Is bitcoin adoption at the federal government level a path to a smaller government?
Bit Bonds: An Idea Whose Time Has Come
— TFTC (@TFTC21) March 11, 2025
Full presentation by Andrew Hohns. pic.twitter.com/Hk1Vw8Wvga
Last week during the Bitcoin for American event co-hosted by the Bitcoin Policy Institute and Senator Cynthia Lummis' office, Andrew Hohns from Newmarket Capital and Battery Finance gave a presentation on Bit Bonds; a budget neutral way for the United States Treasury to accumulate bitcoin while also bringing down consumer interest rates and creating a clear path to defease the national debt over time.
As someone who would like to see the federal government in the US shrunk dramatically, I believe a strategic bitcoin reserve accumulated via a mechanism like Bit Bonds is the only viable path to make a smaller government possible. This may seem counterintuitive - "if the US government acquires bitcoin it makes them stronger." However, when you take a step back and think of the problem of the ever expanding federal government you realize that a large part of the problem is driven by the need to roll over debt by issuing new debt to pay it back.
This leads to a forced expansion of the federal government that can only be reversed if something new is introduced that can defease the debt without having to issue new paper. As it stands today, bitcoin is the only thing that can practically produce this defeasment.
The beauty of the bit bond idea is that it expedites the debt pay back by enabling the Tresury to issue longer-term bonds at lower rates, which works to decrease interest payments on debt that is being rolled over. An incredible kickstarting mechanism that provides immediate results.
Imagine being able to point at the chart of the interest expense on the debt and show that the number is falling.
Bitcoin is for anyone, including governments, and it is a great asset that enables individuals, businesses and governments to think creatively by leveraging the benefits that come with adopting it during its monetization phase. The path to shrinking the federal government dramatically over the next few decades only exists in a world in which the government adopts bitcoin as a strategic asset to begin paying back the debt.
Of course, a bitcoin strategic reserve can be used to abuse its power. Particularly, over individual states. However, with the rise of state-level strategic reserve bills beginning to gain traction it isn't hard to see how that leverage can be eliminated. Michael Goldstein made a very valid point on stage during the Bitcoin Takeover last Friday in Austin in regards to state-level strategic reserves. He pointed out that the federal government uses funding as leverage over states in a carr0t-stick model. "If you don't do what we want in regards to policy, you're not getting these funds."
State-level strategic reserves neutralize that risk. If a state accumulates a sizable bitcoin treasury that appreciates over time, in parallel with a federal-level bitcoin treasury, the states can turn around and say "Actually, I don't need that funding."
In short, while I agree that the federal government accumulating bitcoin can be a bit unnerving for bitcoiners, I find it hard to see what other mechanisms that could be tapped to viably shrink the government over time.
Fidelity's recent report highlights a significant shift toward efficiency through fewer but more powerful nodes. As I discussed with George "Jethro" Bodine on our latest episode, transactions routed between major nodes now move "almost at the speed of light" with success rates approaching 99%. This represents a critical advancement as the network matures into Bitcoin's primary payment solution.
"I want Lightning to succeed. I want it to be that payment network. I want it so that every poor person down there in South America or Central America who's just trying to get ahead can use it." - George "Jethro" Bodine
Jethro passionately argued that Lightning provides essential financial infrastructure for the global poor facing hyperinflation, particularly in countries like Argentina with 125% inflation rates. As I pointed out, Lightning is "inarguably, objectively the most distributed layer two technology on top of a blockchain in the world." Its permissionless nature means anyone can participate or opt out of newer developments like Taproot Assets, ensuring that financial inclusion remains accessible while innovation continues.
TLDR: Lightning Network evolving into Bitcoin's vital payment system for global access
Check out the full podcast here for more on nation-state Bitcoin adoption, compound interest effects on wealth creation, and how to navigate the current market cycle with confidence.
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Final thought...
Yesterday was the last day of the season to justify making comfort chili because of the weather in Austin, Texas.
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