ChatGPT and Bard on a Bitcoin Future

ChatGPT 4 and Bard give us some ideas about what a world in which Bitcoin is the universally accepted store of value could look like.

• Estimates of what price bitcoin could reach if it were humanity’s store of value.
  
• ChatGPT analyzes the advantages and disadvantages of hyper-bitcoinization.

ChatGPT and Bard on a Bitcoin Future. Hyper-bitcoinization is the dream of many bitcoiners. By this term, we refer to a future in which Bitcoin (BTC) becomes the main global store of value, surpassing the U.S. dollar and gold in this predominant role. Such a scenario posits a world in which decentralized cryptocurrency becomes the benchmark currency worldwide, with its fixed maximum supply and resistance to government manipulation.

Early bitcoiners, e.g., Hal Finney, already dreamed of a world in which Bitcoin is the dominant payment method, consequently increasing its price. A hyper-bitcoinized future, while the subject of much speculation, represents a sea change in our global economy and has the potential to restructure how we manage our finances and the function of many institutions.

But what would this future look like? And how might we get there?

What should happen for Bitcoin to become the world’s reserve currency?

The LLM acknowledges that “such a drastic change would be challenging.” Despite that, when asked how a global hyper-bitcoinization could happen, ChatGPT 4 writes a six-step process below.

The financial crisis and distrust of fiat currencies: “A global financial crisis causes widespread distrust. Governments respond to the crisis by printing large amounts of money, leading to inflation and, in some cases, hyperinflation. People begin to look for more stable alternatives and turn to Bitcoin.“

Adoption of Bitcoin by financial institutions: “As confidence in fiat currencies declines, financial institutions begin to adopt Bitcoin. Banks start to offer Bitcoin services, and stock exchanges begin to list Bitcoin. These new services increase Bitcoin’s liquidity and facilitate its use in trading and investment.“

Legalization and regulation of Bitcoin by governments: “In the face of widespread Bitcoin adoption, governments have begun to legalize and regulate Bitcoin. They create laws to protect consumers and prevent money laundering and other illegal activities, increasing Bitcoin’s confidence and facilitating its adoption.“

Consumer adoption of Bitcoin: “With the adoption of Bitcoin by financial institutions and governments, consumers have started using Bitcoin for their daily transactions. Companies such as Amazon and Apple accept Bitcoin, and people can buy groceries and pay their bills with Bitcoin.“

Technological innovation: “We need tech to support the growing use of Bitcoin, and significant technological innovations must occur. Bitcoin transactions have become faster and less expensive, and people are developing new technologies to make Bitcoin mining more energy efficient.“

Bitcoin becomes the world’s store of value: “With the widespread adoption of Bitcoin, it gradually becomes the world’s store of value. Governments and financial institutions hold their reserves in Bitcoin, and international trade uses Bitcoin. At this point, the world has become hyper-bitcoinized.“

Bitcoin as the World Currency

Some of these steps have already become a reality—for example, step 1 (financial crisis and distrust in fiat currencies). Many reports show how countries are turning their backs on the dollar and choosing alternative currencies. That alternative currency is predominantly the yuan, not Bitcoin, at least for now.

Point 3 (government legalization and regulation of Bitcoin) is also underway. There are very few countries where Bitcoin is prohibited. And there is even one – El Salvador – where Bitcoin has legal tender status. Every Salvadoran merchant must accept BTC to cancel debts for products or services. In Europe, the recently passed MiCA law gives regulatory clarity to companies in the Bitcoin and cryptocurrency ecosystem.

Point 4 (consumer adoption of Bitcoin) has relative compliance. Bitcoin addresses continue to increase. But most people perceive it simply as an investment or a means of store of value. As yet, paying with BTC is not a widespread practice. According to Gresham’s Law, when several currencies coexist, people tend to get rid of the less valuable one first (fiat money) and keep the more valuable one (bitcoin) because, in the long run, it will be more beneficial.

Regarding point 5 (technological innovation), we can mention the Lightning Network, which allows instant and cheap BTC transactions. Today, making payments with BTC is a matter of seconds. The Lightning Network ecosystem must continue to evolve, especially in terms of adoption and ease of use.

What would a hyper-bitcoinized world look like?

A hyper-bitcoinized future, in which Bitcoin becomes the global store of value instead of the dollar, would profoundly differ from what we know today. We asked ChatGPT 4 to describe how he imagines such a world, and he mentioned these six characteristics it would have:

Decentralization of economic power

“Bitcoin is a decentralized currency, meaning that no one entity or government has direct control over it. The economic power would be more distributed in a world where Bitcoin is the global store of value. More power equality could reduce the influence of countries controlling reserve currencies, such as the United States.“

Financial stability

“Bitcoin has a maximum supply of 21 million units, which could generate greater financial stability, as governments would not be able to inflate the currency through excessive money printing. However, this could also limit the flexibility of monetary policies, which governments use to manage economic crises.“

Financial inclusion

“Bitcoin and other cryptocurrencies could enable greater financial inclusion. People in countries with less developed financial systems would have the same ability to participate in the global economy as those living in more developed countries, resulting in a redistribution of wealth globally.“

Changes in international trade

“International trade is conducted primarily in U.S. dollars. If Bitcoin became the reserve currency, trade agreements would have to adapt, making trade more efficient and presenting challenges, as Bitcoin’s volatility is much greater than the dollar’s.“

Changes in regulation and security

“With the increased use of Bitcoin, the need for new rules and security measures would also increase. Although Bitcoin is secure by design, its increasing use would attract more malicious actors. We must also adapt regulations to protect consumers and prevent illegal activities.“

Changes in technology infrastructure

“A hyper-bitcoinized future would require a much more robust technology infrastructure. Everyone would need access to the Internet and digital devices to participate in the economy. Governments and businesses must invest significantly in technology and education to keep up.“

Before proceeding further, we will comment on point 5 of this response (regulatory and security changes). Bitcoin transactions are traceable; the blockchain indelibly records them. Therefore, it would be much easier for the authorities to track monetary movements with Bitcoin than with cash. With the right tools, it may be possible to identify the person or entity that owns a given Bitcoin address thanks to its behavior patterns or linked wallets. It is not true that “Bitcoin is the money of criminals,” an idea that many try to promote.

What would be the negative consequences of hyper-bitcoinization?

We asked ChatGPT 4 what the negative consequences of hyper-bitcoinization would be, and this was the answer:

Volatility: “Bitcoin is volatile. Sudden and dramatic changes in its value can generate economic instability. If Bitcoin becomes the global store of value, this volatility could directly impact the global economy.“

Wealth Inequality: “The early adoption of Bitcoin has resulted in a significant wealth accumulation in a small group of people. If Bitcoin becomes the global reserve currency, this inequality could grow.“

Limitations of monetary policy: “Governments use monetary policy to help control the economy, influencing inflation, unemployment, and economic growth. In a hyper-bitcoinized world, governments would have limited control over monetary policy, as they would not be able to issue or control Bitcoin.“

Environmental issues: “Bitcoin mining consumes significant energy, which may contribute to climate change. As Bitcoin use expands, this problem could only worsen if we implement more energy-efficient technologies.“

Financial exclusion: “Bitcoin can potentially increase financial inclusion but could have the opposite effect. People could find themselves excluded from the economy without access to the required technology to use Bitcoin.“

Cybersecurity: “With increased Bitcoin transactions, security risks would also increase. Hackers could attempt to steal Bitcoin, jeopardizing individual and global economies.“

Lack of consumer protection: “Bitcoin transactions are irreversible, which means there is no protection for consumers in case of transaction fraud or errors, making people more reluctant to adopt Bitcoin.“

Is hyper-bitcoinization that bad?

Let’s start with the first one (volatility). BTC is indeed a volatile asset. But we must bear in mind that if it were to become humanity’s store of value, it is because there is a consensus on its usefulness as such beforehand. If BTC were to surpass the dollar and gold in its market capitalization, it would no longer be a mere speculative asset. If all governments and individuals had Bitcoin stored in their wallets, its volatility would decrease, so this would not be a significant problem. It could even be used as a unit of account to set prices for everyday products and services.

The second point is “wealth inequality.” But is this something specific to Bitcoin, and isn’t it already the case with the fiat-based world economy? Moreover, wealth inequality is not even a problem to be solved. Read the following quote from Don Watkins and Yaron Brook:

“We do not consider equality a moral ideal; on the contrary, we consider it immoral. People earn very different amounts of wealth when free, and those who produce have a moral right to the wealth they create. It is evil for government to use its coercive power to “reduce inequality,” not because it will create perverse incentives (which it certainly will), but because it deprives people of rewards to which they are justly entitled.”

Don Watkins and Yaron Brook

And it is worth adding that ditching the dollar as humanity’s store of value would remove the monopoly of global monetary issuance from the United States. I will make issuance more impartial (any state could mine and thus issue bitcoins).

Let’s look at the third alleged problem: monetary policy constraints. The biases of the OpenAI team led ChatGPT 4 to give this kind of answer aligned entirely with the interests of the state sector. Would monetary policy constraints be a problem? Yes, but only for politicians who could not finance their interests by issuing money from thin air (which causes inflation). Unlike that, Bitcoin’s designers fixed their monetary policy since the release of the Bitcoin white paper. It is unalterable. No more than 21 million BTC will ever be issued. And that makes it an anti-inflationary asset.

Environment, Exclusion, and Security

The fourth point ChatGPT 4 mentions are alleged environmental problems. Are you unaware that the fiat financial system consumes several times more energy than Bitcoin? On the other hand, Bitcoin’s carbon footprint would reduce to zero if we change the world’s energy matrix and replace it with renewable and clean energy sources. Bitcoin is often a good scapegoat, but it is not the cause of the planet’s environmental ills.

The fifth point is financial exclusion. That may be true, although, in 2022, 75% of the world’s population will have cell phone access, which will increase in the coming years. All it takes to use Bitcoin is a cell phone with Internet access. There is nothing unique about the “necessary technology” mentioned by ChatGPT.

The sixth point could be right. Security will be critical in the event of a hyper-bitcoinization scenario. It would be catastrophic if bad actors hacked a nation’s state wallet. Governments must take measures to avoid such scenarios.

And, to the seventh point, we partially agree. It is true; Bitcoin transactions are irreversible. But so are purchases with cash (in bitcoins), yet some laws protect people and force merchants to return the money if the customer is unsatisfied. Nothing prevents similar legislation related to Bitcoin from being created in the future.

What price would Bitcoin fetch if it were humanity’s store of value?

ChatGPT is current, at the time of this publication, to September 2021. Still, according to its prediction, if Bitcoin were to become humanity’s global store of value, its price would exceed the market capitalization of gold. At current prices, each bitcoin should trade at around $500,000. We asked this same question to Bard, Google’s artificial intelligence application. Unlike ChatGPT, Bard has access to information currently published online, which is more up-to-date.

Bard does not give a definitive answer. It clarifies that it is difficult to make such a prediction. He mentions that “some experts believe Bitcoin could reach a price of $1 million or more“. One interesting thing he says is fiat money inflation. Yes, bitcoin could trade at $1 million, but the buying power of that $1 million when such a thing happens will not be the same as its current value.

Hyper-bitcoinization – possibility or utopia?

Hyper-bitcoinization, a term that evokes a future in which Bitcoin replaces the dollar and even gold as the world’s primary store of value, remains a topic of intense debate. For some, it is the inevitable culmination of the advancement of Bitcoin technology. It is a consequence of the growing distrust of traditional financial institutions. For others, it is a distant utopia fraught with impossible technical, regulatory, and social challenges.

According to the analysis, hyper-bitcoinization is possible. In any case, we must consider that the governments will not stand idly. They’ll fight while their money issuance monopoly disappears. It is more realistic to think of a future with the greater competition of currencies. In this scenario, BTC is one of those currencies.

In conclusion, even if the much-talked-about hyper-bitcoinization never happens, bitcoin remains an excellent tool for individual monetary sovereignty. Saifedean Ammous, in his book “The Bitcoin Standard,” puts it this way:

“As the first form of digital money, bitcoin’s first and most important value proposition is to offer anyone worldwide access to a sovereign monetary base. Anyone who owns Bitcoin achieves a degree of economic freedom unattainable before its invention. Users of such a network can send large amounts of value around the globe without asking anyone’s permission. Bitcoin’s value is not dependent on anything physically present at any point on the globe; therefore, it is impossible to hinder it, destroy it, or confiscate it entirely by any physical forces of the political or criminal world.”

“The Bitcoin Standard, Saifedean Ammous, Valletta Editions, 2019, p.265.”