Fiat knowledge is a result of information sources being centralized and misaligned in incentives.

This is an opinion editorial by Jimmy Song, a Bitcoin developer, educator and entrepreneur and programmer with over 20 years of experience.

Audio read of article here.

Nobody wants to do the hard work of verification.

Instead most people want to just trust somebody and not worry about seeking out the truth. I get it, verification is hard. Verification is time consuming, it requires effort and taxes your brain. This is because the truth does not give itself up easily, especially when obscured by the people that want to get away with something. The critical thinking, research skills and analytical ability required are not easy to obtain, either.

Unfortunately, the fewer people who verify, the more trusted third-parties become a problem. This is not just true in bitcoin custody, as we’re all too familiar with in the light of 3 Arrows Capital, Voyager and BlockFi, but in all sorts of other fields. The metaphorical cookie jar is very tempting for the trusted third-parties.

Fiat Knowledge

There are two kinds of knowledge. The kind that you have verified yourself — this bed is comfortable — and the kind that you are told (unless you’re an experimental physicist, E=mc2). The kind that we’ve verified ourselves should be the one that we’re more willing to stick our necks out for, but sadly, this is not the case.

Conventional wisdom, political correctness and the general desire to fit in and not get made fun of hinder our willingness to „die on that hill.“ There are social pressures at play that throw verified knowledge out the window.

There’s a famous experiment in psychology which demonstrates this effect called the Solomon-Ash Conformity Experiment. The participants were tested on whether they would give the answer that was obviously true or the false answer that would conform to the answers of everyone else. The experiment was a simple comparison about the length of a line. About 2/3 of people ended up conforming to a false answer rather than being the lone truth teller.

This tendency is what authorities exploit. Many people would rather conform to popular opinion than say what they believe. Thus, trusted third-parties know they can get away with lies as most people will conform to the perceived popular opinion. The authorities can essentially tell us what we should believe. This is what I call fiat knowledge, and it’s a major vector of manipulation.

Trust, Don’t Verify

Rationally, knowledge that’s given to us by someone else should be treated with more skepticism than knowledge we’ve gained directly. Yet when we are confronted by peers or authorities, we suddenly feel less confident in our knowledge unless it happens to jive with what others believe. It’s much easier to defend something when you know you have the support of the crowd, than to defend something that doesn’t.

This is especially true of specialized or technical knowledge. It’s much easier to rely on an authority’s conclusions than to come up with our own. It feels better to be wrong with the crowd than to be right alone. There’s also the amount of time, money and effort to consider. Do you really want to dig through hundreds of pages, find all the flaws and analyze everything? Verification for most technical things just isn’t worth the hassle.

As a result, the trusted third-parties can manipulate everyone who depends on them. By being the source of not just knowledge but also the actions that should be taken from that knowledge, the trusted few can get away with immoral behavior that hurts people.

The most obvious of cases is what the health authorities did during COVID-19. The trusted third parties demanded certain actions, which quickly became regulation. Anyone questioning the main narrative got canceled and called extremists. Rather than having to seek the truth and defend it, most people took the intellectually lazier route of defending whatever the authorities said. It’s just a lot less hassle to do what we’re told — even if truth is sacrificed.

Verification is simply too costly. These costs include significant harassment, many enemies and denied opportunities. Getting along with the powers that be generally means trusting, not verifying.

Hidden Costs Of Trust

Of course, trusting authorities is a Faustian bargain. Sacrificing the truth has some serious consequences.

First, trusting means that you will get manipulated by the people in authority. The demand for trust is a game of power. Giving in necessarily means that you’ve given up some power. These include the power to object or think for yourself. The authorities will demand crazier and crazier beliefs as a test of compliance. Stalin, for example, had meetings at 4:00 AM and put on music and demanded everyone dance — except for himself. This may sound ridiculous, but is it really more ridiculous than masking outdoors during the summer?

Second, trusting means that your sense of reality will be seriously distorted. Whenever there’s disagreement on an issue, there will always be arguments for both sides. Instead of verifying, the temptation will be to pick what you want to be true first and then adopt the arguments for that side. Not only is this seriously lazy, but it leaves you very vulnerable to believing a bunch of lies. This is a great way to disconnect from reality and suffer when your desired belief is found to be false. Think about all the people that lost a ton of money on Ponzi schemes. Most of them wanted to believe and didn’t seek truth and suffered as a result.

Third, trusting means that you never learn responsibility. Going with the crowd is always much easier than learning to defend something unpopular. But it also makes you depend on others for your arguments. You never really learn the arguments the same way you would if you prioritized truth. Many people never learn to verify in the same way that many people never learn to custody their own keys. They don’t want the headache of responsibility. They’d rather live life letting others do the work for them. This is the attitude of little children, not full grown adults. And sadly, immaturity and irresponsible behavior seem to be the norm, even for older adults.

Fiat Knowledge Economy

In a sense, fiat money is a subset of the fiat knowledge as the whole system of central banking was set up to exploit the lack of verification by people. This gave free rein to authorities who wanted to get away with immoral behavior.

The current central bank backed fiat monetary system is obscure and difficult to understand. This is so that the mechanism of theft is hard to discover. The trust, don’t verify mentality surrounds this system.

For example, why is it so difficult to audit the Fed? Gary North, in his book talks about being a staffer for Ron Paul. He tells of how he wanted to know who were the shareholders of the Federal Reserve. It was apparently taboo even to ask that question on The Hill. Why is that? Could it be that the people getting rich from the current system want to continue their grift?

The underlying dynamic at play is that the trust, don’t verify mentality allows those in power to get away with unethical behavior. At some level, trust is broken so someone can do something they wouldn’t do in full daylight.

Because so much money is printed through the current monetary system, there is an added emphasis on the dynamics of power. There are monetary rewards and rent-seeking positions available to those who will say what those in power want them to say, so the truth is further obscured. Trust flows to these designated experts and verification becomes even more costly.

Modern Day Knowledge

As a result, fiat knowledge thrives because of fiat money. As more money flows toward designated experts, they have more means to obscure their findings and make it more difficult to verify, therefore ossifying their rent-seeking position.

The sad result is that almost all knowledge people have is now based on trust, not verification. Given the incentives of the experts, this knowledge is likely not reflecting reality. Instead of a market based on rational analysis by independent verifiers, we have a lot more centralization where trust in a particular group of experts is the norm. The distortions this produces are great as is the obscuring of truth.

Fiat Intellectuals

The result is a phenomenon that I like to call fiat intellectuals. These are people that say enough buzzwords to sound like they know what they’re talking about, but don’t actually know very much. These gullible dupes know that most people won’t verify what they say and they are confident enough in their obscuring abilities to cast doubt on the few people that do.

In our space, the most obvious of these are the business school types that talk about blockchain as if it’s some magical device. This also goes for people that want to bring up quantum computing or proof-of-stake. They know enough to sound smart, but haven’t verified anything. They trust some authority which usually means that they have been manipulated into believing they know something.

You can always tell these people have been manipulated by some of the ridiculous platitudes they spout.

„The truth is probably somewhere in between.“

„So many people working on this thing probably means there’s something useful there.“

Fiat intellectuals are lazy and can’t be bothered to actually learn the topic and instead rely on other people to tell them what’s true. Sadly, most of the people in power, whether it be C-level executives, VCs or politicians are very much fiat intellectuals and are ripe for manipulation.

This is why so many altcoins have such high valuations. Almost every investor, even very big ones, do not verify, they trust. Think about what happened with LUNA and how many large players were involved in that complete disaster. Galaxy, 3AC and Celsius are just three names that were in the news recently due to this. They didn’t verify and instead picked and chose what they wanted to believe. They wanted to believe their investments weren’t scams and they all suffered as a result.

The pattern we’re seeing in the „crypto“ markets is the same as that of central banks. It seems there is a purposeful obscuring of everything that’s going on. The Ethereum 2.0 platform is egregiously complex for that reason. White papers are difficult to read and are hundreds of pages for that reason. They imitate the complexity of central banks because they are exactly that — private central banks. They obscure what’s going on for the same reason, because they want to get away with immoral behavior.

Leveling Up

Bitcoin has a radically different ethic of verify, don’t trust. It’s in that spirit that so many plebs have learned to run their own nodes, custodied their own keys and even learned to code. Verification at a deep level is what keeps everyone honest. We encourage verification in the community for that reason. We don’t rely on central authorities and that means we don’t get screwed by their immoral behavior.

This is in stark contrast to fiat monetary regimes and altcoins. They are all about relying on the trust of their designated experts and not about verifying anything yourself. They discourage “running your own node” because they don’t want you to verify. The complexity of those systems is specifically geared toward making verification unrealistic and difficult.

This is why altcoiners become more like fiat intellectuals over time. They know lots of buzzwords but do little to really verify the truth of their respective systems. Hence, many of them are held down to the bottom because they really don’t know anything about the systems they purport to understand. They believe what they want to believe and lose connection with reality. Such is the end for fiat intellectuals.

The truth is that fiat intellectuals are intellectual slaves of those in power. They are anything but self-sovereign and have convinced themselves that it’s too much responsibility, too much work, too much effort. The only real path of self-sovereignty is to do the hard work of verification in all aspects. We cannot be free until we’re free from the shackles of our intellectual chains. And that freedom is earned through verification. We must be relentless and seek truth.

Freedom isn’t free.

Ten Signs That You’re Becoming A Bitcoin Maximalist

  1. You’ve made peace with the fact that you can’t get certain friends or family members to buy Bitcoin.
  2. You only check the price once a day.
  3. You have a bookmark for
  4. You call your Bitcoin stash „savings“ and not an „investment.“
  5. When you hear proof-of-stake, you think about cattle rancher protocols.
  6. Your pronouns are stay humble/stack sats.
  7. When you have free time, you spend it on improving yourself.
  8. You get happy during bear markets because you can stack cheaply.
  9. You stop regretting not buying when you first heard about Bitcoin and realize you got in at the price that you deserve.
  10. You feel shame when thinking about your altcoin days.

This is a guest post by Jimmy Song. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.


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