Buy Bitcoin guy

TL;DR

  1. Bitcoin is becoming the best possible money
  2. Don’t use shoddy reasoning to appease your Bitcoin FOMO
  3. Embrace your Bitcoin FOMO and buy some bitcoins
  4. Hodl til you yodl.

Are you on the fence about Bitcoin? Do you fear missing out? You should! I explain how I think of Bitcoin and then point out various fallacies I keep hearing when bringing it up with friends and family.

Contents

What Bitcoin wants

Please allow me a bit of anthropomorphizing.

What does Bitcoin want?

Bitcoin wants to become the best possible money. This means it wants to achieve the following things:

  • coin supply non-inflatability
  • transaction uncensorability
  • transaction privacy
  • transaction speed

And through these qualities, it wants to become planet Earth’s universal money.

State of the Bitcoin

Let’s see how Bitcoin fares on these features.

Coin supply non-inflatability and transaction uncensorability have been baked into Bitcoin by Satoshi Nakamoto since its inception. These properties stem directly from Bitcoin’s decentralization, and are part of the reason why decentralization is such a crucial concern for Bitcoin. Additionally, sidechain technology allows Bitcoin’s scarcity to be exported to any other useful currency bearing blockchain without creating a new coin, exporting Bitcoin’s scarcity goal.

Transaction privacy is currently lacking in Bitcoin because of the public nature and thus traceability of transactions. And you can’t run company accounts in Bitcoin because everybody can see what happens to the funds that go to the company’s addresses. This lack of privacy also affects coin fungibility. Although bitcoins are naturally fungible as they just consist of numbers under arithmetic, being able to trace transactions back to addresses whose ownership has become publicly known allows some coins to become seen as tainted. But there are realistic solutions in sight:

With a transaction speed of currently at most 7 transactions per second, it’s clear that Bitcoin in its current form can’t compete with centralized payment networks like VISA which process tens of thousands of transactions per second. Here the obvious solution is going to be the lightning network, a second layer for instant payment routing that builds on Bitcoin.

For now Bitcoin is in its infancy and looks like a solution in search of a problem. But like the Internet before it, Bitcoin first solves various edge cases and expands from there. The internet initially provided fast communication links between Universities. Areas where Bitcoin already has an advantage over fiat include low-cost remittances, drug buying and not losing your life savings in Venezuela. Note that in these applications it functions as both a medium of exchange and a store of value.

More generally, Bitcoin is a top down proposition of better money, grown from the bottom up. It leverages cryptographic advances to enforce all the desirable qualities listed above. In this, it is top down and dictatorial and unflinching and allows no dissent to its rules. But at the same time it starts from nothing, offering its qualities and tradeoffs in the marketplace of ideas, hoping for some buy-in. And people are starting to see that it is good. And so it grows. And grows. And because good money has the tendency of replacing not so good money (read fiat), it is far from finished growing.

The emerging thesis is that Bitcoin will end up as the global currency. Like the internet emerged as the global communications technology.

Fallacies to avoid

All of this rests on the above assumption that Bitcoin stands a very real chance of becoming the planet’s universal currency.

Fallacy 1: screw Bitcoin, I’ll just make my own

I recently read the following comment on seekingalpha (must log in) and it reminded me that I made the same mistake when I first encountered Bitcoin. It worried me that this comment got the most likes.

… people can readily create new close substitutes without paying thousands to previous horders of the technological “first occupier”.

Note the delicious marxist “occupier” language from a capitalist in the anger stage of grief. Here’s similar thinking by Peter Schiff – that whole article is a treasure trove of fallacies:

Even if you believe that cryptocurrency is going to work, how do you know that 10 years from now bitcoin is going to be the one? If digital currencies can work, someone can come up with another one. And another one. And another. And another. There’s nothing special about bitcoin that another cryptocurrency can’t replicate and improve on. Right now, bitcoin is just the most popular because it was first

No, no they can’t just come up with another one that has all the market adoption that Bitcoin already has. I made this mistake when I first came across Bitcoin in 2010 and could have bought cheap and be retired by now but totally dismissed it instead until one of its price surges much much later – due diligence, fuelled by a healthy dose of FOMO finally convinced me. In 2010 I reasoned that hey if these guys can create a currency so can anyone right? Just fork the code, make your own coin and create as much liquidity as you want, so how can there ever be value to a particular coin? What’s the point?

Two things.

First: network effects aka Metcalfe’s law. Bitcoin has the first mover advantage, the smartest developers, the deepest reasearch, the widest commercial adoption and mindshare, and it all adds up to a self-reinforcing ball of awesome that by now I think is impossible to compete against.

Secondly: remember coin supply non-inflatability? From Bitcoin’s point of view, scarcity is a feature, and creating additional coins is a flaw. Think about how everybody plus dog creating their own coin would work. At best you would get lots of localized coins with no broader reach. Adam Back notes that taken to its logical conclusion your coins end up being nothing more than informal interpersonal IOUs.

Would you prefer a coin that you can trade with your friends only, or would you prefer one that you can trade with your friends and also the rest of the world? Asked in reverse, why would I agree to accept your altcoin that I’ve never heard of and don’t trust? Pure cash is always better than a token you can only spend in a specific place or among specific people (also the moon needs to align).

Generously even assume for a moment you’re so good at promoting your new coin that you get it listed on exchanges – which by the way are centralized constructs which eliminate part of the appeal of cryptocurrencies and should only be used to dump your shiat for bitcoins. So for the privilege of dealing with you, people will have to sign up to the few exchanges that offer your coin, trade for it, maybe create a new wallet for that coin, etc. Or they just go with the guy who offers the same services, but for bitcoins.

Fallacy 2: the price is too damn high!

Oh noes, it’s too late now, did you see how much it grew in the last day/month/quarter? It’s too expensive now.

The bitcoin price is too damn high!


I heard this when it was at $1000/BTC, and I’ve heard it recently about $2500/BTC. Too expensive? Really? Oh cool, just show me how you dutifully calculated bitcoins’ intrinsic value which you then found to be lower than its current market value. Oh no wait, you didn’t do that.

If you assume that Bitcoin is going to succeed at becoming the world money supply, you don’t need much arithmetic to figure out that the current market valuation of Bitcoin has a lot of room to grow into those trillions. A recent paper put the unit bitcoin value in a similar scenario at $5.8 million.


Fallacy 3: always diversify right?

But but… shouldn’t we diversify into other cryptocurrencies?

No. Bitcoin only. Remember, this is about creating a world currency, whose prime feature would be having little to no competition from other (crypto)currencies. So this is quite different from the stock market, where you have lots of companies which may or may not be in competition and which on average will do ok. Instead think VHS vs Betamax or BluRay vs HD DVD. Everybody wants there to be only one.

Ethereum and ICOs and everything here that isn’t Bitcoin is a sideshow. To be fair, Ethereum might serve Bitcoin as a cautionary tale for making all the wrong kinds of technological tradeoffs. But tokens, Ethereum’s bastard children, are worse. They’re an unholy amalgation of Ethereum’s me-too-ism and random empty promise schemes. Tokens are the ugly second coming of altcoins, with a foul breeze of 1999’s dotcom mania. Please please please don’t speculate on them. These tokens are like loyalty points for a grocery store that won’t be around next week. Ask yourself: wouldn’t you rather have cold, hard, durable cash – aka Bitcoin?

Cryptographic money is a done deal and its name is Bitcoin. Sure, there will be tons of new useful crypto technologies. They will be incorporated into Bitcoin itself, sidechained, layered on top, or as in most cases, discarded because they weren’t such a good idea to begin with or because they didn’t pertain to digital money.

So forget about Ethereum and other coins or tokens. The ship (or rather, blockchain) for digital cash has sailed. There can be only one money because it’s in everyone’s interest for there to be only one money. Embrace Bitcoin maximalism because “Bitcoin only” is a feature. It only looks like a bug when you’re not holding them. And sooner or later you will. I just want to convince you to hold sooner rather than later because of its potential for appreciation.

How I came around

If you’re still unconvinced, maybe it will help if I explain how I came to stop worrying and love the bitcoin.

  • First, as noted above, I realized that the utility of networks meant that my “screw your bitcoins, I’ll get my own coin” thinking was bunk.
  • Then I had this odd vision – surely bestowed upon me by Lord Satoshi – about an inversion when national currencies would be compared to bitcoin rather than the other way around. In other words, Bitcoin achieving unit of account. The Bitcoin community even has a cool meme for this:

Bitcoin Morpheus

  • Then I noticed the stunning levels of excellence among its developers. I mean, just listen to Gregory Maxwell here, the sheer competence on display. And that’s just one of the geniuses working on Bitcoin Core.
  • Then I heard about sidechains and how they might one day help offload some of the transaction weight of the main chain and help pioneer radical improvements like mimblewimble, all while preserving bitcoins’ scarcity.
  • But still, 7 transactions per second maximum with the current system? So then I learned about lightning network, and how this will lead to a neat layered architecture much like TCP/IP, with the blockchain for (generally indefinitely lived) channel creation, and lightning providing instantaneous low-fee world-wide transfers, making it a viable payment network.
  • Finally, Bitcoin’s uncanny ability to overcome adversity again and again and again made me realize that Bitcoin was an antifragile system whose sound foundations made it overcome and thrive on adversity.

Conclusion

So sometimes FOMO is useful. If you think, hmmm… I hope I’m not missing the boat on Bitcoin, rest assured, you are missing the boat. Luckily for all of us, even though bitcoins’ value has risen so far since its inception, it’s absolutely not too late to invest.


Hey, I missed cheap coins too, it sucks, but there’s quite a way for Bitcoin to go before the rest of the world wakes up. Just don’t be this guy:

Regret


So here’s what you do.

You install a wallet – I recommend electrum. Back up your seed and set up a strong password for your wallet. Electrum generates a bunch of Bitcoin addresses that belong to you now! Later you can buy a Trezor if you want stronger security.

Next you sign up to an exchange, one of the big ones with lots of market depth – for example kraken or coinbase. Yes you’ll have to fulfill their KYC/AML demands, that sucks, and it takes a week to go through.

Then you wire enough bucks to the exchange to buy 1 bitcoin. Or less, if you got less.

When they arrive a day later, you trade them immediately and in their entirety for bitcoins. And only bitcoins. The currency symbol for bitcoins is BTC or XBT. Don’t get confused by knockoffs like Bitcoin Cash (BCH) etc. or you will have flushed your money down the drain. Just after the trade goes through, you send them – withdraw in exchange lingo – straight to one of your electrum addresses.

That’s it. You have succeeded in liberating yourself from your cryptocurrency FOMO, and you can now go back to living your life. In 10 to 15 years you’ll still regret that you didn’t buy 2x, 5x, 10x etc. of how much you just bought, but that pain will be made significantly bearable when you apply that same bulging, throbbing exchange rate to your holdings. Oh, maybe put in some extra cash for your family, your descendants will build shrines to your mystic hodling ways.

So pretty please, with cherry on top, buy the fucking bitcoin. Even in lower fractional amounts. In a decade or two you’ll go full Franzl Lang. If that’s not a great goal in life, I don’t know what is.