“If you want to make an apple pie from scratch, you have to invent the universe first.” – Carl Sagan
The first objection to anyone who has just learned about bitcoin is that it is “too complicated to understand.” And it’s true; Private Key, Block Time, Difficulty Adjustment, UTXOs, Uncensored CoinJoin Transactions, Hash-Some The learning curve is steep and, for most, reasons to climb it seem few and far between.
The first time I was introduced to bitcoin in behaviour (Not in theory—techno-babbling libertarians had unsuccessfully pitched the idea to me for years), the intimidating tech-savvy man who thwarted the process.
First, he made me download some shady looking app – which I didn’t have space for on my phone, and so, ironically, I had to pull out some podcasts on monetary economics first. Second, he generated some random words from the app, and in the absence of pen and paper, I typed them into my phone’s (cloud-saved!) note-taking app. Third, he tried to send me 100,000 sets, but the spotty internet on his phone kept interrupting the process.
Clearly, I will not be a convinced bitcoiner that evening; The difficulties of the process seemed utterly worthless – a cure worse than the central banking malaise it had tried to solve.
When he had gotten his shit together, and my humble patience was exhausted half a dozen times, he finally managed to send the satsang – and triumphantly expressed “Look, look! Happened to know! And no one could stop it!”
Not impressed, I pulled out the $5 dollar bill, handed it to him and made fun of his win: “Look, look! It happened without anyone knowing, and no one could stop us from doing it!”
Bearer assets are nothing new in the history of money and it only led me to believe that bitcoin was a somewhat complicated digital way of doing this. But if Tech-Wrapped can’t do it easily, what hope is there for you and me? And you’re disrupting a banking system that aims to pay efficiently and securely, and make lending and borrowing possible. No one was trying to stop anyone’s payments – what was this guy about?
It will be years before I see those troubles of current fiat payment networks.
The Amazing Thing About Bitcoin Isn’t That It’s Digital
On the Bitcoin 2021 forum, Alex Gladstein wanted to illustrate the simplicity of using bitcoin by sending SATs in real time for Strike’s fundraising campaign for the development of bitcoin. It was very similar to the bitcoin enthusiast I mentioned above:
gladstein: “So I’m on the Strike page, right here, and I’m going to go ahead and donate, you know, two dollars worth of bitcoin, to Strike… it’s gonna go… and it’s gone. It There is a carrier asset that has been moved around the world immediately. And, I didn’t ask anyone for permission.”
Gladstein was able to depict (Lightning) payments better than the guy who tried to send me bitcoins all those years ago. Naturally, audiences “wow”-ed and applauded, but informed critics were equally “yes, and? That’s what Venmo does too.”
In an episode of the “Bitcoin Magazine Podcast”, Mark Maria explains his approach to “onboarding boomers”—a demographic that has a healthy fear of money, time, and government redundancies, yet not quite for his advanced technical knowledge. Is known. “Forget all the principles,” Maria says, pointing to everyday objects like computers or iPhones—do you honestly know how they work? “I have absolutely no clue,” he says, adding more importantly “it’s okay!”
His quip is nice and comforting: no one understands technology X, and that’s okay, because we see what technology X does and we can use it. Likewise, if you don’t understand bitcoin, that’s still fine.
Except that it isn’t.
Understanding what bitcoin can do for you – in terms of its use – requires you to understand the current monetary system. There is no visible value-add in using bitcoin for a middle-of-the-way Westerner, unlike a phone, car or computer that has never been sanctioned, never done anything illegal, ever stuff. Or have not tried to buy the services. Payment processors or the government refuse, their salaries (and savings!) are indexed for inflation, don’t understand why recessions happen and (at least on government payrolls) don’t suffer from them, or what central banks do. or where does the money come from.
I don’t even need to understand any of the underlying technology in the phone to see how I can use it and how it can help my life. In contrast, bitcoin’s value addition, coupled with its “comparison-to-what” option in the current monetary system, which 99% of us never think about, never causes us payment-related trouble. and as a result we do not pay any attention to it.
A Visa card in Apple Pay can also “instantly” pay for halfway around the world. For international transfers, Wise or Ulta or a plethora of fintechs can transfer bank money around the world in seconds.
Tech is not a thing. There is no digital value add.
Of course, most bitcoiners know that the Visa-wise-Apple-Pay analogy is flawed. And my man Saffedian Ammos could argue that bitcoin is marketable throughout the space, which my $5 bill lacks. But to understand what sets bitcoin apart, you need to delve well into the monetary plumbing weeds. What happens when we make a bank payment? What is money?
International transfers or bank-issued Visa cards require identification in a way that bitcoin does not; they do not provide final settlement (payment can be canceled later); Bank transfers are often deferred net settlement (although real-time gross settlement payments are introduced in more and more central bank payment networks). Money is allowed in Venmo or PayPal or other lower layers of the dollar banking system, in the sense that it can be blocked by any of the half-dozen entities required for a payment to be successful – for innocent technical reasons or the more lethal controlling/authoritarian for reasons.
Thinking that a seamless Venmo payment is similar to an on-chain bitcoin transfer because they look and “feel” the same is an elementary error. They are both digital; They both include “money”, whatever that means; They both allow the transfer of value from one place to another. But to understand why they are different, you must – as Carl Sagan quote above – first explain the whole monetary system: where it can go wrong, what it depends on, how new money is put into it. Enters, what banks do, entities that have the power to block, delay, inspect or charge fees for transactions that you are putting at risk by passively holding continuously depreciating currency Huh.
To Gladstein’s credit, he has an understanding of the banking realities of the billions below that ease any payment hassle most Westerners have ever encountered. But the average nocoiner does not. This is why we regularly get news articles where some clever-half financial journalist associates bitcoin with non-fungible tokens (NFTs) and central bank digital currencies (CBDCs) with stablecoins. Or when the chairman of the Federal Reserve Board says that CBDCs obsolete the need for bitcoin or stablecoins: they are all the same, in fact – the new, hip, digital way of storing and transferring what seem to be valuable things.
The Fed is here to help steer the dollar system, so once it has its own fancy-sounding technical solution, there may be no need for private options. And “programmable money” sounds wonderful – at least until non-programmers are programming in kind. stops you By buying what you want.
From Gita Gopinath at the IMF, we learn that the Russia-Ukraine debacle “will also prompt the adoption of digital finance from cryptocurrency to stablecoins and central bank digital currencies.”
What about the conflict could possibly be anything other than bitcoin? Finance is already digital. Fiat bank money is already digital. The Fed adjusts the monetary base digitally, through the purchase and sale of assets through its New York Fed branch. The dollar is already discretionary and permitted, controlled, regulated and surveyed. What does a central bank digital currency (CBDC) bring to the table?
If anything, it would worsen the politicization of banking-related problems on both sides of the Donetsk battlefield, with even greater control by authoritarians as to what people should or should not do with “their” money. You don’t need a blockchain or a token to do 99% of cryptocurrency projects – and while those that do useful, they don’t do it better than bitcoin.
Other than the first few hours and days, before international transfers could comfortably reach Ukraine’s banks in bulk, there was nothing a “cryptocurrency” could do for Ukraine broadly; Its problem was real, not monetary. Help refugees smuggling their savings against a hostile banking system? Sure, bitcoin has always excelled at that, but how will a CBDC issued and governed by the National Bank of Ukraine fare? Or worse, Ripple, whose CEO proudly said:
“To clear up any confusion – RippleNet (despite being able to do much more than just sending a SWIFT message) abides by international law and OFAC restrictions. Period, full stop.”
Rather than being bitcoin’s desire for permissionless, uncensored, FU money, its cryptocurrency “competitors” proudly maintain censorship and government sanctions,
“RippleNet, for example, has always been – and remains today – committed to not working with approved banks or countries with restricted counterparties. Ripple and our customers support OFAC laws and KYC/AML and apply them.”
Freedom to obey authoritarian restrictions is the opposite of wealth.
I repeat: Tech is not a thing. There is no digital value addition,
The value-add of bitcoin is the freedom and independence that comes with holding your own money outright – unencumbered by a bank, a payment processor, a financial regulator or a tax person. It is no longer subject to the whimsical demands of your authoritarian ruler, democratically elected or not. It no longer has to suffer the incurable consequences of monetary excesses, which the current stewards of the dollar have so horribly failed to do.
Bitcoin is the money of freedom for a century of freedom. But to really understand why that is, you need to look at what’s wrong with the system it tries to overthrow.
Understanding how the fiat currency system works is fundamental to understanding bitcoin.
This is a guest post by Joachim Buch. The opinions expressed are solely their own and do not necessarily represent those of BTC Inc. either . reflect the thoughts of bitcoin magazine,