Correct. Bitcoin wins when nobody knows its being used
LinkedIn is currently down form whatever reason. What would need to happen for nostr to be down?
Thrilled to share my newest IBEX Podcast!
In this engaging discussion, I talk about the established corridors of traditional finance to the cutting-edge frontier of Bitcoin. We explore Bitcoin's distinctive features, such as its limited supply and status as digital gold, highlighting its viability as both a store of value and an inflation safeguard. I also articulate my enthusiasm for how Bitcoin can transform financial transactions to be more efficient, affordable, and accessible, particularly benefiting emerging markets.
This episode is essential listening for those intrigued by the future of finance, Bitcoin's game-changing role, and the synergy between traditional and digital financial innovation.
Dive in to explore the infinite possibilities that the fusion of finance and technology heralds for our global future.
#Bitcoin #DigitalFinance #WealthManagement #FinancialInnovation #IBEXPodcast
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Bitcoin as an inflation hedge working in real time as Egypt had to devalue its currency once again. BTC rose 65% TODAY, priced in Egyptian pounds:
The Two Sides of Bitcoin
Throughout its life, bitcoin’s value has reflected its economic properties which are indisputably great, but I believe that this is only half the story. Bitcoin has several industrial uses cases that few people are aware of and that few companies are leveraging. The following are some examples of the two sides from where bitcoin gets its value:
Economic Properties
It is scarce: There will only ever be 21 million bitcoin issued and no more. While this is not all that’s needed to make something valuable, it’s a key property for hard money.
It can be broken down into smaller pieces: Bitcoin can be owned as one whole coin or divisible to eight decimals (0.00000001). This allows for transactions of all sizes to take place.
It can be taken with you: One can easily take bitcoin across a border or across the street in a digital or hardware wallet or even carry bitcoin in your head just by memorizing a sequence of words. It is much harder to do the same with gold bars.
It cannot be counterfeited: Bitcoin moves on the Bitcoin blockchain, which has proven to be the most secure blockchain in existence, making it nearly impossible for someone to send counterfeited bitcoin. Unfortunately the same cannot be said about gold and fiat currencies.
It can protect purchasing power over time: Even though bitcoin has had its volatile past, with a long enough time horizon, it will most likely hold its purchasing power relative to other goods while fiat currencies will lose their value under the weight of their indebtedness. If in doubt, just take a look at what bitcoin has done when priced in highly devalued currencies such as Egyptian Pounds, Argentine Peso, Ukrainian Hryvnia and Nigerian Naira.
Industrial Use Cases
The Bitcoin blockchain offers the ability for two parties to send bitcoin back and forth albeit at slower speeds; this is by design as the Bitcoin blockchain is the most secure blockchain in existence. It is the base layer where other second layers are built on that solve for speed and other very innovative solutions. There are many examples of industrial use cases and below I highlight some that I believe to be solid drivers that will unlock even more value to the Bitcoin blockchain and thus its price:
Fiat over Lightning Network: A second layer built on top of the Bitcoin blockchain, the Lightning Network makes bitcoin transactions instant, no matter if the parties are next to each other or oceans away. By leveraging this network, two parties can transact using their own currencies, resulting in foreign exchange rates that could potentially be better than the rates offered by traditional financial rails; it is also faster and less bureaucratic. This would allow a business to pay for its raw materials by using its own currency while the foreign supplier would get paid in their own currency. No need to go through various currency conversions which end up being costly and time consuming.
Tokenization over Liquid Network: Another second layer on the Bitcoin blockchain, it can be used to issue and list digital assets. By leveraging this technology, a business can tap into markets that were out of its reach in the traditional system to either sell its goods or raise funds. A real estate developer can issue digital tokens to either raise funds for a new development or sell the digital ownership of its properties.
Miniscript for Institutional Custody: As bitcoin gains more institutional adoption, either for ETFs as we have recently witnessed or for any other use case, centralized custodians will have to improve their custodial practices as they now own more bitcoin with an ever-increasing price. Through a Bitcoin language called Miniscript, the custodial model is switched from bitcoin “lost forever” to “bitcoin recovered at a later time.” This is a setup whereby a large bitcoin custodian can have insurance that if they were to lose the keys to their bitcoin, the protocol itself would return that bitcoin at a predefined time in the future. This offers an extra layer of security to institutions that hold third-party funds, giving an extra piece of mind to end users and helping the bitcoin adoption.
Industrial uses cases do take more time to implement, but when they happen, they will truly unlock more value to bitcoin that has never been priced in before. I foresee the same price action repeating when this happens as to when the ETFs were launched and caused the massive bitcoin rally.
Infinity/21M = fiat/Lightning.
I forsee a gradual transition of moving fiat currencies over LN (currently in development). End users won't even realize this, it will just be a more efficient and cheap mechanism to move money. Then a more permanent transition where offramping to fiat won't be necessary and sats are the preferred method of exchange.
Unfortunately the only solution (I can think of) at that point is to sell it all back through that same exchange and then rebuy via non-KYC, such as Bisq or Robosats.
jabba the hutt can go fuck himself
https://video.nostr.build/fe741cf82955565cda4ee001443a4f7ba2cc5aeec10d5fd7b7a0c1e81dd4582d.mp4
End of financial privacy for the general, non-bitcoin population.
Ctrl + D money
The Benefits and Risks of Stablecoins
Stablecoins are a digital representation of fiat currency which are used to move money cross-border, as cash equivalent by crypto traders and staked in various protocols to earn higher yields than in traditional banking. Stablecoins are the result of a very slow and contained fiat world and through their use, fiat scales to solve for speed and reach. If you take a Guatemalan Quetzal to Turkey, it will most likely be worthless; but if you take a stablecoin, there are higher chances that you will be able to convert it to Turkish Lira. If you were to send a wire transfer from Guatemala to Turkey, it would be extremely costly and time consuming- not to mention that it could be blocked. If instead you send stablecoins, they would be instantly received and could be converted for much cheaper to local currency.
There is another side to stablecoins that investors and everyday users need to be aware of:
- Their intrinsic value is based on the legacy financial system: Stablecoins derive their value from traditional financial assets such as treasuries, repurchase agreements, corporate bonds, cash, etc., all of which are subject to the persistent devaluation of the USD, which in turn transmit the devaluation to the stablecoins themselves.
- They can be censored: Stablecoin issuers have the power to block, censor and reverse transactions if they want or if mandated by a regulatory/court order. While this could be considered a good tool to fight illicit activities, this power could potentially be abused as well.
- Depegs: There have been several cases in the past where a stablecoin’s 1:1 peg is broken. In almost all cases the peg is restored, but this will continue to be a recurring phenomenon. Here are some examples:
USDC depegged from $1 to $0.86 when they announced that 8% of their overall funds backing the USDC token were held at Silicon Valley Bank, which failed in March 2023.
TerraUSD algorithmic stablecoin collapsed from $1 to $0.04 back in May 2022 and its market cap crashed from $41B as the Terra network lost all credibility of its high-yielding Anchor Protocol.
Tether has its history of trading at premiums and discounts throughout various exchanges as well. Some have been massive movements and others have been very small.
Stablecoins have had their role in onboarding more people into crypto and bitcoin but they also come with fine print. Investors and everyday users must be aware of the risks involved, especially in assets stating that their value is “pegged” to something else. Massive depegs can lead to holders losing part if not all of the value of the stablecoin if it never returns back parity; as was the case with TerraUSD.
On the other hand, bitcoin’s value is not pegged to anything else and even though it has experienced strong volatility, I foresee its price increasing and stabilizing into the future as a result of its gold-like, economic properties and its industrial use cases that can facilitate cross-border trade (more on this in the next post).
This is great, thanks for sharing
Age of Empires, Bitcoin and Gold
History has proven that no empire can last forever and when its decline begins, things get very ugly. The empire then fights back harder, radical measures are taken in the interests of national security to try and extend its eventual demise. The world has witnessed many changes in world orders from the Chinese, to the Dutch, the British and currently, the US. In his book “Principles for Dealing with The Changing World Order,” Ray Dalio presents us with a graph demonstrating “The Relative Standing of Great Empires” (graph at the bottom).
His analysis takes into account various aspects that forge, strengthen and weaken an empire, such as education, innovation, military and others. While I find it hard to believe that China will be the next world order, it's very clear that the path the US has embarked on, especially as it relates to money printing and debt issuance is not helping its world standing or the credibility to the US dollar. Furthermore, it’s currently administered by a very polarized political system as well as dealing with other internal conflicts that it needs to urgently address if it wants to retain it global leadership position.
According to Dalio, one of the determinants of an empire entering its decline phase is when it carries large debts and prints money, as can be seen in his graph at the bottom of this note, depicting "The Rise, The Top and The Decline" of an empire.
The US is unfortunately in the phase where it has enjoyed decades of power, abundance and as issuer of the global reserve currency, it has lost sight of its true values and foundation that took it to the top. If this path continues, one of the unfortunate outcomes is the further weakening of the US dollar to the point where it might face a challenger. The US has reached a debt/GDP ratio of about 120%; a point where reversing course is not getting easier and the solution could be quite harsh. That transition period could be painful for fiat denominated investors; and it’s important to understand how one should hedge their fiat exposure.
Bitcoin alongside gold are two great hedging candidates and they both share and differ in their qualities. Even though gold has an extensive track record of holding its value across time, bitcoin shares the same qualities such as durability, fungibility and scarcity but also has its own such as divisibility, portability and verifiability. Aside from these, bitcoin goes further in that it can also be used at its protocol level to solve great pains of cross-border financial transactions. Using bitcoin for these transactions can lead to better foreign exchange rates than banks, it makes financial settlements instant and disintermediates money. This means that bitcoin can be used at an industrial scale, ready to solve real world problems. Although it currently trades as a speculative asset, bitcoin’s value is the sum of its economic qualities and its industrial use potential. Bitcoin is slowly on its way to be the main base layer for faster, cheaper and more open-access money.
It’s hard to fathom a world where the US is not the leader, but if/when that times comes we will all live a very turbulent economic environment where I foresee bitcoin and gold outperforming all other assets.
Speaking of rogue money, this quote from the show Andor is pretty awesome. I was reminded of it yesterday.
"There will be times when the struggle seems impossible. I know this already. Alone, unsure, dwarfed by the scale of the enemy. Remember this: Freedom is a pure idea. It occurs spontaneously and without instruction. Random acts of insurrections are occurring constantly throughout the galaxy. There are whole armies, battalions that have no idea that they've already enlisted in the cause. Remember that the frontier of the Rebellion is everywhere. And even the smallest act of insurrection pushes our lines forward. And then remember this: The Imperial need for control is so desperate because it is so unnatural. Tyranny requires constant effort. It breaks, it leaks. Authority is brittle. Oppression is the mask of fear. Remember that. And know this, the day will come when all these skirmishes and battles, these moments of defiance will have flooded the banks of the Empire's authority and then there will be one too many. One single thing will break the siege. Remember this: Try."
https://www.youtube.com/watch?v=-asb8zTiuZ4&ab_channel=StarWars
One of my favorite quotes:
"The pace of repression outstrips our ability to understand it."
- Andor, S1-E5 - The Axe Forgets
Here's an excerpt from my August 2022 article on Lightning that has relevance for today:
https://www.lynalden.com/lightning-network/
Criticism 6) It Has a Scaling Ceiling for Self-Custodial Users
Lightning greatly increases the transaction volume that is possible on the Bitcoin network. However, opening and closing a Lightning channel still requires an on-chain transaction, which means that in its current form, the Bitcoin/Lightning stack still can’t scale to billions of people using it self-custodially.
Specifically, there are block space limits to how many people can use it fully self-custodially on a regular basis, unless certain base layer forks allow for more throughput.
For any network, there are inescapable technical trade-offs. To ensure the widespread auditability and immutability of the base layer, there are some constraints that are hard to overcome.
I view many other blockchain designers as trying to over-engineer their systems. Any solution needs to have product-market fit. Not everybody wants a fully self-custodial experience. Some people want the convenience of using a custodial service of some sort. Bitcoin/Lightning gives optionality to people around the world, but people can see fit to use whichever portion of the stack that they want.
To quantify it, the Bitcoin/Lightning stack can be semi-regularly used by tens of millions of people self-custodially (or more than that over time if many of them are just holding it in cold storage). Custodial services can scale that to higher numbers. For example, all of the tens of millions of accounts on Cash App technically have access to the Lightning network, through nodes and channels operated by Cash App. The same is true for people on Strike, River, and similar types of apps.
At the current time, the Bitcoin network is being criticized by some opponents for low fees and thus supposedly low long-term censorship resistance as the block subsidy winds down (meaning there is not overwhelming demand for its block space at the current time, which if that state were to persist indefinitely could eventually result in a low cost to control over half of the mining share), while it is simultaneously being criticized for not being able to scale self-custodially to everyone in the world (meaning its block space is not nearly big enough to fulfill such enormous potential demand). These are mostly mutually exclusive concerns.
If the combination of the Bitcoin/Lightning stack eventually reaches severe growing pains against the number of people that want to interact with it fully self-custodially (a good thing), then there are additional areas of development that can increase its scaling potential, via ways to allow more users to share a given channel, which are beyond the technical scope of this article.
On the other hand, if the network doesn’t grow much and its block space does not increase in value (a bad thing), then its scaling limitations are a non-issue.
At the current time, the Bitcoin/Lightning stack provides tremendous scaling potential compared to the number of people that currently use the network. The network doesn’t need to overbuild for market conditions that don’t exist yet, although of course it’s good for developers to be thinking about long-term scaling options.
As the saying goes, “necessity is the mother of invention”, and if/when the network encounters persistently high base layer fees, tons of base layer transactions being used to open lightning channels, and an inability to onboard all of the users that want to onboard to the network self-custodially, then that would spark more interest in developing further scaling solutions, including the possibility of new broad-consensus soft forks and other changes.
You need to listen to (if you haven't already) nostr:npub14mcddvsjsflnhgw7vxykz0ndfqj0rq04v7cjq5nnc95ftld0pv3shcfrlx 's WBD podcast on Scaling BTC, they talk about many of the topics you mention in you note; its an awesome episode. Thanks as always for your great content.
Nice!
Posted this on other platforms and for some reason it didn't go through on Nostr. Had some of the same thoughts as your post:
The Bitcoin ETF
There are plenty of articles detailing the pros and cons about the bitcoin ETF from a investment vehicle’s perspective, but almost no articles about the pros and cons from a bitcoin perspective.
Why The ETF Is a Great Idea (for bitcoin, but not for investors):
- The run up to the ETF launch has indeed generated a lot of noise and news around bitcoin, which is quite positive for the asset itself. This has taken the bitcoin conversation from the dark and smoky rooms of its heyday to the family dinner table.
- While there is still not much regulatory clarity around bitcoin and digital assets in the US in general, the fact that there are several ETFs in the “soon to be approved stage,” could potentially bode well for the industry as a whole.
- The asset managers that have submitted their ETFs for approval are some of the biggest and most respected institutions out there. It’s “smart” money that has finally realized the potential that bitcoin has in terms of financial return and demand from investors.
- Bitcoin has gone from being called a tool that facilitates illicit activities to potentially becoming part of every investor’s diversified portfolio with full regulatory backing. This is the same as when nobody believed in the Internet when it was first launched.
Why It’s Better To Own Bitcoin Directly (and not via the ETF):
- When investors buy shares of the ETF, they are basically owning a piece of paper that says that it equals a certain amount of bitcoin, held in custody by a third party. Investors are trusting these third parties’ fiduciary responsibilities that they will keep their bitcoin safe.
- History has shown that no amount of rules and regulation can prevent these institutions from failing, and if they do, investors could be wiped out.
- The amount of bitcoin in custody by these institutions will become honeypots or targets for hackers. Bitcoin and digital asset hacks and exploits will always continue to happen. Investors are better off acquiring bitcoin themselves to then quietly and privately custody it themselves- this last part is understandably still very hard to do for the average investor; however companies like IBEX are here to also guide its clients how to self custody the right way.
- There is still a lot of uncertainty as to what regulation will be like in the US regarding bitcoin and digital assets. In a very dark and (hopefully) unlikely scenario, the US government could confiscate all bitcoin as they did with gold back in 1933 with the Executive Order 6102 as a way to fight the Great Depression. Given the current and massive debt levels of the US government, this scenario could potentially not be too far out.
It is of the utmost importance for anybody considering to invest in the bitcoin ETF to take their time to understand what self-custody is or find the right bitcoin companies, such as IBEX, to guide them.
The Bitcoin ETF
There are plenty of articles detailing the pros and cons about the bitcoin ETF from a investment vehicle’s perspective, but almost no articles about the pros and cons from a bitcoin perspective.
Why The ETF Is a Great Idea (for bitcoin, but not for investors):
- The run up to the ETF launch has indeed generated a lot of noise and news around bitcoin, which is quite positive for the asset itself. This has taken the bitcoin conversation from the dark and smoky rooms of its early days to the family dinner table.
- While there is still not much regulatory clarity around bitcoin and digital assets in the US in general, the fact that there are several ETFs in the “soon to be approved stage,” could potentially bode well for the industry as a whole.
- The asset managers that have submitted their ETFs for approval are some of the biggest and most respected institutions out there. It’s “smart” money that has finally realized the potential that bitcoin has in terms of financial return and demand from investors.
- Bitcoin has gone from being called a tool that facilitates illicit activities to potentially becoming part of every investor’s diversified portfolio with full regulatory backing. This is the same as when nobody believed in the Internet when it was first launched.
Why It’s Better To Own Bitcoin Directly (and not via the ETF):
- When investors buy shares of the ETF, they are basically owning a piece of paper that says that it equals a certain amount of bitcoin, held in custody by a third party. Investors are trusting these third parties’ fiduciary responsibilities that they will keep their bitcoin safe.
- History has shown that no amount of rules and regulation can prevent these institutions from failing, and if they do, investors could be wiped out.
- The amount of bitcoin in custody by these institutions will become honeypots or targets for hackers. Bitcoin and digital asset hacks and exploits will always continue to happen. Investors are better off acquiring bitcoin themselves to then quietly and privately custody it themselves- this last part is understandably still very hard to do for the average investor; however companies like IBEX are here to also guide its clients how to self custody the right way.
- There is still a lot of uncertainty as to what regulation will be like in the US regarding bitcoin and digital assets. In a very dark and (hopefully) unlikely scenario, the US government could confiscate all bitcoin as they did with gold back in 1933 with the Executive Order 6102 as a way to fight the Great Depression. Given the current and massive debt levels of the US government, this scenario could potentially not be too far out.
It is of the utmost importance for anybody considering to invest in the bitcoin ETF to take their time to understand what self-custody is or find the right bitcoin companies, such as IBEX, to guide them.
FOSS.
GrapheneOS on mobiles, Linux on computers, private servers (@start9) to host all your data; all connected via Tor. People don't realize the cost of freely handing your data to third parties such as Google and Apple. When they do, the cost will be too great.
Self-reliance is true freedom.
The cost of privacy is convenience. Self hosting is not easy, but the cost of not doing it will be greater.
As nostr:npub1a2cww4kn9wqte4ry70vyfwqyqvpswksna27rtxd8vty6c74era8sdcw83a says, we are at the "now they fight you" stage.
So sorry you are going through this nostr:npub1utx00neqgqln72j22kej3ux7803c2k986henvvha4thuwfkper4s7r50e8 and appreciate your transparency.