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What about Hyperbitcoinization?

Hyperbitcoinization is a term coined by Daniel Krawisz to describe the phenomenon of a fiat money being replaced by bitcoin at a hyperspeed with exponential acceleration. The concept is similar to hyperinflation in which a fiat money is replaced by an alternative money, except that in hyperinflation, a fiat money is replaced by another fiat or in some cases something even worse, but in hyperbitcoinization a fiat is replaced by a superior money, namely bitcoin.

Daniel Krawisz introduced the concept of hyperbitcoinization back in 2014, when most people mistakenly assumed that Bitcoin was mostly developed according to Satoshi’s original plan.

However, it has since become clear that BTC betrayed Satoshi’s vision and became something entirely different. See below section.

In late 2018, Bitcoin Satoshi Vision (BSV) rose to become the true Bitcoin according to Satoshi’s vision.

Daniel Krawisz himself became a firm supporter of Bitcoin Satoshi Vision (BSV).

In other words, if Daniel were to write about hyperbitcoinization today, it would be about BSV, not BTC.

How does hyperbitcoinization happen?

Hyperbitcoinization, if it ever happens, could be either an event limited to a certain country, or a global event. Being global does not necessarily mean every fiat money in the world will be replaced by bitcoin, but will at least mean that several top fiat monies including the top reserve currency (US dollar) are affected at the same time.

A trigger for global hyperbitcoinization may be a situation where the following all happen simultaneously:

(1) the dominating world reserve currency (presently the US dollar) suffers uncontrollable rapid hyperinflation;

(2) people lost confidence in the government’s ability to introduce a new fiat currency to replace the collapsed currency;

(3) at the same time, other than bitcoin, there isn’t another form of currency, fiat or not, to become an accepted substitute by people; and

(4) prior to hyperbitcoinization, bitcoin has already achieved wide adoption as a way of payment such that there is at least a viable way for people to survive by using bitcoin to purchase necessary goods, even if it has to be done indirectly. (Note: the adoption prior to hyperbitcoinization does not need to be so broad that the majority of the people are already buying most things they need using bitcoin, but at least the infrastructure and payment methods will need to be ready for fast adoption without suffering severe disruptions and high cost of transactions.)

Given the corruption of the current central bank monetary system and the growing debt burdens, the above (1)-(3) are not impossible, but it is hard to tell the likelihood for all that to happen. The above (4) depends on BSV instead of BTC (see below).

Some more optimistic thinkers believe that hyperbitcoinization will happen spontaneously because bitcoin will create its own economy, and therefore the above triggers are not needed.

That sounds fantastic, but we may need to take the following factors into consideration:

(1) Unlike other legacy institutions and technologies, fiat monies have world’s governments to protect their turf, even in the name of national sovereignty. Therefore, just because a new technology can spontaneously replace an old one does not mean the same will happen spontaneously with bitcoin without fiat monies collapsing first.

(2) Unlike switching to a new technology such as Internet and mobile phones, switching to new money when people’s finance is still tied to an existing fiat money system requires users to jump many unusually hard hurdles. These hurdles arise from the fact that people live in a fiat environment, regardless of how well the Bitcoin apps may have been designed. Poor app designs can make it even worse, but even the best app designs don’t make the problem disappear. Unless you create a truly separate and independent economy in which everything is priced in bitcoin, the existing fiat money environment is a hard reality to overcome until the environment itself is collapsing. Money is more than mere information that can jump from one medium to another easily. Money is more like a language, and learning to speak a foreign language is hard.

This is not to say that hyperbitcoinization cannot happen. The point is that it may only happen when some terrible conditions have triggered it.

Hyperbitcoinization possible only with BSV, not with BTC

Hyperbitcoinization would happen only when certain special conditions are met. Bitcoin must be a vastly superior money compared to the money it will replace. The superiority can only be based on their objective economics, instead of some imaginary quality that requires faith in faith itself.

BTC does not have the prerequisite superior qualities. Lacking scalability is one of the fatal problems of BTC. Lacking any real economic utility and anchoring economic fundamentals is another (see: Bitcoin’s Value Fundamentals & Volatility).  Altogether, BTC has seen very little actual use except for speculative trading. It has become a vehicle for speculations about other people’s speculations.

BSV has all the required qualities. See more: BTC and Bitcoin, what is the real difference?

In fact, the ecosystem of the true Bitcoin (BSV) is poised to have an explosion of creativity and will continue to grow for the next few decades at least.  In this regard, it would be more meaningful to compare BSV with Ethereum instead of BTC, because BTC simply has nothing to offer in such areas as smart contracts and tokenization.

BSV can do everything that Ethereum does, but can do much more with costs 10,000 times lower and the scalability a million times better.

The fact that Ethereum is even bursting with creativity despite its ridiculously high system fees and painfully low scalability is something to behold. It achieved that by permitting people to do what BTC intentionally cut away from the original Bitcoin functionality. It tells you how much energy there is in the new technology. It would erupt once a much more suitable platform has emerged into a broader view. 

Hyperbitcoinization and extremely uneven distribution of wealth

However, there is a concern that hyperbitcoinization may cause extremely uneven distribution of wealth and create ‘kings’, ‘servants’ and ‘paupers’. For example, in Bitcoin News: Hyperbitcoinization’s Small Minority: Economist Says Bitcoin’s Growing Success Will Lead to Perverse Consequences.

But the evil of uneven distribution of wealth does not lie in the uneven distribution itself, but in how the uneven distribution is created. It is the worst when it is created by a nonproductive mechanism that does not do fair work to create value but only extracts value from others.

With very few exceptions such as Lightning Network (which does not work due to fundamental flaws), there is little development activity happening on BTC. There are altogether less than eight core developers in the BTC team, and their job is not to develop utility but to maintain and update the protocol and mining software. Outside of the Core (and even part of the Core itself), the energy is focused on promoting BTC narratives to pump up the speculative coin price.

This is not only because the dynamics of BTC speculative market has a ruinous effect on the psychology of the developers (who wants to build products when the coins are making one rich without requiring building actual products?), but also because BTC is designed to be a HODLING (holding) system to cultivate a HODLING culture instead of a work culture to produce value.

What irony it is for a system that is supposed to be based on the Proof-of-Work principle!

The “digital gold” narrative says it all. Unlike productive technology, gold does not create or produce things. Warren Buffett had it right when he said, “Gold is a pet rock.”

At least the real gold has solid fundamentals including a superbly stable and unchangeable nature, while BTC has no fundamentals. See The Idea of “Digital Gold” — BTC’s Value Fundamentals.

The speculative coin value is the entire economy of BTC. It does not have a design, a plan, or even a vague hope to create a multilayered and multifaceted economy based on human creativity.

The reason why BTC, if it were to become dominant, would result in extremely unbalanced wealth distribution is because it is designed to be a value extraction system which gives all advantages to the earliest lucky movers (the kings), some to the early adopters (servants), but little to the mass captives (paupers).

This conclusion is a matter of mathematical fact. An extraction system does not create new values. It is a zero-sum system. It only extracts values from others. Should such a system succeed at large-scale, some will get extremely wealthy, but only at the expense of the others.

Zero-sum is simple math.

In contrast, BSV is fundamentally different from BTC. BSV is purposefully designed to be a value creation system. 

On BSV, everyone has an opportunity to create values by adding utilities to the ecosystem. And thank God creativity isn’t a man-made asset that can be artificially distributed. It is naturally distributed. It doesn’t mean absolute equity, but fair equality.

And creativity as a natural gift itself does not create value. It requires actual work that utilizes the creativity to create value.

There are many who also hope holding BSV coins would be a good investment. A moderate level of speculation is a good ingredient in the mix of an economy anyway. But with BSV, the speculative part has a strong counterbalance by the increasing utility of the coins. BSV is more like digital land than digital gold. In the case of land development in the United States, for example, most early landowners did not become land squatters.  They sold the land. And the buyers, although there are a fair number of speculators, most bought the land for development.

And the fact that BSV price is severely suppressed by the market is a healthy thing for the development as well. It flushes out excessive speculation, and has a hardening effect on the remaining community, especially developers and investors. This is a necessary type of mentality that is toughened onto real development based on human creativity instead of pure speculation. It also provides moral justification for any wealth pattern which the system eventually ends up having. See the moral sentiments of Bitcoin.

What happens to Bitcoin utility if hyperbitcoinization happens?

If hyperbitcoinization happens, the coin price will skyrocket, but the blockchain economy may suffer because the bitcoin ‘land’ might become too expensive, and the business ‘buildings’ on the Bitcoin blockchain may need to find new land to build upon.

On the other hand, it would take an extremely high bitcoin price to affect the bitcoin economy. This is because the smallest ‘lot’ of the bitcoin land is one single satoshi, and for one satoshi to become too expensive to build an economic unit on it, it would require bitcoin price to be tens of thousands of dollars if not in millions. (Note: $1 million per bitcoin corresponds to $0.01 per satoshi, still low, but clearly posing difficulties for micropayments. Payment channels will have to be used in order to keep the transaction cost below the aspired $0.00001 level. See more: Extreme stress tests of Bitcoin scalability)

Perhaps innovative tokenization can resolve the conflict when and if it arises, but it is hard to predict. Should the bitcoin price and the Bitcoin blockchain utility become irreconcilable, I hope the latter prevails because it is the utility not the coin price that benefits the society as a whole.

Hyperbitcoinization is not the only future for Bitcoin

The above explains (1) why hyperbitcoinization may only happen with BSV, and (2) if it happens, may be a healthy thing to the society if it happens with Bitcoin Satoshi Vision (BSV), but not BTC.

But what if hyperbitcoinization never happens? Does Bitcoin have a positive future in that scenario?

Only BSV, the true Bitcoin, does. BSV focuses on utility. Even if it is never accepted as money (e.g., even if we were still living in a world in which goods and services are priced in fiat monies, not in bitcoin), Bitcoin (BSV) will still serve as the underlying technology to transmit value (i.e., a currency) for the future economy. But technology like BSV can be a global currency without replacing any fiat money. See Money & Currency.

And BSV can do much more. Watch the following transformative trends:

(1) decentralization of money (via the coin itself);

(2) decentralization of assets (via tokenization, scripting and smart contracts);

(3) decentralization of data (via Metanet and Teranode, see nChain);

(4) decentralization of computation (via on-chain virtual state machines; different from distributed computation); and

(5) decentralization of AI (a combination of the above #3 and #4)

All of the above require and promise value creation, but does not require hyperbitcoinization. All is about productivity and creativity, hyperbitcoinized or not. It’s a good future for the good people.