The September 15/16th 2022 Ethereum merge is perhaps the most significant event for Ethereum since launching the native ETH token, which emerged from an initial coin offering raising around 31,000 BTC equating to around USD 18.3 million in capital at a price of around 0.31 USD/ETH.

• Considering that Ethereum’s 2022 market value now surpasses USD 235 billion making Ethereum the second largest blockchain in the world behind Bitcoin, the upcoming merge is of historical significance not just for Ethereum, but for the entire Blockchain industry.

• The aim of the merge is switching from Ethereum’s current cryptographic based consensus mechanism Proof of Work (PoW) to Proof of Stake (PoS), which is a switch supported by a majority of Ethereum users noting that some dissenting opinions exist from network participants like miners prepping to mine ETH Classic.

The merge basically reduces some of the costs and problems associated with the monolithic PoW crypto trilemma, which is a trilemma similar to the impossible trinity problem in traditional markets. Just like mandating fixed exchange rates, free capital flows and at the same time conducting independent monetary policy is impossible for governments to achieve, the monolithic crypto trilemma prevents blockchains from efficiently maximizing scalability, security and decentralization in the same layer necessary to outcompete centralized institutions like Visa, Goldman and Mastercard from a user perspective.

• Scalability is the transaction speed

• Decentralization is meaningful distribution of computing power and consensus throughout a network

  • Security reflects a blockchain protocol’s defenses against malicious actors and network attacks.

    By moving away from the monolithic approach used by blockchains like Bitcoin where core functionalities including consensus, settlement, data availability and execution occur on a singular layer to instead rely on a multi-layer core functionality approach, the merge increases Ethereum’s modular capacity, which reduces energy consumption, clears the path for proposer-builder separation and cuts ETH token issuance by more than 90%.

The Merge...

Expands access to institutional investors with environmental energy concerns Democratizes the maximal extractable value (MEV) through holders staking ETH Reduces transaction costs of level 2 roll ups by an order of magnitude Makes ETH 90% more deflationary (1.6K ETH issued daily instead of 16K)

• Currently, Ethereum miners earn around 14,400 in ETH rewards daily for securing transactions on the PoW network profiting miners with superior hardware the most. In addition, MEV bots and arbitrageurs extract an excessive premium from Ethereum users in return for providing liquidity and post merge that value is transferred to stakers, which will generate more Ethereum adoption.

The transition to PoS also paves the way for future transaction fee reduction on both the main network and level 2 roll ups like the EIP-4844 proposal. Finally, although difficult to predict, the likelihood of institutional capital flooding a more ESG friendly Ethereum network expands vastly post merge

How Ethereum Will Share the Liquidity Premium

Blockchain technology enables decentralized trust keeping by relying on cryptography and consensus algorithms instead of institutions. Ethereum is therefore emerging as a low cost high security alternative to centralized institutions as a tool for users and business to exchange goods, services, communication and information via Internet. Ultimately, the merge is a major step for Ethereum to create a blockchain network that minimizes the institutional capacity to extract network value from small users, which is what I call harvesting the liquidity premium without taking appropriate risks and is all too common in the centralized economy of today.

• Basically, internet technology has allowed large centralized monopoly institutions to extract excessive fees and information from consumers and business in return for facilitating transactions and providing information security, which drains money from society to a few leading institutional stakeholders.

There will always be a liquidity premium, but the problem is how capitalist oligopolies and governments are incentivized to extract that small fee from users and citizens.

• The liquidity premium includes profiting from harvesting user and citizen information indirectly or money directly. The main problem is that the incentive to not take risk means that sometimes there is no risk associated with the service that is provided by third-party institutions in return for harvesting money.

The true definition of liquidity premium is compensation for taking risk, but harvesting money is providing liquidity without taking risk.

• For example, banks extract liquidity premiums in the form of charging interest for providing services like lending money to homebuyers, which is why the interest rates are higher for homebuyers with bad credit scores. If a homebuyer does not repay the loan then the bank lose money. The key to the definition of the liquidity premium is therefore taking risk, but when incentives are misaligned money is just harvested, which is defined as moral hazard.

• The Great Financial Crisis in 2008 is a textbook example of moral hazard, as bad mortgage loans by big banks got bailed out by the US government through the trillion dollar TARP bill when housing prices dropped so quickly that it threatened the survival of the US economy. That fiscal put money was then in essence harvested by bankers, while US tax payers took all the risk.

Over time, harvesting small fees is like how wasting time lowers economic output

• For example, experiencing slow internet at work one day may lead to a 10 minute productivity loss per worker that day, but if it's 10 min everyday over 20 years, the cumulative productivity loss equals 41 days per worker, which is essentially equivalent to the harm caused to society from the harvested liquidity premium by banks through charging consumers 0.001% for every transaction.

• On an individual level those fees are barely noticeable, but scaling that transaction fee to account for a global population of 8 billion people, you can see why bankers generate excessive profits for just owning government licenses, some software and a central database.

In an efficient decentralized blockchain economy, users share the excess liquidity premium profits proportionally to the amount of tokens staked together with the creators of decentralized applications established on top of the Ethereum network making everybody participating an owner and liquidity provider.

In a pure decentralized Proof of Stake blockchain based economy, these monopoly institutions must therefore develop decentralized services via the Internet on top of blockchains like Ethereum. By providing good services, these institutions will still make money, but they will not harvest a simple liquidity premium like in the past.

Since Bitcoin’s invention, exponential advancements in blockchain technology have led to the cryptocurrency industry now surpassing over 1 trillion US dollars in market value, which means cryptography based applications has successfully established itself as a new financial asset class together with asset classes such as commodities, equities, fixed income and foreign exchange.

• It’s kind of funny how all cryptography needed to generate bestselling Netflix documentaries was to become synonymous with money by creating a decentralized database securely facilitating transactions and storage of a limited supply of bitcoins. After all, cryptography has secured military communication long before the World Wars, starting at least with early accounts of secret writing or so called stenography by the Greek father of history, Herodotus, 5000 years BC.

• The difference from Herodotus and later the World Wars is the emergence of powerful computers in the 1970s to decrypt sensitive information that is protected by encryption.

•  Every day, these hackers are developing more and more advanced tools to access strategic information ranging from military and infrastructure data to bank accounts and even private user information. 

• Much of the user and even military/infrastructure information is stored on a centralized platform, which creates a single attack vector for hackers. Imagine, for example, the chaos that would ensue if a bad actor was able to shut down the US PowerGrid or access the US nuclear codes.

However, for everyday users much of their information is stored for profit purposes by big technology platforms via the Internet, which are corporations that monetize or sell user information to third parties.

• With more users adopting the internet, the more power rests with these big technology platforms, which can be seen in the trillion dollars in market values of Amazon, Google and Apple.

• These platforms do provide good stuff like iPhones, instant messaging, telehealth, delivery, banking and much more, but the internet is also eroding privacy piece by piece every day and concentrating all that power with a few giant technology platforms is becoming a problem.

 Ultimately, I believe people should decide for themselves how private information should be used and blockchain is the best tool for making privacy on the internet private again. By relying on cryptography, user information can still be accessed by firms trying to provide great services without tying that information to a specific user. 

Until the Bitcoin blockchain network was created to form a consensus mechanism based on mathematical encryption to immutably track exact bitcoin ownership without depending on centralized authorities like banks by Satoshi Nakomoto in 2009,  societal consensus was almost exclusively based on God and State.

Although there are many good use cases of God and State, the problem is that both God and State are structurally based on hierarchy in which single persons’ or establishment groups attain relatively disproportionate amounts of power and control.

·       For God based nations, power centers include institutions like the Christian church headed by the Pope and for State based countries, power equivalents include wealthy political donors and the political cabinets of powerful nations like the US or perhaps even dictators like Hitler.

·       Note that most times power centers are genuinely enforcing beneficial consensus according to delegated powers, but sometimes that enforcement is detrimental to society, ranging from having a slight impact on day to day activities to being an outright Orwellian nightmare, as commandments and laws can be manipulated. 

·    In State run societies, for example, I believe the large majority is vehemently against Hitler’s manipulation of German law for selfish aspirations and China’s law leveraging to clamp down on citizens with behavior considered negative by the CCP. That same majority most likely also considers God based societies leveraging wonky interpretations of religious scriptures to relegate women to basically becoming second class citizens as bad societies. 

However, as demonstrated by the Bitcoin invention, the Network has arrived as a potential Leviathan God and State rival to successfully achieve consensus with the added bonus of delegating control to a blockchain instead of malignant God and State power leaders and centers.

With users adopting the Ethereum blockchain and equivalent competitors, Bitcoin has proven how blockchain technology can leverage computer programming based consensus like smart contracts to verify all types of digital information on an essentially immutable and censorship resistant database beyond the reach of both God and State. 

·       For example, the history taught in schools by God and State societies is based on the interpretation of events by the winning side. In the US, history may argue the importance of how capitalism generates economic growth, while Chinese students may learn how capitalism is a tool used by the US for expanding western ideals and influencing how eastern nations should conduct foreign policy with China. 

In a well-executed Network based society, however, consensus follows immutable and censorship resistant computer code owned by everybody and beyond the reach of malignant God and State power centers to change on-chain history. The Network is the ultimate cooperative society where good behavior is rewarded and too much bad behavior likely disincentivized. The economic growth achieved through superior cooperation by Network participants will dominate both God and State, which is why I believe Network based societies will grow exponentially and ultimately achieve diplomatic recognition.

The ETH Network

As outlined by Camilla Russo’s in her excellent book, the Infinite Machine, the Ethereum blockchain, against all odds, originated and executed in Switzerland 2013 as a traditional LLC called the Ethereum Foundation a novel idea by the unicorn loving billionaire selfless genius, Vitalik Buterin, to create a world computer, which was a necessary centralized evil to overcome the tricky rules created by the God and State establishment.

 The Ethereum Foundation LLC was founded by a group of “Grays”, as Network philosopher deluxe, Balaji Srinjavisan, calls people with Libertarian leanings, with a utopian fantasy for creating a world based on decentralized consensus without relying on the approval from God and State power centers. The Greys are worth mentioning and include co-founders Vitalik Buterin, Charles Hoskinson, Anthony Di Iorio, Joseph Lubin and also Gavin Wood after heavy debate among the original Greys if Gavin should be given the title co-founder despite joining at a later stage than the rest.

·      Beyond the excellent story of how the Ethereum Foundation was debated, formed and ultimately created, Camilla takes readers on a wild journey on how cooperation from Russia to Canada, poor to rich and centralized to decentralized leads to the development of a multi-purpose decentralized world computer based on Network cooperation principles instead of principles preached by God and State. 

·      According to Ethereum’s white paper, written in Vitalik Buterin,  Ethereum aims to create a foundational programming language that leverages computer engineering capacity for developing decentralized applications on smartphones without dependency on centralized third-parties like Amazon, Google and Apple. In other words, a decentralized cloud based world computer that allows for Network censored computer meaning ideas not unsupported by the Network will fail. 

By leveraging smart contract technology, users of the ethereum blockchain can in advance sign a contract that outlines the rules of the game without necessarily trusting each other. The ethos of Ethereum therefore aligns perfectly with how Balaji outlines Network compared to God and State in his book the Network State and expands upon the foundational principles of the Bitcoin blockchain; immutability, accuracy and censorship resistance.  

 As of 2022, the Ethereum project is an unparalleled success with hundreds of billions in market value, millions of users and thousands of decentralized applications. Even if Ethereum fails to become the number one blockchain in the Network State, the objective of a small group of Greys to create a censorship resistant world computer that is owned and used by everyone, I believe, was achieved successfully beyond the wildest dreams of anyone.

Why I am bullish on ETH

Arguing against the belief shared by many of us around the world that technological progress based on centralization marginally erodes privacy piece by piece each day is a difficult task. However, perhaps the fear of an Orwellian future where data is controlled by a single all powerful institution may be prevented without sacrificing technological advancement, as human innovation generally solves problems and the exponentially growing blockchain sector is potentially unleashing a path to make private information ownership private once again.

Through leveraging cold storage of information in the cloud, blockchain technology grants access to personal information only to private key holders without reliance on third party data providers, which means that the blockchain allows people to securely text, transact, upload and store sensitive private information about finance, health and many other areas.

·      If the bitcoin blockchain unleashed decentralized ownership of assets and Ethereum the power to create fractionalized ownership through smart contracts, the creation of decentralized applications providing users with the ability to store information with absolute privacy might be the key for driving an explosion in blockchain adoption.

 ·      There are many great innovations like new drug therapies, financial applications and security products that are generated by storing user data, but that same user data can be used for exploitation by malicious actors especially when data is stored in a third party centralized database.

There are two big problems with storing information centrally. The first problem is that a central database creates a single attack vector. For example, malicious hackers may create havoc by accessing potentially damaging medical information stored by hospitals about political and business leaders or even everyday people. The second problem with centralized databases is owners selling data without consent to malicious actors. A perfect example of the second problem is when Facebook sold private user information without consent to Cambridge Analytica, which was then used by third parties to gain an advantage in the 2016 US election.

 ·      However, if a decentralized database is executed correctly, the information on a permissionless blockchain is not owned by a single centralized entity and all information is encrypted, which means that there is no single attack vector that can be leveraged by a hacker and no information that can be tied to a certain individual. Blockchain therefore solves both problems with a centralized database because when a decentralized database is executed correctly information is owned by everyone and encrypted.

 The Ethereum blockchain is miles ahead of competitors when it comes to the creation of a well-executed decentralized database.

 I therefore expect that a decentralized application leveraging the unique properties of Ethereum in combination with a great user interface to be the canary in the coal mine for blockchain adoption among the general public.

Conclusion

 If God created the moral structure needed to conquer Earth and the State generated law structure needed for reaching Space, then the Network may be the cooperation structure taking humanity interplanetary.

 Pure maximalism is bad, but the Leviathan Network based society is a rival to both God and State nations, as outlined in the Network State. Well-executed Networks depend on co-ownership/operation and time-stamped history, beyond manipulation by God and State.

 If Bitcoin unleashed decentralized asset ownership and Ethereum smart contract platforms, then decentralized apps with superior UI providing its users with tools to store information with absolute privacy might be the key for driving an explosion in blockchain adoption.

 A society that is 100% centralized needs at least 1% decentralization just like a 100% capitalistic society needs at least 1% socialism to prosper. By just getting behind the above, you will understand how a quadratic relationship between central and decentralization generates high prosperity in society, which means you are ahead of 95% of the world population.

God, State and Network are now together propelling humanity forward like three Leviathans.

The objective of MBMC is to create a health application that allows users to securely store personal health information without depending on third-party databases and therefore protected by the fifth amendment.

By leveraging encrypted blockchain technology, MBMC’s application aims to become the number one tool for users to privately store and monitor health information related to, for example, the ovulation cycle, which provides users with the ability to make pro-active health actions like preventing  unexpected or unwanted pregnancies without needing to share information with third-party websites or suffer from potential legal consequences from governments.

·      By allowing women to securely store private information on the blockchain to protect personal health, MBMC believes that half of the global workforce will adopt blockchain technology to create an optimal work-life balance, which ultimately benefits the entire world. 

·      MBMC simply believes that private health is a basic human right and that any health related decision should be made in full and private confidence between individuals and doctors.

With expanded ability for governments through technology to monitor citizens and the legal requirement for centralized third parties like Google, Amazon and Apple to hand over any information, women in states where abortion is illegal are now deleting health applications, which not only has severe impact on the effected women, but also impacts the global economy as women make up 50% of the global workforce. However, if the personal health information is stored privately on the blockchain, women and doctors can continue to use health monitoring applications as individuals are protected by the fifth amendment to not self-incriminate.

By creating tool to store information with absolute privacy, MBMC aims to achieve following objectives:

·      Preemptive prevention of  unwanted pregnancies

·      Monitor personal health during the ovulation cycle

·      Allow private health information storage on a secure database

·      Protect women seeking abortion  across state and country borders

·      Prevent legal action against doctors and hospitals  for treating patients

“MBMC aims to assist in creating the greatest generation of daughters, mothers and sisters that the world has ever seen”

2.  Who am I going to give money to?

1. Treasury:

·      MBMC will run as a foundation. The foundation’s solemn mandate is ensuring absolute privacy meaning no individual or group of individuals can access private user data unless allowed by the user.

2 Software developers.

·      MBMC needs at least a front-end and one back-end developer with solidity experience to build a decentralized MVP application or ZK-snark on Ethereum.  From a front-end perspective, most work involves copying functionalities of existing centralized health applications. From a back-end perspective, the main coding difference is that information is encrypted and stored on Ethereum rather than on a centralized database . The user interface and absolute security must be superior to that of existing women’s health applications.

·      Back-end person will help develop the following:

o   What program to use

o   How we build the app

o   Code design

·      Front-end person will help develop following:

o   UI

o   Functionalities

o   Landing site

Lawyer:

·      This person must have experience with health care laws. I think that certain law firms will be able to work on this pro-bono.

o   The app will connect abortion clinics with individuals using web3

§  There will be lots of legal troubles

o   Explore the issues related to privacy and pleading the fifth

§  If no third-party company owns the information, but the government hacks the phone and figures out the password. Is the acquired information legally binding in court given that I plead the fifth property?

o   Understand contract negotiation

Marketing Person:

·      We will hire a social media savvy salesperson. Hopefully we can find someone with experience in both social media and health care. He/She must be highly passionate about this idea and able to use all forms of social media including web 3

Advisors:

·      We will at least have one senior advisor with experience in start-ups. This individual will hopefully have an extensive business network and be willing to teach a group of young motivated professionals on how to run a company.

3.  How does it work?

User experience:

Step 1: Download and activate the app.

·      Create an encrypted web3 name

o   ( we have partnered with ENS to create a free naming creation)

o   Set up a password and private key with absolute privacy

·      Provide user information to activate the account

o   User information is encrypted and no email, age or other information is necessary to minimize security problems

Step 2: Use the app to monitor health.

·      Like any other health app, users provide health information on an hourly, daily, weekly, monthly or ad-hoc basis to monitor personal health

Step 3: Unwanted health complications.

·      If unwanted health complications occur, the application will send a warning.

·      The app may then provide a vast network of hospitals and doctors offering necessary treatment

·      Users can rely on the app for secure communication with doctors and hospitals to set up in-person treatment without legal consequences

Back End:

Step 1:  Data about the individuals are privately stored and can only be accessed by the user that provided the information

·      The data is encrypted on the blockchain

·      The data can only be viewed by user

Step 2: Connect new information, store and verify data on the blockchain

·      When a user enters in new information, that information is bundled, shuffled and encrypted to be securely stored on the blockchain, which is done similar to normal health apps

Step 3: Connect to hospital and doctor

·      If health complication arise the user can connect through a safe messaging service with a doctor.

·      Doctors and hospitals can use the application for secure communication and prescription provision.

4) Where does this company belong?

The marketplace for this type of product has a download fee of 1 dollar and a monthly subscription price. We are looking at providing this product for tickets at around 10 dollars a year. The product is aimed at consumers, above all else women,  valuing personal health and privacy in geographic locations for which freedom and liberties are threatened. If bitcoin was the first principle method to secure a decentralized database and Ethereum creates an application layer, MBMC is created to generate blockchain adoption by yielding a tool for individuals to monitor their health privately.

The U.S. market is highly attractive at the moment due to the recent supreme court ruling to interfere with a woman’s right to make decisions about their own bodies. Estimated amounts spent on abortion in the U.S. is around USD 60 billion per year depending on whom you ask. In the future we aim to expand in other countries that limit freedoms and liberties.

The main focus will be placed on southern states in the US. That is because the south is a religious Mecca. Religious people infringe their view on others and are not afraid to leverage the law to accomplish their wants and needs. Given that people care what other people do with their bodies in southern states, one can use blockchain to shield private health information from curious people and governments that should care more about their own life.

In the future, MBMC aims to provide services to other markets as well. MBMC will be a key tool for maintaining private health information and other  private information private by shielding the information from outside influence using encryption ultimately protecting all user information with the fifth amendment.  

5) Why has this idea not been done?

There are multiple potential reasons for why a non-linear pricing system for tickets to sporting events has not been created. I have listed them below.

Reason 1:

·      This company is a cross-section between blockchain and the health industry.

Reason 2:

·      Private health information is under threat like never before in history

·      Third-party ownership of private information through the user’s internet dependency can be used to launch unfair criminal investigations

Reason 3:

·      Blockchain has not been adopted yet because there has never been a strong enough why

·      A Woman’s right to choose is a strong why and when there exists a why there is always a how.  MBMC is the how.

Reason 4:

·      The law environment is becoming more conservative although the US is becoming more liberal. The app aims to democratize access to private health and allow people to make decisions in regards to their own bodies.

 In the book prisoners of geography, author Tim Marshall describes how geopolitical conflicts including hot wars are predicted by geography.

·      What if geography also can predict future economic recessions?

 Although timing the impact factors causing market drawdowns from an investors perspective remains difficult, I believe that the supply chain, inflation and geopolitical instability are predictably impacted by geography meaning that economic recessions are not purely a function of human behavior, but instead, like Tim states in prisoners of geography, also a derivative of how geographic location corresponds with climate and abundance of natural resources within the physical borders of nation states.

I believe most governments understand theoretically how current market instability is partly an exogenous function of geography, but that political leaders in both democracies and autocracies are practically incentivized to treat economic issues as an endogenous disease cured by conducting radical fiscal and monetary policy to remain in power like heroin addicts instead of solving problems by weaning of the stimulus medication.

In our current centralized system, poor geographic location leads to sub-optimal economic policy decisions by sovereign nations and therefore predictably increases the likelihood of a more severe economic crash.

Below text outlines how leveraging blockchain technology to create network states is a path forward to partially solve economic and geopolitical issues caused by geography.

The Importance of Price Discovery

 “Conflicts and recessions are currently being ineffectively treated with painkillers rather than cures; knowingly or unknowingly doesn’t matter.”

 The fact is that economic policy is not a tool that widens rivers, reshapes mountains, decreases temperatures and eliminates desserts to improve harvests and supply chains necessary for both for efficient price discovery in stocks and commodities, which are needed to achieve basic standards of living.

 “Without price discovery, bad ideas never die and good ideas never thrive.”

 Just like a snake sheds its skin to remove harmful parasites, the economy needs bankruptcies to remove harmful companies. By allowing bad companies to fail during recessions, more capital reaches good companies in periods during economic growth so that humanity can invent itself out of geographic and climate dependencies.

 To create  sustainable economies, society should therefore leverage decentralized blockchain technology to compete with the current centralized system Just like socialism competes with capitalism to maximize prosperity.  

 Decentralized capital lets democracy decide how to decrease the dependency on polluting sources of energy and poor geography through community cooperation in a cross border fashion to hopefully increase life quality for the poorest humans.

Virtual Competition From The Network State

 “Conflicts and economic recessions are ineffectively treated with painkillers rather than cures; if that is happening knowingly or unknowingly doesn’t matter, as the end-result remains…”

 Improving technology requires investment which in turn needs price discovery, but markets never experience price discovery if central banks continue printing money to prop up dying assets. 

·      In addition to inhibiting investments made based on accurate  information, poorly executed monetary and fiscal policy may lead to re-allocation of resources perceived to disproportionately impact certain parts of  a population negatively, which can spark revolutions, election of populist leaders or even hot wars.

 However, what if technology can be used to de-escalate conflicts by expanding cooperation across borders through decentralized communities?

·      In the book  the Network state, entrepreneur and blockchain philosopher, Balaji Srinivasan, defines in one sentence the network state and how an internet community may form through decentralized blockchain technology;

 “A network state is a social network with a moral innovation, a sense of national consciousness, a recognized founder, a capacity for collective action, an in-person level of civility, an integrated cryptocurrency, a consensual government limited by a social smart contract, an archipelago of crowdfunded physical territories, a virtual capital, and an on-chain census that proves a large enough population, income, and real-estate footprint to attain a measure of diplomatic recognition.”

·      Without technological competition, which may allow communities to form across borders based on self-identified attributes as described by Balaji above, lack of beneficial geographic location creates sovereign competition that may escalate to hot wars meaning that geography is currently perhaps the most important factor for a nation’s economic success.

 However, by adding digital/virtual realms that potentially achieve diplomatic recognition by cross border community formation, real land like desserts, oceans and mountains for strategic security and protection, lengthy rivers without waterfalls for superior trade routes and natural resources like precious metals and abundant energies for monetary power and industrial production, become marginally less important, which decreases the probability of hot wars and increases the likelihood of cooperation between nations to create more sustainable economies.

Risk of Current Economics

 If we return to Prisoners of Geography, Tim Marshall demonstrates how the geographic lottery explains why a US that includes warm water port access to the Pacific and Atlantic oceans and friendly neighbors like Canada and Mexico remains as the dominant world power since around World War 1.

 Tim also outlines how China, due to the abundance of natural resources and geographical luck, has positioned itself as a potential threat to US domination from a game theory perspective by teaming up with other world powers like Russia to both limit the US and expand their own progress.

 Note, economic policy never creates nations, but short-sighted economic policy destroys them. Every single world power in history spanning silver mining Spaniards in the 1500s to a great British empire of the 19th century lost world dominance due to rampant inflation, which is directly correlated with an economic policy to print money.

 With a potential recession on the horizon after a global pandemic in combination with record inflation and expanding interest rates, Americans are now being challenged by the Chinese similar to how the Americans surpassed the British as the number one world power around the start of World War One.

 With 6 trillion in economic stimulus spanning 2020-2022, the US has printed more money for economic recovery in response to Covid-19 than the combined GDP of Canada and Japan in 2021. China has also printed money, but given their centralized state model, they have a greater control over how printed money is spent. China could for example tell companies making perhaps too great of a profit to return that money to the state coffers, while in the US windfall taxes from excessive profits require approval from a democratically elected congress.

Unlike Chinese economic policies where poor companies may be shut down by the government, the FED’s action to print money in response to economic crisis periods like 1971, 1992, 2001, 2008 and 2020 has therefore prevented true price discovery of financial assets and commodities over an extremely long time period, which in a capitalistic market has allowed poorly run companies to stay alive despite delivering inferior products and services.

“The potential dollar devaluation resulting from continuous FED and Treasury stimulus is similar to the currency devaluations that collapsed UK and Spain when they respectively were the dominant world power.”

China is now salivating at the possibility of overtaking the US position as number one and is using a blend between economic policy and foreign soft-power to increase influence in South America and Africa through investments like building a giant canal in Nicaragua and a super dam in Ethiopia with the hope of establishing political influence. These two areas are potential hot zones for future conflicts because the US does not like the fact China is pursuing influence in the west.

Capitalism and Geography

 Legendary investor Howard Marks often states when he is interviewed on podcasts and financial tv that capitalism without bankruptcy is like Catholicism without hell.

 Howard believes that economic recessions are necessary in capitalism as a method to flush out viruses from the system similar to antiviral medication. His argument is that great companies survive tough times, while poorly managed companies with poor business models collapse. According to Howard, economic hardship therefore allows market participants like himself to buy companies with bad management, but with a good business model,  and install good management teams instead to create profit.

·      Although the US is considered capitalist and China socialist, China has benefited immensely relative to the US and other western countries from free trade. In return for shipping deflation to the western world by producing goods and services for pennies on the dollar, China has created import dependency. Western consumers now demand cheap products similar to a drug addict looking for heroin and with supply chain problems China determines the price.

In addition to being the largest exporter in the world of intermediary goods like computers, China contains vast natural resource wealth, natural borders, warm water ports and great trade routes.

·      Western import addiction yields China an enormous power because what happens to the west if China becomes isolationist. From a game theory perspective, China will most likely handle trade embargos much better than most western countries other than the US due to the abundance of natural resources, which ensure survival from global financial hardship that a trade embargo may create. China’s technology sector has vastly improved and no longer relies on western software to run native computer networks.

 Through exporting deflation and becoming both technology and natural resource independent, China is now setting up a push to challenge the US dollar  and become the world’s reserve currency.

 Inflation makes previously cheap goods expensive. In an isolationist world, goods are marginally produced within borders rather than relying on trade of goods produced through comparative advantage. For example, outsourcing production to China has dampened prices in the US to benefit the consumer, while the Chinese have expanded life quality for workers, but with China in power, they will set the price, not US.

Location

 Geography plays a huge part determining a nation’s export and import of goods and services, as countries with abundant natural resources tend to be developing nations that export unfinished goods necessary to produce finished goods refined by developed nations like microchips and batteries to create powerful and expensive computers and electric cars.

 Moving goods requires beneficial geography, as difficult trade routes require higher consumption of energy and greater levels of cooperation. Despite accelerating advances, technology, up until recently, only allowed for centralized advances controlled by companies and governments thereby yielding immense to governments and companies in developed nations.  

 Even sea export, which is the most energy efficient method to move goods, benefits immensely from canals and straits that shrinks the distance between two trading partners like the Strait of Hormuz and Malacca as well as the Panama and Suez Canal may. However, often the location of these straits and canals are monitored by third party nations that are not global world powers like Egypt and Panama.

 For example, the Strait of Malacca is a preferred route for China to import oil from Russia, which means a blockade of oil in the Strait of Malacca could easily therefore escalate into hot conflict. In a centralized world, the spark to a conflict with China could be just one man deciding to invade Malaysia and stop all ships from passing.

 However, if we decentralize communities into states that span virtual and real borders, humanity spreads power and information to a larger group of people that together can de-escalate potential conflicts that may arise from blockades by sharing information and preventing propaganda.

Conclusion

When Tim Marshall wrote the Prisoners of Geography, he hinted at the possibility of using technology  to overcome economic challenges caused by geography. Perhaps blockchain was the technology that Tim subconsciously was describing, but the advances of cryptography and the internet has made it possible for software developers  to create virtual trustless economies.

As described by Balaji in the Network State. The blockchain through the creation of virtual realms may create cross border communities to shake up a world where physical geography historically determined the economic faith of sovereigns, states, cities and towns.

Decentralized communities spanning cross borders will increase empathy for people living on the other side of the world because people in different countries will share things that were not obvious previously. Two Liverpool fans are less likely to fight irrespective of location if they feel a sense of community thanks to the blockchain all else equal.

 That idea of coming together as a group across borders to create diplomatic states recognized by sovereigns is the future and will expand cooperation in our world!

Prior to 2008, investment clubs leveraged asset allocation by spreading risk across asset classes like real estate, equities, fixed income, currencies and commodities to maximize risk and return over time. However, since the creation of bitcoin in 2008, the digital asset space is now a proven new asset class surpassing 1 trillion USD as of June 2022 per Coinmarketcap.

Adding digital assets in an investment portfolio becomes intuitive after qualitatively and quantitatively comparing digital assets to traditional equities by breaking down digital assets into underlying components like coins, tokens and NFTs.

How are digital assets different from equities?

Investopedia defines an asset class as a grouping of investments that exhibit similar characteristics and are subject to the same laws and regulation.

Equities and fixed income have different risk and return profiles. For example, in bankruptcy, bonds are paid before equity holders meaning higher equity returns all else equal. Digital assets are regulatory, statistically and qualitatively different from both!

1. Qualitative Comparison – Crypto Coins vs Traditional Equities

Cryptos come in two forms; tokens and coins. Tokens represent ownership, while coins represent what investors could potentially own.

Bitcoin is a crypto coin meaning that bitcoin behaves more like currencies than equities. Bitcoin’s original function was to facilitate peer to peer transactions similar to dollar transactions, but at a much slower and expensive rate and is therefore not a great replacement for fiat. Bitcoin also behaves like gold because there is a limited supply of 21 million bitcoin and is outside of government control

All coins like bitcoin operate on their own blockchains. Ethereum is also a coin, but also allows for smart contracts.

2. Qualitative Comparison – Tokens and NFTs vs Traditional Equities

Unlike bitcoin or Ethereum, tokens like Uniswap, IMX or NFTs do not own a blockchain and are more similar to equities.

The difference is that equity ownership is stored centrally with a broker, while tokens and NFTs are registered with immutable wallet addresses.Like traditional equity, coins and tokens including NFT’s can also be used as collateral. In return for lending against collateral, the lender earns a token yield similar to how an equity lender earns an interest rate. Finally, like equities, cryptos and NFTs can be further divided into subgroups based on economic objectives.

Unlike equities, tokens and NFTs are smart contracts, which is a form of immutable code creating trust between untrusting parties for purposes other than simple peer to peer transactions. Note, that tokens and NFTs are basically the same except that tokens are fungible, while NFTs are unique. NFTs are basically impossible to replicate tokens.

Most crypto projects and companies are built on smart contracts and as a result, the digital token and NFT ecosystem has exploded. For example, Uniswap is a governance token for a DeFi platform and IMX is a token used to purchase NFT’s on the ImmutableX network.

• Immutable X is built on top of the Ethereum chain and is a layer two scaling solution, but not a sidechain like Polygon meaning the token does not have its own blockchain.

• The scaling solution is a Validium ZK roll up enabling Immutable X to process 9000tps at almost 0 fees compared to Ethereum’s current 30tps and up to 100 dollar transaction fees, while relying on the Ethereum blockchain’s superior decentralization and security.

• Owning traditional equity is a claim on future revenues. For example, equity holders of Amazon receive a tiny part of all transaction fees generated by Amazon’s website.

• In digital assets, the equity ownership can be replaced by tokens or NFTs.

• Soon, Immutable X token holders can stake native IMX tokens to capture profits in proportion to NFT token transactions generated on Immutable X, which means owning IMX tokens is similar to owning equity in Amazon.

• If users love NFT projects on the ImmutableX platform, then transactions will generate a higher yield to holders of IMX, which increases the value of the ImmutableX platform. NFTs traded on platforms like ImmutableX are unique and some of these NFT projects like bored apes are valued like Van Gogh paintings.

Given all the new use cases developed through coins, tokens and NFTs, the underlying return drivers in the crypto space are unique when compared to factors driving legacy markets.

Quantitative Comparison

1. Return

Per the DQYDJ return calculator, bitcoin has generated a return of 265% annualized for the period March 2011 until March 2022 (1). This return can be compared to the 12% annualized for the S&P 500 equity index during the same period. That means 1 USD invested in bitcoin is now worth 46,000 USD, while the same dollar is worth less in S&P500.

2. Volatility

Per the Marketmilk volatility calculator, the annualized bitcoin price volatility spanning the last 3 years was 163% (2), which is much higher than the approximately 15% realized historically by S&P 500.

3. Correlation

The final data point to analyze between bitcoin and equities is historical correlation using different lookback periods. Per the Yahoo finance calculator, the 14 day rolling correlation as of March 2022 between bitcoin and S&P 500 is 0.83. If instead analyzing the 30 and 100 day lookbacks, the correlation between BTC and S&P is at a record high 0.86 as of March 2022.

Conclusion:

From a qualitative perspective, traditional equities and digital assets are both ownership claims, tools used for borrowing and return dependent by economic objective. However, digital assets can be so much more. While equity ownership is fungible, digital assets can also be non fungible. In addition, staked digital assets can create further economic value by validating blockchains. Obviously, history is not necessarily indicative of the future, as statistical relationships break down, but from a statistical perspective, I would argue that digital assets based on the return and volatility of BTC vs S&P 500 also quantitatively represent a new asset class.

With above comparison in mind, investment clubs should consider adding digital assets to their portfolios!

[1] https://dqydj.com/bitcoin-return-calculator/ [2] https://marketmilk.babypips.com/symbols/BTCUSD/volatility?source=coinbase

Decentralized applications run on a distributed peer to peer blockchain network rather than on a single server controlled by a corporation. Compared to centralized technology, decentralized networks therefore have no single point of weakness.

Without an Achilles heel, decentralization limits the ability of malicious corporations to manipulate information stored on central servers without transparency.

• Imagine a politician using Bank of America debit and credit cards to buy drugs. If the same politician enjoys a professional relationship with Bank of America a conflict of interest may arise. For example, the politician may create beneficial policy for Bank of America in return for having transaction history hidden or deleted from Bank of America’s central server.

• Conflict of interest that may create political moral hazard behavior is impossible on immutable blockchains without democratic approval among elected blockchain validators.

• It is true that decentralized applications rely on cryptography, which allows some users to conduct criminal activity while remaining anonymous, while identification is almost mandatory on centralized apps like Facebook and Gmail. Anti-blockchain evangelists therefore argue that cryptography based applications is a tool for criminals to circumvent justice, which in combination with blockchain’s environmental impact is why many politicians pose that blockchain technology is a danger to society.

• However, arguments like increasing criminality by politicians against blockchain were also used against internet in the beginning of the 1990s. The fact that politicians are worried about blockchain’s criminal and environmental impact on society in combination with blockchain’s current adoption timeline makes the technological adoption of blockchain based application almost identical to that of the early Internet.

• Unlike blockchain technology, the Internet was created through public funding. Although lawmakers actually outlawed Internet in the beginning, they later accepted public use of internet with the caveat that no private person or company was allowed to make money on internet by selling goods and services. It therefore took many years for the public to trust the internet with personal information like credit card information.

Imagining life without Internet today is impossible. Developing public trust and convincing lawmakers that blockchain benefits outweighs consequences is therefore super important and understanding why some stakeholders like politicians may want to limit adoption requires investor patience. If blockchain adoption follows in Internet’s footsteps, the road to adoption will be bumpy, but ultimately a life without blockchain may soon also be difficult to imagine.

What incentives exist to ban blockchain if the technology stinks?

Anti-crypto lawmakers believe bans and strict regulations prevent shit products from reaching consumers. However, protecting the consumer argument easily fails to deliver a guilty verdict in a court of justice as shitty products would never create trillions of dollars in value and last more than 13 years in the first place.

The reality is that Dapps threaten central power clusters similar to how the renewable energy push have crushed oil and gas companies. The difference between oil workers and politicians is that the former lost jobs in a justifiable democratic fashion, while politicians use rule of a law as a tool for holding power and influence.

Mass Dapp adoption would decrease revenues for middlemen like banks, credit card companies and stock exchanges. Normally, these middlemen and rent seekers lobby politicians to create laws to benefit their own book. In return for political favors, middlemen back book promoting politicians with cash.

“For example, if consumers send money peer to peer via Dapps instead of banks, politicians supporting banks will stop receiving donations. Slimmer middleman profit margins therefore mean decreasing political donations, which in turn limits political power and influence.”

Similar to how the evolution of internet and open source software provided individuals with a voice and ability to execute new ideas without going through big gatekeepers for capital to fund ideas, advances in cryptography and computer hardware expands power and economic pie for individuals at the cost of limiting power and pie for decision makers.

“The bitcoin blockchain network is worth over 500 billion dollars and has never failed or been hacked since inception in 2009 proving that blockchain with a foundation in solid compute code is more secure and reliable than any centralized server based network ever been in history.”

The final step for decentralized blockchain applications to outcompete their centralized brother is scaling blockchain networks without sacrificing security to increase both transaction speed and public trust. Achieving rapid adoption means decentralized application must generate a truly superior user experience.

Despite blockchain bans and regulations across China, EU and US, decentralized application adoption is likely to explode average smart phone users understand its power.

Next step in mankind’s evolution may take place when the information, capital, genetic and energetic potential for all individuals is unleashed. Imagine the ideas generated by a species consisting of 8 billion capitally, informationally, genetically and energetically enhanced people working together as a team to solve future existential threats.

Executing these perhaps unimaginable ideas will lead to an optionlike and exponentially growing world extending beyond the confines of dear Gaia and perhaps instead moving mankind into a virtual and interplanetary future. The combined evolution of the internet, blockchain, biotechnology and renewable energy networks is now the driving force behind our coming information, capital, genetic and energy revolution.

There is no doubt in my mind that the intersection of internet, blockchain, biotech and renewable energy will unleash unimaginable amounts of untapped potential hidden in nature, our DNA and less developed countries leading first to Metcalf law type of economic network effects and end with a human singularity event.

I define a singularity event as a moment for which humanity evolves into the next form of our Darwinian ladder, which has happened a handful of times spanning earth's multi-billion year history.

Humanity in current form was built bottom up from space dust evolving from single cell bacteria to become complex sentient biochemical structures with consciousness. Mankind’s next step in evolution is leveraging technology to prepare both intellectually and physically for becoming a digital and interplanetary species.

To unleash human potential, incentives across all individuals in our human network must be aligned to prevent powerful centralized rent seekers and corrupt politicians from achieving personal gain by division.

Our political system must balance centralization with decentralization to be both nimble and agnostic. Sometimes quick decisions without a democratic process is needed, but a majority of time a system benefits from relying on predetermined equal weight principles democratically and transparently agreed upon in advance including free access to information and meritocratic access to capital as well as equal access to both genetic enhancement and renewable energy.

Step 1 – Internet – free access to information

The world wide web distributes information across borders in a fashion that circumvents traditional gatekeepers like newspapers and other large institutions.

Although internet began forming in late 1990s, many marginal improvements within information distribution, electric engineering and hardware were needed to create the internet we all love today.

If internet creates effective information distribution, the most fundamental invention to internet success is development of full-writing systems, which seem to have first appeared in Mesopotamia around 3400 BC[1]. Writing systems allow humanity to store and share information so that smart individuals can build on top of previous smart person inventions.

That is why Johannes Gutenberg printing press invention was an accelerator and precursor for today’s internet as the printing press was 10x the speed at which information could be copied and spread around the world[2].

The internet became a printing press on steroids. With the printing press, only institutions could afford to distribute information at scale. For the entire 20th century, large news outlets, book companies and academic institutions were therefore almost entirely responsible for global information consumption.

If inventors, academics or authors shared unpopular ideas not shared by gatekeeping institutions those ideas were not distributed widely to the public. Also, physical books and newspapers are expensive so they are not distributed to poor areas in the world, which are parts with untapped potential.

However, with internet bloggers, content creators and financial analysts may share their views peer to peer over the world wide web, which means information that can be accessed anywhere in the world by anyone holding access to a smart phone or computer.

Basically, the internet is a platform used to share and distribute information for educational purposes so that anyone with smart ideas may raise capital and build a new cool company to help humanity move forward.

Step 2 – Blockchain – meritocratic access to capital

Although the world wide web distributes information globally circumventing traditional gatekeepers like newspapers, corporations, governments and universities, the internet needs a method to efficiently provide capital to those individuals that can use acquired information to start businesses.

Even with the internet, capital allocation remains centralized with a few key players basically holding monopoly power over the ideas being executed by entrepreneurs and startups, which means our society has yet to unleash our true human potential. However, in a blockchain based economy, capital access is democratized like internet democratized access to information.

Although technology has vastly improved our societies financial capabilities over the past 30 years including transaction speed and lowering costs, our financial institutions remain centralized and there is lots of friction when transacting between different jurisdictions.

In a world where millions of transactions occur daily these financial institutions therefore accumulate wealth through transaction fees, which creates outsized profit and power compared to value created for a few key institutions in our society.

These financial institutions then use the money that they accumulate to increase salaries, distribute to shareholders or to invest in startups so that they can generate even more money in the future.

Blockchain and cryptography can create the same level of security for financial transactions as a bank without paying a salary to anyone to monitor that transaction. Instead the blockchain itself is responsible for keeping a record on who buys what from who.

Step 3 – Equal Access to Genetic Enhancement

The Internet and blockchain are networks that efficiently distribute knowledge and capital to untapped areas of the world, while biotechnology enhances the untapped potential of every individual.

Access to untapped genetic potential must be distributed on an equal basis as all people being equal is a core tenant of mankind. Pursuing biotech research that widens both wealth and genetic inequality is extremely dangerous even if that research may eradicate disease, remove undesired traits and increase IQ.

However, gene-editing technology is here to stay and if only autocratic countries pursue gene-editing technology, then democracies are in danger. Besides staying ahead of potential enemy threats, genetics plays a huge part in determining the pursuits of a person.

Pursuits are generally motivated by some sort of gratification like glory, money, love or passion. Upbringing in combination with genetic ability are the two most significant influencers to our pursuits.

For example, if you are over 215 cm, the likelihood of you playing in the NBA considered in isolation is almost 20%. However, if you also have high intelligence that would maybe decrease the basketball pursuit in favor of pursuing theoretical physics because that is what may motivate people with higher intelligence to enjoy doing all else equal. Although IQ and height are not pure functions of genetics as poor training or nutrition may impact both of these qualities, IQ and height remains an important determinant for a person’s future pursuits.

For all of us short basketball players adding 10 cm so that we can be taller than our peers and therefore more likely to become NBA players makes sense, but if everyone becomes 10cm taller than the genetic increase doesn’t really matter. Unlike height, IQ is not relative. If all people become more intelligent, then the world is likely a better place all else equal.

With smarter people, new ideas are developed which in turn grows the economy and improves life for everyone. With synthetic biology and genetic research, a world where everyone is smarter and disease free is a possible future. Unlocking the genetic potential of future generations will most likely help our world move one step closer to the singularity.

Step 4 – Unlimited Energy

Energy on earth is abundant, but our method to extract that energy is unsustainably impacting the environment and therefore an existential threat to humanity.

Currently, our economy is powered by oil, which is a highly polluting approach to harvest energy. Changing from oil to renewable energies like wind and solar or dangerous but efficient nuclear power can decrease humanity’s carbon footprint and perhaps save the world.

Leading scientists worry that climate change is behind increases in both temperatures and natural disasters making earth uninhabitable in the future. However, humanity has shown time and again throughout history that collective human imagination and teamwork can develop tools to prevent man-made disasters.

Eighteenth century economist Thomas Malthus believed that providing food for a geometrically growing population was impossible in the 21st century, but thanks to farming technology improvements, Malthus' end of the world theory was proven wrong!

Like food production, humanity must invent new technology to more efficiently harvest energy to create a sustainable future. I believe that with further advancements in web3, blockchain technology and genetic research, entrepreneurs and scientists will invent humanity out of a climate catastrophe.

For example, blockchain technology like bitcoin provides a foundation for developing meritocratic allocation of resources so that top entrepreneurs’ may be invariant to location and who they know to instead receive capital based purely on creating companies necessary for executing on humanity’s greatest ideas.

In addition to creating a network that democratically allocates resources, mining bitcoins is less expensive using solar than oil power. Potentially increasing mining profitability therefore incentives firms to build solar farms in otherwise unproductive areas of earth to mine bitcoin.

For example, Block and Tesla led by Musk and Dorsey have already developed a prototype for mining bitcoin using solar power in Texas. Blockchain will therefore expand energy extraction using renewable energy sources.

At the moment, solar and wind power in combination with nuclear fission is by far the lowest hanging fruit to solve current energy dependencies and marginal advancements are guaranteed. Although improving sustainable energy technology is the easiest path forward to prevent climate change, further advancements in energy harvesting like fusion power may save earth and make both humanity interplanetary and digital.

Applied methods for harvesting fusion energy are currently under development. Unlike fusion’s distant nuclear fission cousin, which releases energy by splitting atoms, fusion generates energy to power tools by smacking atoms together like two cars colliding.

What makes fusion preferable to fission is that after energy has been created there is no polluting radioactive material that needs secure storage for hundreds of years. Creating fusion reactions by crashing cars is relatively easy, but manipulating energy generated by a car collision is difficult.

In an interview with the All in Podcast lead by Jason, Chamath, David , Elon stated that the sun is a great example of a fusion reactor and that using solar power is most likely the efficient approach to harvest energy in future. However, although Elon believes in Solar, he is in the spaceship building business and spaceship fueled by fusion is a dream for any science fiction nerd. Not surprisingly, Elon has therefore created the world’s first AI powered tokamak fusion reactor to generate fusion energy. Like me, Elon imagines a world where humanity may be manipulating the power of the sun. With fusion power, humanity would be able to create high tech spaceships for interplanetary travel.

Conclusion

By leveraging untapped genetic and energetic potential in combination with meritocratic and free access to capital and information, humanity is on a path to climb the Darwinian ladder.

- Internet distributes information and expands knowledge

- Blockchains are global immutable decentralized power structures for accessing capital

- Biotechnology provides humanity with access untapped genetic potential

- Renewable energy allows movement at a friction of current costs

• #Internet: Information

• #Blockchain: Capital

• #Biotech: Genetics

• #Renewable Energy: Movement

Big shout out to Doudna, Gates, Satoshi and Musk Fusion/Dark Matter/Plasma/Solar scientists for making this happen!