Bitcoin

Dreamt by an electric sheep

Imagine going to the supermarket to buy a pack of cigarettes. The cashier tells you to pay 2 JODs and you take out a note of 5 JODs. On that 5 JOD note is written the name of every person that owned that same note and every transaction made using that same note since the day it was minted by the Central Bank of Jordan. Actually there would be no space on the note, so you would be walking down the street with a 5 JOD note and a trolley with stacks of ledgers proving how you became the rightful owner of that 5 JOD note and that you have the authority to make payment with it to purchase goods.

This is bitcoin.

And bitcoin still hasn’t been widely adopted and accepted.

Imagine now that it is. El Salvador is doing just that, making it legal tender, an unprecedented historic move.

At the time of writing, the number of transactions per second that can be done by Bitcoin is only a measly 5.

Visa on the other hand manages to process 1,700 transactions per seconds.1

So imagine yourself at the supermarket again and instead of using your credit card with “WIFI” that allows you to pay in 1 second with 1 tap, you decide to pay with a Bitcoin card and that transaction could take 340 times longer, or 17 minutes.

And Bitcoin transactions won’t become any faster, because the ledger will simply keep on getting bigger and bigger with wider use and adoption. And apparently Bitcoin transactions use up a lot of energy.2


Supply and Demand

We can bog down the main bitcoin enthusiasts into 3 types:

The speculators: it could be anyone who thinks there is momentum going on in cryptocurrency and wants a chance to profit from it. It does look like a get rich quick scheme, an easy way out… can’t blame them.

The HODL3ers: these are the bitcoin enthusiasts, the bitcoin fanatics, the ones who sold their Ferraris or mortgaged their houses believing in the coming of the next Satoshi to save them from current financial system enslaving them in never ending, ever increasing, debts.

The criminals: it is no secret that drug traffickers, hackers et al. are using crypto currencies to launder their money.

What drives the price of bitcoin to go up? Demand. As long as there is demand for it, followed by a diminishing supply of Bitcoin4, the price will keep on going up. Let us also not forget that the crypto market is not regulated, meaning that pump and dump schemes are always possible.

I’m not making any calls of where the price of Bitcoin will be in the next weeks, months or years. I did that mistake back in 2017 when a friend asked for my opinion on Bitcoin and where I see the price going. I said it would go to 0. The price was $2,000 before jumping to $20,000 a short while after.

What is for sure is that bitcoin cannot be used as a currency, technically. It can only be an asset stored in an electronic vault hoping you would sell it at a later date for a profit.


To the Moon?

A lot of people in the world sympathise with El Salvador’s President, Nayib Bukele (if that name sounds Arabic, that’s because it is; he is the son of Palestinian immigrants originally from Bethlehem): A lot of countries, like El Salvador, want to be free from the US dollar hegemony and the shackles of the World Bank and the IMF’s austerity programs. A lot of people want free trade beyond borders and be able to make payments and transfers across countries in seconds. A lot of people want to move away from the traditional banking system, a system that was created at the same time as Witchcraft and Alchemy in the Middle Ages.

A lot of people want progress.

Maybe other crypto currencies can offer that using blockchain technology… but bitcoin is not the way.

1

https://towardsdatascience.com/the-blockchain-scalability-problem-the-race-for-visa-like-transaction-speed-5cce48f9d44

2

https://hbr.org/2021/05/how-much-energy-does-bitcoin-actually-consume

3

https://www.investopedia.com/terms/h/hodl.asp

4

https://www.businessinsider.in/investment/news/bitcoin-limited-supply-has-driven-up-its-value-nearly-90-percent-has-be/articleshow/85349471.cms