Never mind the Bollocks, here’s Bitcoin

So Iron Man Elon finally bought into Bitcoin, joining a long list of luminaries recently including Paypal, Microstrategy and Jack Dorsey’s Square. It pushed the price of a single Bitcoin to an astonishing $45,000. Bitcoin is the new safe haven for corporate funds nowadays. It’s rumoured that even Apple and IKEA are considering buying large amounts for their treasuries.

In my recent book, ‘Bitcoin and Blockchain without the Bullsh*t’, available everywhere on Amazon, I tell why, after 7 years in the space, I ‘m still mainly what they call a ‘Bitcoin Maximalist’. That isn’t to say that other projects don’t have merit. But it’s the big Daddy that I would trust most.

There will only ever be 21 million Bitcoin. Think about that for a second. This is classic supply and demand.

Imagine a city with 21 million inhabitants. Shanghai, in fact, has grown to this unfathomable population, actually 24.28 million people. Up from 1 million at the turn of the 20th century, and just under 6 million in 1980. Well if every person there bought one Bitcoin, there would be none left for the rest of Shanghai, let alone the rest of the world. This illustrates the potential future shortage of Bitcoin to go around and how starving the supply could increase value. That said, there are enough Satoshis (hundred-millionth of a bitcoin) for every human in the world to own 269,410 Satoshis each, or 0.00269% of a Bitcoin. This is one of the things that make the coin so malleable going forward. In fact, China banned Bitcoin in September 2017, so the extra potential there is still to be factored-in to the value. All 24.28 million in wealthy Shanghai and the rest of China’s 1.4 billion souls. If they want it, they’ll find a way to get it. Despite ‘the Great Firewall of China’, there are ways in and out. Then there’s India. Then Africa.

Bitcoin isn’t the only show in town. I just think it’s the best. I also like Lumens, Litecoin, Monero, Polkadot, but not so much Ethereum. I’m sure you’ve heard all about it.

Nobody can deny the succes of the Ethereum foundation, based in Zug, Switzerland, the lakeside town where I work as a British guy with residency. Ethereum is a cryptocurrency and decentralised network (the Ethereum Virtual Machine) used for creating crypto or executing simple commands via what’s called a ‘smart contract’. Their platform spawned several thousand new coins, tokens and projects, enabling creators to raise tens of billions of dollars right on the EVM. All pledged via smart contracts via what’s called an Initial Coin Offering, or ICO. Rather like an IPO, but without all those pesky rules. Or so they thought.

These are some of the success stories. Blockchain Capital; $10 million raised in 6 hours. Bancor; $152 million raised in 3 hours. Brave (web browser); $35 million raised in 30 seconds. Tezos; $232 million with $160 million of it raised within the first 32 hours. Then, into the big leagues, the world’s biggest (and now deemed illegal) was for Telegram, the messaging app. They raised a whopping $1.7 billion only to be forced to give back 70%, plus an easily-afforded $18.5m civil penalty.

Most of the coins you’re seeing hyped came from this network. Just because they have chosen to do an ICO or similar method, it doesn’t make them dishonest. It avoids prohibitively costly compliance and a lengthy path to market, or at least has the opportunity of making it more accessible. So the market will definitely evolve.

Suffice to say, a lot of that money dissapeared. Shall we say; “fell into the Ether”. If you’re thinking of investing in anything other than Bitcoin, it’s essential to look into the past of a coin or project. I reiterate, essential. Do your homework. It doesn’t take much. There are some astonishingly innovative projects out there. But you have to ask yourself why some of these projects haven’t produced anything tangible yet.

Ethereum’s ground-breaking new protocols and smart contracting push the limits of blockchain tech. But computing on a massive decentralised blockchain, accross potentially thousands of nodes worldwide, all of which have to be in sync, is not all it’s cracked up to be. Ethereum suffers from a glut of processing defecit that it can seldom handle, and very high ‘gas’ fees (paid to process transactions on the network). Its next release, Ethereum 2.0, proposes a change to what’s called a proof-of-stake blockchain to allow for more scaleability.

But that too has its issues. Bitcoin is a bulletproof ‘proof-of-work’ chain that contains all transactions ever to be performed on the network. No other chain is bigger or more secure. A ledger of all ‘work’. These are hashed’ (mixed) together in the blockchain so that the more blocks (of data) are added, the more secure Bitcoin is. With 100,000 plus ‘nodes’ worldwide, all containing identical ledgers, you might unravel one, but you can’t unravel all 100,000 simultaneously. Can’t be done. Bitcoin truly is the safest account of wealth ever developed. Its distributed existence makes it impossible to hack.

Proof-of-stake, by contrast, is just a concensus among a much smaller group of coin holders, and has less of the safeguards or security. I may be virtually a lone voice on the subject, but I don’t like it. Isn’t this just ruling by committee again? Or an extended board of directors? That’s not what I signed up for in this brave new decentralised world.

Not all coins are created on Ethereum, as some mirror the Bitcoin code or that of other tokenisation platforms. Others go much further with original code. Bitcoin and Ethereum is open source, so it’s all out there. Ex-Google executive Charlie Lee famously created Litecoin in less than four hours, directly from the Bitcoin code, changing only a few minor details. Anyone can launch their own coin in this way. And just about anyone has.

In the last couple of years, the US, the Securities and Exchange Commission has woken up to crypto and begun agressively taking down the bad actors. They’ve started to expose some of these ‘projects’ for what they are. Vapourware. I love the democratisation of money and fundraising as much as the next woman, but that doesn’t mean these people should do whatever they want. You can’t just go out and raise money from regular members of the public without complying with securities laws. Maybe I’d love to live in wonderland too, but it’s a fact. Because most of these projects, cryptocrrencies, and tokens, nearly all have an expectation of profit and growth, they are (make no mistake about it) securities and subject to strict laws and submissions. Unless regulated as a bank, many many Defi projects are blatantly breaking the law, and it will catch up with them.

This means that if you’re thinking of buying a token that was created ‘for profit’ or had an ICO which wasn’t conducted legally, your coins, money ,and your nice crisp new shirt, could quite easily dissapear.

To quote the Sex Pistols again, “I don’t believe in illusions, too much is real”. Pick your coins very carefully and if in any doubt, just stick with Bitcoin. It’s easy, not controlled by any company or government, and still delivers everything we need.