Posts

The Crypto Revolution is Just Getting Started

avatar of @nealmcspadden
25
@nealmcspadden
·
·
0 views
·
4 min read

I have been saying for years that using, or even just holding, crypto is a revolutionary act.

Why is that?

It's because when you take the power of money away from the government, you are decreasing their power and increasing your individual sovereignty.

Government Inflation

There isn't a government in the world that runs on a balanced budget that limits spending to the amount of taxes that are collected. They all turn to borrowing and debt monetization to pay for the difference. In other words, governments are financed by inflation.

Governments that are bad at managing inflation pressures versus productivity gains end up destroying their money. Look at Argentina, Lebanon, Venezuela. Governments that are fairly decent at balancing those two factors keep the game going. See the US and Japan. Either way though, everyone is paying for it through reduced purchasing power.

In the old days, capital markets were much less developed, so inflation pressures appeared in the prices of goods and services pretty readily. These days, we have much, much more sophisticated capital markets and financial engineering. As a result, a large portion of the inflation has gone into stocks and bonds. That helps reduce the impact of inflation on prices at the grocery store.

If we look at the BLS inflation calculator we see that they are saying things cost 20% more than they did 10 years ago.

But when we look at the S&P 500, we get a very different picture:

The market has tripled in the last 10 years. That's where all that inflation is going. See my post on Funny Money Fuels the Stock Market for more details.

And we are all paying for it.

The Crypto Revolution

When we start to use crypto as a replacement of government currency, the inflation effect becomes more and more obvious. The price of crypto assets are increasing all over the world for two reasons: people are waking up to its power and that fuels the network effect.

It's a virtuous cycle where the more people who use crypto, the worse inflation effects become, so the more people turn to crypto. That's why bitcoin at 20k is a big deal. It affects people's minds and how they look at their money.

The Battles Begin

Up until 2019, crypto was for anarchists and financial & tech nerds. Then Facebook tried to launch libra and got smacked down by governments. A network of 2 billion people having access to an alternative money would not be allowed.

In 2020 we started seeing companies putting BTC on their balance sheets, notably $MSTR and $SQ. This is a major shift in the revolution as very deep pockets are getting into it. $PYPL launched their own crypto-derivatives business.

Now we are seeing libra being repositioned as diem with a much narrower structure, and the fangs are coming out.

The STABLE Act being proposed in Congress is basically a way to make stable coins (like diem) into CBDCs by proxy. It would require that stable coin issuers (like Facebook) have USD cash on deposit with the federal reserve to match their obligations, require them to get a banking charter, and more.

There are other proposals out there to ban all crypto node operations in the US.

The Future

Whether one bill passes or another doesn't really matter. The overarching point is that the battle is on. Governments are realizing that crypto is a major threat to their power, and are starting to move against it.

Fortunately, crypto satisfies the Law of Disruption: When a new technology is 10 times better and 10 times cheaper than its competition, it will win the market share.

10x Better

Regardless of which crypto monetary control method you prefer, (BTC, ETH, HIVE, and all the rest have different models), people vastly prefer predictable and fair inflation to political whims that reward the well-connected.

Blockchain records and immutability prevent the fraud that is the entire banking sector.

10x Cheaper

People like to complain about the energy it takes to run the BTC PoW network. And it's a lot. But it's far, FAR less than the amount of energy used in the federal reserve banks (computers, buildings, utilities), printing bills and stamping coins (mining metals, harvesting cotton, creating printing machines, transporting products around), and all the rest of the infrastructure it takes to make a fiat money system run.

And then there is the monetary cost itself. Fortunately, in crypto we can see exactly how much it costs. We can see how much the miners/node operators/validators/witnesses are getting paid. And if you don't like it, you may actually be able to do something about it.

This is much cheaper than the stealth inflation tax we are paying with government currencies. It's way more than 10x cheaper.

Disrupted

So in the end, crypto will win. It will take a while. I think we are about 20 years away. Governments will fight it tooth and nail since nobody likes to give up power. What will the actually be able to do when they can't spend money into existence?

But they will lose.

Posted Using LeoFinance Beta