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Month: February 2024

Bitcoin Nation – THE DISCOVERY OF LAW (Pt.2-Ch.7)

My new book “Bitcoin Nation” was published on the 15th anniversary of the Bitcoin Whitepaper, October 31, 2023. You can read it below, one chapter per week. Or buy it here:

Since at least the time of the ancient Greeks and Romans, law codes were public documents, with the purpose of giving people guidelines to live lives that do not create conflicts. If conflicts still arise out of violation of the law codes, the ancients tried to compose comprehensive processes to resolve the conflicts.

In this sense, Roman law was an evolution from previous purely religious law codes, in that it assumed that laws were not to be dedicated by a god and interpreted by prophets. Instead, the Romans recognized that there is natural law, which can only be discovered and is ingrained in the nature of our universe and man made-law.

Natural law is essentially what I described in the previous chapter as “ethics”. Every action that conflicts with the ethics – which result from the properties of consciousness – conflicts with natural law.

An ideal law code would be in complete harmony with natural law. Unfortunately, this is not practically achievable. To understand why, we need to take a look at the praxeological aspect of inter-person conflict.

Let’s say Person A accidentally or intentionally destroys Person B’s favorite art piece. To reverse the violation of B’s natural property rights, A would have to replace the art piece to B, plus pay B for the damages that occurred to him while he was devoid of his property.

Let’s assume the artist who created the work is long dead. Thus, necessarily A can only reimburse B with another good or service, not an exact replica of the artwork.

The conflict is unresolvable if A and B don’t find a good or service that B values as high or higher than the artwork, while A values it lower or as high as the artwork. If no good can be found, where the valuations meet, one of the two will always feel betrayed. So, while in theory every person has their individual ordinal valuation of goods, in this conflict, a man-made law is required on how to resolve such unresolvable subjective valuation conflicts in a manner that is most satisfiable.

Another aspect is the practical consideration of preventing repeat offenders. From a purely natural law perspective, it would always be enough, if the offender restores the damage he has done. Since crimes are not always discovered and not always justly resolved in practice, it is necessary to oversize the compensation in cases where intent is suspected.

Now here again multiple problems arise. Intent is only known to the individual and cannot be proven or disproven beyond doubt. Furthermore, the exact proportion of crime to punishment is hard to determine.

Let’s assume a thief is caught stealing 1 Bitcoin. Should he be fined 1 Bitcoin, 2 Bitcoin, 10 Bitcoin?

Well, obviously this depends on multiple variables. One is, how much Bitcoin the thief already has in possession and how often he gets away with crimes.

A first-time offender, who steals out of boredom and opportunity, might be prevented from becoming a repeat offender, when sentenced with a fraction of his net worth.

A professional thief who stole 100 Bitcoin before being caught, stealing another, will laugh about any sentence less than 100x his latest catch.

The mother who is trying to feed her starving child will likely not be stopped by any fine.

As you can see, there are several hurdles one needs to overcome to create a “just” law code:

  1. The discovery of natural law through scientific philosophy is incomplete.
  2. Valuations are subjective and some conflicts thus unsolvable.
  3. Intent and crime detection rate need to be taken into account to prevent repeat offenders.

If you agree with the logic of the previous chapters, then you surely have a hunch, what my suggested solution to these issues is?

Of course, the free market.

In a society comprised of Bitcoin Nations, law will likely improve over time for two reasons:

Firstly, people can easily switch legal systems, if they are not satisfied with their current legal framework.

And secondly, competing legal systems will need to find arbitration methods to resolve conflicts that arise from differences between people who subscribe to incompatible law codes.

This necessarily forces each legal system to continuously outcompete others and requires that any nation who wants to grow their membership numbers negotiates treaties with other nations, where it is specified how conflicts between their members shall be resolved.

To see how all the market processes described in this book could play out in real life, let’s have a bit of conjecture time.

Bitcoin Nation – THE FOUNDATIONS OF ETHICS (Pt.2-Ch.6)

My new book “Bitcoin Nation” was published on the 15th anniversary of the Bitcoin Whitepaper, October 31, 2023. You can read it below, one chapter per week. Or buy it here:

A thorough discussion of morality and ethics would fill entire libraries, so I cannot hope to do it justice here. Rather, we will focus on pointing out the most fundamental popular misunderstandings and point out a way to create a framework of continuous improvement for ethical standards.

The first misconception about morality is that it is postulated either as subjective or as objective. This is a false dichotomy. In reality, ethics is grounded in objective reality, but since objective reality contains individuals capable of subjective value judgments, these need to be accounted for in any objective ethical framework. The result is necessarily a framework of objective outlines, with subjective nuances.

A second major falsehood is the notion that ethical frameworks offer a moral guidance that results in people being able to decide whether they are “good” or “bad”.

In reality, it is theoretically and practically impossible to be 100% good or 100% evil. So any ethical framework that tries to win over people by soothing their conscience and telling them “Atta boy”, is really just a marketing scam and not any moral standard.

Third and most importantly, most modern ethical textbooks confuse two different concepts. They try to simultaneously describe what are the most “good” behaviors and which behaviors lead to the optimal outcome for human society. While often aligned, the two concepts in numerous instances couldn’t be more diametrically opposed.

If you don’t take anything else from this chapter, please try to internalize the following:

Ethically correct, aka “good”, behavior is a luxury.

Your interests are often conflicting with the interests of other persons. Only those who have met all their basic needs are free to engage in ethically correct behavior. Those who are not can only be “good”, if they sacrifice themselves. And that is also bad.

At this point, you are probably asking yourself where my judgments on what is positive and what is negative come from. As mentioned, a full ethical framework cannot be deducted here, nor am I claiming to have one. There is a lot of serious scientific-philosophy work yet to be done.

What I can give you is the basis of my ethics, which is objective and which can be your starting point if you’d like.

What is objectively valuable?

Austrian economists would likely deny that there is anything objectively valuable in the universe at all because value is subjective.

While this consideration is true for things, it is not true for conscious beings. Even though we have not fully understood, what consciousness is, beyond the fact that it exists, its basic properties are not only known, they are the only thing in the entire universe we can absolutely be certain of.

This was logically proven by Descartes, in his 1641 book “Meditations on First Philosophy”. Specifically, in his famous statement “Cognito ergo sum.” (lat. I think, and therefore I am). By sheer logic, he formulated the apodictic proof that even if the whole universe was a demonic hallucination – or in modern interpretations a simulation – you could still be certain that your consciousness is real and that you as an individual exist.

So, if consciousness is real, and one of the fundamental properties of consciousness (at least mammal consciousness) is the ability and mandatory habit to subjectively judge value, what can we deduct from this?

Let’s explore this with a thought experiment:

For an unknown, unlucky reason, you are the only consciousness left in the universe.

How valuable is the universe? Well, obviously as valuable as you subjectively judge it and yourself to be.

If you die, how much value is left in the universe? Zero, since there is nobody to perceive value. In conclusion, the value of your life must have been as high, as your valuation of yourself and the universe.

So, while we cannot quantify nor objectively measure your value judgements, we still can say with the same certainty that we can claim “cognito ergo sum” that objectively your life must have value.

Starting from this basis, we now know that any thorough ethical framework must include the desires, concerns, and value judgements of all conscious entities, while it can exclude all non-conscious things.

As a rule of thumb, we can then also deduct, that whenever your interests do not conflict with other conscious entities that pursuing these interests is morally neutral. If your actions help another conscious being, i.e., perceive a benefit from your actions, they are morally good. And when your actions conflict with the interests of other individuals and are perceived as hurting them, they are bad.

Obviously, most of your actions that affect other individuals will be perceived as beneficial by some and as detrimental by others. So the morality of your action is seldom purely good or bad. In the end, you make the value judgement, which portion of good and bad actions you are comfortable loading onto your consciousness.

An absolute hierarchy of objectively more good and more bad actions is hard to construct, although there exists a way to at least determine an outline to make statements on some aspects of morality objectively. For example, murdering a person is worse than slapping them in the face because the latter is a brief discomfort, and the other removes all the subjective value this person perceived from the universe and deprives all the individuals valuing that person of said value. I will leave further discussions on objective versus subjective aspects of morality to later books or other authors for now, and try to shift your attention to the translation of ethical baselines into societal frameworks and laws.

Bitcoin Nation – THIS WILL NEVER WORK (Pt.2-Ch.5)

My new book “Bitcoin Nation” was published on the 15th anniversary of the Bitcoin Whitepaper, October 31, 2023. You can read it below, one chapter per week. Or buy it here:

Despite my argument that we cannot end up in a worse place than we are today, I know some will object to the vision of nationality independent of territory, for various reasons. Let me address the two most common concerns, I have encountered when presenting this concept so far:

Corporations will abuse this to not obey laws and avoid taxes.

Today, big corporations already have essentially freedom to choose in which jurisdiction they pay taxes and to lobby the laws in any way they want, often barring small competitors from the market. Before I came in contact with the idea that territorial states may not be the only option available, I thus advocated for a world government.

Unfortunately, such a world government would have the enormous downside of being easily corruptible by large corporations and the corruption or totalitarian takeover of the world government would be recoverable only by global civil war, if at all.

The real question is thus not, whether big corporations could influence the law, but whether their influence would be less than today.

I see an excellent chance that this is the case, and that the influence of big business would wane over time in a world of bitcoin nations. The reason for this is simple. If a nation wants to attract citizens, it needs to provide superior state services. These state services would likely depend a lot on the size of the nation and how strong its contractual network with other nations is. This means that the incentive to have contracts between nations in place that exclude or punish businesses who engage in regulatory arbitrage is forceful. Indeed, much stronger than it is in the current system.

No territorial monopoly means anarchy.

The most common objection to transforming states into nations is that of impending anarchy. Firstly, this is a mistake in definitions, since anarchy – i.e., the organization of a society based on voluntary cooperation – is not the same as anomy – lack of moral standards in a society. Furthermore, a world of bitcoin nations would likely start from the exact same legal framework as is in place in our territorial state society, today. This is due to two main reasons:

First, and foremost, bitcoin nations will most likely arise by states offering digital citizenship, not from the ashes of a broken-down society. Secondly, a society that allows its people to switch nationality at any time, will only have citizens if it effectively guarantees the rights of these citizens, including providing them with protection from amoral actors.

This again leads to the conclusion that a decentralized society of nations would likely improve their moral standards over time, thanks to the incentive structure.

Now, many might object that there even is something akin to “improved” moral standards. So to fully resolve this counter-argument, we will need to discuss the fundamentals of ethics.

Bitcoin Nation – THE DEMOGRAPHIC BOMB (Pt.2-Ch.4)

My new book “Bitcoin Nation” was published on the 15th anniversary of the Bitcoin Whitepaper, October 31, 2023. You can read it below, one chapter per week. Or buy it here:

Population statistics indicate that sometime in the 2030s, most Western states will experience the effects of the demographic bomb. Namely, over half of the population will be over 65 and out of the workforce.

This situation is impossible to overcome for the current Western social security and welfare systems. Especially in light of the enormous debt levels, states have racked up already.

The only way out for states is to acquire skilled workers from other regions. Naturally, the only continent that still has birth rates higher than the replacement rate comes to mind, Africa. Unfortunately, the education system in most parts of Africa is far from the quality and capacity needed to sustain the Western high-tech industrial output. A problem that is next to impossible to fix in time to educate enough highly skilled workers to replace retiring boomers and gen-x. So, unless Elon Musk’s Tesla Bot is ready and capable by the end of the 2020s, Western states will have to face harsh competition trying to recruit skilled labor from other declining populations or from India.

Especially, the United States of America is in trouble if they want to keep their position as the dominant military and economic power. Their advantage is that right now, they are still the most popular target for skilled ex-patriots. It is unlikely that the small minority of people willing to uproot themselves and move across the globe will be enough to spare them from the demographic bomb, however.

At some point in the near future, it is probable that the US will join the movement of digital passports and starts offering their state services to people abroad.

At first, this will look innocent enough, so other states do not feel threatened. For a payment of a flat tax, high earning individuals will get a US passport and all the benefits it brings with it. Later, when the tax situation gets more and more desperate, the portfolio of state services for digital citizens will expand. If US citizens get into trouble with the law in host states, the US will use its diplomatic and military might to claim jurisdiction and bail them out. At some point, the United States likely will push for a UN resolution that expands the right to self-determination to the individual and the property they inhabit. With that move, the US of A would not only gain access to the most productive workers, but also to the land and resources owned by high-net-worth individuals.

Of course, from the perspective of the early twenty twenties, such a fundamental change in the organization of states may sound far-fetched, but I think it is far more probable than guessing a coin flip. The pressure to gradually implement such a system is extreme, thanks to the demographic bomb. Furthermore, the incentive structure is so strong for both states and individuals that by the time the USA would push for an individual right to self-determination, other large states would likely already have copied the digital citizen model. Maybe they would have even tried to outcompete the US in terms of digital citizen benefits.

If you are still unconvinced that my predictions are not lunatic, consider the alternatives.

One possible alternative is a society of ever waning social nets. Such a society would drive unproductive people to flee to countries that still offer a social security system, collapsing the state finances of such countries. This would leave these states with only two options. Either, they would need to attract productive workers even faster than unproductive ones. Or fend off unproductive immigrants militarily, again requiring a surplus in young, productive citizens.

Another alternative is a society that avoids the demographic bomb by totalitarian measures, either killing off or deporting aging citizens. Killings, would likely alienate the citizenship, causing young people to flee while they can. Deportations, on the other hand, again require enough young, productive citizens to fend off immigration.

So, regardless of which of the above approaches a state takes, if any other big nation chooses to offer digital citizenship and credible protection against totalitarian governments without the need to uproot oneself, it would outcompete.

Really, the only scenario I can see, where territorial states remain without having at least limited digital citizen programs is one, where robotics and AI offset the loss of productive workforce caused by the demographic bomb.

Even in such a scenario, a nation that offers digital citizenship, will have an advantage, since it can attract the most successful AI and robotics talent, even if these people or companies are not willing to physically move to the country that nation originates from.

Let’s recap:
There is a strong incentive over the next couple of decades for states to create digital citizenship models. By market competition, digital citizens will likely receive more and more services. Ultimately, the remote digital state service providers will likely offer a similar portfolio as today’s territorial states.

Totalitarianism or a technological miracle are the only alternatives to the digital citizenship approach.

Does this mean that the end of states for the benefit of decentralized nations is inevitable? No. While the competition between states ultimately may lead to a fine-grained patchwork map, this is far from certain.

While I see a chance that all state services may be digitizable, and a nation might thus consist of different nationalities houses, it is unlikely in a city where every single street houses multiple nations.

Not so much because it is impractical, but rather because humans like to surround themselves with like-minded individuals.

Thus, I consider a world of nations that consists of tiny decentral countries the size of cities or counties much more likely than a nation-only world, where every household chooses their nationality willy-nilly.

The beautiful thing about the likely occurrence of digital citizenship and free market competition between nations is that it must over time lead to better and better outcomes on average.

Even if this disruption of traditional state structures may cause a lot of chaos and confusion in the first few decades, in the long run, the game theory of free markets guarantees that the outcome improves over time.

This means nothing less than that we have nothing to fear and should loudly advocate for digital citizenship models, before totalitarianism takes over even more states.

If today’s territorial representative-democracy states truly are the best form of government humanity can construct, they will win out in the end. Yet, even if in the end we find ourselves where we started, we’d be better off, since states would have proven their business model and their representatives would have a far greater claim to legitimacy.