Bitcoin & The Point of No Return
“All men dream, but not equally. Those who dream by night in the dusty recesses of their minds, wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act on their dreams with open eyes, to make them possible.” T.E.Lawrence
This was all started by a dreamer of the day. Satoshi Nakamoto (which translates as “clear thinker” in Japanese) published an 8-page white paper, “Bitcoin: A Peer-to-Peer Electronic Cash System” during the most chilling period in modern financial history. It was October 2008 and the global financial system, as we had come to know, was collapsing. Amidst this landscape, the ideas presented in that fateful whitepaper, based on some 40 years of research in cryptography, began to sprout.
Over the last decade, these ideas have been nurtured by a vibrant global community of coders and advocates — growing into something strong, resilient, dynamic, and brimming with potential; something which is here to stay and to make a positive impact on the world.
Let me give you several reasons as to why Bitcoin has reached a point of no return and is here to stay:
Reason # 1: Security
The key ingredient of every software project is security. The bitcoin protocol, through its decentralized network architecture, coupled with ever increasing computing power has been tremendously resilient. The network itself has never been down and never been hacked. Scores of experienced programmers, including the acclaimed security expert Dan Kaminsky, have tried to hack it and failed. And the recent research estimates chances of hacking the Bitcoin Blockchain and being able to steal bitcoin as likely as winning the Powerball nine times in a row. The odds will get increasingly worse as more computing power is added to the system.
Reason #2: Virtuous Cycle
The self-reinforcing cycle of bitcoin is in full swing with the following stages:
- As more computing power gets added to the network it becomes more secure. At more than 25,000 PetaHashes per second, or 25 Quintillion calculations, Bitcoin Blockchain has attracted the largest amount of computing power in the history of mankind.
- As the network becomes more secure, more coders and developers dedicate their precious time to building applications and more learning institutions such as Princeton, Stanford and MIT are offering courses on bitcoin and cryptocurrencies.
- As a response to increased developer activity, VCs and crypto investors are allocating increased resources & investments to the projects
- As powerful applications develop, like the Lightning Network , Rootstock and Emercoin, piggybacking off Bitcoin’s security, and user growth accelerates, so does the demand for bitcoin.
- As demand increases and given bitcoin’s limited supply, the price rises.
- Increased price acts as an incentive for miners, such as Bitfury, to deploy even more computing power to make the network safer.
- Then, this cycle repeats.
Reason #3: Significant Resources
During the recent bitcoin price run up from $200 to $20,000, many companies in the ecosystem generated billions in profits. Billions more have been raised during the recent ICO boom. And although much of these resources have been reinvested into the ecosystem, still large amounts rest on the balance sheets. In case there is another multi-year bear marker (like we had in 2014–2015), the companies now have tremendous resources to carry on working on new applications. I estimate, if necessary, the ecosystem has enough capital to fund itself for at least a decade. This will give the industry ample time to introduce several killer apps. Decentralized Facebook, Uber and Amazon, to name a few, are all coming up.
Reason #4: Size Matters
Bitcoin at $130 billion market cap is a very different story from bitcoin at $1.3 billion. Size attracts more media attention, which in turn brings more discussion and curiosity. The network difficulty and computing power has grown from less than 1 PH/s in 2013 when I joined the ecosystem to over 25,000 PH/s today. Increasingly, the buyers of this vast amount of computing power have been family offices, institutions, and — in some cases — governments. There are so many stakeholders invested in the success of this technology — these stakeholders are engaging with states and regulators through organizations like Coin Center and the Global Blockchain Business Council to educate and inform.
Reason # 5: Protection Against Future Financial Crises
Unfortunately, the financial imbalances which precipitated the 2008 fiscal crisis have — in large part — not been addressed. They have been swept under the “carpets” of Central Banks. But as Robert Louis Stevenson observed, “Sooner or later everyone sits down to face the banquet of consequences.” With global debt nearing $233 trillion dollars, up from $20 trillion in 1980s, entire countries risk defaulting on their loans. One of the most renown investors Jim Rogers believes that the worst crash of our lifetimes is on its way. I do agree with Jim. And when the system corrects, owning a hedge instrument — like bitcoin — which operates outside of the system is wise.
In his book “Anti-fragile: Things That Gain from Disorder”, Nassim Taleb introduces the concept of “anti-fragile” — things that benefit from shocks and disruptions — becoming stronger and more refined as a result of the turmoil. Bitcoin is an embodiment of the above as it has endured series of shocks and crises since its inception. From exchange hacks to bans in China, from scaling wars to Bitcoin forks — and every time the technology has emerged stronger than before — creating an ecosystem nurtured and propelled by “the dreamers of the day”. My parting advise would be not to bet against them.