Imagine this:
- You’re having coffee with a bitcoin-curious friend
- You successfully convince them why Bitcoin is superior money
- You give them some articles to read as homework
- You meet them next week for a coffee
Me: “So, did you buy Bitcoin like you said you would?”
Them: “Bitcoin? Nah, son. That’s old tech; I’m all in ‘Dachshund-coin’, ‘Bitcoin YOLO,’ and World ‘Coin.’
Aaaand…now they’re an ex-friend.
This happens ALL THE TIME.
It’s hard to prevent your friends and family from falling for the “Bitcoin, but better” marketing narrative pushed by “web3” people.
That’s why I’m writing this ultimate explainer: Why Bitcoin is NOT crypto.
Here are 3 things that will turn your sh*tcoiner friend into a proper bitcoiner:
1/ Bitcoin’s immaculate conception = true digital scarcity
Today, there are 2+ million cryptocurrencies. By the end of the decade, there will be 10+ million.
Doesn’t sound scarce, does it?
Only the original creation of digital scarcity is scarce.
I repeat: Only the original creation of digital scarcity is scarce.
Bitcoin is irreproducible. It exists because of a particular sequence of events that cannot be reproduced.
Bitcoin’s scarcity is a one-time discovery.
2/ Bitcoin is THE Schelling point
Schelling point = a natural solution that people use when they cannot communicate
Imagine this: I tell 100 of you to meet me in Paris at 1 pm (without further instruction or communication).
Which place would you pick? And which place would you think the other 99 people would pick?
The answer: The Eiffel Tower
Now, some of you would end up at the Louvre or Notre Dame or behind some random trash can, true. But the MAJORITY would wind up at the feet of the Eiffel Tower.
Still confused?
Let’s make it even simpler: which square do you think 100 random people would choose and think others will choose?
I think you get the point.
Here are a few examples of Schelling points:
- Travellers use english to communicate in the absence of a common language
- Internet service providers use TCP/IP to transfer data between computers
- People use Bitcoin as THE asset to store their wealth in
No one even compares Bitcoin’s features against Ethereum, Cardano, or XRP when deciding to store value long-term.
They always select converge on the Schelling point for storing value — Bitcoin.
3/ Bitcoin 🤝 Network Effect
- Why do you use the internet instead of intra nets?
- Why do you use Telephone instead of fax?
- Wy do we use Twitter instead of plaform ZYX?
Short answer: Network Effect
We use these technologies because everyone else uses them.
Here’s how networks grow: The number of users increases → value of network increases → the number of users increases →value of network increases…you get the point.
And how do you quantify/measure the network effect?
Well, meet Metcalfe’s law: the value of a network is proportional to the square of the number of users (n²)
So, if a network has 10 users, the value of the network is 10² = 100.
Now, we’ve talked about the internet, the telephone, and Twitter. Those are in the small boy network league.
The ultimate network effect is 🥁*drumrolls*🥁… money.
It’s simple:
- You choose the correct money (bitcoin) = you gain wealth
- You choose the wrong money (fiat, XRP, pokemon cards) = you lose wealth
There are no benefits to having multiple networks for money. Most of the world’s monetary value and users accrue to one network — Bitcoin
Fin.
Big thanks to Jesse Myers (CroesusBTC) for inspiring me to write this email. Give him a follow here.
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