It’s The Potential, Stupid

The recent huge drop of value for BTC and various other crypto coins brought out again the annoying crowd of entitled whiners who felt cheated and complained loudly about the money they weren’t getting. As if somebody ever promised it to them.

One of the few Facebook pages that I am monitoring — that of NiceHash — announces each weekly payouts to external wallets. This happens every Tuesday, and under every such announcement there are a bunch of people complaining how little they are earning and how unfair the system is towards them. They also threaten — whom? — with stopping work.

On Quora — a site I regarded much more highly before I subscribed for updates on the topics of Bitcoin and the blockchain — every day some new bozo will post one of the same five questions: ‘Will the value of BTC increase again, ever?’ or ‘What is going to be the best crypto coin in 5 years so that I can now buy it cheap and become a millionaire?’… plus other pieces of assorted garbage.

Most people seem to be clueless as to what bitcoins actually are. They refuse to recognize the present and future utility of the blockchain. Instead, they insist treating the coins as any other physical resource: something to be obtained and resold for profit now, or kept and resold later for a much greater profit.

I wouldn’t mind that too much — everyone is entitled to their opinion and idiots generally punish themselves for their lack of foresight — except that the collective stupidity and growing madness seems to be getting out of hand.

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If you think about crypto coins only as a means of making a quick buck, you are missing the picture. Bitcoin is not expensive because it can be exchanged for dollars or euro, but because it can help you do more things than dollars or euro, or at least do the same things better. Do you know anybody who is stockpiling money thinking how it will be possible to do different stuff with it in the future? I didn’t think so. We save money because we know that in the future we will likely be able to exchange it for food, clothes, medicine and other amenities. Well, bitcoin might let us do that, and other stuff, too.

The notion of getting rich quick by mining or trading bitcoin looks even more idiotic after BTC lost more than 20% of its value in less than two weeks at the end of June 2017. Nobody in their right mind is investing into something that volatile. Why are you?

There is NO long run investment opportunity here. World governments can murder crypto currencies tomorrow if they wanted to; it will suffice to pass laws that make it illegal for banks and FinTech companies to exchange crypto coins for fiat currency, and we’re done; 80% of Bitcoin’s usability will evaporate overnight. Are you willing to bet that banks will so easily let go of the large bone and will never lobby for such legislation?

There MIGHT be profit in the very short run, if you are very good at technical analysis. But the people who are can make their buck buying, selling and shorting fiat currency or commodities, like they’ve done so for the past 50 years. Much less volatility, much less uncertainty about the future, excellent legal framework, little chances of crookery, comparable profit margins.

The only way to find value is look at not what Bitcoin costs today but what it can do for you tomorrow. The blockchain has the capacity to change so many things. It can validate ownership over a piece of real estate or a company. It can prove authorship of ideas (patents), programming code or art. The blockchain can be your personal notary, banker, or handyman (smart contracts, anyone?).

Once you realize the tremendous potential the technology has, it suddenly feels silly to obsess over making a buck a day mining for the monetary presentation of that technology.

Things would have been different if the idea of the blockchain was defined separately from the idea of the digital currency riding on top of it. People would not confuse the two things and all this madness would not have happened. But inventor Satoshi Nakamoto had no choice but to tie these two things together; without the financial interest of the miners taken care of, there would not be enough computing power available to keep the blockchain running.

The concept of profit is what brought down Bitcoin to its knees in 2017: miners benefited from growing transaction fees and had little initiative to make something that would decrease these fees once more — even if that meant adoption would continue to rise once it was no longer so expensive to make Bitcoin payments. Short-term greed (almost) beat long-term vision.

Does this rant mean I think everybody should mine & hold every satoshi, electricity bills and hardware costs be damned?

No, of course not. A rational person should take reasonable care so that he or she is not losing money on any enterprise.

But this doesn’t mean everybody should be getting into this expecting and demanding profit right now. As long as you earn enough to cover your current costs and still get some leftover BTC, that is fine. Heck, if you can afford it, you can even keep mining when your power cost is more than the price of coins you earn. You’re not doing this to get rich, quick. You’re doing this to see where this wild ride will take us. It’s the potential, stupid!

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