Bitcoin: For Realzies?

Goldman is opening a trading desk for it, in New York City you can buy Subway sandwiches with it, accepts it and its ATMs are globally available, so maybe Bitcoin is, what? Going somewhere?


Amid the fervor, I asked my staff to do a deep dive into which side of this debate we might come down on. Real or fake? Serves any legitimate function? The efficient currency exchange it claims?

Sorry to report, the effort was a fail. Couldn’t reach a verdict on whose thinking is/is not right.

We did, however, uncover clues that might point you toward clarity.

Before we push off, glossary:

Bitcoin: digital currency created for peer-to-peer online transactions, the most prominent of a group of virtual currencies—money that exists mainly as computer code and of no central issuing authority or government, fluctuating value linked in part to a scarcity that is mathematically predetermined. Unlike other digital cash, Bitcoin, like “dollar” cash, is untraceable and can’t be recovered if lost or destroyed.

Cryptocurrency: first known use 1990, any form of currency that only exists digitally, no central issuing or regulating authority, based on a decentralized system to record transactions and manage the issuance of new units, and that relies on cryptography to prevent counterfeiting and fraudulent transactions. Virtual currency bitcoin hit mainstream in 2014, its ATMs springing up globally where cash is exchanged for cryptocurrency, a secure digital payment outside of conventional financial institutions

Dollar: first known use 1528, basic monetary unit of US, Canada, Australia and certain countries in the Pacific, Caribbean, Southeast Asia, Africa and South America.

Blockchain: continuously growing list of blocks (records), linked and secured using cryptography, each block typically containing a link to a previous block, a timestamp and transaction data, typically managed by a peer-to peer network collectively adhering to a protocol for validating new blocks. Once recorded, the data in any given block cannot be altered retroactively without the alteration of all subsequent blocks, which requires collusion of the network majority.

Hodlers: somehow this came from the word holders i.e. holders of Bitcoin, google it, definitions are, well, like Bitcoin, nearly impossible to describe . . .

With no idea where to start, our primer was a swan dive into this raging Twitter debate amongst hodlers:

Hodler A: “You clearly don’t understand the value here. Keep playing Monopoly while those woke of us profit.”

Hodler B: “It’s folly to think that suddenly 100 or even 1000 of these actually have value.”

Hodler A: “It’s an equal folly to assume they’re worthless.”

Hodler B: “Worthless can be 99% lower, where these things would still struggle to justify a $6bn market cap.”

Hodler C: “Every ‘currency’ is monopoly money. Don’t be a fool.”

Whoa! That last one, Hodler C, yep, he’s on to something. You know it in your soul.

Go, read up on the accounting fraud that produces infinite numbers of U.S. dollars (at the expense of future generations).

In Bitcoin’s defense, I like “finite” better. Scarcity mathematically predetermined, meaning “when we get to this number, we stop making them.” Unknown concept in American economics, when cash is scarce, the printing presses roll. C’mon, you knew that, no?