But Bitcoin Doesn’t Produce Anything — YES It DOES, a Better World
video: But Bitcoin Doesn’t Produce Anything — YES It DOES, a Better World
A friend messaged me the other day to discuss crypto.
“Remind me, wasn’t crypto supposed to be a replacement currency. Well, no, it’s not.
It’s going to be a diversifying asset. Well, no, it hasn’t been.
And now we know it isn’t an inflation hedge either.
I’m not totally out, but I’m not convinced it serves a huge purpose. The biggest issue I have is that it doesn’t produce anything, there’s no cash flow. Explain why you’re bullish.”
And as I’m sure many people are asking themselves similar questions, I’ll be addressing these questions, right about … now.
First of all, I don’t care about alt-coins at all, only Bitcoin.
It is, by far, the strongest of all the crypto assets, and similar to when I foresaw Google being the dominant search engine with a 90% market share, I’m not going to waste your time, or mine, trying to figure out which other coin is going to emerge as Bing.
So, the question: Why Bitcoin?
It’s one of very few crypto assets that is entirely decentralized.
What does being decentralized mean? No individual or group, controls it.
Conversely, if I want to take over the ethereum protocol, I can put a gun to the head of its creator, Vitalik Buterin, and a few others, and be fairly certain they’ll comply with my instructions.
Klaus Schwab and the Commies realize this, which is why Bitcoin is so “problematic” for them, as there is no individual, or group, to coerce, or to kill.
It’s like a Chinese made virus released into the world that can’t be eradicated.
However, in this case, it inoculates the world against the totalitarian control of the elites, a subject I’ll be addressing shortly.
- Network Effect
The more people come into the bitcoin space, the more developers derive benefits making it more robust and easier to use, which in turn generates greater number of users, and like a snowball rolling downhill, in a virtuous cycle, the protocol gains momentum, and continues to expand its gravitational force.
The larger the network grows, the more valuable it becomes; it’s called a network effect and with hundreds of millions of souls around the world having either used bitcoin as a payment method, or owning some, bitcoin’s gravitational pull has grown exponentially over the years.
- Talent Pool
For many, including myself, bitcoin is thought as the life raft of freedom, and people like Jack Dorsey, the founder of Twitter, have made it their life’s mission to expand the reach and viability of bitcoin.
Money is not the incentive, it’s the conviction that they are benefitting mankind unlike any other pursuit they could choose.
It is a protocol that is unlikely to ever be changed, though lord knows the powers that be have been trying; from the block wars which were waged from summer 2015 to fall 2017, to China banning mining of it within its borders, to the ESG cudgel of today.
Bitcoin has weathered these, and other storms, making it increasingly “anti-fragile”, a term coined by Nassim Nicholas Taleb that means the more adversity a business or an idea faces and overcomes, the stronger and more resilient it becomes.
- Fixed Supply
The supply of bitcoin is fixed by math, electric power, and protocol. This means it cannot be debased or inflated away like the US dollar or Venezuelan bolivar can when the elites get their hands on the levers of power.
What does Bitcoin Produce?
If, in 1990, I told you that getting letters from friends in the mail, would be entirely replaced by a digital messaging technology, cost next to nothing, and would arrive instantaneously? Would you not have the foresight to agree that E-mail would bring tremendous amounts of productivity growth to the world?
Similarly, bitcoin is on the precipice of obliterating snail mail Western Union from the planet.
My maid in Los Angeles, would send money home to her family in El Salvador, and the total cost, from send fees, currency exchange, gas and transportation costs, paying off the gangs for the right to enter Western Union office to receive the cash, end up costing her 30% of her meager earnings to the middle men.
A charge administered to some of the poorest people on the planet
Today bitcoin and the layer II lightning network built atop it, enable, with a click of a button on a $50 mobile phone, instantaneous and nearly free remittance payments.
Those of us fortunate to be US citizens have American Privilege. We can zap the current world reserve currency, the US dollar, to our friends, to other lands, for low low costs.
Only a small percentage of the world has had this luxury, the rest pay the high fees; that is if they are able to transact at all.
Bitcoin levels the playing field, and using the aforementioned layer II lightning network, most people are completely oblivious they are using bitcoin rails.
You cannot possibly argue this doesn’t make the world a better place … Unless of course you are the CEO of Western Union.
Mastercard + Visa Fees
Whenever you swipe your Visa or Mastercard, the merchant gets charged about 3% of the transaction, and if you’re a coffee shop in Costa Rica, where I lived until recently, the 7% fee is reflected in the high prices there.
To be fair, credit cards have provided benefit to society. The user doesn’t have to carry around his paycheck in cash, which if known, would soon lead to a mugging.Similarly, the merchant doesn’t have to take the time, expense, and risk of moving around large chunks of currency.
Plus there’s the convenience and speed of the transaction.
On the down side, a lot of people end up paying 30% interest on the loan, making them defacto slaves to the bank, and the merchant doesn’t even get the cash in their bank account for well over a month after the transaction takes place.
Now say you’re McDonalds in El Salvador.
The government legalizes bitcoin, and using the lightning network, the cost of each transaction for the merchant gets reduced to a fraction of a penny, and that money is added to your account instantly. Meanwhile, your profits, and remember we’re talking about fast food, a notoriously low margin business, expand dramatically.
No matter in what country your business resides, wouldn’t you prefer to be paid via this method.
Would you not offer some form of incentive to induce this form of payment? You have the added margin to do so. And if you and other merchants do what is in your best interest, wouldn’t this speed up bitcoin’s adoption.
Similarly for the Salvadorian citizen, a country that prior to introducing bitcoin as legal currency, had 70% of its citizens unbanked, the bitcoin wallet on their phone marks the first time they’ve been able to conduct business without carrying around cash.
Now flip those bank account numbers: 70% of Salvadorians are banked today, with a mobile phone acting as the vault and ATM.
How can a technology, a protocol, that benefits both parties to this extent, not catch on like a virus? How in the world do you propose to stop it with the incentives offered on both sides of the transaction?
There still might be a case to use centralized credit processors, if you want certain consumer protections, but for most daily transactions, bitcoin and the lightning network, are going to take a serious bite out of Visa’s business model.
Inviolable Store of Wealth
He who controls the gold, controls the world.
Many kings and nation states have taken this to aphorism to heart, and made the plunder of the precious metal part of the game theoretical calculation when deciding to invade another sovereign, knowing that they could use the seized asset to pay the cost of the war, or for their own hedonistic spending.
With bitcoin, there is nothing to seize. iIn the unlikely event I fear you might find a way to gain access to my private key, I can zap it anywhere on the planet in a millisecond. Doesn’t this change war’s calculus?
Now, let’s take a look at a higher resolution, down to the level of the individual.
If I store my wealth in cash or a Rolex watch, you can hold a gun to my head, and if I don’t comply, merely pull the trigger and take what was mine.
If I have my bitcoin stored on a hard drive, or better yet a multi-sig system, you shoot me and you walk away with zippo, because the keys die with me.
Bitcoin reduces the incentive for real world violence.
““Sure,” you say, “but modern banking is just done with zeroes and ones. The days of the plunder of nation states has ended. And as for me individually, I’m secure, I have my money at the Bank of Montreal.”
As for the plunder of sovereign countries for wealth, they’re still invaded for natural resources, like oil, but its increasingly coming in the form of cyber attacks, whether for technological secrets, (hello China,) ransomware, or draining funds from institutions asleep at the wheel.
And as for your current wealth, you don’t own it. The state is merely nice enough to allow you access to it, so long as you’re a good little boy or girl.
Take Canada, which froze the accounts of not only participants of the Freedom Convoy, protesting the draconian and authoritarian vaccine mandates, but anyone who dared to have the audacity to donate to them.
I emptied every dime in my Canadian bank account as quickly as I could. They are flat out openly letting you know, Turdeau and his commie allies are coming for your property rights. You’ll own nothing and you’ll be happy.
I point this out to some Canadians and get mocked as a conspiracy theorist and then arrogantly preached to by those who claim that since they weren’t the ones stopping traffic in Ottawa, they have nothing to fear.
These brilliant thinkers don’t understand that if someone with a political ideology opposite to them takes over the reigns, they could easily use the precedent set, and seize their funds for merely donating to the opposition, or the indiscretion or holding views, they find “unacceptable.”
The BLM/Antifa riots of 2020 lasted far longer, killed people, and did billions of property damage. Even despite the vastly disproportionate destructive force compared to the Freedom Convoy, these morons would be signing a different tune if Donald Trump had frozen/ seized their assets for donating $25 to BLM.
Good news though for Your Property Rights. That is if you own bitcoin.
Combatting state seizures and cyber theft is the incentivize structure designed into the bitcoin protocol.
If you and I are miners of bitcoin, we are competing, using real world electricity, to reap the block reward doled out every ten minutes.
In doing so, we are both increasing the cost to a third party who wants to hijack the system.
That means, even if we are sworn enemies, be that Iran and Israel, Yankees and Red Sox, or Elizabeth Warren and honesty, it’s a forced synergy. I work in my best interest, you work in yours, and in doing so we are working together to protect the wealth of everybody who owns bitcoin from a cyber-attack.
Unlike cash, Rolex, or gold, so long as you don’t keep your bitcoin on a centralized exchange, it’s virtually impossible to steal your wealth from you. Try as they might, neither Turdeau, Donald Trump, or the King of China, can gain access to your private wallet.
Furthermore, your wealth is transportable. Think of trying to move a million dollars worth of gold across borders. Even if you were strong enough to lift it off the ground, you’re not getting through security checkpoints, or past any armed gangs.
Think of some of the German Jews as Hitler rose to power, who might have even read Mein Kamf, and overrode their intuition that things would never get as bad as the state systematically exterminating them. Why? In part because they didn’t want to leave their house behind, their currency, all of value.
Or perhaps they did flee, leave their assets behind, and had to start over from scratch in America.
Present day, it’s difficult to move your Los Angeles house to South America if Gavin Newsom decides to tax it at 50% per year, but your bitcoin, walk on a plane with your seed phrase memorized and you don’t even need a hard drive, just reconstitute it when you arrive in Colombia.
The same thing is going on in Ukraine today, as millions of the countries citizens have fled to Poland and other nearby countries. All the possessions they left behind, their house, that which they could not carry on their backs, might not be there when they return, if they are ever able to.
With bitcoin many of them were able to transport their wealth with them on their phones.
Not only is bitcoin, if stored securely, an inviolable asset, you get to take it with you.
It Yields No Cash Flow
My friend’s claim that the asset produces no cash flow, is categorically false.
You can already lend out your bitcoin, for example as collateral for someone else’s loan, and earn yield.
It’s not something I’m willing to do, as the earnings don’t justify the risk, clearly demonstrated from those who put their coins up on Celsius, or into Terra Luna which have imploded, but you can earn yield on the asset today.
However, as bitcoin infrastructure develops, so too will the opportunities to earn cash flow from your HODL.
When the airplane was invented, few saw it making any difference in a war.
None other than Nobel Prize winning economist and frequent NY Times columnist, Paul Krugman, predicted the internet would create no more value for society than the fax machine. Few predicted in 1988 your giant brick of a cell phone would be speaking to you, navigating you on a road trip across the country while you listen to Jordan Peterson’s 12 Rules for Life on Audible.
Although various people made correct predictions on all these subjects, they take TIME to bear out, to come to fruition.
The whole reason that gold became the currency and reserve asset of the world is because the supply of it was the most limited out of all the other possibilities and because it maintains its physical form over millennia. If you wanted to increase the quantity of gold in circulation, at least the mining and production of it took work and effort.
Bitcoin does all that gold does, except 1000 times better.
Bitcoin is infinitely divisible, able to be sent around the planet at the speed of light for fractions of a penny, weightless, and the supply is actually Fixed, whereas gold continues to be mined, and whop knows if alchemists will ever to be able to create gold in a lab.
You can print the US dollar to infinitum, which is exactly what the Biden administration is doing, but you cannot print or create any more bitcoin other than that which continues to be programmatically released in the form of the block rewards.
And yes, right now, as the Federal Reserve raises interest rates, liquidity is being drained out of the system, and crypto assets, including bitcoin, which used to suck it up like a sponge, are getting wrung out, but over the long run the reserve store of value will revert to an asset that cannot be controlled by a central authority, and not debased by the printing press.
The US dollar has the waning might of the growing woke US military backing it, Bitcoin has math. Which will have Universal relevance in a thousand years?
Again, just because a new technology and massive advancement for humankind doesn’t fulfill its potential in its initial stages, just wait and allow the gravitational forces to play out.
Even if fiat money like the US dollar aren’t supplanted entirely by bitcoin, there is a solid chance that bitcoin becomes the reserve asset for central banks around the world to store within their vaults.
So for all these reasons, I am very bullish on bitcoin. I love bitcoin because it is a life raft away from Chinese and Canadian totalitarianism.
I love it because it opens up the ability for Africans, Salvadorians, and SE Asians to actually have a store their wealth without the government being able to seize it.
I love it because of it’s beautiful and tested design, and proven anti-fragility.
I love bitcoin because it might put a check on violence and government spending, and its incentives induce cooperation between adversarial entities to insure the security of everyone’s wealth, and I’m grateful that it is a store of wealth that can be transported across the borders of Ukraine, Syria, or Canada when democracy comes under attack.
Be patient and let the beauty of the design, and the viral aspect of bitcoin infect, and better the world.