Five Examples of Bitcoin’s Real World Tools – Bitcoin Magazine
This is an opinion editorial by Trent Dudenhoeffer, a certified financial planner at Watchdog Capital.
Believe it or not, bitcoin is money.
This can be a hard sell for many of us in the Western world, especially here in the US. I understand; The dollar is the world’s reserve currency. Yes, there is inflation, but it is not that bad, despite today’s inflation being the highest it has been in more than 40 years.
I don’t know about you, but the ever-decreasing value of my dollars is one of the reasons I learned about bitcoin in the first place. The one who said we needed to have inflation? John Maynard Keynes did it, by the way, and it’s the economic theory taught in schools across the country.
My point is that it may be difficult for western civilization to understand why bitcoin is important. Many are blinded by the “strength” of the dollar and fail to appreciate bitcoin’s utility.
To jog your memory, let’s go through five examples of what bitcoin can do that the dollar, other fiat currencies and gold can’t.
1. Bitcoin provides neutral, censorship-resistant money
The topic of censorship has been in the spotlight for the past decade, and especially relevant in the last handful of years.
Twitter deplatformed a sitting president of the United States.
COVID-19 origin theories – once seen as heresy – are now largely accepted as valid. Believing in this theory previously led to the deplatforming of many prominent figures, including legitimate, respected doctors.
And this is just what happens on social media. What happens when your money is censored?
Look no further than the Canadian truck driver protest that took place in early 2022. The Canadian government attempted to require vaccination of every truck driver entering the country. At the sight of this blatant encroachment on human rights, the truckers decided to protest the mandate by shutting down the capital, Ottawa, by blocking the streets.
One thing led to another, and before you knew it, the Canadian banking system began “turning off” the money of every person involved in these protests. That is correct. Whether you were a truck driver yourself, donated money to the effort or distributed food, you were on the hit list and you got your money knocked off. Frozen. It was there, but you couldn’t do anything about it.
Today there is a truck driver protest. What if it’s a women’s rights protest next? A protest against abuse from a country you are allied with? Who decides?
Bitcoin sure as hell doesn’t. Bitcoin doesn’t care about the color of your skin, your political affiliation, the country you’re in, what videos you watch on YouTube, etc. If you play by the same rules as everyone else, you can use bitcoin.
This is one reason why thousands of people donated bitcoin to the Canadian truckers’ cause. It was money that no one, not even the government or the banking system, could stop. More than 21 bitcoins were raised in the effort by 5,000 donors, at the time totaling nearly $1 million in support.
Bitcoin is censorship resistant money.
2. You can take Bitcoin with you anywhere without anyone else knowing
Jurisdictional arbitrage will become more prevalent with political parties leaning further to the extremes here in the US, as well as around the world. You see polarization, capital controls and capital flight taking place every day:
- Pro-choice and pro-life states
- States with legalized marijuana and/or other drug use
- Countries with sensible energy policies (e.g. not Germany)
- Countries subject to sanctions, such as Iran and Russia
As a resident, you sometimes have to act fast or risk being too late to escape, but how do you move an entire household of trinkets and things with you when you leave? How do you cross borders with cash falling out of your pocket or gold bars weighing you down?
The answer is simple: you don’t. Good luck getting something of value across national borders without it being confiscated. But you can move your bitcoin, and if you do it right, you can move it without anyone else knowing and without evidence.
All you have to do is maintain 12 (or in some cases 24) words. These words can represent your entire livelihood and are known as a seed phrase. By having these words you can bring your wealth anywhere in the world.
That is what Laleh Farzan did. After receiving threats from the Taliban in 2016, she fled to Germany. Most of the time, when you’re fleeing a hostile territory like Afghanistan in the middle of chaos, you’re bound to face thieves and/or unyielding governments. The emigrants usually leave with almost zero possessions.
But for Laleh, she was able to store her fortune via the seed phrase. It was contained on a small piece of paper that thieves and others ignored. Once she arrived in Germany, she was able to sell part of her bitcoin for fiat to pay for daily expenses.
3. Bitcoin mining and the energy grid are a match made in heaven
Bitcoin mining requires a lot of energy. Talking heads on the news have parroted this line many times. It is supposed to consume all the world’s energy by 2020 (how did that work?).
One could argue, the more energy bitcoin consumes, the better.
Listen to me.
Bitcoin miners act as an energy consumer of first and last resort. Essentially, they will always buy (use) energy if it is available to them. What most people don’t know about our modern energy grids is that this kind of reliability and consistency is extreme helpful. Instead of having to plan for energy demand peaks and troughs, energy producers can simply supply energy without worrying that no one will use it.
Long story short: Bitcoin miners stabilize entire energy grids. If you want a deeper dive, read more here.
Not only do miners stabilize networks, but bitcoin mining encourages the use of the most efficient energy sources available. As a miner, your income statement is very easy to decipher: your income is the bitcoin you mine, your expenses (mostly) are the energy required to mine it.
As a business owner, you ideally want to increase your income and reduce your beef profit expenses. Besides mining more bitcoin, what is the easiest way to increase your profits? Reduce your expenses, also known as energy costs. What is the cheapest energy available to us? Energy that comes naturally: sun, wind, water, etc.
Bitcoin ushers in new developments and innovations in green energy, and more importantly, wasted energy.
Bitcoin miners try, as best they can, to mine with energy that would otherwise be wasted. It is a win-win for both parties. The miner gets cheap energy and the energy producer sells energy that would otherwise generate no income. A good example of this is flared gas mining. When I first saw a video of miners using flared gas, I knew it was a game changer. It makes sense for every producer on earth to connect to a bitcoin miner to earn more income and reduce emissions. It’s a no-brainer.
Did you know that an estimated 60% of the energy produced is lost before it reaches the consumer? Bitcoin miners would like to buy the otherwise wasted energy from producers, thereby allowing producers to earn more revenue as well as providing reliable expectations of supply and demand.
It is only a matter of time before miners fully integrate with the energy markets.
4. Bitcoin is open 24/7
Have you ever needed banking services after 17.00 or at the weekend? Pretty inconvenient, right? In a world of globally connected markets and everything else on demand, why haven’t our financial services been held to the same accessibility standards?
Bitcoin has an uptime of 99.99%. Spanning more than 12 years, the Bitcoin network has only experienced a cumulative 14 hours of downtime.
I can be anywhere in the world at any time of the day and interact with the Bitcoin network as long as I have an internet connection. If Internet connectivity is a problem, some geniuses much smarter than me are working on ways to account for it.
24/7, 365. No holiday closing. No circuit breakers during volatile times. Tick tick, next block.
5. Micropayments and easy internet shopping
Trading is done on the internet instead of meat more and more as the years go by.
I’m not going to focus on commerce that requires a product to be physically shipped to your home in this post, but what I want to talk about instead are products and content that you consume directly on your computer.
Why do I have to provide my credit card information and address to the Wall Street Journal if I want to read an article? Why do I have to do the same with Spotify to listen to a podcast?
Bitcoin, and its scaling layers, such as the Lightning Network, are going to disrupt e-commerce with internet-based micropayments.
There is a growing trend in the area known as value-for-value. Let’s look at Fountain as an example. Fountain is a podcast app built right on top of Bitcoin’s base layer on the Lightning Network. While using Fountain, podcast listeners can upload a Lightning wallet and stream small fractions of a bitcoin – known as satoshis or sats – directly to the content creator. These streams can be as small as five rates per minute, which today has a value of $0.0011.
Content creators can now rely solely on the public to fund their venture if they prefer. Many podcasters appreciate this idea to tailor their own incentives to listeners: zero product shilling, zero false advertising, etc. This also makes for a more engaging experience between the two parties.
Another fantastic use of bitcoin in internet commerce is the pesky payment walls. Let’s use the Wall Street Journal again as an example. I rarely read the Wall Street Journal, but let’s say an article catches my eye that I desperately want to read. Then I encounter a pay wall. 99 times out of 100 I’m going to go out the window and forget about the article.
The chances of me getting my wallet, entering my credit card information, all other personal information, and probably having to sign up for a monthly subscription is next to zero.
With the Lightning Network, the Wall Street Journal can set up a paywall using the BTCPay Server. In this case, I can whip out my Lightning wallet, scan the QR code, pay the bill, and start reading the article. The whole process can take less than 30 seconds without the publication having any idea who I am or where I live. This billing path could greatly expand the Wall Street Journal’s reach, keep one-time readings affordable and respect viewers’ privacy.
While this type of transaction isn’t nearly as world-changing as some of the other points mentioned above, it’s another arrow in Bitcoin’s quiver. Another example of bitcoin making the world better than our current system.
Conclusion
No, bitcoin is not dead. This isn’t the first bear market, and it certainly won’t be the last.
Too many are fixated on bitcoin’s fiat price. What most people don’t realize is that bitcoin continues to work exactly as advertised. It is reliable, open to all and there are no rulers – only rules.
Bitcoin is objectively better money. I look forward to everyone else coming to this realization.
This is a guest post by Trent Dudenhoeffer. Opinions expressed are entirely their own and do not necessarily reflect the opinions of BTC Inc. or Bitcoin Magazine.
