The first time I heard about Bitcoin was in 2012. I was working at Google and I happened to walk into a conversation with a few engineers. They were talking about mining the cryptocurrency and storing it on an external hard drive. I had no clue what they were talking about. It felt like I was invited at a “dîner de cons” and I was the special guest. Since that moment, I’ve always been interested in Bitcoin while knowing only the most basic facts about it.
Fast forward to the crypto craze of 2017 and it seemed that it cryptocurrencies was the only subject being talked about. I spent more time learning about it and even dabbled in some investing. A quick disclaimer, I’m not an expert and I’m not pretending to give financial advice. I’ve very much been interested in the applications of the technology and its potential impact.
While the price of Bitcoin has been hitting all time highs in the past month, it is not the price movement that is most interesting to me (although it does help). The digital currency’s ability to preserve its value and gain more believers is quite remarkable. I believe that there are two key components that make Bitcoin really powerful, its technology and its theology.
Is it better than fiat currency?
From a purely technical standpoint, well yes. The digital currency is better in almost all aspects. It can’t be manipulated and is (until now) unhackable. It’s also verifiable by anyone. Another interesting element is its digital scarcity. There is a predictable, transparent supply schedule which can’t be compromised by unexpected supply increases. A big blocker is the transaction speed but many people are working on it. I’ve provided further reading at the bottom and won’t go into too many details. The technical aspects are very well covered. Yet, technology is only one side of the coin.
The power of a story
The most important reason for Bitcoin’s appeal is the choice of its founder(s) to remain anonymous. The currency was created under the pseudonym of Satoshi Nakamoto. This in by itself is a powerful statement. It does not belong to any one single person – it belongs to anyone & everyone.
Even the online BTC fan clubs can’t claim possession – they can simply profess their faith. That’s the beauty of it.
I’m a bit confused, is bitcoin a digital currency or a religion? ????
— nectarios (@nectarios) May 28, 2019
This creates a certain myth and aura around the currency that is uniquely powerful.
Even the kind and intelligent creator of Ethereum, Vitalik Buterin is a real dude. He can claim to possess certain virtues but he is a person in the flesh. Therein lies the power of Bitcoin. It was the first cryptocurrency created and was done so anonymously. By its very nature, it can’t be manipulated and is censorship resistant. The combination of these two make for a radically compelling narrative – and for a currency to be adopted, people need to believe in it.
Questions I still have
Beyond being a reputable store of value, there are more questions I have and reading I need to do.
- Does Bitcoin ever grow beyond a store of value and how?
- Given there is a limited supply released on a set schedule, can it solve the need for the economy to grow at all costs?
- Governments have monopolies on violence and monetary policy, what happens if they feel threatened by the currency?
- How does adoption grow beyond tech savvy investors?
While writing this post, I felt like I was late to the party but upon deeper reflection, we’re still tremendously early in the digital currency’s history. It will take many more years for it to gain wider adoption. We’re already seeing many companies shift large sums of their balance sheet into Bitcoin and this will likely continue.
I’m bullish on the long-term prospects. People don’t need to understand any of the technical complexities as long as they believe it. The story is what makes its special – and enduring.
Given the topic’s complexity, I’ve had to read a lot just to have a cursory understanding of the matter. Here are some articles that I found useful.
The bullish case for Bitcoin – Vijay Boyapati
Money, Bitcoin and Time – Robert Breedlove
Apéro Bitcoin – Thibaud Maréchal
The investment case for Bitcoin – Anthony Pompliano