Bitcoin confuses many people, including prominent investment professionals.
Recently, I debunked the top ten most pervasive misunderstandings and a further five.
Today, Ill continue by debunking another five.
Bitcoin has a fixed supply of 21 million.
However, each of the 21 million Bitcoins can be divided into 100,000,000 units called satoshis (or sats). Each sat is worth 0.00000001 of one Bitcoin.
That means the Bitcoin supply can be expressed as 2.1 quadrillion satoshis or 2,100,000,000,000,000 sats.
This confuses some people, who think that because Bitcoins supply can be defined as such a gigantic number, it somehow represents debasement.
Clearly, divisibility and debasement are not the same thing.
Consider the example of dividing a pizza. It doesnt matter how many slices you cut, its still one pizza.
Similarly, some people think Bitcoin is not scarce because there is an ever-increasing number of altcoinsall cryptocurrencies other than Bitcoin.
However, altcoins and Bitcoin are not at all the same thing. (If you think otherwise, try using an altcoin instead of Bitcoin and see what happens.)
The growing number of altcoins has absolutely no effect on Bitcoins 21 million supply. That would be like thinking increasing the supply of pyrite dilutes the gold supply.
Recently, Jamie Dimon, the CEO of JPMorgan, claimed that Satoshi NakamotoBitcoins anonymous Cypherpunk creator who disappeared in 2011controls Bitcoin and could change the fixed supply of 21 million.
Of course, Dimon did not explain the technical details of exactly how this could happen because he couldnt.
He simply made a confident assertion and probably hoped most people would lap it up because of his appeal to authority.
However, Dimons sentiment reveals a profound misunderstanding of how Bitcoin works.
Lets start with the basics and build from there to clarify this misunderstood topic.
Bitcoin is open-source software, which means its code is available for anyone to download, inspect, suggest changes, and run.
Bitcoin was released in 2009, and anyone has had many years to inspect the open-source code, but nobody has ever found anything sinister. If you think there is something sinister in the Bitcoin code, nothing is stopping you from proving it.
Think of the Bitcoin blockchain as simply a public database of transactions distributed to over 18,000 computers worldwide. The computers that retain the entire blockchain and run the Bitcoin software are called full nodes.
Full nodes enforce the Bitcoin protocol and consensus ruleslike its issuance and supply.
The more full nodes there are, the more secure Bitcoin is. So its crucial the average person can easily operate one.
The average computer can easily handle running a full node now and in the future, which is essential for Bitcoin to remain decentralized.
Any desktop, laptop, Raspberry Piand even some cell phoneshave the potential to become Bitcoin full nodes. Furthermore, as technology advances, running a full node will become even more accessible.
The fact that anyone can run a full node makes the enforcement of Bitcoins protocol decentralized. So its unlikely that any individual, corporation, or governmentor groups of themcould get together to enforce their will on the network by coercing the full nodes.
As a practical matter, anyone can change any cryptocurrency whenever they want. All you have to do is take the open-source codeavailable to anyoneand make your desired changes to the protocol. But that doesnt mean anyone will follow your lead or value your new cryptocurrency.
For example, I can easily create a new version of Bitcoin that changes the supply from 21 million to 22 million and call it Bitcoin 2.0. But that doesnt mean I can inherit the monetary properties of the original Bitcoin, which are related to the credibility of its supply, which Ive just undermined by changing the protocol. Thats why the market is unlikely to assign any value to Bitcoin 2.0.
In short, anyone can create a cryptocurrency in minutes. Thats the easy part. Making one that nobody controls is the hard part.
If someone wanted to change to the Bitcoin protocol, it would require the agreement of most of the over 18,000 full nodes that enforce the protocol. Otherwise, the only thing they would succeed in doing is creating an increasingly worthless knockoff.
Heres another way to think of it.
Imagine someone wanting to change the rules of chess so pawns could move backward. Of course, anyone could do so anytime, but that doesnt mean people will follow the new rule. Of course, nothing is impossible, but it would be so improbable that such a move would gain traction that its irrelevant.
In my view, getting the consensus of the full nodes to change the Bitcoin protocolto say, alter the fixed supply of 21 millionis even less probable than successfully changing the rules of chess.
Its important to emphasize that Bitcoin is resistant to change, both from technical and economic standpoints and social and cultural ones.
Most people running Bitcoin full nodes have a deep conviction in Bitcoins potential as a hard money resistant to debasement. So they wouldnt want to undermine that essential attribute by agreeing to change the protocol, which would undermine the credibility of its monetary propertiesthe entire value proposition of Bitcoin.
To summarize, Bitcoin developers do not have the power to push updates that change the protocol to the full nodes. There are no automatic or forced software upgrades. Bitcoin updates can only be accepted voluntarily by the full nodes.
Its a crucial part of an ingenious system of checks and balances that keeps a global systemthat settles many trillions of dollars in value running flawlessly without anyone in charge of it.
Heres the bottom line.
The sovereignty in Bitcoin is not with the developers, the miners, insiders, influencers, large holders, or any individual or group. Its with the globally decentralized network of full nodes, which anyone can operate.
The implication is that nobody can change Bitcoinnot even Elon Musk, Jeff Bezos, the Chinese government, the US government, or any of these powerful entities combined.
Even if Satoshi Nakamoto returned, he could not alter Bitcoin.
UBS and other prominent financial institutions have claimed that Bitcoin has no real world applications.
They fail to understand that Bitcoin has a crystal clear use case.
It allows anybody to hold money that nobody can debase and enables anyone to send and receive value worldwide without relying on any third party.
Bitcoin works in the real world, and it probably solves mankinds biggest problem: storing and exchanging value reliably.
If you think Bitcoin has no real world applications, just ask anyone who has been de-banked or who lives in a country with extreme currency debasement and capital controls like Argentina, Lebanon, Turkey, Venezuela, and countless others.
Or ask someone from El Salvador, which became the first country to make Bitcoin legal money and thus free itself from absolute dependence on the US dollar and all that entails.
Learning how to use Bitcoin properly takes time and effort. It comes with a serious personal responsibility.
Although it may initially seem daunting, it is worthwhile and achievableeven for those with limited technology skills.
Its a small price to pay for financial sovereignty, which should be incumbent on any free individual.
If you can learn how to drive a car, you can learn how to use Bitcoin properly.
However, its true that not everyone is willing or able to learn how to do it. Your grandparents would unlikely want to go through the complications of holding their own private keys, running a full node, and using a hardware wallet.
Fortunately, a wide variety of solutions offer a trade-off between sovereignty and convenience.
Getting exposure to the Bitcoin price can be as easy and uncomplicated as buying a stock in a brokerage account.
There are custodial solutionslike accounts at exchanges and Bitcoin ETFsthat are more convenient and easy to use but come with additional counterparty risk.
Many people think that although Bitcoin was an excellent investment over the past decade, its now too late.
Similar sentiment has been expressed for years, even when the Bitcoin price was under $100.
Thinking you are too late to Bitcoin is like saying theres no point in using the internet today because you didnt adopt it in the 1990s and missed the boat.
Put another way, its never too late to ditch the typewriter for the computer.
Heres another way to think of it.
You wouldnt want to travel from New York to California on a horse and buggy because of airplanesa better technology for transportation.
While this is an obvious observation, adopting a better technology for money isnt yet.
Youre never too late to adopt a superior money that is totally resistant to debasement.
The Wall Street Journal estimates only 114 million people worldwide own Bitcoin, or about 1.4% of humanity.
With that in mind, Bitcoin is still in the earliest phase (Innovators) of the adoption curve, comparable to global internet adoption in 1996.
Bitcoin allows anybody to hold money that nobody can debase and enables anyone to send and receive value worldwide without relying on any third party.
That represents a revolutionary improvement in money.
When you put it all together, you have an unstoppable, superior form of money conquering the world. Its not hard to see where this trend is going.
Yet many people still dont understand Bitcoin or its implications.
In short, Bitcoin obviates central banks and their inflationary fiat currencies.
Thats no small accomplishment. Its the most important innovation in money in hundreds of years and profoundly alters the status quo between the rulers and the ruled.
Bitcoins implications could shatter existing paradigms and be as disruptive as the inventions of gunpowder, the printing press, and the internet.
Thats why I have little doubt Bitcoin will continue to be one of the biggest financial trends of the decade.
Think about it.
You can front-run major investors, large multinational corporations, and even governments by getting in on this trend before they do.
Its an enormous once-in-a-lifetime opportunity and the biggest investment story Ive ever seen.
Yet, the vast majority of humanity does not own or understand Bitcoin. Many people believe one or more of the above misconceptions.
That perception gap is a blessing, as it allows us to capitalize on this information asymmetry with investments that tap into this powerful trend.
However, Id bet it wont be long until the rest of the world figures out Bitcoins potential and acts upon that knowledge. And when they do, the opportunity to make transformative profits will probably be gone.
Thats why Ive just released an urgent PDF report revealing three crucial Bitcoin techniques to ensure you avoid the most commonsometimes fatalmistakes. Click here to get it now.
View original post here:
Dispelling Five More Myths: The Truth About Bitcoin - International Man