In the land of digital currencies, Bitcoin is King.
While chewing on the nature of cryptocurrencies and how it is currently eating up the world, I often think back to one of my favorite movies — Ari Folman’s The Congress. In a pivotal scene, the lead actress role played by Robin Wright arrives at a one-way checkpoint, drinks an ampoule and morphs into her animated form while leaving the real world behind.
When I first fell into the cryptocurrency rabbit hole, coins appeared much in the same way to me: colourful, animated money with virtual, elastic properties obeying its own set of laws beyond the physical world. Internet money, as they call it. For Internet natives.
In crypto land, a money network arises pre-determined by computer code and is sustained by its community spread across the world, without any borders. As long as a community believes in its value — by hoarding, exchanging and transacting — the network continues to thrive.
I encountered fascinating subsets such as social tokens, which hold and accrue value specifically within a tight-knit community. Once, I played a gig in the metaverse and was tipped some $WHALE by the audience. A month or so later, I played a second gig in another parcel of land and tipped those who were attending back. By then, the price had already tripled in USD terms. Everything was executed by a bot using a single line of command on Discord.
Some of the kids will go on to swap their tokens for other tokens valuable in other universes. Others will hold onto them for dear life in the bet that their value will increase as the network grows. I keep mine to show that I have earned my way in this community and wait for other opportunities to pay it forward.
Facebook is too, at the end of the day, but a social network. When people argue that cryptocurrencies have no value in them, I wonder if the same can be said of Facebook. If the world were to one day decide to delete their Facebook account, would there be any discernible value left in the abandoned online pages once filled with pictures of life and activity?
This is the network effect, and according to Metcalfe’s Law, networks have value.
While Facebook is currently valued at USD 800 billion, the Bitcoin network recently surpassed USD 1 trillion in marketcap, and is far from stagnant. Regarded on-chain analyst Willy Woo has outlined that Bitcoin users actually double every 12 months. In this 2017 article, he concludes that by following the symmetric S-curve adoption of new technology, Bitcoin will achieve 50% adoption in 9 years and that “…children today by the time they reach adulthood, will transact in a world where everyone uses Bitcoin.”
We are truly at the cusp; the bleeding edge of experimental financial technology today. Governments around the world are dabbling with the idea of digital currencies, with China’s digital yuan the one to watch as being the first out of the gate. What they don’t realise — or are about to find out — is that in the land of digital currencies, Bitcoin is King.
It is not just a matter of first-mover advantage; a title which can eventually be usurped by more usable networks. Bitcoin has actually set the highest precedent of what hard money looks and smells like. Apart from a few necessary updates over the years, Bitcoin has remained stalwart throughout the passages of time. Compared to the trillions in Fiat being printed willy-nilly, this rigidity (alongside decentralization) is Bitcoin’s most sacred and hard-won value. Central bank digital currencies would do well to copy Bitcoin’s hard properties as many other cryptocurrencies have done, but they will then forever remain an imago of an original creation and by regard, an inferior clone.
Contests for legitimacy and authenticity will continue to play out in this arena, and I foresee the ideologies of nationhood digging their heels in deeper in the attempt to stake solid ground in the virtual sea of digital currencies.
The continuing abstraction of everyday Fiat money has become a funnel flowing new value into the virtual world; a world where Bitcoin remains the first to lay down the rules of what it means to be a digital currency. And as Fiat dollars take their first wobbly steps across the chasm, they will invariably find themselves upon unfamiliar shores, and to be measured against Bitcoin’s standards only to come up short.
Another chart that one comes across pretty often reading up on Bitcoin is the one below on tech adoption and market share.
I am convinced that we are now at the stage of Early Majority. My hope for the future is for the last laggard to fall in along with the welcoming of a new monetary paradigm.