1/ Bitcoin calls into question the very basis of economic organization. No other breakthrough in history will contribute more dramatically to the evolution of monetary systems. *Just published* w/ @coinmetrics Bitcoin: A Novel Economic Institution
2/ The promise of Bitcoin is best understood in relation to traditional financial systems, which rely on centrally controlled institutions that enforce the rules, record-keeping, and adjudication of the system.
3/ These institutions were created to standardize the exchange of value, manage wealth, and facilitate economic activity. Ex: Central banks govern monetary policy, while commercial banks custody and manage assets, and centralized payment processors mediate consumer transactions
4/ Under a “trust-based” model, the integrity of an institution is a function of those controlling the institution. Rules enforced from the top down are guaranteed if those in control are trustworthy
5/ Financial systems founded on a trust-based model fail to provide predictable economic assurances. Specifically, under a financial system
6/ Here is why the current financial system falls short: Assurance 1: Value should be exchanged globally and freely. Why the trust-based model fails to meet Assurance 1: Centralized parties determine the eligibility of participants and control the flow of capital.