Why CBDCs Are Doomed
Posted September 23, 2022
CBDCs, as they’re being pitched to the world, are doomed.
At least, that’s the bet I’m making.
The reason I think this is a safe bet has a lot to do with the evolution of the English language.
Sounds strange, but let me explain.
The history of language is the movement from entropy (uncertainty) to redundancy.
In ancient Latin and Greek, there were no spaces between words, no lowercase letters, and no punctuation.
If you go back even further to the Phoenicians, there weren’t any vowels.
Also, for a long time, there wasn’t a hard rule about which direction to write.
Sometimes, words went right. Other times they went left. Sometimes they switched in the same document.
Unlike its forebears, the English language evolved to have a ton of redundancies; there’s more information on the page than is necessary to read.
As societies became more complex and global, these redundancies became crucial for keeping a message clear from interference or noise.
Think of when you have bad reception. Or when you’re in a loud place… like a nightclub or a warzone.
Redundancies ensure that your message can still be communicated in complex, interference-rich, potentially adversarial environments. In fact, it’s estimated that 75% of the information in any English text is redundant.
See for yourself.
Y CN RD THS F Y TR RL HRD
You could read it, right? The absence of vowels in some cases does not reduce the understanding of the text. A look at the word (the word-combination) is enough in order to recognize it.
Also, a lot of the information absorbed during the reading process is contextual.
This is why chain letters like this one work:
fi yuo cna raed tihs, yuo hvae a sgtrane mnid too. Cna yuo raed tihs? OLNY 55% of plope can...
I cdnuolt bleveiee taht I cloud aulacity uesdnatnrd waht I was rdanieg. The phaonmneal pweor of the hmuan mnid, aoccdrnig to a rscheearch at Cmabrigde Uinervtisy, it dseno't mtaetr in waht oerdr the ltteres in a wrod are, the olny iproamtnt tihng is taht the frsit and lsat ltteer be in the rghit pclae. The rset can be a taotl mses and you can sitll raed it whotuit a pboerlm. Tihs is bcuseae the huamn mnid deos not raed ervy lteter by istlef, but the wrod as a wlohe. Azanmig huh? yaeh, and I awlyas tghuhot slpeling was ipmorantt!
Obviously, this isn’t an effective way to communicate if the message is crucially important.
Effective communication is about striking a balance with redundancy and efficiency. If you want to send a high-entropy message, send someone random an emoji of scissors, then a red wire, followed by a bomb, and then a thumbs up. (And then leave them to guess about wtf you mean.)
If you want to send someone a message where it’s crucial the receiver knows precisely what you’re saying — such as the instructions to defuse a bomb — you want to send a message with a lot of redundancies.
The Internet must go through the same sort of evolution if it’s to survive. As it becomes more complex (and more adversarial), it must also become more decentralized — or more redundant. And, it also makes sense that our money would become more decentralized, too.
After all, decentralized networks were conceived as Cold War fail-safes — in the event of a nuclear attack, one “node” going down wouldn’t take down the whole network.
This is one of the BIG problems with centralized CBDCs as they’re currently conceived… and why central banks might have a tough time.
Our colleague Jim Rickards explains more below. (Though Jim might not be as keen on crypto, he also goes into how you can protect yourself from the inevitable rise of the CBDC.)
Biden Passes the Buck on Currency Security
Biden’s Executive Order 14067 could replace the U.S. dollar with a traceable digital currency that will eliminate constitutional liberties like freedom and privacy. It could also eliminate your financial security.
The government can’t be trusted to do much of anything correctly. How can you trust them to keep your money secure once you are forced to convert it to a traceable digital currency? What happens if that digital currency gets hacked? The government certainly isn’t going to bail you out like it did with the elites in the banking and auto industries.
Hackers recently stole around $160 million worth of cryptocurrency from crypto market maker Wintermute. This incident is only the most recent in a long-growing list of large crypto thefts so far this year.
In June of this year, hackers looted about $100 million from a so-called cryptocurrency bridge, again exposing a key vulnerability in the digital-asset ecosystem.
According to a recent article from CNN “In the first seven months of 2022, a staggering $1.9 billion worth of cryptocurrency was stolen in hacks of various services, marking a 60% increase from the same period in the year prior, according to a report released from blockchain analysis firm Chainalysis last month.”
These new electronic currencies are called CBDCs – or “central bank digital currencies”. Or “Biden Bucks” as I like to call the digital dollar because I want him to take full credit for what I consider to be crimes.
This is not like the money in your online bank account. No, this is new and different. Every digital dollar will be a programmable token, like bitcoin or other cryptocurrencies.
But there’s a big difference. Cryptocurrencies are decentralized digital currencies. Instead, if it plays out the way I see it…Biden Bucks will have the full backing of the U.S. Federal Reserve. They will replace the cash (“fiat”) dollar we have now…And will soon be the sole, mandatory currency of the United States.
I predict we’ll see a digital dollar hit circulation next year — or 2024 at the latest. And when Biden Bucks are rolled out, many experts — myself included — believe they will begin an era of total government control and surveillance.
A Federal Reserve paper from January 2022 stated “Threats to existing payment services—including operational disruptions and cybersecurity risks— would apply to a CBDC as well. Any dedicated infrastructure for a CBDC would need to be extremely resilient to such threats, and the operators of the CBDC infrastructure would need to remain vigilant as bad actors employ ever more sophisticated methods and tactics. Designing appropriate defenses for CBDC could be particularly difficult because a CBDC network could potentially have more entry points than existing payment services.”
This part is truly terrifying: “Designing appropriate defenses for CBDC could be particularly difficult because a CBDC network could potentially have more entry points than existing payment services.”
If bad actors can already hack crypto platforms with ease, what’s to stop them from hacking a CBDC network with more entry points?
What could this mean for you and your life savings? How can you protect your finances from being hacked by bad actors?
The White House recently released a framework for developing digital assets, so this replacement of the U.S. Dollar with a traceable digital currency will happen sooner rather than later.
There is only one way I trust to protect your money and your freedom from Biden’s new surveillance machine. I call it “Asset Emancipation” – and it’s easy to do and understand.