Monetary Technology Upgrade
What lies at the nexus of a global commodities super cycle, a progressive collateral shortage, upgrades in the eurodollar system and global payment rails, bitcoin mining and the need for freedom-forward technology solutions? A comprehensive, bitcoinized, telecom hardware, AI and IoT-integrated Web3 ecosystem and payment rails for the development mineral wealth stores which can serve as a private market capital formation tool in markets where the panoptic menace of the Chinese CBDC has established strategic headway.
This comprehensive ecosystem must provide more economic benefit to a far larger user base than the Chinese or any other G7 alternative. It must provide compliance and provenance at the asset level for machinery and human inputs, and must integrate those tools to make commodity asset development in challenging locations much friendlier to private capital while to collateralizing them in accessible and innovative ways.
By anchoring Parhelion’s balance sheet with producing commodities properties and building this ecosystem around them, we can bypass the need for rapid adoption growth of technology ecosystem alone and dedicate resources otherwise diverted to advertising into producing properties. These producing commodities properties begin with bitcoin mining, and extend to the strategics: gold mining, rare earths and lithium, to oil and gas assets, and finally to redeveloped hydropower and denovo solar generation. Through anchoring the ecosystem to bitcoin and the Lightning Network, the platform can likewise generate bitcoin-denominated revenues which may achieve returns on investment higher than mining itself.
The consequence will be durable expansions in the market capitalization and user-generated fees of the platform tokenization tools for directly commercial and non-speculative reasons. These ecosystem tools will also be responsible for driving new capital into the development of core commodity and energy assets to expand net asset values.
Commodities And Technology
Portfolio to anchor balance sheet and generate ecosystem development
For nation states not yet prepared to simply adopt bitcoin as legal tender, an intermediate solution can be achieved.
The legacy of central banking to indenture entire economies into interest-bearing currency regimes has been the single gravest threat to national sovereignty in history. For resource-rich nations which have experienced malfeasant currency regimes, linking currencies to commodity wealth, while technologically preventing the store of value feature of a currency to erode through central bank manipulation, and yet still provide high-quality payment rails for all local users, is one potential solution.
Most nations, including the majority of commodity rich nations, have experienced disastrous results in public currencies.
As such, individual central banks must be prohibited from having exclusive influence over currency issuance. However, energy and mining ministries charged with the licensing of new minerals projects could indeed have a de facto role in currency issuance insomuch as they also represent foreign direct investment at positive net present values. This would provide similar collateralization relationship to early Renaissance banks and the original design of the US Fed which could create credit against inventories and accounts receivable. As a further analogy, the charter for the first bank of the United States was not renewed in favor of returning to the state-issued commodity-backed currency which preceded it, rather than the debt-based currency issued by the bank.
Commodity-Linked Stablecoin Architecture For Southern Africa
Anchor test case for commodities bitcoinization technology ecosystem
The use of digitized shares in multiple mining projects, all batched together in one exchange-traded instrument with direct claims to the production of the commodity-properties in question, tied to mining licenses issued by national mining ministries, could facilitate a base-layer collateral instrument for a monetary network. By making these mining licenses issuable only contingent upon specific and rigorous technology, compliance, mineralization assay and governance standards, mining ministries can participate in the verifiable growth of the national wealth and help ensure that this growth accrues directly to the value of the commodity-linked instrument.
This likewise incentivizes the national treasury only to issue licenses to the most technology-enabled and professional projects, which in turn works toward attracting more foreign direct investment and thus elevating the instrument’s store of value.
Over time, the greater the number of commodity properties represented in the stablecoin instrument’s portfolio, the greater the store of value it will claim and the more capable it will be in serving as a financing medium for new projects, gradually weening the nation(s) off of the need for imported foreign capital and insulating it from the subversive and undermining influences of foreign powers. Likewise, southern African use of mobile and data credits as a payment media will gradually fall in price against the stablecoin media high stablecoin transaction throughput and superior store of value, while the digitized share portfolio instrument itself can be introduced in everyday exchange.
This process could be strengthened and expedited as multiple regional nations opt into these technology and governance standards. Synchronizing mining activity across multiple nations with similar resource endowments smooths out competitive pressure between nations while adding to the value of the stablecoin instrument for all domestic holders.
Meanwhile, by ensuring global Tier-1 institutional operating discipline and forced through a technology ecosystem deployed around each mining site to remove as much operational risk as possible, international investment capital will have higher confidence in making allocations necessary to further develop resources. Furthermore, this capital can be humane and transparent, in contrast to Chinese investment projects, which are often driven by bribery, abuse, racism, and dedicated to indenture of the country if not only mining employees themselves, and where the end result is that the local economy completely finances the government of China. Mining operations will be capable of easily creating ESOP plans denominated in the digitized shares and eventually batched into the stablecoin architecture as multiple mining operations are licensed and opt in. Minimum holding periods can likewise be programmed into these plans to prevent payday overspending, and other such governance features to help elevate long-run utility.
At this moment in world history, when major trade blocs and great power competition have emerged to maximize the global collateral capture needed to bail out there severely over indebted banking systems, sparking a major global commodities super cycle, this instrument will be increasingly valuable and allow for more broad-based democratic wealth accumulation.
The “Truth Engine” technology ecosystem which serves to facilitate western capital to deploy into strategic minerals projects in exotic/hard-to-reach places, simultaneously advancing the quality of local legal regimes, provides a gateway and a superior rails for Western capital to gain exposure to critical minerals. The elevated provenance and underwriting transparency allow for new methods of project finance. Most, especially, we believe there is an outsized opportunity to involve bitcoin based-capital pools and lending as well.
It also may represent the most effective way for Western capital to gain diversified exposure to raw resource assets with relatively low-cost bases in what we believe will be a commodity super cycle, centered around gold, rare earths, energy minerals and oil.
Web3 platforms which unify decentralized 5G telecommunications hardware, edge computing, sovereign decentralized identity software, with autonomous mining machinery IoT, mineral tracking, logistics and import/export traceability, and which can also be integrated at the human labor level for mineral extraction provenance and mineral extraction reporting compliance, can provide the technology ecosystem backbone for this class of digital shares. Mining license issuance driven by the operation of this “Truth Engine” can spur the gradual adoption of this ecosystem into batching shares in individual properties into a larger stablecoin product.
Failure Of Venture
Markup venality and hollow transience
A significant reason venture has experienced such modest success in the last 25 years is that it is geared to parsing out and monetizing individual constituent assets of companies which would otherwise assemble them in longer chains of productive assets for greater advantage and network effect. Somewhat by default, venture seeks to disaggregate companies from internal R&D expenses in order to externalize gains from R&D to the funds which would otherwise accrue internally to the company. This removes opportunities for compounded innovation. Internal R&D is seen as a drain on budgets that should otherwise be directed at rapid customer acquisition and advertising. So venture resources are diverted instead toward a fixation with growth on one or two narrow vectors. This often siloes VC-backed companies into middling, one-off products which sprint to growth milestones through intensive marketing budgets at the expense of finding deep, durable product market fit. A high percentage, 35-40%, of VC dollars into early-stage companies are directed into advertising giants Google/Amazon/etc., in order to shotgun new customers who often have only shallow, transient interest in the product. These growth metrics are then used as the basis for accounting markups which serve as the further basis for raising additional funds and charging higher fees. This obsession with growth metrics is a charade which hollows out innovativeness and value creation.
This dynamic also causes venture to trend toward the predictable and the capital-heavy and away from the innovative and capital-light. In this psychologically zero-sum format, conjoining behind a headline investor is too often a stand-in for VCs in the absence of foresight, insight, conviction and qualifications. Capital heavy because saturation of funding is often all that remains to propel middling, one-off products.
In contrast, by designing an interlinked lattice network of technology products developed in-house, catering directly to captive audiences in or adjacent to a proprietary asset portfolio or mining/energy production partners, it is possible to avoid the considerable ad spend (and concurrent dilution) of most technology companies, but generate rapid product-market fit where the product suite only enhances in value and density and can grow organically. The role of the venture studio is to gear a firm to achieve slow but real, compound growth and create a community ethos of builders, while disposing of the high-gloss veneer of venture capital service providers driven by a venal business model of progressive markups. A firm can bypass some or even all of the capital short-termism imbedded in the reality of most prospective venture partners that asserts if you it’s not growing 400% in 12 months, it’s fake.
Consider if Apple had to raise new equity each time it introduced a new product, then spent 40% of that cash on ads. Its customer loyalty and deep ecosystem would be non-existent. Furthermore, Apple has in a sense acted like a colonial power within its own fallow network of overseas territories (which just happen to be economic not geographic). By owning the stack of products and offerings, its economies of scale are far higher as is its through-put is directed to an already-captive customer base.
This integrated technology stack approach to enrolling large global populations in commercially superior, (and morally superior) offerings must be the apex expression of American power in the next century. But mostly because it can potentially more durable profitability and customer value. In the emerging landscape of technological competition between decentralization and communism, the choice between sovereignty-defending or sovereignty-violating, this approach is sits at the meeting point of scalability, defensibility, and voluntarism which can achieve the long-run compounding and in which private capital will be able to participate.
Complex Coordination
The unsung mode of the firm
Firms which eventually monopolize can:
- Come up with some degree of novelty as a foundation then iterate upwards (SaaS) – most common
- Huge speed of distribution on very thin product (Twitter)
- Create breakthroughs (bitcoin) – least common
A fourth modality is complex coordination, taking many disparate, seemingly unconnected resources and synthesizing them into new products which can dominate entire spaces. This model is antithetical to a lean startup. But because of the outsized charisma and bundled solutions the ecosystem provides, solving multiple challenges for multiple counterparties simultaneously, it can rework fundamental incentives and risk pain points with greater elegance and achieves a greater network effect from independent developers, and greater value capture as a result. The coordination of complex systems, once it is built, is extremely difficult to replicate. But as a consequence of its success as pushing down financial and risk costs, as well as enabling users to interact in new ways to produce/unlock value, the entire ecosystem becomes indispensable.
By driving technology initiatives in-house, Parhelion itself sidestep the traps and distractions often involved fundraising from the venture community. We believe investments made from bitcoin mining returns which can achieve greater multiples of return in bitcoin than reinvesting that element of our budget back into bitcoin mining. The long-misunderstood modality of a firm, one which coordinates complex systems inside its own proprietary ecosystem, has far more to offer in a coming age of volatility and increasing capital scarcity and prolonged elevation of interest rates. Not all of these aggregated complex systems need be innovations by the firm. But as a firm successfully integrates them, the critical inertia of the system in total becomes increasingly harder to outcompete. Apple and Tesla are key examples of this model. We believe that as this ecosystem is erected across multiple portfolio properties, and extends onward into a batched stablecoin product, its acquisition value to major banks and commodity trading houses will be considerable.
This model also lends itself to a world of great power competition, where multiple poles of global influence compete over colonies, territories, and protectorates to secure complex but duplicated supply chains and consumer markets. The world is reverting to a period like the 1870s. The model of the East India Company is more appropriate today than it has been in 130 years. Western firms reliant on any form of public subsidy are running out of runway as the public sectors also run out of runway. And while Oriental firms are essentially arms of the world’s largest mafia, Western firms must compete through voluntarism, decentralization, commercialization, innovation, and humanity.
To Be Continued….
-RC
The Geopolitics of Bitcoin – Part I
The Geopolitics of Bitcoin – Part II
The Geopolitics of Bitcoin – Part III
The Geopolitics of Bitcoin – Part IV