The ₿itcoin Utopia
Fix the money, fix the world
The year is 2021. Humanity still finds itself in the midst of one of the worst economic recessions in history brought about by the COVID19 global pandemic which devastated economies across the globe as a result of forced government lockdowns. Millions live in poverty and the vast gap of inequality continues to widen.
The great irony of the unprecedented stimulus and “money printing” by governments this past year to combat the recession is that instead of a V-shaped recovery what we got was a K-shaped recovery — the rich got richer and the poor got poorer, as usual. It may be easy to blame the rich for this fact but the ultimate root cause of the problem is the fiat-based monetary system we find ourselves in. The ones who profit the most from monetary expansion are the ones closest to the money supply (i.e. companies, banks etc) because they get loans and make investments first which then increases prices for the rest of the population even those at the poorest end who are yet to receive any new money. It is known as the Cantillon effect.
Human beings have made the unfortunate mistake of putting government politicians in charge of the money system essentially. Politicians have proven time and time again that they are easily corruptible and focus only on short-term policies which create a snowball debt problem to be forever kicked down the road for later administrations to deal with. The end result is unsound money, perpetual war and the continual boom’n’bust cycles we experience.
What is needed is an entirely new monetary system. A radical change to the current status quo that will collectively shock us and prevent us from sleepwalking into economic oblivion. The answer to 7 Billion people’s problems was created 12 years ago by an anonymous programmer called Satoshi Nakamoto. 99.9% of people just don’t know it yet. Its name is Bitcoin.
Bitcoin is an electronic cash system with no trusted third party. It allows value to be exchanged between any two peers anywhere in the world as long as they have access to an internet connection. This may not sound revolutionary but what is unique about Bitcoin is that value is transferred using a currency which is protected from unexpected inflation and doesn’t rely on trusted third parties. The fact that Bitcoin’s supply is determined by an unchanging algorithm and not decided in a back room by the financial elite is what gives it value.
There will only ever be maximum 21 million Bitcoins created. This amount is hardcoded into the Bitcoin protocol. It is impossible to change. This makes Bitcoin the scarcest asset in the world because it is the only one to have a truly fixed supply. Even the mighty Gold which has survived as a store of value for centuries is not as scarce as Bitcoin because as soon as the price of Gold rises high enough, production efforts intensify and more Gold is mined to increase the supply until prices reduce. Likewise, if Gold prices reduce too much it becomes cheap enough to use in many industrial/electronic applications again and so demand increases. This pushes the price of Gold back up until equilibrium is reached again. There is essentially an infinite amount of Gold in the Universe which could be potentially mined but there can only ever be 21mm Bitcoin in the Universe thus it is superior to Gold in terms of scarcity.
In fact the true number of Bitcoins that can ever be in circulation will be far less than 21mm because of the many Bitcoins that are “lost forever” so to speak due to forgotten private keys or Bitcoins sent to invalid addresses etc. Thus making the asset even more scarce.
Bitcoin is created constantly through a process colloquially known as “mining”. It is essentially just a process which converts electricity to Bitcoin by having specialized computers perform proof-of-work calculations that verify transactions on the Bitcoin network, adding them to the blockchain and thus securing the overall network. The Bitcoin is created as a compensatory “reward” to miners for performing this critical function.
However the rate at which this Bitcoin is created and rewarded out (supply schedule) is carefully controlled by the Bitcoin protocol through difficulty adjustments and other factors. The supply schedule is not linear over time. It is logarithmic so that the final target supply of 21mm BTC is approached asymptotically over time. This is to make the asset deflationary. It principally happens via the “block reward halving” which occurs roughly every 4 years. This event cuts in half each time the number of new Bitcoin that are rewarded to miners for a successful block.
As of time of writing, there have been three halvings so far:
November 2012: From 50 bitcoin per block to 25
July 2016: From 25 to 12.5
May 2020: From 12.5 to 6.25
And as of today the total already issued supply of Bitcoin stands at 18.6mm, almost 90% of the total maximum supply already! Due to halvings and the logarithmic supply schedule, the final 21mm will not be fully achieved until 2104 in fact.
Bitcoin as Money?
When Bitcoin first came on the scene approximately 12 years ago, many proponents of Bitcoin thought (and still think today) that the ultimate use-case of Bitcoin was to be able to buy your morning coffee with it. This was the absolute pinnacle of Bitcoin’s potential to them. For Bitcoin to be no more than just a sexy alternative to the myriad of small payments solutions which already exist today.
Not only was this line of thinking fundamentally flawed but it completely missed Bitcoin’s true potential: as a trustless long-term store of value. We will revisit this idea shortly…
As a reminder, for an object to be considered “money” it must satisfy three criteria:
1. Store of Value
2. Medium of exchange
3. Unit of account
As humans have evolved from a primitive species to a near space-faring civilization, many objects serving the function of money have come and gone. From basic systems of barter, to seashells, cattle, salt, rare stones, glass beads, bronze, silver, gold, and government-backed paper are just some examples.
What these examples all initially had in common is the first property of money above (store of value). If something is a store of value, it incentivizes humans to work to accumulate more of it. It allows for capital accumulation over time and therefore the delay of immediate consumption. This creates the opportunity of individuals to specialize in the production of certain goods and services, making the overall economy more sophisticated and productive. This is the essence of Capitalism.
However the second property of money (medium of exchange) is the quintessential function that defines money. It exists purely to be exchanged for other goods. Once there is wide acceptance of a certain medium of exchange, all prices can be expressed in terms of it, which is third function of money (unit of account).
Let us now consider if Bitcoin currently satisfies these three fundamental properties of money, and if not now then how it might in the future.
Bitcoin as a Store of Value
It is common sense and age-old wisdom in virtually all cultures for humans to want to store some portion of their wealth for the long term. What medium should be chosen as this “store of value” though is not immediately obvious.
If one were to choose to store his value in “apples” then they would quickly regret this idea as their wealth literally rots away within a short period of time. Apples lack “durability”. Gold has been a reasonably reliable store of value for humans for millennia; its scarcity and its durability give it value. However gold is heavy and therefore difficult to transport over great distances in large quantities. It is also hard to verify authenticity and audit possession (e.g. when you buy Gold you may buy some claim to a number of Gold bars in some vault in Hong Kong but can you really trust that the Gold exists and you have sole claim on it?).
Government paper money (fiat) is probably the most common store of value for people at the moment, this is because it is the most liquid asset and Governments run a monopoly on the choice of money in their individual countries mandating that all taxes, goods and services be paid in their currency. If you try to buy something with a different form of money or try to produce more government fiat money on your own, you will be swiftly arrested. The US Government in particular has ensured through military force that its own currency the US dollar ($) be used as the reserve asset of the world.
The downside is you are putting your trust in short-term thinking corruptible politicians to not devalue the currency by printing more of it at a whim, thereby increasing the supply and reducing the purchasing power of your fiat savings. This is known as Inflation or the “invisible tax”.
This is also the fundamental reason why Bitcoin has value, precisely because it cannot be inflated artificially like this whenever a politician decides it be so. Bitcoin has a fixed supply. No one can change this. And while scarcity is critical, Bitcoin has also been specifically engineered to be superior to even Gold in virtually every other store of value criteria as the below table shows:
A common misconception is that Bitcoin is “too volatile” to be a reliable store of value. Critics most commonly point to the last bullrun as an example when Bitcoin crashed from ~$20k at the end of 2017 to ~$3k a year later.
This is short term volatility. Short-term volatility is to be expected given Bitcoin is still a nascent asset class and we are still very early in the adoption curve. 99% of investors still don’t even understand what Bitcoin is never mind have invested in it.
Zoom out though. Over the long term, Bitcoin’s halving cycles make it deflationary and hence an incredible store of value. The below chart shows the lowest price of Bitcoin each year in $ terms since inception:
As one can see, buying Bitcoin in 2011 and holding for ~10 years would have resulted in an increase in value of +243,850% just by using the lowest price of that year!
Bitcoin as a Medium of Exchange
We now return to the “using Bitcoin to pay for your coffee” issue we mentioned earlier. Why is this concept fundamentally flawed or at least, putting the horse before the cart?
The Bitcoin network is the world’s first monetary energy network. It is the only system in existence that can transfer value between two peers without the need to involve a trusted third party. Every other method of transferring money necessarily involves some intermediary which introduces risks such as capital controls delaying or even preventing the transfer going through. Transferring money over great distances also typically involves long settlement times (days) and large transaction costs. Bitcoin transactions by contrast typically settle within 10 minutes to a few hours and have very low fees by comparison to bank wire transfers.
That all being said, in order for Bitcoin to achieve this fundamental facet of removing the middle man, it must make some sacrifices…
The Bitcoin blockchain is fully distributed amongst all nodes in the network, that is to say every Bitcoin miner around the world has a full copy of the blockchain at any time. This is necessary in order to prevent a single point of failure bringing the entire network down and it adds security to the network since if one or a few nodes are hacked it cannot compromise the greater network as a whole. The downside is that Bitcoin is extremely slow and inefficient because every node must maintain a full copy of the blockchain and be in sync with the rest of the network in order to add incremental blocks to it.
Small payment solution providers such as Visa or Mastercard are completely centralized and operate a single database where all transactions are committed. This allows for vastly more transactions to be processed than is possible on decentralized Bitcoin. Visa for example can process around 3200 transactions per second whereas Bitcoin is only currently capable of 4 transactions per second. It is inconceivable for Bitcoin to ever compete with this.
But the point is it does not need to! Bitcoin can act as a “reserve currency” and transactions over the Bitcoin network can be reserved for extremely large and important transfers of value e.g. settlements between nation states or large corporations. Small payments like “buying a coffee for an individual” can essentially occur “off-chain” on some centralized ledger run by Paypal/Visa/Mastercard etc.
E.g. let’s take an example where Alice, Bob and Carl have Bitcoin denominated accounts at Visa:
1. Alice buys coffee from Starbucks for 0.000013BTC à Visa debits 0.000013BTC from Alice’s account within their centralized database
2. Bob buys coffee from Starbucks for 0.000013BTC à Visa debits 0.000013BTC from Bob’s account within their centralized database
3. Carl buys coffee from Starbucks for 0.000013BTC à Visa debits 0.000013BTC from Carl’s account within their centralized database
4. At end of day, Visa transfers Starbucks 0.000039BTC over the Bitcoin network as net settlement of the day’s transactions.
#1-#3 occur “off-chain” and are processed instantaneously thanks to Visa’s centralized ledger. #4 occurs on-chain and is a final net settlement of many many small transactions that occurred during the day.
Bitcoin as a Unit of Account
As of today, there is no single unit of account across the Globe. Within individual countries, the local government’s own currency usually serves as the unit of account (in US all goods are priced in $, in UK all goods are priced in £ etc). However this means doing trade across countries requires a very inefficient upfront currency conversion in order to complete the trade. In fact, the entire $5tn per day FX market purely exists because of the lack of a single unit of account around the world. Reducing global trade to an almost primitive form of barter and causing endless international trade wars thanks to the constantly fluctuating values of different currencies.
Having a single unit of account across the world would free up these resources for more productive means. Given that Bitcoin can be easily transferred around the world across borders freely to anyone with an internet connection, it is conceivable that once Bitcoin becomes the predominant medium of exchange it also becomes the predominant unit of account.
Once Bitcoin is adopted by a large enough number of users, the predictability of its supply will reduce price volatility as opposed to creating it since small daily fluctuations in demand will be smoothed out by market-makers, resulting in a more stable price.
How is fiat money created?
Many will be familiar with the soundbites of “central banks have printed trillions of $ this year” but how does this process actually work? Understanding the process of fiat money creation will be important to understanding how a Bitcoin denominated economy will be fundamentally different (and superior).
In the current regime, money is created through two possible avenues:
1. Fractional Reserve Banking (FRB)
2. Monetary financing (central banks literally printing money out of thin air for governments to then distribute)
The first (FRB) is considered inflationary whereas the second is considered hyperinflationary. But let’s examine each of these in detail. Firstly FRB:
Imagine the following scenario:
Jack deposits $1 with “MP Bank”. Jack then takes out a loan for $1 from “MP Bank”, but instead of spending it decides to reinvest it by depositing back at MP Bank. Jack now has a deposit account of $2 at MP Bank. He can now take out an additional loan of $1. He again deposits this at MP Bank bringing his deposit account to $3 and then takes out another loan of $1.
This process can continue indefinitely and results in MP Bank effectively loaning out the same $1 an infinite number of times. Repaying the loans would obviously reverse the process but assuming this does not happen, MP Bank has just created an infinite amount of $ out of nothing.
To prevent this from happening, the Central Bank (e.g. the FED) imposes Reserve requirements on banks. E.g. MP Bank may be required to keep 10% of deposits on “reserve” to ensure that there is always enough liquidity for anyone who wants to withdraw cash from their deposit account.
Even with this 10% reserve requirement though, there is ample opportunity of increasing the amount of money in the system by the repeated deposit/loan cycle as this diagram shows:
This is the essence of Fractional Reserve Banking and by controlling the “reserve ratio” of other banks; the Central Bank can indirectly control the money supply.
Monetary Financing: This is much simpler. In this scenario, the central bank literally imagines up some new quantity of money on their balance sheet and then uses this newly created money to directly buy government bonds. Thereby transferring freshly created money to government for them to then distribute as they see fit. Unsurprisingly, this is extremely inflationary since it constitutes a direct increase in the base money supply which cannot be undone. This is how Zimbabwe and Venezuela ended up in the disastrous hyperinflationary situation we know today.
The Bitcoin Utopia
Forward-looking institutions will continue to adopt Bitcoin as a treasury reserve balance sheet holding in order to hedge against continued money printing by central governments.
Eventually governments themselves will realize it makes sense to hold Bitcoin as a treasury reserve asset given its continued proof as a long-term store of value. Many central banks around the world are already rapidly increasing their stores of Gold as a reserve asset again given their realization of the need for hard money to prop up their failing fiat currency. Once they realize the superiority of Bitcoin over Gold, they will begin adding Bitcoin en masse to their balance sheets. Ultimately preparing the world for Bitcoin-backed currency.
The first country’s central bank to announce their acquisition of Bitcoin will likely be a small one but it will trigger a stampede for the rest of them to obtain Bitcoin due to fear of losing out in the global dominance race if they are last.
The exchange rate volatility for Bitcoin we currently see will continue during this period as economic agents hoard as many Bitcoins as they can afford to lose given the expectation that it will eventually be adopted as a medium of exchange and its liquidity increase. Likewise speculators will let their excitement and subsequent fear overwhelm them to create the volatile intermittent hype-cycles of Bitcoin we are already familiar with. No central bank or authority can intervene to stabilise these hype-cycles of Bitcoin and nor should they be able to since doing so would lead to an even greater build-up of speculative excesses as we see today with burgeoning credit bubbles.
As Bitcoin becomes the predominant store of value all fiat currencies or currencies not backed 1-for-1 with Bitcoin will converge to 0 until only Bitcoin remains as the primary money for all countries.
The Bitcoin Banks
Despite the mantra of “being your own bank”, the Banking sector will almost certainly continue to exist since as with any asset that is a store of value, people will seek a trustworthy custodian to secure their wealth and in turn, Banks can lend this deposited Bitcoin to those in seek of credit loans. Real interest rates would rise/fall as determined by free market forces based on the demand for Bitcoin denominated liabilities.
Fractional reserve banking may or may not develop within this Bitcoin economy since it is completely allowed theoretically by free market principles. However any bank engaging in FRB would be taking inherent risk since there would be no “lender of last resort” in the central bank given the central bank cannot print more Bitcoin by definition. Thus if any particular bank decides to engage in FRB and there is a run on the bank due to liquidity fears, there will be no bail-out for this bank. The bank will go bankrupt and all savers will lose their deposited Bitcoin. This is unfortunate but is a necessary free market principle in order to prevent a systemic failure of the banking sector. Furthermore, full transparency over the Bitcoin public ledger and hence where Bitcoin holdings sit will allow market participants to profile different banks according to the level of FRB they implement and thus allow market participants to choose which bank they do business with as per free market principles and their individual risk appetites.
The Bitcoin standard or the Gold standard?
As described earlier, since the Bitcoin network does not have capacity to process all the daily small transactions a modern economy performs, the most likely scenario is that banks will issue “Bitcoin backed tokens” to be used as currency in everyday life. These will be redeemable 1-for-1 with the Bitcoin savers hold on deposit at banks. And the tokens will be used as the medium of exchange and unit of account for all small transactions, funnelled through the fast payment networks of Visa/Mastercard/Paypal etc. Only for final settlement between banks or withdrawal of real Bitcoin from the bank will the Bitcoin network itself need to be used.
Readers may wonder what is to stop the banks/governments from printing more of these “Bitcoin tokens” than they have actual Bitcoin for backing them and so ending up in the exact same situation as before? This was in essence what led to the downfall of the Gold standard in the 20th century. With the Gold standard however, it failed because final settlement in physical gold is very cumbersome and expensive. Thus Gold had to be centralized in a few locations (such as central banks) making it vulnerable to hostile takeover by governments and thereby allowing the temptation of money printing beyond the total value of the Gold to take over. Bitcoin by contrast, is easy to transfer and conduct final international settlements in, without having to rely on the trust of any third party. And finally, thanks to the public ledger of Bitcoin, all Bitcoin holders can audit in real time the holdings of any intermediary and so can quickly verify that no inflation is taking place at any time.
The rise of Automation
The deflationary nature of Bitcoin allows individuals’ savings and corporations’ balance sheets to maintain and even appreciate their purchasing power over time. This allows for greater specialization and productivity in the supply chain. An astonishing tech boom will occur. Scientists and engineers will take a lower time preference and devote more time to their own areas of research. A Danish company launches a new battery which can store twice as much energy as needed to power a personal computer and charges in under a minute. A Swedish firm develops a solar panel with twice the efficiency of competitors. Robotics companies develop ever more sophisticated bots that are able to replace most human workers in sectors such as manufacturing, mining, agriculture, construction, forestry and fishing.
The companies that benefit from these increases in automation will spend a significant fraction of their profits hiring people for community and social projects. Often the same people that had just been laid off by the automation disruption they created. These corporations will identify jobs that are maximally rewarding for the employees in their community for the least cost, e.g. caregiving, launching and maintaining schools, affordable housing, parks maintenance and basic infrastructure.
Across the board, locals agree that these hugely beneficial community initiatives should have been done long ago. Slowly, historically divided partisan sections of society are pushed towards the center.
The New World Order
As the profits of automation and productivity continue to be shared out, millions are lifted out of poverty in the developing world. Old conflicts over petty disagreements of land and race are put aside. Globally there is a renewed push for nuclear de-escalation. The free movement of capital and goods closes the book on historical trade wars between nation states which initiates a path to mutual military de-escalation.
Before long, socially responsible companies weaken state power by taking over more and more of the services that government used to (or should have) provided. There are significant tax cuts, government social service cuts, military spending cuts, free trade across the world (since there is now a common global unit of account in Bitcoin), and finally open borders.
Around the world, everyone feels their quality of life improve. This is because before Bitcoin, the poorest 50% of the world earned only about 4% of the global income. As the world moved on to the hard money standard of Bitcoin, productive companies could significantly lift the bottom 50% out of poverty by sharing only a modest fraction of their profits with them.
Governments become more and more marginalized as a result of tax cuts and the fact that being on a Bitcoin standard prevents them from spending more than they take in through taxes. Private corporations now perform all the previous functions of government and much more efficiently at that. The single global system of Bitcoin money establishes historical levels of productivity in every sector. A new golden age of Science is born. Before long, humans start departing the Earth in search of more resources and begin colonizing the rest of the Solar System and beyond.
It is worth noting, the above described economy would be extremely resilient to market shocks and recession. Taking the recent global pandemic as an example, how would such a Bitcoin Utopia economy react to government implemented shutdowns of large swathes of the economy? Certainly there would be no economic stimulus from the central bank/government since by definition these institutions cannot “print more Bitcoin”, however believe it or not this is actually a good thing…
Firstly let’s take the case of businesses affected by the pandemic shutdown to begin with. These businesses such as airlines, retail stores, restaurants and bars, cruise lines etc have their revenues dry up. Nonetheless their obligations remain, such as rent and salaries of workers. Thus, their demand for short-term loans goes through the roof! This causes interest rates to rise, a lot. Those who have significant savings in Bitcoin will be strongly incentivised to enter the lending market. And so, savers profit. They are rewarded with handsome returns for lending to and thereby rescuing those firms who did not prepare for the worst. Viable businesses would eat the cost of borrowing at higher short-term rates but will ultimately survive. Some businesses will inevitably fail though, and their resources will become available for more productive uses as per free market principles.
What about individuals? Given the de-inflationary nature of Bitcoin as we know, it pays to save. Most people will have significant savings they can tap into when disaster hits such that they are able to weather the storm of the recession. This is in contrast to the current regime where the world is constantly on the precipice of a credit bubble. Many citizens are buried in credit card debt or live paycheck-to-paycheck (a Bankrate survey in 2019 revealed that only 41% of Americans would be able to write a $1000 check to cover unexpected costs). This is however no fault of their own, it is the fault of the current Keynesian economics fiat monetary system which encourages spending and consumption up-front no matter what that spending is for (even War). In a Bitcoin standard, savers would not see their purchasing power melt away through fiscal stimulus but would instead see their savings appreciate in value and would make them very well prepared for any black swan economic hardship such as the recent pandemic.
How to make the Bitcoin Utopia a reality?
How do we force a transition from the current doomed monetary system to the Bitcoin Utopia described above? There certainly seems to be no politician willing to entertain the idea of Bitcoin, likely because this would mean the end of their monopoly on the money system — their ultimate source of power. As with the inventions of the telephone, automobile and electricity in the past, disrupting technologies do not take over the world because people are “ordered to use them”. They take over because they provide a significant improvement over the status quo which nothing else can compete with. Citizens need to take matters into their own hands and “opt out” of the current system.
And the way one opts out is by Buying Bitcoin. This simple non-aggressive act will have significant consequences to the current world order down the line. By buying and hoarding Bitcoin, one helps to perpetuate a positive self-reinforcing feedback loop that will inevitably lead to the Bitcoin Utopia:
We can see that “Bitcoin hoarding” leads to price increase (due to the fixed supply of Bitcoin) which then leads to greater media attention and greater adoption of Bitcoin which in turn leads to more hoarding of Bitcoin and so on the cycle goes. Bitcoins will continue to be hoarded until the expectations of Bitcoin-holders with regards to exchange rate appreciation either adjust downward or are met. At that point, the expected return of lending out Bitcoins will match the expected return of holding them and so Bitcoin-denominated credit markets will begin to develop and Bitcoin will begin to be used more predominantly as a medium of exchange.
Any attempt to use Bitcoin as a medium of exchange instead of a store of value before that point is reached will incur significant opportunity cost risks. The famous story of a man buying two pizzas for 10,000 Bitcoins in 2010 illustrates this.
I put it to the reader that the Bitcoin Utopia is not only possible, but inevitable. The reason is a combination of two facts:
1. The Bitcoin network cannot be stopped
2. All fiat currencies will converge to 0
Regarding #1 — we have already seen that the Bitcoin network has operated uninterrupted for 12 years straight. This is due to the fundamentally impervious design of Bitcoin and it’s resilience to change. Nobody controls Bitcoin. The only option is for people to use it or not use it. It is now so big and so global that no single government can forcibly shut it down. It can no longer be snuffed out like a mere campfire; Bitcoin is now a rampaging wildfire which cannot be tamed. Even with complete co-ordination from all countries’ governments around the world (extremely unlikely as we know) Bitcoin would still very likely survive due to its decentralized nature and lack of single point of failure.
No, if the evidence from the past year is to be taken at face value then the direction we are heading is actually one of attempted regulation and ultimately adoption of Bitcoin as opposed to an outright ban. Central banks/governments recognise and understand the value proposition of Bitcoin more than they let on. It would not surprise me if they are already accumulating Bitcoin for the role as a reserve asset as they are already doing so with Gold but are simply not advertising it yet due to fear of inciting a parabolic price rally making it harder for them to accumulate Bitcoin.
#2 — All fiat currencies will converge to 0. The reader will have most likely heard of the cautionary tales of Zimbabwe and more recently Venezuela with regards to hyperinflation. These countries inflated their money supply to such an extent, that paper money became as ubiquitous as toilet paper.
Even in the United States, this past year has seen unprecedented levels of money printing as a result of fiscal stimulus with the M2 money supply increasing by ~+15% in 2020 compared to ~+5% in years prior:
Whilst theoretically this great expansion in the money supply could be undone by repaying of loans and running a fiscal surplus as opposed to deficit, history has showed this is incredibly unlikely. The current political system ensures that for candidates to get elected they will need to make exuberant promises of spending to the electorate. And the electorate, unlikely to pass on the opportunity of receiving “free money” will vote accordingly. Consequently, politicians will continue to favour short-term policies of deficit inducing spending as opposed to long-term prudence over management of the money supply.
Thus as the above graph shows, the toothpaste will not be forced back into the bottle. Governments will continue devaluing their own fiat currency as a means to a short-term pump in a never-ending game of passing the deficit hot potato down the road to future successors.
In the end, all fiat currency will be debased and tend to 0 as did all previous examples of “easy money” civilisations.
Hence the combination of #1 and #2 above will ensure Bitcoin’s inevitability as our future hard money standard. The transition will be painful, particularly for those with 100% allocation to fiat currencies, but it is a necessary transition in order to ensure the future prosperity and survival of the human race.
 It is *technically* possible for this to change but doing so would require >51% of the Bitcoin mining network to agree to such a change. This is however inconceivable since there is literally no incentive for them to do this. The entire value proposition of Bitcoin is because of the fixed supply. Undoing this would instantly make the Bitcoin network worthless and cause all Bitcoin miners to lose the significant investment they had put in. Thus it will not happen.
 For those interested, the “using Bitcoin to buy your coffee” idea was essentially the origin story of the altcoin “Bitcoin Cash”. Bitcoin Cash is a fork of Bitcoin (a spin-off essentially) created in 2017 by believers of this idea who wanted essentially to increase the block size of Bitcoin to allow greater transactions capacity to make this happen.