Monthly Archives: June 2023

Isn’t The Bitcoin Guy in Jail?

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I was recently in the hospital (that part of the story isn’t important) and had a Bitcoin book, A Progressive’s Case for Bitcoin: A Path Toward a More Just, Equitable, and Peaceful World, out on my desk to read while I was sitting around doing nothing. One of the nurses asked me if I “Was into Bitcoin?”. I naturally said “yes” enthusiastically and asked her if she wanted to talk about it. Her first comment was “Isn’t the bitcoin guy in jail?” I explained to her that “no there is no ‘bitcoin guy’” The guy who is in jail, who I’m assuming she meant Sam Bankman-Fried (SBF), although we didn’t clarify that, I explained to her, was a fraudster but not directly linked with bitcoin. I explained to her that Sam and his company FTX were more or less committing fraud on a level similar to Enron. She seemed to understand that. 

Fighting basic narrative errors about bitcoin like this is important for bitcoin adoption. There is so much false news and when people don’t really have that much interest, this is the type of error they can make. 

I also got to mention to her that there is a limit of 21 million bitcoin ever and it fixes the problem of governments stealing our savings via inflation. She did like that! She mentioned that she had a “lot of cash” and “wished the government would stop stealing things”. Not the most technical conversation, but I’m hoping that by.

1 . removing the connection of SBF/FTX to bitcoin and

2. Connecting the idea of bitcoin saving you from government created inflation, she might be more open to bitcoin the next time she hears about it. 

She also mentioned that she “isn’t tech savvy” but somehow mentioned she has Venmo. You can buy bitcoin on Venmo (it’s not the favorite platform for the “hardcore” bitcoin folks but it works). So I did mention to her that she would be able to buy it there pretty easily.

What Problem Does a Central Bank Digital Currency (CBDC) Solve?

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If you read my previous post you will learn what problem bitcoin is trying to solve. But there is another thing that governments love to talk about when anyone mentions bitcoin or cryptocurrencies. To be clear on the difference between bitcoin and cryptocurrencies read this. The thing Governments love to bring up is a Central Bank Digital Currency or a CBDC for short.  

What is a CBDC and what benefit does it have? The most important thing to know about a CBDC is it is 100% Government controlled, just like money today. It has no limit on how much of it there can be.  Because of this they can create more new CBDC everyday and reduce the value of the ones you own.  This is inflation and that is the problem that bitcoin solves by having a limit that is 21 million bitcoin ever. The fact that  CBDC does not have a limit, means it is not a substitute for bitcoin and you should not be fooled by anyone on tv, or anywhere, saying a CBDC can replace bitcoin and now we don’t need bitcoin.

One thing a CBDC may do is either make settlements at the store faster or international settlements faster. Today international settlements usually go through a company like Western Union.  It is very expensive to send money out of the country. Visa and Mastercard process most payments via their credit system and charge between 1.5%-4%  to the businesses using their network. A CBDC could remove the need for Visa and Mastercard and for Western Union. Basically it could remove any intermediaries as a CBDC would be infinitely and immediately traceable. While to me all our money seems digital and traceable anyway, a CBDC would make it even more easily so. There may be a push from a government to use it as a form of punishment or denial of purchase for certain things which would be another option that opens up even more with the abilities of a CBDC. For example the government could say that buying meat is bad or buying more than 1000g/ month of meat is illegal and could limit your CBDC credit card to purchases of meat, or anything they wanted. 

The main point I wanted to help people understand with that post is that a CBDC certainly does not do anything that would replace bitcoin or reduce inflation and could even potentially be used to control purchases by individuals.

Consider buying a little Bitcoin!

What Problem Does Bitcoin Solve?

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To understand the reason behind why some people (like me) buy bitcoin you need to think about the problem we think bitcoin is trying to solve.  When you use a government currency, like USD, the Government can effectively steal value from your bank account via money printing. How does this work?

To understand that you need to understand what the point of money is. Money is just a measurement of the value of something.  We have all been trained that the value of things goes up over time because the price goes up over time. But just because a house rises in value by $100k over 5 years,  does not mean its intrinsic value has risen. It’s the same house providing the same amount of shelter.  It really shouldn’t gain value. What has really happened is the money,  used to measure the value of the house, has lost value! It’d be like if you used a tape measure with 12 inches to 1 foot  to measure a board and then you changed the tape measure to use 13 inches to 1 foot,  where the foot is still the same length but each inch is smaller so you have “more inches”. But is the 1 foot board actually any more useful or longer if you use 13 shorter inches or 12 inches to 1 foot? No.  This is how the government confuses us. They print more money and then our houses “go up” in value,  but it’s because the measuring stick is changing.  Why does the government do this though? They do it because that’s how they pay for the $1 trillion to $4 trillion budget deficit the Government has each year. 

In WW1, while we were on the gold standard (every dollar was supposedly able to be converted back to gold at a bank), the government had to sell “war bonds” to pay for the war.  This at least provided a little link between Americans turning over money for what they thought was a just cause. If people didn’t buy the bonds the government couldn’t pay for the war. 

Since the US dollar was removed from the gold standard in 1971, the Government has had no restrictions on how much money they can print. The US government is able to fund any war ad infinitum via money printing. When this new money is printed the government uses it to buy good (ships,  tanks,  steel, sometimes roads,  etc). Since they have unlimited purchasing power they can keep printing money until they can pay for what they need.  Meanwhile,  the average person might be unable to buy a new truck because the price of steel was pushed up by the government demanding 200 billion tons of steel for planes and warships.

When thinking about if you should buy bitcoin this is the fundamental issue you need to consider, how is my purchasing power being diluted via inflation? 

Since bitcoin has a limited supply (21 million) as more US dollars are printed a single bitcoin’s value, measured in USD, or any other currency, will continue to go up. 

In fact bitcoin recently hit all time highs, when measured in Argentine pesos,  Lebanese pounds and Venezuelan bolivars

This is due to those countries experiencing extremely high levels of inflation 50%-100% a year.  I can’t even imagine what that would be like to live in. At 100% inflation,  or even 50% you need a raise every paycheck! Your money would lose 1% of its value every week at 50% inflation.

While it seems like high inflation only happens in “far away” places with bad Governments that’s not the case. It has happened thousands of times in history

We, every person in the world, is in a fight with their own government to keep as much of the value they create as they can.  The government explicitly taxes you, which we can debate but at least it is obvious.  But the government also stealthy steals value from your bank account or savings via inflation and money printing that you have no control over. 

Because in the USA inflation has been a relatively small issue (1%-3%) for most of the last 25 years most people in the USA haven’t thought about wealth preservation much.  Now that we’ve seen 10% inflation it’s new to people and they aren’t sure how to protect their purchasing power! A bond paying 5% is really losing 5% a year to inflation if inflation is 10%.

I know bitcoin is volatile but the inherent properties of it (ultimate scarcity, 21 million total coins ever), make it the best chance we have ever had to get out of the system and protect our wealth. If bitcoin doesn’t succeed then we will have lost every opportunity to preserve value!

 I think that is a cause worth supporting, by buying and holding Bitcoin. And you’re not just supporting it, but you’re protecting your wealth! 

I have written politicians and blog posts trying to encourage people to understand this while bitcoin is relatively cheap ($30k). I know once it is $50k or $100k more people will have Fear Of Missing Out and will buy in which could happen in the next year or 2. It’s best to learn about bitcoin when it’s price isn’t rising like crazy and you aren’t having FOMO. 

If you’ve wondered this last year or 2 how to avoid losing value to inflation I’d enjoy talking to you more about bitcoin. I only recommend 1% of your net worth in it to start.  So if you have $100,000 of net worth you can just buy $1,000 worth of bitcoin. That’s a small risk to be part of a monetary revolution that just might pay off.