Bitcoin & the Printing Press

How Information-freeing Innovation Shapes Society

This is the story of two disruptive innovations, several centuries apart, with remarkable similarities. It’s explores the largely invisible technological forces that alter incentives of obedience, through increased access to sources of truth, and steer the evolution of how societies are organised.

Trust is a spectrum that’s built upon reputation. It’s the key ingredient that enables us to cooperate and trade. The greater our access to accurate information, the greater our ability to assess reputation and therefore trustworthiness.

When it becomes easier to establish trust through verifying truth, those who benefited most from the previous opacity are often the first, and the loudest, critics.

When we look at how societies have been ruled or governed throughout history, commanding obedience via the threat of violence is ubiquitous. It’s been less about ‘what will they do for me’ and more about ‘what will they not do to me.’ But if for any reason violence is no longer a real threat, an authority must rely on its reputation.

Knut Svanholm, Deeper Down the Rabbit Hole (Citadel21, vol. 5)

Making promises that are known to be outside of your control or powers is a sure fire way to degrade trust. That’s why large institutions, dependent on a mass audience for survival, make promises in ways that are difficult to measure and over loosely defined timelines. This is often combined with actively limiting access to the very information needed to make such an assessment.

But this is largely a story about technology. And how it’s the driving force in fundamental changes to societies. As such, technologies that reduce the barriers to establishing trust or revealing truth naturally become targets of institutions that act as gatekeepers for the flow of information.

Location: Western Europe, Period: the Middle Ages

The primary institution seen as responsible for people’s well-being was the Roman Catholic Church. It held an undisputed level of influence and moral authority. However, two crucial events would cause people to question what seemed an unshakable level of devotion.

“In a society whose final recourse for nearly all problems had been religion, and Roman Catholicism was the only tolerated Christian faith, no amount of prayer seemed effective against the root causes of the famine. This undermined the institutional authority of the Roman Catholic Church.” -Wikipedia

During 1315–1322, famine struck Europe reducing the population of towns and cities by an estimated 10–25%. Bad weather caused flooding, flooding caused crop failures, crop failures lead to cattle starvation, and a downward spiral ensued.

Twenty-five years later fleas, carried by rats aboard European ships returning from Asia, would ignite the deadliest pandemic in recorded human history. The Black Death (1346–1353) resulted in the deaths of between 75–200 million people.

This catastrophic population loss fundamentally altered the power structures between landowner and labourer.

“Old systems of labour collapsed with so few people left to work. Workers could demand more money because they were less replaceable. Wages rose, rents fell as landlords realised to their chagrin, that they possessed more land than there was demand for.”

-Farnam Street, The Great Mental Models, Vol. 2

Today the Global Financial Crisis and subsequent bailout (referenced in the Genesis block), and now the botched management of the pandemic from global bodies and governments, has severely damaged the contractual trust of their customers (taxpayers). The incentive structures of elected officials and unelected central bankers are geared towards personal enrichment and power consolidation over general ‘governing’.

PEW RESEARCH CENTER: Public Trust in Government: 1958–2019

Part of this loss of trust comes from ‘inflation targeting’. As the authority that imposes their desired interest rates on us, effectively setting the price of money, central banks are going to be held responsible for when things get out of whack. Such as rapid price inflation while wages stagnate. Because we consume difference goods and service in different quantities, and at different points in time, using a set basket of goods to calculate an overall level of inflation is a fools errand.

Telling someone their cost of living has not gone up when it directly contradicts lived experience is one way to prove ignorance, malice, or both. Alternative sources of ‘truth’ are starting to gain wider public adoption, such as The Chapwood Index in the US.

“The trend of more wealth inequality, more polarization, and more discord is a major threat to our collective future. And it is all being caused by the same thing: adherence to an economic system designed for a different time.”

-Jeff Booth, The Price of Tomorrow

Authority dependent upon tax collection requires a captive and compliant population. A few conditions are necessary- there’s a clearly defined and guarded jurisdiction, there are incentives to create wealth within it, and there are barriers/deterrents to prevent a critical mass from exiting the jurisdiction with their wealth or specialised knowledge.

What Johannes Gutenberg and Satoshi Nakamoto gave us was new methods to transport information across time and space. This directly challenges gatekeepers that are reliant on taxation. Ultimately, it incentivises authorities to act honestly and provide a valuable service to citizens in order to retain their patronage. Methods that had, and will continue to have, profound implications on the power dynamic between rulers and the ruled.

Gutenberg and Satoshi were both innovators. This is not the same as being an inventor. Rather, innovation, according to author Matt Ridley, is the process of combining existing technologies in a novel way, at a time when they are mature enough to enable scale, to solve a problem or satisfy an existing need.

Innovation and its ensuing market forces, rather than top-down decrees, tend to more permanently alter how human societies organise themselves. These paradigm shifts often come from innovations that are; a) easy to replicate once discovered and b) dumb or neutral (allowing for tinkering on the fringes).

For Gutenberg, the printing press was made possible by a handful of existing inventions- eye-glasses, paper making, metal casting and the wine press. His own skills, knowledge and experiences (as an intellectual, an engineer and a merchant) likely also explains why he was so well positioned to see and grasp this opportunity to innovate.

Gutenberg’s father was involved in the cloth trade. This exposure would prove useful as paper making evolved from using parchment (animal skins) to recycled fibres from cloth. The process resulted in paper that was significantly cheaper and thinner, making commercial printing operations viable. First invented in China, the process would slowly make its way to Europe via the silk road. In addition, Gutenberg experimented with an oil-based ink which stuck better to paper than conventional water-based ink, providing better resolution without blotting.

The downward pressure required to print a page with clarity needed to be precise and uniform. Manually using one’s body weight was exhausting and uneven. Having lived for a period in Strasbourg (although German by birth), it is speculated that Gutenberg was exposed to the wine-press- a mechanical press that used a screw-like vice to squeeze juice from grapes. This would reduced the manual labour involved by an order of magnitude.

Gutenberg’s family was well versed in goldsmithing and coin minting, occasionally offering expert court opinion in forgery cases. As monks painstakingly copied religious text by hand, Gutenberg envisioned a process whereby metal molds could be forged to cast letters. Wood-carved printing plates already existed, but this was equally time-consuming. He needed something more adjustable and resilient- a movable type. Although movable metal type had been used by book makers in Korea for over a century at this point, there wasn’t an efficient pressing mechanism for mass production, so it did find mass adoption.

By the time the printing press was unveiled, eye-glasses were widely used, allowing a much wider population to not only read, but to read with magnification. This enabled him to reduce the size of text and thus the number of pages required in a book. A wider audience at a lower cost.

The technologies that converged to enable the Printing Press

The success and economics of the press depended on printing large runs of a single book. And which book was the most widely known and demanded at the time? The Bible. The Church could also benefit immensely by freeing up the time and labour of its monks, currently engaged in copying religious texts by hand.

His proof of concept was demonstrated to the Church by showing prints of ‘indulgences’ (a voucher sold to sinners as a way to repent). The first actual print run would consist of ~180 copies of the Bible and take two years to complete. One of the first copies was displayed at the Frankfurt Trade Fair, causing much sensation. By mid 1450’s, Pope Pius II had seen the product and praised Gutenberg.

“All that has been written to me about that marvelous man seen at Frankfurt [sic] is true. I have not seen complete Bibles but only a number of quires of various books of the Bible. The script was very neat and legible, not at all difficult to follow — your grace would be able to read it without effort, and indeed without glasses.”

Future pope Pius II in a letter to Cardinal Carvajal, March 1455

He believed this was the technology that would enable the Roman catholic church to expand its reach and patronage. It did not occur to the Pope that the printing press, with its movable type, could print any combination of words to convey any combination of messages.

Bitcoin’s design is the result of combining several existing technologies in a novel way. Several incarnations attempting to achieve a similar goal paved the way for its eventual creation.

“The genius of Bitcoin, in inventing a digital currency successful in the real world, is not in creating any new abstruse mathematics or cryptographic breakthrough, but in putting together decades-old pieces in a semi-novel but extremely unpopular way. Everything Bitcoin needed was available for many years, including the key ideas.”

-Gwern Branwen, Bitcoin Is Worse Is Better

Bitcoin is Worse is Better by Gwern Branwen

“Along comes an invention or a discovery and soon we are wildly excited about the imminent possibilities that it opens up for flying to the stars or tuning our children’s piano-playing genes. Then, about ten years go by and nothing much seems to happen. Soon the “whatever happened to . . .” cynics are starting to say the whole thing was hype and we’ve been duped. Which turns out to be just the inflection point when the technology turns ubiquitous and disruptive.”

-Matt Ridley, How Innovation Works

Amara’s Law: How We Misjudge the Development of Technologies

Networks are how we move things- people, data, resources. The networks that not only survive, but thrive over time tend to have one thing in common- they are ‘dumb’.

“The dumb network becomes a platform for independent innovation, without permission, at the edge. The result is an incredible range of innovations, carried out at an even more incredible pace… The Internet is a dumb network, which is its defining and most valuable feature. The Internet’s protocol (..) doesn’t offer “services.” It doesn’t make decisions about content. It doesn’t distinguish between photos, text, video and audio.”

-Andreas M. Antonopoulos

‘Dumb’ in this sense refers to impartial or neutral to the content being transported. It may not seem like a big deal but it’s where all the innovation actually happens- on the fringes.

“The first step of forecasting the future requires a trip to the fringes of science, technology, design and society, to where unusual experimentation is taking place. For it’s at the fringe that all trends are born.”

-Amy Webb, The Signals Are Talking

As books became more accessible and affordable, individuals were now personally consuming, reflecting upon, and critiquing written texts. It was an idea meritocracy. No longer was ‘truth’ conferred solely by the ordained to illiterate masses inside churches.

Printing presses and print shops were cropping up all over the continent and, like the spread of the Black Death, mass produced printed books and texts were now spreading across Europe and the world with similar force. It was the start of mass communication and it ended the Church’s monopoly over knowledge, including interpretations of religious texts.

Sharp increase in literacy rates across Europe, as a result of the lowered cost of books, meant the literate elite would soon be challenged. Eventually this would also lead to an emerging middle class.

Our World in Data: Literacy Rate in England & the UK since 1580

Fast forward to present day where global financial literacy is the next major frontier to unlocking human potential and innovation. As was the case with literacy in the Middle Ages, financial literacy is a privilege currently afforded by the wealthy and elite. Similarly, as literacy rates rose as a result of increased access to books, it can be hypothesised that financial literacy will rise with access to sound money.

Financial Literacy Around the World by ‘howmuch’

“Money at the very root of it, is a language. It’s a language that we use to express value to each other.”

-Andreas M. Antonopoulos

Communication Protocols

We use protocols for transmitting data between each other and machines each day- Swedish, SMTP (email), American sign language, TCP/IP, etc. Protocols earn their adoption by giving users greater efficiency, flexibility or scale in their ability to communicate.

Gutenberg’s press standardised the process for packaging and transmitting information through the mass production of books and pamphlets. Previously, the process was undertaken by hand using trained monks as labour. His movable metal type system increased the speed and reduced the cost of book production, enabling the dissemination of information on a massive scale.

Bitcoin has, quite simply, turned money into data. By standardising the structure of transactions and significantly reducing the costs to verify them, we can now transact peer-to-peer and across great distance.

Open protocols like Bitcoin enable pseudonymous transactions- an extension of the pseudonymous digital identities that have already become commonplace. Practically speaking, this is very hard and costly to combat. For centuries authors have employed pseudonyms to publish work so that it may be assessed on its own merit rather than any associated preconceptions held by the reader. It gives a voice to the under-represented and provides protection to the vulnerable. Of course this can certainly be abused, but we must weigh the benefits.

Languages follow power laws in interconnected post-hunter gather societies, simply because it increases opportunities to collaborate and trade. This means we tend to converge on a few common languages (English, Spanish, Hindi, Mandarin) as a Schelling Point, with local dialects forming a long-tail. Money, as we’ve established, is also a language (for communicating value) and follows a similar distribution.

Power Law Distribution

The advent of printing permanently reduced the cost of communicating en mass across distance, resulting in more sources of information. A network that permanently reduces the cost and increases the scope of transacting will be of similar significance. In both cases, individuals gained greater access to mediums of communication for the purpose of expression.

To rebel requires having something to rebel against. Perhaps norms, rules or schools of thought. In times of widespread suffering and societal distress, those in power will be quick to point the finger and distract. This works until an intransigent minority forces the majority to succumb to their preference.

The minority rule will show us how it all it takes is a small number of intolerant virtuous people with skin in the game, in the form of courage, for society to function properly. -Nassim N. Taleb

You may protest that a government will not cede power, especially in the case of controlling the production of money. It’s just as ridiculous as thinking that a dominant moral authority would ever cede power over the production and dissemination of information. The printing press holds a lesson for where we might be headed. Technologies that threaten existing power structures are often the target of misinformation and scare campaigns by incumbents or ‘concerned citizens’.

“When We All Have Pocket Telephones” by W. K. Haselden (1923)

Printing, gradually and then suddenly (sound familiar), weakened the power of the church, democratising access to recorded human knowledge.

“Because the Church attempted to suppress the printing press, most of the new volumes were published in those areas of Europe where the writ of the established authority was the weakest. This may prove to be a close analogy with attempts by the U.S. government today to suppress encryption technology. The Church found that censorship did not suppress the spread of subversive technology; it merely assured that it was put to its most subversive use.”

-Rees-Mogg & Davidson, The Sovereign Individual

The printing press’ design was such that it was able to be replicated using common materials, meaning town or group of sufficient size, wealth and inclination could own one. It was the democratisation of publishing. It also provided a shield of protection for those publishing under a pseudonym.

Latin had been the lingua franca due to the influence of the Church, but now it was economical to publish smaller runs in local languages. It became possible for many smaller cities and towns to now posses their own libraries. The wealthy could also afford their own personal book collections. Primarily Latin and ancient Greek texts were first to be reproduced, including the works of Aristotle and Plato. Similarly, new ideas could propagate at speeds never before seen.

Over in Italy the Renaissance was in full bloom and further spurred by the to heavy investment in the Arts by the Medici banking family. Artists and polymaths from across Italy would be attracted to Florence to compete for the chance to be commissioned.

The time and place would foster the greats such as Leonardo da Vinci, Botticelli and Michelangelo. Many historians contend as to the probability of having such a concentration of ‘great men’ without the prevailing cultural conditions. The excitement and optimism felt in the region would be in stark contrast to just 200 years earlier when Florence lost half its population to the bubonic plague.

The introduction to the printing press in Italy meant information could now easily transcend regional boundaries further disrupting the powers of the religious and political powers. Venice became a hub for book printing operations given its access to the port with ships as a distribution method.

There’s much speculation as to why and how Italy became centre of this explosion in productivity, innovation and culture. Although it’s geographical location, especially that of Venice, on trade routes may explain part of it, we cannot discount the role that sound money had on the time preference and levels of trust between individuals and local governments, leading to highly developed banking system and credit market courtesy of the Medici family.

“It was in the city-states that humans could live with the freedom to work, produce, trade, and flourish, and that was to a large extent the result of.. adopting a sound monetary standard. It all began in Florence in 1252, when the city minted the florin, the first major European sound coinage since Julius Caesar’s aureus. Florence’s rise made it the commercial center of Europe, with its florin becoming becoming the prime medium of exchange, allowing its banks to flourish across the entire continent.”

-Saifedean, The Bitcoin Standard (2018)

Scientific research, which was previously a solitary pursuit due to challenge of hand-written publishing and inability to reach a sizable audience, accelerated sharply in the following centuries.

Society was now freer, but operating in uncharted territory for which there were no precedents. Although the printing press itself is a neutral technology, the power to spread information of any kind was now available to anyone who could pay for it. Humans would have to learn to navigate this new paradigm by updating the models through which they viewed the order of the world and the process by which they imparted trust.

The Bitcoin protocol is the modern day printing press. It’s democratising access to sound money in the same way that Gutenberg’s innovation democratised access to knowledge. The re-wiring of minds to basic economic principles, that are both observable and quantifiable, has begun. Giving any individual, residing in a jurisdiction that protects free speech, an exit from their national fiat monetary system. It also gives those without protected free speech a way to skirt their oppressor, as wealth is now indistinguishable from any other string of encrypted data.

“this new cybermoney will be denationalized… Any individual or firm with access to cyberspace will be able to easily shift out of any currency that appears in danger of depreciation.”

-Rees-Mogg & Davidson, The Sovereign Individual

With a similar hold over the behaviours and outlook of society, the Federal Reserve, by setting the price of money, is our modern day Catholic Church. With similar folklore propagated, such as- moderate inflation is good and necessary, spending creates wealth, and GDP growth is to be worshiped as God.

A 0–1 innovation cannot be undone. There is no way to put the genie back in the bottle. For better or worse, the structure of society forever altered. Francis Bacon, a co-creator of the scientific method, would write in 1620 that the printing press, along with gunpowder and the compass, were the inventions that forever changed the world.

The growth seems shocking on a linear scale…

European output of printed books 1450–1800 by Eltjo Buringh & Jan Luiten van Zanden

..but entirely expected on a log scale.

European output of manuscripts and printed books 500–1800 by Eltjo Buringh & Jan Luiten van Zanden

Which goes to show how difficult it is for humans to comprehend exponential growth aided by technology.

“At the end of the Middle Ages, the monolithic Church as an institution had grown senile and counterproductive, a marked change from its positive economic contribution five centuries earlier… At that time, the Church was indispensable to survival to the survival of large numbers of small freeholders and serfs who made up the bulk of the Western Europe population. By the end of the fifteenth century, the Church had become a major drag upon productivity. The burdens it imposed upon the population were pushing living standards down. Much can be said for the nation-state of today.”

-Rees-Mogg & Davidson, The Sovereign Individual

However, not all jurisdictions advance at the same pace. Regions that are effective in preventing and discourage the use of information-freeing technologies (due to their governance system and location) are gradually left behind. This has a profoundly negative impact on society, robbed of the new methods of expression and scientific advancement that followers.

Despite the initial unanticipated negative consequences of printing technology, there are few people today that would wish to put the genie back in the bottle and forgo the benefits enjoyed by humans throughout the last 500 years.

As the printing press ushered in the start of The Renaissance, Bitcoin is one of the fundamental technologies ushering in the Information Age. In incentivising the development of chip technology (ASICs) and lower cost energy production and capture, Bitcoin is leading a similar charge towards technological advancement.

Bitcoin Total Hash Rate (Terahashes per second) shown on different chart scales

Jurisdictional borders that become more porous to information are detrimental to authority that derives its power by restricting the flow of information. When it is possible for such an authority to prevent the adoption of information-freeing technologies their people and jurisdiction suffers in the long-run. The skilled that can leave do. The capital that can leave does.

“Perhaps the most puzzling aspect of innovation is how unpopular it is.. Despite the abundant evidence that it has transformed everybody’s lives for the better in innumerable ways, the kneejerk reaction of people to something new is often worry, sometimes even disgust.. we tend to imagine the bad consequences that might occur far more than the good ones.

History shows that innovation is a delicate and vulnerable flower, easily crushed underfoot, but quick to regrow if conditions allow.”

-Matt Rdiley, How Innovation Works

The Most Intolerant Wins: The Dictatorship of the Small Minority, Nassim N. Taleb, 19 Aug 2016.

How Innovation Works: And Why It Flourishes in Freedom, Matt Ridley, 2020

The Bitcoin Standard, Saifedean Ammous, 2018

The Signals Are Talking, Amy Webb, 2016

Stephen Fry’s Great Leap Years, S1 E2: A Faustian Pact, Stephen Fry, 2018

The Internet of Money: Vol. 1, Andreas M. Antonopoulos, 2016

The Sovereign Individual, James Dale Davidson & Lord William Rees-Mogg, 1999

The Price of Tomorrow, Jeff Booth, 2020

Bitcoin Is Worse Is Better, Gwern Branwen, 2011

Deeper Down the Rabbit Hole, Knut Svanholm, Citadel21, Vol. 5, 2020

Decentralization: Why Dumb Networks Are Better, Andreas M. Antonopoulos, March 4, 2015

“Charting the “Rise of the West”: Manuscripts and Printed Books in Europe, A Long-Term Perspective from the Sixth through Eighteenth Centuries, Eltjo Buringh & Jan Luiten van Zanden, 2009, The Journal of Economic History, Vol. 69, №2, p. 417

Americans lost trust in the Fed as stocks rose to new highs, Dion Rabouin, Axios, Jul 14, 2020

The Great Mental Models Vol. 2, Farnam Street, 2019

I teach innovation, markets & incentives