Is Bitcoin a good idea for Catholics and Evangelical Christians?

Bitcoin is less vulnerable to political and ideological interference than Ethereum and other crypto currencies.

Qualities of durable money, the Gold standard

Durable money has the characteristics of being salable over:

  • Time (doesn't devalue)
  • Location (easy to transport)
  • Scale (can be divided for small or big payments)

Any item used as currency (shells, stones, cigarettes, fiat currency, etc.) that is easily produced, mined or printed can be devalued. Gold was a success because it was almost impossible to replicate, was hard to mine, fairly small, and rare. The Gold standard from the late 1800's to the early 1900s was the "Belle Epoque" because currencies were backed with gold, rather than dept.

Problems with Fiat Currency

Fiat currency is easy to reproduce by undisciplined governments. Politicians are generally more interested in being elected than in telling the population "we can't afford that (name the thing)". Communism and totalitarianism are worse, because the ruling elite are not accountable to the public. They print money to increase power and cover up corruption and mismanagement.

Governments spend money they don't have and print more money to pay for it. This always leads towards:

  • government debt,
  • devaluation of currency,
  • inflation,
  • government tyranny,
  • compromised educational institutions,
  • concentration of power,
  • big government,
  • bad art (because it is funded by bureaucrats, not market forces),
  • surveillance,
  • constant war (because the nation can print money to feed the military industrial complex and incur debt to keep fighting even if its loosing, and the public doesn't realize the full cost).

Bad ideas are invested in by self interested governments, all this is at the expense of the population it governs.

The term "Time Preference" refers to the ratio of spending money in the present verses saving it for the future. With a sound currency, individuals, corporations and government value saving money over spending. They have a "future time preference" and they fare better than those who spend money in the present, for a variety of reasons, including being able to invest in capital assets. For instance, if someone spends all their day fishing, in 10 years they will still be fishing the same way. But if they reserve 2 hours a day to build a boat, they will have a boat to fish with in a few months and they can get more fish.

Inflation causes people, institutions and governments to spend more in the short term and save less, which leads to debt, and less innovation and lower quality capital assets. This is detrimental to society.

Why is bitcoin a unique "sound and stable" currency?

  • Bitcoin is salable over time, location and scale.
    • TIME: It's scarcity makes it durable over time because it cannot be reproduced easily. Expensive to make new coins (electricity costs). Historically, in the digital realm, the important currency quality of scarcity was not possible before Bitcoin, because when we send a digital asset, it is just a copy of the original.
    • LOCATION: It is transportable because a digital wallet is 24 words that can be memorized or written on a piece of paper. You don't need anything electronic to carry it across borders etc.
    • SCALE: Each Bitcoin can be divided into tiny portions, the smallest of which is a "satoshi" which is 0.00000001 of a Bitcoin. So there are 100 million Satoshis in a Bitcoin.
  • No "trusted third party" is necessary: It is 100% validation and 0% trust because of its "Proof of Work" (PoW) system.
  • Relationship of the stakeholders (miners, coders, and users) creates a tension that assures stability. Blockchain is uniquely useful for Bitcoin because the distribution makes it hard to tamper with and anyone wanting to fork it can't get agreement from enough stakeholders who have competing goals. Any significant change will benefit some at the expense of others, so it's stable.
  • No one owns it: Other crypto or bitcopies have a governing body, whose members often become rich, and who become the defacto "trusted" 3rd party. They are being trusted by users of the system, to not roll back the code, which this governing body can do if they think they have a good reason (i.e, Ethereum) or a selfish reason.
  • Bitcoin is the only valid use of Blockchain: The main value of blockchain technology is to turn the electricity into "trust". Many miners do calculations which is called "Proof of Work" (PoW). Governments that use blockchain are expending tons of energy over a distributed network, which is unnecessary and wasteful for an organization posing as a "trusted 3rd party".
  • Bitcoin's weaknesses are its strengths:
    • It cannot be used efficiently for micro payments and day to day payments. Its more like gold. Expensive, infrequent, slow, transactions (1-10 minutes), allows for a supporting ecosystem where a "trusted 3rd party" software consolidates micro payments off-network before posting to the network.
    • The 1MB maximum means the network can run over any type of connection, which increases nodes and worldwide adoption even in areas with bad internet, or in a social collapse scenario. It makes it a true democracy.

Here are some favourite quotes from the book "The Bitcoin Standard" by Saifedean Ammous:

“Government control of money has turned money from being the reward for producing value to the reward for obedience to government officials. It is impractical for anyone to develop wealth in government money without government acceptance. Government can confiscate money from the banking monopolies it controls, inflate the currency to devalue holders' wealth and reward it to the most loyal of its subjects, impose draconian taxes and punish those who avoid them, and even confiscate bills.”
“The bitcoin blockchain has placed a 1-megabyte limit on the size of each block, which has limited the pace at which the blockchain has grown. That limit allows simple computers to be able to maintain and run a node. Should the size of each block increase, or should the blockchain be used for more sophisticated processes such as those touted by blockchain enthusiasts, it would become too large to be run on individual computers. Centralizing the network over a few large nodes owned and operated only by large institutions defeats the entire point of decentralization.”
“The question of whether bitcoin wastes electricity is at its heart a misunderstanding of the fundamentally subjective nature of value. Electricity is generated worldwide in large quantities to satisfy the needs of consumers. The only judgment about whether this electricity has gone to waste or not lies with the consumer who pays for it. People who are willing to pay the cost of the operation of the bitcoin network for their transactions are effectively financing this electricity consumption, which means the electricity is being produced to satisfy consumer needs and has not been wasted. Functionally speaking, Proof of Work (PoW) is the only method humans have invented for creating digital hard money. If people find that worth paying for, the electricity has not been wasted.”
"Ingenious ideas are rare, and only a small minority of people can come up with them. Larger populations will thus produce more technologies and ideas than smaller populations, and because the benefit accrues to everyone, it is better to live in a world with a larger population. The more humans exist on earth, the more technologies and productive ideas are thought of, and the more humans can benefit from these ideas and copy them from one another, leading to higher productivity of human time and improving standards of living.”

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