Noses
Daily Ramble
I started my day pretending to eat pizza and chocolate-flavored ice cream off a crayoned piece of paper I’d folded into a bookmark—courtesy of Naia’s imagination. Not satiated, we went downstairs after a getting-dressed tantrum for a bowl of granola, yogurt, and fruit.
On the way down the stairs, I thought about the latest daily newsletter from Quantum Economics by Mati Greenspan. He is a top-notch analyst and I enjoy his sober, supportive perspective of the crypto space. But being in the Bitcoin mining space and warding off the constant attacks on Bitcoin’s energy use, it touched a nerve when he suggested we need to look at a protocol level change to reduce the future energy consumption that’ll occur as Bitcoin’s price increases.
It’s a law of human nature that we find anything expensive if we cannot justify its value. And almost the entirety of the Bitcoin energy debate boils down to being appalled at Bitcoin’s energy consumption by those who do not value Bitcoin. Mati is not one of those people. His concern is the future consumption of energy and wondering when enough is enough. Mati is taking his perceived value of Bitcoin today and projecting it into the future and seeing a mismatch with its energy consumption, i.e., it is using too much energy to justify itself.
I flatly believe history will prove him wrong. But not that it’s his fault — it’s utterly, understandably human. We’re horrible at evaluating exponential growth. Indeed, it’s the same logical fallacy that plagued Uber investors that declined an early-stage investment only to regret it later. Early-stage investors looked at the total market size as comprised of the then-current competitor, taxis. They decided it wasn’t a big enough market to warrant the investment and/or company valuation. But instead of displacing the taxi market, Uber grew the rideshare market into something that would never have existed via taxis alone. Why? They built a network that grew exponentially.
And the same thing is likely to happen with Bitcoin. We’re currently trapped in the dominant narrative of making sense of it from an analog perspective — it’s digital gold. But the truth is that it’s digitally native, and as it gains further adoption, the programmable aspects will be further explored. Gold doesn’t have programmable aspects, and so, to understand Bitcoin’s potential, we must first understand the technology and then enter the realm of imagination to predict Bitcoin’s potential capabilities. I don’t understand all of its technological capabilities from a programmatic level, but I have been applying my imagination based on the trends I’m seeing.
Those trends look like they’ll merge into the security backbone of the internet. There’s absolutely no way to hack it without a coordinated state-level attack by multiple nations. That is very difficult to grasp since Bitcoin has no marketing department to speak for it, and we’re accustomed to hearing the word “hack” near the word “Bitcoin.” But, it would not surprise me if all the 3-letter spy agencies across the planet were anchoring their messaging systems into Bitcoin at this point. Microsoft has already built the primitive for an identification system, called ION, anchored on Bitcoin. Microsoft has no direct financial benefit from the ION Digital ID Network, as verifiable by its open-sourced code. Their effort can best be seen as goodwill for the internet commons. It’s not a stretch for me to imagine, in the coming years, that individuals find ION a better internet login solution than using Facebook, Google, or Apple since there’s no 3rd party to be hacked. Complete user control.
Let’s take Bitcoin-as-a-security-layer a step further. We know the world is obsessed with AI. If it worries Elon Musk enough to start a company to try and grab the reigns ahead of a sentient intelligence greater than humanity, it’s not a stretch to think we may want to anchor the reigns of AI into the Bitcoin blockchain. It’d be the equivalent of shackling the AI on digital chains it could not break — it quite literally would not have access to the physical energy to do so. It would certainly make me sleep better at night knowing that our first attempt at digital consciousness was tethered to limits we defined and tethered to the most secure network on the planet. Perhaps we could even go so far as to imagine Bitcoin being the digital defensive military of the internet.
But to get back to Mati and his concerns about future energy use, we don’t know what will be enabled by Bitcoin’s programmatic capabilities colliding with human ingenuity. Just as social networks built on top of the internet’s network have kicked off applications no one in the 90s could have wrapped their heads around, Bitcoin is enabling networks to be built on top of its secure monetary network whose impact we cannot fathom. To constrain Bitcoin’s potential at this point in the game is like cutting off our noses to spite our faces.
So full stop, we’ll have to agree to disagree here, Mati. I like my nose where it is and can see enough future value in Bitcoin’s energy consumption to resist a protocol change out of fear of future consumption.
PSA Things on the Interwebs
If you receive a hardware wallet you didn’t purchase, throw it immediately into a dumpster fire, let your dog pee on it, or crush it under your heel, but do not plug it into your computer.
Bitcoin Price Prediction
Yesterday: $37.4k - $41k
Today: $36.7k - $39k
Tomorrow: $33.5k - $40k
If you’re still stuck in your lawn chair watching the grass grow, I’m sorry about that. I did try and warn you. Bitcoin’s price movement has been anything except exciting. But that’s what consolidation looks like after the 50% price pullback we experienced in May. The good news is that it looks an awful lot like accumulation to me — accumulation leads to bullish continuation. The bad news is that in the last 24 hours, the price has pulled back to the point where it will stop looking like accumulation if it doesn’t form a bullish pivot. In other words, it’s decision time. In the next two days, the market either decides we’re bullish and pushes up to $42k and beyond, or the bears will take back over again.
Bitcoin Q & A
Q: Can Bitcoin be used for anything other than money today?
A: Absolutely!
To date, Bitcoin has been best understood by comparing it to gold. But as its programmable characteristics are better understood and utilized, I fully anticipate unexpected applications will be built utilizing Bitcoin.
For example, two years ago, I could never have imagined that remittances utilizing Bitcoin would cause a country to adopt Bitcoin as legal tender. Still, last week, El Salvador did just that. Strike was the app that made low-cost, instant remittances possible, and it was built using the Bitcoin Lightning Network. The Bitcoin Lightning Network could not start until Bitcoin adopted Segwit, the last software upgrade. Or, as another example, how Sphinx could build a podcasting app on the Lighting Network.
Who knows what other products will be built utilizing Bitcoin as a substrate?
Thanks for reading,
Kent
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