Core thesis
Fiat money is debt-based and inflationary. It rewards spending and leverage, punishes saving, and lets governments and banks expand the money supply when it is politically convenient. Bitcoin is different: fixed supply (21 million), no issuer, rules without rulers, and a public ledger anyone can verify. It is the first monetary asset available to individuals worldwide that no government can inflate, freeze, or confiscate by rewriting a database.
I expect Bitcoin to gradually absorb the monetary premium currently parked in gold, real estate, and other “stores of value,” especially as AI creates enormous new wealth that needs a scarce sink. Cash, bonds, and equities can be issued; gold supply responds to price; more buildings can be built. Bitcoin’s stock-to-flow only gets harder. That scarcity is not a Beanie Baby story — it is energy-backed, distributed, censorship-resistant network consensus that cannot be faked. Its launch (“immaculate conception”) cannot be repeated now that crypto is known and valuable.
A major influence on how I frame this history is Lyn Alden. I subscribe to her newsletter and read Broken Money in 2024. Her arguments and historical context — how soft money, soft banking, and soft geopolitics interact — were very enlightening and sharpened a lot of what follows.
Roughly: much of gold’s price (perhaps on the order of 70–90%) is monetary premium rather than industrial use; a large share of real-estate prices in expensive markets is the same — capital parked because soft money makes people buy “hard” assets. Bitcoin’s price is almost entirely monetary premium by design. As more people treat it as the best money, a large fraction of that gold and real-estate premium can be sucked into bitcoin over decades. That is the demonetization thesis: homes become shelter again; gold becomes jewelry and industry again; the store-of-value job consolidates into one scarce digital asset.
Life under a bitcoin standard
A deflationary currency reverses many perverse incentives of the fiat world. Saving is rewarded because money tends to gain purchasing power. People borrow less; debt traps shrink; long mortgages and casual consumer credit become rare. Employers, not workers, must argue for nominal pay cuts when productivity rises — flat salaries become real raises as prices fall. Housing and other assets can demonetize: if bitcoin holds the speculative premium, homes can be priced more as shelter than as investment vehicles.
Politicians would find it much harder to fund forever wars and vote-buying by printing money. They would need to tax before spending. Time preference lengthens: plan for the future, rather than grab gratification now while the currency melts.
Critics warn of deflationary spirals, sticky wages, and lost central-bank crisis tools. I argue those harms are overstated if the transition happens over years or decades, and if AI abundance means we are not fighting scarcity the way 1930s gold-standard economies did. People will still spend for what they need; they will just stop using excess houses (and similar assets) as the only place to park capital.
The Fed, debt, and fiscal dominance
The Federal Reserve is between a rock and a hard place because of ballooning national debt. Lower rates risk inflation and more leverage; higher rates make the debt harder to service and slow growth. Legislators in both parties blow out the deficit when they hold power. Markets increasingly suspect “fiscal dominance” — that the Fed will eventually let inflation run hot to erode the debt in real terms. A bitcoin standard removes that escape hatch: you cannot inflate away obligations denominated in hard money. Whether there should even be a Fed is a live question; Austrian and “end the Fed” arguments resonate with me more than most mainstream economists. At minimum, a rules-based, boring central bank that refuses to paper over congressional recklessness would be better than the status quo.
Corporate treasuries and capital rotation
Companies like Strategy (formerly MicroStrategy) and a growing list of treasury firms buy bitcoin with equity, preferreds, and debt — products that sometimes try to replace bond-like yield while funding more BTC purchases. Early long-term holders can sell into that demand for a while (they can only sell once). As more firms and households allocate even a modest share of capital into bitcoin or bitcoin-linked products — I have guessed somewhere in a wide band like 8–80%, depending on how irresponsibly governments devalue fiat — bonds and other soft savings vehicles look worse by comparison. That rotation pressures the dollar and other fiats and hastens the path toward a bitcoin standard, especially if dollar devaluation continues.
AI, agents, and scarce money
I expect AI to create tremendous wealth — and much of the monetary premium of that wealth to flow into bitcoin, the only truly scarce base-layer asset at global scale. AI agents will need digitally native money: permissionless, programmable, hard to freeze. Bitcoin (and layers like Lightning) fits that better than KYC banking rails. On a decades-scale path toward the singularity, a hard settlement layer matters more, not less.
Overhead: banks vs bitcoin
Every city is full of large bank buildings. Traditional finance employs several percent of the workforce in developed countries — retail and commercial banking, capital markets, hedge funds, mortgage lenders, insurance, clearing, compliance, IT. Bitcoin’s base layer and open-source ecosystem have far fewer buildings and people; much of the work is voluntary. Mining uses energy, but it also incentivizes cheap and stranded power, and the traditional system’s total footprint (branches, commuting, data centers, ATMs) is enormous too. A gradual shift toward bitcoin settlement could shrink large parts of payment, custody, and FX employment while leaving lending, insurance, and advice in modified form.
CBDCs and gold
I believe CBDCs are likely and harmful: programmable restrictions, negative rates, surveillance, and further centralization. Bitcoin is the escape hatch — gold’s successor for a digital age, with better portability, verifiability, and a harder supply schedule. See my letter to New American magazine (2023) on Bitcoin as a defense against CBDCs.
Why so few get it (yet)
Understanding bitcoin’s value proposition requires holding several abstract ideas at once — cryptography, distributed networks, monetary history, and game theory. Competing narratives (payments vs digital gold vs get-rich-quick) confuse people further. That is normal for a new monetary standard. Adoption grows as more people experience soft money failing them, and as treasury and ETF plumbing makes ownership easier.
Risks I still take seriously
Quantum computers could eventually threaten current signature schemes. The network should be able to migrate to quantum-resistant cryptography, but it is a real engineering problem to watch. The scary quantum scenario is less “break mining with a 51% attack” than stealing coins whose public keys have been revealed. Hashrate concentration in a few pools is another underappreciated coercion risk — not classical double-spend theater, but a vector for regulators to lean on operators. Long-run security budget (fees replacing subsidy after halvings) is an open question. Protocol design trade-offs (energy, throughput, governance) remain contested; layers and soft-fork upgrades are how bitcoin usually evolves without reckless hard forks. The outcome of the recent BIP-110 civil war was disappointing. Volatility and transition pain are real. I am optimistic about the destination, but not naive about the ride.
Over 10–20 years I can imagine many end games: digital-gold niche, full monetary dominance, regulatory capture, displacement by a “better” chain, fiat confidence crises accelerating adoption, war and capital controls, or messy hybrids. I do not pretend to assign precise probabilities; the point of debating them is to stress-test the thesis, not to forecast a single path. Bitcoin prioritizes store-of-value and settlement properties. Everyday medium-of-exchange volume can live on layers (Lightning and successors) without requiring the base layer to be Visa.
Models I built to think with
Debating is useful; simulating forces the assumptions into the open:
- BTC Price Model — monthly simulation of price, liquid supply, treasury/ETF accumulation, mining, and supply-shock scenarios (exploratory toy model, not a forecast).
- Wealth Concentration Model — agent-based model comparing yard-sale vs buy-and-hold dynamics under fiat vs bitcoin regimes, with an AI automation-return layer (built partly to stress-test “Bitcoin ends up like Monopoly” claims).
Source debates with Claude
This artiale is the distilation of many debates that I have had with Claude AI.