Paper 2025/505

Capitalized Bitcoin Fork for National Strategic Reserve

Abstract

We describe a strategy for a nation to acquire majority stake in Bitcoin with zero cost to the taxpayers of the nation. We propose a bitcoin fork sponsored by the the government of the nation, and backed by the full faith of treasury of the nation, such that the genesis block of this fork attributes fixed large amount of new kinds of tokens called strategic-reserve-bitcoin tokens (SRBTC) to the nation's treasury, which is some multiple (greater than one) of the amount of all Bitcoin tokens (BTC) currently set in the Bitcoin protocol. The BTC tokens continue to be treated 1:1 as SRBTC tokens in the forked chain. The only capital that the nation puts up is its explicit guarantee that the SRBTC tokens of the fork will be accepted as legal tender, such as payment of tax to the treasury. We suggest that this is a better approach than starting a new blockchain that mimics Bitcoin, as it will be partially fair to the current holders of Bitcoin, which in turn would make it competitive in the space of other such possible forks by other powerful nations. Moreover, such a proof-of-work blockchain retains its egalitarian and democratic nature, which competitively deters the said nation from any dilutions in the future. To justify our proposal we setup three competitive games, and show strategies for different players that are in Nash equilibrium and which throw further light on these claims. In particular, 1. The first game shows that if the only two alternatives for investors is to invest in BTC or SRBTC, then individuals who have a certain fraction $$ of their wealth already invested in BTC, will invest new money in the original chain, whereas the individuals whose current wealth invested in BTC is less than the $$ fraction will invest new money in SRBTC. 2. The second game shows that if there is a third alternative for investment, which is cash that is losing value (inflation-adjusted) by a percentage $$, then the investors who had less than $$ fraction of wealth in Bitcoin, will invest in SRBTC only if the dilution of SRBTC is large enough (as an increasing (linear) function of $$). Here by dilution we mean the new SRBTC tokens that are allowed to be eventually mined in the fork. 3. The third game shows that investors would prefer a fork of Bitcoin over a replica of Bitcoin that doesn't value original BTC, when both are available and even if both are backed similarly by one or more nations.