It’s been an exciting year for bitcoin.
At today’s price ($15,210), bitcoin has seen a 100% gain in its price movement with 50% of those gains happening in the last 30 days alone. It’s not surprising. What we’re seeing is a response to the global uncertainty and lack of confidence in governments around the world and their handling of the coronavirus pandemic.
More specifically, what we’re seeing a response to the political turmoil in the US and the current status of the presidential election. A bet on bitcoin, is a bet against the USD. Bitcoin is affirming itself as a ‘flight to safety’ asset synonymous with digital gold.
As the price of bitcoin moves up, new waves of investors seem to get interested again and my phone starts pinging with a fervor of people asking questions about crypto, bitcoin and whether now is the time to be buying some.
I wrote this post in order to answer those questions and primarily answer what makes bitcoin unique, what makes it different and why I’m so bullish on what it means for the future of how we think about money.
1. Decentralized trust
The essence of bitcoin is the ability to operate in a decentralized way without having to trust anyone. - Andreas Antonopoulos
For the first time we have a mechanism that allows unknown actors from around the globe to be able to transact with one another without any intermediary or trusted third party. Nobody needs to sit in the middle of the transaction; nobody needs to authorize the transaction and nobody needs to know what the transaction is for. It doesn’t matter who the sender is or who the recipient is. Everyone on the network is treated equally.
This is at the core of what I believe bitcoin produces - decentralized trust - and is incredibly powerful.
2. Censorship resistance
As trust is now built into the design of the network and no single actor can censor, collude, blacklist or restrict anyone from participating in and transacting on the bitcoin network, no transaction can be censored. It either complies with the rules of the bitcoin protocol or it doesn’t. If it does, it’s a valid transaction. No freezing of funds, seizing of assets or deciding tomorrow that the money that you have in the bank is no longer yours.
Your assets are yours and only yours (provided you control your private key). It’s obvious to see why the majority of governments around the world response to this core design was seen as a threat and why many governments still resist the inevitable. As a son of immigrant refugees, I heard firsthand stories of my family being given 72 hours notice to leave the country they were born and raised in and to take nothing more than what they could carry on their backs, losing everything overnight.
Bitcoin doesn’t understand nationality and it doesn’t understand borders. It is a global, transnational currency built for an interconnected digital world. It is a currency built for a world filled with digital global citizens. One bitcoin in South Africa, is one bitcoin in Costa Rica and one bitcoin in America. Carried with you wherever you go, always available and accessible for as long as you have your private key.
There is no sending money from one country to another. No need for rent seeking foreign exchange conversions through third parties. No currency manipulations. No need to wait three to tens days for your money to arrive in a new “foreign” bank account.
A simple comparison is to think of paper post vs cloud email. Paper post is slow. It requires multiple people to handle it along the way from the sender to the recipient. It’s clunky. It’s expensive. Cloud email is always on and sending is instant.
Your bitcoin is like email.. always there, secured, accessible and available, 24/7 on the global network.
4. Programmable Money
The money that we all grew up with and know is dumb money that was built for an analogue world. As the internet grew and software has eaten the world, we’ve adapted these systems to interact with money that seems digital but as a matter of fact is not.
Bitcoin is the first innovation to changed this allowing a truly digitally native currency to be born. This allows complex contracts to be written straight into the code enabling machine-to-machine communication and execution of the transfer of value automatically and in realtime. We are only now starting to see the power of what programmable money can do with completely new financing, lending, payment and infrastructure models being developed and built, drastically redefining how these systems work. While there are challenges in how much scale the bitcoin network can handle simultaneously, bitcoin brings the promise of programmable money with it.
5. Digitally scarce
One of bitcoin’s core technical innovations is that it created - for the first time - the ability for a digital good to be scarce. Written into the bitcoin code is that there will only ever be 21,000,000 bitcoin.
That’s not even enough for every millionaire in the world to own just one bitcoin.
Bitcoin’s scarcity, and the inability to ever produce more, is what ultimately will drive bitcoin’s value over the long term as more and more people and institutions begin to believe in bitcoin and invest in its ownership.
We are already seeing this trend taking place. What started off as a few cypherpunks being the first people to hold bitcoin, then moved to some technical believers, then high net worth individuals, venture funds and now large scale listed organizations (e.g. MacroStrategy & Square) with the price of bitcoin moving from $0.10 to $15,000 today.
How long till we see governments themselves moving from holding gold and the USD to Bitcoin? I predict, sooner than you think (within the next decade).
For me, bitcoin signifies a paradigm shift in how we view money and the entire ecosystem that surrounds it. I don’t believe that we’ve even begun to see the impact that this radical technology will have on the world and we haven’t yet imagined the full set of possibilities, so I’m extremely bullish on what that long-term potential looks like.
Now if you’ve read this far and if you’re still asking.. well is this a good time to buy bitcoin? I’ll answer that question with a not-so-old saying and you can decide for yourself.
The best time to buy bitcoin is 10 years ago, the second best time, is today.*
Oh and here’s a nice chart courtesy of Flinch