The Evolution of Cryptocurrency

From Bitcoin to CBDC

I have covered the evolution of Bitcoin and its effect on the crypto space since my initial October 2017 post on the subject, The Problem with Bitcoin. This post led to Chapter 22, The Bitcoin Flaw, in George Gilder’s best-selling book Life After Google. All my posts on the crypto space continue to hold up today as predictive analyses. I have no posts on bitcoin going to $1,000,000, or that Bitcoin is a useless scam without any financial merit. I am consistent that cryptocurrency and the blockchain are revolutionary technological advancements that portend vast potential for finance and individual freedom. Gilder’s Life After Google vision foresees an internet defined by heterarchy rather than hierarchy. An internet architecture that democratizes money, revolutionizes the financial system, and opens the world to a new era of innovation. Cryptocurrency and the blockchain further enhance security and privacy and prioritizes individuals over siloed information controlled by a few corporations partnered with unaccountable government. The problem remains, how to create stable value cryptocurrency. This solution is achievable but is either not understood or denied because it would end crypto price speculation and the necessity for useless imitators. There are currently no crypto price stability solutions visible.   

A brief recap is that Satoshi built on previous failed attempts to create a digital currency and succeeded in making it work with cryptography, proof of work mining, and the blockchain. The result is Bitcoin. The flaw is fixed supply. No currency of a major economy in history has had a fixed supply. It is axiomatic that a currency must expand its supply with a growing economy. Otherwise, it is deflationary. Deflation is more destructive than inflation in relative terms. The end limit for deflation is zero, while inflation’s end limit is toward infinity. A currency can only deflate so far before its negative impact starts to crater an economy. An economy can adjust to gradual inflation for decades until hyperinflation finally sets in and implodes in Weimar fashion. 

Deflation is a rarely seen economic phenomenon because inflation is the defining characteristic of fiat. Politicians love when central banks create more money because in their kindergarten-level economic minds more money equals more wealth.  A major economy based on a deflationary, fixed supply currency has never been considered as even an outlier possibility—until cryptocurrency. All cryptocurrency has followed in Satoshi’s flawed fixed supply footsteps. The result is that Satoshi’s vision of a decentralized cryptocurrency to compete with centralized controlled central bank fiat was stillborn in its infancy.  

In its early years, bitcoin advocates promoted it as a currency for the transaction of goods and services. Bitcoin got its initial footing and visibility as the Silk Road illegal marketplace currency. That worked as long as bitcoin supply outstripped demand and its value remained suppressed. Once bitcoin demand increased along with its price, it became a speculative investment instead of Satoshi’s vision of a democratized transactional currency. Today, bitcoin is no longer mentioned or considered a transactional currency. The idea of buying any goods or services with bitcoin is a distant memory, along with the 10,000 bitcoin pizza.

The end of the bitcoin promise as a transactional currency created a flood of bitcoin imitators. If bitcoin merely becomes a speculative asset and not a transactional currency, why can’t thousands of other imitators do the same? Bitcoin’s deflationary value instability led to the creation of unaudited stablecoins to dampen the inherent volatility. As a result, Tether became the backbone of the entire crypto space. With the dominance of its stablecoin, Tether brought an uninterrupted history of fraud and criminality. Fixed supply price volatility led to crypto speculation, which naturally led to a proliferation of crypto Ponzis, scams, hacks, rug pulls, manipulation, wash trades, fraudulent entities, rampant criminality, cult-like personalities, corrupt or absent regulation, and its inevitable ongoing implosion.  

Out of the implosion comes regulation, and with regulation comes government control. The highest level of government control in digital currency is CBDC. Some might consider a link between the recent crypto implosion, regulation, and the rapid move toward CBDC as not accidental. It’s time for people to open their eyes to what is well on its way to controlling every aspect of their lives.

CBDC is not an afterthought to the current crypto turmoil. It has been a vision of centralized authority in the works since 2014, when bitcoin and the blockchain first became evident as a sustainable revolutionary technology. Today, 114 countries, representing over 95 percent of global GDP, are exploring CBDC.  There are 11 countries where CBDC is in use. Pilot programs and rapid development are occurring under the guidance of 90 percent of central banks, the BIS, IMF, and the World Bank. All G7 nations and 18 of the G20 are developing CBDC.

The obvious question one might ask is, why is this occurring? Is the global population clamoring for more centralized control of their financial life? CBDC is like monetary gain of function. The world didn’t demand that scientists in university labs and sketchy bioweapon facilities take non-zoonotic viruses and insert genetic sequences, HIV, and furin cleavage sites into them to make them transmissible to humans.  Presumably so that they could then develop a vaccine to protect us from their Frankenstein virus that wouldn’t exist without their handiwork. Similarly, the world didn’t demand that unaccountable, supranational authorities end our access to cash and replace it with digital creations that allow a central authority to control every aspect of our existence.  

CBDC is a solution to a problem that doesn’t exist. Authoritarian control that CBDC necessitates is the end game. CBDC requires a digital identity. Nick Corbishly writes:  

What CBDC research and experimentation appears to be showing is that it will be nigh on impossible to issue such currencies outside of a comprehensive national digital ID management system. Meaning: CBDCs will likely be tied to personal accounts that include personal data, credit history and other forms of relevant information.” 

Social credit scores, carbon footprint regulation, climate change sustainability edicts, anti-government speech control, programmable currency, directed purchases, UBI, access to capital, and any other behavioral limits that unaccountable bureaucrats can dream up are the natural progression of CBDC control. 

Nigeria is an initial test case for the practical application of a CBDC with its introduction of the eNaira. It was a dismal failure, with only 0.5 percent of the population adopting its use. The Nigerian government then doubled down by banning large currency bills and limiting cash withdrawals. The result is financial chaos, the same chaos India experienced with its attempt to ban cash.

China has employed an incentivized approach to its CBDC rollout of the digital yuan, the e-CNY. China used free e-CNY airdrops into lottery winner accounts, who could download the app and spend the digital currency with their phone. Users can then deposit cash into their digital account. The e-CNY app is still in pilot development and is one of China’s fasting growing downloaded apps.

A hybrid model of a centralized ledger to record transactions and a DLT for end-of-day records is the common backbone for CBDC adoption. CBDC is all financial skittles and rainbows for now. The bait and switch will come once the masses acquiesce to its use—like the perpetuating 15 days to slow the spread lockdown. In 1913, Congress enacted the income tax. The top tax bracket was 7 percent on all income over $500,000 ($34 million relative to gold today), and the lowest tax bracket was 1 percent. In 1944, the top rate peaked at 94 percent on taxable income over $200,000 ($7 million relative to gold). Whatever the initial selling point for CBDC adoption, the end result will be 100% different.    

The Biden Executive Order on Ensuring Responsible Development of Digital Assets assures us that individual privacy is its main concern. Right. As we’ve learned from forced/coerced experimental mRNA vaccinations, Covid mandates, health passports, the Twitter Files, and Orwellian-controlled mainstream media propaganda, all individual natural liberties enshrined in the Constitution are mere afterthoughts that authoritarian control will crush. CBDC is the dividing line in Western democracies between individual freedom and authoritarian control. It’s not like they’re concealing the implications of CBDC. As Agustin Carstens, general manager of the Bank of International Settlements, put it at a 2020 summit of the IMF: 

We don’t know who’s using a $100 bill today, and we don’t know who’s using a 1,000 peso bill today. The key difference with the CBDC is the central bank will have absolute control [over] the rules and regulations that will determine the use of that expression of central bank liability, and also we will have the technology to enforce that.

                                      Agustin Carstens

We’re all equal, but some are more equal than others.


  1. George Gilder

    Great blog, Mike. You have to organized these into a book for wide distribution.

  2. Kevin

    This is the best and most concise statement I have found of the fundamental inadequacy of BTC as a currency or medium of exchange. Blockchain is still one of the world’s greatest innovations. Thanks for this definitive article.

    1. Michael Kendall (Post author)

      Kevin, thanks for your comment.

  3. Brazilian Bostilian

    With the ever increasing surveillance power of govts with the new CBDC’s how will criminals (especially cartels I guess) make a buck?

    I suspect people won’t be ok buying/selling weed or coke using their own identity.


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