From cash to crypto: The Cantillon effect vs. the Nakamoto effect

Bitcoin introduces the world to the Cantillon effect 2.0, often known as the Nakamoto effect. Those who live closer to the truth can receive value creation benefits in a Bitcoin world, rather than being rewarded for privilege, status or geography.

The issue of why we need Bitcoin (BTC) is a prevalent one these days, but most people’s responses leave them shaking their heads and declaring it to be either a Ponzi scheme or money for criminals. This conclusion falls short of describing how Bitcoin has the potential to address the systemic inequity and corruption that plague our present monetary system. 

Miners contributing to the Bitcoin network’s security are rewarded with new Bitcoin and fees based on how much protection they give, referred to as the Nakamoto effect. In contrast, the Cantillon effect, a long-forgotten classical theory on how the distribution of money impacts individual wealth, is one of the injustices in our current society.

Our modern monetary system, which is built on the generation of money primarily through bank-issued debt with interest, transfers wealth from the middle to the top, resulting in an unstable monetary system and a society in which the “future doesn’t matter.”

Between 1970 and 2010, the International Monetary Fund reported 425 systemic banking, monetary and debt crises, an average of 10 each year. Monopolistic state money is a fragile and unequal system, while countries with many currencies have historically experienced greater stability and equality. 

The answer to many of these problems regarding state control of money can be found in cryptocurrencies, a new sort of non-state money. After the Great Financial Crisis of 2007–08, the first and most significant of these, Bitcoin, emerged, with the system going online in January 2009.

This article explains the Nakamoto and Cantillon effects, and whether Bitcoin is the antidote to the Cantillon effect.

Please read our guide: Who is Satoshi Nakamoto: The creator of Bitcoin, to understand more about the founder of the world’s first decentralized cryptocurrency.


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Fidelity Says What We’ve Been Thinking: Countries & Central Banks Will Buy BTC

Surprising the world, Fidelity predicts what Bitcoin’s game theory implies. It’s as Satoshi Nakamoto said, “It might make sense just to get some in case it catches on.” That’s the exact same conclusion that Fidelity reaches in its “Research Round-Up: 2021 Trends And Their Potential Future Impact” report. Take into account that Fidelity is a multinational financial services corporation, it doesn’t get more mainstream than this.

What did Fidelity say about Bitcoin adoption at the nation-states and central bank level? 

They put it very clearly:

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“We also think there is very high stakes game theory at play here, whereby if bitcoin adoption increases, the countries that secure some bitcoin today will be better off competitively than their peers. Therefore, even if other countries do not believe in the investment thesis or adoption of bitcoin, they will be forced to acquire some as a form of insurance. In other words, a small cost can be paid today as a hedge compared to a potentially much larger cost years in the future.” 

In other words, It might make sense just to get some in case it catches on. And, as Stacy Herbert said, “First mover advantage goes to El Salvador”. At least if we’re talking out in the open, because other countries might be accumulating Bitcoin on the down-low. For example, Venezuela seized a lot of ASICs from private miners. Chances are those are active in a warehouse somewhere. And, of course, there are rumors that the USA is already mining.

In any case, what does Fidelity conclude?

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“We therefore wouldn’t be surprised to see other sovereign nation states acquire bitcoin in 2022 and perhaps even see a central bank make an acquisition.”

If those players do it in the open, it will probably trigger a race like no other. A race in which it will be too risky not to participate. 

Speaking About Bitcoin Mining…

Fidelity’s report summarized 2021, it goes through most of the major stories that NewsBTC has covered ad nauseam. The company doesn’t try to figure out why did China ban Bitcoin mining, but it highlights how fast the hashrate recovered

“The recovery in hash rate this year was truly astounding and one that we think demonstrates several issues that will be important to keep in mind for 2022 and beyond.”

The Fidelity report also highlighted how well the network responded. “This has now been tested and bitcoin’s network performed perfectly.”

BTCUSD price chart for 01/17/2021 - TradingView

BTC price chart for 01/17/2022 on Eightcap | Source: BTC/USD on

What Does Fidelity Say About The Ecosystem In General?

The report wasn’t exclusively about Bitcoin, they also identified the biggest trends in the wide crypto sphere.

“The biggest non-Bitcoin themes put on display this past year included the massive issuance of stablecoins, the maturation of decentralized finance, and the early days of non-fungible tokens.”

And about those trends, Fidelity predicted:

  • “The growth in interconnectivity between siloed blockchains”

  • “Traditional fintech companies partnering or building capabilities to interact with DeFi protocols”

  • “The dawn of decentralized algorithmic stablecoins has officially begun.” Responding to the “growth in demand for more regulated, centralized stablecoins.”

  • “While the long-term value of these NFTs is not known, the impact of increased digital property rights for art, music, and content is likely to be meaningful in some form.”

In general, Fidelity thinks that investment in digital assets will keep growing:

“Allocating to digital assets has become far more normalized over the past two years for all investors. The Fidelity Digital Assets 2021 Institutional Investor Survey found that 71% of U.S. and European institutional investors surveyed intend to allocate to digital assets in the future. This number has grown across each individual region of the survey for the past three years, and we expect 2022 to show another year of higher current and future asset allocations to digital assets amongst institutions.” 

However, something has to happen to catalyze widespread institutional adoption. “The key to allowing traditional allocators to continue to pour capital into the digital asset ecosystem revolves around regulatory clarity and accessibility.”

Is 2022 the year of regulatory clarity? What will happen first, institutional adoption of cryptocurrencies or nation-states adoption of Bitcoin? What central bank will earn first-mover advantage? Burning questions for the year ahead.

Featured Image by Damir Spanic on Unsplash  | Charts by TradingView


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Today in Bitcoin history: 13-year anniversary of transaction between Satoshi and Hal Finney

It’s been exactly 13 years to the day since computer scientist Hal Finney became the recipient of the first transaction on the Bitcoin blockchain from creator Satoshi Nakamoto.

On Jan. 12, 2009, with the Bitcoin (BTC) white paper a mere three months old, Satoshi sent Finney 10 BTC — worth next to nothing at the time, but now roughly $440,000. The move, likely a test to determine the viability of the blockchain, was the first in a series of hundreds of millions of transactions in Bitcoin between millions of people across the world.

“When Satoshi announced the first release of the software, I grabbed it right away,” said Finney in a 2013 post on “I think I was the first person besides Satoshi to run bitcoin. I mined block 70-something, and I was the recipient of the first bitcoin transaction, when Satoshi sent ten coins to me as a test. I carried on an email conversation with Satoshi over the next few days, mostly me reporting bugs and him fixing them.”

Finney was one of the first people to respond to Satoshi’s post on the cypherpunks mailing list, with many in the space still believing he was one of the pseudonymous individuals behind the creation of Bitcoin. Sadly, the legendary crypto pioneer passed away from amyotrophic lateral sclerosis — ALS, also known as Lou Gehrig’s disease  — in 2014. He would have been 65 years old today.

At the time the first BTC was sent, there wasn’t even a cash value associated with the crypto asset, whose blockchain has accrued more than 701 million transactions as of Jan. 8. One of the most famous early use cases — exchanging 10,000 BTC for two pizzas in 2010 — helped pave the way for the crypto asset to eventually be accepted in many bars, restaurants, and even as legal tender in the entire country of El Salvador.

Related: Former patrons can’t drown sorrows as first-ever bar to accept Bitcoin closes

Thirteen years ago, Bitcoin and crypto were highly experimental, unproven, and largely unknown. Today, regulators across the world discuss how to handle the integration of central bank digital currencies, stablecoins, and digital assets into their financial systems.

In 2035, thirteen years from now, the BTC blockchain will likely still have plenty of blocks to mine. Some experts are predicting the price of the crypto asset will hit $100,000 in 2022, with the potential for even more growth n the years to come.