What is Bitcoin is good for?

Bitcoin Info > 16 Things Bitcoin is good for:

  1. Bitcoin solved the problem of how to register and transfer private property in the digital world without having to trust government or banking officials.  (more)
  2. Bitcoin offers a credible way to have a non-inflationary currency at a time when there is low confidence in government’s ability to maintain the value of the currencies.
  3. Bitcoin offers a private alternative (or hedge) to a future government-sponsored digital dollar which people fear will include:
  4. Bitcoin’s technology is superior to the Federal Reserve’s Fed Wire, which allows people to wire funds from one bank to another. (Federal Reserve vs Bitcoin diagram)
    • Fed Wire takes several hours – days to transfer between Fed connected banks.
    • Bitcoin takes 10 minutes – an hour and can transfer to anyone in the world with an internet connection.
    • Bitcoin’s Lightcoin layer enables instant transactions that settle later in a batch (see below)
  5. A sub-project of Bitcoin — the Lightning Network — offers the possibility to displace Western Union (video) and has forced Mastercard and  VISA to develop Bitcoin strategies.  It is possible to buy a coffee at a Starbucks in El Salvador and only pay about half a cent in fees, while VISA charges roughly 2.3% + 23 cents.
    • To be sure, Bitcoin adoption for payments will be inhibited by its volatility and its tax treatment in the US,

      but the Lightning network is instantcheaper, and works anywhere in the world with an internet connection.

  6. Bitcoin’s Lightning network is capable of transmitting a variety of digital currencies, including a transmitting a digital dollar with extremely low fees.
    • You can think of Taro’s payment workflow as enabling bitcoin to serve as a hybrid of the SWIFT financial messaging system (the communication layer) and correspondent banking (routing component).
    • “Lightning transactions can be fractions of a penny…while a bitcoin transaction at the core protocol layer can be much more expensive than that,” said Alyse Killeen, founder and managing partner of bitcoin-focused venture firm Stillmark.
  7. Bitcoin is Anti-Consumerism: The current monetary system depends upon inflation and “growth” in GDP.  It would collapse without growth, which is why it is incompatible with anti-climate-change efforts.  A system that rewards long-term thinking over short-term gratification is likely to do more for the environment than the minor green washing tweaks that our economy produces.  The inflationary dollar encourages people to consume now because the dollar will be of less value in the future.  A currency with a non-inflationary monetary policy encourages people to save and invest because they know the money they save will be worth more in the future.
    • Some economist want a monetary policy that encourages consumption, but in the long term we need to shift consumption habits to reduce our environmental impact.  A monetary system where people delay gratification to make quality Marie Kondo-inspired purchases will save more energy and resources than Bitcoin mining uses.
    • Note: The 10x gains the author is speaking of will decline as Bitcoin becomes more widespread, but even if Bitcoin becomes ubiquitous there will still be stronger rewards for investment over consumption.
  8. “Openness” – first open monetary network: the key feature that made the open internet better than the privately-owned Compuserve and AOL.  These privately-owned networks thought that there was value in being proprietary, but Compuserve users wanted to connect with everyone, not just those in their own walled garden.   Bitcoin is the first open monetary network that anyone can join at no cost.  Imagine if Yahoo and Google users couldn’t exchange email and had to create separate accounts on each service.  Paypal users can’t send money to Venmo users, which is why we need an open standard.
  9. Diversification: Stocks and Real Estate go up and down together.  The fact that Bitcoin is less correlated with Stocks and Bonds makes it a useful addition to a portfolio in small quantities
    • This Economist article makes the case for diversification but notes the risk that Bitcoin goes to zero.
  10.  Bitcoin is the first truly Fair Monetary system, an alternative to the biased Cantillionaire system that privileges elites who are closest to the money supply with special benefits. (audio version)
  11. Bitcoin’s Lightning layer can be used to make micropayments, which could provide publishers with a way to get funding beyond the advertising-supported click-bait business model many now use.  Jack Dorsey says Bitcoin is going to be a big part of Twitter and Twitter has just rolled out Bitcoin tipping.  The media is currently in a bad way.  This could get at the root of the funding problem.
  12. Blockchain, the technology behind Bitcoin powers Vanguard’s Index fund price updates.
  13. Bitcoin has led to the creation of a new digital finance industry that has the potential to power systems that exchange ownership of stocks, mutual funds, and real-estate. (more real estate)
  14. Bitcoin and crypto make it cheap and easy to provide banking services to the unbanked.
  15. The more people learn about Bitcoin, the more they learn about the American Petrodollar and its disastrous consequences for wars, women’s rights, human rights, the environment, and harm of America’s export industries like manufacturing.
  16. Transitioning from a dollar backed by oil to one backed by electricity has the potential to finance investments in renewables.
  17. Hard money like Bitcoin penalizes unpopular wars.  Imagine what would happen if governments would have to finance wars by fundraising from the public (i.e. through war bonds, like during World War II) rather than just printing $8 Trillion dollars.
    • If financing wars wasn’t so easy, would the recent Iraq and Afghanistan wars have lasted 7 and 20-years? Leaders would have to justify the war’s mission and costs, rather than saying that the war would pay for itself and that Americans should just go shopping.

 

10 Years of Inflation:

Inflation: 10 Years
(red = more than 50% decline)

 

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