Bitcoin: Pandora´s Goldbox opened? A constitutionally guaranteed human right to a DEcentralized, inflation-free, and hardest money- beyond gold — with the principles of Austrian Economics.
The focus and intention of this jurisprudentially non-exhaustive article is to make Bitcoin´s unique core-design of “Satoshi Nakomoto”, set in stone, understandable as untechnical as possible, which is based on a decentralized, open, permissionless, censorship-resistant, immutable, network-consensus-distributed principle of “trustlessness”. The fact that the two most important and unique characteristics of Bitcoin are not even found worth mentioning in the sighted Austrian law-journals by the author of this article, is worth a discussion. The most important condition for a often required “legal-dogmatic” positioning is the comprehension of the fundamentally unique DEcentralized structure, operation, and characteristics of Bitcoin.
The reality of the truth and the facts of this holy grail (in essence: the central banking structure in connection with the fractional reserve banking and the fiat-debt-money-system etc.) are uncomfortable, but must be articulated in terms of an effective public-law-protection of humanity from the practically legally untouchable central-banking-power-structure. Bitcoin, understood with the roots and principles of Austrian Economics, makes the indoctrinated destructive-inflationary monetary-economic theory and system of Keynes obsolete.
- Bitcoin as a Store of Value beyond Gold?
The central bank of all central banks- Bank for International Settlements (BIS) — has committed efforts in their analysis “Cryptocurrencies: Looking Beyond the Hype” and it is indeed troubling that the BIS would go through such lengths to discredit, negatively taint, and pre-condemn “cryptocurrencies”, what it seems to portray as a competitor to the throne of monetary policy, the central banking system.
This BIS-Report is not only totally one-sided and ignores the transformational concepts concerning the introduction of “cryptocurrencies” into the human and mainstream society, but also deceptive in the assumption that the existing monetary civilization has provided an irrefutable public good to society and its people. Here are the facts and the reality: the BIS has failed to mention the potential of cryptocurrencies, especially of the unique essence and value of Bitcoin, the hardest money ever created in human history, to be explained in this article.
The BIS has failed to prove the effects of their “achievement…of safeguarding society´s economics and political interest in a stable currency”. The intended side-effect of this article is a “legal-dogmatic” inspiration, based on a fact-based debate in connection with the taboo-topics “central banks” and “money”. Understanding Bitcoin holistically from only logical sound money-perspective of Austrian Economics, makes the existing destructive-inflationary economic system of Keynes totally obsolete.
The decoupling of gold in the year 1914 and the current fiat-currencies up to now, whose amounts are controlled by central banks, have reduced the sovereignty of humanity over their wealth and left them helpless in the face of a slowly increasing erosion of their monetary value, when central banks had blown up the financing of governmental operations (i.e.: wars). As a matter of fact, it has become impossible to accumulate capital and wealth without the permission of the money-issuing governments. The motivation of “Satoshi Nakomoto” for Bitcoin was the creation of a “purely peer-to-peer form of electronic cash”, which requires no trust in third parties for the purpose of transactions, and whose amount cannot be changed by any other person or entity.
In other words: Bitcoin would bring the desired features of physical cash (intermediaries not necessary; finality of transactions) into the digital realm and combine them with an untouchable and immutable monetary principle, which absolutely cannot be manipulated. For this reason, an unexpected inflation, which could benefit a third party at the expense of the mass of people holding an inflationary money, is not possible anymore. “Satoshi Nakomoto” was successful in achieving this goal by using some of the important, but not understood, technologies: a peer-to-peer network with no single point of failure, “Hashing”, digital signatures (Cryptography) and “Proof-of-work”.
“Nakomoto” removed the necessity for trust in a third party (“100% Validation.
0% Trust”; “In Code we trust”) by designing and building Bitcoin on a totally unattackable foundation of proof and verification. Explained differently: the central-operational feature of Bitcoin is validation- and this is the exact reason why Bitcoin can remove the necessity for trust.
Each and every transaction must be recorded by every member of the network, so that all network-members have one identical ledger with all balances and transactions.
Whenever a user sends a specific amount to another member, all members of the network can verify the sufficient balance of the sender, and the nodes compete with one another, in order to update the ledger with a block of transactions every ten minutes. For a node to add a block of transaction to the ledger, he/she needs to invest processing energy (and electricity), so that complicated mathematical problems can be solved, which are difficult to solve, but their correct results are easily verifiable. Even though these mathematical problems are not connected to the Bitcoin-transactions, they are still indispensable for the operation of the system, because they force the verifying nodes to invest processing energy, which would otherwise be a waste of energy in case of fraudulently included transactions. Essential is: the node, which has added a valid block of transactions to the network, receives a block reward out of the newly originated Bitcoins, that includes all transaction fees, paid by all the people involved in the transactions.
This process is called mining, similar to the terminology of mining of precious metals- and this is the reason why “proof-of-work”-solving nodes are also known and recognized as miners. This block-reward compensates the miners for the invested resources of the necessary proof-of-work.
While the fiat-money, literally created out of thin air, flows into the financing of loans, debts, and governmental spending, the new money of Bitcoin benefits only those people, who invested resources for the updating of the ledgers.
“Nakomoto” has programmed Bitcoin in a specific way, so that every 10 minutes a block is produced — and for every block, for the first 4 years, there was a reward of 50 coins since the Bitcoin´s operation since 2009, which has been halved every 4 years (next halving to 6,25 Bitcoins: 2020).
The quantity of Bitcoins is exactly pre-programmed and it cannot be changed, independently how much effort and energy is invested in the proof-of-work. This goal is achieved through a process called “difficulty adjustment”, which could be the most ingenious aspect of Bitcoin´s design. In human history and evolution, Bitcoin is unique because of its absolute scarcity of 21 Million coins and its difficulty adjustment: if more people hold Bitcoin as a store of value, the higher will the market-price of Bitcoin rise, and the mining of new coins will become more profitable, which again motivates more miners to invest resources for solving the proof-of-work-problems. When the processing-energy grows by more miners, Bitcoin increases the difficulty of the mathematical problems for the purpose of releasing mining-rewards, so that the production of blocks is guaranteed every ten minutes.
The difficulty adjustment is the most reliable technology, in order to produce hard money- this differentiates Bitcoin fundamentally from every other money. Bitcoin is the hardest money, which has ever been invented: the growth in its value can absolutely not increase its amount, it can make the network only safer and more immune against attacks. Bitcoin´s unique strength is the reliability and “trustlessness” on economic incentives, which finally make fraudulent attempts exponentially more expensive than its rewards.
Bitcoin is absolutely limited with a maximum of 21 million coins and the Bitcoin-algorithm is pre-programmed with an ever increasing difficulty adjustment, precisely and mathematically calculable up to the last mined Bitcoin in the year 2140. The mathematical problems to be solved become more and more difficult in continuous and algorithmic calculated intervals for the eventually inflation-free and ever exponentially slower production of Bitcoin.
Every Bitcoin is divisible in 100 Million Satoshis, so that it can be sold easily time-and borderless in the crypto-space, because the digital ledger is globally accessible from every human with an internet-connection.
After Bitcoin has been attacked for 10 years in countless hack-attempts, the ridiculed “cyperphunk” has become an incredibly immune child, which has transformed itself to a long term global store of value, independently of the many attempts to tear it apart.
Bitcoin has certainly the necessary and unpredictable volatility-fluctuations and falsely compared “bubbles” (in relation to tulips etc) during its maturity-phase (slow mass-adoption; expected exponential liquidity and market capitalization in the amount of trillions in the next years and decades etc.). Due to the lack of centralized point of failure or weakness, Bitcoin, as a digital asset and store of value, cannot be prevented, destroyed, controlled, or confiscated in any way whatsoever (“No Private Keys? No Bitcoin!”).
2. Law-dogmatic positioning of Bitcoin within the legal doctrine and jurisprudence of Austria and European Union:
In accordance with Piska, it should be emphasized that the purchase and direct possession of Bitcoin is under the fundamental right of property, the basic right to purchase, and the protection of freedom of movement of goods. Davani´s intention of this article is to position Bitcoin as the constitutionally guaranteed and truly effective fundamental human right to purchasing and holding an inflation-free property and store of value as a protection from the continuously and systematic caused fiat-money-devaluation. Through the centrally controlled destructive inflationary tools (“Quantitative Easing”, “Fractional Reserve Banking” etc.) of the privately controlled Bank for International Settlements, the US-Federal Reserve System and the centralized global banking cartel, in combination with the still dominating international reserve currency of the US-Dollar, the primary root-cause for the symptoms of wars, destruction, suffering, poverty, and extreme inequality become comprehensible.
The Voodoo-teachings of the non-economist and statistician-Keynes- with his spending-obsessive and saving-hostile dogma were marketed as an “intellectual-academic” justification for the controlled inflationary and debt-based economic system of the central banks and governments, beginning with the monetary decoupling from gold. After the fiat-money has gradually weakened the ability of societies to save, the capital investments have come not from the savings of the savers, but from governmentally incurred debts, which have devalued the money supply more than ever.
In summary, in order to understand the bigger picture within the context of Bitcoin and gold: Only the Bitcoin- and gold standard are the only true forms of “sound money”, which increases continuously in its value inflation-free and because of this reality, it has empowered humanity to evolve to a thriving civilization with a low-time-preference: the society saves more, accumulates more capital, the working-productivity and wages rise.
This simple chain-reaction explains, why civilizations under a sound monetary system of Austrian Economics (von Mises, Rothbard, Hayek, de Soto etc.) have evolved on a spectrum of fields. When the monetary systems are debased, societies fall into decay and degeneration.
The contrast between the 19th and 20th century can be seen and understood in the context of the separation from sound money with all its destructive and painful consequences of suffering, destruction, and inequality.
In summary of all the author´s given reasons, Bitcoin is not only sound money with its absolute scarcity of 21 millions coins and a pre-programmed difficulty adjustment. The reality, as proven in history: every entity, which possesses the power to produce the given monetary medium, eventually abuses the trust. The result: a controlling-obsessive power-structure beyond human imagination. The more a monetary medium limits the temptation of increased production, the better its functions as a medium of exchange. With that, it is also a stable store of value. What really counts at the end of the day, is the purchasing power of the money- not its amount — and because of that, every quantity of money is sufficient to satisfy the monetary functions, as long as it is divisible, in order to fulfill the wants of transactions and storage. The fact that the central banks hold huge amounts of gold reserves and are still accumulating, just proves and testifies to the prevailing monetary nature of gold, despite that the governments had not ordered to do so.
Independently of the governmental-promoted advocates, the “State Theory of Money” has been more and more diluted over a time-frame of a decade, as we have been witnessing the continuous success and growth of Bitcoin, which has surpassed the monetary status and value beyond most of the state-backed currencies — exactly because of its reliable saleability and despite the lacking authoritarian decree to using Bitcoin as money.
Bitcoin could even exceed the principles of the Austrian Theory of Money , Austrian Economics and of gold, because Bitcoin — with its absolute scarcity — is harder than than the relatively scarce gold, for the first time in human history.
3. “Legal-dogmatic” analysis: Constitutional guaranteed fundamental human right to tax-free, inflation-free, and hardest money, Bitcoin, as a self-protective store of value from the systematic and debt-based central banking-caused fiat-fractional reserve banking money-inflation.
Bitcoin is actually less anonymous than gold until now. An intelligent criminal would never use Bitcoin for his illegal activities. The reality is that Bitcoin´s ledger is globally accessible and immutable. It is not a precise statement to say that Bitcoin is anonymous, because it is more “pseudonymized”. It is possible, even though not guaranteed, to establish the connections between real identities and Bitcoin-addresses. This way it could be easily possible to trace back all transactions with the help of one address, as soon as the identity is verified. When it comes to the issue of anonymity, it is useful to think of the internet: it is always dependent on how sophisticated a person can hide, and how well others are able to search. The Bitcoin´s blockchain-address makes hiding in the internet difficult. It is easy to rid oneself of a device, an e-mail-address, or IP-address, and to never to use them again, but it is much more difficult to delete completely the traces of money-sources in connection with a Bitcoin-address.
The structural nature of Bitcoin´s Blockchain is not only ideal for the private sphere, and definitely not for illegal or secret activities. The anonymity-threshold in the case of purchase of gold, for the given arguments by the author, cannot be applied to Bitcoin due to fundamental constitutional rights and legal-dogmatic deductions.
4. Are central banks obsolete in Austria and EU?
The Austrian and supranational EU-lawmaker will be compelled sooner or later to dissolve the Austrian National Bank and the European Central Banks with their complex, intransparent, and inflationary-destructive currency-, economic- , and money-policy based on the Treaty on the Functioning of the European Union in connection with the Federal Constitutional Law in connection with the Austrian Central Banking Law — pertaining with other relevant obsolete or outdated laws — once and for all (i.e.: Art. 119 Par. 2 and 3, 127 Par. 1 and 2, 128, 138, 282 AEUV; Art. 10 Par. 1 Z. 5 B-VG; §§ 1, 2, 3 and 78 NBG).
The “antique” banks as intermediary custodian-banks will eventually become obsolete through the ever increasing decentralized technological infrastructure, mobile applications, and new ecosystems.
Bitcoin- the “Internet of Money” — with its total and absolute scarcity of of 21 millions coins (to be mined in totality until 2140) and a precisely programmed difficulty adjustment — is the hardest money, beyond the gold standard.
Bitcoin, in connection with the crypto-fiat-gateway, the technological Blockchain-technologies, and the accelerated scaled payment ecosystems (“Second Layer”; “Lightning Network”, standardized user-friendly interfaces for mass-adoption etc.), will make this exponentially growing debt-based inflationary-destructive central banking system obsolete in the predictable future.
The legal dissolution of the global central banks, starting in Austria through the federal government, should be more of a formal act, because the central bank is lacking the rooted constitutional legitimacy according to the purpose of the elected government, the constitution and the essence of human rights.
(The civil and criminal liability of the accountable owners, decision-makers, and controllers of the total central banking structures would go beyond the scope of this article, yet the author wishes to inspire a fact-based discussion with this article.)
The Austrian Central Bank, the European Central Banks, and finally, because of the logical deductions and consequences, the owners, decision-makers, and controllers of the global-hierarchical central banking structure (Bank for International Settlements) will serve with totally new productive functions and tasks in the sense of monetary-economic principles of Austrian Economics, centered around the DEcentralized, hardest money, and store of value: Bitcoin.
Finally, humanity can and will be served total DEcentralization, dignity, and ethical principles for the evolution of a monetary, economical, scientific, technological, and spiritually thriving human civilization with the hardest and totally decentralized money ever created in human history:
Bitcoin and the transformational structures of Austrian Economics.
Literature and Sources of research:
“The nature of Bitcoin is such that once version 0.1 was released, the core design was set in stone for the rest of its lifetime…”, https://satoshi.nakamotoinstitute.org/posts/bitcointalk/126/ (retrieved on Sept. 9th, 2018).
The White Paper of “Satoshi Nakomoto” was published on Nov. 1st, 2008: “Bitcoin:
A Peer-to-Peer-Electronic Cash System” and the first version of the reference-implementation of Bitcoin Core on January 1st, 2009. The Reference-Software validates the total Blockchain with all the processed transactions from the beginning of the first transaction. https://bitcoin.org/bitcoin.pdf (retrieved on Sept. 9th, 2018).
Scientific, investigatively researched, and fact-based literature: Rothbard, The Mystery of Banking (2nd. Edition: 2008), Quigley, Tragedy & Hope-A History of the World in our Times (1975); Griffin, The Creature from Jekyll Island-A Second Look at the Federal Reserve (1994).
i.e. regarding the Bank for International Settlements: Privileges and immunities according to Art. 4 and 12, “Agreement between the Swiss Federal Council and the Bank for International Settlements to determine the Bank’s legal status in Switzerland”: https://www.bis.org/about/headquart-en.pdf (retrieved on Sept. 10th, 2018).
Chapter V of the BIS Annual Economic Report 2018: https://www.bis.org/publ/arpdf/ar2018e5.pdf.
Indispensable for the comprehension of the facts of reality: Cryptocurrencies vs. Central Banks-An Objective Comparison (published on July 2nd, 2018): https://veritas.veritaseum.com/index.php/component/edocman/cryptocurrencies-vs-central-banks-an-objective-comparison/viewdocument?Itemid= (retrieved on Sept. 10th, 2108).
Ammous, The Bitcoin Standard — The Decentralized Alternative to Central Banking (2018).
Antonopoulos, Mastering Bitcoin-Programming the Blockchain (2nd Ed. 2017), 231 and 252. Antonopoulos, Internet of Money (Vol.1&2); Ammous, The Bitcoin Standard — The Decentralized Alternative to Central Banking 2018, Chapter 10.
Indispensable literature: Antonopoulos, Mastering Bitcoin-Programming the Blockchain (2nd Ed.) 2017, 231 and 252; Antonopoulos, Internet of Money (Vol.1&2); Ammous, The Bitcoin Standard — The Decentralized Alternative to Central Banking 2018, 199.
See more details in the Austrian law journal: Piska, ecolex 2017, 635.
Ammous, The Bitcoin Standard- The Decentralized Alternative to Central Banking (2018), 51.
Read from other excellent academics and scholars of Austrian Economics: https://mises.org/.
Matonis, “Bitcoin Obliterates ‘The State Theory of Money’”, Forbes (April 2nd, 2013): https://www.forbes.com/sites/jonmatonis/2013/04/03/bitcoin-obliterates-the-state-theory-of-money/#45f53acf2274.
Rothbard, “The Austrian Theory of Money” — The Foundations of Modern Austrian Economics (1976): 160 C184; Quote of Hayek from a video-interview-excerpt at the Univ. Freiburg in 1984: “I don´t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can´t take it violently out of the hands of government, all we can do is by some roundabout way introduce something that they can´t stop”.
Ludwig von Mises, Human Action (1949), Page 421.
It would go beyond the framework of this article to demonstrate the financing of global drug-sales, terrorism etc. and the money laundering through banks in the amount of billions or trillions US-Dollar (or: fiat-money) with investigative researched facts and documents.
95th federal Austrian law, by which the trade regulations were changed according to the Anti-Money-Laundering-Directive of the EU.
See the official data for the global debt in the amount of one quarter of a $ quadrillion https://www.iif.com/publication/global-debt-monitor/global-debt-monitor-july-2018; https://www.zerohedge.com/news/2018-07-10/global-debt-hits-record-247-trillion-iif-issues-warning (retrieved on Sept. 13th, .2018).