This article by the Mango Cart is the final piece of a 3 part series on Cryptostorage. You may want to read the first two parts here before continuing.

If you are sold on the concept and value of Bitcoin , the natural question is why this Bitcoin, and not another version of it?

Maybe someone will launch something better or more acceptable to governments and regulators.

This is probably the most important question, because an answer to this question, unravels what Bitcoin really is.

Let’s play on the idea, that someone, i.e. a bank (central or private) or a financial services company creates a cryptoasset or cryptocurrency - how similar would this be to Bitcoin?

First of all you need to trust the entity, let’s ignore the fact that some of them have been fined several times for fraud and unethical practices. Let’s just say for all practical purposes, you trust them , and in fact hold your retirement and investment accounts with them and have a great working relationship.

So Acme Bank asks you what product would you like to have? What do you say?

If you say I want that 10x/100x Bitcoin thing with no capital loss, can you make it? What will they say? If they’re honest they’ll say no such product exists, try the lottery, or we don’t peddle ponzi schemes.

So now you wise up and say, I want a product that doesn’t loose my principal and protects against inflation. Acme tells you to open a savings account or buy a bond. But we already explained in the previous article why this is broken or not possible for some.

Getting fed up, you say, “I want a disinflationary investment product like Bitcoin, can you make one?” “Just take the Bitcoin code, tidy it up a bit, change that horrendous orange colour, and launch it on a new network and I’ll invest in it with my bonafide billionaire friends”, you insist.

“OK, you want us to issue a token (ICO)?” Acme asks.

Now you start to ask yourself, there are hundreds of ICOs issued over the last few years, and none have managed to capture any serious investors, why?

You may say, well because those were issued by amateurs or scammers, but if something is issued by a reputable bank or financial services company it will be different, it will attract the major investors.

“But then, if they could do that, they would’ve already created it, wouldn’t they? After all the technology exists and its open source”, you ask yourself.

“Why are the financial institutions actually promoting Bitcoin trusts, why not compete?”, you ponder this more.

You realise you need to see a niche investment bank and so you head over to Nakamoto Investments, flash your credentials, and demand to see the CEO. You explain you want a new product created- one for real, honest working people- “After all, there is demand!”, you say in affirmation to the receptionist and yourself.

Satoshi, the CEO agrees to see you. You take the elevator, walk to the meeting room, and pull a chair and sit down.

“I hear you want us to issue a token?”, she asks confused.

“Why yes. We will cover all the development and deployment costs you have nothing to worry about”, you reply.

“Ok, explain to me how would we launch this thing exactly?”

“Well, you issue 1 billion tokens, and I represent a few investors that can inject 1 billion dollars, so a 1:1 redemption ratio”, you explain.

and then?”, she says

“Well, when we put this into the market, people will demand it, and its based on Bitcoin, 21 million finite supply, etc.”, you explain.

“And why will they buy this one, and not another, and by the way you just front-ran the public”, says Satoshi.

“Yeah, but Bitcoin front-ra..”, you stop mid-sentence, starting to understand the concept of organically grown vs. incubated in a lab. The early adopters had endured risk, speculation, volatility and not to mention public shaming.

You realise there will always be someone in the beginning but if the network continues to operate as laid out and provide liquidity for over a decade, there must be some substance to it.

Satoshi now starts to explain why that haven’t launched such a product, she says: “let’s think it through.”

“We launch the token, open it to the public, the price appreciates by 100x, all of you dump it, the price crashes, and there is no more liquidity. This system would fail and would massively damage our credibility”, she explains.

Trying to find a solution, you say, “well we can put a % of the gains in a common pot that will pay out interest to all and gets distributed over time. We will also ask all initial participants to have a lock-in period, and as founders we will have a longer lock-in period than the public. All this will be programmed in the code”. Again you start to realise, the misalignment of interests, this time, the public would cash out before everyone else dumps, and certainly the founders would loose invested capital. Your billionaire investors would never agree to something like this.

You also start to realise that it would be hard to convince people to invest in such a convoluted product, and even if they did, it wouldn’t be liquid, and has all these rules and restrictions.

Determined to see if there is still a way. You say “I Have an idea!”, “We pre-mine the 1 billion tokens and assign them to us, and then we release the code to the public, and immediately ask the public to mine their rewards and take over the network in a decentralised way.”

Satoshi reminiscences the long nights in the boardroom she had 4 years ago as her R&D team looked at various ways of launching a competing product to Bitcoin, she then says: “OK, so we let this thing loose in the wild, how do you guarantee you will not get attacked, hacked, or forked?”

Some of those concepts go over your head, but what you do realise, is that you have no way of knowing whether miners will adopt this network (or how many). You also recall that the security of a public blockchain depends on how decentralized the bookkeeping is.

Satoshi continues, “…AND by the way, you need to provide liquidity to the market, you have to redeem the tokens, are all your friends willing to let $1 billion dollars loose in the wild? I didn’t even begin to explain we need exchanges that will redeem this token as well, people don’t just adopt things right away.”

You answer back with, “We just need to ensure we have enough friendly miners around the world first and …”, you are interrupted.

“STOP! You don’t get organic scaling, the Bitcoin network consumes more than 70 Terra Watt Hours of energy per year; and that voting power and adoption is no easy undertaking.

“The average household in the US consumes 11,000 KWh / year. This is the equivalent of almost 100,000 households or the energy consumption of Switzerland, it wasn’t achieved overnight”.

It dawns on you that if those miners wanted to have some fun with you, boy could they- and that decentralized energy guarding $500 Billion for now will never dilute it’s 21 million coins, by issuing more coins. You on the other hand have an uphill battle of convincing the public you would not alter the code or change the rules, let alone guaranteeing the security of the network without significant alliances and upfront capital costs in case your network is attacked.

Your eyes suddenly tear a little for this newly found appreciation of the beauty and symmetry of Bitcoin’s growth and incentive model.

Satoshi continues, “Why don’t you just want to use what is out there already, what’s your concern? The software will continue to be upgraded with new features by developers around the world, and we will remain providing the trust fund.”

You have no answer except the dream of 100x or fear of obscure regulation- and you realise the volatility of a new economic system is unavoidable, and in fact desirable to strengthen the system organically, making it anti-fragile.

Your last attempt at it, “Satoshi, one final question for now, is it okay?”, you ask.

Fine”, she says.

Seriously, it sounds like decentralization is the problem, let’s create a secure centralized network across the world that is administered by each countries central bank running the exact Bitcoin protocol, that will work right?”, you ask excitedly.

“First of all, we are a private investment company so I really cannot comment on that, but to whom would you go to? The UN, the IMF, the World Bank? and do you believe you will get consensus?”

“It is one thing to create and agree on a settlement network across countries, but this is another animal, this is monetary policy, think of all the compliance hurdles you would need”, she adds.

“Well, lets focus on our country then, there is enough wealth for liquidity and only 1 governing body”, you reply.

“It sounds like you’ve already forgotten the first points, how do you launch this system fairly, even within our country?”, she asks.

“and can you guarantee the governing body will not change the code to dilute the supply or the network rules in any other way based on who’s in power?”, she adds.

“Yes we mandate it by law, we have a stable government.”, you say confidently.

“So then you need transparency and audibility, correct?”, she responds.

“Yes, the regulators will perform audits and everyone can view the ledger, essentially the central bank takes on these roles”, you say.

“Well this can be done today by fixing the money supply, and creating a digital currency, why go through all this trouble?”, she asks you.

“… because I don’t want a currency. I want a reserve asset, to store my wealth. The government can still create a digital currency as well, these are separate things.”, you clarify.

“Why not buy an annuity?”, she asks.

“Well you know why, its fiat based and getting debased and would need to be financed so there is market risk. I might as well buy my bank shares and get price appreciation and dividends”, you reply.

“Good answer”, she says.

“But seriously, let’s take the Bitcoin code, run it on 1 secure, government audited computer, and have peace of mind”, you say.

And then the light-bulb moment comes, “Oh! its a central weak point, and because of public accountability, we would need back-doors to reverse transactions, hence another weak point, in addition public policy can change”, you say out loud!

Exactly. It is infinitely less secure with several vulnerable points by design- a honey-pot!”, Satoshi says. “Trust me, if we could’ve created it we would have. Bitcoin’s network security has increased with global adoption and because of its identity-less and open nature”, she adds.

You finally realise, there is no escape, this can only be a grassroot, grass fed, organically grown digital organism.

Bitcoin has managed to survive despite the countless attempts to shut it down, hack it, and defame it.

It has finally gained recognition by governments, regulators, and large name financial institutions.

It is next to impossible to create a new Bitcoin. Layer 1 of the digitally-native monetary network has been built and it is called Bitcoin. With it’s open source nature, new developments will be added on top of this first layer, to provide various financial services that people need, i.e. to deliver a yield curve, speed, and more sophisticated smart contracts.

After 30 years of trial and error, this new, pristine asset class called Bitcoin has emerged, it’s here, staring at you in the face. It works.

Your eyes feel wet again- you are part of a generation witnessing the emergence of the Internet of Money¹. The conception has been anything but immaculate.

Notes & Signature


¹term used by A. Antonopoulos

Article originally published on Medium:

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