There’s no need for a derivative to trade at a fixed rate against the underlying: insurance is the perfect example. The cost of car insurance goes up as you rack up accidents, but the automobile insurance still derives its value from the fact that it can pay for damage your car causes. We don’t all pay the same rates to insure the same cars because our driving records and ability are not all the same. There are many variables. However, car insurance is still a derivative of cars and drivers.

The variable exchange rate, though, highlights the primary argument against Bitcoin as a usable money today: the volatility.

As long as the exchange rate for energy and immutable record keeping is volatile, so too will it follow that the relative value of the token of this exchange versus the rest of the world’s goods and services will be volatile.

So, I’ll concede that a bet on bitcoin is a bet on the eventual stabilization of this blockspace market, and that a permanently volatile blockspace market might lead to a permanently volatile (and thus unreliable) money

If Bitcoin can never be stable, then its upward trajectory might still make it a risk-on asset for young people saving for the long-term, but it won’t be a day-to-day medium of exchange and certainly can’t become a unit of account.

I expect, though, as so many other Bitcoiners, that as the dollar becomes a less reliable medium of exchange (CBDC, censorship, etc) and a less reliable unit of account (entrenched double digit inflation) people might consider alternatives and that this decay of the dollar might coincide with a general stabilization of the Bitcoin ecosystem as more participants and more capital join the party.

I recognize this is a bet on an uncertain future, but I feel comfortable making it with the available knowledge I’ve accumulated about all this stuff, and especially considering the drawbacks of the many possible alternatives.

Said shorter: it’s a tremendous caveat if and for as long as the market for blockspace/energy is volatile. If that market stabilizes (as Bitcoiners predict) then so too might the price (relative value against everything else).

The risk/reward proposition of bitcoin is that there is tremendous upside because this stabilization appears so uncertain to the vast majority of people.

The first person to cross the glass bridge is probably an engineer who crunched the numbers and concluded it wouldn’t collapse. But even as he takes his first steps, the outcome is uncertain.