1/ Bitcoin calls into question the very basis of economic organization. No other breakthrough in history will contribute more dramatically to the evolution of monetary systems.

*Just published* w/ @coinmetrics
Bitcoin: A Novel Economic Institution https://ark-invest.com/white-papers/bitcoin-part-one/

2/ The promise of Bitcoin is best understood in relation to traditional financial systems, which rely on
centrally controlled institutions that enforce the rules, record-keeping, and adjudication of the system.

3/ These institutions were created to standardize the exchange of value, manage wealth, and facilitate
economic activity. Ex: Central banks govern monetary policy, while commercial banks custody and manage assets, and centralized payment processors mediate consumer transactions.

4/ Under a “trust-based” model, the integrity of an institution is a function of those controlling the
institution. Rules enforced from the top down are guaranteed if those in control are trustworthy.

5/ Financial systems founded on a trust-based model fail to provide predictable economic assurances. Specifically, under a financial system:

6/ Here is why the current financial system falls short:

Assurance 1: Value should be exchanged globally and freely.

Why the trust-based model fails to meet Assurance 1: Centralized parties determine the eligibility of participants and control the flow of capital.

7/ Assurance 2: Wealth should be protected and owned wholly.

Why the trust-based model fails to meet Assurance 2: Participants rely on a local enforcer to grant property rights and protect property.

8/ Assurance 3: Rules should be enforced reliably and predictably.

Why the trust-based model fails to meet Assurance 3:
Centrally controlled institutions can enforce and change rules arbitrarily.

9/ Assurance 4: Integrity of the system should be verifiable.

Why the trust-based model fails to meet Assurance 4:
Centrally controlled institutions lack transparency and auditability.

10/ Enter Bitcoin, a trust-minimized financial institution.

Bitcoin fundamentally shifts how a financial system distributes trust, eliminating the roles of several institutions that rely on centralized authorities and creating an ecosystem based on cryptography.

11/ Bitcoin is designed to uniquely satisfy the four economic assurances. It relies on a global network of peers to enforce rules, shifting enforcement from manual, local, and inconsistent to automated, global, and predictable.

12/ Why is Bitcoin able to satisfy these assurances?

Assurance 1: Value should be exchanged globally and freely.

Why Bitcoin Satisfies Assurance 1:
Bitcoin users can send any amount of value anytime to anyone anywhere.

13/ Assurance 2: Wealth should be protected and owned wholly.

Why Bitcoin Satisfies Assurance 2:
Bitcoin has an embedded independent property system.

14/ Assurance 3: Rules should be enforced reliably and predictably.

Why Bitcoin Satisfies Assurance 3:
Bitcoin incorporates a unique system of checks and balances to maintain integrity.

15/ Assurance 4: The system’s integrity should be verifiable.

Why Bitcoin Satisfies Assurance 4:
Bitcoin embeds native verification tools.

16/ By eliminating the need for a trust-based model, Bitcoin is calling into question the current foundation of economic organizations and is paving the way for a more
predictable financial system.

17/ In doing so, Bitcoin presents an extremely unique opportunity to investors.

Stay tuned for Part 2, where @coinmetrics & I analyze bitcoin as an investment. While many investors question its merit, in our view bitcoin is the most compelling monetary asset to emerge since gold