What is Institutional Bitcoin and why write a book about it? Is Bitcoin not Bitcoin? Does its ownership change its properties? I would say it does. When the money used by the world is hard to make and easy to validate, it becomes an exceptional tool for capital accumulation, coordination of trade, and generally aligning the incentives of spenders, savers, entrepreneurs, and planners. Under a system of hard money, capital flows into the strongest and most capable hands. The entrepreneurs who make the best capital allocation decisions end up keeping their capital and those who make poor decisions are fated to their capital flowing to those who better meet the demands of the market.

While this book is not a treatise on Austrian Economics, it accepts that when there exists a money that can give individuals power, it will inevitably gain adoption and discover the economy that will naturally want to emerge when it is underpinned by long time horizons, confidence in humans due to an alignment of incentives, and a ruthless ability to verify every unit of money in circulation. These properties make entrepreneurs want to build on their best ideas, as they have confidence in a rational marketplace for their product. Bitcoin is expected to cause a similar renaissance as Gold did during the Industrial Revolution. Much has been written about the horrific outcome of the century of Fiat money. Money “by decree” is no different from that which is counterfeit. No group of humans who had that power have ever proven themselves capable of resisting it, from the earliest traders of glass beads to the Roman emperors, to the full blown counterfeiting politicians and central bankers of today, to modern institutions engaging in Bitcoin. Individuals have never been able to decree money, nor have they had a strong ability to resist the decree. .A decree that cannot be resisted is considered tyranny. Bitcoin frees individuals from a kind of tyranny that most people don’t realize exists.

The individual owners of Bitcoin, and their personal attributes, are a primary determinant in the life cycle of that Bitcoin as well as the economy emerging around the Bitcoin protocol. Satoshi Nakomoto built and released Bitcoin to empower individuals to exchange money without any intermediary in between them. Individuals have a lot of power as to the fate of their Bitcoin. Like entrepreneurs, the strongest among them are likely to accumulate the best form of it. It is a misconception that the game is to build the biggest stack. The game is to accumulate the most powerful form of capital and, while all Bitcoin are treated as fungible (indistinguishable from one another),, the truth is that the power of the capital is determined by its owner.

A Bitcoin holder who has strong earning potential via their ability to add value to society is going to have a lot more optionality and power with their Bitcoin than one who is destitute and accumulated their stack through borrowing. The more powerful holder can build relationships that turn into circular economies and can much more quickly find themselves at the center of a network of Bitcoin users trading Bitcoin for goods and services. Vendors can rely upon them and will compete for their Bitcoin. An individual who only acquires Bitcoin but doesn’t build an economy runs the risk of never being able to convert that Bitcoin back into anything. Their capital is not as productive, but holding a Bitcoin balance is still a useful act as it concentrates wealth into hard and verifiable money, and away from the counterfeit version. Individuals who own Bitcoin will vary as to their objectives and effort in entrepreneurship but they will do far more than Institutions will in this regard.

Institutions will also vary in how powerful their Bitcoin can be as capital. Some will see Bitcoin as a way to solve a particular problem like cross-border payments or compensating employees who prefer to be paid in Bitcoin. Others might attempt to counterfeit Bitcoin by a variety of methods like custodians fractionally reserving it (or in the case of FTX, not holding any at all to back exchange balances). Across this spectrum, even the most dedicated institutions, like MIcrostrategy, will not be building a circular economy and will act like individuals with limited power.

“Institutional Bitcoin” refers to Bitcoin owned by organizations who 1) understand that the strongest individuals will value Bitcoin higher than the strongest companies and over time will outbid them for it; and 2) understand the risks of the failure to understand how much more Bitcoin is valued by individuals. This book aims to give people at these institutions a road map towards owning and utilizing a powerful and emerging form of capital called “Institutional Bitcoin”