THE HARD, SOUND MONEY REVOLUTION CONTINUES APACE

Stop obsessing about price, Bitcoin today is stronger than ever

Away from the noise, this month the largest cryptocurrency quietly hit important new security milestones that you should pay close attention to

Tomer Federman
Aug 27, 2019 · 4 min read
Image for post
Image for post

In considering Bitcoin’s progress, often people attach great importance to recent price movements. However, this is fundamentally wrong.

You see, price isn’t an indicator of network development or future growth prospects.

To fully appreciate where we are on the adoption curve and what’s next, it’s better to assess the overall health of Bitcoin’s blockchain and the progress being made in the context of the protocol’s overarching goal.

Bitcoin is a decentralized payment network and new kind of money. To succeed in achieving its mission of being the global reserve currency and a digital store of value, it needs to build trust.

And lots of it.

There’s a reason people trust gold. It’s been around for centuries and the mere word inspires confidence among investors and traders. Many people buy gold as a hedge against inflation, currency manipulations, and the next economic downturn.

Yet, Bitcoin offers many advantages over gold. Important features such as fractional ownership, fast payments, and censorship-resistance allow it to stand out compared to the aging incumbent.

But, being more useful is not enough for Bitcoin to threaten gold’s dominance as the de-facto global store of value. To become a true alternative, Bitcoin needs to become at least as trustworthy as gold. Establishing trust in the largest cryptocurrency is essential to drive the shift to “digital gold.”

In the payments space, trust is generated first and foremost through the security of the underlying payment rails. Therefore, the following milestone is especially important: this month Bitcoin’s hash rate hit a new record-high, exceeding 80 quintillion SHA256 hashes per second for the very first time.

Image for post
The estimated number of tera hashes per second (trillions of hashes per second) the Bitcoin network is performing. Source: blockchain.com

The ongoing hash rate growth is critical to the success of Bitcoin as it proves the increase in computing power used to validate Bitcoin transactions. The higher the hash rate, the greater the competition among miners to confirm new blocks.

Given that Bitcoin’s hash rate is now 15x higher compared to 2 years ago, this makes it exponentially more difficult for bad actors to hack the protocol and gather the resources needed to conduct a 51% attack.

The increased network security is also reflected in Bitcoin’s record-high mining difficulty adjustment set every 2016 blocks. With Bitcoin becoming ever more secure, the difficulty target continues to soar to new highs.

Source: blockchain.com

As market turmoil looms large with economic uncertainty over no-deal Brexit, a potential trade war between the U.S. and China and rising tensions in Hong-Kong, the realization that the most secure payment network in the world is going from strength to strength is compelling.

Very compelling.

Finally, on the market size front — it’s worth looking at Bitcoin’s realized market cap, which broke $100B for the very first time this month.

Realized market cap is a metric introduced by Coin Metrics to more accurately measure Bitcoin’s market size. It takes into account each Bitcoin’s price on the day it was last sent. Under that scenario, a Bitcoin sent today contributes $10,000 while one sent a few years ago is valued much lower.

Image for post
Image for post
Bitcoin’s realized market cap. Source: Nic Carter and Coin Metrics

Far from being a perfect metric, this way of measurement accounts for price volatility and diminishes the value of Bitcoins last sent years ago. Some of these Bitcoins may be lost forever by now as a result of lost private keys.

Bitcoin “is an unstoppable force,” U.S. Congressman Patrick McHenry says during testimony on July 17. Source: Youtube

When assessing Bitcoin’s progress, one should consider these important development and security metrics. Bitcoin’s usability, clear monetary policy, and increased hash-rate mean that it is well positioned to realize the vision of its creator, Satoshi Nakamoto.

To understand the long-term potential, ignore the latest price movements. Bitcoin is stronger than ever today.

In the future, Bitcoin could surpass gold as the leading store of value and ultimately become the trusted global reserve currency.

The hard, sound money revolution continues apace and is unstoppable.

Tomer Federman

Tomer is an entrepreneur & angel investor focused on early-stage fintech and enterprise startups.

Tomer Federman

Written by

Entrepreneur & early-stage investor · Previously at Facebook, SAP, multiple startups · Stanford MBA · Host, The Blockchain VC podcast · www.tomerfederman.com

Tomer Federman

Tomer Federman is an entrepreneur & angel investor focused on early-stage fintech and enterprise startups. Tomer holds an MBA from Stanford and previously drove product strategy & global growth of major ad products at Facebook. www.tomerfederman.com

Tomer Federman

Written by

Entrepreneur & early-stage investor · Previously at Facebook, SAP, multiple startups · Stanford MBA · Host, The Blockchain VC podcast · www.tomerfederman.com

Tomer Federman

Tomer Federman is an entrepreneur & angel investor focused on early-stage fintech and enterprise startups. Tomer holds an MBA from Stanford and previously drove product strategy & global growth of major ad products at Facebook. www.tomerfederman.com

Medium is an open platform where 170 million readers come to find insightful and dynamic thinking. Here, expert and undiscovered voices alike dive into the heart of any topic and bring new ideas to the surface. Learn more

Follow the writers, publications, and topics that matter to you, and you’ll see them on your homepage and in your inbox. Explore

If you have a story to tell, knowledge to share, or a perspective to offer — welcome home. It’s easy and free to post your thinking on any topic. Write on Medium

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store