We often say that Bitcoin is “freedom money.” But can freedom money really flourish in a wider economy that is still centralized and dominated by the institutions of fiat?
No. Thankfully, Bitcoin is now developing a native token economy, into more than just digital gold. Evolving into a truly free market that will generate unprecedented innovation and prosperity.
The Beauty Of Free Markets
The power of the free market is deeply counter-intuitive.
It's an economic model based on having no model. No rules, except property rights. No top-down directives, only bottom-up price signals. It lets people put their labor and capital toward any business or endeavor they choose, no matter how silly.
Intuition would tell you that this model is wasteful, or even dangerous – and it would be right. From casinos, to OnlyFans, to reality TV, capitalism in the 21st century has allowed billion-dollar industries to form around the stupid, the useless, the reprehensible.
Yet this system of unleashed chaos has created almost every good thing we now take for granted. Reductions in poverty and child mortality. Elimination of terrible diseases like Polio, human footprints on the moon, and a web of global information.
These are the gifts of chaos. The middle-class today have more material wealth than the aristocrats of old due to the uncoordinated efforts of plebs.
The difference between chaos and control is literally the difference between light and darkness.
Freedom is a double-edged sword. It means freedom to pursue nonsense, but also to achieve greatness. It removes controls on our vices, as well as the arbitrary barriers to our success.
Freedom is chaos – and chaos is a ladder.
Bitcoin: The Embodiment of Capitalism
There’s a reason that Bitcoin has been embraced by the libertarian right: it’s a technological supercharger of free market capitalism and property rights.
Decentralized digital property that only you can control. Freedom to send and receive money from anywhere in the world to anyone you like. Protection from wealth confiscation. Capital mobility. No inflation tax.
Bitcoin bypasses all of the barriers to storing and sending value in a way that can’t be stopped. At its core, the Bitcoin revolution is about taking capitalism to every corner of the earth, together with its unrivaled capacity for wealth creation.
Yet in its current form, that mission cannot be fully realized.
While BTC excels as a monetary instrument, money is still only one side of every financial transaction. In a real-world market, money is exchanged for goods, services, and financial instruments with other unique functions, features, and risk-reward profiles. In a truly free market, those assets would be as liberated from the interference of centralized governance as Bitcoin is.
This is not the world we live in. Financial markets are fiercely regulated in the name of consumer protection, imposing massive barriers to entry before taking any financial product public. This limits the chaos – and therefore, the potential – of the market to make magic happen.
A Native Crypto Economy
Libertarians will frequently tell you that the downsides of market regulation are invisible: you never get to see the fruits of what was regulated out of existence.
That’s only partially true with Bitcoin. While the network doesn’t support highly functional assets aside from BTC, other blockchains have emerged around it and somewhat fulfilled the need for alternative assets in the crypto sphere.
In particular, the ICO boom of the last decade offered a brief glimpse into how a fully free market economy on crypto rails can generate unimaginable wealth for investors. Unlike traditional finance, ICOs supercharged the free market by being globally accessible, making fundraising possible for everyone, and letting investors choose what risks they’d like to take with their money.
Take Ethereum – now the second-largest cryptocurrency. The Ethereum Foundation raised $18.3 million from investors during its initial coin offering in 2014, offering 1 ETH for USD $0.31. Today, the market cap of Ethereum stands at $300 billion, and ETH’s price stands at over $2,400. That’s a 7,700X jump within 10 years – even better than Bitcoin’s performance over the same period.
There were a handful of other breakout successes as well, all of which played a major role in building the crypto economy into its current form.
- Binance: Binance’s ICO raised $15 million at $0.15 per token in July 2017. BNB now trades for $576, and Binance itself is the world’s largest crypto exchange by a landslide.
- Chainlink: The decentralized oracle network raised $13 million from investors starting in September 2017 at $0.11 per LINK. Now its worth $7.1 billion at $11 apiece.
- Tron: Tron raised $70 million in August 2017, and now has become one of the most popular networks driving stablecoin adoption worldwide. The TRX market cap is $13.3 billion today.
As of 2023, ICOs had raised over $50 billion throughout history. Today, the above tokens alone boast an aggregate market cap exceeding $400 billion.
This isn’t to say the ICO era wasn’t without its failures. A study from Satis Group in 2018 found that 78% of ICOs up until that point had been identified as scams. However, that same study found that just 11% of the actual dollars invested during that era went towards scam projects. That same number fell to just 0.3 percent when removing the top three scams at the time.
Regulation eventually put this legendary period of ICOs to rest. But its short-lived success gave investors everywhere a chance to profit regardless of location or citizenship, and proved once again how free markets are messy, chaotic spaces for incredible innovation.
What’s more, a growing wave of legal victories against the SEC from projects like Ethereum and Ripple are slowly re-opening the pathway for ICOs to function again. The agency is already being challenged in court and by lawmakers for their hostility to crypto airdrops, and also failing to clamp down on stablecoin issuers.
Bitcoin’s Ironic Tragedy
One of the Bitcoin community’s great ironies is that it has spent several years praising Bitcoin’s lack of token support as a virtue.
They dismiss alternative assets as either scams or inferior to BTC, urging newcomers to stay “laser-focused” on BTC only – the best money ever devised by man.
But this is a total contradiction. Bitcoiners don’t want their free market money to have a free market.
The recoil against altcoins is understandable. Over time, many have been burned looking for extra juicy returns, only for their altcoin investment to underperform their peers who simply HODLd Bitcoin.
But the outstanding success of other projects – ones that have performed even better than BTC – cannot be neglected. As long as humans continue to innovate, there will always be financial products and investment opportunities with different risk-reward profiles, and some investors will prefer those to the safety of Bitcoin.
That’s why if tokens came to Bitcoin, they would not compete with BTC, nor take away from its mission. Rather, they would complement Bitcoin as the other half of every fully free market transaction in a Bitcoin-native economy.
Moreover, tokens on Bitcoin will allow us to see unprecedented innovation and wealth creation that Bitcoin owners were previously blinded to. Since it's already the largest chain, the Bitcoin ICO boom will likely be the most spectacular yet.
Finally, Bitcoin’s token economy will build on the knowledge from the ICO boom of the previous decade. We know which products work and which won’t, allowing us to fast-track our way to wealth creation with as few mishaps and scams as possible.
Next week, we will review how altcoin ICOs have faltered in the past, and where Bitcoin’s token economy will correct for its flaws. Stay tuned!
