Digital Diplomacy
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Digital Diplomacy

Why experts believe Bitcoin will prosper greatly in a Dual-Currency World

Nic Carter and Michael Saylor both forsee a world in which Bitcoin is used in concert with other currencies, though for different reasons.

The excellent What Bitcoin Did podcast — Michael Saylor | Nic Carter

There’s a classical view of Bitcoin in which BTC’s end goal is to destroy all other monies on the planet and live happily ever after as the sole global currency. Some people refer to this is Hyberbitcoinization. On a recent episode of What Bitcoin Did podcast, Pete Rizzo of Bitcoin Magazine defined the theory, rightly, as a terribly destructive process for the average person:

“Hyperbitcoinization, should it occur in our lifetime, will be a very painful, disruptive process for a lot of people”

The future we predict for Bitcoin matters. It’s the vision we’re driving towards. Some people’s road map for success states bitcoin adoption requires hyperinflation and currency destruction. But is this the only future for Bitcoin? Is it even likely?

In fact, Nic Carter and Michael Saylor both predict a world in which Bitcoin prospers greatly, but still leaves space for other currencies to exist. Where you land on this topic has consequences. Do you see Bitcoin as a weapon against governments, corporations, and the $USD? What if it weren’t even necessary to provoke such enemies? In a dual currency world BTC owns its space and governments own theirs. We render unto Ceasar what is Ceasar’s, and still get to the goal of global Bitcoin dominance. Perhaps easier.

Nic Carter and Michael Saylor both foresee a world in which Bitcoin is used in concert with other currencies, though for different reasons. Carter’s thesis is that Bitcoin requires a partner currency that fulfills the role of unit of account, since he believes Bitcoin is built to accrue value over time, but not to hold that value stable. Carter’s response to the question of a Bitcoin exclusive monetary system:

… redenominate everything in [Bitcoin]? Do I think that’s ever going to happen? Absolutely not.

In Carter’s mind, it’s simply a practical consequence of Bitcoin’s design:

Because it’s volatile by design..It’s very rigid from a supply perspective, that’s what we like about it, and it’s a blessing and a curse… What we’re seeing right now is bitcoin being a collateral type which powers an established unit of account like USD.

Carter isn’t being bearish, he’s being a realist. Due to Bitcoin’s very inelastic supply, it will likely never become a suitable unit of account. It will always spike and dive, and no one wants their groceries to go up 30% next week, even if they may go down 50% the next. This doesn’t have to be seen as a negative. As Carter points out:

Bitcoin can be incredibly influential and important without being the unit of account

So Carter’s vision of Bitcoin is something like a global savings instrument that powers other units of account.

Saylor takes a different path to a similar conclusion. His view is that Bitcoin is not money, but “digital property.” That is an uncommon perspective among Bitcoiners, but deserves some consideration. Saylor’s belief is that instead of being at war with other monies, Bitcoin’s fate is to absorb value from the vast majority of investments, like real estate, bonds and gold.

Regarding how Bitcoin interacts with national currencies, Saylor sees them coexisting:

Bitcoin is digital property and it’s a better balance sheet asset than cash or credit and therefore every company can and should buy bitcoin. Because its digital property, every country can use it as a treasury asset and they can back their currency with it.

So there doesn’t have to be an inherent tension. Continuing on:

I’m not asking for…the United States or [other countries] to abandon their currency. Instead of telling them they have to abandon their sovereignty, I can tell them this Bitcoin will make your country richer and better.

Saylor’s framing is very strategic. Bitcoin’s fate is not to destroy countries’ sovereign right to mint currency. It’s to provide individuals, banks, companies, and governments a true, neutral, global store of value.

What Saylor is suggesting is that we fundamentally reorient our view such that the dollar, and fiats in general, are no longer the enemy. They’re not even in the same category. This may prove to cut tensions with national governments significantly. Governments see currency production and management as squarely in their wheelhouse. But “digital property,” much less so. We begin to see ourselves as not in tension, but operating in a completely different playing field.

Saylor smartly identifies this as the path of least resistance. Why make enemies of the banks, national governments, and corporations if we don’t have to? Each of them, for their own reasons, has a major attachment to their domestic fiat currency. If we view Bitcoin as digital property rather than digital money, all of a sudden we’re out of conflict with these actors and we still win the same prize. This leaves a role for existing domestic currencies to remain intact, while giving the public access to BTC as a savings vehicle.

Saylor’s case is accurate. For example, Tesla bought $1.5 billion in Bitcoin for their treasury and then began accepting BTC payments for vehicles. Then they quickly reversed the payments decision, but kept the treasury. Harvard University, Yale University, Brown University, and the University of Michigan have bought Bitcoin for their endowment funds. And wealthy individuals are starting to put significant portions of their personal wealth in Bitcoin.

Carter and Saylor both propose a dual model. Carter from the perspective that Bitcoin is too inelastic to provide reasonable price stability. Saylor because Bitcoin definitionally isn’t even money, it’s property.

The dual currency model offers a both a helpful and accurate lens for the future of Bitcoin. It’s a path to Bitcoin’s thriving within the current system and rather than taking governments head on, it simply grows around them.

You don’t have to agree with me. You may be a cypherpunk or hard core libertarian and believe Bitcoin’s destiny is to separate money and state. I happen to like this view. But it’s a non-starter for many ‘normies’ who see conflict with the dollar as a bad thing. Whereas, just a savings technology to use in concert with the dollar would be welcome and non-threatening. If you’re pro-Bitcoin but recoil at the idea of adopting a live and let live stance with the dollar, you may want to ask yourself what’s more important to you, converting people to Bitcoin, or converting them to your ideology.

In my follow up piece, I’ll discuss how Costa Rica already has a thriving dual-currency model with the $USD. This model is a template for how Americans can learn to conceptually break apart the qualities of store of value and medium of exchange and use different money for each. If just U.S. savers could learn to see Bitcoin as a better store of value than the USD and store the same proportion of our savings in it as Costa Ricans do the US Dollar (~30%), it would add roughly $3 Trillion to the Bitcoin market cap, sending the price of a bitcoin toward $200k. Lest you think a dual-currency model is bearish.

-Matt Harder runs the civic engagement firm Civic Trust, where he guides cities in re-building their civic infrastructure by helping residents, civic organizations, and local government co-create public projects.

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