Believing in Bitcoin
How many people believe Bitcoin represents a new means of exchange? A handful of crypto-enthusiasts and Libertarians? How many believe the decentralised nature of the blockchain enables them to transact peer-to-peer without the need for a centralised authority such as a government or bank? As important — and often overlooked — how many believe Bitcoin is unstoppable? Unlike many other crypto-coins such as Ethereum or Dash Bitcoin has no central organisation. It is managed purely by volunteer developers and Bitcoin miners. With no organisation how many people believe there is very little for government regulators to regulate?
I know a great many people believe in Bitcoin for two reasons. The first is that the value of a coin has risen from zero in 2009 to $9,374.77 at this time of writing. People are demonstrating their belief in Bitcoin by the value they place on the coin.
The second way I know people value Bitcoin is the extraordinary creativity that is going into seeking to make the coin better. This not only includes the Bitcoin development community. It also includes all the Bitcoin hard forks:
Bitcoin Cash: Forked at block 478558,1 August 2017
Bitcoin Gold: Forked at block 491407, 24 October 2017
Bitcoin Private: Forked at block 511346, 28 February 2018
Nor does the creativity stop with the Bitcoin code. The number of cryptocurrencies available over the Internet as of 10 April 2018 is over 1,587 and growing. (Source: https://coinmarketcap.com/all/views/all/ ).
Admittedly not all of these are currencies in their own right but like the rise in Bitcoin prices, this creativity to make a better Bitcoin through the spawn of new currency-coins seems to be only increasing.
One indicator of this is the number of initial coin offerings (ICOs). ICOs raised more money in the first three months of 2018 than the whole of 2017, according to data collected by CoinDesk. CoinDesk goes on to comment:
“At $6.3 billion, ICO funding in the first quarter is now 118 percent of the total for 2017, a figure that might go a long way toward undermining a common perception that the controversial fundraising method will soon be extinct.” (Source, including image: https://www.coindesk.com/6-3-billion-2018-ico-funding-already-outpaced-2017/)
Creativity and price then are both measures of the belief people have in Bitcoin.
I am also a believer. In my case I decided to get involved in tackling a hitherto neglected aspect of Bitcoin — its volatility.
Bitcoin is volatile. In January 2014 the coin lost -83% of its value from its previous high. This was not an isolated incident. Over seven years the coin has seven times lost more than 60% of its value from its previous high, the most recent being in early 2018.
Many believers accept this volatility as an inevitable feature of a new currency being born. However that does not exclude volatility as something that we can be creative about to make Bitcoin better.
The Bitcoin Enhanced White Paper suggests that all living systems, including fledgling crypto-currencies develop according to the harmony of the Golden Mean. We have all seen pictures of the Golden Mean spiral in the cross section of a Nautilus shell or in a sunflower. The Bitcoin Enhanced White Paper outlines how the same harmony can also be found in time series data such as the price of Bitcoin.
Because the price of Bitcoin develops according to this natural harmony, the times when it falls also follows a regular pattern. Bitcoin Enhanced uses this pattern to improve on Bitcoin’s price by successfully forecasting when these falls are likely to occur. In other words Bitcoin Enhanced is looking to improve on Bitcoin by using its volatility to advantage.
The forecasts are published on the blockchain in an encrypted time-stamped form to ensure there is no cheating. Once the forecast period is over the password is also published so anyone can verify its legitimacy.
The project was launched in January 2018. So far there have been three forecasts. Two correctly predicted Bitcoin’s price fall. The most recent missed out narrowly. The result is that Bitcoin Enhanced is trading at a 21% premium over Bitcoin after 4 months.
My personal belief-into-action story is just one of many. I would suggest that one of the most positive aspects of the Bitcoin phenomenon is the way it demonstrates the power of belief. To take another example, look at the way the seemingly intractable problem of Bitcoin’s slow transaction speed is being resolved:
“The Lightning Network is a “second layer” payment protocol that operates on top of a blockchain (most commonly Bitcoin). It enables instant transactions between participating nodes and has been touted as a solution to the bitcoin scalability problem.” (Source: https://en.wikipedia.org/wiki/Lightning_Network )
“By transacting and settling off-blockchain, the Lightning Network allows for exceptionally low fees, which allows for emerging use cases such as instant micropayments” (Source: https://lightning.network/)
Let us step outside the Bitcoin world for a moment and simply stand in awe and appreciation of the power of belief and the human creativity it engenders. This last graph shows the diminishing times for the men’s mile over the last 150 years.
There may be limits to the power of belief. But I do not see any yet.