A SHORT REBUTTAL OF A RECENT BITCOIN CRITIQUE

The book under review is none other than the recent bitcoin hitpiece Hijacking Bitcoin, written by the infamous Roger Ver. As many misconceptions and false claims are being promoted in the article, I decided to write a short rebuttal of the most controversial excerpts and post it on LinkedIn, so that people can read both views.

The original article was published in German, but I translated it using Google Translate. The passages from the article, which I will paste and debunk, will therefore be in English. Unfortunately, the article lies behind a paywall, so I cannot share it here. For those who would like to read it, you can subscribe to the investor’s brief here: https://boersenbrief.privatinvestor.de/kasse-alle-produkte/?add-to-cart=1094

Note: the excerpts from the article will be written in

quotes

while my rebuttals will be written in plain text.

Let us begin with the initial excerpt, which is as ironic as it is misguided:

As a political scientist (also), I know that something as fundamental as money never exists independently of power structures and interest groups.

To understand the invalidity of this claim, see Mises’ Theory of Money and Credit, on the regression theorem: https://en.wikipedia.org/wiki/Regression_theorem. Money is a product of the market that gets adopted as the most salable good. We use it to facilitate exchange and achieve a greater division of labor, finally resulting in greater capital accumulation, which can be understood as an increase in prosperity. It happened before in the 19th century, when most of the world adopted gold as the universal monetary standard. This was the period of greatest human advancement and increase in well-being in history.

I received his book “The Bitcoin Standard” as a gift from private investors who are enthusiastic about Bitcoin. I read it, but found that the arguments for Bitcoin have an almost religious, radical market character and that Ammous left many questions unanswered.

Money and religion are deeply interlinked, think about usury. There is one ethno-religious group that does not find usury immoral, and they were fittingly the founders and greatest promotors of the debt-based, exploitative fiat regime we currently live under. No other major religion supports usury or debt, which is why bitcoin and gold are the only two moral monetary systems from the three, and fiat is not.

It was still vague, but my thoughts were going in a similar direction to Hens’. Now I know exactly how Bitcoin was perverted and “turned around”. The idea that Bitcoin is primarily a store of value (like gold or central bank money) and should not be used for small and micro payments due to the high fees is also a narrative that was invented after the fact and is not in the spirit of Satoshi, the anonymous inventor of Bitcoin. His idea was above all that everyone could make small and micro payments directly with Bitcoin. We are further away from that than ever.

Satoshi’s idea was peer-to-peer electronic cash, meaning a system of instant global settlement that could work for any peer in the network equally, be it a bank or an individual. The point is to achieve instant cash finality (settlement), which is not equal to micropayments. Micropayments are possible and, in fact, quicker than any other payment network, with bitcoin on higher layers (lightning network). It works exactly as intended.

The opposing books, side by side

The penny dropped when I read the brand new book by Bitcoin pioneer Roger Ver. The original title is: “Hijacking Bitcoin”. In German: “The hijacking of Bitcoin”. First of all: It was completely clear to me that such a project needs steering and management structures and that nebulous formulations such as “open source” etc. would only serve to conceal power interests.

This book was written by Roger Ver, an infamous bitcoin evangelist turned critic as soon as he sensed profit to be made by launching his own version of bitcoin, bitcoin cash. He is a fallen idol in bitcoin’s lore and a sore loser from the legendary Blocksize War. For another view of the conflict, see The Blocksize War by Jonathan Bier. Bitcoin is controlled by a distributed network of NODES, which are in a peer-based relationship, meaning that there is no hierarchy when it comes to decision-making about the changes to be made at the protocol level. Bitcoin Core developers, who propose changes and maintain the code of the system are voluntary actors who cannot force anyone to accept their changes. Changes are only implemented if the majority of active nodes accept them. A study of the Blocksize Wars helps us see how impossible it is to implement a destructive change to the network even when >50% of the hash power (miners), most of the major exchanges, and other corporations try to hijack the network to force their change (an increase in blocksize in this case). Honest nodes rejected the change despite the majority of capital being invested into the other side with huge marketing campaigns etc., and it did not work. Bitcoin is decentralized and controlled by its users, not the people “in power”.

The Blocksize War by Jonathan Bier

Now let’s look at how [bitcoin] was hijacked: According to Gavin Andresen, Satoshi’s successor, Bitcoin was supposed to enable small payments of 1 cent to 1 USD. However, it was supposed to be able to process transaction volumes on the scale of Visa at a tenth or even less of the fees. None of this has happened. Today, actual Bitcoins are traded less than in 2018. A second layer of service providers has emerged around Bitcoin, which enables payments with supplementary solutions and excessive fees. In other words: for many, Bitcoin has become a completely normal service in the financial sector, or a financial product for which they have to pay high fees.

Again, we need to understand bitcoin as a layered money. The base layer (the blockchain) is used as a final settlement layer which is optimized for security and is extremely “slow” and effective, and for a great reason. Increasing the speed by which blocks are made decreases the security of the network and centralizes it (see Ethereum, Solana, or any other shitcoin which is either fully centralized or suffers from constant outages).  Bitcoin has almost a 100 % uptime since its inception, meaning it is the only reliable monetary system out there. Higher layers, such as the lightning network, achieve faster transactions than Visa, Mastercard, or any other payment system despite being decentralized and can process much more transactions. To understand why bitcoin currently serves mainly as a store of value, we must understand the monetary theory and the process of monetization of a new monetary asset. The best work on this topic is Carl Menger’s The Origins of Money. A new form of money monetises in phases: 1.) the accumulation of cash balances (store of value) 2.) increase in salability (medium of exchange) and 3.) becoming a generally recognised medium of exchange in which we express prices of goods (unit of account). We are currently at the shift from 1.) to 2.).

Satoshi originally set the size limit for a blockchain block at 1 MB, but he himself noted that this limit would have to be increased as technology progressed. In order to enable a very large number of payments, the size limit for blockchain blocks would have to be adjusted. Ver describes, as excitingly as in a crime novel, how a handful of programmers at Bitcoin prevented the size limit from being gradually increased from 1 MB, so that it remains there to this day. Conferences from which Bitcoin enthusiasts had actually hoped to find solutions were scheduled to confuse and delay.

Satoshi also tried to implement the first payment channel solution similar to lightning, although it failed. A blocksize increase can still be implemented, but if the network of users currently rejects it, it must be for a good reason, which is that the technology is not yet ready nor needed. Transaction fees are still low, which means that increasing blocksize would bring them further down, resulting in the devastation of miner profits and dealing a huge blow to the mining industry. We must remember that Satoshi only worked with the operating network for a year and then left. He could not have predicted everything that would happen nor could he have perfect foresight into the evolution of a decentralised protocol. He left before bitcoin had meaningful value, therefore he could not know how important one monetary function (medium of exchange) would be over the other (store of value). He discovered bitcoin and proposed a working design, but he is not in charge of it and his opinion is not sacred. It is upon the democratic choice of individuals to determine how the network is headed. If that is not in Ver’s favor, that is his problem and he must do some self-reflection as to what his real interests here are. The main problem the world is currently facing is the inability to store and save capital, that is precisely why bitcoin’s main function is a store of value.

For Bitcoin users, this second layer does not only have the unpleasant consequences of higher fees. If you want to open an account with one of these service providers, you have to identify yourself with an ID. And your account can be frozen at any time . El Salvador introduced Bitcoin as an official means of payment in 2021. The decentralized concept of Bitcoin is now history. Ultimately, you are even more dependent on the state than with a normal currency – then at least there would be cash.

Lightning network applications do not require KYC, this is just false. What a state does has no bearing on bitcoin’s functionality. China banned it, yet the use of bitcoin in China was still high despite the ban and mining was still going on, just under the radar. Bitcoin is borderless, a country banning it only results in that country banning itself from the network. It is not like the SWIFT network, but more akin to the internet protocol TCP/IP, which can also not be banned.

I can now logically explain the gut feeling I had. For me as a political economist, it is completely clear that currencies and markets do not exist in a power-free space and that the quasi-religious hope that many Bitcoin followers placed in this technology was exactly that: a belief. Markets and technologies are always the playing field of power interests.

Partially true conclusion. Bitcoin does not exist in a power-free space, but the power is just not based on human power or political force but on PHYSICAL power converted into bytes of data that represent ABSTRACT power. It is the power of electricity generators that produce electricity, and sell it to miners who then convert electricity into hashpower and try to brute force a cryptographic puzzle to gain the privilege to append a new block of transactions into the global network. Whoever can channel the most hash power will have the highest CHANCE of winning the next block, but securing this power requires large capital investments and careful management. Furthermore, hash power does not give a miner the option to change the network or cheat, but only to be awarded a block reward for mining a new block. Utilizing physical power and expressing it in an abstract object known as proof of work is the only way to win a block. In this way, we circumvent the need for bloodshed in running a global monetary system for an electricity bill that upkeeps the bitcoin network at the core. Not needing to sacrifice human life when fighting over a monetary system is worth every watt of power. For a deeper comprehension of this technological miracle of the proof of work mining mechanism underpinning bitcoin and its orthogonality with other social systems which are mostly predicated on violence (will to power), I would advise the reader to listen to Jack Mallers’ recent deep dive into the origins and significance of substituting abstract power for physical power. It is available on YouTube:

Mining is completely profit-based and safe from human corruption, because it leverages human greed and uses it as the base for its security model. It is only profitable to protect and bolster the network, whereas attempting to destroy it only result’s in our bankruptcy. It is the greatest show of free-market capitalism humanity ever achieved. Not even power-hungry individuals like Roger Ver, Craig Wright, Larry Fink, or Gary Gansler can hijack or stop this network. It was developed to resist any attempt of a hostile takeover by any individual, corporation, or government. Ultimately, its success lies in its track record. The base parameters of the protocol have never been changed since its inception, and the network never failed to produce a new block of transactions according to its rules. Whatever the media claims or its detractors promote, bitcoin’s internal clock keeps ticking with every new block that gets added to its timechain. Its market price only serves us to understand how the market values the network, but its true nature can only be observed from within the system, measured by its mining difficulty, uptime, and the weight of its timechain. Viewed in this light, bitcoin is the most stable computer and monetary network, as opposed to a volatile speculative bubble we know in love.

Bitcoin is chaotic from without, but completely peaceful from within. It does not care about feelings, the state of the fiat system, or the machinations of political elites, all it knows is that a new block needs to be generated once every approximately 10 minutes.

PS: In his book, Roger Ver has shown the logic behind the hijacking of the Bitcoin system and documented it in meticulous and exciting detail. He also named interest groups, but expressly said that one “cannot know what significance these connections have”. As a libertarian global citizen, Ver gave up his American citizenship in 2014 after becoming a citizen of St. Kitts and Nevis. His book was published in early April 2024. In April 2024, Ver was arrested in Spain under American pressure for alleged tax offenses. Anyone who thinks evil of this is a scoundrel!

This is the only part of the article I can agree with entirely. There is no tax fraud, because taxes ARE fraud, and they are based on a threat of violence. They violate the libertarian principle of non-aggression and are therefore not merely immoral, but not part of the free-market process. That being said, I still pay them, but I do not support them.

Until next time,

Klemen Končan Verstovšek - Bitcoin SLOVENIA

Article is also published on linkedin & BitcoinSHOP

Articles and translations for the blog on the website are written by various members, supporters, and groups of individuals in the Bitcoin Slovenia group. These do not constitute any financial advice. Everyone has their own view on the technology, Bitcoin, and existing systems. The society provides a platform to share these views with a wider audience. You can join our society at bitcoin.si, on our Telegram group, or in the "Kriptovalute — Slovenska Blockchain Skupnost — Bitcoin.si" group on Facebook.