This is a part of the Bitcoin Infinity Academy course on Knut Svanholm’s book Bitcoin: Independence Reimagined. For more information, check out our Geyser page!

Protection from What?

Some of the rules that governments choose to impose on us are supposedly there to protect us from ourselves and our respective shortcomings. Bank bailouts, for instance. By removing the punishment connected to risk-taking, you also inevitably remove the ability for people involved to learn from their mistakes. Having skin in the game is crucial for any learning process. If this is removed, the risk taker will learn the opposite of what he’s supposed to learn from failure. He will conclude that the risk was worth taking, regardless of its consequences. Every time a law or policy mitigates the natural penalty for a bad investment, the entire system becomes a little more friendly to scammers and insincere people. This principle holds true for bank bailout policies but also for market regulations that primarily help the regulator and his friends by setting the bar for entry into the market at a height that their competitors can’t overcome. However, the moral hazard created by removing people’s skin in the game isn’t limited to just financial markets and banks. Far from it. Safety regulations, standardizations, certifications, and even social security have successfully removed certain risks from certain professions and businesses, but in doing so, they’ve also helped remove critical thinking and created entire species of bureaucrats that weren’t needed in the first place. Bureaucrats, who have no skin in the game at all except for their own jobs, are conjuring up new policies as excuses for their existence all the time. While mitigating risk may be helpful in the short term, these policies are effectively turning what should be a concrete foundation to build our citadels on top of into a house of cards occasionally repaired with duct tape.

Proponents of generous social benefit policies often claim that their opponents should be less selfish and more empathetic to the needs of their fellow man. In truth, nothing makes people more selfish than a political system that continuously tells them that they’re *entitled *to this and that. When people believe these lies, they also believe that they wouldn’t have survived without the systems they were born into. They are made to believe that without the state and its coercive taxes, things simply wouldn’t work, and no one would be there to look after them. The sense of entitlement is a very dangerous thing because it makes people believe that they can bypass personal responsibility from their life equation. It makes people forget that a society is just made up of its citizens and that there’s no limitless faucet of wealth to pour new resources from whenever politicians see fit. Everyone needs to chip in in order for the machine to work. Fat beggars, able-bodied couch potatoes, and chain smokers demanding free healthcare are relatively new phenomena, and they’re not proof of how far we’ve come or how humane our societies have become. On the contrary, they’re a testament to how limitless the cynicism of the elite really is and what lengths they’re willing to go to in order to keep their voting cattle ignorant enough to uphold a decadent system that slowly deprives them of their souls.

Dependence is the poodle’s kernel here. The more dependent the participants of a political system are, the less likely that system is to survive in the long run. As Margaret Thatcher said: “The problem with socialism is that you eventually run out of other people’s money.” Any society that makes its people dependent on the mechanisms of that society and demands nothing in return is doomed to fail. One could argue that social security programs make people less prone to criminal activity, but this argument fails to address the crime that was needed in order to anesthetize these would-be criminals in the first place, namely the coercive taxation methods used to finance the whole ordeal. Anything but personal responsibility for your actions is less effective and more costly for a society in the long run.

In Bitcoin, none of these problems exist, and it would be very hard to implement such policies in a Bitcoin economy because of the very nature of Bitcoin’s cryptographic signature model. Not your keys, not your Bitcoin is just another way of saying no pain, no gain, and as everyone who has ever truly owned and lost Bitcoin knows, this is the true nature of any possession. If your possessions are somehow guaranteed protection by a third party and not by yourself, you don’t truly own them. With Bitcoin as a world reserve currency, you can build a society on top of an underlying concrete trustless foundation, and you can weave this proveable sincerity into the fabric of whatever policies and values society aims to uphold. It could provide us with a much more stable common ground than fictitious promises such as the UN’s list of basic human rights, the US Declaration of Independence, or even the Ten Commandments ever could. The only thing preventing this from happening is our collective lack of imagination.

About the Bitcoin Infinity Academy

The Bitcoin Infinity Academy is an educational project built around Knut Svanholm’s books about Bitcoin and Austrian Economics. Each week, a whole chapter from one of the books is released for free on Nostr, accompanied by a video in which Knut and Luke de Wolf discuss that chapter’s ideas. You can join the discussions by signing up for one of the courses on our Geyser page. Signed books, monthly calls, and lots of other benefits are also available.