The Internet of Money Volume II Summary, Notes, Lessons & Quotes

Historically, there have been five major changes in money, bitcoin is the sixth. We’ve gone from the barter system to the abstraction of value (shells, feathers, beads, etc.), then precious metals, then paper money, then plastic money. Potential final stop: bitcoin.

Money is a language that allows us to communicate value. When you decouple money from a controlling entity, you give power back to the people to communicate more freely.

Banking has changed forever, it was a stagnant and closed industry that has been ripe for disruption, now it finally can be disrupted.

Just like there are children born today that will never need to use a cd player, there will be children born today that will never need to use a bank, they will just use bitcoin.

Bitcoin only works because of a combination of technologies; blockchain, proof-of-work, P2P Network, and Cryptography. You can’t just isolate one of the ingredients claim that is the secret sauce and transformative technology.

Most of the people who use the term blockchain technology can’t even define it.

The essence of bitcoin is the decentralized network, not the cryptographically chained data assembled in blocks.

If you can replace the word blockchain with database, it’s business as usual and not a breakthrough technology. If it’s not decentralized, borderless, neutral, censorship-resistant, or open, then it’s not innovative.

Permissioned “distributed ledgers” are the worst of both worlds and not a revolutionary innovation. A small group of large banks using “blockchain technology” to create a new currency is just placing your trust in a cartel-run closed network.

The internet killed the business models of most traditional news organizations. So the news organizations doubled down on opinion pieces, cut out investigative departments, the foreign desks, and journalists, and stuck with the most profitable divisions in spite of cutting out the most informative ones.

What the internet did to media bitcoin is going to do to the banking system, it’s creating an entirely new system. The traditional media outlets relentlessly attacked “new” media sources for being untrustworthy and “fake news” just like the banks are attacking bitcoin for being untrustworthy and fake money.

Nothing is as immutable as bitcoin. Due to the proof of work system, it takes an enormous amount of computing power and electricity to rewrite just one new block going forward, and the amount of energy and computation it takes to rewrite the history of the blockchain is next to impossible to produce.

The work this system has produced is so gargantuan and so undeniable, the author likens it to the pyramids of Egypt. You can’t dispute how much energy it has taken to build this monument.

Proof-of-work is also a proof-of-stake consensus mechanism. The participating parties staked their computation power and energy resources in order to create each block. However, proof-of-stake is not proof-of-work.

The cost of fabricating the past is too large for any one party to pull off, so bitcoin is better than “written in stone”.

The banks are attempting to create closed blockchain systems, which are essentially soft promises compared to bitcoin’s hard promises. They are rolling out products with features like the “editable blockchain” which misses the core value proposition of bitcoin.

We live in a current banking system of soft promises. That money you deposited into your bank? It is a promise the bank can easily break. That payment you sent to WikiLeaks? Sorry, we’re going to reverse that transaction because we don’t agree with them politically.

There is a false narrative that chaos will ensue without a central authority, the banks want you to believe that without central banking the system will eventually result in ruin.

Governments wage currency war on their own citizens and competing nations by either debasing their own currency to pay for some unpopular policy, or to hurt an imposing nation’s imports and exports. When nation-states have the power over the currency it results in negative second and third-order consequences to parties who did not consent.

There is an impending war on cash, just look at what India did to phase out the 1000 and 500-rupee. This trend will only accelerate with other countries as central banks try to roll out CBDCs.

You can escape the currency wars by opting into a new system like bitcoin. You don’t have to play their games anymore, you can remove yourself from a game where government plays God in the form of monetary policy.

Gresham’s law states that “bad money drives out good money”. What this means is that anytime a government intentionally collapses its own currency it drives out all other kinds of investment. If pesos are rapidly diminishing in value, citizens will rush to get ahold of USD and invest in all the American assets they can. This will apply to bitcoin as well. As more people catch on to the inevitable collapse of the USD and other currencies, it will drive more money to BTC and other cryptocurrencies.

Immune systems only strengthen when they are exposed to stressors. Growing up in a hermetically sealed plastic bubble makes you extremely weak and susceptible to all kinds of diseases. The same thing goes for software systems.

Bitcoin gets hardened day by day, year by year due to all the attacks. It is an antifragile being. These new private “blockchains” being built by banks are not being exposed to outside stressors. They will eventually become weak and will be exposed.

The same thing happened to the companies who tried to build private intranets instead of adopting the standard public TCIP internet protocol. Security by isolation is a terrible policy, eventually, points of attack get exposed and can bring down the whole “private system”.

Bitcoin is like a sewer rat in the sense that it is exposed to all kinds of diseases, stressors, and viruses. It thrives in the dirtiest of environments, filth only makes it stronger.

Bitcoin is like an entirely new species that was born into an environment where other species couldn’t survive. The author provides a parallel example of how the earth was once inhospitable to any oxygen-dependent organisms. All lifeforms lived in anti-oxygen environments, dependent on carbon.

Then the environment of the earth changed, it began to be filled with oxygen, allowing for all new kinds of life forms to flourish. The old anaerobic species who lived in anti-oxygen environments still live to this day, they were just pushed to niche environments like deep into the ocean or volcanic environments.

Bitcoin doesn’t compete against banks because it’s competing in an entirely different environment. It’s forging a path to a new, more life-friendly financial world. The old banking system will probably still exist, it just won’t be the main financial environment where commerce can flourish. Bitcoin is not the money of the current generation, it is the money of the generations to come.

Bitcoin allows for an entirely new time dimension of money. Our traditional system, due to costs and restraints has popularized the norm of getting paid every other week. With bitcoin this practice becomes obsolete. You can be paid every day, hell even every second.

Your labor becomes directly attached, in real-time, to your compensation. It makes micropayments possible, which opens up new avenues of commerce and new business models.

Just like the internet converged ALL forms of media into one medium; it compressed the audio networks, image networks, and video networks to be provided all over one protocol, bitcoin will do the exact same thing for the financial network.

Andreas compares Bitcoin and Ethereum to lions and sharks. They are both apex predators, but they operate in totally different environments, hence they are never competing with one another. If one of these protocols attempts to jump environments and compete with the other, it would ultimately lead to their death.

Founders and inventors can have intentions and ideas in their heads for how their creations are going to play out and be used, but ultimately the free market determines their ultimate fate. Did DARPA, who created it for academic and military uses, ever envision this many cat videos on YouTube?

Just like Vitallik and Satoshi laid out visions for how their open-source software would play out, they can’t possibly control where it inevitably ends up.

For another invention to come along to become a “Bitcoin killer” or an “Ethereum killer” not only requires innovativeness, it would require groundbreaking infrastructure and correct timing. Netflix didn’t overthrow blockbuster in 1995 during the internet’s infancy, nor was Facebook created in 1993. It takes a mature infrastructure to allow disruptors to “dethrone” the current incumbent.

Writing smart contracts to govern corporations and organizations is rocket science. It’s much more complex than an open-source protocol for a new form of money. Ethereum’s goal is a much more complex endeavor than bitcoin’s goal.

“With a smart contract, money is the fuel and the smart contract is governance”. Meaning that with the invention of bitcoin, we have the power necessary to get to orbit, but we need steering and direction to ensure that the rocket we created doesn’t turn into a bomb.

How is bitcoin’s value determined?

In the same exact way the value of a Euro, USD, or any other currency is determined; through market forces of supply and demand in international liquid markets that operate 24/7.

What are the rules of bitcoin?

Within the bitcoin system, there are about 30-40 “set in stone rules”. The most important ones are:

• My address must be correctly formatted
• Your address must be correctly formatted
• The amount of bitcoin described must be between 0 and 21 million
• If you don’t have bitcoin, you can’t pay someone
• Any signature on the transaction is valid
• The transaction has a sufficient fee to pay the network

How much do you have invested in bitcoin?

Andreas has not only 100% of his financial net worth invested in bitcoin, but he also has 100% of his time, reputation, and mental bandwidth invested in it.

Who is the inventor of bitcoin?

Bitcoin was anonymously created by an individual or group calling themselves Satoshi Nakomoto. Satoshi stole money from the state just like Prometheus stole fire from the gods. They have every right to stay anonymous due to the potential harm governments might direct toward them.

However, that harm may now be zero because Satoshi no longer owns bitcoin, the world now owns it just like no one owns fire.

Won’t criminals use bitcoin?

Yes, but so will honest business people, grandmothers, teenagers, and the rest of humanity. Do you know what criminals also use? The paper USD, in much greater volume I might add. Criminals are almost always the first cohort to adopt a groundbreaking technology. It happened with the automobile for bank heists, the internet, the telephone, and so on.

Should we collect the identity of everyone who uses bitcoin?

No, privacy is important and necessary for a free society. Identifying bitcoin holders also places a target on their back for theft and harm.

What kinds of academic research are happening in the field?

In 2013 there were only about 3 or 4 Ph.D. papers written for bitcoin, in 2014 there were over 40. So yes, academic research in this field is happening. We will not only see academic research surrounding consensus algorithms and distributed computing, but we may see an entirely new discipline arising out of the study of bitcoin.

Are initial coin offerings a disruptive innovator or a bubble?

ICOs offer a new business model for raising permissionless capital, without geographical constraints, but unfortunately, most of their uses so far have been scams or outright worthless. The use case and importance of ICOs are still to be determined.