Bitcoin Is Premium Collateral And Perhaps The Salvation of Hedge Funds

Bitcoin works exceptionally well as collateral; far better than anything else I can think of. And I have a feeling that’s about to matter.

The fact is that collateral has been tremendously abused in the financial systems of the West. Most people ignore this, of course, including professionals who should know better. They’ve been relying upon the Fed Put, which is the implied guarantee that the Fed will never allow the S&P to drop very far… that if it starts to collapse, they’ll flood the markets with liquidity, push their associates to buy, or will simply buy shares themselves in “market operations.”

With ever-rising prices, questions about collateral rarely come into play. As a result, some really bizarre games are being played with it.

The Present State of Collateral

Only those who work in the guts of the financial system have a real handle on the state of collateral, but it is clearly a train wreck. I say that for several reasons, but none more telling than a very strange thing called re-hypothecation.

Re-hypothecation is one of those things that, upon first hearing of it, you think, “that can’t be true.” Stated very simply, re-hypothecation works like this:

  • I use several US Treasury bonds as collateral for a loan from my stockbroker.
  • Then, my stockbroker takes a loan from Bank A, pledging my bonds as their collateral.
  • Then, my stockbroker takes a loan from Bank B, again pledging my bonds as their collateral.

Believe it or not, this is fully legal, and it’s done all the time. In the US this is capped at 140% of the original collateral. In England there is no limit.

Can you see why there is a fundamental problem with collateral these days?

It Doesn’t Matter Until It Matters

As crazy as this situation may be, so long as prices never go down, the game can continue; no consequences will arise.

Except that every once in a while – even with a supposedly omnipotent Fed – things do go wrong. This is what happened with Lehman Brothers in 2008. And covering all that insufficient collateral cost US taxpayers some $700 billion. At one point the Treasury Secretary rushed to an emergency meeting at the White House and told the president that if the “troubled asset relief” plan wasn’t provided, the entire financial system would collapse. (Or so it was reported.)

Things are not essentially better now than they were then, and if prices fall significantly there simply isn’t enough good collateral in the system to cover the debts of banks and shadow banks.

This stands to become a life-threatening issue to hedge funds, which tend to be highly leveraged.

Why Bitcoin Is Better

With Bitcoin, collateral is certain. First of all, it can’t be diluted by the creation of new dollars, Euros and Yen. Only 21 million bitcoins will ever exist, and almost 90% of those are already in circulation.

More than that, Bitcoin can be used with multiple signatures (a simple process called multi-sig) so it can’t be spent more than once without the permission and knowledge of the original parties.

On top of that, securing collateral with Bitcoin is easy, provided you have just one competent IT person on staff. More than that, it’s fast: You don’t need to wait for escrow agents, lawyers and God knows who else to sign off on it. The tech guy either has the keys or he doesn’t. That’s it.

Bitcoin may be the most perfect and reliable collateral the world has ever known. And whenever it is that things get serious, informed players will demand it. Given the legality and prevalence of re-hypothecation and other money games, this may be the only way to be sure.

Bitcoin’s Built-In Leverage

The saving virtue of this from the hedge fund side is that Bitcoin has been escalating in value from the beginning, and will likely continue to do so for a long time. What that means for the financial player is a scenario like this:

  • My hedge fund borrows $50 million from a big bank, pledging 240 bitcoins as collateral. This is protected with a multi-sig system, so neither of us can cheat on it. So long as two plus two equals four, that bitcoin is secure.

  • The dollar price of bitcoin, however, triples over the next year or two. Now, I can triple my loan to $150 million. Either that or reclaim 160 bitcoins

So, my hedge fund got the loan it wanted because it had provably good collateral, then tripled the loan on that same collateral. For a lot of funds – especially once the regime of the never-falling price cracks – this can make the difference between survival and failure.


Paul Rosenberg

Bitcoin: Herald of A New Age

I have friends at the forefront of cryptography and privacy who don’t much care for Bitcoin; they see flaws in it and they think we could do better. And they are not wrong: There are flaws and we can do better. Nonetheless, Bitcoin is. And it is playing a crucial role in the formation of a new age.

I think it’s important for us to understand that role.

How The Future Arrives

Children are oblivious to the future. Old people tend to oppose it on principle. Those of us in-between are left to grapple with it. And the fact is that the future seems to arrive in different ways for different people. Three examples will suffice:

  • Middle-of-the-roaders, fiercely committed to a comfortable sameness, tend to be gob-smacked when changes arrive. In 2009, for example, we heard such people groaning, almost in unison, that “No one could have seen this coming.”

  • Cypherpunks, space advocates and other assorted future-seekers are forever disappointed that it’s taking so long.

  • The most enthusiastic denizens of the status quo; that is, those who believe they are feeding from it, can be counted upon to oppose the future. Somehow they understand that when the future rolls in their ox will not only be gored, but run-down flat.

Nonetheless, the future does arrive, though never according to the pristine wishes of the future-seekers. Rather, the future arrives in a very human way: Sloppily and haphazardly. When the future begins to put down roots, it is not according to the best laid plans; it’s according to an insanely complicated human condition.

When the future appears we purists are seldom fully pleased. Nonetheless, it behooves us not to uproot imperfect developments. Our job is rather to keep building, adding better layers to a less than perfect first layer.

Bitcoin, flawed though it may be, is a very effective first layer for the future, and we should avoid anything that smacks of either tearing it up or idolizing it.

Bitcoin Is Education

Anyone who pays attention sees that Bitcoin is a tremendously important revolution in money. It is decentralized, censorship resistant, neutral and immutable. It’s hard to over-estimate the importance and impact of that. It is a massive game-changer.

On top of that, Bitcoin has survived and thrived for nearly eleven years, beginning at absolutely nothing, always at a gigantic disadvantage. And after that battle we see millions of people enamored with a cypherpunk technology… and a hundred million more who are notably curious.

But there is more to Bitcoin than even this. Bitcoin is also education. Please consider this odd concept:

Bitcoin is teaching people how to behave in the new age.

I once listened to a lecture on ancient Greece and was struck by the historian saying, “Homer taught the Greeks how to behave in their new civilization.” I now think that Bitcoin is doing almost precisely that for our new age. To put some flesh and bone on that, I’ll use this moment’s most common exemplar: the Bitcoin meetup.

Every week, in nearly every significant city on the planet, people gather; sometimes 4 or 5, sometimes 20 or 30, occasionally several hundred. And together they explore the mysteries of the blockchain, a method for assuring and scaling trust that requires no overseer.

These people are learning to think about decentralization. That is, to imagine human processes without the central dogma of the past 5,000 years: That centralized force is essential to life itself.

Think about that for a moment: An ethos of survival that has held since the Bronze Age – that small, tight groups must control the masses – is being replaced with a preference for decentralization. And consider that by this the dignity and utility of the individual is being placed above the dignity and utility of rulers.

This is the future taking root.

Seeing Bitcoin As It Is

Bitcoin is neither magic nor poison. It is a tool. A brilliant tool? Yes, I think so, and more than that a terribly useful one.

As I noted above we should neither degrade nor idolize Bitcoin. Rather, we should use it profligately. Not only because it’s good money, but because it is teaching mankind, week by week, to think in terms of decentralization… to value the utility of the individual… to believe in the dignity of the individual.

And those are things that will very definitely change the world.


If you’d like to read more on this, see:

FMP issue #71

FMP issue #101

Parallel Society issue #4

A Lodging of Wayfaring Men

Paul Rosenberg

Social Attacks On Bitcoin

It’s no secret that Bitcoin has enemies. There are those who’d like to kill it outright and there are those who’d like to subvert it. And, of course, Bitcoin has its fair share of the usual human problems.

The more overt attacks have pretty well failed thus far. Bitcoin, after all, is just a computer program, meaning that there’s no head that can be cut off, killing it with a single blow. On top of that, Bitcoin is protected with encryption end to end, and it’s more or less impossible to swing a sword, or a court order, against math. (Encryption being applied math.)

The usual types of subversion have likewise also failed to do a great deal of damage to Bitcoin and the younger cryptos. Fear of the regulator and especially the seduction of the regulator (“acceptance”) have been tried at length, and while they’ve left a few dents here and there, nothing fundamental has been destroyed.

As for human frailties, we’ve had those too, mostly notably young people finding themselves suddenly rich. That comes with more difficulties than those who haven’t been through it might expect. It’s what we used to call “a crazy-maker.”

Social Attacks

Put yourself in the position of needing to kill cryptocurrencies (for whatever reason), and not having a great deal of success. You can’t cut off its head and regulating it to death isn’t working very well. What choices do you have left?

Well, the next choice is to subvert via social manipulation. If you can’t get at the tech directly, and if there aren’t one or two humans who can sway the whole thing, you’re left to run social attacks. After all, with no one to run miners, develop new applications and so on, the computer programs would sit idle. And so, the intelligent attacker must go after a large number of people at the same time. It’s far from an ideal solution, but they really have no choice.

And so have come, as it seems to me, social attacks on Bitcoin and its younger siblings. I see (or think I see) two particular types that have arisen. These could have come from the negative psychology that floods the world these days – that is, without any particular intent – but I’ve seen this kind of thing before and underestimated it((I saw the beginnings of political correctness back in the 1980s and passed it off as so ridiculous that it would never last. I wasn’t in a position to do much about it then, but mea culpa all the same.)). I don’t want to do that again. 

Social Attack #1

Social attack #1 is something I’ve heard rumors about but can’t verify. The story goes that three or four years ago someone tried to get some bad code into BTC by either manipulating or attacking Bitcoin Core, the primary developers. The attacks weren’t physical, but they were serious.

In such a case, you survive the attack by saying, “I don’t care, call me an asshole.” That’s a necessary stand to take from time to time, and if the rumors are true, it was a good thing for the developers to do.

Social Attack #2

So, if you can’t kill it or subvert it very well… and if your first social attack fails as well, what are you to do?

Sadly, the answer is to take whatever opposite inertia was generated by Social Attack #1, and push it to its extreme.

And that’s what appears to have happened. I think we’ve all seen “I’m a Bitcoin hard-ass” posts on Twitter. It’s turning into a divide and conquer situation, pitting one part of the community against the other. And if it grows, it may slowly poison the whole.

This is a generational problem as well. The younger generation have been shoved into polarities by political types: Either they go Social Justice Warrior on the feeling side, self-righteously attacking anyone who doesn’t carry their feelings, or they go caveman on the other, thinking that kindness is weakness and that insults are the path to strength and truth.

This also plays into divide and conquer.

Is some person or group fanning these flames purposely? I don’t know, but it’s what an intelligent villain would do.

In The End…

In the end, it doesn’t much matter whether these attacks come from agents provocateurs or from human frailty. What does matter is that they are recognized and stopped.

The crypto community needs to become the adults of the financial world, not the squabbling teenagers. And we’re quite capable of doing that, even if prodded toward lesser paths.

Both sides of the polarity are bad choices. We need to be hard when it’s required and cooperative at all other times.

We’re not going to get to the goal by being squishy or by playing hard-ass. It behooves us to find balance and to keep our focus on the goal.

* * * * *

The novel that helped put the crypto revolution into high gear.

Comments from readers:

“Of the twenty five or so people I worked with last fall, all of them revered A Lodging of Wayfaring Men as a bible. They referred to the house and their community effort as a Lodge. We all felt it was modeled on the Free Souls.”

“Actually, I am somewhat at a loss as to how I might explain how I feel about this book other than to say what a great mind to write such an awesome story!”

“I’m an Old guy and find that Rosenberg has captured many Real-World truths in this novel. I wish the Millennial Generation would read this novel and consider the concepts and rationale presented here.”

Get it at Amazon or on Kindle.

* * * * *

Paul Rosenberg

The Two Crypto Economies

Bitcoin has always been hard to understand. Even Satoshi, its author, complained about that. The problem isn’t so much its complexity, but its newness – there’s really almost nothing to compare it to.

Having nothing to compare to is also a problem related to the prices of Bitcoin and the other cryptos. We’ve never seen currencies start from nothing and grow into serious players. We’ve always had silver and gold, at least in the background, but more or less all other currencies (certainly in our time) have been imposed by force.

Bitcoin, unless I’m forgetting something, is the first independent, world-recognized currency to pop up in a long, long time. And because of that, understanding its price is complicated.

The Two Economies

The key to understanding the price of cryptos is realizing that there are two separate crypto economies: the speculative and the commercial. These two economies are currently bumping into each other and occasionally running over each other… sometimes synergistically and sometimes antagonistically.

The speculative economy is the one that shows up on the news. It’s the home of both serious speculators and hucksters promising Lamborghinis. The speculative economy tends to be philosophically shallow, focusing on price and more or less nothing else((Which is not to say that all speculators care about nothing but price.)). This is the economy of CNBC, the futures markets, and get-rich-quick schemes.

The commercial economy is the one that doesn’t show up on the news. It’s the economy of actual commerce and hardworking developers. The commercial crypto economy tends to be philosophically deep. The people who are struggling to build and spread this technology are doing it because they believe in the better future it can bring into the world. This is the economy of Bitcoin taxis in Africa, international settlement transactions, and millions of smallish transactions between friends and business associates.

What we had in late 2017 was the speculative economy running to excess and overflowing the commercial economy.

What we had in late 2018 was the speculative economy flowing back out and draining liquidity from the commercial economy.

This has been inconvenient for many of us, but it’s something we’ll have to put up with. Evidently this is the way new currencies form.

The Primacy of the Commercial Side

While it appears mundane to the outer world, it’s the commercial crypto economy that really matters.

If there were no utility to Bitcoin and the others, they would have no value at all, save as a curiosity. And without underlying value, speculation would be ridiculous. And so it is the commercial economy that underlies everything. And for those of us who are serious about cryptocurrency, this is the economy we need to stay busy with, building and promoting.

And there is so much to be done.

Consider first that there are some two billion humans with no access to fast and simple financial transfers. That is, they have neither a bank account nor the associated services. These people are perfectly situated to become crypto users. They have the inherent need of trade and they generally have cell phones. And with crypto, that’s enough. Early crypto developers are working in these areas already, but there will be huge needs in this sector for a long time.

Consider also that nearly every cryptocurrency is immune to capital controls. Sadly, we can probably expect more of these in the years ahead, and cryptocurrency is, as we say, censorship-resistant. You can send money to anyone with a connection, anytime and in any amount.

Cryptocurrencies are also immune to monetary inflation… perfectly, mathematically immune. There are a fixed number of currency units in Bitcoin and its children, unlike the units of government currencies, which are created billions at a time by the actions of elites rather than by market participants. The value of the US dollar has fallen 90% over my lifetime because of such actions.

So, which is a better place to put the fruit of one’s labors? Government currencies are all but guaranteed to lose value consistently. Cryptocurrency is all but guaranteed (aside from speculative waves) to retain value.

Finally and probably most importantly, crypto is a path around a dangerous and tyrannical set of government currencies. I’ll leave off the details for today, but central banks and their associated systems have become networks of surveillance, control, and dominance. For the sake of our species, they need to be made obsolete.

So, in the long run, cryptocurrency is terribly attractive, first of all for its direct benefits, and secondarily as a speculation.

Until Then…

Until all these things play out, we’ll have to put up with speculative waves rolling back and forth over the commercial crypto economy.

More than that, we need to get even more serious about building the commercial side. Not only does the world need this, but the larger the commercial side, the less damage waves of speculation can cause.

* * * * *

The novel that helped put the crypto revolution into high gear.

Comments from readers:

“Of the twenty five or so people I worked with last fall, all of them revered A Lodging of Wayfaring Men as a bible. They referred to the house and their community effort as a Lodge. We all felt it was modeled on the Free Souls.”

“Actually, I am somewhat at a loss as to how I might explain how I feel about this book other than to say what a great mind to write such an awesome story!”

“I’m an Old guy and find that Rosenberg has captured many Real-World truths in this novel. I wish the Millennial Generation would read this novel and consider the concepts and rationale presented here.”

Get it at Amazon or on Kindle.

* * * * *

Paul Rosenberg

Our Moment at the Crossroads

Earlier this year I wrote an email to several friends, describing my feelings upon arriving at a crossroads for myself and my work. Surprisingly, nearly all of them wrote back that they were feeling the same thing. And so I think a lot of us have arrived at some type of crossroads lately.

Why Now?

How and why we feel to be at a crossroads is a very personal thing of course, but I think I see two reasons that have gotten under our collective skin, so to speak.

1. Saying goodbye to the 20th century.

Many of us are recognizing that the 20th century – the era in which we formed our images of the world as well as our strategies for dealing with the world – is inevitably vanishing.

The 20th century model of almost everything held on for a long time after the year 2000. Much of that can be blamed on the 9/11 event, which froze the previous era’s assumptions inside a wild array of institutions. But that is finally fading, and the 21st century, especially to us of a certain age, is the stuff of fiction… except that it’s here. It will be different, and the assumptions that work within it will be different.

Even for young people, the assumptions of the 20th century ruled entertainment, politics, and much more… and those are starting to fade as well.

2. An improved world may finally be possible.

The children of the 1960s and 1970s saw the need for a better way, but attaining such a thing was beyond their grasp. The communes failed. Drugs were of temporary benefit at best. And if sex could have solved humanity’s problems, it would have done so thousands of years ago. The system won, and they needed jobs. They lost faith that politics could be transcended.

And now… hesitatingly, almost grudgingly… we’re seeing that we may not have to continue pretending the system is the best of all possible worlds.

Almost impossibly, we see the pieces of a new world replacing the old. Politicians are recognized everywhere as liars and thieves, and monetary systems are broadly recognized as a social control. Political orders are fraying, European democracy is turning ugly, free speech is being overtaken by mega-corporations married to political power.

But more than all that, the Internet connected billions of us to a common medium. I don’t think we’ve remotely felt all the effects of that. On top of that, we got encryption, impregnable defensive walls for a new era. Then we were gifted decentralized currencies (which are actually much more than currencies), new models of organization, a new era of biology, a new era in education (homeschooling, Kahn, etc.), with something new arriving every year.

Yes, Bitcoin and all it spawned are portrayed almost as wrongly as possible, but they don’t go away.

The Silk Road was taken down. Ross Ulbricht was given a show trial and condemned to death in prison. Charlie Shrem spent a couple of years in prison for almost nothing at all. And the result of all this was that the new economy… the new world… did not lay down and die. Bitcoin continues, new currencies abound, new markets and better markets abound, and almost no one ran away in fear.

Furthermore, the new way already has its first heroes and martyrs: Assange, Manning, Ulbricht, and Snowden, all punished by a corrupt old regime for crimes like telling the truth and promoting voluntary commerce. They even have a legendary figure in Satoshi Nakamoto.

The Challenge to Us

Shocking though it may be, the famed “long run” may actually be arriving, and the page may in fact be turning. And that is troubling. Talking about it is one thing; facing it in the real world is something else.

And if the page really is turning, we’re the people who’ll have to write that new page… with our actions. That’s a very good reason to feel like you’re at a crossroads, and I think that explains a good deal of what so many of us are feeling.

But if that’s what’s happening, let’s rise to the occasion and make it something great.


* * * * *


The 20th century, for better or worse, is over. This book was written from the trenches of the new data wars. It offers a raw, apolitical view of what is happening and where the practice of intelligence is headed.

Comments from readers:

“Be warned; this book is not rainbows and butterflies. This book is a hard look at a future that can be avoided only through vigilance and dedication. At only 55 pages, I read it in one sitting and agree with every word. If I had the resources I would buy hundreds of these books and distribute them to people freely.”

“Right on the money. What’s described so aptly in this book is happening now and it’s only going to get worse.”

“A must read for everyone. As terrifying as The Black Swan by Nassim Nicholas Taleb

If you have a glimpse of the whole picture of history and where we can head (or are heading) as a civilization, you should come away from this read with new insights.”

Get it at Amazon or on Kindle.

* * * * *

Paul Rosenberg

The ECB and the Feds Are Treating Bitcoin Very Differently


Having been involved with digital currencies for quite a long time, I get more information on the subject than most people, and that includes information on what regulators are doing. I’ve been seeing differing strategies among the central banks for some time. But some information I obtained recently made the Euro–American difference very plain to me, and I think I should pass it along.

The US Model

It seems to me that this model is being spawned by the Treasury and associated agencies, rather than the Federal Reserve, but the Fed is such a black box that I can’t say for sure.

The model developing in the US is to take advantage of cryptocurrencies (that is, Bitcoin and its children), rather than trying to kill them outright. And there are serious advantages to this strategy. Here’s what they’re doing:

  • The Treasury is reaping from the rise of Bitcoin, Ethereum, and the others. Capital gains taxes run in the 20–25% range, and with crypto prices surging every couple of years, that brings in some significant revenue. Accordingly, the IRS has made compliance easy, treating crypto gains precisely like gains in precious metals. Everyone understands that and knows how to deal with it. Exchanges like Coinbase are being quietly forced to comply with whatever the US government wants.

  • They are moving to swallow up crypto incrementally. Regulators are surrounding the crypto scene gently, not aggressively. They show up at meetings and ask questions, rather than threatening people. They bring in crypto advocates to make presentations at their offices. Little by little, they’re not only learning how to deal with crypto but are convincing susceptible people that “a little regulation is necessary” because of scammers, hackers, or whatever flavor of fear seems to be working that month.

  • They are allowing Wall Street to take incremental steps into crypto. They are making them go slowly, presumably not wanting to stoke crypto’s fires, but they are allowing fully regulated and compliant firms to slide in. They’ve rejected all the ETF (exchange traded fund) proposals thus far, but that will likely change at some point, bringing higher and higher percentages of crypto holdings under their control. (Directly controlled by Goldman, etc., but ultimately controlled by the feds: Stockbrokers always comply.)

  • Thus far they are holding the line at tax compliance for daily commerce. The obvious model for that would be how gold is handled, with transactions under a certain amount being exempt from reporting. And while laws have been proposed for this, none have been permitted to pass. What the feds want is to reap capital gains and discourage commerce.

  • They are paying people whom I can describe only as sellouts to do blockchain analysis, hoping to attain a useful level of surveillance.

The financial power elite were actively seducing early Bitcoin developers for a while, but that seems not to have worked terribly well. Bitcoin, after all, is just a computer program, and no one by themselves can control it. (Neither can it ever go broke, but that’s another story.)

The Euro Strategy

The strategy across the Pond is quite different. There, aggressive subversion is under way, mainly by the ECB (European Central Bank). Laws have been passed in some countries to explicitly make every tiny transaction a taxable event. This will have unintended consequences, but its goal is simply fear.

Laws have also been passed making cryptocurrency wallets illegal to sell or distribute, unless the wallet forces a user to comply with AML (anti money laundering) rules.

Behind the scenes, the Euro regulators are getting very aggressive. We know someone on the board of a bank in a smallish European country, in other words, a voice from the inside. Here’s what that voice has told us:

  • Crypto is totally evil according to the central bank. It’s absolutely radioactive for us. We are barely allowed to talk about it, let alone do something distantly related to it. We can’t even lend to an entity that does crypto. We as bankers are not naturally against crypto as is often cited, but one step into the crypto arena and we would have regulators all over us.

  • Our central bank gets its marching orders from the ECB, and the ECB’s reach extends to other central banks. The press here is full of articles on how other countries are obstructing crypto.

  • This reminds me of the huge effort in AML. The public may hear little but it’s a massive issue in the financial sector and is at the crux of the battle on crypto. AML has become a monster that has vastly outgrown its initial purpose. (Or perhaps it is doing exactly what someone really wanted it to do.) It is a huge, expensive, and quite effective spy mechanism.

  • The financial system has been turned into a massive database and search engine for authorities. It is a major weapon in the financial wars of the day and may be more effective than conventional weapons. In decades of banking I’ve never seen anything like it. Initially most bankers brushed it off as just another nuisance regulation, but this was not the case. This is a worldwide effort.

  • If you don’t cooperate, you are cut off. You basically can’t make a mistake without very heavy penalties. You have to report on your customers or else you will look like you are not a player. The whole model is very Soviet and it works almost worldwide. Most bankers feel it is political issue wrapped in financial regulatory clothing. It’s hard for the public to understand, and politicians won’t touch it.

  • The authorities are coming down on all institutions in the region. Correspondent lines are being cut… High-ranking US financial officials make house calls to all the finance ministries in the region and remind them about how compliance complements military and other aid… some of those compliance issues are such a hot potato that few managers are even willing to talk about them. [The financial elite] finally have open season on financial data and they don’t want anyone taking that stick away, including crypto.

Final Thoughts

So, there you have it. What to do about all this is a second question, but this is pretty clearly what’s going on at present.

Act carefully, but do not stop building the future.

* * * * *


The 20th century, for better or worse, is over. This book was written from the trenches of the new data wars. It offers a raw, apolitical view of what is happening and where the practice of intelligence is headed.

Comments from readers:

“Be warned; this book is not rainbows and butterflies. This book is a hard look at a future that can be avoided only through vigilance and dedication. At only 55 pages, I read it in one sitting and agree with every word. If I had the resources I would buy hundreds of these books and distribute them to people freely.”

“Right on the money. What’s described so aptly in this book is happening now and it’s only going to get worse.”

“A must read for everyone. As terrifying as The Black Swan by Nassim Nicholas Taleb

If you have a glimpse of the whole picture of history and where we can head (or are heading) as a civilization, you should come away from this read with new insights.”

Get it at Amazon or on Kindle.

* * * * *

Paul Rosenberg

Why We’ll Win


A free, post-scarcity world will not be prevented by archaic systems scratching and clawing to retain their domination. We will evolve freely, unburdened by an unfortunate past. This will happen, and today I’m going to tell you why.

But more than that, I want you to understand that we deserve to win, and that the future – the world of our children, grandchildren, and so on – very much needs us to win. Our culture stands for – and supports in action – the things that make life thrive on Earth.

Let me make this point very clear:

We believe in the Golden Rule… as in actually believe in it, all the time. Our culture takes it seriously and acts like it’s the only healthy way to live.

The easiest and most gutless life is to follow the crowd. What makes the world better, on the other hand, is to live by what’s right. Making unpopular choices – developing and trading crypto, homeschooling your children, ignoring brain-locked regulators, pursuing unapproved cures, changing religions where it’s forbidden, pursuing what is disliked by the powers that be – these things require strength of character and dedication to real principles.

Regardless of our occasional stupidities and errors, our way of life clearly deserves to win.

How We’ll Win

“To change something,” said Buckminster Fuller, “build a new model and make the old obsolete.” And we’ve been building a new model considerably more than we may realize.

A new model is precisely how the personal computer came to be and how the Internet came to be. Regardless that computers and the Internet have been recaptured by the status quo, the model remains and has also spawned encryption and Bitcoin, technologies that are ephemeral and a lot harder to conquer.

Moreover, the cryptosphere is growing tremendously. When I started pursuing such things back in the 1990s, there were very few of us, and far between. Now I run into crypto advocates in grocery stores, not to mention in general business circles.

Likewise there are dozens of VPN providers these days. When we started Cryptohippie, few people outside of technical circles had any idea of what we were selling.

Furthermore, there are tens of thousands of people working to develop, improve, and spread cryptocurrencies every day, often at their own expense and with considerable uncertainty. Because they believe in them. Because they believe they’re building a better world.

Homeschooling makes another fine example. When I started my involvement, parents had recently been arrested for homeschooling in the US. We had to get busy supporting a legal defense fund. Now there are a few million homeschooled kids in the US alone, and everyone knows that homeschooling produces excellent results.

We’ll win by doing these things, followed by others like them. Little by little, step by step, planting seed after seed, we’re moving toward our goal faster than we’ve appreciated.

Once human action of these types account for enough of our activities, it’ll be almost unstoppable, and the legacy system will begin shrinking. We can expect screaming, threats, and even bloodshed from the obsolete system, but over time it will give up its operations piece by piece.

This isn’t to say that our new systems will be immaculate, but they’ll be far better than the Bronze Age relics that currently dominate mankind.

And if Not…

If, for whatever reason, we fail to continue what we’ve begun, our new civilization still wins in the end. For one thing, human evolution continues. We are notably better than we were a few thousand years ago – qualitatively better – and we’ll be still better in the future.

More immediately than that, however, the next cycling of rulership will finish the job for us. As we covered back in FMP #18, civilizations always cycle. They always have and almost certainly always will, until violence-backed hierarchy ends. When the next cycle comes along, it will do so in a rich technological environment. Because technology does not cycle. Rather, it accretes… it builds up.

So, once the present hierarchies break up and vanish for a few hundred years, tech will be free to come out and play. We’ll be free to reorganize in innovative new ways. Things simply will not be rebuilt according to the same old model. That’s how history works.

But while it’s nice to know that the insanity will pass one way or another, I think all of us would like it to be sooner rather than later. For our own sakes and certainly for those of our offspring, time is important. And so we need to believe in what we’re doing and to do it with vigor.

“The fashion of the present world,” says the Bible, “is passing away.” Let’s help it along.

* * * * *

As it turns out, history was never too hard to understand; they just told you the wrong story.

Comments from readers:

“This is the most amazing little book I have read on history in 36 years of reading history.”

“It will change the way you look at nearly everything.”

“I will flat out say that this is the best history book I have ever read… I am fairly well read, but I learned a tremendous amount that I hadn’t known before or hadn’t aligned so that it made sense.”

“This is the best and clearest description of the history of Western civilization I have ever read.”

“Packed with insights on every page concerning how the world came to be the way it is and what we might expect in the future.”

Get it at Amazon or on Kindle.

* * * * *

Paul Rosenberg

The True Vision of Satoshi Nakamoto

I had planned to write about the philosophy of Satoshi Nakamoto, based upon his writings. Recently, however, I’ve heard about food fights in the Bitcoin Cash camp, centering on “Satoshi’s Vision.” One thing I’m certain about is that Satoshi would not want to be the subject of fights.


I had planned to write about the philosophy of Satoshi Nakamoto, based upon his writings. Recently, however, I’ve heard about food fights in the Bitcoin Cash camp((I think Bitcoin Cash is a fine currency from a technical standpoint, but the behavior of its advocates has soured me on it.)), centering on “Satoshi’s Vision.”

One thing I’m certain about is that Satoshi would not want to be the subject of fights.

Hence today’s article. In it I’m going to explain what Satoshi was really all about, what he/she/they hoped would happen with Bitcoin, and how I think Satoshi would react to the continuing development of cryptocurrencies.

What I’m Basing This Upon

Telling the world what did or would go through someone else’s mind is usually a fool’s errand. That’s why I planned to base my original article on specific writings. Given, however, that people are fighting about “Satoshi’s Vision,” I think the errand is worthwhile, and I hope that Satoshi would agree.

And I have a background for this. I became involved with cryptography and digital currencies in 1995 or so, and I followed those developments closely, not only as an observer but as a participant. I was in the same general crowd as Satoshi, and it wasn’t a terribly large crowd.

And so, let’s get to it. What really was Satoshi trying to accomplish, and what did he (I’ll stick with “he” for convenience) see in the future?

Us and Them

I think a first thing to understand is that Satoshi was clearly a cypherpunk… a cryptoanarchist. In an email of January 16, 2009, he shows his cypherpunk identity:

I think there were a lot more people interested in the 90’s, but after more than a decade of failed Trusted Third Party based systems (Digicash, etc), they see it as a lost cause. I hope they can make the distinction that this is the first time I know of that we’re trying a non-trust-based system.

And in another place, he states, “Then strong encryption became available to the masses.” That’s another cypherpunk/cryptoanarchist theme.

As he began to release Bitcoin, he described it as something he and his friends could use to

“win a major battle in the arms race and gain a new territory of freedom for several years.”((Email of 11-07-2008.))

Notice that he sees Bitcoin as part of an ongoing arms race. And that arms race was, and is, between the advocates of cryptography and the advocates of force. Put simply, they have violent men, guns, and legal orders backed by violence. We have cryptography.

The same passage goes on to state, “Governments are good at cutting off the heads of a centrally controlled network like Napster….”

This was the motivation behind Bitcoin: to create a cryptography-based digital currency, one that had no head for governments to cut off… because weapons can’t cut through crypto.

Satoshi was going through the digital gold currency wars as well (roughly 1999–2009), noting that, “one of the e-gold systems already has a form of spam….”((Email of 01-25-2009.))

Satoshi’s Open-mindedness

Reading Satoshi’s emails and posts (and you can find them all thanks to Daniel Krawisz at, you see a person who is anything but rigid. He has his reasons and expectations, but far more than anything else, he wants this thing to work. He’s happy to consider options, even to change things if they’d work better a different way. And he fully expects the model to change over time. For instance:

When that runs out, the system can support transaction fees if needed.((Email of 01-10-2009.))

Satoshi’s Modest Vision

While Satoshi considered the possibility that Bitcoin would succeed wildly, and to some extent designed for it, he didn’t really expect it. Notice the arms race passage above. Satoshi expected Bitcoin to function for only a certain number of years before the lords of violence found ways to chop it down. And he was deeply concerned that Bitcoin would be attacked before a functional community had been built up:

I make this appeal to WikiLeaks not to try to use Bitcoin. Bitcoin is a small beta community in its infancy. You would not stand to get more than pocket change, and the heat you would bring would likely destroy us at this stage.((Post of 12-05-2010.))

Perhaps Satoshi was being overly cautious, but in those days no one had a clear idea of what Bitcoin was becoming.

Channeling Satoshi

Satoshi didn’t write very much, specifically noting that “I’m better with code than with words,” but he wrote enough for us to get a decent image of his motivations and character. And so, I’ll continue my fool’s errand by telling you a few things that I think Satoshi would say in confidence.

Above all, make cryptocurrencies work. Not just for coders, but for technically ordinary people.

Free markets are useful things, and that includes free markets of strategies.

If we don’t keep adapting, we’ll lose the arms race. Our enemies are not static.

Some adaptions won’t be any good, but it’s better to have a mix of good and bad than none.

We have an unexpected chance for long-term success. Don’t slow down!

Dear Satoshi…

Amigo, I hope you’d approve (at least more or less) with what I’ve written here. But if not, feel free to correct me.

And either way, thank you.

* * * * *

The novel that helped put the crypto revolution into high gear.

Comments from readers:

“Of the twenty five or so people I worked with last fall, all of them revered A Lodging of Wayfaring Men as a bible. They referred to the house and their community effort as a Lodge. We all felt it was modeled on the Free Souls.”

“Actually, I am somewhat at a loss as to how I might explain how I feel about this book other than to say what a great mind to write such an awesome story!”

“I’m an Old guy and find that Rosenberg has captured many Real-World truths in this novel. I wish the Millennial Generation would read this novel and consider the concepts and rationale presented here.”

Get it at Amazon or on Kindle.

* * * * *

Paul Rosenberg

Bitcoin and the Beatles


I’ve been involved with cryptography since the mid-1990s. That’s when I had my “aha” moment and realized that cryptography creates a terra nova the lords of force can’t penetrate. Progress, however, was disturbingly slow. We had great ideas, brilliant people, and even some impressive projects. But nothing really stuck. Disheartened, most of us gave up on our world-changing dreams.

Then, to our great surprise, Bitcoin stuck. And now, finally, I’m facing the possibility of cryptocurrency making some of our dreams come true. And trust me, that’s not easy after years of disappointments.

Fun (and Maybe Useful) Parallels

As it happens, I’m starting on a series of stories just now, involving jumps back into the past. Part of the process has been to listen to old music to get a feel for the era I’m writing about. And that led me to my Bitcoin-and-Beatles parallels.

Bear in mind, please, that this isn’t only for fun. Both the rise of the Beatles and the rise of Bitcoin are social phenomena, tied to popular acceptance. There may be substance beneath some of this.

But either way, let’s have some fun with this idea.


In the cases of both the Beatles and Bitcoin, it wasn’t any single thing that made them a big deal, but a synthesis of several factors. Consider:

The Beatles: Yes, the lads were talented and hardworking, but in no way did they stand above the era’s best musicians. Paul was a competent bass player, John just an average guitarist, Ringo a professional-level drummer, and George a shyly inventive guitarist. Paul and John were pleasant singers and George was a competent harmonist, but none of them could come close to a singer like Andy Williams. Even when it came to songwriting (their strongest area in my opinion), it’s quite debatable that they were as good as, say, Goffen and King.

But taken all together… the synthesis was an earthquake. In 1963, the top 100 songs still included Henry Mancini, Nat King Cole, and Tony Bennett. Fine musicians all, but definitely rooted in the post-World War II era. In 1964, the Beatles blew the doors off everything that had come before, with nine songs hitting the top 100, including #1 and #2.

Bitcoin: No single component of Bitcoin was a revolution in itself. Diffie and Hellman had invented public key exchange back in the 1970s and Ralph Merkle, hash trees back in 1979. Bram Cohen defined P2P networking several years before Bitcoin, and proof of work was previously developed by Adam Back as a cure for spam.

But again, the synthesis was an earthquake.

The Acceptance Pattern

The Beatles (Lennon, McCartney, and Harrison) had been playing together for six years before the broader world noticed. Then they exploded. But after the explosion, as few people remember, they slowly faded. As we said, in 1964 they had nine songs in the top 100. In 1965 they had only four. They had four again in 1966 and lower on the list. In 1967 they had only two songs on the list. By the standard measurements, they were dropping.

1967, however, was the year the Beatles released the Sgt. Pepper album, changing the music business and making the list almost irrelevant.

Bitcoin likewise labored for years before it was noticed. It dropped onto the internet in January 2009, but few people heard of it until the exchange rate rose dramatically in 2016 and 2017. Then the world heard about Bitcoin, which promptly fell into a slump.

So, is Bitcoin’s “Sgt. Pepper moment” coming? Consider first that literally billions of people have no bank account and no serious hope of getting one; they are constrained to their local trading circles. They do, however, have smart phones, and that’s all they need to use cryptocurrency, opening the world economy to them. Crypto gives them more or less all the advantages banks can provide (and then some), with few of the hassles or fees. Consider also that the value of Bitcoin can’t be inflated away like government money. (The dollar has lost 90% of its value since I was a boy.)

So the answer is yes, Bitcoin’s (cryptocurrency’s) Sgt. Pepper moment is almost certainly coming. It may not be as sharp an arrival as the release of Sgt. Pepper, but it’s almost certain. People are not blind to what’s in their interest.

Further Parallels

Both the Beatles and Bitcoin had fleeting predecessors. For the Beatles, Elvis and Little Richard had shaken things up some years before, but they were mainly gone. For Bitcoin, the cypherpunks had shaken things up some years before, but they were pretty well gone too.

Both handled their fame admirably. The Beatles were suddenly influencing a hundred million young people while not far past boyhood themselves. But they behaved themselves and moved toward peace and love, admirable directions. Likewise Satoshi: He, she, or they got out of the way and stayed out of the way, which, in retrospect, was probably necessary.

It was just the right time. The world was ready for new music in 1964, but probably no more than it’s ready for new money now.

* * * * *

A book that generates comments like these, from actual readers, might be worth your time:

  • I just finished reading The Breaking Dawn and found it to be one of the most thought-provoking, amazing books I have ever read… It will be hard to read another book now that I’ve read this book… I want everyone to read it.
  • Such a tour de force, so many ideas. And I am amazed at the courage to write such a book, that challenges so many people’s conceptions.
  • There were so many points where it was hard to read, I was so choked up.
  • Holy moly! I was familiar with most of the themes presented in A Lodging of Wayfaring Men, but I am still trying to wrap my head around the concepts you presented at the end of this one.

Get it at Amazon ($18.95) or on Kindle: ($5.99)


* * * * *

Paul Rosenberg