White Paper

version 3.0

The Evolution of Currency: Integrating Traditional Banking with Cryptocurrency through TNT

By Joseph Mark Haykov, with assistance from Phillip and Nathan Haykov

August 20, 2024

Executive Summary

TNT is an open-source, distributed database system that leverages patent-pending Transparent-Network-Technology to synchronize data across multiple nodes by allowing updates only during pre-agreed real-time periods, effectively using batch processing for these updates. Like Bitcoin, Ethereum, and other cryptocurrencies, TNT maintains a double-entry ledger for a cryptocurrency bank, complete with smart contract functionality. However, TNT elevates security to an unprecedented level by ensuring that all peer-to-peer nodes are consistently informed, effectively eliminating the risk of fraud, such as double spending, both in theory and in practice.

TNT merges established banking practices with decentralized finance (DeFi), ensuring information symmetry through comprehensive transparency in payment processing. Unlike other cryptocurrencies that process payments continuously, TNT employs a batch processing method. For instance, a TNT peer-to-peer ledger may accumulate payments during odd minutes and then pause to process them collectively during even minutes. This approach, rooted in banking methods used since the Italian Renaissance, ensures that all peer-to-peer nodes remain informed of current account balances and pending payments, thereby fully eliminating the risk of fraud such as double spending. Furthermore, batch processing allows sufficient time for peer-to-peer nodes to collect digital signatures from both sending and receiving wallets.

No trust in the honesty of payment processors is needed in “true-no-trust” or “true-node-trust” TNT because every node’s honesty is independently verifiable by any other TNT-Bank node. In TNT, trust is unnecessary because all debits must be approved by a digital signature matching the debit approval public key of the issuing wallet, and all credits must be approved by a digital signature matching the credit (or dual) approval public key of the receiving wallet. Requiring dual signatures for all valid TNT banking transactions not only establishes these transactions as legally binding contracts but also facilitates anti-money laundering (AML) compliance by refusing to accept dirty money into clean, AML-monitored TNT wallets.

To further enhance security, TNT mandates that all wallets sign the cryptographic hash of each update block with their dual, or credit-approval, private key. Thus, the TNT True-Node-Trust blockchain file format ensures a higher level of future fraud resistance than any competing blockchain. This requirement means that to distribute a fraudulent TNT blockchain, perpetrators would need to know the credit-approval private key of every single TNT wallet. Without these dual signatures, the block update will not be considered future fraud-free and will, therefore, be deemed invalid and excluded from any True-Node-Trust, future-fraud-free TNT bank ledger.

Keywords: Transparent Network Technology; Decentralized Finance; Asymmetric Information; Batch Processing; Cryptocurrency; Bitcoin; Legal Ramifications of Cryptocurrencies; Nash Equilibrium; Double-Spending; Traditional Banking Integration; Cryptographic Hash Functions; Homomorphic Encryption; Digital Signatures; Smart Contracts; Payment Processing; Energy Consumption; Fraud Risks; Mining Process; Proof of Work; Proof of Stake; High-Frequency Trading; Arbitrage; Forex Market; Fiat Currencies; Game Theory; Information Symmetry

JEL Codes: G21; G23; K22; C72; E42; E51

Introduction

Cryptocurrencies are a hot topic in today’s financial discussions, largely due to their unique ability to mitigate counterparty risk, such as the risk of commercial bank failure. The reduction in counterparty risk when using Bitcoin to store purchasing power, rather than relying on a traditional store of value like the US dollar, arises from the decentralized nature of its ledger. Multiple custodians, including miners and peer-to-peer nodes, store copies of the Bitcoin ledger in the form of the blockchain, which is used to confirm Bitcoin payments.

Consider the consequences of the FTX exchange failure: anyone holding Bitcoins in their own wallets was unaffected and retained the option to convert their Bitcoins to fiat currency via other exchanges like Binance or Coinbase. This stands in stark contrast to the recent failures of First Republic and Silicon Valley Banks, where, if not for the intervention of Janet Yellen, any funds exceeding $250,000 would have been permanently lost.

Bitcoin's market capitalization—well over one trillion dollars—along with its adoption by major Wall Street firms, notably BlackRock and Fidelity, underscores the growing popularity of cryptocurrencies. Both firms have made direct investments in cryptocurrencies to support Bitcoin-backed ETFs. However, exposure to cryptocurrencies can present unforeseen challenges, such as BlackRock’s Ethereum wallet being inundated with ‘dirty’ coins of ‘ill repute.’

In reality, cryptocurrencies face more serious challenges than merely dealing with unwanted or ‘dirty’ coins. These challenges include high energy consumption and elevated fraud risks due to information asymmetry in payment processing. Many cryptocurrency users, such as those using Bitcoin, have limited knowledge about the miners processing their transactions, including their geographical locations or the exact number of active miners. This lack of transparency can facilitate fraudulent activities. The significance of this problem is highlighted in scholarly works like George A. Akerlof’s "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism" and Jensen and Meckling's "Theory of the Firm."

This paper examines how Transparent Network Technology (TNT)—a peer-to-peer software system—addresses these challenges by integrating traditional banking protocols, specifically batch processing, into cryptocurrency transactions. This integration effectively eliminates the potential for fraud associated with information asymmetry in pending payments, thereby enhancing both security and transparency.

Redefining Money: The Debate Over Bitcoin, Gold, and Fiat Currencies

The question of what qualifies as money is a topic of broad and ongoing debate, particularly regarding whether assets like gold or Bitcoin should be considered money, or if the term should be reserved exclusively for fiat currencies like the dollar. These debates are driven by the fact that, unlike fiat currencies, neither Bitcoin nor gold is widely used for everyday transactions, with certain exceptions such as Bitcoin’s role in ransomware payments. Critics, including the late Charlie Munger, have disparagingly referred to Bitcoin as a "turd," citing its suitability for unconventional uses by criminals. Similarly, although gold has historically served as a medium of exchange, its limited use in this capacity today raises valid questions about its status as money, according to widely accepted monetary theories in mathematical economics.

As explored in "A Walrasian Theory of Money and Barter," 19th-century economists Jevons, Walras, and Menger emphasized money's essential role as a medium of exchange, crucial for overcoming the double coincidence of wants in direct barter systems. In 1954, a more comprehensive mathematical economics framework, known as the Arrow-Debreu general equilibrium model, was developed to further explore these concepts.

Despite the existence of multiple schools of economic thought¹, the Arrow-Debreu model remains foundational in the field of mathematical economics. This model is a "formal system," wherein theorems are derived from axioms, and it has earned numerous Nobel Prizes for its groundbreaking approach. The Federal Reserve currently uses a general equilibrium model similar to that developed by Arrow and Debreu to set real-world interest rates.

Confusion about money often arises because, within the Arrow-Debreu model, money serves no primary role other than as a unit of account in which prices are measured for the theoretical Pareto-efficient general equilibrium. This framework challenges the traditional view proposed by William Stanley Jevons in the 1870s, which posits that the primary purpose of money is to act as a medium of exchange. Over time, Jevons' hypothesis became dominant within mathematical economics. According to this now-outdated view, any asset not primarily used as a medium of exchange is not considered money, fueling ongoing debates about the nature and function of money.

However, regardless of whether one considers assets like Bitcoin and gold to qualify as money, gold remains particularly problematic as a store of value. It can be lost, stolen, pilfered by household members, or expropriated by governments, as evidenced by the 1933 confiscation under President Roosevelt. The continued use of gold as a store of value and the defense of its monetary status only serve to highlight the inadequacies of fiat currencies by comparison.

There is no doubt, however, that money has taken many forms throughout history, ranging from cattle and tobacco leaves to cowrie shells, gold and silver coins, and today’s fiat currencies. This practice of using diverse forms of money continues in the present day. Various currencies—referred to as units of account in the Arrow-Debreu model or simply as units of money—are simultaneously used to facilitate global trade. This diversity is evident in the approximately 30 different currencies actively traded on the Forex market, each recognized as a valid form of fiat currency within its respective country or regional economy, such as the Euro (EUR).

The Essential Functions of Money: A Consensus Across Time and Theory

Despite differing views on what constitutes money in economic theory—since theories are, after all, educated guesses with varying degrees of accuracy—there is universal agreement on the three essential functions that any form of money must perform in real-world economies. As outlined by the St. Louis Fed², money serves as a medium of exchange, a unit of account, and a store of value in all observed economies. In every instance, past and present, money invariably fulfills all three core functions—not just some, but all. If you disagree, then you disagree not with us, but with the evidence provided by the U.S. Federal Reserve.

To make this point perfectly clear: historically and currently, money fulfills three fundamental roles across all economies. It acts as a unit of account ("U"), a store of value ("S"), and a medium of exchange ("E"). These roles, abbreviated as "USE," provide both a mnemonic and a practical framework for discussing the nature and function of money in this paper.

Following Bertrand Russell's advice to transcend existing dogmas and focus on factual evidence³, we recognize a clear imperative. The initial Jevons-Menger-Walras hypothesis could be false in two ways. First, according to the Arrow-Debreu framework, the primary function of money could be as a unit of account, not a medium of exchange. Alternatively, money may have no singular primary function and generally serves all three roles, as per the U.S. Federal Reserve. These theories (Jevons-Menger-Walras: money is a medium of exchange and Arrow-Debreu: money is a unit of account) highlight different roles money plays in an economy. There is no 'primary' role. The utility, or use value, of money in its various roles depends on the specific use case, just as the utility of any good depends on its use case.

For example, to one person living in an apartment, its ‘primary’ role, or use value, is derived from providing living space. But for another person using an apartment as an office, the use value is derived from amenities and location, such as proximity to restaurants, doctors, museums, and so on. Similarly, money can act in different roles depending on how it is used, but it does not have a 'primary' role. For instance, one cannot claim that the 'primary' role of shoes is to protect your feet because the 'primary' role of Louboutin shoes is to make a fashion statement. Just as other goods, like shoes, do not have a primary role, neither does money. Its utility depends on the specific use case and varies accordingly.

The views of Jevons, Menger, Walras, Arrow, and Debreu are not in conflict; rather, they complement each other and align with the empirically observed roles and functions of money as detailed by the Federal Reserve Bank of the United States. The following can be said about money outside any theories, as a purely evidence-based claim universally true of all money: all money serves three roles—that of a unit of account (U), a medium of exchange (E), and a store of value (S). Therefore, money is defined by its U = S + E roles. In this sense, all immediately spendable, on-demand money, as exemplified by the US M2 money supply—or the supply of minted aureus coins in a bank-less system like ancient Rome—is conceptualized as a unit of account, or U. However, when any particular money unit—such as a $20 bill, being a subset of the total spendable money supply like M2—is not being used as a medium of exchange, it automatically functions as a store of value.

In other words, while a gold coin is sitting in your wallet or in a safe, it is being used as a store of value, not a medium of exchange. Similarly, funds sitting for years in a checking account, though classified as part of the actively circulating money supply (M2), are actually serving as a store of value. Moreover, the money that is being used as a medium of exchange (E) also performs the dual role of a unit of account (U_E), in which the exchange rates of all goods and services, as defined by their relative prices, are measured. Additionally, as money is being used as a store of value (S), it simultaneously acts as a unit of account (U_S), where the overall purchasing power of money is defined, as measured by absolute, rather than relative, price levels.

We now propose a new axiom, not only because it appears self-evidently true to us but also because it is supported by empirical evidence and is contradicted by none. Our hypothesis (or axiom) is as follows: just as the use value of all goods and services, everything else being equal, determines their exchange value, the same holds true for money. In other words, the better money functions as a unit of account, a medium of exchange, and a store of value, the higher its use value to those who use it as currency, and the higher its exchange value relative to other competing forms of money. As money continues to evolve, so does its ability to serve its roles in the economy, influenced by its effectiveness in fulfilling the functions of 'E', 'S', and especially 'U'. TNT Bank money, designed to excel in all these roles, aims to surpass other digital currencies by enhancing payment capabilities and addressing the limitations of systems like Bitcoin and Ethereum.

Cryptocurrencies Today: The Case of Bitcoin

Some argue that Bitcoin’s value is merely a product of collective belief in its monetary worth. However, Bitcoin's enduring significance—evidenced by its longevity, market capitalization, and widespread acceptance—is fundamentally rooted in its functional capabilities, not just speculative belief. Aristotle, an early pioneer of economic thought, distinguished between use value and exchange value—concepts central to mathematical economics and later echoed by Marx. Both thinkers emphasized the distinction between the market price (or exchange value) of objects and their subjective use value. This use value might be the practical utility of items like shoes or a winter coat, or it could confer social prestige, such as flaunting new Louboutin shoes or a sable coat. This subjective use value, derived from personal consumption, is elusive to third-party observers but distinct from the exchange value determined by market prices. Typically, use value and exchange value are in market equilibrium, but a significant divergence between them often indicates a ‘bubble.’

The phenomenon of 'Tulip Mania' famously demonstrated how the exchange value of an asset can sometimes drastically exceed its use value, culminating in a classic 'bubble.' However, the dynamics surrounding cryptocurrencies like Bitcoin are distinctly different. Unlike assets purely driven by speculative interest, Bitcoin's tangible utility and integration into global financial systems are underscored by actions of major financial institutions such as BlackRock and Fidelity. These firms have successfully sued the SEC to allow them to sell Exchange-Traded Funds (ETFs) backed by Bitcoin holdings, designating them as custodians of Bitcoin and further legitimizing its role in the financial sector. These developments strongly suggest that Bitcoin’s market value is underpinned by solid financial use cases rather than merely speculative trading. This challenges the narrative that Bitcoin is simply another economic bubble, underscoring its enduring relevance and stability in financial markets—a perspective that is increasingly accepted today.

Bitcoin's substantial exchange value, compared to other currencies, reflects its significant subjective use value to those who possess Bitcoin wallets and use Bitcoin as money. As a currency, Bitcoin fulfills the three essential monetary roles: it serves as a unit of account, a medium of exchange, and a store of value. Like traditional money, Bitcoin provides considerable utility to its users in multiple roles, similar to how the use value of an apartment encompasses not only the living space but also, more importantly, its location and amenities. Just as an apartment's exchange value is represented by the rent landlords receive—compensating for the use value derived from residing in the space—Bitcoin’s exchange value, currently around $65,000 per unit, mirrors its significant use value. This use value particularly benefits individuals without access to reliable banking systems, highlighting Bitcoin’s role in providing financial services where traditional banking may be inadequate.

Distinguishing Classical Utility from Marxian Economics: An Aristotelian Analysis

In this analysis, we employ the dual-definition of 'use-exchange' as it applies to value—a concept originally introduced by Aristotle. This distinction differentiates between the 'use value' of a good or service, defined by its subjective benefit to an individual consumer, and its 'exchange value,' exemplified by its monetary price. Although Karl Marx adopted this terminology, and the definitions of use and exchange values closely align between the two, as illustrated in Das Kapital, we specifically utilize Aristotle's framework to ensure clarity and to explicitly distance our analysis from Marx's interpretations, with which we fundamentally disagree.

We specifically critique Marx’s views on the extraction of surplus value from labor. Economists such as George Akerlof, Michael Jensen, and Bill Meckling have consistently argued that value extraction—evidenced by agency costs, such as employees pilfering company assets, and fraudulent scenarios like dishonest used car dealers exploiting gullible clients—is contingent on the presence of asymmetric information about the goods and services being exchanged, including the sale of labor for wages. In any unfettered trade environment—excluding involuntary exchanges such as slavery or robbery—all transactions are presumed to be mutually advantageous, ex-ante, barring unforeseen circumstances. This occurs because a rational individual would only engage in a trade if they subjectively perceive it as beneficial beforehand. Symmetrical information ensures that the benefits anticipated before the transaction align with the actual utility realized after the exchange.

Workers possess deeper insights into the quality of their labor than employers do, while both parties are equally informed about the wages received as compensation. Consequently, when information asymmetry exists, it inevitably favors the employee. This scenario suggests that any potential deceit is more likely to originate from the better-informed employee rather than the less-informed employer, aligning precisely with the agency theory principles proposed by Jensen and Meckling.

These principles, such as the issuance of stock options to executives to align their interests with those of shareholders, are designed to mitigate unearned wealth extraction. Such extraction often involves better-informed agents exploiting their superior knowledge to pilfer assets from less-informed owners—a dynamic also recognized in public choice theory as the extraction of 'economic rents'. This concept was notably explored by Gordon Tullock and James Buchanan Jr., the latter of whom was awarded the Nobel Prize in 1986 for his work in public choice theory. This approach contrasts sharply with Marx's theories, which, though well-intentioned, may be seen as unrealistic and utopian, consistently failing due to fundamental errors.

Karl Marx's theories exhibit several flaws, akin to a 'version 1.0' in the realm of economic thought, with Arrow-Debreu mathematical economics representing a more refined 'version 2.0', analogous to the technological leap from Blackberry to iPhone. As demonstrated in a related working paper, the U = S + E equality of money integrates seamlessly into the Arrow-Debreu framework of mathematical economics.

The consistent failures to realize socialism or communism in practice can be traced back to shortcomings in Marx's theories, which stem from his limited grasp of mathematical principles and a fundamental misunderstanding of key concepts in mathematical economics and game theory. Das Kapital is replete with false assumptions. Despite these limitations, it is noteworthy that Marx was among the first to conceptualize money as a unit of measure—a pioneering effort substantiated in the references section of this paper, where Marx is cited prior to Jevons.

Indeed, Marx’s accurate identification of money’s key function as a unit of account, well before Arrow and Debreu, earns him respect, but it is largely incidental. The multiple deficiencies in his early and very "buggy" theory can lead to significant misinterpretations in his economic analysis, challenging the validity of his arguments. A more detailed examination of these issues would exceed the scope of this paper.

Bitcoin as U=S+E: An Evaluation

Bitcoin's market capitalization, now exceeding one trillion dollars, underscores its significant role as a unit of account. This status, alongside other cryptocurrencies, offers distinct advantages over traditional stores of value like gold, primarily due to the predictability of its future money supply. Economists universally recognize that volatility in the spendable money supply is detrimental, a sentiment reflected in central banks' efforts to combat inflation and avoid deflation to stabilize prices.

In the Forex market, where currencies are typically priced in dollars, Bitcoin sets the standard against which all other cryptocurrencies are evaluated, solidifying its essential role as a unit of account. Mathematical economics models a representative agent in the economy as a rational utility maximizer. According to public choice theory, politicians seek to maximize their subjective utility, just like everyone else in the economy, resulting in the phenomenon identified by Gordon Tullock as rent-seeking. This aligns with the principles of the Arrow-Debreu model, as discussed in "A Walrasian Theory of Money and Barter," which underscores that fiat currencies are susceptible to devaluation due to politicians' rational utility maximization behavior. They inevitably choose to expand the M2 money supply rather than vote for tax increases, making fiat currencies unreliable units of account and poor stores of value. Even if someone as wise as King Solomon managed the Federal Reserve, the outcome would likely remain influenced by rent-seeking behavior by politicians, leading to an unstable quantity of M2 funds in the US.

Bitcoin's market value is significantly derived from its dual functionality as a unit of account ('U') and a store of value ('S'), fulfilling its 'U=S' role. The effectiveness of Bitcoin in these two roles is illustrated by the number of irretrievably lost⁴ Bitcoins, demonstrating the system's high level of security and the near impossibility of retrieving bitcoins without the correct private key. The irreversible nature of Bitcoin transactions enhances its resilience to theft, bolstering its reputation as both a dependable store of value and an accurate unit of account with a stable supply.

However, in its role as a medium of exchange, the 'E' in the U=S+E equation, Bitcoin faces notable challenges. Transactions, due to the nature of the proof-of-work consensus algorithm, are costly and time-consuming, reducing Bitcoin’s utility for everyday use as a payment method. Furthermore, vulnerabilities include not only theoretical risks, such as a 51% attack—where a single entity could control the majority of mining power—but also real threats, such as the confiscation of Bitcoins obtained as ransom by the FBI. While such actions are entirely justified, they highlight fundamental security concerns that need addressing. These issues affect Bitcoin's efficiency and trustworthiness as a transactional currency and raise concerns about the security infrastructure's vulnerability to internal and external threats.

A fundamental challenge in using Bitcoin as a medium of exchange is the presence of asymmetric information when processing payments. The lack of comprehensive knowledge of all pending payments by each peer-to-peer node can lead to significant vulnerabilities, such as the risk of double spending—a critical issue highlighted in the 2008 Bitcoin white paper⁵. The risks associated with fraud, particularly double spending facilitated by asymmetric information, challenge the integrity of transaction processes and pose an ongoing threat to the trust and stability necessary for the widespread adoption of cryptocurrencies as a reliable transaction medium.

Dogma-Induced Blindness Impeded Literacy (DIBIL) in Action: The 2008 Bitcoin Paper

Cognitive biases inevitably lead to systematic errors in thinking and decision-making by causing real-world irrational behavior. One such bias, theory-induced blindness⁶, was extensively discussed by Daniel Kahneman in his renowned 2011 book, Thinking, Fast and Slow. Theory-induced blindness occurs when a “formal system”—which all rational theories are—is influenced by an axiom based on a false implicit assumption, what we refer to as dogma, the root cause of the problem.

This dogma can cause individuals to overlook contradictory evidence and maintain confidence in their beliefs, even when those beliefs are unfounded. In theoretical development, especially in complex fields like game theory and mathematical economics, the risk of cognitive biases such as theory-induced blindness adversely affecting our thinking is ever-present. The 2008 Bitcoin white paper, authored by Satoshi Nakamoto, exemplifies this bias, which we term Dogma-Induced Blindness (DIB). DIB occurs when adherence to a particular theoretical framework or dogma impedes one's ability to reason rationally, leading to conclusions that may be logical within the confines of the theory but fail to align with real-world conditions.

The concept of dogma-induced blindness (DIB)⁷ is well illustrated by a quote attributed to Mark Twain⁸: “It’s not what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so.” In this context, “what you know for sure that just ain’t so” refers to a flawed implicit assumption—the “dogma” in DIB.

Dogma-induced blindness has the propensity to cause the Dunning-Kruger effect, where individuals overestimate their knowledge or competence in a domain. This results in a dangerous combination of overconfidence and misinformation. Those blinded by incorrect assumptions perceive themselves as top experts and are erroneously regarded as such by others, leaving no one to correct them. In such scenarios, the manifestation of DIB exacerbates the Dunning-Kruger effect, as flawed assumptions go unchallenged and continue to guide decisions and actions.

The interplay between cognitive biases and dogmatic beliefs can significantly impede rational reasoning, leading to potentially flawed conclusions and strategies. For example, in a professional setting, an individual may develop a rigid belief based on early success or outdated information, causing them to dismiss new insights or alternative approaches. As a result, their decisions may no longer align with the current context or best practices, undermining the effectiveness of their strategies.

This underscores the importance of critical evaluation and open-mindedness in any field of study or practice, particularly in areas as nuanced as mathematical game theory—the foundation of all decentralized finance, driven by the concept of Nash Equilibrium. By actively questioning assumptions, seeking diverse perspectives, and embracing a willingness to adapt and learn, individuals and organizations can mitigate the effects of cognitive biases and enhance their ability to make informed, rational decisions.

Dogma-induced blindness also impedes literacy, as it prevents individuals from fully understanding and engaging with new information. This leads to a narrow perspective and a reduced capacity for critical thinking—a phenomenon that may be aptly described as Dogma-Induced Blindness Impeded Literacy (DIBIL). By limiting individuals' ability to question assumptions and seek diverse perspectives, DIBIL can significantly hinder intellectual growth and the capacity to adapt to new ideas.

Satoshi Nakamoto and the Case of DIBIL

Satoshi Nakamoto’s Bitcoin design serves as a compelling case study of Dogma-Induced Blindness Impeding Literacy (DIBIL). Despite being a skilled programmer, Nakamoto's lack of formal training in mathematical economics and game theory led to a critical oversight in Bitcoin's architecture. This one particular instance of DIBIL stemmed from a false assumption that impaired mathematical literacy, causing Nakamoto to focus on the wrong problem. Rather than addressing the core issue of asymmetric information—a key enabler of fraudulent activities—Nakamoto’s design concentrated on preventing double spending.

In reality, double spending, which involves fraudulently spending the same Bitcoin more than once, is merely a symptom of asymmetric information among peer-to-peer nodes. The true problem lies in the lack of symmetric information, which facilitates fraud by allowing discrepancies in the perceived state of transactions. This concept has been well understood since at least 1970 when George A. Akerlof explained in his seminal paper, "The Market for 'Lemons,'" that fraud, such as selling a defective car to an uninformed buyer or double-spending Bitcoins, can only occur in the presence of asymmetric information, particularly in contexts of fully voluntary trade.

In the context of the internet, where involuntary exchange is impossible due to the ability to disconnect or unplug computers, fraud like double spending can theoretically occur only if asymmetric information exists. When all participants in a network possess equal information about transactions, the opportunity for fraudulent activities is significantly reduced.

Traditional banking systems offer valuable insights into the importance of information symmetry. Banks mitigate fraud risks associated with asymmetric information by batch processing transactions overnight. This practice ensures that all bank branches—akin to peer-to-peer nodes in a banking network—have ample time to fully synchronize data. Consequently, the possibility of fraud due to asymmetric information is entirely eliminated. The overnight pause in accepting new payments allows for the collective synchronization of all pending payments, ensuring complete information symmetry regarding both current balances and pending transactions. By maintaining this information symmetry, traditional banks effectively prevent double spending and similar fraudulent activities, highlighting the critical role of synchronized data in secure financial transactions.

Satoshi Nakamoto's design for Bitcoin notably diverges from this centuries-old practice of batch processing transactions overnight, a method that inherently achieves complete information symmetry in payment processing. While the proof-of-work mechanism might appear ingenious from a programmer's perspective, its evaluation through the lens of mathematical game theory reveals significant flaws. This approach can be described as "not even wrong," a term coined by physicist Wolfgang Pauli to denote fundamentally flawed arguments that fail to address core issues.

A robust payment system architecture necessitates a profound understanding of game theory, particularly the concept of Nash Equilibrium. Cryptocurrency users aim to establish this equilibrium in the real world, where unilateral attempts at theft provide no benefit. Achieving this equilibrium, even in theory, requires that all participants—represented by their respective peer-to-peer nodes—possess equal knowledge of account balances and pending transactions. Symmetric information is a key assumption in game theory, enabling all players in a game to make optimal strategic decisions based on expected payoffs. In traditional banking, fraud facilitated by asymmetric information is not possible due to the temporary pause in accepting new payments overnight, which allows all bank branches to access the exact same information, thereby entirely eliminating any fraud risks associated with information asymmetry.

While Bitcoin's design is innovative, it overlooks this crucial aspect of information symmetry in practice, resulting in potential vulnerabilities and inefficiencies. By not incorporating a mechanism to synchronize information among all participants, Bitcoin's architecture exposes itself to risks that traditional systems mitigate through established practices. The absence of this foundational element in Bitcoin's design underscores the need for a more comprehensive understanding of game theory principles in developing robust cryptocurrency systems. Addressing these issues requires a shift away from dogmatic beliefs and an embrace of more flexible, reality-aligned approaches to system design and implementation.

Challenges and Considerations in Bitcoin's Mining Process: Sustainability, Efficiency, and Alternatives

Bitcoin's design demands continuous, ad-hoc transaction processing, resulting in an energy-intensive and costly mining process. This reliance on mining introduces significant inefficiencies, making the system less sustainable and economically burdensome over time. Alternatives like proof of stake reduce energy requirements and associated costs but come with their own challenges, including security concerns and potential centralization. In the Bitcoin blockchain, a 51% attack requires substantial real-world resources, whereas in Ethereum, such an attack could be carried out through collusion among a handful of validators who hold enough coins to influence the network. These validators can also be swayed by external entities like the FBI, as well as by less benevolent forces.

Proof of stake systems have struggled to gain widespread adoption due to heightened counterparty risks. In these systems, the potential for theft by better-informed payment processors is not counterbalanced by the real-world costs that miners incur in proof of work systems. This lack of economic disincentives for dishonest behavior creates an imbalance between risk and reward, undermining confidence in the security and reliability of these alternative consensus mechanisms. As a result, stakeholders remain cautious, as these systems do not adequately mitigate potential abuses, making them less attractive compared to more established methods.

While proof of work is relatively more trustworthy compared to other payment methodologies due to its mitigation of asymmetric information between bank clients and payment processors—achieved through the inherent costs of mining—the substantial energy requirements and associated costs of Bitcoin mining are significant. These costs, borne by end-users, represent a direct wealth transfer from Bitcoin users—engaging in its 'E' role as a medium of exchange—to miners. The environmental impact is stark, with Bitcoin mining's electricity consumption last year matching that of Argentina. These factors highlight the system's limitations in scalability and practicality, posing challenges to its long-term sustainability and viability as a mainstream financial solution.

Bitcoin's reliance on mining contrasts sharply with the more structured and cost-effective systems employed by conventional banks for centuries. The inefficiencies of mining challenge environmental sustainability, limit scalability, and raise significant hurdles to Bitcoin's long-term viability in mainstream financial ecosystems. The energy-intensive nature of mining, coupled with its substantial operational costs—including electricity, cooling, and equipment—raises concerns about its ability to be sustainably integrated into global financial systems as a viable alternative to traditional banking methods.

TNT: The Next Evolution in Cryptocurrency

Transparent Network Technology (TNT) represents a significant advancement in cryptocurrency by adopting the well-established batch processing method traditionally used by banks, specifically designed to minimize asymmetric information. This strategic alignment with proven financial systems enhances both efficiency and security, effectively addressing fundamental vulnerabilities observed in decentralized cryptocurrencies like Bitcoin. By leveraging these established methods, TNT positions itself as a superior alternative within the cryptocurrency market, offering a more reliable and secure solution that optimizes transaction processes and significantly reduces risks associated with less structured systems.

Batch Processing for Enhanced Transparency

TNT significantly streamlines cryptocurrency transactions by adopting a scheduling system akin to traditional banking practices. This is accomplished through batch processing, with all honest nodes collectively agreeing to accept new payment instructions exclusively during odd minutes, similar to how banks only accept checks during business hours. No new payment instructions are accepted during even minutes, mimicking bank closing hours. This periodic pause allows all peer-to-peer TNT Bank nodes to achieve full transparency, ensuring symmetric information about current wallet balances and all pending payments. By making all pending transactions visible and verifiable across the entire network, this approach effectively prevents double spending and enhances overall security and reliability.

Dual Approval for Secure Transactions

TNT-Bank substantially enhances security by requiring both the sender and the recipient to approve the resulting debit-credit pairs before they are accepted and permanently recorded in the database. Payments lacking such dual approval, evidenced by digital signatures from both the sender authorizing the debit and the recipient authorizing the credit, are deemed invalid. This mechanism mirrors how unsigned Bitcoin transactions are treated, ensuring they do not affect account balances. The dual-signature/dual-approval requirement not only secures transactions but also legally formalizes fund transfers within TNT-Bank accounts. These transactions, executed and digitally signed in a non-repudiable manner by both parties involved, offer legal assurances comparable to those in traditional finance. The legal recognition of email messages as binding agreements further underscores the robustness of provably and fully non-repudiable quantum-proof digital signatures.

Advanced Security and Legal Frameworks

Within the TNT-Bank framework, digital signatures are fortified by rigorous mathematical proofs to ensure they are quantum-proof, enhancing security against sophisticated cryptographic threats. This advanced security framework employs quantum-proof cryptographic hash functions and patented unbreakable homomorphic encryption technologies. While a detailed discussion of these technologies exceeds the scope of this introduction, each plays a vital role in bolstering the robustness of TNT-Bank. TNT-Bank is not merely a theoretical improvement; it represents a practical, secure, and legally sound solution poised for widespread adoption.

The dual-approval via dual (debit-credit) signature feature, facilitated by batch processing at TNT-Bank, effectively transforms bank funds into fractional ownership certificates. These transfers, akin to the sale of a condo or shares of IBM, are each legally enforceable and mutually authorized by both parties involved. This mechanism not only secures transactions against fraud but also firmly establishes their legality, positioning TNT-Bank as a pioneering force in the cryptocurrency space. By aligning its operations with the trusted and regulated practices of traditional financial transactions, TNT-Bank ensures that these contracts are legally binding.

Key Management and AML Compliance

Another significant feature of TNT-Bank is its ability to split keys. For instance, if you entrust your TNT-Bank account to “JP Morgan as an AML custodian,” you can keep your spending key private while handing over your credit-approval payment acceptance key to JP Morgan. This allows JP Morgan to comply fully with all AML regulations by controlling any transfers between what effectively become JP Morgan-custodied, TNT-Bank peer-to-peer maintained accounts. As long as JP Morgan remains the designated custodian of funds, they can ensure AML compliance by simply refusing to accept credits of dirty money into AML-monitored ‘clean’ wallets, tailoring their oversight based on how the TNT-Bank is structured and used.

Integration of Smart Contracts

TNT also integrates smart contracts into its operational framework, making them a critical part of the real-world legal system. Like an email exchange that forms a contract, smart contracts in TNT become legally binding when signed by both parties involved in the transaction. This dual-signature requirement ensures that TNT’s smart contracts are not only theoretically enforceable but are also recognized under the legal frameworks of the United States or any other jurisdiction where digitally signed proof of transfer of ownership constitutes a legally binding transfer of title.

Transaction Efficiency and Speed

Another attribute of TNT that deserves particular attention is the throughput and speed of transactions, significantly enhanced through batch processing. This method not only optimizes transaction capabilities but also demands considerably less computational power compared to platforms like Ethereum or Bitcoin. By minimizing the need for continuous, intensive computation, TNT provides a more efficient and scalable solution. This efficiency sets a new standard in the cryptocurrency market for both speed and energy conservation, paving the way for broader adoption and improved daily operational performance.

Thanks to TNT-Bank’s streamlined verification process—which only requires checking digital signatures and the current time—TNT can process real-time payments at speeds that match those of established systems like Visa and Mastercard. This high level of efficiency not only positions TNT as a viable digital currency but also cements its role as a legitimate payment system. Leveraging the mathematical principles of Nash Equilibrium from game theory, TNT distinguishes itself from less efficient technologies, enhancing both security and functionality. The excessive energy consumption observed in other cryptocurrencies, often due to poorly informed design choices, underscores significant development oversights.

DIBIL is Infectious: An Evidence-Based Claim

Before concluding, it is essential to highlight a critical observation: although the mathematics underlying our discussion are straightforward, their application often falters due to theory-induced blindness. This cognitive bias, more precisely described as Dogma-Induced Blindness Impeding Literacy (DIBIL), occurs when axioms dependent on false assumptions are mistaken for established facts, leading to dogmatic thinking. Such dogma-induced blindness often stems from well-meaning but inadequately educated programmers who, lacking a background in finance or mathematical economics, mistakenly assume that the primary challenge in cryptocurrency systems is preventing double spending. In reality, the core issue in processing payments is managing asymmetric information, a problem extensively studied in game theory. Banks have historically addressed this issue by pausing new payments to process existing ones with equal information.

We explore these issues in depth on our website, tnt.money. Visitors can learn about our innovative payment processing system and discover why such promising solutions have remained underdeveloped, despite significant investments in cryptocurrency payment technologies. These efforts have been consistently hindered by one of the most insidious cognitive biases: Dogma-Induced Blindness (DIB).

This discussion on DIBIL leads naturally into our final section, where we introduce the dual-definition of TNT, also known as the True-NO-Trust blockchain file format. The TNT blockchain file format ensures consistent coin balances in digital TNT bank accounts, independently verifiable for authenticity. It leverages cryptographic techniques to guarantee that the blockchain log file is independently verifiable, regardless of which decentralized payment system—proof-of-work, proof-of-stake, or others—is used to produce the True-NO-Trust TNT blockchain file.

TNT: True-NO-Trust Blockchain File Format

As previously mentioned, both the theoretical 51% attack scenario and the Bitcoin confiscation by the FBI are examples of "steal-back" fraud. Unlike double spending, which occurs ex-ante (before the transaction is finalized), this type of fraud occurs ex-post, after multiple blocks have been added to the blockchain—long after transaction recipients believe their coins are secure in their wallets. This makes the system uniquely vulnerable to ex-post theft.

In contrast to ex-ante fraud, which is unlikely due to the monitoring of block updates by multiple nodes, the relative risk of a perpetrator committing future (or ex-post) theft, as exemplified by the "steal-back" of Bitcoins, can be modeled based on the number of private keys needed to replace all digital signatures securing the blockchain. In other words, the more private keys required for a perpetrator to commit fraud, the more resilient the blockchain becomes against future fraud.

Future Fraud-Free Security

This is where TNT truly excels. TNT maximizes future fraud resilience by requiring every wallet to sign the cryptographic hash of every block update to the TNT blockchain—without exception—making it provably immutable. Any attempt at "steal-back" fraud would necessitate access to the private key of every wallet in the entire TNT bank. This effectively renders involuntary exchange impossible, as one could simply disconnect their peer-to-peer server to prevent unauthorized access.

For example, in Ethereum, if the FBI knows who the validators are, they could potentially confiscate Ethereum coins by obtaining all their private keys. However, you can’t "steal back" TNT one-true money coins because every wallet on the TNT blockchain must sign the update hash for it to be considered valid and included in the ‘true-no-trust’ TNT blockchain. This requirement makes the TNT blockchain file format provably more future-fraud-free than any competing alternative, as it would require access to everyone’s private keys to commit ex-post fraud.

Enhanced Security and Compliance

TNT elevates security beyond what is achievable in existing blockchains by requiring digital signatures that approve not only debits but also the corresponding credits. This mechanism prevents malicious actors from flooding wallets with tainted coins and ensures full compliance with Anti-Money Laundering (AML) regulations. The TNT system also facilitates independent audits, as it consistently allows verification that the auditor is examining the one-true, forever future fraud-free version—or the most fraud-free version possible—of any blockchain: the TNT blockchain.

Conclusion

This paper, while centered on TNT, also aims to highlight the detrimental impact of Dogma-Induced Blindness Impeded Literacy (DIBIL) and its influence on our systems and decisions. DIB occurs when false assumptions are mistaken for facts, leading to cognitive biases that result in flawed decisions and actions. By recognizing and addressing DIB, we can develop more effective systems, as demonstrated by TNT.

Dogma-Induced Blindness (DIB) is not only pervasive but also has the potential to mislead us profoundly. It has led our law enforcement agencies, such as the FBI, into the absurdity of spending counterfeit money to combat blackmailers—an action that defies logic and undermines integrity. TNT, by facilitating AML compliance, ensures that law enforcement agencies no longer need to participate in fraudulent activities but instead are equipped to actively prevent them.

TNT represents a groundbreaking advancement in digital currency, addressing long-standing issues that have plagued existing cryptocurrency technologies since their inception. By overcoming the limitations imposed by the dogma of Satoshi Nakamoto, TNT-bank offers a superior DeFi solution. TNT provides a secure, efficient, and transparent alternative for modern financial transactions. With TNT, we can safeguard the integrity of our financial systems, uphold the honor of our law enforcement agencies, and guarantee that our digital currency transactions remain fraud-free.

TNT stands for True-NO-Trust, reflecting its future fraud-proof nature. The TNT blockchain format ensures consistent coin balances in digital TNT bank accounts, independently verifiable for authenticity. By leveraging robust cryptographic techniques, TNT creates a blockchain that is verifiably secure, regardless of which decentralized payment system—proof-of-work, proof-of-stake, and so on—is used. This innovative approach offers a future-fraud-free solution, promoting AML compliance and establishing a sustainable, legally sound foundation for the future of digital currencies.

Finally, let us define Dogma-Induced Blindness (DIB) with absolute clarity. DIB occurs when false assumptions—referred to as dogma—are mistaken for facts, leading to cognitive biases that result in flawed decisions and actions. It is a form of blindness caused by reliance on incorrect or unverified assumptions, which can be particularly harmful when these assumptions are deeply embedded in systems or theories. This can lead to significant problems, such as misguided actions by law enforcement agencies or inefficiencies in current cryptocurrency technologies. By recognizing and addressing DIB, we can develop more effective, transparent, and secure systems, as illustrated by the TNT framework.

TNT not only stands as a pioneering force in cryptocurrency but also sets a new standard for integrity and efficiency in digital finance. By addressing and eliminating the pitfalls caused by DIB, TNT ensures that our financial systems remain secure, transparent, and just, paving the way for a brighter, more secure financial future. Indeed, TNT-bank money promises a future of finance that is more fraud-free than any other competing digital currency system.

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1https://en.wikipedia.org/wiki/Schools_of_economic_thought

2https://www.stlouisfed.org/education/economic-lowdown-podcast-series/episode-9-functions-of-money

3

4https://fortune.com/crypto/2024/04/24/bitcoin-wallets-waking-up-lost-coins-satoshi/

5https://bitcoin.org/bitcoin.pdf

6https://libquotes.com/daniel-kahneman/quote/lbk4t1w

7https://haykov.substack.com/p/pascals-wager-and-theory-induced

8https://quoteinvestigator.com/2018/11/18/know-trouble/