Hermetica Manifesto

The world is at a pivotal moment. Our financial system is undergoing a fundamental transformation as all money and assets shift into digital form. We face two possible futures: one centralized and permissioned, the other decentralized and permissionless.

Both systems already exist in various forms, but only one will define the future of global finance. The question is: Which one of the two is more desirable? Which one should we be cheering on to win the battle?

We believe the answer lies in economics. The financial system that generates the most prosperity for humanity is the one that should, and ultimately will, prevail. That system is decentralized and permissionless.

Decentralization reduces the risk of rules benefiting only a few at the expense of the many. It allows more people to engage in economic activity, increasing total output and unlocking the potential for significant global economic growth. By providing equal access to payment rails and financial services, we can create a more inclusive and prosperous world.

So why haven’t we created a decentralized permissionless system yet if it comes with desirable advantages? The answer is Survival.

Financial systems must be resilient enough to withstand attacks and resist co-option. History is full of decentralized systems that succumbed to centralization due to inherent weaknesses. The Gold Standard, for example, started decentralized but was eventually centralized because of logistical costs. For a decentralized system to survive long-term, it must be built on incorruptible foundations. 

That foundation is Bitcoin.

Bitcoin’s permissionless structure, governed by a distributed network and protected by proof-of-work consensus, makes it incredibly difficult to manipulate. This makes Bitcoin the ideal base layer for a financial system that can endure for centuries.

A financial system is more than just a store of value; it’s a network of services. As history shows, the network with the biggest network effects always wins. To dominate, a new financial system must not simply replicate existing services, but offer a superior alternative that is faster, cheaper, and more accessible. Only then will enough users adopt it to tip the scale and allow it to dominate.

To fully realize Bitcoin’s potential, we must build Bitcoin-native decentralized financial services (Bitcoin DeFi). Bitcoin DeFi offers a path to financial inclusion, unlocking services once reserved for institutions and the wealthy and making them available to everyone. It expands Bitcoin’s utility while preserving the decentralization that makes it powerful and resilient.

At Hermetica, we are committed to pushing Bitcoin DeFi forward and broadening its network effects. We aim to build an open financial system that unlocks services for everyone. However, to create Bitcoin-native DeFi, we must address infrastructure. Should we build on Bitcoin’s base layer, or on Layer 2?

To create a financial system capable of mass adoption, we need six key components:

1. A way to digitally represent money and assets (fungible and non-fungible)

2. Strong finality — confidence that transactions cannot be reversed

3. Smart contract functionality for complex financial services

4. Trust-minimized ways to move assets from the mainchain into smart contracts

5. Fast confirmation times for responsive user experiences

6. Low transaction costs to support a broad user base

Bitcoin L1 provides digital money (BTC), token/NFT primitives via Ordinals and Runes, and finality through its consensus mechanism. However, it lacks smart contract flexibility and is hindered by slow confirmation times and high fees.

Layer 2 solutions solve these issues by offering programmable smart contracts, fast transactions, and scalable infrastructure. The optimal system is one that settles on Bitcoin’s main chain for finality, while transacting on Layer 2s for speed, flexibility, and cost-efficiency.

This future is already taking shape.

A range of Layer 2s, including Stacks, Mezo and Arch, are building the infrastructure needed to create a secure, decentralized, permissionless financial system. These systems leverage Bitcoin’s security while offering a best-in-class user experience with fast, cheap transactions and fully expressible smart contracts.

Only through Bitcoin Layer 2s can we unlock Bitcoin DeFi at a global scale. Only Bitcoin DeFi can replace today’s outdated financial systems. We’re not just imagining that future, we’re building it.

At Hermetica, our mission is to enable global financial freedom. 

We believe a decentralized, Bitcoin-powered financial system has the power to empower individuals worldwide, giving them access to the tools needed to thrive. The path to financial freedom is open to all, and Hermetica is at the forefront, creating a system that works for everyone, everywhere.