I hope y'all won't mind a little coffee fueled Sunday Long Post... If so, please skip ahead about 15 inches of screen (sorry).
Sheep in Wolves Clothing How Two Apps Have Lit a Fire that Will Burn Through All the Paper Money in the World. As long time bitcoinners in the developed world we need to come clean about something. C’mon. You know you need to. It’s like this: All through the years we have seen cool invention after cool invention around Bitcoin. For example, if you’ve been around long enough you saw the first Bitcoin exchanges pop up and watched as they eased trade in this new tech that we all knew would change the world, even if we were not yet sure how, exactly. Maybe Bitcoin was going to kill the banks! Yeah, that’s a good narrative! Let’s go with that one!
So back to it: Mt. Gox, BTC-e, Cryptsy. These new industrious companies... umm... wait a moment. They were all scams? Well maybe not scams... The first one was just run ineptly, and robbed becoming a hopeless fractional reserve, the second one might have laundered that stolen money, and the third one? Umm, yeah, just a scam. Ok how about some of the first apps? Like Satoshi Dice, or Seals with Clubs, or the Silk Road market? Pretty amazing stuff really! But was this how we would change the world? By proving martingale systems don’t work, playing poker and selling drugs? Yeah, yeah, I know... freedom, libertarianism, evil governments and so on. I am not here to downplay the importance of these things. Well, you could buy alpaca socks, pizza, t-shirts and coffee mugs! That’s some world changing shit right there. Those banks were about to pee their virtual pants for sure!
OK, then. I mean... what could you really buy with a virtual currency? Wait! I know! How about another virtual currency? Like Tenebrix, or Solidcoin? Don’t worry if you came in too late to know what those are. You didn’t really miss anything. They were just the first in a seemingly never ending litany of scams that used
“BLOCKCHAIN, THE TECHNIOLOGY BEHIND BITCOIN!” Sorry. No matter how many times I type that it comes out in all cAPS for some reason. Thus, began the many year sidetrack into shitcoindom. But it had to happen. You can’t try to make something as fundamentally powerful as money powered by free open source software without the well-meaning developers forking it to fix or improve it, and all the scammers who just wanted to get rich off of it. And we are still not done yet. And I am not here to completely dismiss all other projects. I will leave that to the more hardcore maxis. But trading lots of virtual currencies to try to get rich? Is that how we would kill the banks? To be honest all the criticism of Bitcoin as a Ponzi is sort of deserved if you don’t see any more than that.
Now, all those transactions being done to and from the exchanges, gambling sites, and darknet markets began to show us that Bitcoin was going to have a problem scaling well before we had a chance to slay any dragons (banks) with it. So then, just a few years in, came the scaling wars. The history of which is beyond the scope of this little piece. But suffice it to say we were going to need to figure out how to scale transactions if we were going to want to keep sitting in the glow of our monitor, stoned off whatever we bought on the darkweb, trading shitcoins and playing poker. And transaction layers were born! The most decentralized of which so far is the Lightning Network.
I remember after setting up my lightning node, and finally figuring out how to connect a wallet to it the first things I did were transferring money back and forth to ANOTHER wallet I controlled for
“JUST ONE SAT!” (What the hell is doing that?!? Some Word plugin?) And after doing that for a few days, I found a lightning roulette site, and then bought a t-shirt and some stickers from Blockstream! It felt like the early days of Bitcoin again! It was amazing! We were well on our way to crushing those banks!
Then more and more user friendly lightning wallets that the high priests in the Bitcoin community would approve of were being released each day. But most of the really easy ones were “custodial” which the priests do not like, not at all. Like “Wallet of Satoshi” for example.
And then Jack Mallers, and his company who had made a lightning wallet that the priests really approved of (but was still kinda hard to use –early days etc) made this new product called “Strike”. Boy, it took a while, but this is where we get to come clean... us bitcoiners in the developed world. This app was really neeto! What did it do?!? Well, you hooked it up to your bank account, and then you could send money directly to another Strike user over the internet! Amazing! Hmm. But, there is just one thing. Isn’t this just the exact same thing as PayPal, Venmo, and CashApp? Why do we even need this? We already have those things, and our pre-coiner friends all use those so this thing is not going to beat Venmo, right? So, it uses the lightning network. Whoop-de-doo. That really just increases the chances that a transaction will fail since it is a nascent, fragile little network run by nerds on Raspberry Pis. Why do we even need this?
That’s just it.
We don’t. (yet)
But here’s the littly bitty part of this thing that we miss because of the world WE live in. The one thing that makes this app different from those other three I mentioned is the fact it uses the Lightning Network to transfer the money. Yeah, we got that, so? So that is a decentralized, trust-minimized, monetary settlement network running on top of THE decentralized, trust minimized base layer. There are no controlling third parties. There is practically no counterparty risk.
AND NOTHING CAN STOP THESE TRANSACTIONS. (This time I did that! On purpose!)
Yeah. I know. Sometimes they might fail. So “nothing can stop” might not make our more literal readers happy. But what I mean is no third party, no middleman, no government. It does not matter if a Christian in Greece is sending money to a Muslim in Iran. There is no central authority, who if they do not approve of your politics, can stop you from transacting, or even seize your funds. There is no need for any prior approval for the transaction to happen. It is running on actual freedom. Freedom you can taste if what you are used to having crammed down your throats is usury, oppression, and scams. Those of us who are used to more freedom (though it is disappearing at an alarming rate) do not at once see what this means.
El Salvador is in the news today because they have legislation pending to declare Bitcoin as legal tender in their country. This is because the people have already been using Wallet of Satoshi, and Strike in that country for a while. And it is working. They use the former (and other lightning wallets I presume) for business. Stuff like surfboard rentals, meals, beer, and yes, T-shirts! And they are using the latter for remittance. People from El Salvador go to developed countries like the US to work, and they send money home. And they pay quite a bit to do it. If you want to do it quickly it can be very expensive. Fees over $100 or as much as 20% are not uncommon. But with Strike they can do it for a few cents at most, or even less than a single penny.
THAT is why Strike matters. We didn’t quite see it because it is kind of subtle, and we do not usually need this benefit.
And this is what got the attention of the Salvadorian president who called Mallers to help him figure out how to make Bitcoin work even better in their country.
Since this news has been released it has been fun to watch all the reactions. Of course, bitcoinners are mostly cheering. But people who, for whatever reason, want the power of the state to continue are twitching and writhing a little. I have heard some people praise President Bukele as a young forward thinking agent of change for his country, and others call him a corrupt puppet. I honestly have no idea if he is either of these things. But the bitcoin part of that story goes like this: Honey Badger don’t care. It doesn’t matter. Even if his motives were not good what he is proposing will help not only his citizens but ultimately others in Latin America, Africa and many other developing areas who suffer because of all the red tape of the old system strangling them. And it will also help those of us in the developed world who might not realize that the freedoms we cherish are eroding faster than ever before.
One crazy thing, though... What is Strike? They are an app, on mobile devices. A disruptive one, sort of like Uber. But what do they do? Well, they hold money. They act as a trusted third party. They do all the work of legally getting the ability to run in a particular jurisdiction, but all they have to do is be able to send and receive money from banks in that jurisdiction. They hold that money for their customers, and facilitate transfers using Bitcoin.
So, they are basically a bank.
Wait. Didn’t we say earlier that... yeah. We were wrong. Strike disrupts the legal and financial systems that currently exist by employing a decentralized network exactly how Uber disrupts the legal and costly systems around taxis. But Uber basically IS taxis, and Strike basically is a bank. At least they are dressed up like one. A sheep in wolves clothing, if you will.
Trusted third parties are security holes. - Nick Szabo
It is true that Strike is a trusted third party. And a sort of bank. Things we bitcoinners traditionally had great distaste for. But here is the nuance: We can build systems on TOP of the trust minimized decentralized monetary network that introduce little bits of trust, or centralization to benefit us. Strike is a perfect example. So is the ease of use with Wallet of Satoshi. The point that matters is we cannot do it the other way around. If Bitcoin were centralized, ultimately so would be the lightning network, and payments through strike could be stopped. In that case we could not benefit from the tradeoffs that introduce features at the cost of things like trust. Trust is like salt. Just because you should not eat a bowl of salt, does not mean that putting a little into your soup is bad.
The PEOPLE via Strike, and Wallet of Satoshi are already way ahead of the government in El Salvador. The fire has already been started. The government there is just going to enact legislation that essentially throws all their bales and bales of worthless paper money on that fire to really get it going. And now one of Bitcoin’s great concepts is about to be tested.
The prisoners dilemma.
Much has been written about the game theory behind bitcoin. The concept of the prisoners dilemma deals with decisions made by people independently, but that will affect the other. People, and countries are incentivized to protect themselves. The game of musical chairs is also relevant. There are only 21 million seats. Looks like Seat #1 is about to be taken. So no one can have that anymore. But seat #2 is still available. Oh wait... did someone just sit down? Or we can use the analogy of dominoes falling. Particularly that image of the tiny domino pushing down the slightly larger one, and again, and again until a huge one falls at the end. But the metaphor I am liking the most today is a fire. Today we can bask in the glow of the fire set by the people of El Salvador. And the fuel for the fire is the broken, corrupt paper monies of the whole world. It was lit in a surf town in Latin America. Their president wants to stoke it even more. And it will be fueled by wheelbarrows of worthless paper money in Zimbabwe and Nigeria. I suspect other African as well as Central and South American countries will ignite soon as well. And yes, someday in the future the mighty US Dollar itself will ignite. As a proud citizen of the US, I hope we do not wait too long.
We might be last because we cannot see yet how much is being stolen from us by the central banks. And by all the fees, and the “Bit Licenses”, and the red tape, and the control, and the inflation. Whoo boy, the inflation.
The statist’s main argument goes like this: "We NEED central bankers to keep the system fair". Right. And slavery is freedom, and war is peace. The people are waking up. And the ones to wake up first will benefit so very much.
So, we were close back then at the beginning. Us early bitcoiners all mad at “the banks”. But it was the CENTRAL banks, really.
I want to say: Get ready for the big fight. Because they are not going to go down easily. But that would be ignoring that the fight is already on. Seriously, do you think Elon Musk just realized last week that bitcoin uses energy? Lol. Who on Earth would have enough power to make him turn 180 degrees away from the only thing that has ever made his company profitable?
Who, indeed?
The fight is on. We are all faced with decisions we need to make. The chairs are rapidly filling up. The dominoes are falling.
The fire has been lit.
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