bitcoin – Page 3

If gold were just like bitcoin…

Bitcoin Gold

Many people think of bitcoin as digital gold. And that is true, but bitcoin is also much more. This misunderstanding is part of why bitcoin is still so undervalued.

For example, bitcoin is both a bearer currency and a payment network. It’s like the USD + PayPal, if they were inseparable from each other. Admittedly a very imperfect analogy.

But I want to pose a thought experiment:

What if gold were exactly like bitcoin? What if a gold bar or a gold coin could do everything that bitcoin can currently do?

If gold were exactly like bitcoin…

You could send gold to anyone in the world, anywhere in the world, in 10 minutes, for less than $10 (as long as they had an internet connection)

You could send the tiniest fraction of gold or a suitcase full, and it would be just as fast, cheap, and easy to send

With a simple computer program and internet connection, you could instantly verify whether the gold you have is real or fake, at no extra cost

Anyone in the world could instantly verify how much gold existed in the world, and exactly how much gold was held by each owner (each wallet)

Anyone in the world could also see every time new gold was minted, old gold was destroyed, or gold was sent.

You could carry any amount of gold that you want, to anywhere in the world, just by memorizing or writing down 12 unique words. No need to worry about gold’s heavy weight, or risk of confiscation, or losing it in your checked luggage.

Right now, there are people around the world working to improve this “gold”, and everyone who holds some can enjoy the improvements. So if someone devised a way to make sending gold cheaper or faster, every gold holder would enjoy this upgrade.

People are also working to build products and services on top of “gold”, that make use of its many unique features. For example, someone could build a tool that allowed you to temporarily lend small fractions of your gold (the lightning network), and in return you would earn more gold for providing this service. And anyone who holds gold could use this tool

You would know exactly how much new gold is mined around the world, every minute, hour, and year, and by exactly which miners. Further, every 4 years, the rate of newly mined gold would drop by half, in perpetuity

Finally and perhaps most importantly, you are certain that there will only ever be a maximum of 21 million “gold” units in the world, and that is also public and independently verifiable

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If gold were bitcoin… but gold is not. It can do none of those things. And that is why, slowly and inexorably, bitcoin will win in price and mindshare and adoption.

Bitcoin is gold with wings. Or conversely, gold is like a dumb bitcoin.

There are many more differences that I have left out. But I hope it’s an interesting thought experiment.

Note: of course, there are some benefits to physical gold that bitcoin doesn’t have. For example, gold has materiality. Gold has some niche industrial uses.

Sensible view on what’s likely to happen with bitcoin next year

Fan of their writing and analysis: https://capriole.com/issue-33/

To quote:

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So, we have three incredible catalysts on the very near horizon:

1. The best inflation hedge and hardest commodity known in a macro environment with the tightest economic conditions on record which is primed to pivot.

2. Institutional regulatory status and on-ramps with imminent ETF approvals by the SECs

3. The Halving event, forecast for 16 April 2024.
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Of course everything could go the exact opposite way — such is markets. Plenty more shoes that *could* drop, but I find it unlikely we’ll see sub-$20K Bitcoin again before we see 6 figures.

Is money always remade by powerful new technologies?

roblox-robux

In Lyn Alden’s fantastic new book Broken Money, she talks about the natural arc of money towards increasing “hardness”. Any time there’s a new form of money — say, like rare pearls — the ingenuity and incentive of humanity is to find a way to “break” that money by, for instance, developing new ways to harvest and grow the oysters, or manufacture fake replicas, or travel far distances to collect more for less effort. In her (and others’) estimation, this is perhaps the primary reason gold has remained the hardest money for thousands of years. It still hasn’t been broken — but that could change in the future if, for example, we developed asteroid mining or found massive new gold mines.

Anyway, it got me thinking that perhaps new technology is what really drives the development of new money. Gold is an outlier, and we just haven’t yet developed the technology to enable cost-effective gold production or scalable asteroid mining.

The question I’m asking myself is something like — do powerful new technologies almost inevitably lead to the creation of new monies? I use the word “technology” in the broad sense, to quote one of my favorite simple definitions, “technology is anything that breaks a constraint”.

A brief and incomplete history of money follows:

Nature’s commodities eg, shells, teeth, shiny rocks – these required the (then novel) technologies of finding, harvesting, cleaning, storing

Metal coinage – the technologies of mining, smelting, minting, verification

Paper money – the technologies of paper making, writing, printing press (printing @ scale), counterfeit methods

Fiat money – the technologies of nation states (that could organize, distribute, and track it at great scale), distribution networks, telecommunications networks

Bitcoin / Ethereum – the technologies of the internet, cryptography, encryption, digital mining, distributed systems

All of these new monies were the products of new technologies, which both enabled their creation, while also rendering older forms of money either “broken” or inferior.

**On a somewhat related note, think about in-game currencies like Robux in Roblox. The game of Roblox is not a new general purpose technology, but rather an application of many technologies, yet it is cutting edge, and though Roblox the game doesn’t *require* Robux the money to function, it feels like a natural moving forward, in much the same way that humans evolved to prefer burgers and bagels though we could technically eat nuts and plants

Alright I’ve rambled enough. Just wanted to get some thoughts down on blog.

I ask the question because for me, the above conclusion implies that as powerful new technologies are developed, they may inevitably lead to the development of new kinds of money. On the horizon I see technologies like AI, VR / metaverse, bioengineering, and many others (known and unknown). And aliens, of course. Hopefully wise and peaceful ones.

🤔🤔🤔

Why 21 million bitcoins? “I ended up picking something in the middle”

Another fascinating glimpse into Satoshi’s thought process:

My choice for the number of coins and distribution schedule was an educated guess. It was a difficult choice, because once the network is going it’s locked in and we’re stuck with it. I wanted to pick something that would make prices similar to existing currencies, but without knowing the future, that’s very hard. I ended up picking something in the middle. If Bitcoin remains a small niche, it’ll be worth less per unit than existing currencies. If you imagine it being used for some fraction of world commerce, then there’s only going to be 21 million coins for the whole world, so it would be worth much more per unit.