Bitcoin, the first crypto currency, created by Satoshi Nakamoto, was released in 2009 as a social and economic experiment. The beauty of the blockchain, (An open ledger) is its simplicity to follow commands, transparency, and reward, in coins, for mining (Running the ledger). When Satoshi invented Bitcoin he put a limit of 21 million coins, hence the halving that’s coming in May, which will lower the amount of coin one will able to mine. Think of Bitcoin as gold, there is only a certain amount in existence. The dollar was backed by gold until Nixon took the US off that standard and the treasury began printing. The fiat, paper money, you carry, says specifically, at the top, Federal Reserve Note. It is not backed by gold but faith in the United States, which hey, it’s a pretty good bet.
The genius of Bitcoin is the elimination of the middle men, banks. Bitcoin is decentralized; it’s peer to peer transactions. You can send digital assets, (Coins, tokens) to anyone in the world, which is recorded on the blockchain, (Open ledger) and not governed by a central bank, like the Federal Reserve. The supply of Bitcoin can’t be manipulated. The first such transaction took place in Florida, 2010. Programmer, Laszlo Hanyecz, paid a European, ₿10,000 for two Papa John’s pizzas. The same year, Mt Gox, launched the first bitcoin exchange based in Shibuya, Tokyo, Japan. They were responsible for 70% of all transactions by 2014, than they were hacked, 850,000 Bitcoins stolen; 450 million dollars. But, Crypto did not die.
Recently I visited Las Vegas and certain hotels were accepting Bitcoin, instead of using Visa and MasterCard, the owner and I have our own transaction. Crypto currency has come a long way in a decade. This was clear when I found Bitcoin ATM’s in California last summer and Coinbase, an exchange based in San Francisco, (That only traded a handful of digital assets for the longest time,) has now, 20 different coins, a total over 13 million users; plus a USD coin in the works.
Bitcoin, a deflationary asset, in 2009 rewarded miners with 50 BTC per block. This was reduced to 25 BTC on November 28, 2012 and again on July 9, 2016, to 12.5 BTC per block. On May 18, 2020, Bitcoin will see its 3rd halving, resulting 6.25 BTC per block to the miners. When we investigate the history of the events, optimism is on the horizon.
The first halving, at the end of November, 2012, the price
of BTC was $12.12 USD. The next halving in July, 2016, had BTC rise to
$656.45. Bitcoin saw a massive spike in
2017, February 3, trading at just under 20k, it’s all time high. This brought mainstream attention and the
term, crypto currency, registered in the psych of the American public; even
though it entered Webster’s in 2008. Today one coin is valued at $6,667. The M.A.T.H. indicates an ROI of 5,000% from
November, 2012, to July, 2016. From July
to the present the ROI is 915%. I know
these numbers seem too good to be true, but weigh the risks with your greed.
The total market cap, currently, is 300 billion for crypto, (The FED pumped in $500 billion into money markets in 2019) but this is a volatile exchange that never sleeps. It trades 24/7, 365, and will see many up’s in and downs. Whales may sell off a large chunks initiating a price drop, or run up an initial coin offering, (ICO) like a penny stock. You could lose your investment through a hack or lose your wallet that was on your special flash drive. The government could deem it illegal tender, they see as a threat, (i.e. halting Facebook’s Libra currency) but the genie is out of the bottle. Will the 3rd halving be the last rub of the lamp before it is adopted?
A common argument against crypto is that only criminals use it for drugs, contract killings, and human trafficking. This is true for any currency and yes, the Silk Road was the poster boy for exchanges of digital assets, for products and services deemed illegal. I suspect that the cartels, dictators, and terrorists of the world do most business in the US dollar, for the stability it holds as the reserve currency of the world, as opposed to a risker crypto haven. I’m reminded of steroids in baseball, really, you don’t say, that’s terrible. It’s simply not the case that Bitcoin was invented to aid criminal activity.
Instead, it was born out of a need for a “trust-less” cash system. In our current environment we trust the banks to hold our deposits, but they lend it out immediately at interest, and keep little physical currency on hand, (i.e. a bank over 110 million must hold 10%). The FED is trusted not to debase the dollar but booms, busts, larger government, too big to fail, income inequality, and loss of purchasing power continues. We’re better than this.
The transparency of open source and the block chain have many more implications than crypto currency. Imagine the businesses that would drastically reduce cost of repairs and equipment using open source engineering with a 3-D printer. Avoiding corporate profit’s like users of Bitcoin, avoiding the interference of the banks and governments. This libertarian idea of peer to peer transactions, trusting in the universal principle of math, on an open source ledger, miners, and a finite number of coins can lead to a better system.
The main reason I showed apprehension 2 years ago, was I saw BTC as a threat to traditional banks; I mean how could they let this happen? I guess they viewed it as a pipe dream. Even though one cannot purchase most goods and services with BTC yet, what happens when Amazon starts, or puts their own coin out? We’ve been headed toward a cash-less society for some time, even though green backs have been surging up in supply since 2008. How can we not pay in inflation for all the quantitative easing? If you look at this on a chart over the last 25 years it’s alarming.
I’m willing to bet, what I’m willing to lose on BTC. I love the idea behind it! I can put trust in it and when it comes down to it, perception is reality. The other option, the status quo, I want to think bigger, bolder. Think of the reach crypto will have in emerging markets, where the majority of citizens don’t have bank accounts but do have smart phones. Resources, human capital, and manifest destiny are plentiful in these areas. Crypto is the spark that will grow these economies while block chain, open source, and A.I. become whole, leading the global economy into a new industrial revolution.
