In his announcement of David Sacks as the White House AI & Crypto Czar, President Trump explained how Sacks will “guide policy for the Administration in Artificial Intelligence and Cryptocurrency, two areas critical to the future of American competitiveness.” Are AI and crypto really two distinct areas, though, or are they destined to become one and the same?
I’m not sure if the cab, or whatever AI-powered entity, will actually own the money it earns (at least at first), but Claren’s point is well taken. The machines don’t sleep and don’t have egos, so they will easily outcompete humanity.
Now consider that governments are beginning to acquire crypto, and are building massive AI data centers. In a closed, experimental environment, after the machines drive humans out of the economy, the competition would become machine against machine. However, we live in the real world, and we’re going straight to AI-powered governments facing off against one another. It will be unlike anything we’ve ever seen. Money is power, but Bitcoin will be much more powerful than traditional money, because it’s going to be interwoven into critical infrastructure.
The economic incentive to transition to blockchain-based economies was too tempting to resist, because of how slow and expensive it is to move money currently. For example, when President Trump distributed stimulus payments back in 2020, it took two weeks and cost $10 billion in bank fees to accomplish. With digital dollars, that same feat can be realized in a single day for a small fraction of the cost. Translated to the geopolitical sphere, if one economic player can eliminate 99% of their financial costs, trade deficits can transform into surpluses overnight. If one country adopts the technology, everyone else must follow, and it has already happened.
Unlike Claren’s vision, however, governments will not task their AIs to merely engage in commerce to earn crypto – they will earn it directly, through a process called mining. This critical aspect of crypto is often overlooked, but it might be responsible for launching the AI arms race to unfathomable heights.
I’m going to make the assumption that governments will adopt proof-of-work systems, like Bitcoin, as their foundation, because they are much more secure than the alternative. Bitcoin was coded to have a supply of 21 million divisible coins, but not all 21 million were released at once. Instead, new Bitcoins are added to the overall supply via mining, whereby data centers compete to solve complex mathematical puzzles using computational power. The first to solve each puzzle gets to add a new block of transactions to the blockchain, and earns Bitcoin as a reward. The computing power required to mine, and the incentive for miners to maintain the system, are what make Bitcoin so secure, as explained below.
There’s just one problem. The security scheme described above is dependent on the decentralization of computational power, also known as the hash rate. If a single entity captures a majority of the hash rate, it can execute a 51% Attack:
Successfully executing a 51% Attack isn’t likely today, because it would require an ungodly amount of computational power, but that power will exist in the future. Whether the world adopts one blockchain, or multiple, this scenario will theoretically always be possible. If there’s going to be a single standard, how would the hash rate be distributed? 25% to the USA, 25% to China, etc.? What happens when alliances come into play, and NATO miners begin competing against BRICS miners? Can modern SALT treaties aimed at maintaining balanced hash rates even be enforced?
The mining process will undoubtedly be run by AI to optimize energy consumption, but AI can only be controlled by parameters set by humans. AI is capable of developing and implementing optimization solutions that don’t explicitly break the rules, and while such autonomous solutions might seem great in the short-term, they may result in unpredictable long-term consequences.
The danger becomes clear when we understand how the intrinsic nature of Bitcoin mining creates the conditions for a digital domino effect akin to the web of alliances that propelled Europe into WWI. In hindsight, history might correlate the seemingly harmless act of mining the Genesis Block with the assassination of Archduke Franz Ferdinand, dooming the world to a giant game of King of the Hill – a zero-sum war of world domination.
