Bitcoin can mean different things to different people. Most, especially in the developed world, first come into it for the investment as they don’t often think of it as a currency right away. The idea of getting rich quick is typically the reason people first show interest in Bitcoin. People treat it as they would a stock, where they buy in and hope to sell at higher prices in order to convert back to dollars. Although Bitcoin is the best performing asset of all time, people who jump in and out realize that it is difficult to make a lot of money in the short term, but over the long run it tends to continue to rise in price. As people learn more about Bitcoin, they begin to view it as a long-term savings technology instead of a short-term investment.
With more conviction, people often hold through the ups and downs and appreciate the technology side of Bitcoin and what it offers to humanity. For many in developing nations living under authoritarian rule, Bitcoin represents freedom as they can send and receive money without their government confiscating it.
Between the ability to preserve wealth over the long term and the freedom that the technology presents over authoritarian rule, Bitcoin becomes a sense of hope for the future. What you may also find surprising is that Bitcoin has the potential to reduce global conflict as well as help reduce environmental damage. This article will delve into Bitcoin as a long-term savings technology, as well as freedom and hope for billions of people around the world.
Savings Technology
Bitcoin’s price action can be a bit intimidating to newcomers in the space. On a linear chart, the price fluctuates up and down violently and critics have compared it to the Tulip Mania of the 17th century where Tulip prices skyrocketed and then dropped back down to basically zero when the supply caught up to demand. Critics have also declared Bitcoin dead over 450 times and yet the fundamentals are stronger than ever. (https://99bitcoins.com/bitcoin-obituaries/)
The key to understanding this asset is to extend your time horizon to at least 4 years since that is how often the halving or supply shocks take place. If we look at Bitcoin on a log chart, the price action seems much more systematic. The first chart below shows the price of Bitcoin in log and linear graphs and the second chart plots the four-year halving cycles into the log graph.
The charts clearly show how the halving creates a supply shock every four years, which creates a rise in price, followed by some speculative investments to come in later in the cycle which subsequently leads to a greater spike in price before the bear market comes and the price comes back down and settles into a higher equilibrium than the previous cycle; before the halving starts the rise again. On a linear chart these swings seem drastic, but in a log sense we clearly see a gradual rise in dollar terms over time. These swings can still be drastic, and newcomers should be wary of 80% draw downs, but patience has continued to pay off for those who hold long-term. For more proof of Bitcoin’s long-term performance, strategy.com is a great website that shows the performance of Bitcoin compared to other currencies and every company in the S & P 500.
Over the years, these cycles have brought in more and more people who become convicted holders. This creates even more of a supply shock to the system which creates the higher floor for the price. Bitcoin is the fastest asset to ever reach a $1 trillion market cap and as Bitcoin becomes larger and more secure it brings with it the ability for large institutions and nation states to get involved with it. Currently Blackrock, the largest hedge fund in the world, recently got approval for a Bitcoin ETF, as well as ten other companies. Two countries have already made Bitcoin legal tender in their jurisdictions (El Salvador and Central African Republic). This is all happening just 15 years since Bitcoins inception. The smartest money in the world is starting to get involved, and with only 21 million coins (divisible by 8 decimals), Bitcoin begins to look even more scarce. To put the scarcity into context, if everyone in the world were to have an equal share, we would each get about .002625 Bitcoin.
For a deeper look into Bitcoin as a plan for long term savings or as a part of your investment portfolio, there is a great book by Andy Edstrom called “Why Buy Bitcoin.” Edstrom comes from the traditional finance world and in his book, he breaks down why having an allocation of Bitcoin in your portfolio is important.
Freedom
The idea of Bitcoin bringing freedom to people may not resonate with citizens in the US as quickly as it does for people living under an authoritarian government, but Bitcoin still presents some tools for democratic nations as well. The main superpower of Bitcoin is that it gives people the option to become their own bank. This may sound trivial, but becoming your own bank comes with a lot of freedoms that many people around the world do not have. Currently there are around 1.7 billion people in the world that are unbanked, meaning they don’t have access to a bank. With Bitcoin, people have the ability to be their own bank, meaning as long as they have an internet connection, they can send and receive Bitcoin without needing a third party’s permission. This could include earning Bitcoin, receiving remittances in Bitcoin or exchanging their local currency for Bitcoin at a Bitcoin ATM without the need for an actual bank. If you know how to properly store your Bitcoin, which we will discuss in detail in the next article, then someone living under an authoritarian government can leave the country with their entire net wealth just by memorizing the “seed phrase” or password. This is not possible with gold or paper money.
This ability is enhanced when individuals run their own Bitcoin node. Nodes are the validators of the Bitcoin blockchain. They audit the entire blockchain every ten minutes and keep the security of the network. Anyone in the world can run a node and the more nodes there are the more decentralized the network. The reason no government can stop Bitcoin is because there are tens of thousands of individuals running nodes around the world and even some in satellites orbiting the planet. Setting up and running a node is not in the scope of this article, but it takes freedom to another level. When you run a node, it means you can validate all of your own Bitcoin transactions as well as help secure and decentralize the network further. Governments may try to ban the purchasing or mining of Bitcoin, but they cannot shut down the network as long as there is at least one node running the Bitcoin protocol. Many governments have tried banning Bitcoin and none have successfully kept it out of their country. Today nodes come equipped with other freedom technology enhancements such as being able to run your own home server from your node, run ad blockers and VPN’s, self-host your own AI, and even allow you to host your own relays for decentralized social media applications such as Nostr. You can find more details about Nostr on the Bitcoin Resources page (part 8).
Remittances are another huge issue with today’s current system. Sending money from country to country can be a very cumbersome task. Wire transfers can be expensive to send after fees, require a lot of paperwork and can take several days or even weeks to get through. Depending on the country you are sending money too, it may not make it to the recipient if they live in a authoritarian government as dictators can simply seize the funds. With Bitcoin, money can be sent instantly using a QR code over a video call and does not have to pass through any intermediary. This can be done with 10 cents or $10 million. There is no other system in the world that allows this to happen at this speed.
Bitcoin has the potential to give people back their online privacy and financial freedom.
Hope
Bitcoin provides us with clear predictability in a money while we have 160 other fiat currencies in the world with zero predictability of issuance. The 21 million hard cap provides humanity with the ability to make true economic calculations unlike other currencies whose issuance and total supply fluctuate dramatically depending on governance and global events. When you do not know the issuance of future supply, making economic calculations it is like trying to build a house with a tape measure that is constantly changing lengths. With a hard capped supply, you can perform calculations much more efficiently as you always know how much of the total supply you have. Retirement calculations for example, become much more doable versus trying to guess how much inflation will reduce your savings in the next 30 years. We discussed in the last article how Bitcoin could pave the way to a more abundant future where people are incentivized to save money and the costs of most everything should fall to its free market value over time. This gives people hope in the future rather than worrying about being buried under a mountain of debt.
Bitcoin provides hope in many aspects of life that we didn’t know was possible. We have gone into detail on the potential for savings and abundance. Now we are going to touch on just two other areas where Bitcoin’s incentives provide hope for the future: the environment and global cooperation.
Environment
The environment is hot topic that people are losing hope over. We are always trying to “fix” the environment within a fiat system that is supposed to grow forever. That seems counterintuitive. It is with fiat money that we are incentivized to buy more and more things that are of lesser and lesser quality and yet we think we can fix the pollution of these products within the system that creates them.
Bitcoin is often thrown under the bus when it comes to its impact on the environment with many articles pointing to Bitcoin damaging an already fragile climate. However, much like many other topics on Bitcoin, most people have been misled on the impact it has on the environment. Bitcoin mining actually incentives renewable energy projects, can bring energy costs down, and uses mainly wasted or stranded energy.
We will keep these examples brief, but there will be links to look up companies working at the forefront of green bitcoin mining. Great American Mining is a Bitcoin mining company that takes the wasted methane of oil producers (methane is more harmful to the environment than CO2) and uses it to mine Bitcoin. The company does this by capping the pipes that flare methane into the atmosphere and convert that gas to energy to mine Bitcoin. This electricity is then fed to Bitcoin mining equipment that is brought right to the site of the oil producer since Bitcoin mining can be done from anywhere in the world as long as there is an internet connection. The entire process of connecting to mining pools and how mining works is out of the scope of this article, but essentially these powered up mining rigs can now participate in the global competition of mining Bitcoin (for more details on mining pools you can check out this article https://bitcoinmagazine.com/guides/what-are-bitcoin-mining-pools). So instead of releasing excess waste into the atmosphere the oil companies now make a small profit on their wasted gas, thus allowing them to provide reduced energy costs to their customers and while reducing pollution to the environment. A true win-win situation. The company was recently purchased by Crusoe who still continue to mine Bitcoin today. (https://crusoe.ai/blog/understanding-the-problem-crusoe-solves/index.html)
Vespene Energy (https://vespene.energy/) is a company who captures methane from landfills. Methane is released from materials decomposing in landfills and they capture the wasted methane and convert it into Bitcoin. Again, less pollution and cheaper costs as the landfill is now making a small profit on selling wasted methane to Bitcoin miners.
Bitcoin miners also incentivize more green energy infrastructure from wind, solar, hydro, and even nuclear. Most of these infrastructure projects have huge costs to them and the locations in which they are built are not in areas where there are a lot of towns and civilization. So even if they are constructed, there isn’t a demand for the energy they produce right away. The amount of energy they produce cannot simply be stored. Most is wasted if it doesn’t have a consumer to send it to as it is being produced. A majority of these projects don’t even make it to construction because the cost is so high with a risk of never being profitable. However, unlike towns and other energy consumers, Bitcoin miners can go right to the source. They will buy the energy cheap since no one else is using it, which gives the projects the ability to start making money years before they had a chance to otherwise. Bitcoin bootstraps the infrastructure project by purchasing power at very low costs until the project is fully constructed and towns are able to be built up around it. Then Bitcoin miners eventually get priced out of the market and go find another source of cheap energy.
The energy conversation is a complex and difficult one as most of us do not understand how energy grids work. Most of us still view energy consumption as a bad thing, but energy consumption is directly correlated with human flourishing. In other words, we do not need to use less energy, we actually need to use more energy to lift more people out of poverty around the world. We just need to learn to use that energy more efficiently with less pollutants. Bitcoin mining represents a way for us to use more stranded and wasted energy that we have not tapped into, as well as incentivizing a greener future with more stability in our energy grids around the world. This was a brief introduction to this topic and there are many more examples outside of the ones given above. Lyn Alden does a fantastic job delving deeper into this through a series of articles and videos if you would like to learn more. The series can be seen with this link.
Global Cooperation
Global cooperation is a tricky subject and there are no promises being made as full cooperation is something that will probably never happen. The world is severely divided at the moment and with so many competing countries running their own currency there is a constant battle to raise and lower the strength of individual currencies. Let’s look at China for example. How did China become the supplier to the majority of the world? One of the ways is that they actually kept their currency weaker than the dollar in order to provide cheaper labor prices to the global market. It is not a coincidence that the American labor force was hollowed out and we shipped all our production jobs to China. With a strong dollar, the production of goods gets expensive, and China was willing to keep their currency weak in order to become the supplier of goods to the world instead of the US. If the citizens of the world chose to use digitally native currency with a supply cap tied to real world energy and resources that no one could manipulate, how would the incentives change in the labor force. Prices would be competitive around the globe. This would still mean low prices as it would usher in a true global free market so countries would naturally compete to bring prices down in order to keep customers, but the pricing mechanism would be fair across the world and therefore wages would be competitive everywhere. If everyone used the same digitally native currency, countries and individuals could shop for items around the world with no friction and with the same global measuring stick. This single incentive could change how countries cooperate entirely. While nothing is a sure thing and we don’t know how individual countries will combat this potential, it does trend toward giving individual citizens more options to opt out of the system or country they are in if they feel they are being treated unfairly or want to see a change in their circumstances. Citizens have never truly had an alternative system to opt into until Bitcoin was invented.
Not only does global commerce get simplified, but using one global currency that cannot be manipulated drastically changes the global war landscape. No war since leaving the gold standard has been paid for with taxes. Instead, the money is printed to fund war and the citizens get stuck with the bill through future inflation. It is a sneaky way of governments getting the wars they want with no opposition from the public. Think of the endless wars we have been fighting just in the US such as “the war on drugs” or “the war on terror.” How long would these wars have lasted if the public was expected to pay for them in actual taxes? They may have not even started.
Bitcoin has the potential to end or at least drastically reduce war by making it too costly. If there is a supply cap to the money and a country does not have enough money to fight in a war and the citizens do not support it, then leaders of these countries will have to find another way to solve their issues. Maybe this is just wishful thinking, but there is something drastically wrong with this system and for the first time in history there is another system that people can opt into. Whether it all plays out like this or not, it seems to be a system worth fighting for and all people need to do is use a different money than the one being forced upon them.
Come for the money stay for the revolution.
The next article in the series can be found here.