Sleeping beauty Bitcoin wallets wake up after 14 years to the tune of $2B

It's not backed by a government, and while some may say that's a good thing, I think it is not.

Without institutional backing, crypto is just a number in a database that people agree is worth something—for now.

If that collective belief evaporates, there’s no court, no army, no tax base, and no GDP to catch it. Contrast this with fiat currency, which—while not backed by gold—is backed by coercive power and taxation.

Let’s start from something even more fundamental. How do you bootstrap trust? Suppose two pseudonymous entities online want to exchange money for services. Such a system will likely need a reputation system to establish the trustworthiness of entities. That system needs to be tolerant to Sybil attacks (i.e., forging multiple identities), while also ensuring the service provider isn’t exploited by a buyer who refuses to pay after receiving the work.

But this exposes a deeper issue: trust cannot be bootstrapped from scratch. It needs either:

    A shared history (which pseudonyms lack),

    An external authority (which decentralization avoids), or

    A system of credible, enforceable consequences (which requires identity or stake).

Without these, any trust system collapses into a prisoner’s dilemma. Each actor is incentivized to defect (cheat) unless:

    There’s a future cost to cheating (reputation loss that matters),

    There’s a benefit to cooperation over time (e.g. recurring jobs),

    Or there's a credible mechanism to enforce fairness (e.g. escrow and arbitration).

But even escrow only works when dispute resolution is possible and trusted. And dispute resolution requires either a neutral arbitrator (who must have their own identity and incentives) or hard-coded, binary rules, which rarely capture the complexity of creative or service work.

More fundamentally, trust-based systems are built on recursive assumptions:

    You trust X because X has a good rep.

    X has a good rep because others say so.

    You trust those others because…?

Eventually, without a root of trust—whether a state, a court, a verified identity, or long-standing social capital—the entire structure becomes circular. There’s no ground truth. Just reputation built on sand.

And so, the real limitation isn’t crypto per se—it’s that trustless systems don’t exist. At best, we shift trust: from institutions to code, from names to keys, from legal consequences to probabilistic deterrents. But the requirement for trust itself never goes away.

In a pseudonymous setting, the cost of betrayal is minimal. A buyer can stiff a seller and vanish. A seller can deliver garbage or nothing. Reputation can be reset at will unless there’s an expensive cost to identity creation or a strongly linked personal history—which violates pseudonymity.

Thus, bootstrapping trust in such environments is not just technically hard—it is philosophically incoherent without compromising at least one of the pillars: privacy, decentralization, or enforceability.

It follows that if you can’t bootstrap trust, you can’t bootstrap anything that depends on it—including money. Money, at its core, is a social contract, a belief system upheld by collective trust. We accept currency in exchange for goods or services because we trust that others will accept it from us in turn. That belief is reinforced by institutional structures: central banks, governments, legal systems, and ultimately, enforcement mechanisms.

But the moment that trust breaks down, the system unravels. If people no longer trust that their money will hold value tomorrow, they will try to offload it as fast as possible, converting it into hard goods, foreign currency, or anything perceived as more stable. This behavior accelerates inflation—sometimes catastrophically.

We’ve seen this repeatedly in history:

    In Weimar Germany, the collapse of political and institutional trust after WWI led to hyperinflation, with prices doubling every few days.

    In Zimbabwe, trust in government policy collapsed alongside the economy, and the currency became worthless.

    In Venezuela, rampant inflation was fueled not just by bad economic policy but by the public’s loss of faith in any institutional ability to right the course.

The underlying mechanism is always the same: money ceases to function as a store of value when the population no longer trusts the system that issues and manages it. Once the shared illusion cracks, even fiat currency—backed by laws, taxes, and armies—can become just colored paper.

Now contrast that with crypto. Cryptocurrencies claim to solve this by removing central authorities and placing trust in mathematics and distributed consensus. But this is not true trustlessness—it's merely replacing institutional trust with collective belief in code and game theory. And the cracks are showing: when confidence drops, as in market crashes or protocol failures, value disappears just as quickly—if not faster—than in fiat regimes.

So the uncomfortable truth is this:

    Money only works if you believe it will still work tomorrow.

Without enforceable trust, money becomes unstable. Without shared trust, money becomes meaningless.

And that brings us back to the core issue: you cannot build a functioning economy without some root of trust. Whether that root is institutional, social, or cryptographic, it must be anchored, persistent, and costly to betray. If it’s not, the system becomes inherently fragile.

The reason I used pseudonymous here is exactly because we assumed govs are bad. If govs are good, then crypto degenerates to just a slower system for transactions.