Read “A Look At The Game Theory Of Bitcoin”, part one of this series, here.
In this article, I will suggest potential avenues for Bitcoin game theory to unfold. So what is game theory? Simply put, if you play any strategy game, be it Chess, Basketball, Football, Battleship, Monopoly or Checkers, any move you make in the game will have to be countered by your opponent. The strategic decisions you and your opponent make will ultimately determine who wins and who loses the game. This is game theory in its most simplistic form.
Undoubtedly, countries with the highest inflation rates will adopt bitcoin first and will be the biggest beneficiaries. Countries like the United States may take longer, as they will continue to hyperinflate their currencies with their mighty seigniorage that they hold. When these superpowers eventually adopt bitcoin, all of the countries that adopted it first will get an economic boost and be placed on equal footing with the more powerful countries. This is how powerful Bitcoin can be for a country that willingly accepts it.
Smaller countries in Latin America, Africa, and many other parts of the world whose money is collapsing will watch bitcoin’s progress with anxiety and excitement. They are the ones who will benefit the most.
All small countries will most likely continue to be bullied and belittled by the International Monetary Fund, central banks, G7 countries and other central authorities for not accept bitcoin in exchange for promises of “free money, protection and support”. These powerful entities will do everything in their power to prevent Bitcoin’s hope and prosperity from spreading, because the widespread adoption of Bitcoin means their power will be gone forever. Until now, central authorities have ruled with fear, lies, slave fiat currency and taxation. US chess pieces will continue to attack Bitcoin with lower Moody ratings and false narratives about adopting countries. The IMF could probably stop providing funds to countries that accept the hope and sound money power of this new technology. When the world sees the freedom bitcoin can give them from the shackles of their dishonest rulers, many more places will embrace bitcoin. The darkness of the fiat world will be swept away and the pure monetary light will shine from the beacons of Bitcoin.
One of the biggest theoretical Bitcoin gaming events we could see unfold is when global energy companies like Exxon Mobil, Saudi Aramco and others start mining bitcoin. This is unavoidable because they can convert their excess energy resources into digital energy. Imagine what a world will look like when Saudi Aramco decides to start pricing oil in satoshis. The reason why this is highly likely is twofold: the first reason is due to the unfairness of the petrodollar system, as detailed by Alex Gladstein. What better unit of account to choose to replace this system than bitcoin, because no one can manipulate it? Second, oil companies will be able to make money from bitcoin mining. What oil company doesn’t want to make more money? One of my bitcoin brothers, @harvardhodl, believes that energy companies will become the new banks of the world. In his own words, “energy companies will create bitcoin and have the ability to keep it on their balance sheet by subsidizing it through the sale of energy.” I value his opinions very much because he works in the energy sector and has the pulse of its inner workings. I also highly recommend you listen to his excellent podcast, “Bitcoin for the People”.
The United States effectively became the first world power to allow Bitcoin to flourish. Here are the strategic moves the US made in this bitcoin chess game:
- The United States has adopted the Internet Protocol (TCP-IP) and does not regulate its Internet companies like China. Bitcoin is the native currency of the Internet. Inevitably, more US regulations will appear in an attempt to control Bitcoin, but US lawmakers will “rake the leaves in the wind” with their regulations as they realize that they cannot control an open protocol, just as they cannot. control the internet.
- The Internal Revenue Service taxes bitcoin as an intangible asset, just like tangible real estate.
- The CFTC considered bitcoin a commodity.
- The US stock market has allowed mining companies, such as Bitfarms, Hut 8 and Marathon, to register as public companies. Mining company Core Scientific will likely be next.
- Mining companies are spreading rapidly in states like Texas, Wyoming, Washington, New York, Kentucky and Georgia. States are fighting among themselves to attract mining companies to their economies.
- America has over 35% of the Bitcoin mining hash rate.
- Governors and senators push for Bitcoin
- Bitcoin has become mainstream among stars like Tom Brady, Kevin O’Leary, and many other beloved and popular American athletes, celebrities, and stars.
- Major payment apps such as Cash App and PayPal allow the purchase of bitcoins.
- 46 million Americans own bitcoins, or about 17% of the US population.
- Intel and Jack Dorsey’s company Block will begin designing Bitcoin mining ASICs, making mining more accessible to ordinary Americans.
- Regular and everyday Americans will be able to buy bitcoin at 300 local community banks this year.
All of these moves are part of Bitcoin game theory.
The United States will be forced to adopt Bitcoin as a defensive measure, otherwise its status as the world’s reserve currency could be lost. All currencies since the advent of fiat have failed and the US dollar will be no different. US senators, governors, presidents, and military will use bitcoin to win elections, attract bitcoin companies to their states and the nation, and fight the currency wars we currently find ourselves in. Bitcoin will serve as a defensive and offensive move to enable the United States to retain its superpower status. But Bitcoin only belongs to the world.
Russia could adopt Bitcoin ahead of the United States in a strategic move to get ahead of its age-old rival. If this happens, in the words of Max Keizer, “a global hash race is about to begin”, and this will set off a chain reaction among the G7 countries. Russia’s capitulation will be because it understands the correlation between gold and bitcoin, which it has been buying aggressively since the 2008 crisis. Russia has plenty of cheap energy and it will start mining bitcoin when she realizes how much money she can make, given that excess energy.
Another bitcoin game theory event could occur if Turkey decides to buy bitcoin with its bloated and worthless fiat currency, the lira. This will be the most important strategic move for a country that has a hyper-inflated currency. The beauty of this move is that Turkey will be able to print worthless fiat to buy silver which is appreciating by around 170% per year. Essentially, they will mimic what the United States has been doing since 1971 – printing fiat to gain economic prosperity. The only difference in Turkey’s case is that they don’t invade countries to do this – instead, they just breathe new life into their country’s failing economy by becoming huge beneficiaries of the first mover advantage. Turkey will set off a chain reaction among all other inflation-ridden countries to follow suit and the world will watch in complete disbelief the rapid adoption of bitcoin. The G7 countries will watch these events nervously and start their surrender even sooner.
There will be great divisiveness in the transition from a fiat world to a bitcoin world – but it won’t be bitcoin’s fault. Wars can be fought: not necessarily kinetic wars, but maybe even cyber wars. Leaders don’t want to allow bitcoin. Why wouldn’t the rulers of the world desire a world like this? The simple answer is that in the fiat world, the rich get richer and the poor get poorer. In a Bitcoin world, all people are treated fairly because money is:
- Open to everyone
Bitcoin Game Theory is an elegant, organic, phenomenal, and powerful thing to watch unfold.
This is a guest post by Jeremy Garcia. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc. or Bitcoin Magazine.