Isn’t Bitcoin Dead?
On bad days in Bitcoin I constantly get messages from people that I know asking me if I’m doing OK or if I’ve finally given up on this newfangled, fake, upstart attempt at money since it has now failed. My usual reply is quite snarky in which I tell them that I was unaware of its failure and that I’ll look into it. I’m writing this two days after Mike Hearn, one of the original developers of Bitcoin, decided to leave the project and sell all his holdings. This news came shortly after the news that Cryptsy, a cryptocurrency exchange, announced that it had closed its doors since it had been the victim of a heist and that they have been hiding it for over a year. Both of these events combined caused a significant drop in price of which my phone has been reminding me regularly. With news like this happening on a quite regular basis, isn’t Bitcoin dead by now?
The short answer is no, Bitcoin is not dead. But I’m not one for short answers. You see, Bitcoin has a long, colorful history of events that should have, by all rights, taken it down and/or ruined it. But Bitcoin is more than the sum of its parts, which actually says more than the surface of that phrase belies because Bitcoin has a lot of parts. In fact, Bitcoin has more parts than even I can put a face to. Hopefully, by the end of this Article, you’ll see why Bitcoin earned the nickname “the Honey Badger of Money.”
Bitcoin has survived doubters, haters, and scam accusations. Just go read any mainstream economic publication before 2015. Any news story you find before last year were discussions about how Bitcoin isn’t money, currency, or a store of value. They like to go on about how Bitcoin is no different than Beanie Babies, POGS, or tulip bulbs. Bitcoin often gets compared to Ponzi schemes, pyramid schemes, or boiler room scams. All of these are absurd and I’ll tell you why.
What people fail to see, apparently, is that Bitcoin has every feature that people consider in a currency: durability, divisibility, fungibility, and limited quantity. Bitcoin is as durable as the network, which is stronger than the World’s largest 500 supercomputers combined , at the very least. Some reasonable estimates set that bar higher. The fact that Bitcoin can be backed up with passwords and accounts recreated using the Blockchain make it more durable than any currency in existence. Bitcoin is easily divisible down to the 8th decimal place. That’s far more divisible than our current fiat systems like dollars and cents, and far more easily divisible than gold. Bitcoin is as fungible as any paper dollar, since it’s all just numbers detailing inputs and outputs. To be fair, some would argue that consistency and history should be in there, but I think those are necessary to strengthen, not invent. Those will come to Bitcoin with time. So Bitcoin could possibly be the best money ever invented.
The most important feature that I listed above, in my opinion, is limited quantity. Bitcoin is nothing like Beanie Babies and the like. You see, Bitcoin has something that none of those have. Indeed, as our universe expands and we look out into infinity, Bitcoin has something that the Universe increasingly lacks: limited quantities of anything. Beanie Babies and tulip bulbs stopped being valuable when people realized there wasn’t a finite number of them. More kept being produced. Gold, silver, diamonds, indeed everything else in the universe, we’re finding out, aren’t finite either. In July 2015 an asteroid passed by Earth close enough that it could be seen with privately owned telescopes. Contained within this single asteroid was roughly 90 million tons of platinum. Just for reference, all the platinum ever mined is just over 16 tons, all of which could fit in your living room. Bitcoin uses computer code enforced rules based on complex mathematics which force artificial rarity on a universe within which we are finding rarity to be increasingly difficult to maintain.
And, as for the scam accusations, I’ll take them one by one. By its very definition Bitcoin cannot be a Ponzi Scheme. It has no operator because Bitcoin is decentralized. It is also not offering guaranteed returns. People in Bitcoin talk about the volatility every day. So a pyramid scheme would be closer to the correct definition. The goal of my webpage, for instance, could be said to recruit people to Bitcoin. But even that accusation misses the mark because you don’t have to get brought in by me and I don’t get your money if you are. I may get kickbacks on referrals, but that doesn’t come out of your Bitcoin purchase. That’s a company paying me back for freelance advertising referring you to them. So the last possible option would be a boiler room scam. This one is harder to refute because a boiler room is called such because of high pressure sales tactics being used to sell speculative securities. The only evidence I can provide here is that there is no company behind Bitcoin so there can be no undisclosed relationship between seller and this non-existent company. Bitcoin, again, is decentralized. Now, I certainly can’t deny that there have been Ponzi schemes, pyramid schemes, and boiler room tactics that have used Bitcoin as their currency of choice, but you could say the same about any currency in the world there.
Bitcoin has also survived seemingly unlimited bad press. Stories like Ross Ulbricht, the alleged mastermind behind the darkweb site the Silk Road. And stories like Charlie Shrem, an entrepreneur that created a company to sell Bitcoin to people looking to buy them. Shrem was accused of selling Bitcoin without first acquiring a license, which made his business an illegal money-transmitting business. But to compound his issue, people used those Bitcoin to buy illegal narcotics from the Silk Road, which turned the charge into money laundering. I’m not going to get into the politics of what went on here. You can find all the gritty details online.
Bitcoin is often linked to news stories where people allege that it was used to fund drug trafficking like the one above, or money laundering, corruption, or terrorism. But the truth is that the most used tool for illegal purposes, in every category I mentioned above, is the United States $100 bill. And I’m not even talking counterfeit ones. I’m talking US minted $100 bills. Did you know that Pablo Escobar, the King of Cocaine, wrote off $2.1 Billion from his books every year because rats ate the paper bank notes or they were damaged by mold? And did you know that pallets of cash disappear into war torn countries never to be seen again. To put this in perspective Bitcoin, as of writing, has a market cap of less than $6 Billion. I’m not going to deny that Bitcoin could eventually become these things that it’s accused of above, but to point it out as a flaw at this point in time is nothing short of hypocrisy. It’s just outright ridiculous.
Bitcoin has survived even itself. I’ll point to the paradigm shifts that occured in mining. When the protocol was first turned on every computer running it used the computer’s CPU to mine Bitcoin. For a long time the typical miner was a single computer. Then someone figured out that you could mine much faster using graphics cards, or GPUs. People built computers with multiple graphics cards hanging out the side on racks to mine Bitcoin. And this was the standard until someone figured out how to build the hashing function into integrated circuits and Bitcoin hashing ASICs were born. Through all of these paradigm shifts Bitcoin endured.
Bitcoin has already survived forks in the code. The first fork was when someone figured out they could create Bitcoin without the mining process. Satoshi saw the problem, Gavin Andresen saw the solution, and the Blockchain was rolled back. All of this was resolved in a very short amount of time. The new version of the software fixed the issue and Bitcoin continued on with a price drop, but otherwise little fuss. Other forks have happened where two Blockchains were running side by side until one of them became the dominant, longer chain. In the end Bitcoin continued on, again with a price drop but otherwise little fuss.
Bitcoin has survived exchange meltdowns. Cryptsy isn’t the first exchange to implode. Once upon a time, not so long ago, the preeminent exchange was Mt. Gox. It was the largest Bitcoin exchange at the time. Through 2011 there were a number of security breaches. In 2013 the legal problems continued off and on due to contract disagreements on one hand and over-regulation by the US on the other. In 2014 the bombshell dropped that Mt. Gox was insolvent. Whether from mismanagement, theft, embezzlement, fraud, or a combination of all of them, the result was the same. They declared bankruptcy. Bitcoin continued on, albeit with a price drop from which it has yet to recover, but it’s certainly not dead.
Bitcoin has also endured a colossal number of stories about “the CEO of Bitcoin” having done this or having said that, or even that they’ve been arrested, committed suicide or are dead for one reason or another. I want to make this clear right now: There is no CEO of Bitcoin any more than there is a CEO of Gold, Money, or the Internet. There are CEOs of companies that use Bitcoin, gold, money, and the Internet, however. And they are people, just like you or I, and that makes them fallible. Sometimes they make bad decisions. Sometimes they make mistakes. Sometimes they’re targets. Sometimes they’re made examples of. Sometimes they’re just caught up in things. Sometimes they choose a permanent solution to a temporary problem. As sad as all this can be, it’s just life. And Bitcoin continues on unaffected.
Bitcoin has survived the loss of developers as well. There is nothing new with this when it comes to open source software. You could be a contributor to Bitcoin if you wanted to be. All you have to do is look at the code on GitHub and recommend a code change. Of course you won’t be able to commit your change to the version on GitHub without a Core Developer to insert it. But you can put your code out there yourself to be downloaded. If people like your changes they can download it themselves. If you get a big enough following you could cause a fork and your version of Bitcoin could eventually become the main Blockchain. And, then, your version becomes Core. And, if you eventually leave, abandon the project, or disappear, Bitcoin will go on.
That’s the whole point. No one person is Bitcoin. It’s bigger than us. It’s bigger than all of us. And once we’re gone Bitcoin will continue on unaffected, with little fuss. It is greater than the sum of its parts. Honey Badger don’t care.