TNT White Paper as a Legal Brief
By Joseph Mark Haykov
July 12, 2024
Executive Summary
The settled, precedent-based U.S. laws regulating commerce are numerous. The U.S. federal government's actions to enforce these laws include breaking up monopolies and imposing lengthy prison sentences for insider trading. The reason why such enforcement actions are justified is that they are supported by mathematical economic theory, as exemplified by the Arrow-Debreu model.
It is worth noting that a general equilibrium model of the economy – in full accordance with Arrow-Debreu theory – is used by the U.S. Federal Reserve to set interest rates. However, this is entirely different from the fact that, legally, the fundamental reason why the Court has granted the U.S. government the power to forcibly break up monopolies is that, according to mainstream economic theory supported by mathematical economics, doing so increases the general welfare of the public.
According to the governing legal document, in this case, the U.S. Constitution: “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.” In this sense, because the Constitution directs the Court to “promote the general Welfare” of “We the People of the United States,” and mainstream economic theory shows that breaking up monopolies is proven to increase general welfare – according to the first welfare theorem of mathematical economics – such enforcement actions are legally justified and allowed.
Based on this longstanding legal precedent, we are proposing additional government regulation of cryptocurrencies. Our proposal is based on a mathematical economic analysis presented in our TNT white paper. The purpose of this document is to explain why our economic analysis is admissible as evidence in a court of law to argue for the adoption of our proposed crypto-AML regulatory policy.
Introduction
The purpose of this brief is to establish that the TNT white paper can be incorporated as an integral part of any legal brief, as it contains no hearsay. All our assertions and claims in our white papers about economics are fully evidence-based, ensuring their admissibility in a court of law.
Truth, in both reality and law, is defined not only as a Boolean value—represented as a bit (0/1) in computation—but also, and far more importantly, the as accuracy of claims about reality. In other words, any claim in applied mathematics is only true if it is true in reality. For instance, “2+2=4” is a logical claim in algebra theory whose truth value is Boolean. Such logical claims fall under Aristotle's law of excluded middle; they represent an assertion that can be true or false, with no other allowed values. Any assertion, statement, or claim, either in theory or in reality, whose resulting value is constrained in this manner – in other words, any boolean assertion – is defined as a logical claim, that must be either true or false, and can not be “half-true” or “self-contradictory” or any other silliness – none of such contradictory, ill-formed logical claims are allowed under the law of excluded middle. However, the fact that a logical claim is universally true in theory does not mean it is also true in reality. The assertion that “2+2=4” – while it obviously holds true universally in algebra theory – does not always hold true in reality. Truth in reality is foundational in law, which is precisely why factual evidence is generally admissible, and hearsay is strictly prohibited.
Hearsay, such as stating "2+2=4" without empirical backing, may be logically sound in algebra but can be false in reality if not evidence-based. For example, in reality, 2 apples + 2 apples = 4 apples, but 2 moons of Mars + 2 moons of Mars = 2 moons of Mars, as Mars only has 2 moons. The reason why 2+2 is not always 4 in reality is that in algebra theory, this claim is deduced logically from Peano’s axioms of arithmetic, including Peano’s fifth axiom—the induction principle—which posits as an axiom – makes an implicit assumption – that infinitely many countable objects exist. This theoretical assumption is violated in reality—as Mars only has two moons—which is why 2 Moons of Mars + 2 Moons of Mars = 2 Moons of Mars in reality, no matter how we choose to count them in theory.
The TNT white paper makes legal claims calling for specific government actions certain to improve the general welfare of the U.S. public according to mathematical economics principles, in full accordance with, and directly utilizing, the Arrow-Debreu framework. This framework is used by the Federal Reserve to set real-world interest rates. While some of our legal claims, like the “U=S+E” roles of money as a unit of account (U), a store of value (S), and a medium of exchange (E), may seem theoretical, they are all evidence-based. Therefore, such claims cannot turn out to be false in reality, akin to factual evidence presented in court, which cannot be false barring perjury.
Unlike facts, hearsay—even if not perjured—can always turn out to be false, as exemplified by mathematical axioms that are considered "self-evidently true" often turning out to be false under unforeseen conditions. Indeed, hearsay is inadmissible in court precisely because "2+2" is not universally "4" in reality. To reiterate, in reality, 2+2 is only 4 when Peano's fifth axiom—the principle of induction—is not violated, because Peano's axioms of arithmetic are used to prove that "2+2=4” in algebra theory. Peano's fifth axiom states that there are infinitely many countable objects, and this implicit assumption is violated when counting the only two moons that Mars has.
Claims about mathematical economics posited as axioms without proof should therefore be treated as hearsay in law on account of their inherent risk of turning out to be false. This is precisely why we explicitly exclude any and all hearsay from our analysis. The truth of each and every one of our evidence-based claims is independently verifiable, providing a reliable foundation for promoting general welfare through informed economic policies, without assuming or guessing. By excluding hearsay, our theoretical claims about welfare promotion are certain to remain true once established.
Schools of Economic Thought: Unearned Wealth Extraction
Just as there are many different religions, there are numerous schools of economic thought, each offering unique and alternative "subjective-truth" (multiple-truth) beliefs, theories, and perspectives that describe the same "one-truth" objective reality. While there are many religions, a small handful represent a set of theories that collectively account for what is subjectively perceived as "one-objective-truth" by the overwhelming majority of the population. Such deeply held belief systems include atheism, agnosticism, Christianity, Islam, Buddhism, Taoism, Judaism, and many others. Despite this diversity of belief, over 99% of the world's population adheres to the top seven or eight religions in terms of popularity, as suggested by the Pareto Principle.
Similarly, numerous schools of economic thought exist. By far the dominant school in mainstream modern economic theory is mathematical economics, with the cornerstone being the Arrow-Debreu general equilibrium framework. However, if we rank such macroeconomic theories by popularity, Marxism-Leninism-Socialism remains surprisingly popular and is still widely practiced in countries such as China and North Korea. In this sense, just as the vast majority of religions share certain common beliefs, so do all schools of economic thought, including Marxism.
For example, almost all religions assert the existence of a higher intelligence, often called God. There are exceptions, of course. Atheism as practiced by communists—Lenin, Stalin, and Mao—did not assert the existence of God or a higher consciousness and intelligence. In reality, such godless belief systems, by violating the principle of "In God We Trust"—upon which the U.S. nation and legal system were founded—have consistently, without any single exception, each and every time led to horrific real-life results such as cannibalism, forced prison labor, and millions murdered.
All rational schools of economic thought assert, as an evidence-based proposition, that the unearned extraction of wealth by unproductive "economic parasites" reduces efficiency. It is an established fact—independently verifiable for accuracy and evidence-based—that robbery, theft, and fraud are detrimental to economic growth. For example, the prevalence of total lawlessness in Haiti facilitates involuntary exchange, such as robbery, which violates the unfettered exchange condition posited as necessary for achieving efficiency by the first welfare theorem of mathematical economics, the cornerstone of the Arrow-Debreu general equilibrium model of the economy. As a result, Haiti’s per capita GDP is roughly five times lower than that of the neighboring Dominican Republic.
Marx’s entire argument is similarly rooted in the theoretical assumption that economic inefficiency is caused by unearned wealth extraction by employers from labor (employees) in the form of surplus value. However, few people realize that modern mathematical economics offers far deeper, more accurate, and realistic theories about unearned wealth extraction than Marx’s early hypothesis.
Economic Agents and Utility Maximization
Mathematical economics and game theory view an individual representative agent as a player in the game of "econ-life," where the primary goal is to maximize subjective benefits (or utility) derived from goods and services purchased using money as a medium of exchange. A representative agent in mathematical economics is a rational, utility-maximizing consumer-producer. From this axiom, it logically follows that rational individuals participating in unfettered trade (meaning voluntary, fully free trade, excluding involuntary exchanges like robbery) seek to maximize their own subjective utility or benefit. This rational, utility-maximizing behavior naturally extends to politicians who, like all other people, aim to maximize their own wealth—which provides future subjective utility—by engaging in rent-seeking activities in addition to performing their regular duties.
First, it is important to explain that while early economic theory conceptualized money primarily as a medium of exchange, necessary to solve the double coincidence of wants problem in direct barter, mathematical economics underscores money’s key role as a unit of account in which prices are measured in a general equilibrium. When transactions are facilitated using money—as both a unit of account and a medium of exchange—the value of the transaction, measured by money as a unit of account, reduces our wealth, which represents our future ability to obtain utility without working.
In any non-barter economy, money serves not only as the unit of account in which we measure prices but also as the unit of account in which we measure and relate the subjective use value of a purchase to its subjective exchange value. The subjective use value of all goods and services is determined by their subjective utility or benefit to the end user—the ultimate consumer of the goods and services being purchased. This is where the key role of money as a unit of account becomes absolutely clear: we all use money to relate the subjective use value of all the items we purchase to their subjective exchange values—subjective costs—that we face in our dual roles in the economy as producers of labor that we sell for wages. Before making a purchase, most representative agents, barring billionaires, compare the subjective exchange value of an item to its expected use value before the purchase, with said exchange value being measured by the amount of time it takes one, in their role as a producer, to earn enough money as wages to purchase the item desired as a consumer.
A typical representative agent in the economy engages in such cost-benefit analysis routinely, many times, before making a purchase by comparing the expected benefit of an item about to be purchased to the known subjective cost of making the purchase, as measured by the amount of time and labor it takes to earn sufficient wages as a producer to purchase the goods or services desired as a consumer. The subjective cost to a representative agent of any such purchase is estimated by dividing its price by one's hourly wages to estimate the real exchange value: one's own time/labor.
Money, as a medium of exchange accepted as payment for all available goods and services in the marketplace, constrains the subjective utility one can obtain from using these goods and services. Thus, money, naturally a store of value owing to its acceptance as payment, is used to not only store wealth, which constrains purchasing power, but also measure it. Purchasing power (wealth), in turn, defines how much subjective utility per unit of time is available to any one particular individual.
Purchasing power, or equivalently, wealth, is not only measured by money as a unit of account but is also represented in reality by money in its role as a store of value (or wealth). Money determines how much utility any one of us is able to obtain daily without working until we die of old age. In fact, wealth measures future available subjective utility per unit of time (i.e., per day).
Individuals strive to accumulate wealth not only for immediate consumption but also to enhance their future utility and purchasing power. By maximizing our wealth, we maximize expected future subjective utility, ensuring that we can access greater benefits in the future. This alignment of economic activities with long-term well-being and goals is fundamental to rational behavior.
However, obtaining wealth or purchasing power without contributing to the production of real GDP that everyone collectively consumes is a real-world economic inefficiency, no different in either theory or in reality from parasitic vermin, like rats or roaches, pilfering grain in a warehouse. This is why Gordon Tullock defined economic rents as wealth obtained without a reciprocal contribution to productivity by rent-seekers, or economic parasites, who consume without producing.
But how are these economic parasites able to extract unearned wealth from the rest of the participants in the economy according to modern economists, excluding the obvious examples of theft and robbery in places like Haiti? Mathematical economics has all the answers!
Unearned Wealth Extraction, Barring Crime
Unearned wealth extraction occurs daily through various forms of crime, including theft, robbery, extortion, and collecting ransom—whether involving people or a computer's hard drive. These crimes allow perpetrators to consume goods and services without contributing to their production, aligning with the definition of rent-seeking in public choice theory.
Public choice theory, as developed by Tullock and Buchanan (1986 Nobel Prize), applies economic principles to political processes, analyzing how self-interested behavior influences decision-making in government. It explores how individuals in the public sector (politicians, bureaucrats) pursue their interests, sometimes leading to outcomes that do not maximize social welfare. Unearned wealth extraction occurs when these individuals use their positions to benefit themselves or specific groups at the expense of the general public.
Rent-seeking, according to public choice theory, involves efforts by individuals or firms to gain economic benefits through manipulation or exploitation of the political and economic environment rather than through productive economic activities. This includes lobbying for favorable regulations, subsidies, or tariffs that provide them with unearned wealth. Rent-seeking is inefficient because it diverts resources away from productive activities and creates economic inefficiencies, much like other forms of theft.
Asymmetric Information and Fraud
Another significant and related area of study in mathematical economics pertains to asymmetric information and fraud. The impact of asymmetric information on market transactions has been extensively studied by economists like George Akerlof. Akerlof, along with A. Michael Spence and Joseph E. Stiglitz, was awarded the Nobel Prize in Economics in 2001 for his work on markets with asymmetric information. In his famous 1970 paper, “The Market for ‘Lemons’,” Akerlof describes how outright fraud facilitated by asymmetric information results in unearned wealth extraction.
In reality, potential fraudulent unearned wealth extraction facilitated by the existence of asymmetric information, such as double spending Bitcoins or Bernie Madoff lying about his performance, is extremely costly to mitigate. For instance, Bitcoin mining consumes more energy annually than Argentina, and billions were lost to Madoff. This energy consumption highlights the significant costs associated with securing transactions and preventing fraud in the digital age.
Agency Costs
Agency costs, according to Jensen and Meckling’s most referenced paper in corporate finance, "Theory of the Firm," arise from conflicts of interest between principals (owners) and agents (managers or employees) in a company, owing to owners being asymmetrically informed about the quality of the agent’s labor. When agents act in their own self-interest rather than in the best interest of the principals, it can lead to unearned wealth extraction. Examples include excessive executive compensation, perks, or investment decisions that benefit managers at the expense of shareholders. This naturally also includes smaller-scale issues like employees pilfering office supplies. Agency costs can be mitigated through proper incentives and monitoring mechanisms to align the interests of agents with those of the principals.
The Role of Mathematical Economics
Mathematical economics provides frameworks to understand how unearned wealth extraction occurs through the behavior of individuals in political and economic systems. Public choice theory highlights the self-interested actions of public officials, rent-seeking underscores the inefficiencies created by gaining wealth through non-productive means, and agency costs illustrate the conflicts within organizations that lead to misaligned interests and inefficient outcomes. Additionally, there is always the risk of fraud facilitated by asymmetric information, such as potential double spending of Bitcoins, CEOs cooking books (Enron), outright lying and fraud (Theranos), and Ponzi schemes (Madoff). Together, these theories describe the precise, specific mechanisms of unearned wealth extraction in various contexts.
By understanding these specific mechanisms, policymakers and businesses can develop strategies to mitigate unearned wealth extraction, enhance economic efficiency, and promote fairer economic systems. Implementing robust regulatory frameworks, improving transparency, and aligning incentives can help reduce the prevalence of rent-seeking and fraud, thereby fostering a more productive and equitable economic environment.
Axioms (Inadmissible Hearsay) vs Evidence-Based Claims (Admissible Facts)
Marx's early theory of wealth extraction is not only trivial, oversimplified, and underdeveloped but also makes a key false assumption described fully in the TNT white paper, which explains precisely why socialism or communism as described by Marx is unworkable in reality and doomed to failure. However, we cannot blame Marx for this—his work was early and had bugs, much like the first version of the "GUI" developed by Xerox, which Steve Jobs then "borrowed" and turned into a second-generation, much better and more refined product: the Mac. Similar to the early and buggy "Blackberry-like" technology, Marx's work is an early and buggy version of the more refined, accurate, and bug-free "iPhone-like" model of the economy: mathematical economics, underpinned by the first and second welfare theorems.
We elaborate on this in more detail in the TNT white paper that follows. Most importantly, unlike the false accusations of wealth extraction that Marx made—causing all sorts of real-world troubles—all assertions or claims we make, including those in the TNT white paper about the workings of any economy, are evidence-based assertions that no school of economics would dispute, as even Marxists are rational enough not to dispute verifiable empirical facts.
It is for this very reason that all the claims we make in any of our legal briefs (and in any of our mathematical economics white papers) are fully evidence-based, specifically excluding any hearsay, which are merely unproven assertions. For example, the claim that "holding everything else equal, raising the minimum wage (price of labor) reduces the consumption of labor, causing increased unemployment" would be classified in our legal brief as hearsay, on account of the fact that while this claim is generally true, it does not hold true universally in reality (akin to 2+2=4), as it is a well-known fact that increased prices can produce an income effect, in addition to the substitution effect.
A claim that is evidence-based and not hearsay is that under the first welfare theorem of mathematical economics, raising the minimum wage is guaranteed to reduce general welfare. This is because imposing a minimum wage acts as a real-world binding constraint on the real-world gradient descent optimization that results in a theoretical Pareto-efficient equilibrium as per Arrow and Debreu. Imposing the minimum wage—a binding constraint on gradient descent optimization—reduces the amount of Pareto-improving free trade and thus is certain to result in an overall welfare reduction. Unlike the Austrian claim, which is nothing but hearsay, our claim based on the first welfare theorem of mathematical economics cannot turn out to be false, barring the first welfare theorem itself being violated, such as by involuntary or asymmetrically informed exchange that results in fraud, as per Akerlof.
In this sense, a Pareto-efficient alternative that is not certain to reduce general welfare would be to provide to the people a guaranteed minimum income instead of mandating a minimum wage at no cost to the government. Whatever your opinion about a guaranteed income policy, it is at least not rooted in a mathematical fallacy of how the value of any objective function is in reality maximized (or minimized). Binding constraints are always bad. While the substitution effect will lead employers to hire less labor, the income effect impacts workers, such as laid-off female waitresses who may be forced to take on less desirable but higher-paid jobs, such as stripping. In this sense, raising the minimum wage does not necessarily increase unemployment but can push women into unwilling prostitution. But we are not here to talk about forced prostitution through imposing minimum wage laws; it is up to consenting willing adults to do with their bodies as they choose.
Let us discuss the monstrosity that is Bitcoin—an unregulated, ransomware-facilitating, electricity-wasting, insecure, terrible monstrosity. We offer a far superior product, TNT, that enables full regulatory AML compliance on crypto, while burning no electricity, and making theft impossible, but FBI confiscation easy. The reason why we can make statements like this is that, just as in libel law, truth is our absolute defense. The reason why we are willing to put our head out on the line like this is that we are provably right!
Unlike axioms, which are accepted without proof because they appear self-evidently true but could always turn out to be false, the evidence-based claims in the TNT white paper are based on independently verifiable empirical facts. For example, the statement "the Earth is round, and it orbits the Sun" is an empirical fact that cannot possibly turn out to be false, barring singularly unlikely scenarios like mass hallucinations or extreme drug abuse. The same is true of the TNT white paper, as all logical claims in it are evidence-based. By excluding hearsay from our economic analysis, we can produce a white paper admissible in court as a legal brief, on account of excluding all hearsay and only relying on evidence-based claims (or facts) and logical deduction.
Hearsay vs. Heresy: Understanding the Intersection
Hearsay refers to repeating something you have only heard second or third hand, making hearsay evidence inadmissible in a court of law, as it is little more than gossip. Heresy, on the other hand, is going against the teachings or accepted wisdom of society, one's religion, or the people around you.
What we are suggesting here is that these two concepts are, in fact, identical. Just because many people believe that 2+2=4 does not mean it is always true in reality. Both are examples of dogma—theoretical claims about reality that most of us are firmly convinced are always true but could turn out to be false.
In law and in reality, hearsay is rejected in court because it is unreliable; it cannot be independently verified and often changes as it is passed along, much like the game of telephone. Similarly, heresy challenges and seeks to reject established beliefs or doctrines that the heretic believes to be objectively false, questioning their validity despite widespread acceptance.
Both concepts highlight the fallibility of commonly held beliefs. Hearsay shows how easily information can be distorted, while heresy emphasizes the importance of questioning and critically examining widely accepted truths. By recognizing that all dogma—regardless of how many people mistakenly agree with it—is susceptible to error, we can appreciate the need for evidence-based claims and the value of challenging assumptions in the pursuit of truth.
In summary, we wish to emphasize that not only could hearsay always turn out to be false, but also heresy could always turn out to be true. For this reason, we should—and usually do—only accept as objectively true those claims whose accuracy is independently verifiable. This unfortunately limits our subset of assertions in whose truth we can be absolutely certain to those logical claims that are evidence-based—such as empirical facts—or derived through deductive rational reasoning. The truth of such claims is independently verifiable, meaning these claims cannot turn out to be false.
The same is true of all conclusions in our TNT white paper. All are evidence-based, and any axioms we make are not only self-evidently true but also supported by empirical evidence and not contradicted by any. Of course, to all of us mere mortals, the future is inherently unknowable, so we cannot promise you with absolute certainty that our legal claims will never be falsified in the future – for example, we cannot promise with absolute certainty that our conclusions will not be overturned on appeal. However, what we can promise with absolute certainty—and this we guarantee beyond any and all reasonable doubt—is this fact: our conclusions are less likely to turn out to be false than the conclusions arrived at by any alternative legal theory that requires making additional implicit theoretical (axiomatic) assumptions that could always turn out to be false. Our TNT conclusions are more likely to remain valid due to being relatively less likely to be falsified in the future than any competing alternative legal theory based on unnecessary additional assumptions (or axioms) that are, in reality, merely guesses that could always turn out to be false later on. Our legal theory is therefore provably more likely to remain true than any other legal theory.
Conclusion
"The monkey looked the buzzard right dead in the eye, and said, 'Your story is so touching, but it sounds just like a lie'" — a quote from an old Nat King Cole song, “Straighten Up and Fly Right,” that rightfully teaches us not to trust assertions that could very easily turn out to be false. We quote from this 1950s song because, in reality, the only assertions that we can be absolutely certain will never lie to us about reality — the only assertions in whose ultimate truth we can be absolutely certain — are independently verifiable claims. This is the definition of objective truth about reality, whose accuracy is guaranteed. These are limited to logical deduction and empirical, evidence-based facts whose accuracy is also independently verifiable by any and all third parties. In reality, the only way we can be certain that a claim is true is through independent verification, for only such logically sound claims, independently verifiable by any third party, could never turn out to be false.
Truth in law and in reality – as opposed to truth in theory – must exclude false accusations. This is exemplified by Marx’s theories that led to disasters, such as cannibalism in 1920s Ukraine. Regardless of one’s thoughts on Marxism, no rational economic theory would claim that cannibalism is an efficient outcome, regardless of how one wishes to redistribute real GDP or what one seeks to produce. Truth in reality is defined as the real-world accuracy of a claim, and thus, any legal claims about reality that contradict empirical facts and evidence are not true in reality.
Anyone who truly believes he is Napoleon is legally deemed clinically insane and can be forcibly committed to a mental institution. Similarly, a man who believes that Marxism could work in reality, despite it having been tried multiple times—each attempt an utter failure due to Marx's theory being derived from false axioms—would be classified as insane as per Albert Einstein’s definition of insanity: doing the same thing over and over again and expecting a different outcome. What we are saying here is that the objective, real-world truth of a claim — defined by its real-world accuracy — must be independently verifiable. Hearsay does not qualify; only facts and logical deductions are infallible, as their truth can be verified independently by any third party.