Radical System Change: Bitcoin & Degrowth

Radical System Change: Bitcoin & Degrowth — Issue #7

This issue’s topic: How to implement demurrage using bitcoin and thoughts on bitcoin and freedom

Just thoughts on the connection between bitcoin and elements of the “degrowth” movement that argues that never-ending economic growth is leading us toward an unsustainable and ecologically destructive path.

Finally! The final installment on the intersection of bitcoin and regional/complementary currencies. The reason why I went down this demurrage rabbit hole was that degrowth advocates promote the use of regional and complementary currencies to localize economies and make the system more ecologically sustainable. In the last hundred or so entries on the matter (sarcasm!), we went through the origins of demurrage. We also covered examples of demurrage currencies in practice, and the dangers when such currencies are centralized. Finally, we now tie it all back to bitcoin, to show that bitcoin is well-aligned with degrowth.

The best solution for a demurrage implementation is to use bitcoin as the base layer currency and have complementary currencies to bitcoin, which local communities can control and operate. One way this can happen is to create stablecoins on the lightning network (h/t to Ben Arc for introducing the idea to me at a very loud Bitcoin 2022 party). These stablecoins would have their own wallet, which could manage the holding fee and the distribution of this fee. A community could agree on an open-source wallet and a set of publicly known addresses where the funds would be directed. In this way, the collection and distribution would be traceable by the community. When a person wants to exchange out to bitcoin, a small fee could be collected just like with the chiemgauer. Since this would happen on a regional scale, accountability would be easier to manage.

Right now, I only know of Lightning Lab’s taro protocol as a means to create a stablecoin on the lightning network. It will take time before the protocol is fully implemented, so if one wanted a demurrage currency right now, the alternative is to create a colored coin on bitcoin’s base layer and a corresponding wallet that would act in the same manner as described above. The community could agree to cover transaction fees, to eliminate the burden on micro-transactions. Such a community could also invest in a small renewable-backed mining operation, which could direct a fraction of the transaction fees back into the community’s economy.

I think as lightning matures, we will see complementary currencies develop on bitcoin that will challenge the status quo of our dominant fiat currencies and democratize control of money creation. From the Nashian perspective, participants in these regional currencies could measure the quality of their currency against the bitcoin standard, and demand better from local governments. For those who value the strength of the 21-million bitcoin cap, there is no harm done to the main protocol.

There is also freedom here to choose your economic destiny. Not all communities will operate on complementary currencies, some will decide to operate using bitcoin and bitcoin alone. The goal is to decentralize power and give it back to the people.

Digressing for a moment, the basis of bitcoin’s future should be built on the following principles, as outlined in David Wengrow’s and David Graeber’s Dawn of Everything:

[W]e are not talking here about ‘freedom’ as an abstract ideal or formal principle […] [W]e [are] instead talk[ing] about basic forms of social liberty which one might actually put into practice: (1) the freedom to move away or relocate from one’s surroundings; (2) the freedom to ignore or disobey commands issued by others; and (3) the freedom to shape entirely new social realities, or shift back and forth between different ones.

Having the freedom to decide your own economic destiny, through bitcoin and complementary currencies, aligns well with freedom (3). My goal with this newsletter series is to explore (3) and how bitcoin makes that possible using ideas from the degrowth movement. Yet, we need (1) and (2) to make (3) possible. Circularly, we also need a monetary network that makes (3) possible, to make (1) and (2) possible. Bitcoin, so far, is the only monetary system that I see that makes it possible to shift one’s own psychological reality, to put (1) and (2) within reach. As some bitcoiners like to say, “bitcoin is fuck you money”. That’s (1) and (2) in five words or less.

I’m not sure where I’m going with the next edition of the newsletter, but one thing is for sure, I can’t stop thinking about Michio Kaku describing the Internet as a type I civilization telephone network. It only takes a tiny leap to then conclude that bitcoin is a type I civilization money. There’s some implications here for degrowth, I believe. I’ll think on this…