After my last post about Bitcoin, I got a lot of, “So… Bitcoin?” No one has a concrete opinion on this thing except the evangelists, but everyone wants to discuss it. Skeptics seem more concerned about staying in their lane than dragging down crypto – they don’t understand it, they don’t need it, and maybe it smells a bit fishy to them. I think crypto is an elegant solution in search of a problem and I am constantly reminded of the early internet. We didn’t see the use of the internet at first, but today it’s a basic utility. Here’s how I’m looking at Bitcoin right now.
What is the Purpose?
It’s a way to store wealth. This is particularly handy if your centralized currency authority is devaluing/confiscating. With fewer institutions between transacting parties (basically just the network), Bitcoin is a fast and cheap way to send money to someone else. Compare sending Bitcoin versus a wire transfer, particularly internationally, and you will see a clear case for Bitcoin. I think the buzz around Bitcoin makes people expect that it is something more than what it is. The real magic is in the blockchain concept – a decentralized network working together towards a common application using a defined set of rules. If the buzz was around blockchain with the understanding that Bitcoin was just one use, there would be less hysterics.
Where is the Value? Why is this Worth Anything?
Keep in mind that value and price are two different concepts. The value lies in that it is decentralized, permission-less, and anonymous. These things are not valuable currency traits in the United States, but Bitcoin applies a rule of law to wealth which is valuable for people whose native institutions don’t necessarily provide that.
What if Bitcoin gets Hacked / Mt. Gox?
This was a huge concern of mine before I actually researched Bitcoin. Due to its decentralized nature, a “hack” is astronomically difficult. The more likely targets are the exchanges, which is what the Mt. Gox issue was. If you’ve done 5 minutes of research on crypto, you’ve seen the warnings not to leave large amounts in an exchange due to this concern. You can “cash out” of the exchange by creating a virtual wallet. The wallet can be stored on hardware similar to a USB stick or even on a piece of paper.
The shoe shine guy just asked me about Bitcoin – is the bubble about to burst?
Let’s look at it like this: What if the shoe shine guy asked about Netflix? If he was asking about Netflix the stock, I’d be skeptical and say it’s likely over-valued. What if he was asking about Netflix the company, though?
The buzz around Bitcoin falls first on the price. Yes, it is up approximately a gazillion percent and we are required to repeat the anecdote about the $73 million pizza. Then the conversation turns to WTF is Bitcoin and everyone shrugs their shoulders. Now we’re suddenly talking about the utility of Bitcoin rather than the price. That utility is not readily apparent. It reminds me of the 2000s (or whatever we’re calling it) when we questioned why we would subscribe to get DVDs in the mail when we could go to Blockbuster. Or why would I want my music or a camera on my phone? If someone is asking about Bitcoin, think about whether they’re asking about Bitcoin’s price or Bitcoin’s utility. I’m finding that price is what people are using to break the ice to ask about crypto. They’re signalling that they know about Bitcoin by mentioning volatility or the latest story when they’re often truly after information on why they should use it.
Let Me Know
I own a very small amount of crypto-assets because I’m interested in how it all works – the same reason I started this blog and built my own computer. I don’t have a dog in this fight except that I think crypto is fascinating and I can’t wait to see what comes of it. There are hucksters launching ridiculous ICOs (marketing reminds me of the Fyre Festival), but this space is also attracting talented creatives who are coloring outside of the lines.
Not only do I have a dab of Bitcoin, but I hold (or hodl) some other cryptos, too. Ethereum is a building block platform that has set a standard in crypto for developers to hitch their ideas to without having to recreate the wheel. Ripple aims to be a kind of institutional Bitcoin. Funfair is a totally wild idea built on the Ethereum platform – gaming outside of the transaction block. Ark is a token that “listens” to other tokens and aims to get different cryptos to work together – really cool concept. I think other cryptos like Bitcoin Cash or Iota are interesting, but if I put $5 in 50 different things, I would have gotten overwhelmed.
One last thing: I don’t recommend buying into crypto at all. If you do, you should do more research than just reading other people’s opinions (including my own!). My previous crypto post has some good starting places.
Is there a crypto I should look into? Am I just plain wrong about all this? Let me know on the Twitter dot com or email me – matt at matthewgarrott dot com.