“Like a letter at the post office” – Building a Bitcoin-Nation (Part 1)

Three years later, El Salvador’s President Nayib Bukele made an historic announcement, applying these recommendations almost to the letter.

Original text, in French: https://bit.ly/btcnation

Note: The title of the article is a pun on the French expression “passer comme une lettre à la poste” meaning “going off without a hitch”.


Building a Bitcoin-Nation

In his speech at the “Crypto Conference” in St. Moritz last January, Federal Councillor Johann Schneider-Ammann hoped that “in five or ten years’ time, no one would talk anymore about “Crypto Valley Zug”, but about “Crypto Nation Switzerland”.

Beautiful formula, which made ink flow and enthusiasts chuckle. But what exactly does this mean? And how do we build this “Crypto Nation”? What essential foundations constitute such a “Crypto Nation”, and what fashion trends should it avoid?

It is true that Switzerland is an ideal location to host these technologies, both historical and political, cultural, and social. Provided you no longer waste time, focus on what is important, and put aside unnecessary distractions.

Not a day goes by without the media talking about cryptocurrencies, crypto-assets, tokens and ICOs, Blockchain and “distributed ledgers”, without understanding everything well, and in confusion bordering on the noise. It has become clear that these technologies, which are constantly evolving and are still obscure to many, but well established to last.

So politicians as well as companies around the world suddenly seem to want to appropriate them. Sometimes it is only empty announcements, sometimes it is a serious will in which real resources are invested.

But like electricity at the time or the Internet more recently, these are global technologies that break with the past, which will therefore be impossible to fully control. It is therefore necessary to position oneself in a thoughtful way, thinking globally, on a large scale, and in the long term.

In this article, broken down into three parts, I explore the mechanisms required for Switzerland to position itself as a world leader in the field of Bitcoin and crypto-assets. And to better look to the future, I propose to start by putting the historical context in perspective, to better appreciate its fundamental principles.

Part 1: “Like a letter to the post office”

In January 1906, the “Cheques and Postal Transfer Service” was officially created. An integral part of Swiss Post, this new branch is established to guarantee the supply of cash throughout the national territory through the network of post offices. Money transfers are suddenly simplified, thanks to a service set up by the State for the people.

It may seem obvious today that PostFinance ATMs are present everywhere, but at the time, it was a revolution. Before the law was pronounced, the Post Office was used exclusively for the delivery of mail. And the PTTs (uniting the telegraph and the telephone) did not yet exist.

When we read the message from the Federal Council to the Federal Assembly concerning “the draft federal law regulating the service of cheques and postal transfers” published in the Federal Sheet on April 5, 1904, we better understand what this transformation may have brought.

The full text of this document is available at https://www.amtsdruckschriften.bar.admin.ch/viewOrigDoc.do? id=10075816 and by diving into it, we rediscover a not so distant era where new technologies were approached in a simpler and more direct way. We go to the essentials and the recommendations are still deliberately a little vague:

“Anyone who meets the conditions still to be set could have a chequing account opened.”

With this new service, the Post Office will offer dematerialization of the currency, guaranteed by the State, and will change the perception of value transfer, as the telegraph and telephone had changed the way we communicated now. Thus, it will position its modernity at the crossroads of social, trade, employment, etc. in a decisive political advance.

“As a state institution, the postal administration presents an incomparable guarantee for the funds entrusted to it, which is important, especially for the peasant, the small merchant and the saver, since the assets of the accounts will be interest-bearing.”

It will therefore be a public service, promoting savings, and easy and convenient to access for the least well served, thanks to the 3,000 access points of the Post Office throughout Switzerland. Looking back, it is easy to make the connection with the social advances brought about by the Internet and wireless telephony networks.

And it even reflects the current desire of governments and banks to eliminate cash:

“A large proportion of reciprocal payments between participants could take place by debiting or crediting cheque accounts without the need for banknotes or cash.”

But at that time, the same scarecrows as today are not yet waved, and the logic remains similar to that of cash. There is therefore no question of anti-money laundering laws, for example. It is also realized that placing responsibility for the audit on post offices would be an unnecessary, illusory complication, and detrimental to the adoption and use of the system:

“Under the provisions of the Federal Bond Code, the cheque can be issued to the bearer. (…) In the event of the circulation of cheques in favour of a specific person (…), cheque offices should check at each presentation for payment whether the holder of these cheques is identical with that person. This verification would create ongoing difficulties.”

La Poste also admits that to be effective, its system must be universally adopted, and therefore not be perceived as too greedy or unfair:

“We therefore do not intend to give this service a fiscal character, on the contrary the postal administration must only collect what is necessary to cover its own costs (…). In the interest of its development, the transfer service would be favoured by specially low fees.”

Finally, on June 16, 1905, the Federal Assembly of Confederation promulgated the Federal Law concerning the Service of Cheques and Postal Transfers. The latter, barely simplified and paraphrased, decrees:

Art. 1. The Post Office now manages payments and money transfers.

Art. 2. A new division is created to manage this service, with employees.

Art. 3. The Federal Council will take care of the details later. There will be no benefits.

Art. 4. The Federal Council makes this law official.

Or in its original version:

Art. 1. Apart from the services assigned to them by the Federal Law on the Remunement of Posts of 5 April 1894, Swiss Posts also provide for the collection, payment and transfer of sums of money by cheques and transfers.

Art. 2. A new division is created in the Postal Directorate-General, responsible for the cheque and transfers service. This division will include an inspector, an assistant, first and second class secretaries, first and second class assistants and employees.

Art. 3. The Federal Council will enact, by ordinance, all the requirements necessary for the enforcement of the law, subject to the subsequent regularization of the new service in the Federal Post Law. The taxes to be collected for this service and the interest to be added on the assets of chequing accounts will be calculated to cover administrative costs and risks, without resulting in any benefits for postal administration.

Art. 4. The Federal Council is responsible, in accordance with the requirements of the Federal Law of 17 June 1874: concerning popular votes on federal laws and decrees, for publishing this Law and fixing the time of its entry into force.

That’s all.

This is how we revolutionize a country’s society, technology and cash flows in a few lines. Just take the first step.

By examining the simplicity of these four articles, we realize how ambitious and forward-looking the Confederation’s attitude was.

And precisely, it is indeed the future that is at stake. Without looking back, without fear of possible road accidents. And in 1920, the first international agreement concerning postal transfers was signed. La Poste concludes postal money order contracts with the main European countries, and Switzerland is well present on the international financial scene.

The Confederation will have understood that it is much more than just money transfers between individuals and small traders that are at issue. It is infinitely more complex and it is the modernity and competitiveness of the entire nation that is at stake, or even its sovereignty.

The decades that followed saw the arrival of remittance slips, Postomat ATMs, and then the Postcard. Today PostFinance is undoubtedly one of the pillars of the Swiss economy, and “presents a systemic risk” such as UBS and Credit Suisse.

Historically a pioneer in new technologies, PostFinance still clearly positions its strategic orientation towards digital technology. But technologies are evolving and becoming more complex, as are competition and financial markets.

Following the fall in its operating income in the first quarter of 2018 by 60% compared to the same period in 2017, its President said that it will “strengthen its cost control, diversify its revenue sources and continue its transformation to the Digital Powerhouse”.

And this transformation is precisely part of the new economy encouraged by Mr. Schneider-Ammann. An economy in which the dematerialization and globalization of transactions of all kinds set new operating milestones, create new needs, offer new perspectives, and open the door to an infinite number of new opportunities. An economy where money is no longer just money, where computing power and storage are shared through thousands of relay participants, to secure data exchanges.

This is an even more important and exhilarating economic development than the one whose recognition was requested in April 1904 by the Federal Council.

A century ago, when responsibility for cash transfers was entrusted to the Post Office, Switzerland opened the door to a movement of popular and citizen growth, which transformed society. Today, these new technologies are much more than a confusing and difficult to classify economy: they are beyond the scope and competence of the SNB and FINMA, and will therefore have to be managed separately, autonomously and experimentally, by a state body directly owned by the people

The story is just beginning, and remains to be written. Should everything be bet in ICOs? Create a government and stable crypto-Franc? Delegate to companies the power to issue their own national cryptocurrencies? What is needed above all is to avoid pitfalls and ignore glamours. I will explore some of them in the 2nd part of this article: “The tree that hides the forest”.

Calculating Bitcoin energy consumption per transaction is a very flawed metric.

Here’s why.

On 12 January 2009, Hal Finney received 10 BTC from Bitcoin’s creator Satoshi Nakamoto in the first ever Bitcoin transaction.

The block in which this transaction was recorded (block 170) was mined by Nakamoto, with a standard personal computer running the Bitcoin client software.

The transaction was sent from this standard personal computer, to Finney’s standard personal computer. There was no specialized material involved, no mining farm, no “energy burning as big as Switzerland”.

It was just two normal people using normal computers’ CPUs, exchanging data through a normal Internet connection. Peer-to-peer.

The block that included this transaction, and made it immutable and verifiable by anyone (for as long as the Bitcoin network will work), was the same as the blocks mined today. Back then, it gave a reward of 50 new BTC to the miner who discovered it (in this case Nakamoto), and it took approximately 8 minutes to be mined.

That block contains exactly 2 transactions. One was the mining of the 50 BTC subsidy, and the other was the transfer of 10 BTC to Finney and 40 BTC back to Nakamoto change address. 2 transactions, or 3 overall, depending how one looks at it.

A desktop computer uses an average of 181 Watt hours (Wh). This is the computer itself (171 W) and the internet modem (10 W).

Multiplied by two (Nakamoto and Finney), that’s 362 Wh. For the 8 minutes it took to mine this block and make the transaction, that comes to 48.3 Wh for 3 transactions. That is, 16.1 Wh per transaction.

In reality, the transaction didn’t take 8 minutes, merely a few seconds at the most, but for the sake of this comparison, we will count the whole block as it provides the final settlement of the transactions it contains.

If we compare with the Visa network for example, who declares consuming a total amount of 205,555,556 kWh globally for all its operations, and processed 138.3 billion transactions in 2019, that is an average of 1.49 Wh per transaction.

So, on a purely ‘per transaction’ metric, Bitcoin consumes ~10 times the energy of the Visa network, right?

Well, not really. Because the figure presented by Visa only counts what the company consumes, not the computers used by merchants and customers to make the transactions. If we want to compare apples with apples, we should add the computing power and modem consumptions of all participants in the transaction, from the customer to the merchant.

Bitcoin is a peer-to-peer network. There are no intermediaries between the sender and the receiver. On the other hand, Visa is an intermediary, so transactions on the Visa network ALSO consume energy to be sent to and from Visa, from and to the client and the merchant.

If we safely assume the large majority of merchants are receiving their Visa transaction from a standard computer and/or a credit card POS machine (average consumption 100 W), we need to add this extra energy — obviously not counted by Visa for their own operations — to the ‘per transaction’ total. Otherwise we would only be counting one part of one small part of the transaction and ignoring everything that comes before and after.

But that’s not all. There is at least one more computer involved in this transaction. As shoppers know, merchants use the same POS machine whether payment is made with Visa, MasterCard, Amex, or any debit cards. This is because the payment doesn’t go directly from the client to Visa, but first gets handled by a card processor, often a bank or a specialized business renting out the machine to the merchant and handling different card companies.

We suddenly realise that there are more participating computers for one single Visa transaction than for one Bitcoin transaction. Obviously, the Bitcoin transaction must be consuming less energy if it requires fewer machines to process it.

Of course, I do know both network scale differently.

And I also know the computing power of the Bitcoin network varies according to the price of BTC. And that this variation influences the adaptive mining difficulty, further complexifying calculations. And rendering one unprofitable miner suddenly profitable, or the opposite.

I also know that one single Bitcoin transaction can have multiple recipients, essentially multiplying its energy efficiency ‘per transaction’ hundredfold, on the main Blockchain. We are not even talking about ‘layer 2’ systems like the Lightning Network or Liquid.

Environmental impact is not directly connected with energy consumption. And not connected at all to how that energy will precisely be used.

You, me, and even Tesla, are dependant on the energy source that our governments decided to make available to us. For example, how much CO2 does charging your smartphone emits in the atmosphere? And how much CO2 emissions does building one Tesla car produce?

Obviously, the answer will depend on government’s energy grid choices. It doesn’t make sense to compare two identical phones if one is charged by 100% run-of-the-river hydraulic energy and the other one uses electricity from coal. Because even though the two phones are exactly the same, their respective owners did not choose the origin of the electricity they had to consume.

Same logic applies to a Tesla produced in a state favoring and encouraging renewable energy, or one built in a factory using electricity coming from coal.

Furthermore, it would make even less sense to calculate the energy and CO2 per photo or song in the phones’ memory, because their batteries will use the same amount whether the phones are full of data or free space.

Similarly, CO2 emissions from Tesla manufacturing is not impacted by the length of each individual car. A longer model uses more or less the same energy and produces more or less the same CO2 emissions as a shorter one, but nobody would calculate Tesla’s CO2 emissions ‘per inch’.

Deutsche Bank on Twitter:

“Bitcoin’s market cap of $1 tn makes it too important to ignore. But will it evolve into an asset class, or will its illiquidity remain an obstacle? Find out more in the latest instalment of “The Future of Payments” from Marion Laboure.”

«Central banks and governments understand that cryptocurrencies are here to stay, so they are expected to start regulating crypto-assets late this year or early next year. They are also speeding up research on their own Central Bank Digital Currencies (CBDCs) and launching pilots.»

PDF here: https://www.dbresearch.com/PROD/RPS_EN-PROD/PROD0000000000517378.PDF

Consommation d’énergie ≠ empreinte carbone.

67% d’énergie gaspillée rien qu’aux USA selon les sources officielles.

“The 2019 energy flow chart released by Lawrence Livermore National Laboratory details the sources of energy production, how Americans are using energy and how much waste exists.”

Ce n’est pas la consommation d’énergie qui est un problème, mais bien la pollution, souvent engendrée par son gaspillage.

Récupérer une partie de l’énergie perdue, gaspillée, pour optimiser le rendement de sa production, ne génère pas plus de pollution, au contraire. Mieux rentabiliser l’énergie permet plus d’investissements dans son optimisation.

Les consommateurs d’énergie (particuliers et industries, dont Bitcoin) ne peuvent consommer que ce à quoi les gouvernements veulent bien leur donner accès. Politiques énergétiques et régulations brident la consommation finale.

La production d’énergie, sa consommation et son impact sur l’environnement, sont des sujets politiques, et c’est nous citoyens qui devons exercer notre influence sur nos gouvernements pour optimiser et améliorer son rendement de manière respectueuse de notre planète.

Bitcoin n’est pas le problème, mais sa solution.

Source: https://flowcharts.llnl.gov/

China’s National Digital Currency

No, Central Bank Digital Currencies (CBDC) are not at all “similar to Bitcoin”, nor technological progress. A centralised blockchain is just a slow and inefficient database.

First country to launch their CBDC, China merely nationalised WeChat pay and Alipay, with even more centralization and stricter limitations.

Value automatically decreases, funds expire and disappear, can’t send money to friends and family… Central Bank dystopia!

Bitcoin fixes this.

Read full article here: https://www.nytimes.com/2021/03/01/technology/china-national-digital-currency.html

Bitcoin discussed today in Nigerian Senate Plenary

Nation states, especially those not in the West, are facing today a unique opportunity to learn about, embrace, and harness Bitcoin.

Forget Tesla, MicroStrategy, Square, and prepare yourself for sovereign nation states including BTC into their Central Banks reserves.

Today in the Nigerian Senate Plenary:

“We didn’t create Cryptocurrency and so we cannot kill it and cannot also refuse to ensure it works for us. These children are doing great business with it and they are getting result and Nigeria cannot immune itself from this sort of business.” – Senator Biodun Olujimi

https://twitter.com/ngrsenate/status/1359836204955533313?s=21

Senate resolved to:

“Mandate the Committees on Banking, Insurance and other Financial Institutions, ICT and Cybercrimes, and Capital Market to invite the CBN Governor for briefing on the opportunities and threats of the Crypto currency on the nation’s economy and security and to report back findings within two weeks.”

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