Think Bitcoin™ Issue #12
From novelty to ubiquity; money printing explained; debunking FUD; why saying "Bitcoin is speculative" is reductive
Hey friends, welcome back to Think Bitcoin™. As always, if you have any questions or comments, feel free to reach out!
In this issue:
Headlines/Insights: A week filled with signposts and signals of the world we are moving toward (FDIC exploring ways for banks to hold Bitcoin, Mastercard allowing merchants to incorporate crypto, U.S. Bitcoin futures ETF approval, Australia spot ETFs, India not banning, Wharton accepting bitcoin)
Content Round-Up: 2 articles, 2 podcasts, 1 video
As always, if you find this newsletter interesting or useful, please share it with others who might find it interesting or useful!
Headlines and Insights
Signposts
There’s a great detail in Alex Leishman’s latest piece in Newsweek about how the telegraph, at the time of its invention, was considered to be useless and wasteful. Henry David Thoreau went so far as to say, famously, “we are in great haste to construct a magnetic telegraph from Maine to Texas, but Maine and Texas, it may be, have nothing important to communicate." Leishman notes that, approximately seven years after Thoreau said this, “telegraph lines ran coast to coast.” Five or so years after that we had transatlantic telegraph cables.
This historical detail highlights how, with transformational technology, the evolution from novelty to ubiquity can be incredibly quick. In Bitcoin, the phrase “gradually, then suddenly” is common1 and refers to precisely this jump.
In the novelty stage, critics and skeptics tend to question any alleged usefulness of the technology or decry its alleged wastefulness. There’s another Newsweek article worth discussing in this context. The now-famous 1995 article, “Why the Web Won’t Be Nirvana,” by Clifford Stoll, is perhaps the most salient example of this type of criticism in the early stages of a technology, just before the proverbial Cambrian explosion of use-cases and value propositions.
Stoll dismissed the burgeoning community of folks building and using the internet as a “most trendy and oversold community.” He lampooned the universe of potential use-cases pondered by early adopters. In Stoll’s words:
“Visionaries see a future of telecommuting workers, interactive libraries and multimedia classrooms. They speak of electronic town meetings and virtual communities. Commerce and business will shift from offices and malls to networks and modems. And the freedom of digital networks will make government more democratic.
Baloney. Do our computer pundits lack all common sense? The truth in no online database will replace your daily newspaper, no CD-ROM can take the place of a competent teacher and no computer network will change the way government works.”
The idea of “telecommuting workers,” “interactive libraries,” and “virtual communities” was laughable to Stoll and, almost certainly, to the majority of Newsweek readers at the time. The phenomena Stoll derides are now fixtures of our daily lives. He goes on:
“How about electronic publishing? Try reading a book on disc. At best, it's an unpleasant chore: the myopic glow of a clunky computer replaces the friendly pages of a book. And you can't tote that laptop to the beach. Yet Nicholas Negroponte, director of the MIT Media Lab, predicts that we'll soon buy books and newspapers straight over the Internet. Uh, sure.”
We now have Kindles, an array of online publications (e.g. newspapers, blogs, magazines, and even this newsletter, which you are reading on a phone or a computer). We “can’t tote that laptop to the beach,” says Stoll. Well, it turns out we now have supercomputers that fit into our pockets, and we take those to the beach. What about “cyberbusiness?”
“Then there's cyberbusiness. We're promised instant catalog shopping—just point and click for great deals. We'll order airline tickets over the network, make restaurant reservations and negotiate sales contracts. Stores will become obselete. So how come my local mall does more business in an afternoon than the entire Internet handles in a month? Even if there were a trustworthy way to send money over the Internet—which there isn't—the network is missing a most essential ingredient of capitalism: salespeople.”
These predictions are so profoundly and self-evidently incorrect that further commentary is unnecessary. Amazon was founded in 1994, but had obviously not yet re-shaped our experience of commerce. Google would be founded in 1998, Facebook (excuse me, Meta) in 2004, and the first iPhone would be released in 2007.
At the time of Stoll’s article, in 1995, when the internet was beginning to grow out of its novelty phase, there were surely signposts and harbingers of what the future would hold. Stoll, and many others, didn’t know what that world would look like, what would be created on top of the internet protocols, and how fundamentally and dramatically re-shaped our daily experience would consequently become.
In the liminal state between novelty and ubiquity, it can (and obviously was) difficult to see the path to widespread use and even more difficult to fully imagine what a world in which the internet was widely used would look like. With Bitcoin, I think we are moving out of the novelty stage, and the existence of a discernible path beneath our feet, a path being built every day, is undeniable. But what exactly a world in which Bitcoin is widely used will look like is still challenging to predict with any degree of certainty. And this is okay. This is how these leaps in technology work. The direction is inevitable, but the destination, the newly created world, remains difficult to fully envision until we’re there, at which point it, too, will seem inevitable.
I still see so many people saying Bitcoin is speculative but, directionally, it’s not speculative at all. The evidence that we are moving toward a world in which Bitcoin plays a significant role is incontrovertible. Only the the details of what this future ultimately looks like remain speculative.
This week we got a series of signposts worth noting:
The FDIC is exploring how banks could hold and interact with crypto assets, which, per Reuters, could include “clearer rules over holding cryptocurrency in custody to facilitate client trading, using them as collateral for loans, or even holding them on their balance sheets like more traditional assets.” It’s hard to overstate how impactful this could be. Bitcoin is pristine collateral, in the sense that it’s the only collateral whose value cannot be manipulated or inflated away.
Mastercard is partnering with Bakkt to allow their network of merchants to incorporate crypto into their products. Mastercard has an enormous network.
The SEC has now approved more than one bitcoin futures ETF. While it’s not the same as holding actual bitcoin and is certainly inferior to a bitcoin spot ETF, which has not yet been approved, the SEC approving a bitcoin investment product of any kind is legitimizing. It means (a) the SEC is obviously not going to attempt to ban Bitcoin; (b) regulators will get a chance to get more comfortable with Bitcoin, which, (c) will hopefully mean the approval of a spot ETF is a matter of when and not if. And a spot ETF would be a game-changer.
The Wharton School of the University of Pennsylvania (arguably the best business school in the world), announced it will accept bitcoin as tuition payment for one of their executive education courses on blockchain.
The Australian Securities and Investments Commission (aka ASIC) has given spot bitcoin ETFs (not futures-based ETFs) early approval, opening the door for them to be traded on Australian exchanges.
India, a country once expected to ban Bitcoin, is now likely to regulate it as a commodity, per reports.
Each of these headlines is a step in the same direction, namely the direction of ubiquity. The financial system our children and grandchildren will grow up in and use is being architected before our eyes, beam by beam, brick by proverbial brick. We are still very early, but the signposts are there for those looking for them.
Do we ultimately know every granular detail of how a financial system increasingly dominated by Bitcoin, the hardest money on earth, will look? Of course not. In 2007 we didn’t know the countless ways in which the iPhone would redesign, reorient, and rebuild our lived experience. In 1995, Clifford Stoll wasn’t alone in questioning how the internet would change the world. But the internet was a printing-press-level invention, in terms of its cultural, political, ontological, and epistemic impact. Bitcoin, which brings money into the internet age and disintermediates it from nation-states (as the internet disintermediated information from walled gardens), will be similarly seismic in impact.
It’s less important and significantly more difficult to predict the exact destination of a technological innovation than it is to discern its direction. And knowing the direction is about reading the signposts along the way.
Moreover, each of these headlines is legitimizing, by which I mean each represents acknowledgment and acceptance of the fact that Bitcoin is not a passing fad that can simply be ignored until it disappears or dissipates. Each of these headlines represents an expectation that Bitcoin won’t just disappear or dissipate and thus must be taken seriously. Every such institutional acknowledgment or acceptance is an additional foothold for the technology and an additional step in the path from novelty to ubiquity.
Content Round-Up
1. “What Bitcoin’s Environmentalist Critics Miss,” an article in Newsweek by Alexander Leishman. As most of you know by now, the most common mainstream criticism of Bitcoin is its environmental footprint. As I’ve noted on countless occasions, these criticisms tend not to understand how the Bitcoin network uses energy, fail to consider the benefits and global utility of its energy usage, and wholly overlook the ways in which it actually incentivizes the use of renewable energy. I’ve directed you to a multitude of resources on this point in previous issues, which I encourage you to check out.
This article, like many others, attempts to correct misconceptions (or to combat coordinated misinformation, depending on how conspiratorial you lean) about Bitcoin and energy. Leishman contextualizes the polarizing opinions Bitcoin seems to generate by looking at the reaction elicited by other historically important technological innovations, specifically the telegraph, which was roundly criticized and considered wasteful or useless by many. Until, of course, it became ubiquitous and transformed society.
Leishman succinctly explains some of the misunderstandings around Bitcoin’s relationship with energy and then offers a vision of the future:
“What does that future hold? Simple: Bitcoin is becoming the world's leading energy-efficient currency. In the near future, it will both ride the wave of sustainable power production and help to spur it along, by aligning miners' self-interest with the world's environmental interest. Ironically, Bitcoin's environmentalist critics may become its fiercest advocates, as the currency promotes the adoption of their favored technologies.”
2. “Bitcoin vs. Money Printing,” a 5-minute video by Natalie Brunell. If you want to know why the wealth gap is implacably widening, why everything is more expensive, and how how Bitcoin addresses these problems, Brunell covers it all in under six minutes. She also discusses how “money printing” works. I talk about money printing all the time in this newsletter and on Instagram, but it’s shorthand for a more complicated process that doesn’t actually involve literal printing of dollars. Brunell explains it succinctly and effectively.
3. “Debunking All the Bitcoin Misinformation, One By One,” an article by @jbourneBTC that systematically discusses the ways in which the most common Bitcoin criticisms are wrong. This is a pretty exhaustive piece, and I commend the author for the effort, particularly in compiling so many sources and distilling so much information into the essential points. The author addresses 21 (fittingly) common criticisms of Bitcoin. Some examples:
“Bitcoin is too volatile.”
“Bitcoin is bad for the environment.”
“Bitcoin is not scalable.”
“Bitcoin will be banned by governments.”
“Bitcoin is used by criminals.”
“Bitcoin only advantages the rich.”
“There are so many other cryptocurrencies, surely another better one will replace it”
And many more. Everyone, at some point in his or her respective Bitcoin journey, has heard or thought some or all of these things, and this is a great compendium of resources that, in rebutting these common criticisms, fosters a much deeper understanding of Bitcoin.
The following two pieces of content fold Bitcoin into larger conversations about American politics and human rights, respectively.
You’ll hear Aarika Rhodes talk about the importance of financial literacy, teaching financial literacy in schools, improving the education system, addressing educational achievement gaps, advocating for children, taking big corporate money out of politics, serving the interests of constituents, and more.
You’ll hear Alex Gladstein talk about human rights and technology, how the nature of money and money creation affects human rights, how Bitcoin protects a litany of human liberties, and how Bitcoin fights authoritarianism.
4. “Fighting For Bitcoin in Congress,” an episode of the What Bitcoin Did podcast with Aarika Rhodes, a Democrat running against Rep. Brad Sherman in California’s 30th congressional district.
5. “Bitcoin, Authoritarianism, and Human Rights,” an episode of the Lex Fridman Podcast with Alex Gladstein. One of the many great quotes in this one from Gladstein is “a billionaire and a refugee are the same in the eyes of the protocol.” Think about how powerful that is.
Bonus/Miscellaneous
The Mayor of Miami, Francis Suarez, sat down with Isaiah Jackson, educator and author of Bitcoin and Black America, to talk about Bitcoin. They discuss how Bitcoin can empower the powerless; how Bitcoin can impact the Black community; how the banking system has historically failed people of color; the role of government in restricting people from taking risk; regulation; and why it’s important to teach kids about Bitcoin and blockchain technology.
As always, thanks for reading! If you enjoyed it or found it useful, share this newsletter widely and freely!
“Civilization is in a race between education and catastrophe. Let us learn the truth and spread it as far and wide as our circumstances allow. For the truth is the greatest weapon we have.” -H.G. Wells
See you next week,
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DISCLAIMER: I am not investment advisor and this is not investment advice. This is not, nor is it intended to be, a recommendation to buy or sell any security or digital asset. This newsletter exists for educational and informational purposes. Do your own research before making any investment decisions.
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I’m not altogether certain, but I believe this phrase may originate with the outstanding series of writing done by Parker Lewis for Unchained Capital.