Bitcoin Blues

No blog can be complete without the mention of Bitcoin. Let me start my blog with it and be done with it right away.

There's a plethora of information out there on Bitcoin, in terms of how it works and what the current and potential use cases are. Unfortunately, there's also a lot of contradictory information about it all over social media and web in general. This is exacerbated by the fact that both the proponents and the opponents are extremely fanatical about their position and mentioning a counter-argument to either group invites a lot of flogging and insults, usually unsupported by any tangible facts. 

The other challenge in weeding out noise from signal is that in many cases our opinions and eventually our stand on any issue is influenced by the profile and reputation of the person making the argument rather than the actual argument1. 

So instead of getting influenced by group-think or anything like that, my approach is to take step back and analyze it in an analytical way by listing all the arguments that are made in favor of and against, and let that be our guiding factor. The goal is not to decide which bandwagon to jump on to, but to have access to all data points for emotion-less decision making.

I've listed all arguments that I've come across and will keep updating this list as I come across more points. If I you think I should add any, please let me know.



Proponent Opponent
It is a store of value. It is too volatile to be a store of value3.
It is a hedge against inflation and can be considered digital gold. If the price of gold were to go to 0, the holder would still be able to use it for jewelry and other industrial applications4.
It is the future of currency and payments. The current implementation's scalability problem restricts the network's ability for high throughput needed for real-time payments.2
The top 10% own more than 70% of US household wealth7. Bitcoin democratizes wealth and provides an equivalent of "Swiss Bank"/"Cayman Islands" for ordinary people. About 3% of all wallets own 95% of bitcoins in circulation8.
Bitcoin is scarce resource due to 21 million coin mining limitation. Since it is easy to spin up new alternative coins, the supply to meet demand for crypto-coins is essentially limitless. Investors and speculators will move to alternate coins if the price of bitcoin is too high.
The anonymity offered by Bitcoin protects wealth from hostile governments and actors. It enables protection of individual wealth from central bank's monetary policies (currency debasing through inflation, injecting unhealthy amounts of liquidity, etc.) The anonymity and lack of KYC enables money laundering and illegal activities.
The price increase is fueled by institutional demand and increasing acceptance of bitcoin as an asset class.5 The price increase is fueled by pump and dump by existing buyers and is a ponzi scheme based on Tether pump.6
"Have fun staying poor!" "You are going to lose your shirt sh*tcoiner!"

Notes and References:
  1. List of cognitive biases: This should be the default home page on all browsers. 
  2. Bitcoin scalability problem: There are proposals to solution this problem and given the attention, and hence talent and research investments, Bitcoin attracts, one should expect this to be something that will be solved in the near future.
  3. The volatility of Bitcoin and its role as a medium of exchange and a store of value: Though bitcoin is volatile, it is being compared against financial instruments (fiat currency exchange rates, gold) that have been around a lot longer. Anything new would exhibit volatility in its early decades.
  4. Gold supply and demand statistics: Jewelry and industrial uses account for almost 50% of Gold demand.
  5. Some examples of institutions getting in to Bitcoin offerings: Paypal, ETF, Morgan Stanley, Tesla
  6. Tether pump: Roubini, Crypto Doomsday
  7. Distribution of Household Wealth in the U.S.
  8. Top 100 richest bitcoin addresses: This list also includes wallets held by exchanges.

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