Draft

Bridging Theory and Reality: The Evolution of Money and the Rise of TNT

By Joseph Mark Haykov

There is no agreement in economic theory on what constitutes money, as evidenced by the ongoing debates over whether gold or Bitcoin qualify as "money" today. Why do these debates persist? Early economic theory, developed in the 1870s by pioneers of mathematical economics, notably William Stanley Jevons, Léon Walras, and Carl Menger, views money as a medium of exchange necessary to solve the double coincidence of wants problem inherent in direct barter. Because gold and Bitcoin are rarely used as a medium of exchange to pay for goods and services—with the exception of ransomware payments in Bitcoin—they are not considered money in the theoretical sense. However, economic theory and reality often diverge.

In theory, there are many forms of money, including commodity, representative, and fiat currencies such as the Euro. In reality, however, there are only two types of money: physical and virtual. Physical money includes items such as gold coins, cowrie shells, or paper dollar bills. To spend physical money, it must be physically given to someone, such as with a paper check. Virtual money, on the other hand, can be spent from anywhere in the world by requesting a wire transfer. The U.S. dollar balance in your checking account or the number of bitcoins in a wallet, such as BlackRock's, where you own a fractional share when you purchase Bitcoin-backed ETF shares through your Fidelity account, are examples of virtual money that can be spent without the sender and recipient of the funds sharing physical space.

In theory, the dollar balance in your checking account and a $20 bill in your wallet are considered the same form of money—fiat dollars. It's debatable whether Bitcoin qualifies as money at all, in theory. In reality, however, Bitcoin and the US dollar function similarly, as both are represented by ledger entries in a database. These entries originally symbolized fractional ownership of an asset, such as gold stored in a bank vault. Aside from who maintains the database, there is no difference in how dollar bank funds and bitcoins are stored or how payments are recorded. Both Bitcoin and dollar checking account balances are entries in a database that track fractional ownership, although these days, it is fractional ownership of nothing tangible.

Understanding that Bitcoin and the US dollar are operationally identical helps explain Bitcoin's market capitalization of over $1.3 trillion. Bitcoin is considered a superior alternative to fiat currencies like the US dollar because it is decentralized and extremely difficult to steal—though not impossible, as evidenced by the FBI's seizure of bitcoins collected as ransomware. More importantly, the counterparty risk due to an individual custodian failure—like First Republic and Silicon Valley Bank—is eradicated entirely. When the FTX exchange failed, it had zero impact on bitcoins held in any wallets, even those owned by individuals associated with the FTX exchange. In many respects, Bitcoin is almost perfect money, except for a few software bugs.

In reality, as a unit of account, Bitcoin surpasses even gold with its more predictable future money supply, earning a solid 10 out of 10. As a store of value, while it is not impossible to steal bitcoins, it is far more difficult than stealing gold. Additionally, crypto is much easier to retrieve and spend than gold buried on a desert island or even stored in a vault, giving it a 9 out of 10. However, as a medium of exchange, Bitcoin falls short. Despite the ability to make payments worldwide, Bitcoin transactions are prohibitively slow and expensive compared to alternatives like credit card payments or FedNow.

In reality, we understand this might sound outlandish, but we have developed a better Bitcoin, a digital currency we call TNT (or True-Node-Trust), based on Transparent-Network-Technology (or TNT). TNT fully eradicates all information asymmetry about pending payments, making fraud, such as double spending, absolutely impossible, both in theory and in reality. In game theory, a Nash equilibrium is an outcome in a non-cooperative game for two or more players in which no player’s expected outcome can be improved by changing one’s own strategy. TNT forms a properly designed real-world Nash equilibrium, where honesty becomes the dominant strategy for all peer-to-peer nodes. Any attempt at fraud by any fully transparent TNT node becomes immediately detectable to every other node in the network. This makes any deviation from the dominant strategy of honesty certain to be unprofitable for the perpetrator of fraud, meeting the strictest criteria of a Nash equilibrium, where any unilateral deviation from the dominant strategy only leads to losses—guaranteeing an honest real-world Nash equilibrium state.

For those familiar with the writings of Ilf and Petrov, this is akin to the situation described in their book “The Little Golden Calf” of Viacheslav Lahankin living in a communal apartment and stealing meat from soup in the kitchen cooked by others. In this sense, imagine multiple hidden cameras always monitoring the kitchen, 24/7, and immediately alerting all members of the communal apartment as to any unauthorized attempts to access the soup stored in the communal kitchen. Any such soup theft would become consequently impossible, both in theory and in reality. This is akin to how criticizing Stalin became singularly difficult in reality in the Soviet Union after 1937, due to the prevalence of stukachi, but that is another story.

TNT ensures full transparency by utilizing batch processing for all transactions, without exception. This approach updates the database on a regular, real-time schedule—once per minute, for example—as each node appends the same block update to its respective blockchain. This method guarantees, both in theory and reality, that all peer-to-peer nodes are equally—or symmetrically—informed about current account balances and all pending transactions and payment requests.

Fraud, such as double spending facilitated by asymmetric information about pending payments, becomes impossible in this setup. The risk of fraud only arises when fully voluntary Internet-based commerce occurs in the presence of asymmetric information, as described by George Akerlof in "The Market for 'Lemons.'"

Batch processing—accepting payments during the day and processing them at night—has been used by banks since the Italian Renaissance to eliminate fraud, such as the use of counterfeit money or bouncing checks. This kind of fraud can only occur when the parties to a transaction are not symmetrically informed about the current account balance and all pending charges. By taking the time each night to fully synchronize all information across bank branches—or, in the case of TNT, peer-to-peer nodes—while no new checks are being accepted, all nodes are equally and symmetrically informed, eliminating any possibility of a negative account balance.

Everything we say is independently verifiable for accuracy by anyone, especially those familiar with mathematical economics and game theory. All our claims about TNT are based on the same formal axiomatic system used to prove the first and second welfare theorems of mathematical economics, although we do not assume either unrestricted or symmetrically informed exchange. The only assumption we make is rational utility maximization—just as in game theory—the same assumption used to design nuclear de-escalation and many other stable real-world outcomes. To avoid the possibility of false claims about our product—TNT—we minimize the chances of inaccuracy by inviting anyone familiar with mathematical economics or game theory to review our work and prove us wrong, which is impossible, hence our confidence—fully justified, as you will see. Please visit us at www.tntcoin.green-coin.org and access our white paper by clicking on "TNT."

You may also wish to ask your congressman or senator—with all due respect—why we are wasting obscene amounts of electricity unnecessarily mining Bitcoins. We suggest that, at the very least, Bitcoin payment processors—just like all other atmosphere polluters—should be required to buy carbon credits to offset the greenhouse gas emissions of Bitcoin mining, an unnecessary cost on society. Moreover, Bitcoin does not even facilitate something as simple as regulatory compliance with anti-money laundering regulations (AML), forcing the FBI to engage in what can only be described as steal-back fraud to justifiably confiscate illegally obtained bitcoins. With TNT, there is no need for such folly, as we facilitate full AML compliance, preventing the use of dirty money without turning our law enforcement agencies into burglars.

While the ability to facilitate AML is important, even more important is that TNT not only possesses all the beneficial features of other cryptocurrencies, such as a predictable and stable money supply, but it is also far more secure. True node trust goes both ways: we allow all bank clients, collectively as a group, to punish perpetrators of fraud by voting to fork such fraudsters off the True-Node-Trust network, resulting in the most future fraud-free blockchain possible, either in theory or in reality. Anyone cheating will be forked off our TRUE-NO-TRUST guaranteed to be honest, TNT transparent blockchain.

References

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