Beginners Guide Part 1/3 - Why Bitcoin? With American HODL

 
 

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“The way in which you think about it will not be the way in which you think about it in 10 years time, but you are involved in something here that is going to be one of the defining things you do in your life; this will be the thing that your grandchildren ask you about.”
— American HODL

SHOW DESCRIPTION

American HODL is a Bitcoiner who has been promoting the innovation for over 8 years. In this interview, we discuss why is Bitcoin important: what makes it an improved version of money, why society needs it, how it improves inclusion and thereby the world, the proof we have that Bitcoin can work, and how the world will look in the future with and without Bitcoin.

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This is the first in a series of special What Bitcoin Did shows aimed at opening people to the basic principles that underpin Satoshi Nakamoto’s innovation. Bitcoin has been in existence for 14 years. Whilst the adoption rate is tracking other paradigm-shifting technologies like the internet, we are still very early. Most people still don’t own Bitcoin. And, for those that do, a lot are still to fully properly grasp its properties and potential, and therefore understand why it’s important.

The majority of people are yet to comprehend Bitcoin’s capacity to better individuals and the world for a number of reasons. It is an innovation rivalling the disruptive power of any technology that has come before it. Those who grasp it are still in awe of its elegant and revolutionary design. But, because it risks upending the balance of power between individuals and the state, it rarely gets a fair representation in the mainstream media.

Further, Bitcoin touches on many fundamental tenets of modern society. Firstly, it is a new form of money, purposefully outside of the scope of centralized control. So, to understand Bitcoin, one must understand the principles of money and trade. Secondly, it has been developed to account for the manifest risks of increased surveillance of individuals in the electronic age. So, to understand Bitcoin, one must understand why privacy is the bedrock of democracy.

Bitcoin also requires an appreciation of cryptography, the internet, game theory, economics, politics, philosophy, and energy. It’s the analogy of peeling an onion, where awareness at one level enables the next layer to be peeled away revealing hidden characteristics. Someone on this journey of discovery is said to be going down the Bitcoin rabbit hole. It takes time and effort.

Those embedded within the Bitcoin community know that understanding Bitcoin is a process. But further, they know the profound awakening that comes to those who open themselves to it. The period of time before you properly understood Bitcoin will be manifestly distinct from the period of time after. This is when the hyperbole from those advocating for Bitcoin suddenly seems understated. Asking why Bitcoin is important is the start of that journey.

TIMESTAMPS

00:00:56: What is Bitcoin, and what is money?
00:03:12: What defines good money?
00:05:06: Why we need Bitcoin
00:07:48: The importance of decentralisation
00:09:33: How fiat money leads to distortions
00:11:46: The difference between Bitcoin and fiat incentives
00:14:41: Bitcoin in the developing world
00:16:44: How Bitcoin improves financial inclusion
00:18:47: A world without Bitcoin
00:21:50: Is Bitcoin working?
00:23:29: What have you learnt from being in Bitcoin?
00:25:29: Final comments

 

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SHOW NOTES

Connect with American HODL:

  • Nostr: npub1rtlqca8r6auyaw5n5h3l5422dm4sry5dzfee4696fqe8s6qgudks7djtfs

Glossary: 

  • 21 million Bitcoin: Bitcoins’ issuance is capped at 21 million coins. The limit is designed to give it anti-inflationary properties. The Bitcoin issuance declines over time, with the last Bitcoin to be issued in 2140.

  • Bitcoin Beach: Playa El Zonte in El Salvador. This small town became one of the first locations in the world to use Bitcoin as a basis for a circular economy. It has inspired numerous projects around the world, and El Salvador’s adoption of Bitcoin as legal tender.

  • Bitcoin Blocks: A collection of Bitcoin transactions that are permanently added to the Bitcoin blockchain every ten minutes.

  • Bitcoin Standard: A description of an economy in which Bitcoin is used as the primary currency for transactions.

  • Black Swans: Rare and unpredictable events that have a major impact on markets, such as the rise of the internet, the September 11th attacks and the Global Financial Crisis of 2008. Such events are often incorrectly rationalized after the fact with the benefit of hindsight.

  • Cantillion Effect: The process by which an increase in the money supply, typically as a result of government intervention, increases the wealth and consumption of the wealthy before it benefits the rest of the population, by nature of the fact that new money is distributed to the wealthy before anyone else.

  • CBDC: Central Bank Digital Currency, a digital form of money issued by a central bank and backed by the government. It is not a new currency, but a new form of distribution and control for a sovereign currency. Being digital and centralized, it opens up the possibility of transactions being censorable and subject to manipulation by the state.  

  • Check Your Privilege: A phrase used to remind people of the advantages they have due to their social status or identity. It is a phrase used to highlight that criticisms of Bitcoin and stablecoins often exclude the real-world benefits these innovations are having for people living in countries subject to authoritarian control and or suffering currency crises.

  • Double Entry Ledger: A type of accounting system in which each transaction is recorded twice in two different accounts, with a debit to one account and a credit to the other. This helps to ensure that each transaction is balanced and properly recorded.

  • Efficient Market Theory/Efficient Market Hypothesis: The theory that markets are efficient and that prices reflect all available information. According to the theory, it is therefore impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. 

  • Emergent Systems: Complex systems that arise from the interactions of their parts, and can exhibit behaviour that is not present in the individual components.

  • Federal Reserve Board: The central bank of the United States, responsible for setting and implementing monetary policy “to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy.”

  • Fiat Money: Fiat means ‘by decree’ or more specifically “let it be done.” It’s money that is accepted as payment because of government regulation or because it is declared legal tender by the government (e.g. US dollar, British pound, the euro, Japanese yen, Chinese yuan etc.).

  • Lightning Network: A second-layer payment protocol built on top of the Bitcoin blockchain, designed to enable faster and cheaper transactions.

  • Money Printing: The process of producing physical currency and coins by a government or central bank. The term is also used as a euphemism for increasing the non-physical money supply through Quantitative Easing (QE). 

  • Satoshi Nakamoto: The pseudonymous creator or creators of Bitcoin, which launched in January 2009. Satoshi was active in Bitcoin’s development up until December 2010. Their identity is unknown, but there is speculation that Satoshi could be one of a number of cryptography and computer science experts.

  • Shitcoins: Cryptocurrencies that are of low quality, have no real use case and may have been created in bad faith. Some Bitcoiners believe that all digital currencies excluding Bitcoin are shitcoins, whilst other Bitcoiners accept that there are a limited number of other digital currencies that have valuable utilities. 

  • Stablecoin: Cryptocurrency that is designed to maintain a steady value, usually by being linked to a stable asset such as gold or the U.S. dollar.

Mentioned in the interview:

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