Make no mistake.
This is really about permission to build our own financial instruments. The gatekeepers are falling in every industry, and it’s time for one of the last ones, finance, to topple.
The blockchain, bitcoin, and other cryptocurrencies are showing the potential to transform how we interact with, store, and share our money with others.
Of course, before that happens, we’ll see some significant pushback.
But let’s back up.
Cryptocurrency chatter, forums, subreddits, this new tech has been buzzing in the background of my work for the past 3 or 4 months. For better or for worse, which was illustrated by this beautiful tweet.
You’ve probably been hearing these words buzzing around, and not pay too much attention.
The thing about this tech is it’s still in its infancy. People forget that there was a time when email was all but unusable to folks not super tech savvy. So if it feels opaque, if it sounds too technical, that’s because right now it is.
But it in the future it won’t be.
Like how you got your first cell phone and every text message felt like a miracle. The computing power of your phone outweighs the best computer from the 50’s, but by the time you’ve used it for a year or more, that magical technology has lost its luster.
That’s how technology works, it all eventually becomes invisible. The topic of conversation and then boorrinnng.
But right now we’re still in that first phase.
So those who want to dive in are still hesitant, and for good reason. I’ve probably spent ~50 hours so far dipping my toe into the landscape, and I’m only now starting to understand the high-level view of this thing.
So it goes without saying that I’m not making investment advice here.
Bitcoin is a Black Swan event: unprecedented, unpredictable, and wildly interesting. A lot of turmoil will happen before that shakes out and steadies the market.
To start understanding Bitcoin, you have to start by looking at the history of money. You’ll see that, every so often across the centuries, the manner in which we share value with each other changes. Used to be we bartered, used to be we used gold coins, used to be the U.S. was on the gold standard. It changes when we recognize there are better instruments for moving and storing value. No surprise, this isn’t a process that stops.
This is just the next evolution of the species of money.
IT’S NOT ELECTRONIC MONEY; IT’S PROGRAMMABLE MONEY
We already have electronic money. The 1’s and 0’s in your bank account previously store your value. The difference is we have no control over our money online, which is why there are data breaches; and if you want to understand an issue with your bank, you have to wait on hold for an hour. You think you own your money, you think the number in your account is yours, but what about when you get locked out of your account?
What about when you live in, say, Greece and suddenly there are withdrawal limits on your ATMs? What about when the money in your economy is devalued by rapid inflation?
What about when bad actors tank the system?
See, you don’t have as much control over your money as you think. You’re on the bank’s network. They own your account, not you.
Bitcoin aims to change that.
We take for granted that everyone can publish on the web, and everyone can make a website and give their business a shot. No one can tell you no: We treat all IP addresses the same despite their race, gender, identity, and age. It’s why there are Youtube stars at 16.
But not everyone has access to a bank. (In fact, billion’s don’t.)
Not everyone is capable of storing their money, and most people pay large interest on loans internationally, to the economy’s detrement. This impact is most interesting for those in developing countries.
What the internet did for publishing, business and communication, Bitcoin is doing for finance.
HOW DOES IT WORK?
That’s the question everyone is trying to understand, but believe me, you’ll use it even if you don’t understand it.
But think of it like this:
Bitcoin is a network of computers that agree on who has money, and lets you send money from one computer to the other. (Just like you’re sending email).
Your Bank, too, agrees with you on who has money and lets you send money from one computer to another.
Now imagine that you can drop the Bank and replace it with Bitcoin. Like how you dropped the USPS and replaced it with email.
Suddenly how we move money around changes.
Just as, suddenly, the speed of email vs mail, and the contents of a letter, entirely changed.
Bitcoin is only the first example of what this new technology, the blockchain, can do.
Ok sorry, so the Blockchain is the technology, and Bitcoin is the first application of the technology.
Like how we had the internet, and then we got email. There are many potential applications of this technolgoy. Which is why there are also many other cryptocurrencies out there, so if you’re going to invest, you will want to find out the special aspects /focus of each and decide what makes sense to you. And again, this isn’t meant to be financial advice.
ISN’T IT FOR CRIMINALS?
I have Bitcoin, many of my friends have Bitcoins, thousands of other individuals and companies are utilizing Bitcoin.
And, some criminals probably use it as well, just like they use cash from banks and the internet.
DECENTRALIZATION IS THE FUTURE.
Centralization creates power, and eventually, power corrupts and negatively affects the public. New technologies are decentralized, meaning there’s no boundary, and no one is in control. It’s borderless, international, and non-discriminatory. Innovation happens at the edges, not at the center.
We’re interdependent, yet separate. Think Wikipedia.
THE MARKET NEVER STOPS.
Unlike our stock market, it’s up and down 24/7. There’s no market close, so you go to sleep and hope nothing major happens while Asia is making trades and…
THE REST OF THE WORLD IS INVOLVED
Other markets are adopting it rapidly, and the price is based on global investment, not just U.S. investment. My Global Econ degree might come in handy after all….
But if you’re like most people and you’re a spectator or wondering what the buzz is, just try and wrap your head around the basics, my prediction is we’re 5 years from serious adoption. 2023 and all of a sudden cryptocurrencies feel like the new norm.
And if you don’t believe me on any of this: like all industries, follow the money.
First, it’s the geeks were mining Bitcoin for free. Then the techno-elite like the Winklevoss twins go all in with investment. Then Venture Capital goes all in (where we are now). Then the masses hear about it.
Sincerely sifting through the noise,
Resources to get you started:
Regarding investment, read this before you decide what to do.
Diversification (aka How To Survive A Crash)
Best author, and easiest to understand book.
Commentary on the price fluctuations.