The Bitcoin Dream Is Dead . . . ?

A recent article was trending on Twitter yesterday, and I thought it might be interesting to discuss it.

The article was entitled The Case for a Million Dollar Bitcoin and it’s the latest in a long line of Bitcoin Obituaries . . . or at least that’s what I initially thought.

Bitcoin has gone from being an interesting experiment in decentralized finance to being the best-performing asset of the decade, rising more than 10,000,000% since 2010 and jumping 220% last year alone. There’s a Bitcoin ticker on every finance website. Legendary investors like Paul Tudor-Jones, Stanley Druckenmiller, and Bill Miller speak approvingly of its prospects, and companies like Square and MicroStrategy have invested their corporate cash into Bitcoin. Despite being extraordinarily risky and volatile — as evidenced by the 25% drop it took between last Friday and Monday afternoon — Bitcoin has, in some sense, been admitted to the club and is now seen by many as a plausible competitor to assets like gold. But along the way, something odd happened: Bitcoin completely lost its original reason for being.

Bitcoin was, after all, not designed to be a speculative asset. It was designed to be a currency, a new medium of exchange that people could, and would, use to transact daily business with each other. (That’s why we call it a cryptocurrency.)When Bitcoin was first introduced to the world in 2008 in a white paper, its mysterious creator, who dubbed himself Satoshi Nakamoto, described it as “a purely peer-to-peer version of electronic cash [which] would allow online payments to be sent directly from one party to another without going through a financial institution.” He billed Bitcoin as “an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party,” like a bank or credit card company. And that’s exactly what Hanyecz was doing on that day in 2010: sending an electronic payment directly from himself to another person without any third party being involved. He may have unknowingly made a terrible investment decision, but he was using Bitcoin exactly as it had been designed to be used.

tldr; Bitcoin has gone from being a speculative asset to being the best-performing asset of the decade. It’s now seen by many as a plausible competitor to assets like gold. But Bitcoin has never really functioned as a currency. Most Bitcoin transactions have been trades: people buying and selling it.

Ok, this is similar to complaints I’ve heard before — especially from the Bitcoin Cash community.