The Bullet. No.2. The Bitcoin Rabbit Hole.
TL;DR Our system of money is broken and I think Bitcoin is the solution.
Learning about Bitcoin is often referred to as going down the Bitcoin Rabbit Hole, where nobody has yet found the bottom. This rings true for me as well as many others in the Bitcoin community and I thought it a good place to pick up from my first letter, where I received a lot of questions (please feel free to keep them coming), and where I also left a lot of things hanging. The purpose of this newsletter is to a) crystalise my own thinking about all of it and b) help whoever I can navigate their way around the same warren. Over the coming issues, I hope to answer some of those questions for myself and for you. For now, this is how I entered the rabbit hole, 3 bullets this week:
1. What went down in 2007?
The financial crisis that started in 2007 caught almost everyone by surprise. Many of us understand it better now in hindsight through films like The Big Short, excellent journalism and even social media to help unpack it. I summarise it as some people got greedy, took on too much risk, were able to manipulate the financial system to their advantage, and in the end didn’t face the consequences of their actions in any way. As an individual, if I make an investment decision, I’m expected to do my due diligence and take on the risk of that investment going wrong. If I lose money, I have nobody else to blame, and if I make money then that’s my reward for bearing the risk. In 2008 the banks were covered for their losses, through taxpayer backing and quantitative easing, so were never punished for their bad decisions. If they had been, perhaps a new and better system would have replaced it, but instead we rewarded the kids stealing from the biscuit tin, by refilling the tin, instead of letting them go without.
2. Quantitative Easing (QE)
QE is a process where a central bank, say the Bank of England, increases the money supply. They literally create more money, out of thin air, and the way they then get it into the economy is by buying government debt with it. It’s worth reflecting on this. The government can get into as much debt as it likes, spend on whatever it likes, and then the Bank of England can simply create new money to write off that debt. Tell me, why do we pay taxes again? That’s a question for another time and for the record I pay my taxes. Back on track, I studied economics a bit at university and always enjoyed it, thinking about the wider world and how it all works. I’m no Emma Raducanu A* student, but I know enough to be of the view that QE doesn’t feel right and there must be consequences. Inflationary pressure and increased inequality being the foremost. It wasn’t until much later, that I really began to understand it though.
3. Discovery in 2017
It’s no coincidence that Bitcoin was introduced to the world in October 2008 via a white paper and launched soon after in January 2009, as a reaction to the financial crisis. The first block of transactions contains the reference “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. Over the following years, I remember reading news articles about a digital currency and people losing fortunes in hard drives they put in landfills but never paid it too much attention. Then in early 2017, the ticker for Bitcoin kept being highlighted regularly on the homepage of an investment platform I use, and I tried to find out what it was, that was the start of my rabbit hole. Many people do a better job than I can explaining what Bitcoin is and how it works, so I won’t try to emulate that. Instead, here are the 5 best resources I think for anyone looking to get started:
a) What Bitcoin Did - Peter McCormack - Bitcoin 101.
https://podcasts.apple.com/gb/podcast/what-bitcoin-did/id1317356120?i=1000505580820
b) Vijay Boyapati - The Bullish Case for Bitcoin. As mentioned in the above podcast.
https://vijayboyapati.medium.com/the-bullish-case-for-bitcoin-6ecc8bdecc1
c) Bitcoin White Paper. The start of everything and written by the creator of Bitcoin. It gets a bit techy which is why I didn’t start with it, but a lot is explained in d).
https://bitcoinwhitepaper.co/
d) Hash Power. 3 part podcast series. Explains Bitcoin in technical detail and the fundamental change it could bring about. You can also find it on Spotify and Apple.
https://www.joincolossus.com/episodes/39800754/lowin-hash-power-part-1?tab=mentionedcontent
e) John Lanchester - When Bitcoin Grows Up. I loved this article because it really gets you to think about what money is. Consider that it was written in 2016.
https://www.lrb.co.uk/the-paper/v38/n08/john-lanchester/when-bitcoin-grows-up
My personal conclusion. Money isn’t real in a tangible sense, it’s a human invention to help us trade and is already in many respects digital. Our current money system can be manipulated at the will of only a few people and to their own benefit. Bitcoin’s fully transparent monetary policy, that can’t be tampered with by anyone, with a known supply schedule, is a harder, better and fairer form of money than we have now because it gives everyone a level playing field.
Closing thoughts this week are dominated with the news that my friend and colleague Ben Johnson passed away. Ben and I were of similar age, and he had a son and daughter, who are similar ages to me when I lost my Dad. My thoughts and best wishes are with them and anyone that knew him. A timely reminder if one were needed, that life is precious. Ben was special, and everyone loved him. He had boundless energy, was incredibly fun, and always brought a different perspective with his sharp mind. I wasn’t going to publish this week as a mark of respect, but Ben was a major support and champion to me throughout my career and this new direction I’m pushing in, as well as being a good-natured piss taker to keep me grounded. So today’s letter is in memory of him. Love you Ben, RIP.
Peace, love and Bitcoin.
Rob
Awesome article. I liked BC for the reasons you elude to. Heading on hols and so will try to read some of the above. 2 Q’s for me for BC that I keep coming to, is who really created it (can something so sophisticated and remain so secret, really not be from a nation state) and the environmental/energy question associated with the ever increasing compute power. That aside love the democratised nature of it :-)