The Dark Future Where Payments Are Politicized and Bitcoin Wins
Satoshi Nakamoto intended bitcoin to be used for online payments. But it never caught on as a mainstream payments option.
The main hurdle to widespread adoption of bitcoin-as-cash is its wild, and potentially lucrative, price changes. This roller coaster-problem isn’t going to disappear. Which means the only way for bitcoin payments to ever go mainstream is if the nation’s reliable payment pipelines, the ones that have knitted it together for decades, stop doing their job. Only then will second and third-best payments rails like bitcoin be called into play.
Here’s a short story about how America’s payments infrastructure slowly implodes and bitcoin payments go mainstream.
We all know that America is ideologically divided. This turmoil has already enveloped both the traditional media and social media, with many conservative voices now migrating to Parler while liberals stick to Twitter.
Banks and payments processors have also become venues for conflict. For instance, activists have successfully pressured card processors to cut off white supremicist book seller Counter-Currents, the Proud Boys merchandise store, and social network Gab, which describes itself as pro-free speech but has high concentrations of toxicity.
Imagine a world in which these divisions were to deepen. Say that some payment processors begin to cut off all customers that are deemed too Republican. In 2023, the Wall Street Journal is deplatformed by its acquirer, the bank that hooks it into the Visa and Mastercard networks. Companies with Trump-supporting executives like Home Depot and Goya Foods are cut off by their banks too.
And conversely, Republican activists start to pressure financial institutions to unplug Democrat-aligned businesses. In 2024, several large banks agree to stop connecting abortion clinics to the card networks.
What emerges by 2026 is a divided ecosystem of payments processors. One half specializes in connecting Republican businesses and nonprofits to core payments infrastructure, the other half specializes in connecting Democrat ones. Any bank or processor that tries to stay neutral is shunned – she who connects my enemy to Visa is my enemy.
Even at this level of divisiveness, Republicans and Democrats can still do business together. As long as Mastercard and Visa themselves remain neutral by letting both Republican and Democrat-aligned payment processors hook into their networks, then dollars can flow across the ideological chasm.
But in 2029, Democrat activists pressure Visa to end its neutrality and disconnect all Republican payment processors. Suddenly, Republican businesses can no longer accept Visa cards. The next year Mastercard goes Republican. All Democrat-leaning businesses are exiled from the Mastercard network.
America is now divided into two card fiefdoms. Consumers will need one of each card if they want to shop at both Republican and Democrat stores. Democrat shoppers shamefully hide their Mastercards and Republicans their Visas, lest their friends and family see that they are consorting with the enemy.
By 2031, cracks finally appear at the core of America’s payments plumbing. The neutrality of the Federal Reserve, made up of 12 district Reserve banks, comes to an end. The CEO and Directors of the Federal Reserve Bank of Kansas City, all staunch Republicans, unilaterally decide to stop providing Democrat-leaning banks in their district with access to Fedwire. The Kansas City district includes the states of Kansas, Wyoming, Nebraska, Colorado and Oklahoma.
No one wants to live in a country where bitcoin has become vital for payments.
Fedwire, the Federal Reserve’s real-time settlement system, is America’s most important payments utility. When anyone makes a payment from their bank to another bank, it’ll eventually be settled by a movement of funds along Fedwire. By cutting off Democrat-leaning banks and their customers from this key utility, the Kansas City Fed effectively removes their access to the rest of the U.S. banking system.
The Atlanta Fed, also Republican, follows the Kansas City Fed a month later. In retaliation, the Federal Reserve Banks of San Francisco and Boston disconnect Republican banks from Fedwire, in one swoop unbanking all Republican-leaning businesses located in their districts.
In 2033, the San Francisco Fed halts all incoming payments from both the Reserve Banks of Kansas City and Atlanta. Suddenly, there is no such thing as a universal U.S. dollar. Money held in accounts in Georgia and Florida and Oklahoma can’t move into accounts in California or Washington, and vice versa. The payment tissue that once connected all American has torn.
The collapse of America’s payment infrastructure would be just one theater in a much larger factionalization of American society along ideological lines. Other key bits of American infrastructure would also begin to fall apart: the courts, law enforcement, the education system. There would be large physical dislocations as Republican families migrate to Republican enclaves and Democrats to Democrat enclaves.
But commercial life would still go on. Within their own enclaves, Democrats would still do business with Democrats, and Republicans with Republicans. They would probably rely on local credit-based systems to engage in trade. Credit, which relies on trust, is the most efficient way to carry out transactions.
What about trade between Democrats in one enclave and Republicans in another enclave? Each side will produce goods that the other side needs. With neither side trusting the other, IOUs would be an unacceptable currency.
It’s possible that silver and gold would become popular again, as they were in the 1600s and 1700s. Or perhaps bitcoin would become America’s favorite medium for conducting inter-factional trade. The nice thing about bitcoin, like gold, is that it doesn’t rely on a trusted counterparty. Suspicious traders needn’t worry about the IOU-issuer welching.
But if America’s electrical and telecommunications infrastructure has crumbled, would it even be possible for people to use bitcoin?
It’s a stretch, but we can imagine distributed solar power solving the electricity problem. As for accessing the bitcoin network, tinkerers could try to connect old fashioned ham radios to Blockstream’s bitcoin satellite. If the remnants of AT&T and Verizon can only provide patchy internet service, so-called decentralized mesh networks might offer an alternative way to access the web.
This dystopian future probably isn’t going to happen. For now, bitcoin has found a role as a popular way for Americans to speculate, sort of like gold. Let’s hope it stays that way. No one wants to live in a country where bitcoin has become vital for payments.
Everything The Felder Report got wrong about Bitcoin
Bitcoiners are crying foul at former billion-dollar hedge fund manager Jesse Felder’s “inaccurate” hot take blog post about Bitcoin today in which he claims the crypto asset “doesn’t make sense as an investment nor as a currency alternative.” Bitcoiners seemed taken aback by the number of factual inaccuracies in the post coming from someone working in finance.
In the Nov. 18 post on his financial blog titled “Please Stop Asking Me About Bitcoin,” Felder claims Bitcoin (BTC) is not used as a medium of exchange, nor does it provide any store of value. He also questioned the value of one of the key features of the cryptocurrency — its scarcity, with only 21 million possible coins — by claiming that hard forks are “multiplying the number and type of Bitcoins in circulation.”
“If you put together all the hard forks Bitcoin has undergone since it was first created, the number of total Bitcoins has actually grown faster than the number of dollars,” said Felder. “That’s a fact.”
NEW POST: Please Stop Asking Me About Bitcoin https://t.co/xkD8no6lgr
— Jesse Felder (@jessefelder) November 18, 2020
However, it’s not a fact unless you mistake BCH or BSV as part of the Bitcoin supply. Coin Metrics co-founder Nic Carter was quick to correct this, stating that “almost everything in this post is wrong” and pointed out that “hard forks did not dilute Bitcoin.”
The former hedge fund manager also claimed that Bitcoin could “be supplanted by a better cryptocurrency” that hasn’t been created yet. More than one Twitter user said that this would be “highly unlikely” due to network effects.
Felder also seemed to be operating under the belief that the Bitcoin network itself had been attacked, rather than insecure exchanges or wallets with poor security, when he claimed “millions of dollars worth of Bitcoin has been hacked.” He continued:
“Bitcoin may make a great deal of sense as a speculation. Ponzi schemes can work out great for early adopters.”
Felder’s confident assertions about Bitcoin had many Twitter users champing at the bit to set him right.
Bitcoin bull Anthony ‘Pomp’ Pompliano was one of the first to respond, calling Felder’s words “really inaccurate” and offering to educate the former hedge fund manager over a phone call. Alex Gladstein, Chief Strategy Officer at the Human Rights Foundation, followed suit, stating Felder was “too lazy to do the research” and out of his depth.
It has been hacked. Wrong.
Forks multiply it’s supply many times. Wrong.
It is not a store of value. Wrong.
It could be supplanted by a better crypto. Wrong. Google Metcalfe’s law.
Doesn’t provide safety of principal. Wrong.
Doesn’t provide an adequate return. Wrong.
— Lawrence Lepard (@LawrenceLepard) November 18, 2020
Part of Felder’s apparent confusion may be due to him stating he relied on an “old school definition” of investments, however the fact is that hard forks do not affect the total Bitcoin supply of 21 million coins. While hackers are able to steal coins from time to time, these crimes are usually limited to exchanges and custodians, phishing attempts, and misplaced private keys — not the Bitcoin network itself.
“Better to have no opinion than a poorly reasoned one,” said Twitter user anilsaidso.
Bitcoin Suisse expects to offer Ethereum staking before Christmas
Crypto service provider Bitcoin Suisse expects to offer its Ethereum (ETH) staking services before Christmas, underscoring the firm’s expectations of an imminent launch of Ethereum 2.0.
In a statement released Wednesday via Trustnodes, Bitcoin Suisse said:
“The deposit contract for Ethereum 2 is now live. This means that the new version of the second biggest protocol by market cap will most likely become a reality before Christmas.”
The firm intends to offer the staking service from the first day that Ethereum 2.0 is live:
“This is one of the most significant milestones in crypto this year and we will be ready for our clients on day one.”
Bitcoin Suisse was founded in 2013, making it one of the first crypto-focused financial service providers.
The Ethereum 2.0 deposit contract is open, which means anyone who wants to become a validator can deposit their minimum stake of 32 ETH. As of Wednesday, the deposit contract had over 101,700 ETH deposits valued at nearly $48.2 million.
The first stage of ETH. 2.0 is expected to launch Dec. 1, according to an Ethereum Foundation blog post from earlier this month. Developers have set a minimum total staking threshold of 524,288 ETH as the trigger for the mainnet. The target must be met at least seven days beforehand, so by Nov. 24.
At the current rate, it appears unlikely that enough ETH will be staked to ensure a successful launch by Dec. 1. However, that could quickly change as the cut-off date nears. As ConsenSys engineer Ben Edgington recently told Cointelegraph:
“There’s little benefit in staking early, so I think people are just taking their time.”
As a crypto custodian, Bitcoin Suisse lets investors participate in Ethereum staking without having to meet the minimum 32 ETH threshold. Svante Jorgensen, a blockchain engineer at the firm, told Trustnodes earlier this year that Bitcoin Suisse offers “no lower limit on staking size.”