Bitcoin vs. Marx The Geopolitical Domino Theory of Two Competing Forces

Bitcoin vs. Marx The Geopolitical Battle of Titans and the Domino Effect of Competing Forces

Author: Robrrt Malka, Bitcoin Magazine; Translation: Songxue, LianGuai

Marx tells us that the revolution will be decentralized. The poor will tire of the massive inequality of capitalism, while thousands of the rich will suffer from the global revolt they have incited through their greed.

Establishing central banks and controlling the money supply will usher in communism. The concentration of wealth leads to anger, and class will become the determining factor, with people of various classes and genders in the most developed countries being the first to resist. The dominoes will fall until the least developed countries eventually achieve industrialization, experience the same inequality, and become communists.

Of course, this is not the case. Lenin adapted Marxism to his own needs and implemented communism from the top down in underdeveloped Russia with the help of American communist sympathizers. The dominoes were forcefully knocked down.

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Satoshi Nakamoto is the pen name of the creator of Bitcoin and did not make any political statements. In his nine-page whitepaper and public posts, we learn about the workings of Bitcoin and whether it would succeed – meaning, could it handle a large volume of transactions, and could it prevent an entity from attacking the network and compromising its legitimacy.

However, it is well-known that Bitcoin’s deflationary monetary policy and peer-to-peer structure are rooted in the insights of Austrian economists such as Ludwig von Mises, Friedrich von Hayek, and others – thinkers whose work stands in direct contrast to Marx and his dialectical materialism of history and political tendencies. Therefore, it is not surprising that theories about the political implications of adopting Bitcoin have emerged.

According to one theory, the most developed countries, especially the United States, are closest to having a legal printing press. The most powerful central banks are those that manage the world’s reserve currencies. The few controllers of central banks can print unlimited amounts of money and engage in money laundering to serve their interests. These interests will never align with the interests of their people, especially those countries that are forced to peg themselves to today’s global reserve currency, the US dollar. The US dollar, not backed by gold or any other hard currency, will become worthless due to inflation. Other central banks that are also printing money will suffer a double blow. Their money is devaluing, and the money they rely on, the US dollar, is also devaluing.

People will realize this and grow tired of it. They will understand that they cannot store the value of their daily work in a depreciating currency and will withdraw funds from fractional reserve banks, the very foundation of this endless printing. They will put that money into hard assets, initially gold and ultimately Bitcoin.

Citizens of developed countries invest in Bitcoin, but as relative winners in the fiat currency game, they eventually use it as currency. Similarly, the governments of the most developed countries do not take Bitcoin seriously or hold any hostility towards it. However, citizens of poor countries and countries with currency devaluation will turn to Bitcoin first. When the currency of a poor country experiences rampant inflation, they will realize that Bitcoin’s volatility is not so bad after all. At least its monetary policy is transparent. Who knows what goes on in the office of the Federal Reserve?

Citizens of smaller, poorer countries will store their value in Bitcoin and use it for transactions. Smaller, poorer governments will see Bitcoin as a way to escape legal debt and devaluation, and adopt it as their legal currency. The dominoes will fall. The rich of central banks will be overthrown, replaced by the poor who own Bitcoin. Developed countries will be the last ones to catch up. Ultimately, due to Bitcoin’s deflationary monetary policy, poor countries will have a place in this new world. One day, we will live in a paradise of the free market, where no one can control the money supply and the economy can grow as the people desire.

In both of these theories, the economic situation leads to a decentralized phenomenon of emotions and culture, a struggle against corrupt oligopolies.

But for Bitcoin, this hasn’t unfolded as expected either. When Salvadoran President and New Ideas party leader Nayib Bukele made El Salvador the first country to adopt Bitcoin as legal tender, the interest of Salvadoran citizens in Bitcoin was almost 0%. Only a few Bitcoin enthusiasts from developed countries residing in tourist destinations like El Zonte Beach had any understanding of Bitcoin. Now, the adoption rate of Bitcoin among Salvadoran citizens has exceeded 35% and continues to rise, due in part to the government’s Chivo wallet and the efforts of non-profit organizations like Mi Primer Bitcoin. The dominoes in El Salvador have primarily fallen through top-down efforts, despite being a poor country with another legal tender, the world reserve currency, the US dollar. While El Salvador cannot control the monetary policy of the dollar, it certainly does better with a dollar monetary policy than countries like Argentina or Lebanon, whose currencies have severely depreciated at the time of writing this article.

In addition, there is blatant misinformation here. The United States has not yet adopted Bitcoin as legal tender, but it does hold a significant amount of Bitcoin. The IRS holds holdings. There are even rumors that other institutions occasionally confiscate, hold, and purchase Bitcoin, which is particularly easy for a country that frequently prints money.

The list of countries that mine Bitcoin for free (some of which are confidential) is too long to mention one by one. Therefore, developed countries, regardless of whether they publicly acknowledge the importance of Bitcoin, are certainly investing in it. That’s where the advantage of poor countries ends.

Lastly, there are geopolitical activities involving the use of Bitcoin. Russia is accepting Bitcoin in exchange for natural gas, and the United Arab Emirates is also interested in this asset. Both are far from poor or underdeveloped countries. On the other hand, Nigeria is not wealthy. Apart from Americans, Nigerians have the highest number of Bitcoin users for transactions. However, the government is hostile towards it, even promoting their CBDC (e-Naira) to the public. Meanwhile, savvy citizens in Argentina and Lebanon mine and hold Bitcoin, while their governments seem unaware of the urgency of adopting Bitcoin.

So, will Bitcoin, or more precisely, the Bitcoin economic theory, become as universal as communism? Is there any theory that can cover the trajectory of this asset? Also, considering that Bitcoin fundamentally challenges central banks and extends to certain normalization principles of communism, should we expect to see them challenge each other in geopolitical terms – right?

Which economic incentive structure will prevail? Or will it completely eliminate centralization? Or will Bitcoin be stifled due to some clever unforeseen circumstances? In the current situation, Bitcoin is undoubtedly at a disadvantage, with its main advantage being decentralization achieved through proof-of-work consensus mechanism. Meanwhile, laws control every major institution on Earth – including the armies necessary to achieve their purposes.

The geopolitical theory surrounding Bitcoin relies on the assumption that Bitcoin cannot be stopped. As a computer network, anyone can run a node, transact with others, and mine to secure the network and earn money. In fact, it is the most secure computer network in history, with a normal operating time of 99.99999999% and zero successful attacks against it.

In fact, it is hard money, meaning that everyone – including those who despise it – will ultimately choose to store their value on the network, preventing them from wanting to destroy it and lose their wealth. Only a few who are closest to the money printers suffer the most when transitioning to the Bitcoin standard. They cannot wield a world that loses control over major currencies. If they can’t beat them, they will join them.

If I don’t mention Lieutenant Jason Lowe’s theory, I would be remiss. While controversial, it tells a fascinating story: as Bitcoin reaches every nook and cranny, nation-states will start adopting Bitcoin and wield it as a geopolitical weapon to elevate their motives for engaging in conflicts. Conversely, conflicts over hash rates and geopolitical differences in the Bitcoin mining space will arise. It’s a compromise between two ideas, where Bitcoin is embraced by incumbent authorities, including central bank members, but Bitcoin finds a way to redirect their incentives in their own favor.

To some extent, they can hoard surplus bitcoins and try to dominate the network through conquering computing power. Lieutenant Lohori’s proposed economic “game” may find some reality. Although there are valid criticisms of Lohori’s paper, a version of such events may occur. According to Limpwar, a country that adopts bitcoin as its legal tender and attempts to use bitcoin to counter other countries may find itself in a predicament. Hostile countries may sell bitcoins during a competing country’s economic recession, further reducing that country’s purchasing power in the short term. If subsequent military actions are taken, victory or defeat may be determined.

Similarly, governments can also hoard bitcoins in response to their people. As people dedicate themselves to revolution, primarily investing their assets into bitcoin, the government may sell a large amount of bitcoins, weakening the people’s assets. Perhaps other countries or citizens will buy bitcoins, thus raising the price again. It may take longer than expected. As we have seen, a bear market can persist steadily for over a year with just a few whales having the power to drastically change bitcoin’s price. There is currently no reason to believe that the future performance of the bitcoin economy will be any different.

My position is that imposing frameworks on bitcoin indicates a lack of integrity. The network will flourish where it is needed and stagnate where it is not. It is still unclear whether it is equally needed everywhere or has the same value everywhere. For example, Gulf countries may hoard bitcoins but find no need to spend it, preferring to trade with fiat currency based on the value of their natural and digital assets. The citizens of these regimes may also do the same, feeling no need for international transactions and lacking strong economic motives to use bitcoin.

Finally: Does the bitcoin economy look significantly different from today’s economy? An economy under the bitcoin standard is likely to be similar to the economy under the fiat system. Any significant changes to such a system will take several generations, and even then, such changes may only be iterations of the current system rather than the radical vision of a few bitcoin enthusiasts. There will still be credit. Many people still prefer to leave their money with intermediaries. Countries will still have central agencies to manage the purchase, sale, and holding of bitcoins, as well as how to legally transact with the network and its services. Perhaps countries will spend less than they do now, or pay less attention to GDP – but can we really believe that in a crisis, countries will continue to spend more than they have currently, is that truly insane? Before World War I, we believed it was impossible for a country to spend more money than it possessed – but Europe kept the war going for an unthinkable amount of time. Bitcoin can never eliminate this instinct. As long as there is strong will, there will be a way for you.

Therefore, perhaps Bitcoin will overcome the threat of infinite inflation in the long term. In the short and medium term, there may be a recognizable adjustment for us who are paying attention to society.

Marx believed that all culture and politics are built on the economic structure of the people. Our economics defines us, its historical process, from tribal bartering to feudalism, to free markets, to communism, and so on, is inevitable. Bitcoin supporters with a nonzero amount also assume the teleology of Bitcoin’s history, in fact, they just disagree with Marx on the anticipated inevitability. Many (but not all) celebrities are Christians. So, in economics, both sides see the savior of history, and that makes sense. Therefore, both sides believe that only their assets or methods will prevail, and new politics will be widely inspired by them. It is not only possible but also confirmed that one side will bring about a new politics. Bitcoin is likely to do the same thing.

But to believe that as both sides potentially could, only their methods will dominate – Marx’s method because the rich always acquire fundamental (and inevitably growing) inequality from the poor, and Bitcoin’s method because there is no alternative asset for this method. The superior storage, transfer, and protection of energy and value – seems short-sighted. The entire framework of this problem may also be wrong. Perhaps economics is not the foundation of the cultural and political superstructure – on the contrary, economics only affects some functions of society, not almost all functions. Otherwise, our framework would be too narrow and we might miss the root causes of other deep cultural or political issues. Resolving this issue requires us to address whether, as Marx believed, all philosophical problems fundamentally stem from the material world, and whether new philosophy can only arise from new material conditions.

In any case, we see that both of these philosophies are not playing out as people expected. And for the first time since Marx wrote, we are applying Austrian economics. The latter has never had a political opportunity to oppose Marxist fervor until Bitcoin appeared.

In another 300 years, who knows what will happen to Bitcoin? Who knows if the integrity of such a system will persist or if central banks will not only continue to exist but also thrive in new forms?

Bitcoin has changed the economic landscape of entire nations and has saved the wealth of many individuals. It has the potential to change the structure of currency and the way we harness energy.

However, there seems to be no clear theory to encapsulate it. Bitcoin is slowly but surely filling the vast space that used to be the ocean. Will it continue to fill every space until we navigate it like fish in water? Who knows if other economic theories will continue to compete. But this road will be long and bumpy, undoubtedly, the dominoes will not fall in any way we imagine.

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