The crypto solution
The smartest way out
The structural problems of the global financial system were painfully exposed in the 2008 GFC.
To fix them, pseudonym programmer Satoshi Nakamoto¹ introduced a novel solution in 2009: Bitcoin; A global currency that no one can dilute or control.
In recent years, people have started to think of bitcoin as a store of value.
This is because unlike paper currencies, bitcoin has a fixed supply and is highly decentralized; There will never be more than 21 million bitcoin, and no single person or group controls its production and distribution.
As trust in central banks wanes, bitcoin is increasingly seen as a hedge against their money printing programs and the dilution of purchasing power all over the world.
The crypto innovation
Crypto is more than a solution to our broken financial system, and it's more than just about bitcoin.
At its heart, crypto is about distributing power, ensuring fairness, and instilling trust.
It does this with a tech innovation called the blockchain⁴.
A blockchain is essentially a recorded list of transactions that everyone has access to. If Account A sends some bitcoin to Account B, the transaction is made known to everyone on the bitcoin network.
Think of it like a series of email conversations that everyone is CC'ed into; Any time someone replies to the email conversation (i.e. makes a transaction), it is recorded on multiple computers with everyone having the exact same copy of the conversation.
This makes the blockchain highly transparent, credible and resilient; If one computer goes down (or tries to fraudulently tamper with the contents of the blockchain), there are countless other computers that hold a legitimate copy of the blockchain.
This highlights up one of the most important characteristics of the crypto ecosystem: since the blockchain is duplicated across a network of computers around the world, it cannot be shut down (or "hacked") unless the majority of computers are shut down (or "hacked") at the same time, which is practically impossible to do.
The implication is that no single authority can change how the blockchain operates; The rules are hardcoded into the network and is impossible to alter. For example, there will never be more than 21 million bitcoin in existence.
Compare this to the American central bankers who, at their sole discretion, increased the money supply by 37% (!) in 2020⁵ and helped the rich get richer (including themselves) while everyone else got poorer. Conveniently, it's never the other way around.
It's no wonder that people are tired of struggling under the elites' power and the rigging of the system to their benefit, under the guise of "serving the public".
The blockchain is an innovation that takes power away from the few and distributes it to the many; It creates a fair playing field with a system of fixed rules that everyone can examine and therefore trust.
To complete the point, let's look at some of the characteristics of bitcoin:
- Immutable: No government, corporation or person can or change the rules or data on the Bitcoin network. Compare this to the current monetary system with rules that change at the whims of a small group of rich people.
- Scarce: There will only ever be a maximum of 21 million bitcoins. The more paper currency is printed (i.e. devalued), the more valuable bitcoin becomes in comparison.
- Transparent: Anyone can inspect all transactions on the Bitcoin blockchain, as opposed to the opaque processes of the central banks. You and I, for example, cannot personally verify exactly how much money is being printed, or how much gold the central bank has in deposit. Bitcoin is 100% transparent and verifiable.
- Decentralized: The Bitcoin network is run across a million computers all over the world⁶. There is no central point of control (unlike with paper currencies that are 100% controlled by central banks), so the power is distributed and the playing field much fairer.
- Divisible: You can buy 0.00000001 of a bitcoin. Compare this to the traditional wealth building vehicles like prime real estate and fine art that only the rich can afford. With bitcoin, everyone is given the same opportunity to get richer too.
- Permissionless: You can send and receive any amount of bitcoin without requiring a bank's (or anyone's) approval.
- Highly transportable: Since bitcoin is a digital asset, it can be sent across borders without restriction. You can literally move your entire net worth across countries without restriction.
- Fast transfers: Transfers can be done in a matter of minutes, as opposed to days in the traditional banking system.
- Privacy protection: Bitcoin accounts (wallets) are pseudonymous. This means that while everyone can see all transactions in and out of all accounts, no one by default knows who owns which accounts. You can be very wealthy and no one will know.
Bitcoin solves many of the problems caused by the mismanagement of the existing financial system.
This alone, however, is not enough for me to consider a substantial investment in it; Just because something is a good technical solution, doesn't mean it's necessarily a good investment.
So to explain why I'm investing BIG in crypto, here's my investment thesis.
Next: Investment thesis