The CEO of Bitcoin Owes Me Money

my original book project, German rejection, the basics of my Bitcoin thesis, simping for shl0ms, a few spicy crypto takes

My recent pieces have been getting a lot of shares. Thank you so much. The growth of my newsletter audience would not be possible without you.

If you’re coming here through a referral, please do not forget to subscribe:

Hi Friends,

Those of you who have been reading Seeking Tribe or following me on Twitter for awhile know that I am a Bitcoiner. I’ve mentioned it multiple times and occasionally link to posts, mostly from maestro Nic Carter, but I’ve never written anything long-form about my thinking on it.

The existence of Bitcoin is part of the reason why I am optimistic about the future. If the technology did not exist, I would be much more pessimistic about our prospects of continuing to live in a free world.

I’ve thought it was interesting for several years but truly fell down the rabbit hole in December 2018. At the time, my hope was to write a book about the non-monetary use-cases of blockchain technology. I had applied for a fellowship to spend 15 months in Germany focused on researching systems that would allow individuals to self-authenticate their identity, without being reliant on any government.

The primary audience I had in mind was dissident refugees who might be held in limbo if their state refused to help them to authenticate their identity. The secondary audience was leisure travelers—imagine ApplePay but instead of payments it certifies your identity and only directly shares your information with the service provider if you violate your side of the agreement. Ie. you can rent a bike in Sweden without filling out any paperwork and your private information would only be shared with the company if you did not return the bicycle. I did not receive the fellowship and abandoned the book project after months of research. The fellowship rejection was a loss for everyone involved, abandoning the book was a great idea.

Writing books on technology is difficult. While I was conducting my research, I was referred to other authors who had tried similar projects in the preceding year. Several of them had written exuberantly about the ICO—Initial Coin Offering— craze. At the time, entrepreneurs were selling tokens to investors with promises that they would essentially be shares in a future, profitable company. This was almost certainly illegal and most (and that’s putting it lightly) of the companies failed…if they even attempted to build the company at all.

The aforementioned authors later pulled their books from Amazon. They thought they had glimpsed the future and were positioning themselves to be heavily referenced experts. They were wrong.

Crypto is the wild west and I think that’s good. It should stay that way. People need to be able to take big risks and have the potential for big rewards. If we prevent everyone from taking risks, then we will live in an increasingly stagnant society dominated by our existing oligarchy.

I don’t know about you but I am not an oligarch. I do not want to live in that world. Thanks!

I spent the rest of 2019 writing Lead The Future instead. So far it seems to have aged well! I just got a new review the other week:

But you know what has aged much better than my book?

Bitcoin.

The sad reality is that if I had invested my time and money into buying Bitcoin at that time instead [and had held it], I would be in a completely different place financially than I am right now. The price at the time of publication was ~$6100, now it is ~43,500. I might have similar regrets two or three years from now, it’s not even hard to imagine.

The basics of my Bitcoin thesis:

Bitcoin is not controlled by any corporation or government. It is a medium-of-exchange and store-of-value with a fixed supply schedule. There will only ever be 21,000,000 Bitcoin and we know when each of them will be created.

Bitcoin enables its users to transact in peer-to-peer, global, immutable transfers of value—these transactions cannot be censored by any third-party. Transactions are processed by decentralized groups of ‘miners’. The proof-of-work mining system encourages miners to compete with one another to receive the subsidy (new Bitcoins) and mining fees (fees paid by the person publishing the transaction) by processing all transactions. Bitcoiners are intolerant to any form of censorship, especially by miners, they will take their business elsewhere.

In a time when people are being banned from social media, banks, payment processors, platforms like AirBnb and Uber, and states are coercing companies to harm dissidents, this type of asset will only become more in-demand.

Furthermore, people are witnessing how the value of their cash savings is eroded by inflationary monetary policy, or at least when the associated capital allocation is atrocious. I’m less opposed to stimulus spending than most Bitcoiners but I believe that we would be better off if we distributed any new dollars as an UBI—Universal Basic Income. Producers creating profitable, in-demand goods would benefit from the additional demand (or a rise in their stonk price) and could then allocate their new capital as they wish. But right now both the least savvy and most conservative savers are having their wealth eroded through inflation, while the rest of us are either without savings or gambling it on assets that we think can outpace inflation. Even in the US there are expectations that inflation will be ~4%+ or more.

If you’re an American and read those last two paragraphs solely from the point-of-view of an American, who believes our government is doing a great job and these are not genuine problems, you can be forgiven. Although I do not personally like our status quo much at all, it could be much worse. However, Bitcoin is a global protocol. If you lived in Brazil, Venezuela, Belarus, Iran, etc, you may be more inclined to see the value in Bitcoin. If you were protesting a regime you believed was illegitimate and it was using the country’s financial infrastructure to suppress your dissent, Bitcoin might come in handy.

Bitcoin is strongly differentiated, no other cryptocurrency is trying to compete for its niche.

Other protocols like to frame themselves in opposition to Bitcoin. They don’t do this because they’re genuine rivals but because it is still the king. Most other cryptocurrencies tend to value themselves relative to other protocols (although people construct all sorts of narratives to try to pump their bags). Ethereum holders believe it’s better than Bitcoin so its market cap should be greater than Bitcoin’s. Solana holders believe it’s better than Ethereum so its market cap should be greater than Ethereum’s. Etcetera.

There is a fundamental trade off in blockchains: the more data (transactions) published to the blockchain the larger the size of the ledger (copy of all transactions). If the ledger is rapidly increasing in size, you will need ever more storage space and high download speeds to be able to run your own full node (software which allows you to personally verify all transactions on the ledger). The greater the requirements to run your own node, the larger the barrier to being able to audit transactions without being reliant on a third party. However, being able to run your own node may not be necessary for many potential use-cases of blockchains.

I am personally bullish on NFTs—non fungible tokens— as a technology. They enable people to demonstrate ownership of a digital asset, ie. you could have a private key associated with an NFT version of Shl0ms’ homage to Marcel Duchamp. The use-case for video games and virtual reality are clear to me. They likewise have the potential to spur the creation of amazing digital art as they enable artists to capture value that would’ve otherwise been copy-pasted or distributed via torrents. It may be fine for users to rely on an oligopoly of node providers for NFTs.

Likewise, it seems plausible to me that a comparatively decentralized network, ie. relative to Solana, like Ethereum could come to dominate DeFi—decentralized finance— through the creation of tools that remove middle-men from certain financial transactions. Ethereum’s path-dependence from proof-of-work to proof-of-stake may even end up facilitating its success. Proof-of-stake blockchains are generally prone to oligarchy and centralization. I’m not as bullish on DeFi but Ethereum is more decentralized than whatever systems are currently being used. People in my generation will never forget when Robinhood’s clearing house stopped trading to prevent retail investors from destroying some overzealous $GME bears.

However, being able to run your own node is necessary if you want to have a medium of exchange that cannot be censored or tampered with by any third parties. This is Bitcoin’s niche and why it only has ~4.6 transactions-per-second on layer one. In comparison, Ethereum’s ‘Ultra Sound Money’ is a gimmick. I listened to the Bankless podcast episode on the topic and they either don’t understand Bitcoin at all or were lying through their teeth. I think it’s the former.

Bitcoin has memetically tied its value proposition to an existing, market-valued asset: gold.

Bitcoin has the potential to eat a significant chunk of gold’s market cap, and perhaps other stores of value as well, ie. certain qualities of bonds. For a digital world, and boy are we living in an increasingly digital world, much to my dismay, Bitcoin is superior to gold. Transacting is much cheaper, the payments are global and immutable, the supply is highly auditable, storage is easier and more discrete, and there is no possibility of a supply shock.

You can send Bitcoin across the world while lying in bed. The transaction costs, even on the first layer, are extremely cheap for large payments. Earlier today 600 Bitcoins, or 24 million dollars worth of value, was moved for 0.00005324, or $2.31 (at price of $43,454). Even if you had to pay $100, this transaction would be cheap. How much do you think it would cost to move 24 million dollars of any physical asset from Austin, TX to Prague, Czechia?

Bitcoin ownership is simply a string of characters—ie. bc1q4c8n5t00jmj8temxdgcc3t32nkg2wjwz24lywv. A private key which allows you to sign transactions on the network. This private key can be reduced to a series of 12 words that you can memorize. If you were facing persecution and could not afford to take any physical possessions with you, you could hide your Bitcoin in your memory.

The corollary, if you lose the key, you would lose access to all of the wealth associated with this private key. There exist numerous firms to help you manage your private keys and ensure your family can access your Bitcoin if anything happens to you *knocks on wood*—one of them should reach out to me about collaborating. Estimates suggest that 3.7 million Bitcoin have already been lost.

There will only ever be 21 million Bitcoin. If the above estimates are correct, there are really closer to 17 million Bitcoin. How many people will there be on the planet when the population peaks? 9 billion?

Yes, Bitcoin is a highly volatile asset. It has to be! If your current market valuation is 810 billion and you are striving to have a market valuation of at least 11.11 trillion, then there’s a lot of volatility in your future. For an asset to go up that much, it’s also going to go down at times. No risk, no reward.

Do not allocate any money to Bitcoin that you cannot afford to lose. There is certainly a probability that it will not win. But I have been aggressively seeking objections to its system and associated economics and have not found any persuasive FUD—fear, uncertainty, doubt. The exception: highly advanced quantum computing, but if all encryption breaks we’ll have many other problems—the gold bugs might be the ones with the last laugh.

Otherwise, I’ve mostly heard why people do not like it and don’t want it to win but not any persuasive arguments as to why it won’t. These people tend to not understand that it’s not going anywhere. We’ve opened Pandora’s box. People are going to continue to expend energy to mine new Bitcoins. There’s no CEO of Bitcoin that’s going to close up shop one day because you shared a half-baked think piece. And trust me, I’d know if there was an CEO of Bitcoin because he owes me money for all of this pro-bono marketing.

Please reply if you have a killer argument that you don’t think I’ve already heard. I would love to find out I’m wrong before the price goes down and never comes back up.

This does not reflect all of my ideas about Bitcoin but gives an overview of the basics. If you have questions, please reply with them. I will likely create an FAQ where I respond to them, or perhaps a series of videos.

Likewise, if you have a lot of questions about crypto (and there are no stupid questions in a space so rife with misinformation) and want to discuss with someone who you find credible and informed, I am available for private consultations. You can easily waste hundreds of dollars making bad decisions in Bitcoin and crypto, I would love to save all of my lovely readers from such a fate. This is also a great way to support my newsletter ;).

Your Friend,
Grant

None of this is financial advice. I, unfortunately, do not own a lot of Bitcoin. This is purely for entertainment and informational purposes. If you were not informed or entertained, please reply to this email.

Share

Don’t forget to subscribe: