Money exists on a quality distribution, and it therefore applies that not every money is created equal. - xh3b4sd

All systems prefer hardness, because hardness allows any system to survive. The lifeblood of any economic system is simply money. And that very money is defined by properties of hardness too. The factors for any money to develop a specific hardness may be internally or externally defined along the dimensions of supply and demand. Who is then to say how much anything should be worth anyway? How hard is the money of networks and nations? And what has the gold standard to do with all of that?

The notion that anything might be of value is as old as time. Barter existed ever since there have been humans on the scene. Gold was used as store of value for about 5,000 years. Formal money was developed roughly 3,000 years ago. Humans virtualize enterprise ownership for over 400 years by now. And as impactful as the information age has been so far, the tokenization of everything has literally just begun.

What we want to further focus on here is the way in which nation states and blockchain networks define their monetary policies. In particular we want to look at the gravitational centers of those types of economies, because their Gravitropic Forces do effectively define the economic behaviour of any given system.

Let's start with the nation state and the establishment of the gold standard act in the year 1900. The mechanism designers of the day wanted to create a money that is stable, and that can be trusted. And the best anchor for said money was the one thing that everybody wanted, but not many could have. That anchor, was gold. The one quality that was valued most during those uncertain days was stability. And up until 1971, gold provided that very stability for the US Dollar. In this picture, gold was the external factor that determined the value of the nation's money.

It turns out that even stability comes at a cost, because what is yet so stable may not adapt very well to periods of crises. Subsequently the gold standard was abandoned, because the backing of gold restricted monetary policy too much. So much so that the government was not able anymore to respond to sea changes like wars, depressions and the changing world order. In technical terms we would say that the system wasn't very flexible or elastic, so it couldn't adapt to change very well.

On top of the above, the gold standard had one mechanistic flaw that nobody ever talks about. The global gold supply was effectively determined by externalities outside of the control of any government whatsoever. And that means the valuation and stability of the world's monetary policies dependend heavily on the desire and ability of anyone to dig up gold from the ground, wherever it may be found. An analog to this very dynamic might be explained by today's control that petroleum exporting countries have over the global oil supply. And if adversaries can increase your gas prices or decrease your gold value, then there is not much left of a nation's sovereignty. The power struggles playing out here are of extraordinary geopolitical consequence, none of which help a nation to establish hardness.

The search for an optimal monetary policy eventually created systems of money printers and zero interest rates. And the further monetary policy strayed away from hardness, the more was there left to be desired. That very desire lead to the irony of our story, because it lead to the creation of a technology that was built to compete with all of those problems of hardness. Irresponsibility lead to competition, and competition brought us blockchain networks.

Blockchain networks define their own monetary policy using tokens that are algorithmically issued one way or another. The boundary conditions of the network itself define how much supply may be created and under which circumstances that supply may come to exist. Those supply mechanisms serve a very special purpose. And that purpose is inherently desirable for the network, because it is the network itself that defines its own boundary conditions trustlessly, which cannot be easily exploited. Those types of hard wired and self sustaining economies produces a hardness that the nation state can simply not compete with. Blockchain networks were the first hyperstructures that codified monetary policy in their own programmatic constitution.

The relationship between the nation state and its own money supply is at times artificially inverted by creating more money in order to fight more crises. More money now may help to solve a problem today, but that very solution comes at a cost that must be paid in the future. The flexibility in monetary policy as described in this example may appear to be elastic, but the question we have to ask is which part of the system is actually expressing those properties of elasticity. Because elasticity, similar to hardness, unsurprisingly, comes at a cost too.

A nation's money supply is artificially held elastic in order to provide overall system stability. What we then have to realize is that the elasticity in money supply is actually a detractor for a system's hardness. The way in which hardness is minimized here, is the fact that the artificially manipulated money supply simply borrows from the future. And the fact that this type of borrowing is even possible creates a systemic downward spiral of necessary discipline, which detereorates the system until the borrowing either reverses or the system collapsed. The more money a nation prints, the better it is doing in the short term. And the tragedy of an artificially inflated nation is that it remains stuck in this vicious cycle of producing ever more liquidity. In the moment it looks like everything is just fine, but security budgets do eventually matter. And the only way out of this vicious cycle is a very painful portion of prolonged austerity.

A network's money supply is programmatically held elastic in order to minimize trust assumptions. That is only possible because the monetary policy of blockchain networks cannot be compromised by the first crisis showing up on the horizon. The network's builtin boundary conditions ensure a systemic accountability which humans are otherwise tempted to circumvent. The correlation between a network's money supply and that network itself is uninverted when compared to the nation state. The more supply there is created, the less healthy the network becomes. But if the network grows, the more supply it can generate in order to increase its utility function. This uninverted correlation between supply and network is the desired default behaviour.

And so, market based reductions in money supply are inherently healthy for networks, but excruciatingly painful for nations, because nations can typically not just stop spending. The reason why the respective supply correlations are flipped across nations and networks is because the nation choses to keep their inputs elastic, while the network choses to keep its outputs elastic. That asymmetry allows a nation to fake system health temporarily, while it allows a network to guarantee hardness over long periods of time. The United States Government is essentially forced to debase its own currency over time in order to address structural issues like generational demographics. Ethereum is aiming for the infamous burn in the long run, which increases the value proposition of its own money, the more it is being used. Ethereum expresses hardness when it becomes ultra sound in the most relevant way.

Nations and networks both seek to establish hardness, but nations prefer economic stability while networks prefer economic elasticity. Treating the inputs and outputs of a system properly has the effect of redefining that system's utility function. This conclusion is not to dunk on the stability that governments try to provide, but rather to outline credible paths towards hardness for programmatic economies.

And with that we make a hard break for the number that we picked for this week. 400 user operations per second are performed across the entire Ethereum ecosystem over the course of a day. We refer to user operations here because they capture the intended actions of a user instead of submitted transactions. Another way of saying this would be that there may be many different user operations executed within a single transaction. A user operation may refer to an ETH transfer, a token swap, or any contract write onchain. The user operation terminology originates from the concept of account abstraction, which is another mechanism to utilize a network's economic elasticity. Integrating Ethereum ever deeper into the real world economy will eventually allow us to turn elasticity into hardness, synchronously composable for all of the United Chains of Ethereum.