Why Bitcoin Will Bring World Peace

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Bitcoin on top of a 100-dollar bill.
Photo by Bermix Studio on Unsplash

Yes, you heard that right. In this article, I discuss why I think Bitcoin will bring world peace. To be precise: Bitcoin will bring world peace by making warfare as we currently know it unfinanceable once it has replaced fiat forms of money. Whether such a Bitcoin standard will happen or not is beyond my point, but some say that it is inevitable.

I first discuss current and subsequently historical military financing practices. I then show that financing a traditional war under a Bitcoin standard is close to impossible. I conclude with what conflict resolution would look like in a hyperbitcoinized world.

How war is currently financed

The United States, which I take as an example here because of its love for “spreading democracy”, spends $754.8 billion on defense — in a single year. It’s a mind-boggling number. To put it into perspective: India, a country with a population four times as large, spends 36% less on all categories of its budget.

“Of course,” you may say. “The U.S. is much richer than India, and can afford to spend this much.” Well, not quite: the U.S. government has a budget deficit of close to three trillion dollars. Barring the earmarking of government funds, you could say the entire U.S. military is entirely paid for by debt.

What debt, you ask? Let’s ask Alan Greenspan, former Federal Reserve chairman:

“The United States can pay any debt it has because we can always print money to do that.”

It sounds like a conspiracy, but it is not. Greenspan openly discussed the practice on NBC News to reassure viewers that the U.S. won’t ever default. Now, it must be stated that not all federal debt is directly accounted for by ‘printing’ — the dollar system is incredibly complex, as exemplified below.

US Dollar system as visualized by the Federal Reserve of New York.
The U.S. Dollar Funding system is complex. | Diagram courtesy of the Federal Reserve Bank of New York, permissible use. I have no affiliation with this institution nor does it endorse this article.

Having said that, the Federal Reserve currently holds over 20% of U.S. debt via government securities. In turn, it financed those by steadily increasing the base money supply — with over 600% since 2008. In short, it’s easy to see that “printing money” plays a huge role in paying for U.S. operations, including wars.

Interestingly, the practice of funding war using the printing press is age-old — this article is applicable to any country with a central bank. For example, Kings of England Henry VIII and Edward VI began minting coins with decreasing amounts of silver content to finance overseas military operations. At the peak of this Great Debasement, ‘silver’ coins contained just 25% of pure silver.

A more recent example is the Federal Reserve’s monetary policy during World War II:

“A commitment to maintain low yields (high prices) of government bills and bonds necessarily resulted in the purchase of a significant volume of government securities, producing a substantial expansion of the System’s balance sheet and, in particular, of the monetary base. Indeed, the monetary base increased by 149 percent from August 1939 to August 1948.” — Daniel Sanches, Federal Reserve Bank of Philadelphia

So, whether it’s through directly increasing the money supply by “printing money” or indirectly through interest rate control, central banking has been at the forefront of warfare since its inception. And that’s for good reason: having access to cheap credit is vital to winning a war. Run out of money to pay for bullets and the shooting stops — it’s that simple.

War cannot be financed on a Bitcoin standard

One of Bitcoin’s key characteristics is that its maximum supply of 21 million BTC cannot be increased. This is a mathematical impossibility anchored in code that is decentrally governed by selfish actors, who will never agree to the debasement of their currency. Therefore, with Bitcoin, there’s no such thing as minting an impure coin or “typing money into the system.”

Clearly, funding war through money creation is prohibited by Bitcoin. This leaves us with two other methods of financing: taxes and loans.

War taxes are unpopular and therefore not practical because citizens have to carry the financial burden of war in a very obvious manner. It is no coincidence that two of the U.S.’ most meaningless wars, the ones in Afghanistan and Iraq, did not come with any direct financial responsibilities to the population. In other words, when you ask citizens to contribute to war they’ll start asking questions about its necessity; after all, funding is coming out of their own pocket.

In practice, war taxes alone cannot sustain a war. In fact, Immanuel Kant saw war taxation as one of the means to achieve his utopian ideal of “perpetual peace”:

“If the consent of the citizens is required in order to decide that war should be declared […] nothing is more natural than that they would be very cautious […]. Among the latter would be: having to fight, having to pay the costs of war from their own resources, having painfully to repair the devastation war leaves behind, and, to fill up the measure of evils, load themselves with a heavy national debt that would embitter peace itself and that can never be liquidated on account of constant wars in the future.”

Add to this the fact that confiscation of bitcoin is impossible, and that bitcoin is very scarce, and you reach the simple conclusion that war taxes aren’t much of an option under a Bitcoin standard.

That leaves us with loans, war bonds if you like. In the case of Bitcoin, these wouldn’t work either: a creditor will only provide a loan if the debtor can pay it back, but the U.S. has to take on more debt to prevent defaulting:

“Raising the debt limit has nothing to do with new spending. It has nothing to do with my plans on infrastructure, or Building Back Better. […] It is about paying for what we owe and preventing a catastrophic event from occurring in our economy.” — U.S. President Joe Biden about raising the debt limit with another 2.5 trillion USD.

And you guessed it, this debt is (partially) paid for by increasing the money supply. This is what Alan Greenspan meant when he said that the U.S. can never default: it can simply raise the debt limit, print money, and therefore ensure creditors are paid back when they redeem their bonds. To put it another way, the collateral of U.S. debt is the ability to print money. When the money supply can no longer be increased, this house of cards comes tumbling down.

State-sponsored war, therefore, is nearly impossible with Bitcoin. It’s simply not financeable — except for rare wars that receive continued, conscious support from citizens that voluntarily give up their scarce bitcoin to fund it.

How will we resolve conflict, then?

While war with guns would no longer be sustainable with Bitcoin, scholars predict another form of war that will not involve any human casualties: hash wars. Jason Lowery, part of the U.S. Space Force, says that the sensible thing to do is not to fire a nuke, but to mine bitcoin instead, based on his idea of “Mutually Assured Preservation”:

“Bitcoin is digital violence. It obsoletes messy, analog physical violence and is the ultimate “peacekeeper” missile.”

And from a game theory point of view, this makes sense. Why indulge in kinetic warfare that could cause the annihilation of the entire human species, when you can take part in an energetic form of warfare that can reward you with— and deprive your opponent of (!)— a perfect form of money?

Clearly, bitcoin mining would be a much more efficient and clever form of resolving conflict — and it would result in zero blood-shedding! And so, citizens would be very willing to pay for “mining operations” (war) because it will enrich them, not tax them.

A volcano in El Salvador.
A volcano in El Salvador, soon a chess piece in energetic warfare. | Photo by Oswaldo Martinez on Unsplash

We are already seeing this in El Salvador, which is going to mine bitcoin using volcanic energy. By doing so, the country is effectively hurting the U.S. and its dollar without firing a single missile. It’s a matter of time before other countries will follow; everyone wins with Bitcoin.

Conclusion

Bitcoin is here to stay and if the game theory plays out, more and more countries will adopt it. Hyperbitcoinization could be messy — it would mean the collapse of the dollar and its associated institutions — but with such a peaceful end in sight, it’s absolutely worth it.