On The Re-Hypothecation of Bitcoin
The extension of the (digital) overseas synthetical dollar and contract creation program
This writing is meant to be concise which might make it seem disjoint and unsupported. It’s also meant to open the Overton Window wider on the related subjects.
Joe Wang’s Central Banking 101 as a Primer To Understand the Digital Overseas Synthetic USD Program
Wang explains that the 2008 global financial crisis was exacerbated exponentially by the overseas shadow-banking program. In his book Central Banking 101 he explains the system in an easy to understand way. I highly recommend his book for people (especially bitcoiners that like to talk about money!) to understand how balance sheets of different banks relate to each other.
The narrative of the 2008 crisis has always been about the toxic mortgage backed investments being listed as high grade but Wang touches on an important and more relevant aspect in regard to the unregulated shadowbanking system.
What Wang explains is how foreign banks effectively create and extend the USD by making USD based loans. In one sense new dollars aren’t being created but when it comes time for monetary policy changes to react to changing global conditions, and when the global economic tides shift, these synthetic dollars REALLY start to matter because the contracts that create them are leveraged-eventually someone needs the dollars but they don’t exist.
“SpaceX uses Stablecoins”
In a recent interview Chamath Palihapitiya explained how SpaceX uses digital stable coins to extend their program to other nations without using their foreign currencies:
SpaceX uses Stablecoins. They collect payments from Starlink customers and when they aggregate them in long-tail countries, they don't want to take the FX risk or deal with sending wires, so they'll swap into stablecoins, send it to the US, and then swap back to USD.
One can think about how this program was introduced and when or not it’s fostered over seas leveraged USD based lending contracts.
The People’s Reserve
In an interview on the podcast Cypherpunk’d CJKonstantinos gives an explanation of a bitcoin based lending program called “The People’s Reserve”. The idea is you will put up bitcoin in an overcollateralized fashion in order to get a mortgage or perhaps other types of USD lending contracts. The host doesn’t ask however what the Peoples Reserve will do with that bitcoin which allows them to profit off of the venture. It seems to me he mentions he’s under NDA such that he can’t answer such a question.
I see this separation of duties as a possible way of obfuscating the total program presented to a would-be bitcoin lender. CJ does mention there is a real estate side of the program.
Re-Visiting “On the Di‐vi‐nation of Swan Bitcoin Mining”
Previously in an esoteric writing I called attention to a program run and described by Raphael Zagury on the “What Bitcoin Did” podcast. Zagury explains that Swan was mixed up in subsidized mining infrastructure and energy contracts:
…so the difference between what Riot does and what we did something that is similar to what marathan did so we don't hold we don't own our infrastructure right now so there are people there are some companies out there that all they do is build infrastructure right so they were they had access to cheap power right so they built a storage facility at the size of cheap power and Bitcoin miners would come in and would rent these rent these facilities right and all of these guys that did that and these are usually in smaller scale but there's some large ones right uh all most of them were suffering because there was massive demand in the boom Market all of them overbuilt…
because some of these they would pay long-term contracts for energy they need to have somebody they hashing right and for most of these we got with them and said okay so here's what we're going to do, let's say you're getting 5 cents energy, you're going to give us the 5 cents energy, so it's pass through, but we're going to share some of the upside, so when we mine one Bitcoin we're going to give, I'm making this up, we're going to give you 0.1 Bitcoin for you right you-derisk both sides
you align the interest so that you make sure that if they have up time it's great for them they don't want to see their facilities down right so they're 100% interest in make sure that most of the ASICS that we have there are hashing as efficiently as much as they can because otherwise they won't get paid right uh so this was also another thing that actually really helped us uh a lot to to deploy um so again we were lucky in a sense that we're very lucky
so the there's no magic here this is another machine…mining is also a speculative attack on the dollar… raising capital we're getting the capital, people don't like to say this right but that's what it is you're getting fiat right and you're transforming fiat into Bitcoin may lose money in the meantime right but that's what you're doing if you pay too much for the cost of Capal you're going to go under if pay too much of machines are going to go under if you pay too much energy you're going to go under right so you have to manage all of these things appropriately luckily at the time that we deploy this uh again it's a little bit of luck but also not like as we were doing the due diligence on this company
On the Types of Mining Contracts That Could Exponentiate the Synthetic Dollar Program
Here I am thinking about the real estate programs that were behind the scenes of the 2008 global financial crisis-the actual real estate. We can think of a scheme where the creation of mortgages is in and of itself perpetuating a market bubble that only a few insiders gain from (at the expense of the coming crisis it would be creating).
In such a scheme you wouldn’t want to be building expensive buildings on the real estate owned but rather shell houses that represent insurable assets.
We can think about the extension of such a program in a world where “shell houses” could be bitcoin mining infrastructure that might start out as profitable mining ventures.
On Bitcoin Mining Templates and NDAs
I think its quite plausible that the creators of “shell house” early mining infrastructure properties have sold mining and energy contracts to new buyers with the promise of subsidizing the program to the point of profitability for the new owners. HOW could such a venture be profitable for the old owners and the new owners if the miners themselves hash at a loss?
This could be done under a contract where the new owners get paid not in the bitcoin they mine (the mined bitcoin would be always forfeited to the old owners) but in USD stable coin contracts.
What’s interesting here is to consider whether or not such payouts and contracts themselves can be lent upon in whatever nation they exist in.
Of course the old owners would lock the new owners under NDA and would have great interest in control their mining templates.
…we give transparency on everything so we have a dashboard our mining dashboard
Nick Carters Article: I don’t support a Strategic Bitcoin Reserve, and neither should you
In a recent article Carter gives criticism aimed at the concept of a Strategic Bitcoin Reserve. I find it strange his title is a hard left authoritative moral command how others should think.
His main reasoning however is that a Strategic Bitcoin Reserve would cause the world to LOSE confidence in the USD as a reserve currency:
It might make sense, if you are Russia or Iran, to consider an un-seizable asset in your FX reserves, especially after the US confiscated Russia’s treasuries in 2022. But the US does not need to hedge its exposure to the dollar, because it itself issues the dollar.
Acquiring Bitcoins and assigning them a monetary role—whether as FX reserves or something more significant—would imply the US is losing confidence in the current dollar-based system.
How strange is it now that Carter doesn’t see the problem of the Triffin Dilemma?
In an article Carter wrote in 2018 he cites and extends a previous article by Mahmudov and Tache:
This post builds on excellent prior work by Murad Mahmudov and Adam Taché, and we suggest you add that to your reading list.
In that article entitled The Many Faces of Bitcoin the authors write about the popularity of Bitcoin as a reserve currency and cite me and Hal Finney with respect to supporting reasoning behind the idea:
A niche number of individuals, the most prominent of whom posts under the names Juice (Medium) and SoakerPatoshi (Twitter), generally agree with the Bitcoin Maximalist thesis that Bitcoin is likely to become the new modern Gold Standard...
This possibility was initially thought of by Hal Finney...
Note they state its generally agreeable to the Bitcoin Maximalist perspective.
How Could Synthetic USD Stable Coins and Contracts Suppress the Price of Bitcoin?
By issuing contracts that pay in dollars that pay more than the underlying bitcoin mined. Who could do this? The USG and Elon and people with transnational energy contracts.