Bitcoin: Cryptoasset Promotions Consultation (Response to HM Treasury)
To HM Treasury
Response to on Cryptoasset Promotions Consultation
I was delighted to see a Cryptoasset promotion Consultation taking place.
I can see by the questions being asked that the UK Government is still very confused about Cryptoassets, how to categorise them & how to classify them.
I am a blockchain, crypto-asset & DLT specialist. The information I provide below does not answer the Cryptoasset Promotions Consultation questions directly because I have provided you with the information you need to be able to answer the questions yourselves. I hope you find this useful:
Understanding The Paradox of the Centralised Starting Point of Money
If money has a central point of authority & control then it is ultimately worthless because the most powerful Governments in the world could never agree on its control. It, therefore, cannot be defined as commodity money. This raises a paradox with digital currency because it is man-made & therefore must have a centralised starting point, which itself is the central point of authority & control. However, Satoshi Nakamoto realised that the fundamental value in a monetary network comes from its neutral growth & scale. He, therefore, neutralised the Bitcoin network through a process of continued decentralisation. Stages outlined below:
1st: Satoshi Nakamoto released the Bitcoin White paper on 31st October 2008 & provided a reasonable amount of time (2 months+) for anyone else to start the network themselves.
2nd: He started the network himself on 3rd January 2009 under a pseudonym ‘Satoshi Nakamoto’. This de-centralised the starting point because the paper was written & released in English & yet the author had a Japanese name. A Japanese pseudonymous author name gave his work the best credibility because Japan is technologically advanced, highly developed & politically neutral.
3rd: Japan provided the best cover opportunity for him not to be found because of the language barrier, its population size & geographical location/distance away from the western world where the Bitcoin White Paper was first released. This allowed the Bitcoin network to grow without a central point of authority, control or influence for a period of 10yrs+, which is where the fundamental value of Bitcoin lies as it is something that neither the USA or China could simply replicate themselves overnight.
As well as its neutral growth Satoshi Nakamoto devised a way to scale the network through a continual process of decentralisation. Decentralisation is an infinite dynamic state (not a static state). This is because only a dynamic state of competition can create decentralisation. If a system were to be static it would be centralised because parties would collude & work together for their own self-interest. Competition is therefore essential for decentralisation. It is also essential to give the network its economic value through 3x things: Speed, Cost & Scale, without which the network would stagnate & centralise.
Understanding Commodity Money
Blockchain is the process of producing immutable digital data by integrating it into an infinite mathematical sum (ledger) that exists on a distributed, decentralised network that does not have a central point of authority or control that could turn it off. This is the commodity value of Bitcoin because only a truly decentralised network could be considered immutable. Blockchain is the first time this world can provide immutable digital data and all the benefits that come with it as there would be no need for computer virus software or cybersecurity. This immutable data is only made possible with Bitcoin because is the Bitcoin asset that economically sustains the network.
Understanding Proof Of Work
A Proof of Work (POW) based network is the only way to provide sustained competition for a decentralised system. Businesses never stop producing digital information on their customer’s transactions & will therefore always want that digital data protected, which provides an infinite digital market. A decentralised system can only exist in an ever-increasing market because if there is no new market to compete for competing operations start to take market share from & off one another as the system starts to centralise.
Satoshi Nakamoto understood that accountability was essential for decentralisation in order to hold any creator of a system to account. Without accountability, the creator of a system can act with impunity. This is why Satoshi Nakamoto designed Bitcoin with a chain of signatures so that nobody on the network could do anything that someone else wouldn’t know about. It also explains why anonymous systems are centrally controlled & therefore utterly worthless.
Understanding the Need for a Locked Protocol
Satoshi Nakamoto also realised that for a permissionless, decentralised network to exist that the protocol must be locked so that no one could change it meaning that everyone could build on it.
Understanding the Need for Speed, Cost & Scale
Satoshi Nakamoto also understood that the network must be a fully open market (not a closed market). A closed market being a market that excludes others from using it either because transaction are too slow, the cost of transactions are too high or the network can’t scale to suit the size of the required market.
It’s the combination of all of the above that I have just explained that makes a digital asset valuable. This means that all “digital assets” that run on any other type of DLT such as Proof of Stake (POS), Delegated Proof of Stake (DPOS), Pre-mine, Centralised POW, Lightning Network, Hashgraph, IOTA Tangle & anonymous systems have no fundamental value & will ultimately crash to absolute ZERO, all information be erased & all applications built on the system be lost as the network will no longer exist.
The only DLT with the ability to provide digital assets with a fundamental value rather than a dangerously speculative price is the network that Satoshi Nakamoto designed & described in his White paper titled “Bitcoin: A Peer-to-Peer Electronic Cash System”, which is called Bitcoin Satoshi Vision & shortened to BitcoinSV with the ticker (BSV).
THE BENEFITS TO THE UK ECONOMY USING DIGITAL COMMODITY MONEY
Digital commodity money is truly decentralised which means it is fixed in supply & has no central point of authority or control. This means that its value continually increases as it gets divided further by more parties coming into the economy and using it as a Medium of Exchange (MoE) to conduct trade.
This has major benefits to the economy as suppliers compete for the MoE, in exchange for the goods & services that they provide. This also means that the purchase price of the good and services will be driven lower & yet the quality of the goods & services driven higher.
A commodity money that increases in value is an inclusive tool for trade that encourages further participation, whereas, an inflationary fiat currency that the world currently uses is exclusive because it only benefits a small minority that possesses it. This is because an increase in its supply simply increases the value of goods & services for everyone because as a MoE its value falls as supply increases.
A commodity money that increases in value means that the economy can deal with economic bumps in the road like this COVID19 pandemic because businesses have the benefit of accruing value in it over time.