Is Bitcoin
boom or bust, a rocket ship to $500,000 or a crash to $5?
In Today’s analysis, let's assume you are working in the CTO (chief
technology officer) office with me and let's assume, today, in 1 minute, we have an appointment scheduled
with someone called Satoshi Nakamoto, who is here to present his product,
Bitcoin, to us now in 2020. We have never heard about him before, so we have no
bias. Our job, yours and mine, as the CTO office, is to decide whether to commit our company to his project, or not. We
have already taken the 2G/3G/4G/5G protocol to every person on the planet - for
communication. Today, our job is to figure out if Bitcoin will become that -
for money. In preparation for this important meeting, let me remind you of two
things: Number 1. We have to think for ourselves. Most people want a simple,
polarized message, for this or against that, a "price prediction",
told by someone else. For that, I recommend the neighbourhood fortune teller. Here, today, our
company pays us a fortune to use our own brains. Number 2. We have to focus
carefully. The average attention span on
TikTok is now 3 seconds. If you zone out or start scrolling your phone on a CTO
level meeting, I'm moving you to work in the janitor office tomorrow. Today,
now, we focus. Please turn off your notifications for a while. Oh, he's here! Welcome!
I'm Satoshi Nakamoto. I'm here to present
my protocol, Bitcoin. Do you want coffee? Please go ahead, Nakamoto-san. Oh
wow, that was quite a presentation. Good job, Sir! If we take the idea first. Will
the promise of Bitcoin make it? In my opinion, YES, absolutely, for one very
specific reason. It is a global system, that competes with a myriad of local
systems and then the global system almost always wins. There are local banks in
100+ countries,
1 million offices and 10 million people working in them. And then comes this 1
guy, who is standing here today, who wrote a piece of software that more or less does the same thing. Well
done, by the way. Either we get a private dominant company monopoly like we
have Google for search, Amazon for
online purchases, or like we had Facebook/Instagram for social media. In China, this has already happened for money, with
Alipay and WeChat Pay, a billion+ users. Given how important money is in every
country, I don't see how the governments of the world will let a company
registered in another country, run their money. Which means that we would still
end up with local systems, each country having its own application, AliPay in
China, Venmo in the US, Swish in Sweden, Vipps in Norway, etc and we started with the insight that global systems tend to beat local
systems. Or it's this guy's invention. It's
registered nowhere, all governments dislike them equally.
YES, the idea of Bitcoin will make it. Then let's move on to the 2nd
part, the execution of this idea. Our guy here, Mr Nakamoto, did a great job. The
product works fine. He has made the people of the world aware of it, to some
extent. But we don't live in isolation. All good ideas will be copied and this
good idea has already been copied 5,676 times. This is not so different from
wireless communication technologies. Now
we have 1 system for the whole world, but it was not always like that. We had
so many competitors before we beat them, year after year, decade after decade until
only the 2G/3G/4G/5G system remained. I
would break this question down like this: Use Cases and Technology Money - money has value because people believe it has value, no other
reason, or in one word: Trust.
This is where Bitcoin BTC really shines. The trust is there. Bitcoin
has stood the test of time, in a way that none of those 5,676 challengers can even compete with today. So
yes, it is real money. Congratulations Nakamoto-san to your 1 million coins,
worth 10 billion dollars. A real unicorn startup, sorry decacorn. Peer to Peer Electronic Cash Here no. It can
be used for big, seldom purchases, like an investment, or buying a car, but
even among people very into Bitcoin, most of them, don't use it as cash. On-chain transactions are expensive and the lightning network is a bit
complicated and not widely deployed. There are many other coins that technically do this better today.
Here Bitcoin is lagging vs. competition. Immutable data storage Mr.
Satoshi demonstrated to us today how he stored a text string in the first
block. "Chancellor on brink of second bailout for banks" Very
impressive but today Bitcoin BTC is not suitable for storing data of any
significance and not something the team wants to do. Other coins can do this, so Bitcoin is a laggard for
this use case too. Code execution Again, the Sir here showed us how scripts could
be executed, and he mentioned his friend Vitalik wanted to build his idea
Ethereum on top of Bitcoin, but he said that didn't pan out. Today, Bitcoin BTC
is a laggard, you can't write code on it in the same way as you can on
Ethereum, Binance or on most of those other 5000+ coins. Store of Value Questionable.
We had an 85% drop in 1 year. If you stored your value and then needed to use
it 1 year later and found it worth only 15% of what you put in, you'd say stable coins are doing a better job on this use case today. So
Laggard. Let's move on to look at the technical
characteristics as such Security Fantastic. It's secure. Over 11 years, the
Bitcoin network as such has never been hacked. Absolute leader. Performance Not
a speed leader. Fairly slow. I made a transfer yesterday, it took 1 hour until
fully confirmed. Then I made a transfer on BNB, that took less than a minute. Lightning network is fast, but not widely deployed. Scalability
Not good. 7 tps is frankly, a joke. Alipay did 256,000 transactions per
seconds, two years ago with actual traffic. In this office, we are used to
millions of tps. Lightning network is a good idea, but just opening channels,
which still has to happen on-chain, would clog the network if this takes off. Installed
base Leader, but still small. 50 million users are nothing.
Here in the CTO office, we've run beta tests that are 100 million subs.
We had 4 billion users and we were still seriously threatened by a competing
technology. Bitcoin is nowhere near too big to fail today. Some 50 million
users can be overtaken in a day. So what do you think? I think, seeing this
chart, I'd say the race is still open. This could become the winning protocol,
but it is not given. Why? Because it is still small. There are 1 billion users
of Alipay and WeChat Pay in China. We
have 8 billion mobile subscriptions. Bitcoin is so small, that you can't even
see it if you plot it on the same chart. So what will determine how this ends? I'd
say the outcome depends on which use cases take off first. And I'm talking
really takes off, into the billions of people. If it is secure money, where
Bitcoin is a leader, it will be Bitcoin.
If it is one of the other use cases, another coin that is the leader in that
field, could well eclipse Bitcoin and then also eat the use case of secure
money. In fact, this almost already happened. For a period in 2017-2018 with
Ethereum, which could both act as money and run code, then suddenly ETH was
money, the currency people talked about, not Bitcoin. Then that all crashed,
for good reasons, but that's how close it was. I'm not saying that will happen. I'm saying
it's a case of the butterfly effect.
A seemingly small, unpredictable event, can get the entire world to
steer in a different direction. This isn't settled yet unless we believe in
fate. So let's go back to our meeting. CTO Larsson and team, will you commit
your company to my protocol? Nakamoto-san. You are asking if Bitcoin BTC will
become the 2G/3G/4G/5G of money? My answer is: I will commit: To study, to
research, to follow this, but it is too early for me to commit all resources to
this 1 protocol. Before I can do that, you need to pass 2 milestones, and I
will invite you to come back here regularly, to update your scorecard on those
2 KPIs.
We created this mobile phone protocol, today used by every person in
the world. When it was ready, did people buy? No. In fact, most people said
things like "I will never get a mobile phone!" But eventually, they
did. Why? Because between us, as technology creators, you and me, and those 8 a billion consumers, there was another entity, a consumer-facing entity, like Nokia, and
then Apple, selling the consumer
products and Verizon, Vodafone, Telenor, selling the consumer service, with
marketing, support, guidance, education and patience with beginners, translating
this new complex technology into a language people can use and understand. Where
is your consumer-facing entity? Is it Coinbase?
Binance? That still seems pretty techy to me. Is it Jack Dorsey's
company, Square? You need to figure this out, Mr. Nakamoto, your vehicle to
consumer adoption. This indicator is in the red. Secondly, Sir, there is no way
to put this nicely, it seems those 10 billion dollars has made you fat and
lazy. You were the only one on the market, now you are a laggard in almost
every single category here. How can this happen? I see even your company
Blockstream here identified that it doesn't work to move bitcoin between
exchanges and then instead of fixing it, you made another chain to
transport these slow, fat bitcoins on. Not impressed. I heard your counter-argument
today that the blockchain has to be downloadable over satellite and run on any
hardware. For that, I'm happy to announce to you, that in this CTO office, we have built a mobile data network for you, That
we have rolled it out and covered every spot of the globe and soon it will be
even faster. So now you can use that, at a fraction of the cost and if you live in a dictatorship where Bitcoin is blocked, you can use
a VPN.
There are even decentralized VPNs now. And even small phone handsets
have become incredibly powerful
computers today. So no worries about that, Sir. We got you covered! So to
summarize this meeting: Mr. Nakamoto, your idea will succeed. Well done and you
are now one of the handfuls of contenders to become money, the distributed
ledger used by the world, but you are not there yet. You have competitors. Anyone who says that they, today in mid-2020, can
predict how this will turn out, I say lack experience or believe in fate. I don't, not in a
professional setting. This is a case of the butterfly effect. I will monitor
you AND your handful of rivals. Until you have succeeded with your promise, your
product remains a speculative asset. That means I will bet on you, and on the others.
I will trade your successes and your setbacks, up and down. The more uncertain
this outcome is, the more violent the up and down swings will become. Great for
a trader. By combining the trend-momentum of the market, with how this scorecard develops, we will see if this is going to
$500,000 or to $5 lightyears ahead of everyone else. That means we can make
insane amounts of money on this, either way. To remind you, the 2 KPIs on your
scorecard, that you will report on regularly here is: Your vehicle to consumer
adoption. Missing today. Your
Leader/Laggard technology sheet
Note: sorry for too long article but really it needs length.
Regards
Tahir
