Good Morning Everyone,
As the situation in Europe continues to develop, and world leaders posture and signal to their people about how they intend to act and how righteous they are, rather than allowing our minds to be on the end of the strings of the powerful and our attention to be captured and controlled by the legacy media machine, i want to turn our attention to something far less cortisol inducing being Network effects, or Metcalfe’s Law.
Metcalfe’s law named after Robert Metcalfe states that the value of a telecommunications network is proportional to the square of the number of connected users of the system (n2).
The network grows exponentially as the number of users of the network increases. As discussed previously, this effect is even more pronounced with monetary networks due to the incentive that exists to join, as well as the disincentive that exists not to join; that is the longer you delay joining the network, the fact that those that joined early benefit disproportionately implies you are comparatively disadvantaged.
With all the talk about banning Russia from the SWIFT system, one thing that doesn’t appear to be as well understood about Metcalfe’s law, is that it works both ways.
Not only does the network grow exponentially as the number of users increase, so too does it grow smaller as the number of users decrease.
By removing any nation from being able to interact with, and as part of the network, it actually harms all participants as it directly impacts the protocols network effect, which is the fundamental underlying property that gives it it’s stability and power.
As per the SWIFT website, it states the system is neutral.
The system may have been designed to be neutral, but as we know, it is most certainly not the case. It is vulnerable to human influence and the protocol design does not prevent this. We have seen this demonstrated with Iran being sanctioned and thus excluded from the network in 2012.
If Russia were to be cut off from the system, given Russia’s size and economic significance in the world, and also the clear alliance that exists between China and Russia as well as the China/US dynamic, this move would be far more significant for the overall health of the network and could see Metcalfe’s law begin to accelerate exponentially to the downside as participants are essentially incentivised to seek an alternate system in the face of the current system being weaponised and entities seeking a truly neutral option that insulates them from the political attack of other nations.
Historically speaking, the moment a money becomes a tool that can be used against you and as a means of exerting power over you, it seizes to be a good form of money, and people will naturally seek alternatives.
We have already seen a 30-year deal between Russia and China for the supply of gas in Euros and have discussed the trend of de-dollarization multiple times already. I believe it is evident that we are in the throws of a major historical inflection point as countries transition in response to the changing environment leading to the decline of the US Dollar as the worlds reserve currency.
In the short term Russia, China and the like could trade in euro’s or we may see China try and push for some kind of Yuan-ification. India has said it is exploring ways to setup an alternative to enable trade with Russia in the face of increasing sanctions.
According to one article, government and banking sources said:
“India is exploring ways to set up a rupee payment mechanism for trade with Russia to soften the blow on New Delhi of Western sanctions imposed on Russia after its invasion of Ukraine.”
Whether that is a move by India to try and gain some power in the global currency wars, i am at this moment unsure and don’t have a strong opinion.
What is clear to me is that most are still operating under an old and obsoleted paradigm. Nation states, and the powerful few that represent these want to control these systems as a way of protecting themselves from having the system turned against them, as opposed to the obvious, which is to adopt a system that does not require anyone to control it and thus is truly neutral. This is counter to every system that has come before it. Whether it be China trying to push for the increased use of the Yuan or India doing the same for the Rupee makes little difference. While those alternatives can suffice in the short term, in the long term they would suffer the same fate.
In the face of the invasion into Ukraine, there were significant funds transferred via BTC, ETH and USDT to ‘support the people of Ukraine’. This is Metcalfe’s law playing out in real time. While Ukranians had their access restricted to payment service providers by the central bank, people flock to seek an alternative.
In response there were many people that had an opinion and that bitcoin shouldn’t be used to “support” war and that the network effectively should censor these transactions.
Surprisingly few still seem to get this - Bitcoin is for everyone.
That is not to say I want to support war. I have no opinion or appetite to get into such disingenuous and simplistic arguments.
The point is that in order to be a good form of money and thus the worlds most sophisticated monetary network, the neutral, censorship-resistant nature of bitcoin is absolutely fundamental. It is the very reason that over time i believe every country will come to join and plug in to the bitcoin network. It’s the only system that exists that any country or entity can truly be confident in using, and that cannot be weaponised against them.
As you can see with this situation, the weaponization of money does not solve the problems. If it did, we would have rid the world of child traffickers and pedophiles. Unfortunately we have not. Humans are capable of unimaginable evil, and obviously we should oppose this, but weaponising a monetary system for this means is simply ineffective and over time leads to the systems demise due to Metcalfe’s law.
Bitcoin doesn’t fix everything, but it does fix this.
Sooner or later it is going to seem so obvious.
Hope you all have a great day. Bring the Monday morning energy! 🔥🔥🔥
I will talk to everyone tomorrow.
AK
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