By now you\u2019ve probably heard of Bitcoin. You may have heard that it\u2019s made some people rich.<\/strong> You may also have heard that it\u2019s a new form of digital money, and that it\u2019s the future of commerce; or that it\u2019s a criminal enterprise, and that it\u2019s bad for the planet.<\/p>\n The messaging is confused and confusing \u2014 which is partly because no one person controls it. Just like Bitcoin, which belongs to\u2026 well, all of us.<\/p>\n In this short essay I want to help the Bitcoin-curious understand a few facts about the world\u2019s top cryptocurrency. It\u2019s not technical, and it\u2019s not hard to follow. It\u2019s not comprehensive, either, which is why this article is peppered with links so you can find out more.<\/p>\n I\u2019m not advocating for Bitcoin as an investment, although I do think it\u2019s worth owning a little. I\u2019m just trying to set the record straight on a few misconceptions, and to help newcomers to the Bitcoin community get up to speed quickly with a few key concepts. Hopefully if you\u2019re reading this with an open mind, you\u2019ll realize quickly that there\u2019s much more to Bitcoin that its price.<\/p>\n Let\u2019s start by getting a few things out of the way: cryptocurrency is a dangerous and often ugly place. There are countless scams, hacks and exploits. It appeals to degenerate gamblers and criminals and fools. Motivated reasoning and sunk cost fallacy prop up bad ideas long after they should have collapsed. Con artists thrive in the open and ordinary people often lose their money. The crypto space is 95% bullshit by volume, so it\u2019s understandable that some people conclude it must be entirely bullshit.<\/span><\/p>\n But mostly<\/em> bullshit is not the same thing as entirely<\/em> bullshit. Dismissing crypto because it is full of scams is like dismissing Twitter because the average Tweet is terrible. The problem is not that Twitter (or crypto) have nothing to offer. The problem is that it takes time and energy to learn how to dig through the bullshit and find the genuinely interesting ideas.<\/span><\/p>\n Rejecting cryptocurrency entirely is much easier and seems to offer a lot of moral clarity \u2014 but it leaves behind a nagging question: if cryptocurrency is so obviously awful, why doesn\u2019t it just die?<\/span><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n An interesting thing about Bitcoin is that almost no one believes in it right away. Bitcoin\u2019s design is so ugly and counterintuitive that almost everyone rejects it at first as impossible. It was around three years between when I first heard about Bitcoin, and when I finally started to seriously investigate it. I studied game theory and mechanism design in grad school, so I knew exactly why Bitcoin couldn\u2019t work. I just couldn\u2019t figure out why it was still around.<\/span><\/p>\n In theory I was confident that Bitcoin could not exist\u2026 but in practice it did and when theory conflicts with observed reality, it is theory that must change. I became skeptical of my skepticism.<\/strong> I read <\/span>the whitepaper<\/span><\/a>. I changed my mind.<\/span><\/p>\n More than anything I can write or say the most compelling evidence that Bitcoin works as advertised is the history of its operation so far. The longer Bitcoin continues to exist, the more seriously you should take it.<\/span><\/p>\n<\/blockquote>\n<\/blockquote>\n The academic term for this is the <\/span>Lindy effect<\/span><\/a>, the idea that the longer something has survived the longer you should expect it to continue. We could all collectively decide tomorrow that gold is no longer valuable and we could decide to keep listening to today\u2019s hit singles forever. But we probably won\u2019t.<\/span><\/p>\n Gold has been valuable for a long time, so it will probably still be valuable a long time from now. Today\u2019s top songs are mostly new, which suggests tomorrow\u2019s top songs will probably mostly be new as well. The continued existence of something is evidence it will continue existing. That\u2019s the Lindy effect.<\/span><\/p>\n That\u2019s why governments around the world have stopped ignoring Bitcoin and started to develop formal policies to<\/span> outlaw<\/span><\/a>, <\/span>regulate<\/span><\/a> or <\/span>adopt<\/span><\/a> it<\/span>. A policy of ignoring Bitcoin and assuming it will go away on its own is no longer realistic. If Bitcoin was going to go away on its own, it already would have.<\/span><\/p>\n \u00a0<\/p>\n A common objection to Bitcoin is that since they aren\u2019t backed by anything they must not be worth anything. Since they don\u2019t have any intrinsic utility they must be a <\/span>greater fools\u2019 game<\/span><\/a>, where the only goal is to sell your worthless bags at a higher price to an even greater fool than you. It is true that the only use for Bitcoin is to transfer your bitcoin to someone else \u2014 but that doesn\u2019t mean Bitcoin is useless. Transferring value is a valuable service. That\u2019s why banking is so lucrative.<\/span><\/p>\n \u201cAs a thought experiment, imagine there was a base metal as scarce as gold but with the following properties: \u2013 boring grey in colour \u2013 not a good conductor of electricity \u2013 not particularly strong, but not ductile or easily malleable either \u2013 not useful for any practical or ornamental purpose and one special, magical property: \u2013 can be transported over a communications channel If it somehow acquired any value at all for whatever reason, then anyone wanting to transfer wealth over a long distance could buy some, transmit it, and have the recipient sell it.\u201d \u2014 Satoshi Nakamoto<\/span><\/i><\/p>\n Money is a technology for transporting value through space and time<\/span><\/a>. Bitcoin is a vehicle for value that eliminates physical distance and cannot be diluted, seized or censored. It is the value of that service that \u201cbacks\u201d the value of Bitcoin.<\/span><\/p>\n \u00a0<\/p>\n “I think there’s no capacity to kill bitcoin” says @PatrickMcHenry<\/a> #btc<\/a> pic.twitter.com\/DY70tx2TvV<\/a><\/p>\n \u2014 Squawk Box (@SquawkCNBC) July 17, 2019<\/a><\/p>\n<\/blockquote>\n\n Bitcoin does not have a central point of control so the only way to \u201cstop\u201d Bitcoin is to stop every person on the Bitcoin network individually. Even shutting down the entire internet wouldn\u2019t work because you can connect with the Bitcoin network<\/span> over radio<\/span><\/a> or <\/span>by satellite<\/span><\/a>.<\/span> By any realistic measure the network itself cannot be stopped.<\/span><\/p>\n Governments can of course outlaw cryptocurrency (several have) but making Bitcoin transactions illegal is like making drug use illegal \u2014 it doesn\u2019t eliminate it so much as drive it underground. China is a powerful, authoritarian state that <\/span>has repeatedly banned Bitcoin<\/span><\/a>, but you can\u2019t actually ban Bitcoin from China because Bitcoin has no concept of China. China can only choose to isolate themselves from the network.<\/span><\/p>\n But what if governments go farther and actually attack the network? They could secretly acquire or seize mining rigs and set them to mining empty blocks, slowing down the network and reducing revenue for honest miners. They could market sell the rewards they earn mining and open short positions to drive down the price of Bitcoin further damaging miner revenue and market confidence. As miners quit defending the network attackers will control more of it, causing a feedback loop \/ death spiral.<\/span><\/p>\n Attacks like this are easiest to picture with an abstract, monolithic world government. It is less clear how they would work in the context of actual world governments today. The two most obvious governments in practice that might launch such an attack are the US and China. <\/span>China has been systematically working to expel all the mining rigs from its borders<\/span><\/a> \u2014 so they aren\u2019t exactly gearing up to launch a mining based attack on the network.<\/span><\/p>\n \u00a0<\/p>\n China’s $1 Trillion mistake, #Bitcoin<\/a> miners being shipped away. pic.twitter.com\/wxoO9BMDUy<\/a><\/p>\n \u2014 Documenting Bitcoin 📄 (@DocumentingBTC) June 27, 2021<\/a><\/p>\n<\/blockquote>\n \u00a0<\/p>\n America also seems like an unlikely candidate to launch an attack on the network. Seizing private property like mining rigs outside the context of a conventional war would be an unusual and politically explosive precedent. More pragmatically, <\/span>cryptocurrency has matured into an effective lobbying group<\/span><\/a>. Sitting Congressional representatives in both parties own Bitcoin and have made support for cryptocurrency part of their platform. <\/span>Some have even made it their signature issue<\/span><\/a>.<\/span><\/p>\n \u00a0<\/p>\n A Bipartisan group of U.S. Senators just wrote a letter to Treasury Secretary Janet Yellen informing her that she hasn\u2019t done her homework on #Bitcoin<\/a>. pic.twitter.com\/St4KkMMITj<\/a><\/p>\n \u2014 Dennis Porter (@Dennis_Porter_) December 14, 2021<\/a><\/p>\n<\/blockquote>\n \u00a0<\/p>\n A sufficiently powerful, ideologically motivated attack could suppress the Bitcoin network, but it would be expensive to maintain and wouldn\u2019t prevent the network from resuming normal operation after the attack stopped. The game theory of what happens when motivated attackers and defenders clash over a blockchain is complicated and reasonable people can disagree about what it might mean. But the two most powerful governments in the world today are either embracing Bitcoin or systematically disarming themselves.<\/span><\/p>\n \u00a0<\/p>\n THREAD:<\/p>\n Many things set #Bitcoin<\/a> apart from any altcoin. But keep it simple, no technical metrics needed.<\/p>\n Three elements to consider: \u2014 Croesus 🔴 (@Croesus_BTC) March 29, 2021<\/a><\/p>\n<\/blockquote>\n \u00a0<\/p>\n Bitcoin is (by design) a very limited system. You can pretty much only use it to send and receive Bitcoin. It is very difficult to change (also by design) so it adopts new technology very slowly if at all. That can seem primitive and sluggish to outsiders but being resistant to change is the central value proposition of Bitcoin. You can\u2019t make a better Bitcoin by making a Bitcoin that is easier to change.<\/span><\/p>\n Bitcoin is better understood as a social revolution than a technological one. No new cryptocurrency can achieve the same results as Bitcoin because the social context in which it was created is gone now. For the first year and a half of its existence Bitcoin was essentially free \u2014 <\/span>there was a website called the Bitcoin faucet that gave users 5 BTC just for solving a CAPTCHA<\/span><\/a>. Satoshi disappeared before the project hit major prominence and never collected any kind of special founder\u2019s rewards for his efforts. Even if a new project could somehow recreate these conditions they still couldn\u2019t recreate the history of proven operation since.<\/span><\/p>\n Other cryptocurrency projects may still prove useful \/ valuable \u2014 but not by outcompeting Bitcoin to be the best money. If they are successful it will be because they optimized to serve a different use case.<\/span><\/p>\n They won\u2019t replace Bitcoin, they will exist alongside it.<\/span><\/p>\n<\/blockquote>\n In short, Bitcoin works as advertised<\/span><\/p>\n Bitcoin has operated continuously outside of anyone\u2019s control for more than twelve years now \u2014 that fact alone should merit serious attention even from skeptics. It has not been hacked, censored, halted or controlled. It has survived bubbles and crashes, attempts to commandeer it or to outlaw it or to obsolete it. That history of operation is a growing body of circumstantial evidence that Bitcoin really is what it claims to be: a perfectly scarce, sovereign asset.<\/span><\/p>\n The growing body of evidence that Bitcoin is real means that responsible people need to start planning for that possibility. What does the existence of a universally available, perfectly scarce asset mean for the world?<\/span><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Bitcoin is often accused of being principally useful for criminals but that isn\u2019t really true. <\/span>Criminal activity on Bitcoin peaked at ~2% in 2019 and fell to ~0.34% in 2020. Bitcoin transactions create permanent and public records<\/span><\/a>. Most criminals would rather do business in US dollars. <\/span>Bitcoin is actually mostly used for saving<\/span><\/a>.<\/span><\/p>\n Bitcoin is good for the poor because <\/span>inflation weighs most heavily on the poor<\/span><\/a>. If your net worth is mostly cash and future cash-denominated wages inflation is a drain on your wealth. If your net worth is mostly investments and property inflation just changes the numbers next to your accounts \u2014 it doesn\u2019t cost you anything. In countries with runaway inflation Bitcoin is a safe haven for the poor.<\/span><\/p>\n Bitcoin is also valuable for activists like <\/span>feminist protestors in Nigeria<\/span><\/a> or dissident politicians like <\/span>Alexei Navalny in Russia<\/span><\/a> or disenfranchised groups like <\/span>unbanked women in Afghanistan<\/span><\/a>. Alex Gladstein of the Human Rights Foundation has called it an \u201cessential tool for preserving freedom.\u201d<\/span><\/p>\n \u00a0<\/p>\n Why Bitcoin matters for human rights, in two minutes. pic.twitter.com\/7whCGZKEXi<\/a><\/p>\n \u2014 Alex Gladstein 🌋 ⚡ (@gladstein) June 24, 2020<\/a><\/p>\n<\/blockquote>\n \u00a0<\/p>\n In spite of the reputation it sometimes has in mainstream media Bitcoin is actually good for the environment. <\/span>Bitcoin uses a lot of energy<\/span><\/a>, but it is a scavenger that feeds on low-cost waste energy. Energy is much, much easier to produce than it is to store or transport which means a lot of energy is wasted.<\/span><\/p>\n For example oil mining often produces natural gas as a side effect. When it is convenient oil companies will sell that natural gas \u2014 but often oil is mined in remote locations so it is not easy or cheap to bring that gas to market. Instead in practice oil companies simply vent that gas into the air and light it on fire, a practice called flaring. <\/span>By the estimates of the CBECI enough gas is flared globally to power the Bitcoin network ~6x over<\/span><\/a>. Here is how large flaring is relative to other sources of carbon dioxide emissions:<\/span><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Several companies are building <\/span>traveling Bitcoin mining rigs<\/span><\/a> that can go to the vents and use that natural gas on site to mine Bitcoin. That causes Bitcoin\u2019s energy use to go up, but it actually has a positive impact on the environment because using natural gas is much better than flaring it. Both flaring and using natural gas produce carbon dioxide but flaring (which is often inefficient and incomplete) can also release methane and NOx into the atmosphere as well. Methane damages the ozone layer and NOx contributes to acid rain. Using the graph of Bitcoin\u2019s energy use as a proxy for its environmental impact is misleading.<\/span><\/p>\n Bitcoin mining is also really useful for renewable energy because lots of renewable energy is produced at off-peak hours when it is less valuable. The Bitcoin network acts as a \u201cbuyer of last resort\u201d for energy producers, which makes renewable power more economically viable. Bitcoin effectively subsidizes the creation of more renewable energy by creating a market for their excess power. That\u2019s why <\/span>renewable energy companies are starting to add Bitcoin mining to their operations<\/span><\/a>.<\/span><\/p>\n A lot of anti-Bitcoin critics cite environmentalism as a concern but not as many environmentalists cite Bitcoin as a concern because if you sincerely care about the environment it is fairly obvious that Bitcoin is a footnote.<\/span><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n Energy use can be surprising. Bitcoin uses more energy than Argentina but less energy than American Christmas lights. Neither comparison is especially useful \u2014 a better comparison would be to the energy use of the entire legacy financial system or <\/span>the environmental cost of the petrodollar<\/span><\/a>. In proper context Bitcoin\u2019s energy use isn\u2019t so much large as it is easy to measure.<\/span><\/p>\n \u00a0<\/p>\n USD full node pic.twitter.com\/4qs2bDVpMp<\/a><\/p>\n \u2014 Gabor Gurbacs (@gaborgurbacs) May 29, 2021<\/a><\/p>\n<\/blockquote>\n \u00a0<\/p>\n The history of warfare is a history of the defense and acquisition of wealth. If that wealth has a physical location it will require defending physical territory, which implicitly means violence. As wealth migrates to non-physical systems like Bitcoin, it can be defended by non-violent means (i.e. Bitcoin mining). The more wealth leaves physical goods the less wealth requires physical defense.<\/span><\/p>\n \u00a0<\/p>\n Few understand\u2026#Bitcoin<\/a> pic.twitter.com\/PEt8M1vRtz<\/a><\/p>\n \u2014 Jason Lowery (@JasonPLowery) November 1, 2021<\/a><\/p>\n<\/blockquote>\n \u00a0<\/p>\n Bitcoin also makes it harder for governments to prolong a losing war by spending their citizens\u2019 wealth by hyperinflating the currency. It is much easier to fund a war with the creation of new money than through direct taxation because people understand the impact of direct taxation more clearly. That\u2019s why <\/span>most of the countries involved in World War I had to abandon the gold standard<\/span><\/a>. If the people understood how much money war cost them they would put a stop to it sooner.<\/span><\/p>\n None of which is meant to imply that Bitcoin is the end of war \u2014 power plants and population centers will always need to be defended.<\/span><\/p>\n Governments will always find reasons to quarrel with their neighbors. But to the extent that Bitcoin gains traction it does meaningfully reduce the means and incentives for violent conflict.<\/span><\/p>\n<\/blockquote>\n It is entirely possible that even having considered all the arguments above and in the first essay you remain unconvinced about the value of Bitcoin \u2014 <\/span>you should probably still own a little bitcoin either way<\/span><\/a>. That\u2019s because if Bitcoin succeeds in becoming the best possible way to store value it will capture most of the value currently stored in other ways. It\u2019s not just that the price of Bitcoin will go up \u2014 it\u2019s also that the value of everything else will go down.<\/span><\/p>\n That\u2019s why whether you like Bitcoin or not everyone needs to think about how they will protect themselves from the possibility that Bitcoin is real. Owning a small amount of bitcoin is one way to safeguard against that risk \u2014 and you probably need less than you think. If everyone in the world wants bitcoin there won\u2019t be very much to go around \u2014 owning 0.074 BTC (~$3,400 at time of writing) will likely be enough to put someone in the top 1% of Bitcoin wealth.<\/span><\/p>\n \u00a0<\/p>\n \u00a0<\/p>\n This estimate is based on current global wealth inequality. I also made a spreadsheet<\/a> where you can examine\/tweak assumptions for yourself.<\/span><\/p>\n Given that it takes such a small amount of bitcoin to hedge against a Bitcoin future owning no Bitcoin at all is actually an extremely confident stance. Being doubtful about Bitcoin\u2019s chance of success is very reasonable but being 100% certain that it will fail is overconfident. Intelligent skeptics are skeptical of their skepticism.<\/strong><\/span><\/p>\n Regardless of how you feel about Bitcoin I encourage you to stay curious. I\u2019ve been immersed in the space since 2014 and I am still learning new things and <\/span>changing my mind every day<\/span><\/a>.<\/span><\/p>\n If you want to read more I\u2019ve curated <\/span>a reading list of pivotal essays<\/span><\/a> that I think are worth your time. A version of this story first appeared in<\/span>\u00a0this newsletter<\/a> (Something Interesting) \u2014 I write ~2-3x a week about cryptocurrency news and topics and I try to answer all reader questions.<\/span><\/p>\n \u00a0<\/p>\n<\/div>\nThere are babies in the bathwater<\/strong><\/h3>\n
![\"Bitcoin](\"https:\/\/cointelegraph.com\/magazine\/wp-content\/uploads\/2021\/12\/Bitcoin-vs-DotCom-and-other-Bubble-Assets-1024x468.jpeg\")
Bitcoin is not going away<\/b><\/h3>\n
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![\"Ponzi](\"https:\/\/cointelegraph.com\/magazine\/wp-content\/uploads\/2021\/12\/Ponzi-will-not-reveal-secret.png\")
<\/b><\/h3>\nBitcoin has value because it is useful<\/b><\/h3>\n
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Bitcoin will not be stopped<\/b><\/h3>\n
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\u2013 Digital scarcity is a one-time phenomenon
\u2013 Schelling points
\u2013 Money is the mother of all network effects & tends to one pic.twitter.com\/yBcso6Z66p<\/a><\/p>\nBitcoin will not be replaced<\/b><\/h3>\n
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Bitcoin is good for people<\/b><\/h3>\n
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Bitcoin is good for the planet<\/b><\/h3>\n
![\"Flaring](\"https:\/\/cointelegraph.com\/magazine\/wp-content\/uploads\/2021\/12\/Flaring-emissions-Bitcoin-is-good-for-the-planet-1024x576.png\")
![\"Bitcoin](\"https:\/\/cointelegraph.com\/magazine\/wp-content\/uploads\/2021\/12\/Bitcoin-energy-usage-vs-other-countries-1024x668.jpg\")
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Bitcoin is an alternative to war<\/b><\/h3>\n
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![\"Bitcoin](\"https:\/\/cointelegraph.com\/magazine\/wp-content\/uploads\/2021\/12\/Bitcoin-vs-Cash.png\")
<\/span><\/h3>\nYou should own some Bitcoin either way<\/b><\/h3>\n
![\"You](\"https:\/\/cointelegraph.com\/magazine\/wp-content\/uploads\/2021\/12\/You-should-probably-own-some-Bitcoin.png\")
<\/p>\nKeep your mind open<\/b><\/h3>\n