Response to 'The Bitcoin Delusion' by Sam Leith (Spectator App - 8th Nov 2021)

I really like the Spectator. It has interesting writers and, on politics, it is careful to mix up the viewpoints to provide challenge for everybody. Avoiding lazy views is very much part of its appeal to us readers, yet when it comes to technology it tends to go for simplicity. I wouldn't mind, but when I go to the pub and meet people and cryptocurrency comes up, the views I hear are very much shaped by articles like Sam's. Not that it wasn't well written, it is just that it falls into all of the old traps.

To be clear on what I am saying, it mentions only two coins, Squidcoin and Bitcoin. Now obviously Squidcoin is a good light-hearted tale of people hoping that there is a bigger fool out there. Well, back in the normal commercial world, Wirecard AG was a highly valued payment processor until suddenly it wasn't. There are poor investments to be had in most areas and there are whole pension funds betting their clients money on the bigger fool theory. So seriously, lets move onto the question about whether there are proper cryptocurrency ventures worthy of being considered seriously.

Fine, Sam would no doubt say, I was just being entertaining. But what about Bitcoin then? Is that any different? And the answer is that Bitcoin is different and a one-off. The parallel that should be drawn is with Gold. Due to a quirk of history, gold became the touchstone of a reliable store of value. If it wasn't so shiny and attractive, would gold be kept in special vaults? Would there have been a Gold Standard if gold had had its original scarcity but looked and felt like coal? With gold, people (experts dare one say) have been suggesting for decades that it is wildly overvalued. It keeps its value pretty well nevertheless, not least in times of inflation - which is very much why many people put a proportion of their savings in Bitcoin. I could expand on this, but Bitcoin is really quite boring compared to the real story of cryptocurrency, so please pardon me if I move on.

Imagine reading about a start-up. It is very well financed having sold shares originally, and what is more every shareholder paid the same price, even the founders - no percentage kept back for the insiders. Dozens of software engineers have been working hard on the project that they love for three or four years. They are building a machine that no-one in the world has seen before. Most are driven by the conviction that what they are doing will benefit society. Everybody involved is a shareholder and a believer. For every software engineer who is paid to build certain parts, there are three or four who have no formal link to the start-up but they are contributing most of their spare time and expertise to improving things. And they are some of the very best software experts - working for free. Do most people involved hope that their shares are going to go up and allow them to have a better lifestyle? Of course, but don't think that is what drives them. Most just like building beautiful things.

So what is this machine meant to do? Well, in the beginning it was a little idealistic and saw itself as making the future Internet of Things work. That is, the future where every device, car, and widget would be talking to each other. It wanted to build a network that would connect everything in the world and would be both fast and free. That is the internet you say, and that is true, except there were additional specifications. The new network needed to be both decentralised, permissionless and provide absolute trust. What does that mean? Well it means that you the reader could use it for free - no need to ask anyone's permission - and that any transaction you made would leave a 'fingerprint' that was absolutely reliable. Nobody could ever question whether what you said happened did happen because the 'fingerprint' was mathematical proof.

All of this is difficult to understand without an example, so lets pick a random one. Take small farmers, seed merchants and import export merchants (and many others) in a large, rural area of Africa. Imagine that there was a network that they could access for free with an app on their phone, a network that allowed them all to trade in a way that recorded with perfect records, timestamped and unarguable, every stage of their interactions - values, the parties involved, the goods. All of this without any large company involved milking the transactions. Indeed with a system that provided a complete internal currency of its own so that for most of the time banks had no involvement at all. That was the kind of project that the start-up found it could do.

This was already way beyond the Internet of Things concept, and as time went by the start-up discovered that the machine it was building would be able to do more and more. In the outside world cynical investors looked at the huge potential of Squidcoin and scoffed. "Why aren't your coins rocketing in value like Squidcoin?" they laughed. "You are all failures." In the start-up however the talented software engineers were getting extremely excited. Yes, it took many months to make each stage of improvement to their machine but it was now clear where they were going. If they could provide a reliable, fast, free, decentralised and permissionless trust network then they could actually become the backbone of a new economy where entrepreneurs, companies and governments could implement a myriad of projects that could never be dreamt of a decade ago.

So, in summary, that is the kind of thing that one very real cryptocurrency venture, is doing. There are many others, each with their own story. Yes, it takes a little time to understand the detail. Actually, quite a lot of time, but for those of you investing only in old-world ventures and scoffing at Bitcoin, it is as they say, time to get out and about and smell the coffee.

dumdave (Iota Discord handle)

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