bitcoin’s birthdate.
Satoshi Nakamoto’s creation of the first block in the Bitcoin blockchain fourteen years ago was a move that kickstarted an entire movement. It marked an exciting moment for those in the crypto space, but more importantly, it served as a beacon of hope for individuals around the world who have long been disenfranchised from the traditional banking system. Through Bitcoin, Nakamoto sought to create a monetary system based on sound money, one that could not be manipulated or controlled by anyone or anything.
The singularity of Nakamoto’s creation is put on display through the message engraved in the Genesis block: „Chancellor on brink of the second bailout for banks.“ By including this message, Nakamoto not only solidified the date of Bitcoin’s birth, but also established a manifesto that calls for accountability and antifragility in the global financial system. The message serves as a reminder that Bitcoin was created as a response to the reckless policies of the central banks and its implications on the lives of millions of people around the world.
In order to realize its potential, Bitcoin was designed to be powered by a distributed network of nodes, each running the protocol’s software and as such enforcing its rules. This allows individuals to take up the reins of their financials and be in control of their own destiny. With the blockchain technology, individuals can perform transactions safely and securely without the need of any third-party intermediary.
Bitcoin has come a long way since the Genesis block was mined. Its purpose is becoming more clear and, fortunately or not, needed. With the current global economic climate and the increasing need for financial autonomy, Bitcoin is poised to play a major role in the future of finance. Even after fourteen years, the message that was engraved in the Genesis block still resonates today and serves as a reminder of why Bitcoin was created in the first place.
• Channel jamming is a problem with the Lightning Network that can cause nodes to lose money while their liquidity is locked up.
• Last month, Lightning developer Antoine Riard proposed a formal protocol that utilizes Chaumian ecash tokens to mitigate channel jamming.
• This protocol would use anonymized credentials to build a sort of reputation scoring system for users routing payments through nodes without having to dox or associate that reputation with a static identifier.
Channel jamming is a major issue on the Lightning Network that has the potential to do serious damage to its users. Channel jamming occurs when an attacker is able to route a payment through other nodes from themselves to themselves, and then refuse to finalize the payment. This makes that liquidity useless for forwarding other payments until the hashed timelock contract (HTLC) timelock expires and the payment refunds. Last month, Lightning developer Antoine Riard proposed a formal protocol to mitigate this problem.
Riard and Gleb Naumenko published a paper in August exploring different solutions for mitigating channel jamming. One of the proposed solutions was a form of anonymized credentials that nodes could use to build a sort of reputation scoring system for users routing payments through them without having to dox or associate that reputation with a static identifier that would negatively impact peoples‘ privacy. This solution has now become the formal protocol proposal made by Riard last month.
The protocol proposed by Riard utilizes Chaumian ecash tokens. These tokens are centralized tokens issued by a mint authority in a way that prevents the issuance of a token from being correlated to the redemption of a token later. This is done by signing a token in a blinded way, allowing the receiver of the token to unblind it without invalidating the signature. The issuer can then verify it is a valid token without seeing who issued it.
The proposed protocol would allow nodes to issue these tokens to route payments through them. Nodes could then issue different types of tokens that would give users discounts for routing payments through them. This would create competition between nodes, as nodes that offer the most attractive discounts would be most likely to receive the most payments routed through them.
In addition to creating competition between nodes, the protocol would also create a reputation system for users. When a user receives a token from a node, they can use the token to prove that they paid the node a fee, or that they received a fee from a node. This would allow nodes to track the amount of money a user has routed through them, and can be used to allow nodes to blacklist users that are attempting to jam channels.
Overall, the proposed protocol would allow nodes to track users’ payments and create a reputation system without exposing users to privacy risks. This would allow nodes to prevent channel jamming and protect their liquidity while still allowing users to remain anonymous. The protocol is still in the early stages of development, and more research is needed before it can be fully implemented. However, if the protocol is successful, it could provide a much-needed solution to a major problem on the Lightning Network.