Bitcoin Didn’t Win. The Dollar Lost.
Making sense of value at the dawn of the blockchain revolution
Quick Disclaimer
This document is for informational use only and constitutes a theoretical framework for illustrative purposes only. It is not, and should not be regarded as “investment advice” or as a “recommendation” regarding a course of action, including without limitation as those terms are used in any applicable law or regulation. Additionally, this document is not intended to assert or imply any expectation of token value appreciation of the brifs.co token (BRC), or any other token, coin, or cryptoasset. Purchasing cryptoassets for speculative purposes is extremely risky and is inadvisable for most individuals.
Framework
Concepts relating to blockchain and cryptocurrency can be fairly abstract, and for the human mind, amorphous ideas tend to be difficult to wrap our heads around. In this post, we will attempt to make some of blockchain’s and cryptoassets’ underlying ideas more tangible through example.
We need to get some fundamental bases covered so that we can reach our goal of understanding what value truly is in the blockchain era, what value is not, and what you can do about it.
But, Bitcoin Isn’t Real!
“Bitcoin is an illusion, a mass hallucination…”
— Maria Bustillos ¹
Before we can discuss how value is extracted by companies in the crypto space, we have to define what value truly is. It is natural to think of value in terms of money; dollars, euros, shekels, and so on, but money is not value — it is simply one of many ways in which value can be represented.
In her wildly popular Medium article, You Don’t Understand Bitcoin Because You Think Money Is Real, writer Maria Bustillos states that “Bitcoin is an illusion, a mass hallucination,… not backed by anything other than the faith of the fools who buy it and of the greater fools who buy it from these lesser fools”. ¹
While Bustillos concedes this fact, she goes on to make the case that the same is true of the US dollar. She writes, “The main difference is that, for the moment at least, the illusion, in the case of dollars, is more widely and more fiercely believed”. ¹
In addition to having the very best title of any article in the history of the blockchain, Bustillos makes a very valid point. Money seems more real than bitcoin, because you can hold it in your hand, and because more people agree on what its value is at any given moment in time, but that doesn’t make it real.
Big Mac Attack
Used Nissan Sentra today; two all beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun, in a year.
Worth $2.50 when introduced in Nov ’17, Venezuela’s 100,000 Bolivar note is now worth just $1.²
Hard currency is still just a collective agreement on value. This fact is made evident in countries which experience hyperinflation. Venezuela, for instance, is on track to have its currency inflate 100,000% this year.³ Can you imagine a Big Mac which costs $3.99 today going for nearly $4 grand a year from now? Used Nissan Sentra today; two all beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun, in a year .
Hyperinflation is an extreme example, but hyperinflation is not what matters. What matters is that this demonstrates that money, quite clearly and most certainly, is not value in its own right.
OK, Then. What is Value?
Value has 2 components; utility and perception. The utility of a Big Mac, for instance, is the nourishment it gives you; but that is where its basic utility ends.
A Big Mac’s perceived value is the enjoyment you feel biting into one of those tasty devils and it’s the comfort of the warm hug feeling you get when your belly is full from all the cheesy meaty goodness.⁴ A Big Mac can also represent fashionable consumption, as in the case of the North Korean officials who caught flack for having Mickey D’s flown in from China, along with other “luxury” items such as Omega watches, and Hennessy Cognac.⁵ All of that is a Big Mac’s perceived value.
Love ’em or hate ‘em, no matter what your perceived value of a Big Macs is, if eating a Big Mac meant the difference between life saving nourishment and a premature demise due to starvation, its utility value would be undeniable.
Utility and perception are both elements of value, but utility is what you might call true value.
The Dollar’s Loss
The dollar went down 92.6% against bitcoin⁷
Let me flip an idea of value for you.
@max.brewman |courtesy of @themotusprojectsIt’s common to hear people describe crypto’s 2017 bull run by saying something like: ‘Bitcoin has gained more than 1,400%’ in 2017 ‘against the dollar [sic]’”.⁶ ⁷ Another way to describe that same price change is “The dollar went down 92.6% against bitcoin last year”.⁷ ⁸ That is an indisputable fact. It’s just math. It’s as true as 2 + 2 = 4.
Beyond that mathematical reality, you could say that the dollar; or more accurately fiat currencies in general, went down against bitcoin and other cryptocurrencies because they are heavily burdened by monetary policy. Interfering with the value of money debases it’s utility as a representation of value.
While, cryptoassets are far from immune to manipulation, one thing that they have going for them over fiat is that they don’t have to help pay for roads, build schools, and so on.
Don’t get me wrong. I recognize that monetary policy is just one lever that can be used to impact world economic affairs, domestic spending, etc. I’m also very grateful for the infrastructure, spending on public education, and enforcing the rule of law, et al. which is aided by monetary policy, but that’s not my point here.
Crypto by design is better than cash
My point is that shoehorning this secondary utility into fiat is all very burdensome on something which has the primary goals of representing value and making that value easily transferable. Crypto has a much narrower focus for its utility. In that regard crypto by design is better than cash.
How can the dollar ever compete with crypto’s utilitarian purism? The truth is that it cannot. Hence, this is why it’s the dollar’s loss.
Crypto’s Utility Value
Crypto’s core value, if nothing else, is that it is wildly deflationary.
First off, crypto is ostensibly, inexpensive to transfer. There are a number of instances where vast sums of money have been transferred for an unimaginably low cost, as in the ETH transfer of $44M USD which cost a mere 13 cents.⁹ Inexpensive value transfer, however, is just the tip of the iceberg.
Additionally, there are smart contracts. Smart contracts are, as Stiftung Ethereum describes them, “applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference”.¹⁰
With smart contracts, cryptocurrencies become even more functional and essential for reducing the costs of most processes imaginable and across many industries.
Q&A Monologue
This increased efficiency, in addition to increased privacy and other aspects, is what constitutes crypto’s utility. The implications of this beget a series of questions:
- How much is all of blockchain’s applied efficiency worth in fiat currency?Without a doubt, it is worth trillions over a long enough timeline.
- Does this mean that crypto is severely undervalued?
Yes. By this line of thinking, as an asset class, crypto is probably undervalued by billions, if not trillions of dollars.
Markets can remain irrational for longer than you can remain solvent”.
— John Maynard Keynes
- Should we all go out and buy crypto now?
No! You’ll still have to pick winners and losers and that requires some combination of skill and luck. The crypto-revolution is not going to take place overnight. It will takes years, if not decades, and the cryptocurrencies of today may or may not be the cryptos which bring about all of this efficiency. Even then, success really depends on your investment timeline and your ability to absorb loss — remember: “Markets can remain irrational for longer than you can remain solvent”.
Crypto now is like the internet in the 90's
- What are we all supposed to do then?
A popular meme comes to mind, which is likely attributable to Matt Goetz of BlockTower Capital. It goes something like: Crypto now is like the internet in the 1990's.¹¹ If you believe that as I do, then for Pete’s sake: ‘become the change’.
If you have a strong conviction that you’ve got what it takes, then by all means, start your own blockchain project.
If you want to make a smaller, and perhaps a safer bet, then join a blockchain project run by people with a demonstrable track record in tech. Do that even if, at first, the value you can add is non-technical like answering the phones, scheduling travel, and/or building Ikea furniture. If that is your best way to get your foot in the door and start learning, then pick a crypto project, get a power drill, pull up one of the YouTube videos for assembling the Galant storage combination with drawers, and get to it!
Plain & Simple
Some of the far-reaching implications of blockchain tech are causing many traditional notions of business and profit to have obsolescence on their horizons.
Mark my words; blockchain is an extremely deflationary technology. Cryptocurrency and blockchain technology are so deflationary that they’re creating a path for entirely new business models.
I’ll say that in another way: Some of the far-reaching implications of blockchain tech are causing many traditional notions of business and profit to have obsolescence on their horizons.
That said, blockchain’s new business models are a topic which merits its own discussion. Fortunately, it’s a topic I’ll be covering in our next Medium post.
Here’s how you can stay tuned in to this topic, and follow along as brifs.co ‘becomes the change’ by leveraging blockchain to fix the enormous inefficiencies with gift cards:
- Join brifs.co on Telegram
- Read our 1-Page Summary &/or our Whitepaper
- Follow our blog on Medium
- Visit us on the web: brifs.co
- Email: hello {@} brifs {dot} co
- Follow our Twitter: @brifsdotco
Special thanks to the brifs.co team & Katie Schofield for helping to put this post together. Bravi! Bravi!
Thank you for reading,
Charlie Muir
Founder @ brifs.co
Works Cited:
- Medium, Maria Bustillos, You Don’t Understand Bitcoin Because You Think Money Is Real, 2017–11–30
- Business Insider, Rosie Perper, Venezuela’s new 100,000-bolivar note is worth less than $2.50 in US dollars, 2017–11–06
- Miami Herald, Antonio M Delgado, In Venezuela, inflation quadruples to 18,000 percent in two months, with no end in sight, 2018–05–02
- CNN, Madison Park, Why eating a lot feels so darn good, 2010–11–24
- The Telegraph, Julian Ryall, North Korea’s elite defies international sanctions ban by importing McDonald’s, 2011–07–20
- Crypto Cipher, 2017 “The Year Of The Crypto-Bull” (Recap, Predictions, and More), 2017–12–31
- MarketWatch, Ryan Vlastelica, Bitcoin passes $14,000, has gained more than 1,400% in 2017, 2017–12–06
- finance.yahoo.com
- CoinJournal, Joseph Young, $44 Million in Ethereum Moved With $0.13 Fee, How Can Bitcoin Reach Similar Scalability?, 2017–08–23
- ethereum.org
- Business Insider, Frank Chaparro, A former Goldman Sachs VP who founded a crypto hedge fund says betting on bitcoin is like betting on the internet in the 90s, 2017–10–07
