Hyperbitcoinization: A Bitcoin Maximalist Fantasy?

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1 year ago

Theoretically speaking, hyperbitcoinization is the tipping point at which BTC becomes the reserve global currency. By the time hyperbitcoinization happens, BTC would have upended all Fiat currencies, lodging itself as the de facto global financial system’s medium of exchange and store of value.

What Does A Hyperbitcoinized Future Look Like?

In a fully hyperbitcoinized society, BTC will no longer be priced in dollars or any other currency, as happens today. In such a future, there’ll be no need to exchange BTC for any other currency; existing goods and services will be predominantly transacted with BTC as the primary medium of exchange. Besides, economics dictates that a hyperbitcoinized economy would be deflationary, rather than inflationary, as it currently is.

Current Bitcoin adoption stands at less than 1%, at the time of this writing. Yet in a hyperbitcoinized world, BTC adoption will likely stand at 100%, with every single financial transaction happening on a version of the current BTC blockchain. This is not too hard to picture, as literally, every chain is currently downstream from the BTC blockchain.

Full hyperbitcoinization is bound to change the very fabric of how society operates; the basics of communication, social contracts, the mode and speed of information exchange, the mode and speed of value exchange, and the forms of governments of the day. Current indications however seem to indicate that the future is much more likely to become a multi-chain future than a hyperbitcoinized future.

What Are Some Potential Triggers Into A Hyperbitcoinized Future?

1. Fiscal and Monetary Manipulation by Central Banks

Central banks throughout various points in history have been culpable for ushering financial distress amongst the people. This is often most felt through a reduction in purchasing power, and a loss in faith in whichever currencies are involved. Past fiscal data suggest that an increase of as little as 10% in the money supply of a country could result in decreases of up to 40% in purchasing power for the people over 5 years.

Today, more mainstream options exist, into which distressed populations can migrate into; cryptocurrencies. BTC, in particular, has a capped supply of 21 Million coins, which presents a more stable and predictable monetary policy, than the arbitrary Fiat system that controls value today.

2. The launch of CBDCs

Following the current crypto wave that grows every day, Central Banks and governments throughout the world have started to consider launching competing state-backed digital currencies.

Obviously, this will be followed up with massive state-sponsored campaigns and mass education programs to recruit, even coerce entire populations into these govt.-issued CBDC chains.

However, the limits and drawbacks to centralized blockchains will become quickly apparent to the populations, resulting in mass migrations into more Lindy, and established chains, such as BTC.

In a round-about way, governments will have helped to beat the path for the masses, through which they will shift to more robust and secure blockchains, with better reputations of withstanding security threats and Black Swan events.

3. Direct Government Intervention

Some theories entertain scenarios where hyperbitcoinization is triggered by governments themselves dabbling in Bitcoin.

Scenario A

Countries start accepting BTC as legal tender, triggering a list of other countries who’d like to consider the move, and eventually join it.

Scenario B

A group of countries begins to trade with each other to avoid US-imposed sanctions and related embargoes, opening up an entire sphere of possibilities in geopolitical relations, with BTC at the center of it.

Scenario C

Smaller countries with fragile banking systems might start accumulating BTC to hedge against an uncertain future, triggering a wave of BTC accumulation amongst smaller countries, to expand into perhaps bigger nation-states.

What Are Some Potential Challenges to Hyperbitcoinization?

The foremost challenge that hyperbitcoinization would face would be the very same incumbent traditional financial and banking system that it tries to supplant.

To the primary beneficiaries of TradFi, it is imperceptible (impossible if you ask them) for anyone to establish an alternative global finance system. The fiat monetary system has been in place for decades now; any alternative system running parallel to TradFi could only spell trouble, anarchy, crime, violence, chaos, disorder, and law-breaking to the incumbents. Any threat to TradFi has been synonymized by incumbents as an assault on civilization, economics, and the law.

A quick rebuttal to this worldview opines that TradFi and the incumbent banking monetary system is chaotic and anarchist, interfering with an otherwise operational global market system. BTC enthusiasts especially view government Fiat as an unnecessary interference to monetary stability, proper market function, and a transparent money-printing process.

The Fundamental Problem with Central Banks

The most apparent flaw that central banks have is the hubris to assume that they know better than even the people, how best to deploy scarce resources. Central Banks today operate on the false premise that they know better than everyone else, how to deploy the people’s resources.

Assuming that central banks are well-intentioned, it is simply ridiculous and ill-informed to think that they can spend our money better than us. They don’t know yet that they can’t, especially considering that their allocations have been proven to be dismal.

Assuming that central banks are ill-intentioned, it follows therefore that they know that they can’t spend the money better than the people, yet still insist on doing it. They still go ahead and spend the money on cronyism and what they consider important; they simply don’t care.

Money, like language, is a manifested human tool to communicate data and value. It is irresponsible of society to let a few old men sitting in archaic offices with mainframes running on FORTRAN, decide the next chapter of human civilization.

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1 year ago