I wish more people knew about Bitcoin’s connection to the bank bailouts. Bitcoin unfortunately does not have the best brand ambassadors. This week is a great opportunity to tell your friends about it, because it matters.
The 2008 bank bailouts were a major motivator behind the creation of Bitcoin. The first block ever mined even contains a reference to it: The Times 03/Jan/2009 Chancellor on brink of second bailout for banks. During the bank bailouts, the government just printed a bunch of money and gave it to the banks, around 700 billion USD. They did this because it was politically expedient, well really because they had to or the whole damned system would collapse. And the 99% ended up paying for the mistakes of the 1%. All of us were made to pay for the mistakes of a very small, incredibly powerful and wealthy segment of society who made reckless investment decisions. People lost their homes, their jobs, their livelyhoods, their savings, and yet not a single one of those bankers went to jail. Instead, they took the bailout money and gave themselves extravagant bonuses. Yet the problem is not new, throughout history, every nation that has ever failed, has had their currency end in hyperinflation. The temptation to print money is too strong. Perhaps it is something that should not be entrusted to politicians or even humans at all.
Satoshi, in his wisdom, created a system by which no new money could ever be printed. No corruptible, tempted authority could use it to turn on the money printer and rob entire generations of their wealth or force them to pay for wars they did not support. He made a currency which cannot be corrupted and cannot be hacked, with 99.9% uptime, with instant transfers across borders. It is neutral technology open to anybody with a phone or a computer and access to the internet. Which is much less than you need to open a bank account. Bitcoin doesn’t care about your credit history, or whether or not you can provide a reliable mailing address. Bitcoin doesn’t close on weekends and will never charge you exorbitant fees to use your own money. You never have to wait days for a payment to clear. Bitcoin puts you in charge of your money and nobody else. And it makes sure nobody can print away its value.
But then a bunch of people came along selling get-rich-quick schemes based on crypto technology, and everybody goes “crypto bad”. Satoshi gave a gift to the world. He didn’t stick around to get rich off it, he didn’t use it for celebrity, he just made Bitcoin and disappeared. Thank you Satoshi for your gift to the world.
sure, this might sound good in abstract, but it didn’t work out to be useful. almost no one actually uses it as a currency, they hold onto it as a pseudo-asset which fluctuates wildly in “value”.
Have you met currency speculators? They do the same thing with fiat, as do speculators on every asset class in existence. This is not a problem that’s unique to bitcoin.
You can’t do anything with it except buy drugs. you can’t use bitcoin to pay for rent or groceries. some stores experimented with taking it as payment several years ago and they all quit because it was a pain in the ass and transactions took too long to clear.
If you google “where to spend Bitcoin” you’ll find plenty of places to do so. There are many restaurants, online vendor, hell, some US states even let you pay your taxes with it. Walk into any grocery store in the US with a coinstar and you can convert USD to and from Bitcoin. Is it as popular as the US dollar? No. But it’s much more popular than many other smaller national currencies, especially in the countries with those less reliable smaller national currencies. Why? Because even though Bitcoin’s price isn’t as stable as the US dollar, it’s easier to access and better than their local currency, they can trust it. All they need to use it is a cell phone and a cell network, which many places have even if they don’t have functional banking infrastructure.
a big reason why people say crypto is bad is because it has an enormous environmental impact
Problem 1: we get too much of the world’s power from unsustainable sources, that’s not Bitcoin’s fault. Bitcoin relies on the cost of energy usage to provide security. Energy has a relatively constant cost relative to the entire economy, relative to physics even, that is important.
Problem 2: What is the environmental impact of banking? Even smaller, what is the environmental impact of the top three remittance companies (Western Union et al) whose core functionality Bitcoin has been better at since day one? Bitcoin has lower fees, faster transfers, simpler cross-border movement of money, etc. What about all the Western Union kiosks and offices and whatever. That adds up. If we assume Bitcoin is to replace the global currency system, SWIFT, etc then we are really looking at a massive amount of energy that system uses. How much energy is spent driving cash from one place to another?. This is not even getting into non-proof-of-work cryptocurrencies which have their own pros and cons.
Problem 3: Bitcoin can actually be really, really good for the environment and can help subsidize the change to green energy due to its ability to dampen demand curves. I’ll leave this here for that
and the main thing it’s known for is as a vehicle for normal people to be tricked out of their money and left holding the bag as its “value” evaporates.
Crypto as a whole? Sure. Bitcoin? No. The crypto world is full of grifts, scams, and rugpulls and it’s incredibly unfortunate. Then again, many of these are very obvious on the surface get rich quick schemes. But it is how it is. These scammers don’t need crypto to scam, there was a healthy scam market long before crypto. Other highly volatile asset classes have similar problems. It’s a bad thing, and I agree with you that it’s left people with a bad association with crypto, and that is unfortunate.
i think it would inevitably happen with any so-called “money” or “asset” that has no inherit value and nothing backing it up institutionally.
Traditional currency relies on faith, a collective mass delusion that the currency is worth something. It’s a network effect. The currency is useful because other people believe the currency is useful. Does having an established, trustworthy government behind the currency help? Of course! You can also just impose the currency on people against their will, as many conquerors have done in the past. But that’s it. There’s nothing inherently valuable about a piece of paper that has Benjamin Franklin’s face on it. It ultimately comes down to trust and faith. People have faith that the US will continue to have sound economic policy and stable currency exchange raters, or at least that it will be sounder and more stable than the other national currencies. But any day that faith could end up being misplaced. Faith in bitcoin is faith in the mathematics underlying the system, faith in the most widely read and audited source code in the world. You don’t have to place faith in a person or institution, that is the key difference.
it becomes a problem when your currency is treated as an asset. if your money will put on gains year-after-year without having to do anything, it’s deflationary and that means no one will want to spend it, causing a retraction of money supply. of course no one wants to lose their money’s value to inflation, but the deflationary aspect of bitcoin ensures that people will hoard it instead of using it to buy things. if the whole economy was like this, you’d be looking at something akin to the conditions of the Great Depression.
You are making good points here, and most economists would agree with you that a little inflation is healthy precisely because it incentivizes people to spend money instead of hoarding it. Your statement presumes we would enter in a deflationary spiral because Bitcoin’s price would continue to increase forever, but I don’t think that’s a sound assumption, especially if it were to actually contain a majority of the wealth of the global economy. But even going on that assumption, I wonder how the world might look if somebody had to really convince you to part with your money. Perhaps our products would be of higher quality? Look to any country with hyper-inflation, people will spend their money on anything they can get their hands on because the money will be worthless tomorrow. It’s a broken market environment. In the same way that capitalism to function correctly must have the risk of failure, how might corporations and banks act more responsibly if they didn’t think the next bailout was right around the corner? These are interesting questions.
Satoshi gave us the ability to create our own financial systems and experiment with them, which many people are doing, and those experiments can be done without wrapping up an entire national economy in them. For the first time in human history since fiat currency became dominant, we have the ability to choose which economy to participate in, and it’s much more accessible and useful than for example trading foreign currency ever was. For example, want a universal basic income? Use a coin based around that concept. You can have a protocol that automatically distributes 1% of the total transaction fees of the entire network back to all the participants. And that 1% can be decided by a network-wide vote. You don’t have to convince a national government to run that experiment with the entire economy, you can grow a system for it sustainably by starting small. With blockchain technology, we have the opportunity to create economic systems which are ruled and governed by their participants, not their creators, not by whomever currently rules everything else. It represents a new type of democracy. That is a beautiful and exciting thing, and a gift that will bring all sorts of new things both good and bad. And we have Satoshi to thank for opening that door for us.
