Good Sunday to you,
It seems Iran is planning to turn the Strait of Hormuz into the marine equivalent a toll road, or so at least the Financial Times among others is reporting. Ships wishing to pass through the strait must pay a fee of $1 per barrel of oil.
Here’s the clincher: the fee must be paid in bitcoin.
Why bitcoin? It’s the best money for the job.
As it is “permissionless”, no government can order the funds to be frozen or seized. No bank can block the transaction. There is no intermediary. It is outside geopolitical control. Transactions can be made remotely and digitally. Settlement is within minutes. Ownership is clear. The network is sufficiently liquid.
No other widely used currency or payment system in existence has these qualities. Not the dollar, not the euro, not gold or silver, not stablecoins.
Suddenly bitcoin has become “a tool to navigate a global conflict’, in the words of bitcoiner Jesse Tevelow.
A particular company might not like Iran. Iran might not like the company. Neither might trust the other. The two can still transact. Trade can happen between parties that don’t like or trust each other. Trade can also happen outside of politics.
Every bitcoiner has known for some time such a moment was coming. It was just a matter of when. If this is enforced, it would mark the first real-world use of bitcoin as neutral settlement infrastructure in a live geopolitical conflict, where traditional systems cannot operate.
Obviously this only works if Iran can enforce it, and the Strait is not only Iran’s. This is currently only a contingency situation and, if this conflict ends, habits may quickly revert.
There is the other possibility that it does work. Indeed it works so well other nations start copying.
The BRICS nations, for example, might find bitcoin an extremely useful non-US-dollar currency in which to transact.
In which case, this sets a precedent.
My view: the world just changed.
At the other end of the scale, we have my little life
And the same problem - fiat inadequacy - presents itself though rather more mundane circumstances.
I’ve been travelling through Namibia this past fortnight, on my way to give a speech at the Cirrus Investment Conference.
When I arrived at the airport, I couldn’t get my card to work in the ATM machine, but I had £200 in cash which I changed - no doubt at some over-priced rate - for local dollars. This was the only cash I had.
I’ve been staying at various lodges across the country, all in the middle of nowhere, and I have had a terrific time, but I’ve needed money to tip my various guides, lodge staff, drivers and so on, but with no access to cash.
The banking system didn’t work. The card failed. Cash was finite. The people I wanted to tip couldn’t take card payments. We still wanted to transact.
So I’ve been using the opportunity to orange pill the locals. Instead of local dollars (which by the way is pegged to the South African rand), I’ve got every member of staff to download a wallet onto their phone, and I’ve tipped them in bitcoin. Everyone so far has been delighted at the arrangement, and the locals now have some money that might appreciate in purchasing power.
I’ve told them to HODL their coins for at least 5 years and then perhaps this little tip might be worth something.
In the meantime I’ve told them to read up on bitcoin - watch vids, listen to podcasts and so on.
As I argue in the book the first step on the bitcoin journey is to download a wallet and practice sending and receiving small amounts of money.
So you have the same function at two extremes: bitcoin works where other forms of money fall short.
Once again I urge you to have some exposure to this extraordinary tech. ETFs are the simplest way - but they are far from permissionless, as anyone dealing with the FCA will tell you. Charlie Morris’s BOLD is another option and one I some in my own portfolio.
On which note, I heartily endorse Charlie’s various newsletters, which you can read here.
But the best way to start with bitcoin is to sign up to an exchange and buy twenty quid’s worth.
Here’s a little story for you.
About ten years ago, around the time I wrote Bitcoin: the Future of Money?, I was at the Port Eliot festival in Cornwall where the internet signal is bad, or was back then. “Accepting bitcoin” it said on one of the little cafe vans. “What’s bitcoin?” a mate standing next to me in the queue said. I told him, sent him a fiver’s worth and told him to use it to buy us each a coffee.
The bloke selling the coffee couldn’t get a proper signal on his phone, other people in the queue were getting impatient and so my mate paid in cash and we both forgot about the bitcoins.
Several years later when bitcoin went on one its runs my mate messaged me. “Hey, you remember those bitcoins? Well I got out my old phone, retrieved the wallet, sold them and bought myself a car.”
It wasn’t a Ferrari or anything like that. Just some second-hand family motor, but even so quite the gain.
I doubt those tips will get the Namibian locals a car, but you never know.
Why Adam Back is not Satoshi Nakamoto
Finally, there was a big story in the New York Times this week arguing that cypherpunk coder Adam Back is Satoshi Nakamoto. Author John Carreyrou spent over a year on the story, but I’m afraid - and I’ve been there - he suffers from a terrible case of Prosecutor’s Bias. He has decided who he thinks Satoshi is and then found coincidence after to fits the story.
If you’ve read the book, you’ll know Adam Back was a prime candidate, but one that was easy to discount, because he wrote in a different coding language - C - to Satoshi, who wrote in C++. Indeed, Satoshi came to Back for advice on the White Paper, which Back gave him (you can read the email correspondence). Meanwhile, Back then only came to bitcoin relatively late, in 2013 - and set up Blockstream almost as a catch-up play, which he wouldn’t have bothered doing if he was Satoshi who at this point was worth a 9-figure sum.
I wrote a thread on X about it, retweeted by Adam Back himself - so it may be of some interest.
Here is this week’s commentary:
Thanks for being a subscriber to the Flying Frisby.
Until next time,
Dominic
PS Bitcoin: the Future of Money? is available at Amazon and all good bookshops.
