THE $BTC 
BOMB

altMBA

/CASE STUDIES

HONORS PROJECT FOR SETH GODIN’S ALTMBA COHORT 18

Many people believe that the future of Bitcoin is digital gold. However there is an alternative view which holds that Bitcoin is a tactical nuke, designed to implode the financial system - but not in the way you might think.

OVERVIEW

Synopsis

The Bitcoin Maximalists believe that Bitcoin will become a great store of value, potentially even rising to over $500,000 per bitcoin in $USD terms. This would equate to a market cap of roughly $10.5 trillion dollars, rivaling the market cap of gold.

Bitcoin price coming back down to earth $38,805.50 from the all-time high of roughly $60,000 (May 24, 2021).

In the maximalist view, because bitcoin will become so valuable, no one would intentionally destroy the value of the network. There is a blind spot in this view, one which ignores the realities of geopolitics and the new way that warfare is waged.

  • It is precisely because Bitcoin will trade at a high value and become so embedded in the financial system, that makes Bitcoin the perfect weapon to reset the entire financial system.

  • The more valuable Bitcoin becomes, and the deeper it continues to integrate into the wider financial system - the greater the risk the Bitcoin bomb gets deployed, and the network gets turned off via a 51% attack.

Image of three resonant waves.
Tweet from June 1, 2021 responding to John Rob asking “What is the next global shock in our perma-crisis? I’m taking bets now.”

altMBA Honors Project

The original idea for this case was conceived with Ben Page as an Honors Project for altMBA cohort 18 in February 2018. The assignment was to apply the Crossing The Chasm model to a business of choice.

  • That paper focused on identifying what was necessary for Bitcoin to cross the chasm, and imagined a strategic airdrop (think helicopter money) from the Satoshi Genesis Wallet to fuel velocity.

  • This case takes the kernel of the original paper, but focuses more on the thesis that bitcoin is a weapon, and less on the adoption lifecycle.

Sketch of the initial Chasm model.
Image of sketchbook and patches.
Final Chasm Model for altMBA 18 Honors Project.

THE END GAME

The World Changed in 2020

COVID-19 ushered the world into the Exponential Age, where the rate of change began to snowball and out of control.

Image of sketchbook and patches.
Photo taken May 7, 2020 Grand Street NYC. New York finally started receiving shipments of toilet paper after a national shortage.

Politicians never waste a good crisis, and humanity is standing on the precipice of a great shift. The result of this massive pandemic is a coordinated push towards a supra-national government entity. I.e. the IMF, WHO, and UN dictating what other sovereigns can and can't do.

  • At some point, the cost to service sovereign debt will far exceed the amount of tax revenue produced.

  • Meaning the interest payments will cost more than the amount of revenue raised by governments to pay off the debt. At that point, the world will have to endure a debt jubilee.

(Bloomberg Chart) Global debt has hit an all time high of $281 trillion USD in 2020, or a worldwide debt-to-GDP ratio of over 355% according to Reuters.

Bitcoin will be leveraged as a weapon by creating a liquidity vacuum within the entire financial system. The result will provide the perfect scapegoat to cover up the crumbling financial system.

A New Digital Hegemon

The end game is a global debt reset yielding clean sovereign balance sheets, and a new Central Bank Digital Currency (CBDC) regime.

  • The new CBDC regime will become an IMF crypto-backed SDR system, combining gold, commodities, and proprietary data per country.

  • A new Phoenix world currency was prophesied in the January 9-15, 1988 issue of The Economist. The article said that a new world currency would be introduced in 30 years, or 2018. (tweet) (archived article).

Image of three resonant waves.
The Economist cover January 9 - 15, 1988.  Get Ready For A World Currency.

Demographic Twilight

Aside from the sovereign debt load becoming untenable, another reason for a debt jubilee is because global demographics are collapsing. Peter Zeihan’s research points to a demographic twilight starting in 2022 when the majority of Baby Boomers retire.

  • This means the consumption patterns of the past will no longer support the conventional wealth creation for the future.

Demographics Representing High Income Countries Minus the United States in 2030 (from Youtube). The contraction at the bottom means that there will be less young people to replenish the demands from the older generations (bulge at the top).

In his presentation to the 2020 WM Sustainability Forum, Zeihan says:

  • The global system of greater markets, more access, technological advancement, more interconnectivity - was going to collapse in the next decade anyway.

  • The economic model we started with the discovery of the new world in the 1500’s, ends in the next ten years.

  • We do not have an economic model for what comes next. We need a new ‘-ism’. We have no idea what that will be.”

2020 WM Sustainability Forum - Peter Zeihan (Youtube video starts at 13:30)

Carbon Credits

With global consumption grinding to a halt, global energy demand is increasing exponentially. Carbon credits are going to be leveraged in order to “net out” balance sheets and produce new revenue streams.

  • Carbon credits are also a great way to hide the toxic supply chains for new high tech ventures as local communities in rich first world countries cry “not in my back yard.”

Global Primary Energy Consumption By Source (Our World In Data). Global energy demand is increasing exponentially as the developing world modernizes.

Data is the New Currency / Commodity

In the economy of attention data is the new currency - especially health data for the future of biotechnology post pandemic.

  • The UN’s ID 2020 will enable all your data to be tracked, traced, taxed and mined via AI. This will produce a new credit market as well as opportunity for population control via a global social credit score.

  • All sovereigns want CBDC’s to expand the central bank tool kit (negative interest rates) and to have the ability to mine all population data and nudge behavior.

  • It’s difficult to overstate how important and valuable data tied to a person’s identity is at scale, because the opportunity cost isn’t just future revenues, but the potential for total population control.

Image of three resonant waves.
ID2020 Meeting at the UN (Source: UN)

Merger of Mega Monoliths

In order to build out the global data infrastructure, Public Private Partnerships are going to be leveraged in order to facilitate the roll out.

  • One such major Public Private Partnership is the Council for Inclusive Capitalism with the Vatican.

  • The Council claims itself as “a movement of the world's business and public sector leaders who are working to build a more inclusive, sustainable, and trusted economic system.”

  • The Council functionally represents the merger between the world’s largest religion, and the world’s largest corporations.

Image of sketchbook and patches.
Group photo of the Council for Inclusive Capitalism.

Stripe, the well known online payment processing company recently named Mark Carney to the board (second from the left of the pope).

  • At a recent Economic Policy Symposium in Jackson Hole, Wyoming, Carney said: “It is an open question whether such a new Synthetic Hegemonic Currency (SHC) would be best provided by the public sector, perhaps through a network of central bank digital currencies”

HYBRID WARFARE

The Changing Nature of Warfare

One effect of this new paradigm shift is the changing nature of warfare. War is no longer being waged in the traditional sense where nations invade with lengthy campaigns using occupation forces like in the 1930s.

  • Today war is waged with bits, not bombs. Bits could be disinformation, socially engineering narratives, or withholding facts on purpose.

  • Bits can also represent money through the manipulation of financial data and crypto currencies.

Conventional warfare is waged with governments and militaries. Unconventional warfare is waged between governments and populations.

In military doctrine, this new battle space is called the Gray Zone. The gray zone is engaging in the infinite space between peace and conventional war.  Operating in the Gray Zone can take many forms:

  • Controlling/manipulating narratives

  • Influencing populations

  • Lawfare

  • Cyber attack

  • Coercion

  • Social engineering

  • Biological means

  • Theft and dissemination of trade secrets

Image of three resonant waves.
The gray zone is a hazy undefined space between peace and war.

Think of the Gray Zone as the democratization of warfare. Anyone can operate there. Many in fact, are socially engineered on a mass scale every day, and are acting as unwitting participants.

  • This is why security as a whole is so important moving beyond 2020.

  • In fact, the Department of Defense (DoD) published documents in 2003 on plans for electronic warfare and psychological operations (PSYOPS). (tweet) (original doc).

  • The Council functionally represents the merger between the world’s largest religion, and the world’s largest corporations.

DoD document outlining the need to improve psychological operations (PSYOP). Messaging needs to be honed in order to deliver maximum impact to influence decisions and modify the target's behavior.

THE BTC GRAY ZONE

The Ultimate Gray Zone Weapon

Bitcoin is a perfect Gray Zone weapon because it’s an incredibly powerful narrative generation tool.

  • This means the narrative can be amped up and down by politicians or activists, to socially engineer emotional reactions by the public.

  • Two prevailing narratives today are that Bitcoin is only used by cyber criminals, and that Bitcoin is a massive climate killer.

  • Ransomware has been requested to be paid in Bitcoin, and because Bitcoin’s protocol requires so much energy to function, climate activists hate it.

  • Bitcoin also represents censorship resistance and freedom, which makes Bitcoin an even bigger target to anchor negative narratives.

WannaCry Ransomware

WannaCry was the first major global ransomware attack that occurred in May 2017. The malware encrypted files on the victim's computers, then demanded ransom to be paid with Bitcoin in order for you to read the files again.

  • The ransomware attack infected around 230,000 computers globally including ATMs and medical devices.

  • Ransomware attackers demanded payment of $300 then $600 USD to be paid in Bitcoin.

Image of three resonant waves.
Typical computer screen when infected with WannaCry malware.

The WannaCry attack also coincided with a 10x bull run in Bitcoin price from $1,833 on May 12th, to its peak of $19,244 on December 18th. By May 2018 Bitcoin’s price settled back down at $6,400 the following May.

Image of three resonant waves.
Bitcoin price chart from January 2017 to January 2019.

After the world’s largest meat processor JBS was hit with a ransomware attack in May 2021, the White House issued a statement on June 4th that Biden believes ransomware attacks are a ‘rising national security concern.’

ElonGate

Elon Musk made a joke on twitter, that if he was ever embroiled in a scandal, he wanted people to call it ElonGate. The joke being a meme reference to the word elongate, ie a long rocket or an erection (lolz).

Image of three resonant waves.
Elon Musk joked on twitter about meme-naming a scandal after himself, which happened one month later (tweet).

On May 12, 2021 - four days after his appearance on Saturday Night Live, Elon sent a tweet stating that although he believed in cryptocurrency, Tesla was concerned about the rapidly increasing use of fossil fuels for Bitcoin mining and transactions.

  • This was immediately received as blasphemy from the Bitcoin community, and instantly Elon was dubbed a heretic.

Image of sketchbook and patches.
Text screenshot attached to Elon Musk’s tweet.
Image of sketchbook and patches.
Bitcoin electricity consumption, TWh (annualised) from cbeci.org (tweet)

The same day, Elon tweeted again but this time advocating for a carbon tax.

Image of three resonant waves.
Elon Musk tweeting about a carbon tax May13, 2021.

Twitter was not happy. The internet labeled Elong Musk a hypocrite and overnight, he lost his uber meme credit with the Bitcoin and crypto crowd.

  • Elon is hailed as a brilliant engineer. Anyone who understands physics (and math), would automatically know that mining, in order to be profitable, would seek the cheapest and therefore most efficient source of electricity possible.

  • Therefore these statements obviously made no sense .The challenge lies in geopolitics.

The majority of the hashpower at the time (over 70% in fact) was done in China. What China does is subsidize electricity costs for state owned enterprises like steel, so they can drop the price in the international market and undercut their competitors.

  • At the time, China was producing cheap electricity to mine Bitcoin, and generate dollars to support their own economy.

  • A closer look at global events paints a more realistic picture of what’s going on behind the scenes.

Coloring In The Gray Zone

One month prior on April 10th 2021, Taiwan staged live-fire drills off the coast of the Dongsha islands as fears of a possible PLA attack grew.

  • Lo Chih-cheng, a Taiwanese legislator said “the United States and Taiwan could also cooperate in other areas to counter the PLA’s ‘grey zone’ warfare, which includes sending civilian vessels and coastguard ships to harass others.”

  • Four days later on April 10th, China’s military began a six day live fire exercise off the coast of Taiwan, right before US officials were due to meet the Taiwanese president.

Dongsha Islands (Photo Credit: CNA).

On April 16th, explosions at a coal power plant in Xinjiang took nearly a quarter of Bitcoin's hashrate offline.

  • According to Coindesk, the explosion clipped as much as 35 exahashes from the Bitcoin system’s global hashrate.

  • The next day on April 17th, US Climate envoy John Kerry visited China on a climate mission while Chris Dodd landed in Taiwan.

Image of three resonant waves.
Bitcoin hash rate graph from January to June 2021 (Source: Blockchain.com).

The occurrence of these events was no accident. One month later, on May 19th, the USS Ronald Reagan (CVN-76) left Japan to support the withdrawal of US troops from Afghanistan. Thus leaving the Asia-pcific region without a carrier presence.

  • This comes the same day May 19th, that China protested the passage of guided missile destroyer USS Curtis Wilbur Navy Ship through the Taiwan Strait.

  • Also that same day, the pope issued a tweet proclaiming that “technology based on the use of highly polluting fossil fuels need to be replaced without delay.”

Image of three resonant waves.
Pope Francis tweeting that technology should not run on highly polluting fossil fuels (tweet).

Unpacking the series of events above, Elon issues a tweet about how Bitcoin pollutes the environment.

  • A coal fire plant explodes the day before high ranking US envoys visit China and Taiwan.

  • Then a predominant carrier group leaves the South China Sea.

  • The Bitcoin price has since plummeted about 45% because hash rate and price are correlated.

Image of three resonant waves.
Bitcoin price June 2021 (coindesk).

What’s really happening is that because China controlled the majority of the hashing power, China controlled enough mining power to launch a 51% attack.

  • A 51% attack is when one group holds 51% or more of the hashing power, they can effectively disrupt the network.

  • During the “climate talks”, the US probably cut a deal with China. Turn down the hashpower and we’ll leave the South China Sea.

  • Reducing China’s hash power also reduces the amount of dollars they can raise outside the SWIFT financial system by mining Bitcoin and selling them for $USD.

On the Elon side, Tesla made $518 million in Q1 2021 revenue from the sales of regulatory carbon credits.

  • This was the bargaining chip that the US government used to get him in line vis-avis tweeting about Bitcoin needing to be more green.

  • Elon also runs SpaceX, which needs government approval to launch rockets into space. Not to mention the recently approved $2.9 billion dollar government contract (awarded April 17th) to build a lunar lander.

Illustration of SpaceX Starship human lander design that will carry the first NASA astronauts to the surface of the Moon under the Artemis program. (Photo Credit SpaceX).

It doesn’t matter how efficient Bitcoin mining is. What’s important is the narrative that gets attached to Bitcoin’s name for maximum spread and impact.

  • Most people aren’t sophisticated enough to understand how Bitcoin works let alone mining operations, baseload power generation, regulatory capture, and electricity transmission.

  • This is the key that most bitcoiners miss. They are trying to fight a narrative war with logic, rather than better narratives.

  • Narratives function on emotion alone, which tap into the primal essence of humans.

  • People don’t have to think - they react. Case in point - China bans bitcoin… again.

THE MAIN EVENT

Number Go Up

Tether offers a USDT stablecoin which was supposed to be backed one-to-one by $USD. Meaning each Tether stablecoin was supposed to be backed by one dollar.

  • It was revealed in March 2021, that Tether holds 76% of it’s reserves in cash and cash equivalents.

  • Only 3.87% of Tether’s reserves was actual cash.

  • This means Tether can print money out of thin air ($2 billion USDT in one week), and pump that liquidity into the Bitcoin network. Thus artificially raising the Bitcoin price.

Chart mapping Tether Treasury printing to Bitcoin price from @cryptowhale (tweet)

Digital Gold

As the value of Bitcoin dramatically increased over time, the narrative transitioned from digital cash (the original purpose according to the Bitcoin whitepaper) to a store of value.

  • The new narrative re-anchors Bitcoin’s primary function as digital gold, even though the price continues to fluctuate wildly.

  • An anonymous person who calls himself “Plan B”, is banking on Bitcoin’s value equaling 100 Trillion USD or $1 million dollars per BTC.

  • He noticed that because Bitcoin has a fixed supply and pre-set halving periods, there were price increase correlations that function like clockwork.

  • The last major halving was preceded by the WannaCry cyber attack (May 2017) - which also resulted in a 10x bull run in price.

  • Many more subsequent attacks have occurred in the first quarter 2021, potentially setting Bitcoin up for the same meteoric price action.

Image of sketchbook and patches.
Plan B’s stock to flow chart.

Infiltrating the Wider Financial System

Before a 51% attack can be deployed, a few more elements need to be in place in order to deliver maximum impact. First, Bitcoin needs to have sufficient penetration into the wider legacy financial system.

  • With the latest NYDIG partnership with FIS, any bank will be able to buy, sell and hold Bitcoin right alongside cash in their bank accounts. This solves the difficult UX problem that Bitcoin previously had.

CNBC's Hugh Son reports on the latest news from NYDIG (Source: CNBC).
  • Now that payment networks like Square, Visa, and Paypal accept Bitcoin, there is enough variety in ways to pay and transact with Bitcoin.

  • Colorado Governor Jared Polis wants state residents to be able to pay their taxes with Crypto (tweet) (coindesk), getting us closer to legal tender.

  • In a pre-recorded announcement at the 2021 Bitcoin conference in Miami, the president of El Salvador announced that he plans to introduce legislation declaring Bitcoin legal tender in his country (video).

  • A few days later, legislators from Panama, Brazil, Argentina, and Paraguay joined suit.

Jack Maller give a presentation reading El Salvador legislation law at Bitcoin 2021 Conference (Source: Youtube)

51% Attack

If you control 51% of hashpower, you can disrupt the network. This is the ultimate Gray Zone use of Bitcoin, because no one suspects that any logical being would intentionally destroy the significant value of the network.

  • The wider the adoption gets, the more the risk the financial system incurs.

  • If the price drops significantly combined with wide enough adoption and significant financial leverage (now available up to 100x), you introduce enough volatility to crash the whole thing.

The United States will not allow this to happen, because the power of the United States comes from controlling the global financial system - and the subsequent ability to create an infinite money supply.

  • Effectively functioning as a tactical nuclear weapon for the financial system, the United States will retain the power to launch a 51% attack.

  • China previously had this capability, and the recent “climate talks” mentioned above changed that.

  • Elon Musk played his part, most likely begrudgingly in order to keep Tesla and SpaceX solvent.

The World Economic Forum (WEF) has already warned of a cyber pandemic, and by launching a 51% attack with Bitcoin, it enables the emerging supra national state to reset all debts while controlling the narrative about who takes the fall.

  • Bolstering cyber security efforts also pushes the world towards everyone having a global, universal, and digital identity that can be tracked and mined.

  • That was the long term after all. To get everyone on the grid.

WHAT'S NEXT

Bitcoin Goes Nuclear

In order to produce carbon credits and reframe the narrative that Bitcoin is bad for the climate, Bitcoin will go nuclear powered.

  • Like all exponential change, it will be slow at first - then all at once.

  • The first step just started with Square committing $5 million to build a solar-powered proof of concept bitcoin mining facility.

  • This will provide the inception point for the narrative to shift from Bitcoin as a climate killer, to Bitcoin electric as a green machine producing clean carbon credits.

  • Jack Dorsey’s name gets pumped, while Elon’s name gets dumped. Playing big tech entrepreneurs against each other in the economy of attention.

  • Speaking of wind farms, China has plans to build one too. But it’s in Texas, 30 miles from the largest US Airforce pilot training US base.

Cities Become Nuclear Powered SEZs
(Special Economic Zones)

Only “smart cities”, big tech, and big banks will be allowed to get licenses to nuclear power their BTC mining and IT operations.

  • This gives them cheap, green, consistent baseload power, and they can sell carbon credits back and excess power back to other corporations and cities.

  • Nuclear power provides nation state protection because you can produce nuclear weapons.

  • Renewables alone can’t handle the baseload generation necessary, especially with the push to add more EVs to baseload grid demand in cities.

  • This load increases the more electric cars get put on the road, and less shale the US gets to extract from the ground.

Deployment Phase

Carlota Perez echoes that we are in the middle of a sociopolitical revolution, not a technological revolution.

Carlota Perez presenting her theories with Chris Burniske (Youtube)
  • Meaning it is much more than just blockchain technology that is driving change.

  • She says “To have an illusion of riding the future, is a very important thing to move people” Carlota perez. This is where technology be it Bitcoin, blockchain, AI, or synthetic biology - is right now.

  • However, she goes on to explain that “only the state can unleash the golden age. By redesigning, taxation, regulation, policies, and institutions to tilt the playfield in synergistic directions.”

  • This is the transition from Installation Phase into Deployment Phase. Unfortunately, there is usually some war or revolution in between.

All Hail Satoshi

Bitcoin becomes a new religion based on freedom and zero knowledge trust and proof of work.

Satoshi Luther with his trademark 'laser eyes' goes against the Vatican's Council For Inclusive Capitalism in the reformation 2.0.