Preface

At the time of writing these lines, 16 years after its birth, the general public’s understanding of bitcoin remains negative. Doubly negative, in fact. Negative in the sense of harmful, and negative in its numerical sense, meaning less than zero.

Practically everyone has heard of bitcoin and has some opinion about it. Yet a large portion of people believe one or more of the misconceptions we will address in the central part of this book, and although they have heard of it, it would be very generous to say they know little about it. It would not even be accurate to say they know nothing. The reality is that they know “less than nothing”. How could someone know less than nothing? After all, knowing that it exists is already knowing something. Right? Indeed, knowing that it exists is already knowing something; however, the sum of knowledge can be less than zero --- that is, negative.

At first glance one might think that when it comes to knowledge there are no negative numbers, because all knowledge adds up. But if we think carefully, we can see that this is not the case. There is knowledge that is the equivalent of a debt, because it is knowledge that takes those who hold it further from zero, from the starting point needed to begin learning. These are “knowledge items” that hinder real learning, things that must be unlearned in order to reach zero.

This may seem very abstract, but imagine someone who “knows” that the Earth is flat. How would we assess that person’s knowledge of astronomy? Do they know more or less than someone who does not know whether it is flat or spherical? One could say they know less, since they are further from the truth than someone who knows nothing at all. And this distance from the truth is not imaginary. In fact, it is quite difficult to retrace steps taken in the wrong direction --- it is hard to rid oneself of such “knowledge”.

The most useful learning in life is to unlearn what is false.¹

— Antisthenes

One of the many biases of our mind is the cognitive bias toward the first idea. The human brain processes ideas in a way similar to how an egg processes sperm. When the first sperm manages to enter the egg, the egg closes itself off to prevent others from entering. Analogously, when the first idea manages to take root in our brain, the brain closes itself off and prevents new ideas from entering. This does not only affect some people --- it affects all of us, and not even scientists, more accustomed to logical reasoning, are free from this bias, as Max Planck made clear.

Science advances one funeral at a time.²

— Max Planck

If you are thinking, “ah yes, that is true, it affects many people I know, but I am very open-minded”, you are not alone: we all think that way. Rarely does one see oneself as closed-minded --- it is always others who are. Well, to be honest, there is one difference. If you are aware that your brain also works this way, if you accept it, then you truly have an advantage. Being aware of cognitive biases does not make you immune to them, but it helps you keep them in check.

About bitcoin you may think you know a few things. You may “know”, for example, that it uses too much energy, that its intrinsic value is zero, that it is a Ponzi scheme, that it encourages criminal activity because it is anonymous, that it is only useful for speculation, that its distribution is unfair, that 21 million coins are not enough for everyone, or that the 21 million limit will be changed because it is software and the code can be modified, or that, in any case, quantum computers will break the cryptography it relies on, that it is very bad for the environment, or that governments will ban it. Well, each one of those things you “know” about bitcoin is the equivalent of knowing that the Earth is flat.

However, as with all analogies, this one is not perfect either. There is an important difference. While far less than $1$% of the population are flat-earthers, a large part of the population likely believes one or more of the statements in the previous paragraph. How is it possible that such a large portion of the population is the equivalent of a flat-earther? Perhaps the $1$% are wrong, but the majority cannot be wrong. Can they?

In the third century BC, the vast majority of people believed the Earth was flat. Only among scholars did the belief exist --- more from a philosophical standpoint --- that it must be spherical. One day Eratosthenes, director of the Library of Alexandria, read in one of the library’s books that in Syene (present-day Aswan), during the longest day of the year, at noon, sunlight illuminated the bottom of water wells. He knew this did not happen in Alexandria, but he did not therefore conclude that what he had read was false. Nor did he simply accept it as true. During the following summer solstice, he traveled to Syene to verify it with his own eyes. There he confirmed that on June 21st at noon the obelisks cast no shadow --- that is, the sun’s rays were completely perpendicular to the Earth’s surface. In Alexandria, on the other hand, the sun’s rays formed an angle of $1/50$ of a circle with the vertical. From this difference he deduced that the Earth was not flat but spherical, and by “measuring”³ the distance between the two cities, he calculated that the circumference of the Earth was 39,614 km --- a value surprisingly close to what we calculate today.

When Eratosthenes deduced that the Earth was round, the rest of humanity did not learn of it immediately. On the contrary, the knowledge spread very slowly because it was completely at odds with the everyday experience of everyone. Imagine how slowly it spread --- so slowly that in the 21st century there are still people who do not know it.

Today’s reality is very different from the time of Eratosthenes. Nowadays we have access to an enormous amount of information and it travels at great speed. We are constantly bombarded with mountains of news that we cannot verify, and it is even a difficult task to decide what is worth investigating to determine its truthfulness. In most cases we resort to trusting the opinion of someone we respect, and very often this includes certain media outlets, the general press, television channels, and so on. And although this strategy may work for some things, it does not always work well. Unfortunately, mainstream media outlets publish large amounts of misinformation regarding bitcoin, and if you have not made the decision to understand bitcoin for yourself, it is not easy to escape it. You probably have some preconceived ideas that hinder your understanding --- and not only about bitcoin, but about money and economics in general. To reason about bitcoin, we must go to Syene and measure the shadow of the obelisks; it is not enough to trust, we must verify.

In recent years we have heard hundreds of journalists talk about inflation, yet almost none of them has explained why it occurs. Journalists in mainstream media outlets have not investigated why it exists. None of them seem to understand it, even though it is very simple --- it is nothing other than the law of supply and demand, which everyone understands, applied to money itself. Why does no one explain something that most of the population does not understand, even though it is quite straightforward? No one in mainstream media explains it because there are strong incentives for people not to understand it and not to investigate it. Those in power love the fiat system for a very simple reason: because it benefits them enormously. In all likelihood, if I were the one who could create money out of thin air and spend it simply by saying I was “injecting liquidity” into the market to stimulate the economy, I would not be writing this book. I would be creating money and, beyond spending it on myself and my family, I would also spend it on free education for everyone, free healthcare for everyone, and many more “free” things. But above all, I would spend a great deal of money to pay economists and schools of economics that agreed with my “monetary policy” and spread the message.

It is not a coincidence that the situation is what it is. There is a causal relationship. The reason so many people “know that the Earth is flat” (in monetary terms) is that those in power have an interest in making us think the Earth is flat. If we think the Earth is flat, they can live off the labor of others. Economists study that the Earth is flat in every school of economics (with the exception of the Austrian school), since what is taught as economics in our universities is not really economics but Keynesianism: a pseudo-religious view of the economy in which everything is fixed by spending more and the decisions to solve problems are made by the State, which has the power to create money out of nothing to solve supposed “market failures” and control “economic cycles”. But Keynesianism is to economic science what astrology is to astronomy…

Those in power love to spend, regardless of whether the system of government is a dictatorship or a democracy. In democracies, those who promise to cut spending on education, healthcare, pensions, and so on do not rise to power. That is not how elections are won, obviously. Those who win are the ones who promise many things and spend a lot of money. It always works: to decide whether increasing spending is a good electoral measure, the current level of spending is irrelevant. The policy measure to win more votes is always to increase it. Everyone understands the benefits of spending more on healthcare and education, and very few can see the negative consequences. If many want to spend more and few can see the negative consequences, the result is clear: an ever-growing state, without limit.

Let me issue and control a nation’s money supply and I care not who makes its laws.⁴

— Mayer Amschel Rothschild

The money-printing machine tends to perpetuate itself since it finances the belief that it is good for society. This is the reason why the vast majority of the population are flat-earthers in economic terms. The money-printing machine is slowing the spread of knowledge, but now an alternative exists. As more people come to realize that the Earth is round, the flat-earth propaganda will become more costly, and little by little those who govern us will gradually lose their enormous privilege. They will lose the power to create money out of nothing and therefore to steal from people the fruit of their labor. There is no date marked on the calendar, and for a while it will still feel as though it will never happen, but the day will come when no one wants fiat money any longer. Each of us individually has our own date. The moment you become aware of the serious problems with fiat money, you will be able to start saving the fruit of your labor in something that no one can ever devalue or confiscate --- something that was never possible in human history until the invention of bitcoin.

When you have your first satoshis, you will own a % of the total bitcoin that will ever exist. That percentage will remain the same year after year, forever, unless you choose to spend or give them away. No one can cause that percentage of the total to decrease because no one can inflate the monetary supply of bitcoin.

This book seeks to refute all the misinformation spread about bitcoin and to provide the reader with a new perspective. To that end, it is structured in three parts.

The first part covers the history of money and consists of five chapters that provide the background knowledge needed to approach the second part of the book.

The second part addresses the various misconceptions (the FUD⁵) and their refutation. The vast majority of the reasons why bitcoin “is not going to work” fall into this category: misinformation. There is a chapter dedicated to each of the arguments most frequently made over the past fifteen years.

The third part of the book addresses the social and moral implications of bitcoin. Although bitcoin is a technology and therefore holds no more political opinion than the wheel, the printing press, or steel, bitcoin exists, and by existing it changes the reality in which we live, just as the printing press once changed the reality of the Middle Ages --- eliminating the monopoly the Catholic Church held over books, making it possible for knowledge to spread throughout much of society and driving the literacy of the population. In an analogous way, bitcoin will mark a before and after in human history. Bitcoin will change society at its roots, and it will do so by granting greater sovereignty to the individual and disincentivizing violence, which will have profound implications for the way we live together in society. It is a technology to be fought by those who crave a totalitarian organization of society, by those who want the State to decide everything. Bitcoin is the enemy of coercion and violence and the friend of freedom, voluntary cooperation, and human rights.

I hope that after reading this book you see bitcoin as a means that allows you to plan for the future and save the fruit of your labor in something that no one can devalue --- but also, and more importantly, as a moral issue in which to take part. I hope that, if you have not already done so, it helps you step off the hamster wheel. Opt out.