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Currency

Under a Bitcoin Standard, currency is the exchange of Bitcoin for goods and services, from payments via secondary layers (such as the Lightning network), to final international settlement on the base layer. And much like saving in Bitcoin, spending in Bitcoin (via Bitcoin-backed currency) is incredibly powerful.

Not only can one be a sovereign of their own savings, they can be a true financial sovereign -- a sovereign of their own business or sovereign family dynasty -- impossible with fiat, but made possible with Bitcoin, simply by opting-in to sound money: getting paid in Bitcoin, buying goods and services in Bitcoin, and empowering local businesses through liquidity (such as lightning channels). In other words, empowering sovereign commerce through Bitcoin.

Bitcoin versus Fiat

Fiat-based currency does not and cannot allow for sovereign commerce. If your payment rails require trusted third parties, then those third parties will hold absolute power over whether you can or cannot transact. Fiat inevitably produces the Biblical mark of the beast, without which one cannot buy nor sell.

Sovereign commerce necessitates truly peer-to-peer transactions that cannot be censored or controlled by any authority. As such, we are still very early. Technical and economic development remains in order to make Bitcoin-backed currency globally scalable. For now, sovereign commerce will look simultaneously antiquated (reminiscent of a gold standard) while also forward-looking (inevitable innovations that make sovereign commerce possible at global scale).

In short, we're not there yet, but like with Bitcoin itself, it is inevitable.

future inevitable

For Bitcoin-backed sovereign currency to scale globally, several architectural layers become necessary:

  • layer-2+ liquidity channels, such as the lightning network (which solves transaction scaling)

  • layer-2+ non-custodial wallets (which must solve pseudonymous user scaling) -- this must:

    • allow unlimited creation of cryptographic wallets (such as hierarchical deterministic wallets) which can effectively collect and lock funds from existing liquidity channels, however,

    • closing channels must not impede any locked funds in use on the network. In other words, funds must be spendable independently of the liquidity source. E.g., if a channel paid 100 sats to X, and the channel is later closed, then X must be able to spend those 100 sats on other channels.

    • funds must be collectable into an on-chain transaction should the owner decide to do so, e.g., to create their own liquidity channel to send and receive from -- effectively making them financial sovereigns in their own right.

Sovereignty Levels

Imagine a local community of workers. They could be unbanked in the fiat world. They could be farmers, fishermen -- any small and relatively self sufficient community. Imagine they have some Bitcoin and occasionally they trade outside. Now imagine they experience fiat hyperinflation. There are countless real-world examples of exactly such communities, and many in our future. How could they establish sovereign commerce?

  • Level 1: Custodial -- Start with custodial apps and exchanges to hold and send Bitcoin, ideal for beginners. Relies on third parties, vulnerable to censorship, prompting self-custody shifts.

  • Level 2: Physical Tokens -- Use devices like OpenDime for physical "digital cash" trades without internet. Simple for local swaps, but limited to in-person, leading to digital tools.

  • Level 3: On-Chain Wallets -- Control keys in non-custodial wallets for direct peer-to-peer sends. Achieves personal sovereignty, but high fees limit scalability, needing layers.

  • Level 4: Non-custodial -- Open Lightning channels for fast, cheap micro-payments. Scales daily commerce, requires liquidity management, evolving to networks.

  • Level 5: Merchant Networks -- Integrate Point-of-Sale and full nodes, accepting payments via Lightning Network, and eventually into cold storage. Builds business ecosystems with shared liquidity, expanding to global reach.

  • Level 6: International -- Use full Lightning with LSPs for cross-border trades. Enables global commerce, but onboarding barriers hint at future ease.

  • Level 7: Ubiquitous Future -- Advanced L2+ solves global liquidity for billions in self-custody. Realizes global sovereign commerce, inevitable under Bitcoin Standard.

Before diving in and learning about sovereign commerce, let's understand the terms.