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This is an email from thatMeaning. , a newsletter by thatMeaning.


Look, you could say that it is weird that bitcoin has any value, and it is. Because, you know, it is just a long list of numbers and letters. The thing is that you and I could type some bitcoin-y looking numbers and letters (f5d8ee39a430901c91…) on our computers but they would mean nothing unless they reference previous bitcoin transactions. When you own bitcoin(s), it means there are string of numbers like this (f5d8ee39a430901c91…) that were sent to you. There, thats it.

And we have talked about this, that bitcoin is a successful production of artificial scarcity. Yes, with the price in tens of thousands of dollars, you could even say very successful.

Hahaha, and I don’t know if you know, but it could get way more artificial.

Look, there is a lot of discussion about what happens when the last bitcoin is mined. Because, right now, the computers that verify past transactions and put new ones into blocks, so that the mechanism that we have described above works, get rewarded by bitcoin. They “mine” bitcoins, they are miners.

But when the last of the 21 million bitcoins is mined, they will only get fees. And they will have to be pretty high fees to make the economics of the miners work. For one thing, bitcoin would not be able to facilitate micro-payments, like paying for a coffee because the fees could be multiples of the price.

Arguably, bitcoin is already perceived as more of a store of value than some e-money because people painfully recognize its scarcity in an inflationary world, but this can get even more true in future in a way that, if you think about it in detail, is quite fun.

The (your) string of numbers and letters (f5d8ee39a430901c91…) might have lost its function because you don’t want to send it or part of it to anyone because the fees are too high, but it is still valuable because it references all the previous bitcoin transactions that cannot be replicated and are clear evidence that you own it.

But being a smart investor you would still want to use that value somehow, and so you might wrap your bitcoin to make it usable on ethereum, where you can earn income by (for example): 1. putting it into a liquidity pool and earn rewards whenever someone comes and exchanges one asset for another, or 2. use it as a collateral to mint a DAI and earn interest from staking, or 3. other trading (like using it as a collateral to borrow other cryptocurrency which you can sell in expectation that it falls in value vs. your bitcoin).

I guess this makes sense .. that bitcoin can lose its function but still have value on other blockchains, but isn’t it fun? Because, you know, what it means is that you would take your precious string of numbers and letters (f5d8ee39a430901c91…) and send it to a bitcoin address that has been generated by an ethereum app like Ren that then creates ethereum tokens that represent that your string of bitcoin is stored and locked somewhere.

You swap artificially scarcity for artificial scarcity².

My writing is decentralized here.



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George Salapa

Founder finstora. Thoughts on money & culture. Some poetry. Mostly recycled literature. Wrote for Forbes and Venturebeat before.