For Bitcoin To Win, We Must Burn The Ships

This is an opinion editorial by Interstellar Bitcoin, a contributor to Bitcoin Magazine.

Whether we like it or not, Bitcoiners still live in a world built on fiat currency. Fiat rules everything around us, from the food we eat to the houses we live in. Until we “burn the ships,” we are not prepared to realize our eventual victory.

In 1519, Hernán Cortés led a Spanish army to modern-day Mexico to conquer the Aztec Empire. Upon landfall, two leaders mutinied to return to Cuba at the order of the governor who had commissioned the fleet Cortés led. In response, Cortés scuttled his fleet to forestall any future mutiny by closing the sole path of retreat.

Against all odds, Cortés went on to defeat an opposing force of over 300,000 Aztecs, a few thousand Spaniards, superior military technology, an unforeseen smallpox outbreak, and shrewd political alliances ultimately prevailed.

Many of those on the expedition had never seen combat before, including Cortés himself. Historians will point to August 13, 1521, as the final victory of the Spanish campaign against the Aztec Empire. However, Cortés truly won the moment he “burned the ships.”

At its core, the metaphor of “burning the ships” represents the point of no return: the psychological commitment to crossing a line in the sand once and for all. Beyond this event horizon, there can be no hedging or looking over one’s shoulder. From now on, everything — all thoughts and efforts — must be focused on succeeding in the new reality.

Like Cortés, Bitcoiners have crossed the Atlantic to the promised land. However, while Bitcoiners still use fiat money, we will not be truly free. Until we burn the ships, we will not win.

Bitcoiners are the remnant. We lead by example. We must show the world we are not afraid to live on a bitcoin standard. We must use bitcoin not just as our store of value but as the unit of account and medium of exchange for our daily lives.

We must strive for peace and prosperity, by building circular bitcoin economies that remain resilient against the volatility of the fiat exchange rate. We must keep studying to build the knowledge and intellectual depth upon which rigorous discourse can thrive. We must build large stacks upon which generational wealth is built. In the end, only the strong survive.

There is a nascent movement in the Bitcoin cultural sphere known as #GetOnZero which polarizes many people. This movement represents “burning the ships.” This state change is both functional and psychological. It drives companies to build better products for Bitcoiners. It drives Bitcoiners to harden our resolve as Bitcoiners. It shows we are willing to go down with the ship. It proves we are fearless in the face of insurmountable odds.

“Give me Bitcoin or give me death.”

The critics will say it’s “too early” or point to statistics in an attempt to rationalize why holding some fiat currency is better. While such notions may seem correct on paper, in practice, until Bitcoiners take that grand leap of faith, we are not prepared to do what it takes to win. Until we are ready to completely let go of fiat currency, it will continue to culturally and functionally survive. Bitcoiners, like Cortés, must embrace burning the ships. Once we do, the process of hyperbitcoinization already underway will rapidly accelerate.

The moment Bitcoiners burn the ships is the moment Bitcoiners win.

https://getonzerofiat.com/

This is a guest post by Interstellar Bitcoin. Opinions expressed are entirely their own and do not necessarily reflect those of BTC, Inc. or Bitcoin Magazine.

Simple Steps You Can Take To Help Further Bitcoin

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Hyperbitcoinization is happening in real time. For fiat, the end is nigh, and no one explains this better than Brian Harrington.

For him, Bitcoin is a lifestyle. Every day, the actions he takes center around furthering Bitcoin. Harrington and I discussed many interesting topics in this episode of “Meet The Plebs,” but none are as fascinating to him as the “get on zero” movement. Described as maximally limiting your exposure to fiat usage and holdings, Harrington talked about how this movement is a part of making hyperbitcoinization the reality of today.

We also discussed planning for the future, stress and many other interesting topics. Be sure to check out the written interview below, and the podcast as well.

How were you first introduced to Bitcoin?

I have one email from my dad from 2014 that has the word “Bitcoin” in it and he was talking to me about a trading bot that he was trying to run on Mt Gox. In January 2015, we then both made our Coinbase accounts together.

What are some considerations bitcoiners should begin thinking about as they plan for long-term wealth (retirement, taxes, etc.)?

I think Bitcoiners should begin thinking now about what they want to do with their influence that is going to come from being long-term wealthy. We have a huge opportunity to really put a dent in changing the world for the better. It’s impossible for bitcoin to 10x and 100x from here without Bitcoiners also 10xing and 100xing.

What strategies can Bitcoiners use to lessen the stress of planning for their future?

Different stacks for different things. Bitcoin is going to eat checking accounts, savings accounts and retirement accounts. Bitcoin is the new base money. Hold different stacks of it in different places for different goals. If you still have fiat or stonks sitting in a retirement account, seriously take a look at Choice App, you can transfer and rollover from wherever your retirement currently is and get it into bitcoin.

What does “get on zero” mean, and why is it important?

#GetOnZero means stop holding fiat for any longer than you have to. Fiat doesn’t work at all for saving over long time frames and the timeframe that it does hold purchasing power to goods and services is shortening and shortening. #GetOnZero is working the muscles for using bitcoin as your day-to-day base money.

All the tools are available to use bitcoin as your base money, you can get paid with it and pay your bills from that stack, so it’s time to look at the math on if that makes sense. When you look at the daily average increase of BTC and you look at the daily average decrease of fiat, it becomes clear that you will end the year wealthier by using BTC fully as your base money.

Why is Bitcoin-oriented community action important (meetups, etc.)?

Advancing Bitcoin in your community is important because that’s where you live. Those are the physical humans creating goods and services around you and the physical humans that can make where you live a thriving place. The more people close to you operating on a Bitcoin standard, the better.

What’s the primary change for the world you want to see come out of the adoption of Bitcoin?

The number one change I want to see for the world is ending time theft through money debasement in this generation. I don’t want our kids to experience time theft.

What are you most looking forward to in the Bitcoin space?

#GetOnZero is the newest, freshest thing happening and my favorite thing happening right now. All the tools are available to use bitcoin as your base money. We can all do our part to reduce our fiat footprint and drain our productivity from the old world.

Is It Time For Bitcoiners To Get On ‘Zero Fiat’? Not Yet

Should we all go zero fiat? I’ve seen this idea gain prominence on Bitcoin Twitter recently, discussed by people like LaserHodl and Heavily Armed Clown. Personally, I’m open to the idea, and I believe that we all will eventually #GetOnZero. But not just yet.

As much as I’d love to live in the hyperbitcoinized world today, we’re not there yet. Put in simple terms, I still have fiat-denominated obligations with individuals or businesses that do not directly accept bitcoin. So, while I generally minimize my fiat exposure, there are valid criticisms and concerns about literally going to zero fiat today. And what about using the fiat system’s debt for your own benefit before it collapses?

So, as I write this in December 2021, I don’t believe “the juice is worth the squeeze” for many bitcoiners sitting on something around 99%, to go all the way to 100% bitcoin and zero fiat.

Steelmanning #GetOnZero

Let’s try and present the charitable version, or “steelman,” of the case.

The main point of #GetOnZero is to maximize bitcoin exposure, and obviously minimize fiat exposure. The #GetOnZero gang have a good point in that by continuing to hold fiat, you have not “truly left” the fiat system and you’re in some sense supporting the fiat system. In economic terms, we could argue that if you still hold fiat, you’re still contributing to fiat liquidity by chipping in to the reservation demand for fiat.

One worthwhile insight from the #GetOnZero gang is that, while there are capital gains taxes headaches associated with selling your sats, at least the reporting can be mostly automated. For example, your exchange or bitcoin broker service should provide you with a transaction export CSV list, and then you could take that to a tax accountant or automated software solution to automatically calculate taxes payable at year end. I believe this is a point that few had really considered up until recently. Still, there are many bitcoiners sitting in a solid green position, and if they had to liquidate some for an emergency fiat obligation, they would now have to pay capital gains taxes that they otherwise would not have had to.

What’s the rejoinder from the #GetOnZero stance? Well, you might still come out ahead even after taxes because of the additional bitcoin exposure.

So, let’s say you are a diligent saver and planner and you’ve stacked a six-month emergency fund. Instead of maintaining say, a six-month fiat emergency fund, you, the #GetOnZero adherent, would rather not bother and simply HODL bitcoin. As bitcoin is going up very quickly (155% per year on a 10-year basis as of December 18, 2021, or let’s say around 60% to 70% per year going forward for the medium term), it’s clear why you want to maximize bitcoin exposure.

So, let’s say you had $10,000 in fiat stashed in an account, well you’d now be exposing that emergency fund to the 70% return per year. So, in the years that you didn’t need to draw on this emergency fund, you might well have $7,000 extra on a $10,000 emergency fund. Pretty nice, right?

So, Where Do I Principally Disagree?

When your obligations are fiat denominated (and the person you owe does not take bitcoin payment), you will generally need to sell some bitcoin. In these cases particularly, you are bringing a whole new world of tax and reporting into your life that previously did not exist relative to paying with fiat.

In other cases you might be conflicting with other objectives of using the fiat system. Let’s summarize some situations where you might be:

• Cushioning yourself against an extended bear market or job loss

• Using the fiat system for loans to stack more sats

• Interested in staying more under the radar by legally not incurring capital gains tax events

• Unable to access the services that help you stay zero fiat

Long Bear Markets Could Leave You Rekt

I say this because the 2014, ’15, ’16 bear market was brutal. Bitcoin went from around $1,200 in late 2013 down to around $200 or so. It wasn’t even clear that bitcoin would recover in those days. At this time, if you were zero fiat and lost your job or income, you would have been spending down bitcoin at the worst time. This is the time that a fiat emergency fund of say, three to six months of living expenses would be most helpful.

While the scenario might be more on the bearish side, I’d generally prefer to keep more resilience in my overall life and not be so reliant on selling or spending down sats at the worst possible time.

Consider also that you might have large upcoming fiat obligations. Would you be willing and able to sell bitcoin to meet them if you lost your job? What if the scenario is that the Federal Reserve or other central banks try (even temporarily) to raise interest rates, and the market tanks, and there are mass layoffs? Losing your job at these times would be even worse if you didn’t have a fiat emergency fund.

Now, the #GetOnZero rejoinder here might be: save up enough sats such that you have enough to ride this out. But how much is actually enough? While you might think, “sure I’ve saved up two-years’ worth of sats to live on should things go bad,” what happens when bitcoin tanks 80%?

If your fiat purchasing power drops to one-fifth of what it was, does that mean you now need to have 10-years’ worth of salary saved in bitcoin? How comfortable would you be trying to ride out two years without a job, spending down a significant portion of your stack?

Now, in fairness, the six-month emergency fund might not tide you over for two years, but I’d view this as part of the overall mitigation approach: cut expenses down and spend fiat rather than spending bitcoin while looking for a new job or income.

While the 2018, ’19 bear cycle wasn’t as harsh and long as the previous one, there are no guarantees about what the future holds. Be wary that your backtesting only includes recent history.

Using The Fiat System And Debt To Stack More Sats

I recently did an episode of my podcast with Dylan LeClair of Bitcoin Magazine (SLP326) to talk about using the fiat system to stack more sats. In this episode, we spoke about some of the techniques around using fiat debt to be able to stack more sats. As part of this strategy, you may need to keep some fiat on hand to be able to repay the fiat loan, with the net result being that you end up ahead in bitcoin terms.

Another example could be using a collateralized loan for a portion of your stack (don’t borrow against your whole stack! Or even a large part of it!). In this case, you might have a life expense or large purchase to pay for, and rather than paying bitcoin or selling bitcoin, you’d rather retain the bitcoin exposure.

If you can get a loan with decent terms, and/or you have fiat income to be able to repay the loan, you might calculate that your expected value (EV) is higher to use fiat credit than to spend/sell sats. In the successful case, you could see that borrowing fiat worked out, and once the loan term is up, you either rollover and withdraw some collateral (if number has gone up), or you may have saved enough fiat to repay the principal and take all of your bitcoin collateral back into your self custody. In this case, you are able to make a purchase which could be tied to a life event, but avoid a capital gains tax event on the sale/disposal of bitcoin, and end up ahead in bitcoin terms.

Now, of course, if you’re not careful, you could end up down and rekt as discussed in the episode of my show with Andy Edstrom (SLP273). But note that one of the mitigations against getting rekt here: deposit more fiat to lower your loan-to-valuation (LTV) ratio. You might need some fiat available on hand to quickly deposit into the loan facility to meet a margin call and avoid liquidation. This is another reasonable case for not being on zero fiat, but for a calculated reason.

In other cases, you might need to maintain some fiat balance for the sake of a broader freedom and sovereignty objective. For example, if you wanted to pursue residency in some other countries, one qualification is demonstrating a minimum fiat balance (e.g., Malaysia’s MM2H program) or purchasing a government bond for a given period of time. Now, why do this? Because it might help you legally reduce your net tax payable amount to the state, and give you another flag that you could stack as part of “flag theory.” In doing so, you might be able to reduce your reliance on any one particular state.

Rather than being locked inside the country like Australians were during Hysteria-19, you could potentially use an alternative citizenship or residency to leave. Speaking merely of minimizing fiat rather than grandstanding about literally having $0.00 in your fiat bank account is more precise here.

Staying Under The Radar

As Bitcoiners, we’re often more skeptical of the state and don’t want to unnecessarily report and deal with the accounting and taxation headaches associated. While there are automated tools as discussed earlier, this can still be a pain to track if you have multiple wallets and setups running. Not every bitcoin wallet has auto-export functionality with transaction descriptions attached, and few bitcoin wallets track cost basis.

This problem is compounded if you’re already sitting on a gain from some time ago. Then, even if the price hasn’t recently gone up, but you have fiat obligations due, you end up paying a capital gain. The desire for complete purity from fiat money ends up causing logistical and accounting headaches as well as increases the capital gain tax payable — where otherwise the HODLer could have maintained a small fiat balance to pay with.

Not Everyone Can Access The Services That Help With Zero Fiat

Some of the services that specifically assist Bitcoiners going “zero fiat” are only available for U.S. customers, and are simply not available everywhere in the world. For example, having credit cards that auto-pull from a BTC balance, or allow you to spend your bitcoin down “but as fiat.”

What’s a HODLer to do? Keep a bitcoin balance on an exchange? Hope to be able to find peer-to-peer cash deal counterparties (someone wanting to buy bitcoin for cash) every time? It seems impractical to me.

When Would It Make Sense?

I’ve mostly been spelling out some reasoning why it doesn’t make sense to go zero fiat. But to be fair, when would it make sense?

Probably when all our income is in bitcoin, and we can pay all or most of our costs directly in bitcoin, and ideally after the DCA army has grown larger. Living in a world where obligations are denominated in fiat and unpayable in bitcoin just makes it impractical to go to zero fiat for most people.

It would also make more sense once fiat inflation crosses above a certain threshold. The reason for this would be that your fiat emergency fund would have to start climbing very rapidly in nominal value at some point. Yes, it’s subjective, but I don’t perceive that time as being now.

Summing Up

Bitcoin is best treated as the ideal savings account — that doesn’t necessarily mean you can’t use the fiat system for what it offers you today. This could be conservatively using fiat debt or loans to stack more sats, or simply protecting ourselves against long-term bear market cycles and unknowns.

Rather than #GetOnZero, I think something like #MinimizeFiat is a better heuristic for maximizing your bitcoin exposure within safe and conservative limits. But going all the way to zero fiat? Not quite yet.

This is a guest post by Stephan Livera. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.