Why Bitcoin is Important

Capitalist Exploits's picture

By: Chris Tell at http://capitalistexploits.at/

“Bitcoin is the anti currency”; “Bitcoin, the currency of the future”; the “currency of the resistance”; “Bitcoin is a Fad”; “Bitcoin is a fraud”; “Bitcoin is a currency for drug dealers,  kiddy fiddlers and terrorists.”

These are some of the opinions I've heard thrown around when discussing Bitcoin.

I have no particularly original insights into Bitcoin, and I won't pretend to understand the technology behind it. I can barely understand how my coffee machine makes such great coffee. This is the complexity of the world.

Firstly, let me say that we think Bitcoin is "cool". I love disruptive technologies. 5000 years ago shipping changed the world. I discussed this in depth in an article entitled Predicting Prosperity. I alluded to the “Guano age” of the 1800's which was destroyed by the advent of nitrate-based fertilizers.

The Internet, at least the Internet that most of us know has only really existed since the mid-90's, and even then VOIP and data streaming were far from common. Technologies which we take for granted today have often only been around for less than a decade. Yet we're all comfortable enough with them.

In the 1990's the first fibre optic cables where being laid allowing for what would become the world wide web. Who could have known who was going to profit and who was going to fail?

When a friend introduced us to Bitcoin nearly 4 years ago now we were busy, looked quickly at it, decided we didn't understand it and dismissed it as quackery of some kind. This despite our friend being a man we hold in very high regard. Hindsight, as they say is 20:20. It was still very early days in Bitcoin history.

Fast forward to today and we've spent more time learning about digital currency (not Bitcoin per se) and this is how we see it.

The Mania


Markets, especially those affected by revolutionary technology exhibit distinct patterns. This is because human beings really don't change.

Circumstances change, technology changes, environment changes but human behaviour never changes.

I found the chart below from Gartner. It provides us with a visual image of what I'm talking about.

hype cycle

The crazy, silly hype that existed is now over, and I think we're in the third stage.

Please note that I'm not a Bitcoin bull or bear. I think people miss the point behind Bitcoin and that point is simply that Bitcoin is at its core a technology. That technology has been replicated to a large extent with dozens of other digital currencies. As such there is no particular moat around Bitcoin other than first mover advantage. First mover advantage in technology is not always all it's cracked up to be, heck Netscape had first mover advantage too, right?

The value lies not in Bitcoin but in the technology. Technology is a market I can understand and play in. Trading, or rather gambling on what price a Bitcoin should trade for isn't.

How useful then is the technology?

As Goldman Sachs IT analyst Roman Leal argues:

“in 2013 money transfer fees would have fallen by 90% if Bitcoin had been used. Global transaction fees at retail point of sale, meanwhile, were $260bn on over $10trn of sales. Using Bitcoin those fees fall by almost $150bn to $104bn."

I don't care who you are, these sorts of numbers are compelling and the odds favour this technology being utilized in the future.

I believe that the technology is here to stay. That doesn't mean that Bitcoin is here to stay. I have no idea but I do think that the cat is out of the bag in terms of the technology.

How Best to Play It

Investing in core technology (note: I said technology, not Bitcoin) companies that are building the infrastructure for digital currencies is right now the best way to play the odds game.

The market is currently disillusioned with the price of Bitcoin. It's collapsed from well over  $1,000 to just over $400 today. The companies we've been speaking to, who not 6 months ago had all the arrogance of a pimply-faced teenager who'd found the powers of tequila and testosterone, today sport far humbler valuations!

The sector is ripe for discerning investment and we're actively exploring private equity in this sector. Our friends at Pathfinder Capital have setup the first FSA regulated crypto technology fund. We think they are on the right track! Target the companies building the ecosystem and the platforms that will drive innovation. Let others try to figure out which "currency unit" will win.

- Chris

"Any sufficiently advanced technology is indistinguishable from magic." - Arthur C. Clarke

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devo's picture

If it's important it should be obvious where we don't need someone to tell us how important it is. Nice try, ponzi dude.

tekknik's picture

the ponzi claims aren't working anymore, you bankers really need new material

TheFutureReset's picture

"If it's important it should be obvious where we don't need someone to tell us how important it is. Nice try, ponzi dude." 

You just negated all media, advertising and commentary. Would you say the same goes for gold? If it's so obviously a ponzi would we need you to point it out? 

TPTB_r_TBTF's picture

Hi Noob,

 

this board has a bug.  If you start your post with a quote, we canT vote you up.

If you start your post with a quote, so that we canT vote you down, then we hate you.

 

And donT forget Rule #1.

Ralph Spoilsport's picture

Hey n00b,

It's italics that triggers the bug, not quotes. LOL!

Dewey Cheatum Howe's picture

Is it just me or are the biggest knuckle draggers besides the usual disinformation trolls sent here to undermine bitcoin the ones, you the ones that understand it the least are the loudest ones screaming kill it and don't use it.

Same as those people who don't know where Ukraine is are screaming the loudest to go invade the place because Russia bad.

Anyone picking up a general pattern here or am I the only one?

 

TPTB_r_TBTF's picture

Apophenia is the experience of seeing patterns or connections in random or meaningless data.

logicalman's picture

All humans suffer from it.

Probably animals too, but I wouldn't know.

mijev's picture

Bitcoin is a blatant attempt to model the monetary characteristics of gold in a digital world. It can't be easily duplicated, finite supply, difficult to produce/mine etc. And whoever was behind it has more brains than I do. Ten years from now I imagine kids in the next generations won't understand why gold exists outside of jewelry, much the same as kids today wouldn't have a clue what a cassette or vinyl record is. I just read that teenagers who have never smoked are taking up e-cigarettes. In the meantime, I'll hold both gold and bitcoins. Ten years from now I won't give a shit how either are doing.

MeelionDollerBogus's picture

10 years from now bitcoin won't exist except as a meme for jokes and gold will be the primary currency to pay for food, rent or a  house - actual gold coin, not an electronic or paper proxy.

mijev's picture

Finally something very useful in the technology that links bitcoins to the fiat world. I wonder if Discover are making some sort of play in the cryptocurrency world. It's a debit card that you fill up with btc and then withdraw cash from an atm. Supposedly willl work at 90% of atms around the world. We'll see.

 

http://gigaom.com/2014/04/07/new-bitcoin-debit-card-claims-to-work-with-...

Rising Sun's picture

shitcoin is dead.

 

what these turds fail to realize is that shitcoin is up against a military backed currency - something that gold could never do - pure and simple.  bitch all you want, but these are the facts.

 

you want your shipment to get from asia to north america and not get hijacked?  you gold bars aren't going to save you, but two fully loaded aircraft carriers and their crews sure will - at a price.

goBackToSleep's picture

and the military is backed up by..............Murikans? Dollars? Oil? Mom and Pop who are prior military are figuring that one out. The sandbox vets' children aren't going. Perhaps the sexually confused set will tangle with Putin in the new military.

Run away Run away, a la monty python.

El Hosel's picture

Tulips were important too.

messystateofaffairs's picture

My business math skills cannot understand the cryptographic technology behind bitcoin. However smart independent people with those skills say there is something good going on there, and they can look because its open source. The idea of cryptocurrency, as introduced by bitcoin, is here to stay and get better and more used over time. To me it is by far the most important single event of the 21st century so far; a digital gold, peer to peer, non expandable, decentralized, easily stored and transported currency, that is functionally private. When it goes mainstream it will change the way the worlds economies work for the better. It won't threaten gold but become another golden currency choice. I am rooting for crytocurrency and ordering every ZH'er who say unpleasant things about it to buy and use one btc to help support the idea. I am also ordering you all to give me an up arrow for this post.

Mercuryquicksilver's picture

"non expandable"

 

You are kidding. Cryptocurrency is unlimited.

inky's picture

@messystateofaffairs "I am also ordering you all to give me an up arrow for this post."

hmmmmmm

Lol Nope.

goBackToSleep's picture

Ordering on zerohedge is tantamount to suicide.

RaceToTheBottom's picture

WS will fight it to the death.  They will do both on the surface, debating the technology, etc.  But they will also fight it via Proxies, introducing volitility and denouncing everything about it, while taking part in it.

 

Same as Congress did earlier.  Same as the FED/WS does with Gold/PMs.

 

No industry will willingly give up 90% of its profits

MeelionDollerBogus's picture

hahha

HHAHAHAHAHAAHA

who do you think REALLY made sure you'd have bitcoin?

It's a honeytrap from the NSA.

Fools.

oh bother, I've got rumblies in my tumblies, oh please where is the honey?

dogismycopilot's picture

when pimps and hookers are using bitcoin maybe (and i stress maybe) it will be here for real.

until then, cash is king.

inky's picture

Sorry to say this (because so many people have been sucked in)

But it seems to me that Bitcoin is a NWO trojan horse (a tester) for the NWO global currency.

Why dont you think they have attacked it fully? or they are actually allowing it to be and run its course?

Ok the muppets in goverment will argue for and against it (but thats just pantomime which is all scripted) for the sheeple.

They are letting Bitcoin develop and evolve (for now) and watching the progress from the sidelines.

Put it this way = if you printed your own money you would be locked up by now !

ONLY THE PTB CAN CREATE MONEY OR SIMILIAR.

They write the laws they say what is and what isnt.

Mad Muppet's picture

Why Bitcoin is Important? It isn't. Bitcoin has the same flaws of the USD...t is backed by faith and has no intrinsic value. While it may have a great moral superiority, that won't cause me to invest in it while I can still buy Au, Ag, guns, land, ammo, or anything that I can hold in my hands. 

TheFutureReset's picture

Is there a competent person alive that thinks if the guns and goons didn't enforce the USD it'd have any value? Those are the things backing the dollar, it's value comes from people believing that everyone has the same gun to their heads. Sure it will take some time to unravel our positions, and there will be big losers, but that is what we are seeing all over the world, as the smell of freedom emanates from gold AND bitcoin. 

Bitcoin is different because it is voluntary and independent. Gold is its real competitor in the medium term. In the short term it's the guns and goons. Bitcoin and its infrastructure might just be the right tech at the right time, to act as a bug out bag for commerce. 

messystateofaffairs's picture

Stop being a muppet. Even the janitiors at Goldman Sachs and all those other bastions of TPTB know that an object becomes money only because of the widespread faith and confidence of ordinary people and NOT because of any "intrinsic value". That knowledge and the ability to use it lies at the root of Babylonian Money Magic. Now wake up and go buy a bitcoin and spend it on something nice for your loved one.

MeelionDollerBogus's picture

Nope.

Objects which are highly useful in a totally non-monetary manner, yet are also able to be divided, weighed, tested, handled safely & conveniently are money. All of them, from pills and tools to metals and dried foods.

Lordflin's picture

I think digital currencies such as bitcoin are wonderful. I can't wait to put total control of financial assets into the hands of a few psychopathic monsters...

As for Ralph... It is very naieve to think that tomorrow will be like to today... it never is. History moves slowly and incrementally and the all at once. You sir get up each morning and think 'there is no storm today' and consequently you don't believe in storms. If you are too blind to see the terrible forces at work in human society then there is really little point in trying to reason with you.

We are at the end of a cycle... It involves mass destruction on a grand level... fall of Rome sort of stuff. The difference this time is that it will be global and involve means that have never before figured in the affairs of men. What will the trigger be? It is hard to know. Cheap money, decadent culture, and military conquest on behalf of megalomanic lunatics all run a more or less parallel course. It is a fool who does not recognize the times in which he lives.

Ralph Spoilsport's picture

Why are you mentioning me in your rather incoherent comment? Because of my comment about paging fonestar? LOL!

Lordflin's picture

As I said sir, you are a fool.

Imagine down flags are for my take on bitcoin. It would be great to think that an alternative currency had been found... but it has far too many, if not all, of the characteristics that central planners have been wanting for years now. Any introduction that becomes a standard for trade is easily a first step in it's legitimization. Planners are content with one step at a time if that is all they can accomplish. Just give us that gun, you don't need that gun to derive pleasure from your second amendment rights (paraphrasing Holder from the other day). Just let us limit your freedom of speech in this situation... we need to take away your right to privacy under these conditions... besides, no one can expect privacy in such a technologically advanced world.

The dangers of going down this road far out weigh any advantages IMO. If there is any hope for freedom in a world that is rapidly becoming authoritarian, then money must be uncoupled from government and clandestine authority. I know that many people see bitcoin in this way... But I believe that opinion to be a pipe dream.

What better way to achieve final and complete control over the exchange of goods and services then to create a form of money that gives the illusion of having risen from the people.

Somewhere some folks are getting a really good laugh.

Ralph Spoilsport's picture

I ask you to point out any post where I have been a supporter of BitCoin. You can't, because I have deliberately remained neutral. You sir, need your meds adjusted.

"Somewhere some folks are getting a really good laugh."

I'm personally getting a good laugh at your pompous and self-aggrandizing style of writing.

MeelionDollerBogus's picture

Bitcoin, born of the most powerful hoax to trick people into giving up all tangible wealth for something that can be erased in nanoseconds, is incredibly important.
The new generation is the last best hope to rise up & resist the beast but if they are so addicted to technology that they fail to understand its downside, they will be robbed completely and left unable to rise up.
Robbing them before they can rise up will leave them & their parents unable to afford resistance, migration or retaliation of any sort.
Slavery will be complete and the 0.0001% oligarchs will have a thousand year empire.

commander gruze?'s picture

Please, tell us more how do you go about wiping out all bitcoin wallets in nanoseconds. I'm very curious. And oh, also please be kind enough to explain the same for paper backup and brain dump of a bitcoin wallet.

MeelionDollerBogus's picture

#1 EMP: gone
#2 fire: paper gone (also paper isn't a useful way to have bitcoin because it's off the network & the bitcoins can be invalidated by the electronic transactions)
#3 brain dump: EMP again, unless you're thinking you are Rain Man and you mean actually in your brain. Brainwallet=EMP=fail.

Lordflin's picture

Well... That is not hard to imagine... you have backdoor entry points to the code that allow you control whenever you desire to take it. Imagine a world in which such a currency is owned by everyone, and used for most if not all transactions. Folks wealth is tide up in the stuff just as it is in paper. Turn the lights on, you have complete control over all wealth.

You and others like you have great faith... actually, so do I, just not in digital currencies. You believe that you know how these things work, but you don't. No one does other than the creators of the source code.

Someone comes to me and says, I have this magic bag here. I know it appears empty, but it really contains great wealth. I would like to trade it for your land.

Somehow that doesn't work for me.

MeelionDollerBogus's picture

Rather than outright backdoor entry, since the code is public, most people don't understand the code they read because they're not programmers, and don't understand the hardware limitations for blocking snooping, having secure, unknown hard-line connections and for stoping decryption by brute force.

They flat out don't get it. 256-bits is too small and most devices with bitcoin are 100% compromised by the NSA.

hot sauce technician's picture

"You believe that you know how these things work, but you don't. No one does other than the creators of the source code."

Uh, the source code is readily available for you to explore.

"Someone comes to me and says, I have this magic bag here. I know it appears empty, but it really contains great wealth."

No one's telling you that. At least not the developers.

"I would like to trade it for your land."

You'll get that offer when you'll be able to buy somebody else's land with btc. The market isn't stupid. It's actually quite efficient. That's why paper dollars work. Because they allow the market efficiency.

Lordflin's picture

I realize the code is public... If that gives you faith in the idea that it is immune to outside assault or intentional access that's great... I can think of nothing better than a currency that derives itself from the bottom up and is impervious to manipulation.

I just don't believe it.

Bendromeda Strain's picture

Easy - you don't wipe out the wallet. You wipe out its value. You make its anonymity illegal, and back that up with NSA level enforcement. You proclaim the golden age of digital currency, and demand that it be brought out of the shadows. Next thing you know, you don't have a dollar bill to slip hand to hand anymore. Oops.

Grosvenor Pkwy's picture

"Easy - you don't wipe out the wallet. You wipe out its value."

You just change the software that controls the blockchain, which is the distributed ledger that assigns value to all "Bitcoins." This can be done once the control of the Bitcoin software is centralized in sufficiently few hands, which has pretty much already happened with the centralization into a few powerful mining pools and exchanges.

People talk about "Bitcoins" as if they were real entities, "coins" that exist in some virtual space that can be owned by individuals. When someone considers that they own a Bitcoin, what they really have is an encrypted address that points to a credit in the distributed ledger called the blockchain.The key word here is credit, which is not the same as owning something.

It's ownership only in the vaguest sense, similar to "owning" airline mileage points that may someday, if you are lucky and obey all the rules, be redemmed for a standby flight to someplace that you probably would rather not go to anyway.

The endless photos of golden coins imprinted with a big B are useful to fool people into believing they are actually owning something of substance, which they certainly are not. At best, they have a credit with the Bitcoin blockchain software system serving as the counterparty. If that software system breaks or decides to not honor the credit, that's the end, as the customers of several bankrupt exchanges have found out to their great regret.

teslaberry's picture

lets see what all these bullshit ass bitcoin articles ( not that there aren't good bitcoin articles ) are flapping on about when bitcoin hits its price that it was before the november bullshit u.s. congressional hearings  around 100 bucks. 

 

good chance bitcoin is going to 100 bucks as early holders liquiditate to pay their capital gains. 

 

also good chance bitcoin goes down as the stock market tapers off. 

 

i actually like bitcoin . i think it will be more fairly priced at 100 dollars----when the first round of bullshit venture capital investments in bitcoin get written off as UTTER GARBAGE. 

the funcitonality of bitcoin, if anything, is that it is an application platform that offers FREE to 90 % cheaper services than ordinary. all these high valuation 'startups' are totally crap. the free market should hopefully clear this crap out of the wayj at 100 dollar bitcoin price. once it reaches its level as it sells off------then there will be some decent opportunities. 

 

and the great thing about bitcoins 'comeback' after the coming crash is that it won't need any bailouts to revive the zombie Money M1 of bitcoin. its just a commodity money --so really the simplicty of its operation , its robustness are the underlying long term built in assurance that bitcoin has staying power---that it can survive wild swings DOWN in value. 

 

 

toward 100 dollars in price. everyone will be screaming bitcoin is a dead turkey. that's when you buy it. 

be patient could take a a while---perhaps until the fed starts raising interest rates.

MeelionDollerBogus's picture

http://flic.kr/p/kyKgtF

No point waiting for $100 when you can wait for $6 (again) like what happened a few months ago.

kurt's picture

They will not be able to patch up the Bitcoin operation. Sorry.

stacking12321's picture

ok.

i will assume from your 1-sentence response, that you are a supreme expert on bitcoin, have spent years weighing the evidence in this matter, and have thoroughly resolved the matter and come to the above conclusion.

did eveyone just catch that? the issue is settled, kurt said so, we can stop using bitcoin now.

donsluck's picture

+1, however, the technology itself is another matter.

RaceToTheBottom's picture

Finally something intelligent about the bitcoin technology. 

I would have expected something about the P2P ledger concept.  That in addition to the partially anonymity ledger.  Those are also a major part of the value.

commander gruze?'s picture

Just read the original Satoshi paper. It's surprisingly accessible https://bitcoin.org/bitcoin.pdf

MaxThrust's picture

For Me the most compelling aspect of Bitcoin is its ability to bypass the Bank of International Settlements.

This reason alone will be enough for the "tribe" to be  very concerned.

 

Of course the Diamond market does not use cash transactions, its built on a credibility structure, (credibility of its participants ) This market is allowed to operate outside of the BIS becasue its run by the Tribe.

 

Max