Globally, people are losing faith in our institutions. Our financial institutions, our governments, our media, our medical systems, even democracy as a concept in many cases. And for sound reasons. Proposed upgrades to Bitcoin’s protocol would enable use of the chain (and L2s) for things aside from just money. On the world’s most secure document: the bitcoin ledger. It will change everything and here’s why.
The root problem is that we are building systems which rely on trust and time and time again, that trust has been broken. We have to trust that the people elected or appointed to those positions will do their jobs faithfully. But, of course, like us, they are humans and fallible. Subject to stupidity, greed, misdirection, and error whether through malice or accident. Take money, for example. Money has to be trust-able, so it is entrusted, for all its faults, to the most stable and neutral institutions humanity has ever created: the state. And yet, the state often abuses that authority to print money they shouldn’t leading to inflation and hyperinflation, particularly for unpopular wars of conquest. Every failed state ends in hyperinflation, because it’s a tool in the state’s toolbox and they will use it when they have no other options. They’ll turn on that money printer if they need to. And time after time, they have. There are ways to create trustless systems, where we do not have to trust individual actors to administer them faithfully, only for them to be mostly rational actors subject to the same laws of math and physics as the rest of us. Instead, the system administers itself according to some form of protocol. Bitcoin did this for money 15 years ago, it was created by Satoshi in the wake of the nearly total collapse of the global financial system (2008 financial crisis) to create a system which could not suffer the same fate. We all had to bail the banks out because they were “too big to fail”, which was true, Bernanke won a nobel prize in economics for his analysis of this and the bailouts likely prevented the worst economic period since the great depression had the entire banking system be allowed to fail. You may not know who Bernenke is, but if you were alive during this time period, you know his face, he was the guy who had to sell the bailouts to the world as an idea. The reality is, fractional reserve banking is a ponzi scheme, and had the banks failed and people realized it, it would have stopped functioning. Our debt-based world order would have collapsed. No credit could be issued to build roads or fund schools or do anything because there would be no money in the banks to use as collateral and nobody would trust it. Just like in the US great depression. You can argue it’s a sneakily beautiful ponzi scheme which drives the engine of human progress if you are a die-hard capitalist, but you can’t argue it’s not a ponzi scheme.
The crazy thing is, Bitcoin worked. It has kept every promise it made. For 15 years, it has faithfully administered a financial system with a known, transparent, limited supply of 21 million coins which can be transferred across the globe in seconds for pennies in fees. And it has continued to grow no matter which metric you measure it by. Through pandemics, wars, international conflict, attempted bans by major world powers, tick tock, next block, the blockchain continued to function. Not a single hour of downtime, not a single bank holiday, not a single hack or breach of security or protocol. Now, it has a market cap of over 1 trillion USD, which is bigger than the GDP of Israel, the Netherlands, Turkey, or Switzerland, countries with tens of millions of people. It’s been consistently over 800 billion for a while now. It moves hundreds of millions of dollars of value on the regular. I can send a transaction to anybody on the planet with a cell phone and halfway reliable internet for under a cent in under a second.
Nobody can make Bitcoin print money it’s not supposed to print. Nobody can transfer money without the private key of that coin. Nobody can force the network to do anything outside of its protocol, even if they bought every Bitcoin in existence. Even if they had a trillion dollars and 1,000 people with AKs ready to die for it. It’s mathematically, computationally, financially, and logistically infeasible. I think the question is, long-term, how can be we build political and social systems which are equally trustless where we don’t have to put people in positions of power. Just like democracy did to monarchy in spreading power around and reducing the damage one corrupted individual could do, we can now do that again in an order of magnitude greater in the same direction towards greater democratization. Whether you’re a capitalist, a communist, or a member of the federation of planets, this tech has serious promise for making your ideal global vision come true. It’s a matter of setting up the system correctly and getting adoption of it. It can be used for voting systems, for the collection of taxes, for the administration of public funds, goods, and markets. It can be used for a lot more than just money. With smart contract functionality, Bitcoin will be the ledger upon which all this is built.
I’m excited to be here with all of you. We are early. Most people I know don’t own any crypto. The future is coming. Thank you Satoshi for your gift to the world.
I agree on some points and disagree on others. The fact that it has worked for 15 years reliably I completely agree on. The idea that it can be sent for pennies though is completely false unless you are using lightning which is either hard to set up or custodial which is not ideal at all. I personally rely on Monero because I do not want the entire world knowing my account balances. I think that’s a bit crazy.
The idea that it can be sent for pennies though is completely false unless you are using lightning which is either hard to set up or custodial which is not ideal at all
Lightning has come a long way. Custodial solutions have always been easy, but even self-custody solutions are easy now. Wallets like Phoenix (and Zeus which gives you even more control and privacy) run a lightning node on your phone and are excellent and abstract away basically everything for the user. No managing channels/liquidity/any of that nonsense like it was in the lightning early days. You can rent liquidity if you want, but in actual everyday use once you’ve locked up your “average daily spend” amount in lightning, you’ll find that you never get hit with main chain fees to add liquidity since lightning should be for everyday spending not large txs. You can also do swaps to empty your liquidity bucket for like a 1% fee. There’s lots of solutions. I did a writeup if you’re interested, this comment specifically
I personally rely on Monero because I do not want the entire world knowing my account balances. I think that’s a bit crazy.
I agree with this, I look forward to the day that Bitcoin incorporates better privacy on L1, though it has gotten better in recent years. Lightning does offer significant upgrades in this capacity currently, basically all your txes are opaque and you can easily run a lightning wallet over Tor. The Bitcoin community is very pro privacy, I think they are waiting until a certain critical mass is reached before “flipping the switch” and proposing such an upgrade, which is a wise strategy. Monero will lose a lot of it’s draw if that happens. Bitcoin, Monero, and others will have to upgrade to post-quantum crypto at some point, so that might be when such an upgrade happens.
In order to adopt a technology as an alternative to the institutions, that tech also needs to prove itself, or earn trust in the parlance of the text. Not keen on losing my life savings when my wallet gets hacked, I forget my password or someone like crypto.com decides to use my funds illegally. At least the institutions are backed by govt legal frameworks so I have some recourse if things go south.l, otherwise I might as well be burying my money in a secret location in my back yard.
I agree that it needs more public awareness, trust, and adoption to reach its full potential. I would also say that it has proven itself. It works. For 15 years. Every year, you need more of insert asset here to buy 1 BTC. Banks are investing in it. State government pension funds are getting exposure to it. Small countries are exposing their national treasuries to it. They’re probably all wrong though, right?
You wouldn’t store your life savings in a single wallet, you would use shared custody arrangements so a wallet hack can’t threaten it. Things like cold wallets, multi-sig, etc. Or you can trust other custodians (like Banks) if you want to, just you know, hope the bank doesn’t collapse or their insurer is faithful (FDIC etc). It’s not either or. There’s a spectrum of users and custody arrangements. Bitcoin doesn’t solve theft. Neither did the dollar or our current legal system, especially when we talk about cross-jurisdictional theft or the theft of the government devaluing people’s currency. Or politicians and despots raiding their national treasuries.
But the ledger that banks use to settle those amounts of money will be Bitcoin, because it’s instant and cross-border. Because it can’t be cheated. Because they don’t have to trust the liquidity the other bank says it’s providing is actually real, which is especially important cross-border where your legal system won’t help you if the other bank is lying or defaults.
We never see it or deal with it, but the byzantine settlement layer banks rely on is slow, outdated, and more complicated than you can imagine. IOU on IOU on IOU and it’s fragile. Settlement times measure in days to weeks depending on the type of transfer. Hell, even a credit card has a 30 day settlement time if you are a merchant. Fedwire, the US system banks use internally, has less transaction capacity as Bitcoin’s base chain, for example. And it’s not instant. And it can’t be used cross-border. There’s over a dozen different systems used for that. If you’ve ever had to deal with the complexity (and cost!) of sending an international wire, you have experience a fraction of how painful that setup is. The backend is an absolute rats nest.
