The digital corporation

July 15, 2021

It's difficult

You will have picked up over the years that people involved in bitcoin are rather anti-government. The source of this really goes to the original design of the network which anticipated that one day (or every day) governments would try to undermine bitcoin to ensure the survival of their own currencies. It was a laughably over-optimistic dream in the early days that they would even bother but since then we have seen every attack vector pursued.

1. Narrative attack: Bitcoin is used by terrorists and drug dealers.

  • No. It's the worst thing possible to use since all transactions are traceable on the blockchain. Most people know this now and this attack vector is used less often.

2. Hacking attack

  • Less visible, but there have been many attempts to hack the protocol and break the encryption bitcoin uses. 

  • Many of these have been state sponsored but they haven't worked and since the government itself relies on the same encryption they pretty much know this is a waste of energy.

3. Mining attack

  • The government closes down Bitcoin miners rendering block production impossible. 

This one just happened. In the last month nearly 30% of bitcoin miners have disappeared, which is most of the industry in China. Bitcoin block times rose to a level never before seen. It was taking 23 minutes to produce a block instead of the normal ten.  You can see the outlier in the top right corner of the chart.

What happened next is the genius of bitcoin. Every two weeks (or 2016 blocks), the protocol adjusts the mining difficulty. This time it was a downward adjustment of 27%, one of the largest ever. Now bitcoin is producing blocks again every 10 minutes. The protocol never stopped and mining is now much more profitable than it was last week and we will see hash starting to rise again as the Chinese miners relocate.The difficulty adjustment is perhaps the most subtle and brilliant part of Bitcoin but we have never had such a dramatic demonstration of its power until now. 

The digital corporation

The US state of Wyoming has now recognised DAOs as legal entities. A DAO is a 'decentralised autonomous organisation', basically some computer code that says who gets what in certain circumstances.They are just codified shareholder agreements, the computer doing the allocations of economic benefits through digital tokens rather than using lawyers and bank accounts. Below is a codified version of just how simple it could be to start a digital organisation:

  • Provide the cryptographic signatures of the shareholders

  • Name of corporation, state of corporation, names of directors

Layers of complexity can be added, different classes of shares, it is actually so much easier to use code because there is much less room for argument later. 

There seems to be great excitement at this happening but there shouldn't be. This has been a reality for many years now and one of the largest businesses in the industry, Binance, started in this way with no formal company structure or bank accounts.

The codification of company structure is just vastly simpler and easier than the old ways of operating, it will take time for regulators to catch up but this is happening.Everything is going digital in ways we cannot imagine, even the boring tasks of corporate law.

ESG

The first meeting of the "Bitcoin Mining Council" reported last week. There is some debate about whether such a council is necessary at all, but the American miners have convened and formed a council to counter some of the factual inaccuracies being thrown at them by their politicians and who can really blame them.Members of the Council reported 67% of their energy use as renewable, higher than any meaningful jurisdiction in the world. Perhaps even more relevant was the disclosure that the network's consumption of global energy is around 0.1% of the world's total. It is massively overblown as an 'issue', especially when half that energy is renewable. 

This is correct. The Bitcoin network has no conscience at all, it does not care, but it will absolutely select the lowest cost energy and in all likelihood that will be renewable in the next ten years. 

BTC v Euro

We are now one year into tracking the Euro v Bitcoin. A shocking quarter for us to finish with means we only managed to outperform the Euro by 64x. The real surprise was how the Euro held up against the USD, the race for monetary weakness is real. Who can print and spend the most is no longer a slam dunk, particularly with the US infrastructure plans gaining pace.

Euro-Trash

Not one month after winning her last "award" Agent Lagarde has done it again. This time winning the Ruth Bader Ginsburg Medal of Honor. The award is in its inaugural year

The World Jurist Association awards the Ruth Bader Ginsburg Medal of Honor in recognition of inspiring women jurists who fight to defend and strengthen the rule of law and to consolidate society’s advances in gender equity.

Some pretty special people were also honoured:

Luz del Carmen Ibáñez Carranza, Vice-President of the International Criminal Court,Maite Oronoz, Chief Justice of the Supreme Court of Puerto Rico,Navi Pillay, Judge of the Supreme Court of South Africa,Rosario Silva de Lapuerta, Vice- President of the European Court of Justice,Sujata Manohar, retired Judge of the Supreme Court of IndiaYoung Hye Kim, Senior Judge, Commissioner at National Human Rights Commission.

It must be said they are all in fact jurists, lawyers or experts in law. People who have given their lives in the pursuit of justice. Christine Lagarde's most recent contribution to the law was to be found guilty by a French court of negligence in her approval of massive sum of money to political allies. She then, inexplicably, then escaped punishment. Agent Lagarde was gracious enough to acknowledge the other winners too, while they all stood behind her for the photo op. 

As well as congratulating myself, I "also" want to acknowledge the people at the back, whoever they are. It's breathtaking. She cannot be stopped. I just wonder what comes after the ECB, I'm starting to think the French Presidency is on the cards.