Beware the Bitcoin Basilisk
Democrats need to change their focus from protecting consumers in case cryptocurrency fails to protecting democracy in case it succeeds.
A few weeks ago, while writing a piece on Artificial Intelligence, I touched briefly on the concept of Roko’s Basilisk. A 2010 thought experiment named after the handle of a poster on the LessWrong rationalist web forum, Roko’s Basilisk, describes a monstrous superintelligence that would reward all who facilitated its development and punish all who tried to impede the rise of AI. Roko’s Basilisk is essentially a reboot of Pascal’s Wager for the digital age. In the 17th century, Blaise Pascal argued that belief in God was rational since the infinite rewards in heaven given for a life of faith multiplied by even the slightest chance of God’s existence would provide an expected return far greater than the sum of all the finite joys of faithless hedonism (not to mention the chance of eternal damnation that might come from living such a life). The Roko’s Basilisk thought experiment follows a similar line of thinking. Humans should faithfully promote Artificial Intelligence development since even if there is only the slightest chance of an all-powerful superintelligence like Roko’s Basilisk being created, that probability multiplied by the infinite pleasure or pain the Basilisk could inflict would make it rational to live according to the interests of our future AI overlord.
Does anyone outside AI web forums and Silicon Valley even care about Roko’s Basilisk? It’s hard to say whether the thought experiment has had any real-world consequences beyond sparking the unlikely romance of Elon Musk and EDM artist Grimes. Even if our elites are completely oblivious to the thought experiment, the willingness of both parties to take an “all in” energy strategy to satisfy AI’s unquenchable thirst for electricity suggests that the bizarre Silicon Valley cult of AI is mutating into a state religion that would be quite pleasing to Roko’s Basilisk.
Despite our political leaders bowing down at the altar of Artificial Intelligence, skeptics and critics of AI can rest easy for now. Nothing approaching Artificial General Intelligence is on the immediate horizon, and certainly nothing with the power, omniscience, and vindictiveness of Roko’s Basilisk. But there is another digital being already out there that should concern us, one far less complex and conscious than Roko’s Basilisk yet still capable of showering riches upon its believers while potentially inflicting financial ruin on those who doubt it and stand in its way. If the basilisk of Western mythology could be likened to a serpent or dragon, this digital creature would be much closer to a protozoan or a virus. But just like biological viruses can wreak havoc on world trade and destabilize governments, this simple digital organism has the potential to collapse our economy and facilitate the final oligarchic destruction of our Republic. The digital creature I am referring to is Bitcoin.
What could something so unintelligent and basic as Bitcoin have in common with the all-seeing, all-knowing, all-powerful Roko’s Basilisk? If Bitcoin does anything well, it is remembering. As the first blockchain currency, Bitcoin’s main claim to fame is that it is an immutable ledger maintained by a decentralized network keeping track of every transaction ever made. This indelible memory allows Bitcoin to exhibit the Roko’s Basilisk-like quality of knowing exactly who supports it the most (i.e., who owns the most coins) and those who do not support it at all (i.e., those who own none at all). Like Roko’s Basilisk, Bitcoin’s supporters thrive (i.e., become richer) when Bitcoin becomes stronger (i.e., its price increases). Most importantly, this alignment of interests with a digital overlord (even one far less intelligent than Roko’s Basilisk) gives Bitcoin maximalists the incentive to boost its value even if that could mean accelerating climate change, destroying the dollar, and destabilizing democracy in the process.
The idea of a Bitcoin Basilisk provides a chilling new perspective to view the fiscal nihilism at the heart of Trump’s One Big Beautiful Bill, which adds $3.9 trillion to our national debt. Such reckless spending by Trump is most often explained by referencing the Republicans’ toxic blend of greed, stupidity, and cruelty. That point is hard to dispute when the ruling party is slashing Medicaid to fund billionaire tax cuts, armies of masked ICE agents prowling America’s streets, and the construction of detention camps surrounded by alligators. The fact that the One Big Beautiful Bill also causes a dangerous ballooning of national debt is explained away by the idea of Republicans playing a short-term strategy based on electoral cycles, knowing Democrats will have to share the long term fiscal conseqences of this debt burden and will quite likely have to shrink the size of a federal government that Republicans are all too happy to dismantle. But what if Republicans weren’t just indifferent and careless about our unsustainable national debt? What if there were a way for Republicans to personally profit from running up the national debt while simultaneously redistributing national wealth across partisan lines?
“For all cost cutting Republicans, of which I am one, REMEMBER, you still have to get reelected. Don’t go too crazy! We will make it all up, times 10, with GROWTH, more than ever before,” Donald Trump posted on Truth Social June 29th, bullying the few remaining Republicans still wary of the disastrous fiscal consequences of his One Big Beautiful Bill. Passing deep tax cuts justified by the debunked notion that the cuts will drive economic growth has become a hallmark of the modern Republican Party. But unlike Ronald Reagan, George W. Bush, and himself in 2017, Donald Trump in 2025 is deeply invested in a business that stands to directly benefit if the creditworthiness of U.S. treasuries crumbles and our country descends into a sovereign debt spiral. Bitcoin Jumps After Trump Says Growth Will Offset Deficits, Boosting Bull Case for Bitcoin and Gold, CoinDesk declared shortly after Trump’s Truth Social post. The “Bull Case” mentioned in the article is an investment thesis prevalent in the crypto community asserting that America’s national debt is unsustainable, the dollar (like all fiat currencies) will inevitably fail, and eventually all investors will seek out gold, Bitcoin and other cryptocurrencies as the only reliable stores of value in a world where the global reserve currency has faltered. Since the value of a Bitcoin is most often measured in dollars, there is no meaningful difference between the implosion of the dollar and the explosion of Bitcoin, as well as all the lesser cryptocurrencies that swim in its wake. Trump’s One Big Beautiful feeds the Bitcoin Basilisk in two ways: (1) making dollar-dominated assets like US Treasuries more risky and less appealing to investors seeking a stable store of value; and (2) redistributing wealth away from public spending and into the deep pockets of the richest private investors who can buy more crypto now that their money is no longer going to Medicaid recipients or funding green infrastructure projects. The One Big Beautiful Bill is a wondrous gift to the Bitcoin Basilisk, and with the Trump family all-in on crypto (reportedly boosting their net worth by $2.9 billion), we are now facing a frightening scenario where the sitting President of the United States could grow his personal wealth exponentially if the United States defaults on its debt obligations and the dollar nosedives.
Since Trump was sworn in for his second term, the dollar has suffered its worst six months since 1973. Since Trump signed the One Big Beautiful Bill on July 4th, Bitcoin has broken out to a new high above $120,000. This price movement represents not just the change in a digital asset’s price, but also a change in the distribution of national wealth from those whose fortunes are tied to dollar-based assets and those whose wealth is concentrated in crypto. During previous crypto booms, this wealth shift had minimal political impacts. Just a few years ago, Donald Trump was calling Bitcoin “a scam against the dollar,” while crypto whiz kid Sam Bankman-Fried was the second largest contributor to his rival Joe Biden’s campaign. Yet, during Trump’s exile, he came to the realization that aligning himself with the Bitcoin Basilisk could lead to greater political power and more personal riches. Meanwhile, the Biden Administration and its SEC chairman, Gary Gensler, undertook measures to regulate the crypto industry that only agitated the Bitcoin Basilisk rather than significantly weaken it. Sensible, educated liberals spurned crypto as a scam and a Ponzi Scheme. Democratic lawmakers gave little thought to the political impact of a crypto boom and instead focused on mitigating the damage done to individual consumers and the banking system when crypto inevitably failed. What followed was the most terrifying mutation of the Bitcoin Basilisk we’ve seen to date: the alignment of crypto interest along partisan lines, with the fortunes of MAGA and crypto bros tightly intertwined.
During the next three and a half years, the Bitcoin Basilisk could very seductively whisper into Trump’s ear the most sinister of self-serving plans: defaulting on fiat dollar-denominated debt and pegging a new dollar to Bitcoin or a basket of cryptocurrencies. Trust could tout the benefits of inflating away our country’s debts to foreigners based on old dollars, while championing the long-term stability of a new dollar tied to a decentralized cryptocurrency like Bitcoin with a fixed supply of 21 million coins. Even just a Truth Social post from a deranged president hypothesizing such a plan could send shockwaves through the world financial system and profoundly reshape the distribution of national wealth away from dollar-invested Democrats to crypto-crazed Republicans. It is hard to see Trump having the self-restraint to resist such an opportunity to increase the wealth of not only his family empire but also the wealth of tech oligarchs and his MAGA followers. It is even harder to see him resist an opportunity to inflict financial pain on all the know-it-all liberals who have turned their noses up at crypto in favor of responsible investing in safe dollar-based assets like U.S. Treasuries. With the crypto industry emerging as one of the largest sources of campaign donations, a significant weakening of the dollar to the benefit of cryptocurrencies will profoundly shift the balance of political power, helping the Bitcoin Basilisk grow to monstrous proportions and influence electoral races across the country.
What can the Democrats do? Just bow down before the Bitcoin Basilisk and surrender to Big Crypto like they have surrendered to Big Oil, Big Pharma, and Big Tech? Hope that the Bitcoin Basilisk becomes collateral damage of Trump’s erratic tariff policies, or that it will be destroyed forever by advances in quantum computing capable of cracking the cryptography that secures the Bitcoin network? Continue pushing the kind of incrementalist efforts to regulate crypto that did little to thwart the rise of the Bitcoin Basilisk, even when they controlled the White House and both houses of Congress?
To defeat the Bitcoin Basilisk, Democrats should consider the strategy used to defeat the original basilisk of Western Mythology. Able to turn its enemies to stone by just looking them in the eye, the mythical basilisk could not be defeated by straightforward attacks but could only be slain by holding a mirror up to its eyes, turning its powers against itself. If we held a mirror up to the Bitcoin Basilisk, it would see that it is nothing more than the latest monstrosity spawned by an economy dominated by speculation and financialization, paired with the corrupting influence of runaway wealth inequality on democracy. With Democrats’ direct attacks on crypto likely to be as futile as straightforward attacks were on the mythological basilisk, they should instead focus their energies on building a populist movement for a Wealth Tax capable of reversing the most devastating impacts inflicted by the Bitcoin Basilisk. Unlike attacks by the mythological basilisk or Roko’s Basilisk, the Bitcoin Basilisk’s attack is neither permanent nor fatal, so long as we have a mechanism for wealth redistribution strong enough to reverse any impacts caused by Trump radically devaluing the fiat dollar against cryptocurrency. Our current income tax system will not be sufficient. Crypto whales with large stashes of highly appreciated coins would never sell them so they can avoid triggering income tax, and would instead employ the “Buy, Borrow, Die” strategy of borrowing devalued dollars against the collateral of their crypto horde. We need a Wealth Tax to directly tax the unrealized gains on assets like Bitcoin if they appreciate significantly. Without a Wealth Tax, one crazy move by Trump to peg the dollar to Bitcoin could reshape the landscape of American political and economic power for generations to come.
Even if crypto collapses on its own and the Bitcoin Basilisk ceases to be a threat, a Wealth Tax is the only way to undo the corrupting effects of obscene economic inequality. In a country where a small oligarchic elite can rig our elections and manipulate financial markets, it will only be a matter of time before monsters even more menacing than the Bitcoin Basilisk emerge from its carcass.