Oddbean

Here’s why after more than 10 years of working in traditional finance I decided to dedicate my professional career and life to Bitcoin: Developing economies need a faster, cheaper and more efficient financial system than what is currently available to them. The current and most promising solutions out there are all based on the legacy financial system which has proven to be slow, expensive, bureaucratic and not available to a great percentage of the world’s population- which needs it the most. Throughout history, financial institutions have leveraged technology to move money across borders in ways believed to be the most efficient. From the mid-20th century, banks communicated via Telex machines only to be replaced by the SWIFT cooperative utility in 1977, which has not had a revolutionary upgrade ever since. This is where Bitcoin comes in, as a protocol (or “blockchain”) and as a currency. Bitcoin with a capital “B” refers to the blockchain, whereas bitcoin with a lowercase “b” refers to the currency. The difference between these two is quite important and most people pretend to understand the value of bitcoin and not Bitcoin. The following is a comparison of layered-based systems across time (with a visual representation at the bottom): 1977, SWIFT: is the base layer upon which the global banking system communicates using its protocol to move money around the world. SWIFT can very loosely be compared to an early version of a blockchain: transactions are submitted by various participants, following the protocol’s rules and these transactions are recorded and stored forever. 2006, Google Translate: is the service functioning as the base layer upon which English is the execution language used to convert to and from other languages. 2008, the Bitcoin Blockchain: is the base layer upon which the Lightning Network communicates using its protocol to move money around the world [same sentence as SWIFT in 1977, written like this on purpose]. Bitcoin is much more efficient and cheaper than SWIFT in that it allows transfers for much smaller amounts and with minute-long settlements rather than hours or days, in local currencies. Up until now, bitcoin has been traded as a risk asset, being bought alongside stocks when there is optimism in the economy and being sold when investors panic. If there was a deeper understanding of the value within the Bitcoin Protocol (or “Blockchain”), there would be far more buying and much less selling constantly, indefinitely. This is just one of the use cases for the Bitcoin Blockchain. It is analogous to the Internet Protocol (HTTPS/TCP/IP). If you could have bought shares of “the Internet Protocol” when it first started, what would be the value of those shares today? (Hint: Everything runs on the Internet today). Owning bitcoin is the equivalent of owning “shares” of a Protocol that is becoming as or even more disruptive than the Internet Protocol itself. https://m.primal.net/HPdm.jpg