A World Without Bitcoin

20 minute read

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A World Without Bitcoin

By Alex Gladstein

Posted February 11, 2020

The year is 2040, and cash is gone. The money you use on a daily basis has fully transitioned into a tool of surveillance and control.

In midtown Manhattan, you tip sidewalk performers with a scan of your wearable, your face, or your fingerprint. Coins and dollar bills are now curiosities—fossils from a forgotten age.

In Beijing, the government-issued Yuan has long since been digitized into the ubiquitous DCEP. Holding old paper notes is illegal, all payments are touchless or biometric, and all transactions are natively linked to your full identification stack. Every time you buy something, your national digital profile simultaneously updates.

Transaction privacy was one of the last freedoms to be stripped away in China. Now, your communications, movements, and interactions with other citizens are tracked with billions of cameras, real-time surveillance streaming from your wearables, swarms of micro-drone recorders, and immensely powerful algorithms, linking everything together in a panopticon.

In Caracas, Venezuela, the recovering economy runs on digital dollars. There is some street bartering, of course, but greenbacks finally became obsolete a few years ago, and other bearer assets like gold remain incredibly rare. If you want to buy something, you have to do it electronically and the transaction will be tracked and linked to your citizen profile.

In Lagos, like in many African capitals, all commerce is carried out on the rails of Chinese fintech, and everyone communicates seamlessly with the latest version of WeChat. The Nigerian economy runs on DCEP and the government and its 300 million citizens basically act as a Chinese satellite state.

At some point in the 2030s, governments around the world made cash illegal. They initially accomplished this feat through a demonetization process where public officials announced a new digital economy that they claimed would not leave anyone behind, would increase stability, and would make it easy to catch criminals and money launderers. Most citizens believed them.

Even in countries where the majority never had a brick-and-mortar bank account, all citizens were encouraged, then forced, to create ID-linked digital currency accounts accessible through their wearables or biometrics. Then, they were given a multi-year time window during which they could redeem their cash for a shrinking amount of digital credits. Almost everyone cashed in and went fully digital early on, when they could get the most credits. After the window expired, it became a punishable offense to carry paper or metal money.

Now, in 2040, there are two dominant currencies in the world: the digital dollar and China’s DCEP. The world is roughly divided: North America, Europe, and some top U.S. allies use the digital dollar, while the rest of the world uses DCEP. Very few other currencies remain.

Some rogue states still produce their own currencies, but these don’t last long and aren’t worth much to anyone else. These regimes tend to inflate their money supply extremely quickly, severely devaluing their currency, and eventually forcing authorities to create new currencies. This cycle destroys trust between state and citizen. Eventually, such governments give up sovereignty in exchange for survival and turn to the digital dollar or DCEP. The common person effectively has no ability to store savings in a way that isn’t controlled by either the American or Chinese government.

There hasn’t been any meaningful innovation in savings technology. Most citizens simply just save up their digital credits, but the value of their credits depreciates against real goods relatively quickly. And then there is autotaxing. By now, taxes are automatically deducted from your credit balance and tax rates rise unpredictably and always, it seems, too fast.

As in previous decades, some poor and middle class citizens still buy things like cattle or sheet metal in an effort to save against inflation, but all (save the 1%) are locked out of premium assets like real estate, fine art, vintage wine, and other scarce items.

Financial privacy has virtually disappeared, and not just in China and the DCEP countries. Along with the rise of ubiquitous surveillance cameras in public places – all linked together with AI-powered insta-analysis – all transactions are immediately linked to individuals. With cash gone, it’s extremely difficult to buy a burner phone or SIM card. Fines for trying to manipulate your credit wallets are harsh, and no one ever invented an alternative digital currency that was able to hold value.

Big data analysis wasn’t always so powerful. But it is now. Of course, humans had credit cards for decades, but unlike those early days, now governments can sift through all financial data with the press of a button.

To get credits, you need to provide ID. To use credits, you need to be loyal. To get the best perks, you need to be a perfect patriot. Around the world, digital currencies give governments unprecedented abilities to control their citizens. If your digital profile doesn’t have a top rating, you’re locked out of many public services and benefits. In dictatorships, if you dare to criticize the government, you immediately lose your financial abilities. Some say being in financial jail is worse than being in actual prison.

Corporations do create their own money. Libra was just the beginning. But all these credits are inevitably pegged to the digital dollar or DCEP, and therefore are surveillable, censorable, and confiscatable. They don’t offer an escape.

There has also been a dramatic increase in the real-time sale of your data and behavior to third parties. There is practically no way to buy something without your government and a range of corporations knowing. Instantly upon purchase, you’re met with a variety of advertisements. Many people have upgraded to smart visors and retinal implants, and they get advertisements there, too. Unless, of course, they can pay for the premium versions. In the DCEP countries, one can opt out of everything except government propaganda.

The public feared the rise of the Orwellian police state, and it came, but they also got the dystopia of Aldous Huxley. In this brave new world, a sophisticated constellation of carrots and sticks built into the financial system encourages and reinforces state-compliant behavior with impressive efficiency. Patriotism is addictive.

The Chinese social credit system, much mocked in the early 2020s, was finally implemented by governments worldwide in the ensuing decade, and with the transition into a fully digital economy, has become incredibly effective at stamping out dissent.

Governments ran sweeping campaigns to locate every single citizen within their borders and connect them to national identity systems. India’s Aadhaar was the first of many, initially promoted as a miracle for the unbanked, vulnerable, and stateless. But later, it became clear that these ID networks were just surveillance and exploitation machines.

Things are more fair for some, but a tiny few control everyone else in a way not even previously imaginable. The benevolent idea of “compliance” has led ultimately to slavery. It is the digital banality of evil.

Even now, governments continue to innovate their surveillance tech. Some citizens are being offered valuable perks for agreeing to install their credit wallets into their wrists or retinas. They say it’s the ultimate in touchless convenience. The program is popular. Some analysts say that by 2050, everyone will have one.

This could be our world.

But thankfully, this is a fantasy. In our world, we have an escape.

In 2009, a pseudonymous programmer by the name of Satoshi Nakamoto launched Bitcoin, a sovereign financial system.

Over the next few years, this decentralized money project grew. A global community made it strong, and grew a brilliant initial design into an unstoppable force. Over time, there were more nodes, more miners, more users, and more adoption.

By 2020, the separation of money from state had begun.

What was first a curiosity turned into a powerful global phenomenon. Once people understood they could digitally transact in a parallel economy that authorities didn’t control, they wanted to learn more and get involved. Satoshi pioneered a way out of the panopticon with proof-of-work, creating a non-governmental financial system.

Our future 2040 is still a horribly imperfect place, but omniscient tracking and surveillance is much more difficult for governments to achieve, because Bitcoin has enabled the survival of a digital form of cash.

So let’s rewind — let’s describe the year 2040 again, but what it could look like not just with government issued digital currencies but also with Bitcoin.

In the Bitcoin future, privacy has actually improved in some areas. With technological improvements in the Bitcoin software, it actually becomes very difficult for governments or corporations to track the Bitcoin use of citizens who practice good operational security. Bitcoin was at one point hard to access and clunky to use – just like email in the early 1990s – but things got a lot easier in the 2020s.

Governments promised waves of crime and terror if citizens dared to use a currency outside of state control. But those waves never came. By 2040, crime rates are essentially the same as they were for the previous century. In the Bitcoin world, however, it’s much more difficult for bankers to steal your money and for governments to devalue your savings.

Back in 2020, very few used Bitcoin, and even fewer understood its potential. A long hard road of education was to come. But later in the 2020s, universities began offering courses and degrees in Bitcoin. Eventually, one was able to get a bachelor’s degree or even a PhD in Bitcoin Engineering at any top university.

By 2020, tax authorities began asking citizens how much Bitcoin they held or sold, further increasing awareness among the citizenry. But by 2030, most people were using Bitcoin without knowing much about how it works, just as hundreds of millions of young people once adopted email without knowing how it worked.

Governments tried to prevent their citizens from using Bitcoin, but most measures and bans failed or were unenforceable. The permissionless nature of Bitcoin turned it into a virus that infected the surveillance state, preventing it from reaching its maximum potential.

Even in the most restrictive tyrannies, citizens figured out how to send Bitcoin back and forth in a way that was virtually impossible to effectively surveil at mass scale. Yes, governments are still able to police nations and communities, and investigators find most big criminals, but broad-based financial surveillance has been stopped in its tracks.

By this point, the Bitcoin network is protected by geopolitics. Part of Satoshi’s genius was creating an asset that would increase in value due to scarcity. Even bad governments which subsist on authoritarianism got involved in Bitcoin initially because of their greed. But over time, their reliance on Bitcoin shifted their local economy towards it, which in turn hurt their ability to control the money supply and financial system and ended up eroding their control over the citizenry.

The more democratic governments adjusted to life with Bitcoin. For example, many democracies changed the way they taxed their citizens, veering away from an income-based approach. Sales tax, VAT, and “citizen” taxes all became more important. Just as in the 20th century, taxation and the financial relationship between citizen and state continued to evolve in the 21st.

In democracies, the people created laws to allow daily small purchases to be completely private. You can buy groceries, have a small medical procedure, or buy an e-book or podcast without disclosing your identity. Because of this, your digital footprint ended up being much smaller than it would have been had all these events been tracked. Governments still ensure that larger purchases like cars, weapons, and homes require that the seller ID their customer, but for most purchases, your transactions are not uploaded to a national database—just like how things were in the cash age.

Critically, Bitcoin has allowed dissent to survive in an increasingly digital era. Independent media organizations and NGOs are still able to receive funding from supporters, even in the most difficult environments. In mega-cities, one can pay for public transport with Bitcoin-based payments, preventing the authorities from knowing your every step.

Ubiquitous surveillance cameras and data collection from next-gen social media still make privacy in general very difficult to achieve, but at least payments are protected. And Bitcoin becomes a native payment rail for pseudonymous social media platforms, where citizens can still enjoy avatars online, and practice digital freedom. Without a decentralized currency, all of this would be impossible.

I’ve painted two visions here.

On the one hand, an Orwellian dystopia.

On the other, an overly-optimistic techno-utopia. Neither will happen.

How close we get to a more positive and open financial future is dictated by what we do now with the Bitcoin ecosystem in 2020 and moving forward.

In this essay I propose six priority areas for you to consider getting involved with. There are of course more aspects of Bitcoin, but the ones I list here will be most crucial for us to tackle in the coming years.

A first priority area is global education. Only a tiny fraction of people on this planet use Bitcoin, and even fewer properly understand its power. The latest estimates put the total number of Bitcoin users at no more than 45 million people — roughly .058% of the world’s population. I personally interact with many at the top of the wider cryptocurrency and blockchain industry, ranging from executives to journalists to investors. My best estimate is that, at most, 25% of them understand the underlying principles of how Bitcoin works and why digital scarcity is the key to its success. It’s a back of the envelope estimate, for sure, but let’s just say that even inside the industry, the number of people who understand the impact Bitcoin may have on the world is small. There aren’t enough non-technical explainers; not enough university-level courses; not enough (or virtually no) journalists at mainstream media outlets who understand; few if any initiatives to try and bring this topic to the attention of policymakers, philanthropists, and public figures; and no good Bitcoin film or video content on platforms like Netflix. There is much work to do.

A second priority area is usability. Just as the mobile phone and email were hard to use at first, and only popular with the scientific or economic elite, Bitcoin has begun its life as a niche technology. We should try to break this bubble. In order for that to happen, the average user needs to be able to send and receive Bitcoin with a few clicks and a swipe. But this will take time, as all users should be able to easily control their own keys without relying on a third party. Bitcoin usage needs to be simplified without making critical tradeoffs with regard to decentralization, privacy, or sovereignty. Technical complexity needs to be minimized as well, as Bitcoin should be accessible to those who need it most around the world, who have the least powerful devices and least consistent internet access. Thankfully, things are moving in the right direction. Even in just the past two years, Bitcoin wallets have become much, much easier to use. Just as sending email transformed from a complex task to a swipe on an iPad, Bitcoin will eventually simplify. Already, unnecessary details are being gradually hidden from the end user in the same way that Signal, for example, made private communications much easier and more widespread than previously possible with clunkier tools like PGP.

Which brings us to the third priority area: privacy. It is critical that privacy be encouraged, normalized, and baked into the Bitcoin ecosystem. Critically, we want Bitcoin on-ramps, wallets, and payment networks that are open source, decentralized, and relatively private. For example, BTCPay Server is perhaps one of the most important technologies in Bitcoin today. Originally a clone of Bitpay, today it allows anyone to set up their own hosted payment server, allowing them to receive donations or payments in Bitcoin, in a way that is much more privacy-protecting. Each transaction is done via a unique invoice, and can be dumped into a wallet that isn’t attached to your ID. This will prove equally important for mom-and-pop corner stores as it will for non-profit organizations operating under authoritarian regimes. Other key innovations in this space include the upcoming Taproot upgrade, which will help reduce the amount of information Bitcoin transactions leak on the blockchain; innovations in mixing technology like CoinJoin that help camouflage users; and, of course, the Lightning Network, which takes transactions off the surveillable chain into a second layer.

This brings us to our fourth priority area: scaling. All base monies need to be scaled through secondary layers to have a global impact. Consider the gold-based economy, where we invented paper notes to help scale commerce. Or the dollar-based economy, where companies like Visa helped spark growth around the world. For Bitcoin, the most promising scaling solution is the Lightning Network: an open source, decentralized payment system. You can think of Lightning as digital cash to Bitcoin’s digital gold. At the moment, the Bitcoin network can only support around 7 transactions per second. With Lightning, there is no technical upper barrier to how many transactions per second we can do with Bitcoin. This technology is still nascent, but arguably essential for Bitcoin to become usable by hundreds of millions of people in a non-custodial way. If we want to scale Bitcoin to the masses, without them having to trust a third party, Lightning seems to be the way forward. Companies as big as Square seem to agree: there, CEO Jack Dorsey has created Square Crypto, a research group that is building a Lightning toolkit for developers. This kind of scientific exploration is important for other companies and universities to emulate and expand on in the coming years.

A fifth priority area is liquidity. Once the average person can acquire Bitcoin, the following step, at least for the next few decades, is to ensure that it is easy for them to convert their BTC to local fiat currency when necessary. A world in which we pay for everything or even most things with a Bitcoin-based system is far away, and may never come at all. For now, people in distressed or repressed places need an ability to shave off their Bitcoin into fiat to pay for daily expenses and bills. This, thankfully, is getting a lot easier. In most major urban areas on earth, there is some mixture of Bitcoin ATMs, peer-to-peer marketplaces, Bitcoin brokers, and brick-and-mortar exchange points. Expanding Bitcoin off ramps will be key to popularizing the technology in the future. The website UsefulTulips.org does a good job of analyzing Bitcoin’s growing use around the world. More initiatives like this are necessary so we can learn how and why people are using Bitcoin.

A sixth priority area, and one that might really move the needle, is minimum ID. There is a strong need for a platform like Twitter that still allows some level of pseudonymity to adopt a Bitcoin-based payment system that reveals an absolute minimum about the user. If avatars online are to exist in the future, we must be able to operate them securely without fear of our real life identities being leaked. So attaching a bank account or a credit card with our full ID stack on it to our social media account won’t do us any good. We’ll need to use digital assets that don’t require Know Your Customer (KYC) or Anti Money Laundering (AML) compliance. Lightning seems well placed to serve this function. The less we reveal about ourselves in our transactions, the harder it is for Big Brother or surveillance capitalism to grow. There could very well be a future, even a near future, in which an individual can walk into a coffee shop, buy something online, send money to a friend, and make a donation to a cause all while giving up just a minimum amount of information about themselves.

If developers and investors can focus on these six areas; if consumer protection advocates can lobby for the space for them to grow in our societies; and if users can more easily engage with Bitcoin, then we are well on our way to a more private and free world.

In conclusion, let’s revisit the impact Bitcoin could have on human rights communities if its technology ecosystem grows along the lines we’ve described.

First, consider independent journalists and NGOs operating in authoritarian environments who need to preserve financial independence. With Bitcoin, they are able to collect funds from around the world in a way that is difficult to surveil and impossible to stop. Then they can convert it into local fiat currency on an as-needed basis to pay for program expenses. This is already relevant in places like Russia and Hong Kong where the bank accounts of activists are frozen.

Second, consider the billions of refugees and stateless individuals, who cannot currently access the banking system. Today, you need to prove your identity to open a bank account or use any of the apps attached to the legacy financial system. With Bitcoin, you don’t need an ID or a passport. You just need, practically speaking, a smartphone and access to the internet. This is a great equalizer, giving anyone, no matter their class, education, background, or ethnicity, equality of opportunity.

Third, consider individuals who are dealing with high or hyperinflation. Many countries have been hit lately with double digit inflation, and some have suffered through hyperinflation. Ask any Argentine, Syrian, Turk, Iranian, Zimbabwean, or Venezuelan and they will tell you how rampant inflation can crush economies and vaporize the savings of the lower and middle class. With Bitcoin, anyone has access to a savings technology that requires no permission from a company, and cannot be devalued by a government that decides to print more money.

Fourth, consider the growing number of people who are falling under intense daily financial surveillance. Especially in China, hundreds of millions of citizens are increasingly being watched not just by hundreds of millions of surveillance cameras but also through their texts, calls, and social behavior. Transactions are a big part of this trend and will continue to be increasingly surveilled. Bitcoin provides the infrastructure for a parallel economy, one in which our financial transactions are not natively linked to our identities.

Fifth and finally, consider those who are victims of sanctions. The tragic fact is, individuals who live in sanctioned countries like North Korea and Iran didn’t vote for their governments in free and fair elections and shouldn’t reasonably be held responsible for their dictator’s crimes. Through Bitcoin today, individuals inside Iran, for example, can earn income from abroad by working on open source software projects, or can receive money from their family abroad to pay for basic expenses or medical bills at home.

If the Bitcoin project falters or slows, then there won’t be much hope for the billions of people in these situations around the world, especially as cash fades. Private payments will be practically impossible. All daily transactions will become increasing points of surveillance and control. The monetary substrate itself will be watching you, and controlling you—and you won’t be able to do anything about it.

One more thing to keep in mind: the Davos elite who currently run the world are threatened by a technology that separates money from state and provides permissionless access to a premium savings technology. They are used to running things and want the game to be rigged. They want there to be obstacles and barriers to entry. Bitcoin will frustrate them because anyone can access it and use it, no matter who they are. In the progression of the global banking elite first ignoring Bitcoin, then laughing at Bitcoin, then fighting Bitcoin, and then giving up, we are nearing the end of the laughing phase. A big battle is on the horizon.

The good news is, there is excellent momentum for Bitcoin in the areas we’ve covered, and there is growing global adoption. Despite the obstacles, the path to freedom is clear.

In an age of increasing fear over how corporate and state technology will steal our rights and freedoms, we can be grateful to Satoshi that we won’t ever have to live in a World Without Bitcoin.

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