Life is good! I had a few absolutely wonderful few days in San Francisco with Grace and her family for Christmas and I love going to work every day as a professional athlete for SVG. We sit at a solid spot in the table and are looking to pick up a bunch more points in the coming weeks to put us in a great spot for the playoffs. I am lucky to be part of such a great club–with great leadership, die-hard fans, an amazing coach and assistant coaches, community support, and a driven, smart, and friendly group of teammates. All the best for 2018!!
Bitcoin is fascinating to me.
So is cryptocurrency and blockchain technology in general. Writing helps me wrap my head around it all.
I’m particularly drawn to my own psychology towards the topic and the psychology of the masses. As an old adage goes, “What is truer than truth?” Answer: The Story. Like so many others I’ve been swept up in the story surrounding Bitcoin and cryptocurrencies. It is a powerful one- a novel and (hopefully) more efficient form of money with the power to make the world a better place. I also read the great book Sapiens a year back and it primed me to think of money differently than I had in the past- essentially as an elaborate shared trust system. Shells, silver, gold, gold-standard printed currency, fiat currency, ….bitcoin? I heard about cryptocurrency and blockchain this summer and then I read and absorbed anything I could get my hands on- and it is really intellectually exciting and it works at a functional level. To really simplify, Bitcoin solves the “issue” of trust with…math. The insights laid out in the original Bitcoin white paper are [were] truly revolutionary, and having an anonymous creator only adds to the intrigue. For a good run-down on Bitcoin see here.
As an American Millennial, it is also really easy for me to understand a loss of confidence in some of the existing institutions around us. Massive student loan debt, lower wages, and a tough job market have hit us hard. A large number of Americans, and more than half of Japanese millennials, are living at home. These factors and more add up to a lot of lost hope. “In the US, UK, and Japan, the generation of citizens aged 19-35 are the first in modern memory on course to be worse off than their parents.” That story sucks.
Given the times I have grown up in it is a lot easier to put some trust in a team of software engineers and a global network of computers that are in pursuit of a better (different) world than my tweet-happy President or the “too-big-to-fail banks.” I don’t think everything is broken but so many of the institutions we have grown up with are flawed or have failed many. Rebels, romantics, or curious people like me got excited about “the global revolution that blockchain could potentially bring to the world and its citizens. It [is] all about immutability, public ledgers, anonymity, bypassing third parties and banks, in order to re-distribute the global wealth and regain financial freedom and independence for all of humanity. If everyone becomes his or her own bank without any intermediary parties having control/power over your monetary assets, this is real freedom, at least in a monetary sense.” Bitcoin and cryptocurrency offer this solution, offer progress, offer hope, empowering individuals. And now it makes some rich. That’s a pretty powerful story.
Unfortunately, when you look at the story more closely, a lot of it starts to unravel. I’ll just look at Bitcoin for now to simplify the discussion a bit. Bitcoin is generally understood as decentralized, trustless, world-improving, a long-term store of value, and hints at overthrowing the current financial system. It’s not quite any of these. But it is an ingenious step.
Decentralized?: It has a small number of large-share owners and leaders at its core that make it more centralized than it might seem. Approximately 40% of coins are held by 1,000 individuals.
Trustless?: For almost everyone “accessing” the technology, it just requires trust in a different intermediary who haven’t been around that long and consistently run into a slew of problems and hacks.
World-improving?: I hope so, eventually. But right now it does little to tackle income inequality or sustainability. Although this article made me rethink a lot of the numbers the press has been throwing out about power consumption.
The “investing” space is also ripe for ICO scams and other problems.
Long-term store of value?: Maybe. You are placing an awful lot of trust in a group of people to NOT change the long-term rules of a particular chain.
Overthrowing current financial system?: It can’t be used to make reasonable daily purchases, even though certain forks and altcoin seek to fill that, and other niches.
But also remember it wasn’t built to do all that. As a historian it is important to go back to the primary sources. The white paper defines Bitcoin as a “purely peer-to-peer version of electronic cash [that] would allow online payments to be sent directly from one party to another without going through a financial institution.” This worked great. And it really was ingenious. A distributed, open-source, shared ledger system that could be used to transfer value backed by proof-of-work. Its generally anonymous nature in the beginning made it very appealing for darknet marketplaces like the Silk Road.
Thanks to the media cycle, word-of-mouth, and a powerful STORY, Bitcoin has taken off well beyond its more humble beginnings, and has led itself and the entire altcoin/token ecosystem with it, into what many (myself included) believe is a speculative bubble. Jealousy fueled by tales of new Bitcoin millionaires abound. And just because they knew about it first and invested big, “they got rich”- furthering the mania that you could benefit next. Only the ones that come on board before larger crashes get really hurt. Greater-fool theory in action. And –shocker– very few people know or understand what they are investing in.
The crypto space right now is really insane, the most recent champion of this irrational, speculative market: Ripple. Please take the time to inform yourself if you have the tendency to get swept up in the mania like I did: https://medium.com/@twobitidiot/i-see-you-xrp-fcf151feb96d
TL;DR: What big banks? XRP?? What do you own?? How are you ever going to use it?? Or most likely you’re just hoping to pass it off to the next guy. Nothing like a massive wave of financial speculation to add to the mania of this greater story.
BUT–the blockchain technology backing all this speculation works. That’s the coolest part.
Perhaps it’s easier to look at Bitcoin as a digital collectible, as Mark Cuban does. It exists and it’s scarce, and scarcity sells. It could be that, especially when one considers all the time, capital, and human resources that have already gone into it…It’s owning a piece of a revolutionary idea. If you’re a fan of collectibles of course then you can get in on the blockchain-collectible Crypto-Kitty mania that runs on the Ethereum blockchain. https://www.cryptokitties.co/faq (Disclaimer: Internet+free-time+curiosity+cats = I totally own some crypto kitties and now want other people to buy them. I did learn a bit more about how the network functions through this process, but I’m just telling myself that so I don’t feel like I completely wasted $40.)
As far as cryptocurrencies in general, other coins will come along, and from a business strategy standpoint (with open-source code being used and no real barrier to entry), as long as it is the most efficient, it should win out over the long-haul. It’s not easy to manage a decentralized project by its very nature, but with such quick on-ramps, innovation will explode. As one author puts it, there will be a Cambrian explosion of economic and shared government projects–out of which much will be learned. The challenges Bitcoin and other blockchain projects face now are often just that, technical challenges that will be overcome with enough time and effort. https://fee.org/articles/imf-head-predicts-the-end-of-banking-and-the-triumph-of-cryptocurrency/
Winning people’s trust is one of the main obstacles these new idea-dependent projects have. Bitcoin, despite its volatility, has been around since 2009, and human trust is built up over many small interactions over time. Years ago people many would have thought you were crazy if you asked them to put their credit card information on the internet to purchase something. Over time, though, people learned that the systems in place were secure enough to trust and thus a much more efficient payment method was adopted by the masses.
The real battle, as with many projects, is the battle over people’s minds. Can they understand it? Can they trust it? Do they even like the idea of what it means for the world? This is the battle that perhaps most fascinates me.
So we’ve got a bit of everything: A great story. An ingenious solution to an old problem that actually works but is not flawless by any means. A healthy dose of pure speculation in the space…and some revolutionary spirit in the form of code. Where do you stand? And why?
Please reach out- tell me where you stand and agree or disagree. Would love to hear your thoughts! I still am in love with parts of these stories that are being created and told- and frequently wage a battle in my own mind about what the future may hold. I love learning about it all. This technology and more will continue to disrupt our lives (hopefully overall in a positive way) as all technology can. But just wanted to get out some of my thoughts for right now. There are so many aspects of bitcoin/crypto/blockchain that are appealing to discuss…
Remember that where we spend our time and our money is a vote for how we want the world to be, besides just how we want to spend our precious time of conscious existence that we all have.
I will continue to stay involved and interested in the space but also plan on spending way more time invested in relationships with those around me.
Investor’s perspective (Thanks Cam!)
95 Crypto-Theses for 2018
Decentralized Business Model
Full disclosure/disclaimer (you’re reading a volleyball player’s blog): None of the above is intended as investment advice of any kind. I hold small amounts of BTC and ETH.