Multi-Million Dollar Bitcoin
The Big Opportunity for Innovative Investors and Advocates of Distributed Political Power Alike is to Repeat After Me: “a Bitcoin is Measured in Millions of Dollars…”
If, as an innovative investor, you are reticent to endorse BTC, know that I’m right there with you. There are many reasons why Bitcoin is not the best crypto-asset choice from a technology standpoint, a troublesome fact given that this crypto-space is driven entirely by being the cutting edge of the technology behind political power (i.e. money). On the other hand, if BTC fails to become established as global de facto store of value, the entire crypto-space and all the possibility of that new ecosystem will collapse in the short term. Even if I wish that BTC was a better technology, do you really think the global marketplace is going to align on a single new store of value among the many new altcoins in the absence of Bitcoin? And if we cannot, crypto-assets will never compete with gold which has thousands of years of dominance as store of value. If no credible store of value is achieved, can we expect to fulfill on the other benefits of distributed currency, not to mention the myriad of less obvious blockchain applications?
Now, there are many store of value technologies out there (like ZEC, VRN) which are quite literally brilliant and could gain significant market share on the shoulders of BTC. I’m not saying other store of value propositions will not come into use as such. But the health of the ecosystem depends on the reputation of the only coin that all others are “alt-” in relation to, the only community of miners that has already withstood years of attack and battle testing, the only store of value that has a level of global security and distribution today which is sufficient for the global 0.01% of the wealthiest players to store their wealth. Even Jamie Dimon had to step back his disdain of Bitcoin in the face of its current market power, even if just as the de facto traiding pair for all other cryptocurrencies on every single market.
In terms of scalability, I love what the venerable Andreas Antonopoulos tweeted about Bitcoin energy consumption: “Madam, I’m concerned about the progress of your pregnancy. At current rate of growth, your belly will be the size of this building in just 5 years.” The point is that the “if things continue as they are…” logic is faulty, if tempting. We know that the architecture of our brains is designed to extrapolate, using aggregated past experience to define future outcomes. We can’t help it at a “gut” and thus “crowd” level. Bitcoin energy consumption is itself a scalability issue (go BURST coin) but one which I have little doubt will remain equivalent to the energy used by all banks, credit processors, wire services, their branches, even gold mining which will be taken partially offline by the emergence of BTC in the long run. One conservative analysis I read calculated that today BTC uses about 1/6th the energy of the equivalent traditional banking electricity, although that fraction is growing quickly and the calculation is fuzzy, at best.
So how could scaling issues work themselves out? The million dollar bitcoin could be the answer. Think of bitcoin as something that will only be accessible to the market whales, to settle multi-million dollar accounts, including those of large crypto-networks which benefit from a decentralized deflationary and transparent store of value which is orders of magnitude larger than any single network.
The rest of us non-whale players will use more accessible, deflationary crypto-assets to store our wealth. Our bank will offer a crypt-savings, for example, where we will watch savings gain value in the local currency denomination of our choice. In addition to benefiting from true deflationary store-of-wealth options, new cash networks for fast, cheap, secure transactions will soon come online. These will feel just like debit/credit cards but without noticeable fees and increased privacy. Even stock trading will be accessible from our mobile devices, without any broker or trader or bank. We will buy directly from sellers whether that be a used bicycle, ride share, intellectual property, stock options, a car, even a home.
Now is a limited window to buy what will become a very expensive coin, before it floats out of reach as the only coin used for multi-million dollar transactions. Those markets can afford thousand-dollar fees and potentially slow transfer times to settle large accounts or store wealth in a proven deflationary asset. Bitcoin will remain a market for only HODLers (what are called ‘low velocity’ markets) where miners get paid handsomely for a handful of transactions per block. Those that are mining bitcoin will become a new class of the richest people globally, and with all their wealth ultimately linked to BTC (even if just in image, at first), they will be incentivized to ensure the long term strength of this infrastructure. The high fees and slow times themselves along with the emergence of much more technologically savvy networks with specific uses will bring BTC energy/scalability into a sustainable equilibrium. But only if bitcoin are measured in millions.
Now if I go beyond this, what I consider safe, prediction to more imagined outcomes, I think it makes too much logical sense for asset+currency pairs to become standard practice in financial markets. Like gold and the dollar as deflationary reserve + inflationary coin, we will have new opportunities in blockchain to link together symbiotic technologies. By leveraging high fees of the asset to allow near-zero fees for the currency, for example. Verium/Vericoin make a great argument for this, and the Lightning Network is offering a similar proposition, although in the VRM/VRC case I doubt that a new pair like this could manage to gain market share in competition with twice as many other projects given that two new coins must gain traction in unison.
As programmers make new links between such fast cash and slow commodity instruments we could go a step farther, with linked triads. The third leg being a blockchain for DApp architecture. In the gold/dollar analogy above, this third leg would be like crude oil. DApp architecture fuels digital machinery to get work done. While I doubt any single triad will become dominant globally. Only if historical conditions happen to cause such an unlikely miracle, the stability of having a triad of standard market bearers would breed innovation (ironically) as confidence in the long-term value proposition of blockchain/DLT is established. I think of this as growing dirty roots to feed the more alluring organic growth upwards where flowers can bloom. Dirty being the operative word as I don’t love the choice of the only likely triad on the horizon today BTC/ETH/BCH. It seems that these are what history has offered us as our possible unlikely roots.
Finally, let us address a most important question: ‘What if BTC/ETH/BCH are similar to MySpace or Netscape in the dotcom-crypto analogy?’ Let me first say that I share these fears. The dotcom analogy (HTTP, DNS, SMTP, Ethernet, 802.11) fails at some point, though. Causing a revolution in how we store and transfer value depends on key features of money which were not applicable in the dotcom digitalization of paper functions. That is, USPS for paper delivery versus email as opposed to cash versus altcoin — letters are not the same as dollars in fundamental behaviors even though they are both paper-based. Next, I refer back to my earlier argued assumption that if Bitcoin falters or even simply fails to establish itself in a singular manner, confidence in all crypto, at least for a number of years, will falter as each market splinters into using their own local coin as the trading-pair for crypto-to-crypto trading. Eventually the underlying value of the DLT technology would take hold and we will eventually notice that the world economy has fundamentally changed. However, if we fail to establish million dollar Bitcoin, the major corporations and governments will have time to build blockchain-based DLT infrastructure which will allow them to retain a greater degree of dominance as we transition to a new-world-economic-technological-order. Blockchain can be centralized without losing all of its value, assuming the central authority has widespread social acceptance. I believe that Bitcoin is our one, flawed, chance at having a global infrastructure for exchange which is fully decentralized.
So whether you are trading altcoins and want your markets to stay strong or if you want to take advantage of the relatively slow adoption by governments and corporations to favor individual privacy and distributed power, it serves your interest to think of Bitcoin as bedrock, long term, store of multi-million dollar value. If Ethereum and Bitcoin Cash gain similar dominance in their own value propositions, the disruption would cut that much deeper, allowing more “niche” altcoins with features like privacy, speed, low costs, and much more to flourish. Buying into the dotcom analogy too much is more of our biological desire to use the past to predict the future. I frequently have to take a deep breath and repeat “Bitcoin is measured in millions of dollars. Bitcoin is measured in millions of dollars. Bitcoin is measured in millions of dollars…”