Bitcoin Is God Money

Satoshi Nakamoto is dead. But the wife of Bitcoin’s pseudonymous creator would say he’s just hibernating, his body suspended in time and space in a vat of liquid nitrogen.

Hal Finney is also dead. And while nobody knows if Hal is actually Satoshi, he was probably the only person on the cryptography mailing list not to roll his eyes when Satoshi shared his creation there on Halloween night, 2008. Finney was on the receiving end of the first Bitcoin transaction, and he apparently worked closely with Satoshi (a clever guise for Finney should he turn out to be the true creator) on Bitcoin’s rough early software. When Lou Gehrig’s disease evicted Finney from his first flesh-and-blood home in 2014, a cryogenics team was standing by, and the moment Finney was declared legally dead, they vampired his blood, setting his body on a cooling course to 320 degrees below zero.

Cypherpunks, whose legendary mailing list peaked in the ’90s when they appeared, masked and holding a wrinkled American flag, on the cover of Wired magazine, were known for their resistance to government surveillance and essential contributions to digital privacy. But cypherpunks are fundamentally futurists who embrace the unknown with their entire beings, submitting themselves to a cryogenic fate in the hopes of being resurrected in the impending age of immortality, when they can again drink greedily from the elixir of youth.

So what led the cypherpunks to develop Bitcoin, a defiant monetary foil to the US dollar that has grayed the hairs of regulators the world over? To answer that, we have to understand the flaws the cypherpunks saw in both the debt and discounting principles embedded in the financial system.

Discounting is the single most important concept in finance and possibly economics. It’s the idea that money is less valuable tomorrow than today. The reason is quite existential: our impending death. Better to spend now than to never enjoy the fruits of your labor. The related inexorable march of inflation also ensures money is less valuable over time. The US central bank, the Federal Reserve, has two goals: ensure the dollar can buy 2 percent less stuff a year from now, and keep the unemployment rate as low as possible. In other words, because we are all going to die and because the greatest economic minds on the planet are dedicated to ensuring every dollar is worth 2 percent less every year, we have a “discount rate” that roughly equals the rate of inflation plus the average level of existential angst in society.

But Finney, if not Bitcoin’s actual creator then its primary early sponsor, believed that one way or another, he would live forever. Inventing digital money with a fixed number of total coins (i.e., no inflation) was critical to ensuring bodily resurrection would resurrect a similar level of economic security to that enjoyed at the moment of freezing. (Cypherpunks do not use the word “death.”)

Belief in immortality, however, played no role in my interest in digital currencies. In fact, they were a means to make my life, in the face of my glaring mortality, meaningful. Ironically, it was the enormous volatility of cryptocurrencies that gave me the faith that in a few months I could accumulate many lifetimes of wealth and enjoy all of life’s pleasures before time ran out.

Bitcoin is insulated from the corrosive forces of inflation; one Bitcoin tomorrow is at least as valuable as one Bitcoin today—or so the theory goes. For this reason, the cypherpunks rejected one of the tenets of mainstream monetary theory: death is optional, and therefore money is no longer worth more today than it is tomorrow. A monetary system based on steady inflation to stimulate hot-potato spending—even if it lubricates the gears of the economic machine—is unethical in light of immortality.

The cypherpunks believed they would live forever, and so built a monetary system instantiating this philosophy. Bitcoin is god money. This is one reason why it can be hard for those of us still resigned to mortality to embrace Bitcoin fully. Bitcoin is built on a philosophical foundation as different from the mainstream one as Mars is from Earth. Understanding this underlying design philosophy is critical to understanding the confusion many feel in reconciling the world of Bitcoin with the world of stocks and bonds.