4 Important Books To Understand the Next Decades

If you find it hard to sleep at night, give a try to some heavy non-fiction reading.

Here are four important books that give us tools to make sense of where the world is going in the next decades, given that we are at a juncture where three macro trends collide:

1. the decline of the nation-state 
2. the unfolding of the current debt cycle started at the end of the second world war.
3. the digitisation of information and money, and in particular the introduction of a state-independent, inflation-proof form of money.

Here are the four books, ordered by publishing date:

The Sovereign Individual (1997, Davidson, Rees-Mogg) 

Many recent events were anticipated by the writers: the phenomenon of digital nomads, jurisdiction arbitrage through acquisition of extra residencies and passports, the rise of crypto-currencies not controlled by nation-states. And also: the reaction of nation-states to the increased power of individuals by seizing any opportunity to limit individual mobility (such as pandemics for instance), regulation overreach, the rise of anti-tech populism and the neo-Luddites, etc... The main thesis of the book is that nation-states are becoming less and less relevant with a shift of power towards individuals who turn from being captive citizens to customers of a chosen jurisdiction.

The Bitcoin Standard (2018, Saifedean Ammous) 

Dives back into history to show how hard currencies have always displaced softer ones. Denounces the excesses of the Keynes school of thought whereby inflating the money supply is seen as a 'good' thing. Explains the unique properties of Bitcoin as the first form of money with a built-in immutable monetary policy, immune from state manipulation.

Principles for Dealing with the Changing World Order: Why Nations Succeed and Fail (2021, Ray Dalio) 

Thorough look back at history to enumerate all previous world order cycles (around 80-100 years) showing how they all display very identical patterns: crisis > rebuild > prosperity > money printing > debt > crisis. In every occurrence governments have never managed to resist the temptation to abuse their privilege to print money and inflate the money supply, eventually resulting in some form of crisis, reset, coup, revolution, civil war or world war.  

The Network State: How To Start a New Country (July 2022 , Balaji Srinivasan ) if legacy nation-states based on geographical borders are becoming less relevant, what do we build in their place? How to assemble a digital community and build a new model of democracy? And is it viable? The book is available online since July 4 and will evolve over time.

Yep, heavy reading.

Bitcoin and Energy Latest Key Figures

 

Bitcoin mining uses electricity as a security mecanism. Security means preventing past blocks from being modified so that the sequence of transactions remains written in stone. 

The difficulty to mine a block tends to increase on average with the bitcoin market capitalisation because a higher bitcoin price means more mining companies become profitable. When more miners join the collective hashing power then the code automatically increases the difficulty of the algorithm so that the pace of issuance of new blocks remains constant (1 every 10 min on average). 

It kind of makes sense that security increases with the market cap: the more gold is in the vault, the larger the walls.

Another factor influencing energy usage is the efficiency of the ASICs in terms of how many hashes can be produced per unit of energy. This tends to go down as newer equipment is rolled out.

Note that energy usage does not depend on the number of transactions processed by the network. 

So how much energy does Bitcoin mining actually use?

154750 TWh 

Total amount of energy produced around the world 

247 TWh

Energy used by Bitcoin mining 

0.16%

Share of global energy production used by Bitcoin mining 

Source: slides presented during the Bitcoin Mining Council Q1 2022 briefing. The video of the presentation is available here.

Other sources show figures with the same order of magnitude yet using different models/assumptions: 

• Coinshares Research report on Bitcoin Mining (January 2022) 
• Cambridge Centre for Alternative Finance (figures updated daily based on a theoretical model)

How does this compare to other countries?

 Source: Bitcoin Mining Council Q1 2022 Review slide 7

An interesting aspect of bitcoin energy consumption is that a BTC is proof that energy was spent to create it. This is in contrast to a USD or EUR, which when minted by the FED or ECB is a promise that energy will be spent in the future to redeem it. This may sound philosophical but actually has a fundamental impact of the ‘hardness’ of Bitcoin as an asset. In a context of financial crisis, people tend to favour proofs over promises.

From an environmental perspective -share of green energy in the energy mix, the Bitcoin mining industry stands out from other industries because of the natural incentives of miners to consume excess energy from hydro/solar/wind power plants. You can place a bitcoin mining container right next to a solar plant (100% green energy mix). You cannot do that with a Tesla car or a Christmas tree, whereby the energy mix coming out of the standard power socket depends on the country’s energy grid.

Takeaway from Bitcoin 2022

I got the overall feeling this year was somewhat more informative and less about sensational announcements than last year. There were many sessions taking the macroeconomic and political angle as well as an entire stage dedicated to the topic of mining. It is always fascinating to hear industry insiders talk about mining. However I was suprised to hear that home mining is making a comeback: some people know how to mine at home with minimal noise while heating up their swimming pool.

The most exciting presentation was the one Jack Mallers gave about how Strike is using the bitcoin network as payments rail for paying online and at points-of-sale. It is available here. The description he gave of the existing obsolete credit card network is EXCELLENT. You’ve got to watch it. 

Some small jurisdictions announced that they were welcoming bitcoin, making it officially ok to pay with it without generating a tax event: Prospera in Honduras and Madeira in Portugal. Operating on small territories is a smart approach: from the point of view of the country it involves little effort and it’s a zero-cost way of getting worldwide visibility and attracting investors. It also looks less daunting than the huge undertaking by El Salvador, where the government is going through the hassle of deploying its own wallet to the entire population while standing up to the IMF. Instead, why not start small and fly low. 

You have to give credit to the team organising this event for making the conference available live on Youtube on three different live streams (main stage, mining stage, open source stage) and posting each individual session just a few hours after it happened. Great job. And all this despite YouTube taking down the channel for a few hours in the middle of the event.

Some good quotes:

Michael Saylor during his firechat:

“Competition will decide. Banks that embrace it will grow, banks that reject it will shrink.”

“Not supporting bitcoin is not supporting sound money,

not supporting Lightning is like not supporting the internet.”

Ricardo Salinas about CDBCs

“Fiat religion has its high priests and this religion is not tolerant: it hates heretics.”

Jordan Peterson about central planning of money.

“one of the lovely things about cash is that it is a decentralised monetary system. It’s not that easy to track cash. Thanks God because you could be certain that if it was easy to track cash then every agency with some ethical notion would be tracking everything you’ve ever purchased trying to nudge and tap and compel you into making the decisions they regard as ethical. And it would be fine if they were right but they won’t be and so that’s a big problem.

The reason they won’t be right is because you can’t make those assumptions a priori. One of the fundamental axioms of a free market system is that the only way to properly compute the value of the emerging horizon of the future is by sampling and summing the free choice a multitude of free agents. There is no central planning way even in principle that can substitute for that.”