Nevertheless, Bitcoin Persisted (A Begrudged Examination)

To be frank, I thought we were done with you.

I thought you were going the way of Pet Rocks and Crazy Frog ringtones. I assumed all your disciples had cut their losses and crawled back to the almighty dollar. Then suddenly, in a year when bizarre news stories are all insisting the others “hold their beer” as they earn the front page, you pop in like a zany, onerous old foe.  

I’m talking about you, Bitcoin. If that is your real name.

Summer Surge

Bitcoin and the people who love it are enjoying a sudden string of buzz that’s hard to ignore. The market value of this perplexing cryptocurrency doubled during the month of May. Bold-print hackers, such as those behind the WannaCry virus, are demanding their ransom be paid in bitcoins — which is worth X amount when exchanged for physical greenbacks. But a bitcoin’s always shifting value in U.S. dollars misses the point of this supposed revolution: That one day we will move on from the physical; that all roads don’t lead back to the tangible, taxable and traceable “outdated” concept of money, stored in and controlled by centralized banks.

“Bitcoin is complicated ‘AF.'”

The long game for cryptocurrency requires more patience than several billions of my friends and I seem to have. My lack of patience can read as ignorance to the converted minds out there, and rightfully so. Call me a non-believer. You see, I want to buy spaghetti this evening, and my neighborhood pasta dealer does not accept bitcoins. We laymen are content with handing over a few dollar bills here and there, and since Bitcoin’s introduction in 2009, it hasn’t quite convinced the public at large to reconsider this time-tested tradition.

Not to mention that Bitcoin is complicated “AF.”

So, why won’t it go away? In the words of Austin Powers, “Why won’t you DIE?!?”

Well, to understand the news surrounding Bitcoin, ignoramuses like myself can benefit from a crash course in the movement as a whole. Not every trending topic deserves our devotion, or even our half-hearted support. But topics this widespread and consistent demand a certain degree of acceptance and awareness. For example, even if I never buy an album by the Chainsmokers, I’d like to know why someone would — rather than continue pretending that they don’t exist.

“This sort of stuff is real in that people have collectively decided it is real,” says Stratechery founder and tech author Ben Thompson, discussing cryptocurrency on his Exponent Podcast. Cohost and Harvard Business Review writer James Allworth expands on that statement: “The folks that are more likely to have believed in it historically are more likely to have survived.”

A basic knowledge of the news helps us understand the world today and our place in it. Presently, enough people have decided that Bitcoin is real for it to be news. So, for the fellow Bitcoin-abstinent, whether actively or unintentionally, let us skim the surface and hit the main points of this resilient phenomenon. It’s a harmless bit of learning to assist in keeping up with the headlines. And were Bitcoin to truly change our financial landscape —and some would argue it already has — an entry-level comprehension will go a long way.

(If you’re perfectly fine not knowing about Bitcoin, you can head for the exit now — and I wouldn’t blame you. I am tempted, and I’m the one writing it.)

Tales of the Crypto

Bitcoin — or “buttcoin” as fellow cynics on the web so lovingly call it — is a “peer-to-peer electronic cash system,” according to the core white paper on the Bitcoin homepage. Owners choose a preferred “wallet” in the form of an installed software or a third-party-hosted web platform, and this tool serves to store, receive and send currency to others in the form of unique, coded addresses. Transactions are performed within encrypted “blocks” on the internet, and new blocks are constantly generated to meet the growing need. These transactions are recorded and the timeline of each bitcoin made tamper-proof in databases called “blockchains.”

Unlike government-issued money, which is printed in wide, fragrant sheets on a daily basis, only a firm limit of 21 million bitcoins can exist at any given time; and with the understanding that there will be no smell. This pre-established cap is a cornerstone of the currency’s philosophy and subsequent demand: The more businesses that come along for the ride, the higher each individual coin is valued.

Early champions of the movement saw this as a modern gold rush and a no-brainer, putting in the work to learn its complex inner workings and campaigning businesses and cohorts to cosign. It would require an outpouring of faith to lift this idea off the ground, like a Tinker Bell of sorts, and a fair amount of adoption to justify its existence. The first bonafide transaction saw a Florida programmer pay 10,000 bitcoins (BTC) for a pizza after announcing the offer on a forum. The exchange rate at the time was $0.0025 for each coin.

That fateful day — May 22, 2010 — is now a celebrated holiday in the crypto-community known as Bitcoin Pizza Day. If you take nothing else away from this, please remember Bitcoin Pizza Day.

Fast-forward through a tumultuous few years, including a “great bubble” bursting in 2011, widespread use on the Dark Web and four Bitcoin Pizza Days, and Bitcoin hit a milestone of 100,000 merchants in early 2015. (There are even some pasta manufacturers that now accept bitcoins online, so color me impressed.) Today, the exchange rate is over $2,000 for each coin. For the faithful who bought in back in 2009 and stayed the course, that adds up to a lot of pizza. For others who either cashed out or were careless with their investment, it adds up to millions or even billions of regrets.

For the rest of us, it means a significant barrier of entry — rather, a second barrier of entry after the winding learning curve. At $2,000-plus a pop, the middle and lower class are practically shut out of this particular cryptocurrency as it stands. And those who take the leap do so knowing that the exchange rate drops just as quickly as it rises, which leads some to compare Bitcoin to more of a new stock exchange than a disruptive currency. To make matters worse, the habit of “bitcoin hoarding” and the refusal to spend them on actual goods is common and impossible to penalize. This does no favors in the effort to legitimize (or persuade future merchants).

Competing Currencies

Several million (as many as 14 millIon) bitcoin owners exist around the world, and estimates vary based on the source. While eager global investors are likely pinching their pennies to save for a single coin, up-and-coming payment networks are competing for the residual glory. Bitcoin remains the gold standard (perhaps soon to be called the “bitcoin standard”), but others like Litecoin, Ripple, NEM and now Etherium each has a growing presence and merchant adoption rate. Proponents of cryptocurrencies, and others who just like to gamble, can obtain these currencies at a vastly lower price but maybe not for long. The virtual unavailability of bitcoins will send countless interested parties off to the races in obtaining the next chosen one, and the cycle may repeat as each becomes too expensive or dies along the way. And though this distributed worth may be exciting in the short term, it threatens to derail the unified vision of the most passionate evangelists: complete merchant adoption that renders banks useless. It may become just another space of contenders clawing away at each other for relevance.

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Murky Waters

Skeptics and believers alike are left wondering what comes next, and it’s anybody’s guess. Eight years after the fact, though, this knotty new domain persists. With each bit of media coverage and every hundred merchants who climb aboard, the ship gathers steam and lives to sail another day.

Cryptocurrency owners are increasingly diverse and have their own personal motivations. Many feel that the future is indeed now and old money is holding us all back from a better world. Some, unfortunately, exploit the anonymity of digital currency to buy and sell illegal contraband. Others simply view it as the next get-rich-quick scheme and buy bitcoins with the sole intention of flipping them months or years later.

Then there’s people like me. I enjoy just handing over paper money and being handed things in return and don’t desire to complicate it any further. I don’t mind being taxed because I like having paved roads. I don’t sell guns. The actual stock exchange stresses me out enough as it is. I don’t terribly mind banks. And it appears that, like so many others at this stage in the bit-game, I simply can’t afford it. So, while I accept the cryptocurrency movement for what it is, I remain set it my ways.

We may look back on this moment and laugh at the passing trend of cryptocurrency and the real absurdity of it all. Or we may instead laugh at the naivety of holdouts during the slow and painful death of dollars. If that’s the case, I will happily eat my words.

So long as I can still eat my pasta. There are some things you just can’t digitize.

 

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