The Race to 10 Million
How can we onboard 10,000,000 bitcoiners in the United States? For the problem background, see Cory Klippsten's article.
So how can we do it? Is it even possible? I plan to use this substack as a space to put my thoughts, and hopefully to help generate ideas that will promote the goal: onboarding 10,000,000 people in the US to make a government-led war against Bitcoin impossible. Either (A) the bitcoiner voting bloc becomes large enough that candidates need it to win elections, or (B) Bitcoin flippens the dollar and renders politics / voting even more irrelevant than it already is. As I see it, there are (at least) the following 5 main categories of sticking points that prevent people from getting on board:
Bitcoin is widely misunderstood. Partly because it's a new technology, partly because financial literacy is poor.
Bitcoin has a bad reputation. It's seen as just another crypto scam, only useful for illegal markets on the dark web.
Bitcoin is difficult to use. The experience of sending or receiving money is often slow and complicated. Safe ownership requires a non-negligible amount of work, care, and attention.
Bitcoin is dangerous. On-ramps are usually shady businesses that push crypto snake-oil after collecting detailed personal information. Exchanges—and investors—sometimes go bust overnight.
Bitcoin is easy to ignore. We live with 24/7 information overload. Bitcoin barely registers as a blip, if at all. It's been a household name long enough that anyone who has ignored it until now feels free to continue ignoring it into the future.
These are the mental blocks that many people seem unable to get past. I’ve heard all kinds of questions from Bitcoin skeptics over the years—I myself was a skeptic for a long while. In my experience, most any question or concern about Bitcoin fits into one or more of these 5 categories. Some examples:
“The price is too volatile.” (Poor financial literacy.)
“Bitcoin is based on nothing.” / “Bitcoin is a Ponzi.” / “Why not Ethereum?” (Association with scams.)
“It’s too expensive. I don’t have $20,000 to invest.” (Misunderstanding new tech.)
“I tried it once and my payment didn’t go through / fees were too high.” (Poor user experience.)
“My friend lost $10,000 trading Bitcoin.” (Danger! Run away!)
“Bitcoin? Who cares. I need dollars to put food on the table.” (No reason to give time & attention.)
I don’t know that any one bucket is more or less important than the others, but I do know that it takes time and energy to deal with all of them. Bitcoiners would do well to become as knowledgable as possible about each of these types of questions. Onboarding new bitcoiners is still largely a word-of-mouth game. Friends, family, and acquaintances aren’t going to go watch 1,000 hours of Michael Saylor (or your favorite Bitcoin evangelist’s) interviews. Even if they did, they would surely have more questions that Saylor didn’t speak to. But people do listen in face-to-face conversations, and you can provide real answers to any questions they bring up.
Below are some common questions and criticisms that skeptics frequently level against Bitcoin, and my attempts at a response.
“Bitcoin is backed by nothing.”
It’s true that Bitcoin does not have a large, powerful government like the US that guarantees it’s utility as a legal tender. But “nothing” is just a wiggle word, and being legal tender is not the only thing that makes money valuable. Clearly, some people are attracted to Bitcoin for reasons beyond “number go up”.
Fundamentally, money is a unit of account. The way we count money as just as, if not more important than whatever it is we are counting. Bitcoin provides an accounting protocol with provable guarantees about how the system will perform under real-world conditions. These guarantees do not exist for any other accounting method, e.g. those used by banks (to count US dollars or other assets). The appropriate question is not “what backs Bitcoin?”, but rather “what is more important: the guarantees provided by Bitcoin, or the guarantees provided by the US government?” US government promises may be rock solid, but the rivers of money that flow through DC will eventually wear down even the strongest of rocks. The mathematical formulas behind Bitcoin are uncorruptible.
I am reminded of the saying attributed to Stalin: “It’s not he who votes that counts, but he who counts the votes.” Money is only good insofar as it can be counted reliably. The easier it is to count, the more ways there are to count it, and the more transparent and reliable the counting process, the more valuable the money becomes. US dollars and other relatively stable fiat currencies are valuable because the accounting methods are open and fair, at least when compared to unstable currencies like Zimbabwe dollars or Venezuelan bolivars. Ultimately, however, US dollars and other fiat currencies cannot be fully accounted for. No one knows exactly how many dollars there are, or how many new ones are pumped into the system every year, and therefore no one knows exactly how much of the pie they have.
With Bitcoin accounting, anyone with a computer and the internet can prove to themselves that there will only ever be 21,000,000 bitcoin, and not a satoshi more. Every single satoshi will always be worth exactly one 2,100-trillionth of the bitcoin pie. If money is to have any value at all, then it must be something that can be counted accurately. Bitcoin is the most countable money ever made, and tens of thousands of people perform a full audit of the books every 10 minutes like clockwork. In that most fundamental respect, you can't do better than Bitcoin.
But is it just a Ponzi? Ponzi schemes involve continually bringing in new investors to pay earlier investors. Investors and speculators get into Bitcoin to make dollars. That’s fine, but it’s not what bitcoiners want. Bitcoiners get into Bitcoin because they want a piece of the 21,000,000 bitcoin pie. They don’t want dollars (no accountability), bonds (empty government promises), real estate (headache of property upkeep and tenant management), or stocks (fiat bubble corporations). If bitcoiners never plan to sell their coins—and many of them don’t—then it’s not a very good Ponzi scheme. Bitcoin is the escape hatch from the inevitable fiat bubble bursting Those who think fiat is not a bubble or that it can’t burst simply don’t know their history.
“I’m too late. Bitcoin is too expensive, but I can still buy Ethereum (or Litecoin, Doge, etc.)”
Too late for what, exactly? Bitcoin is an accounting protocol with a transaction ledger that is open to the public. Anyone can use it at any time. The per-bitcoin dollar price is relatively high, but you don't need to buy a whole Bitcoin. You can currently buy something like 6,000 satoshis (0.00006000 bitcoin1) for just a dollar.
If you think Bitcoin is overvalued, then you might be missing the context. Bitcoin currently secures around $320 billion in value. That's a mere 2% of the value secured by gold, and a tiny fraction of the value secured by real estate, bonds, and other financial products like equities. No one can say exactly what amount of value will ultimately be secured by Bitcoin, but given that it’s the hardest money ever created and that it has already attracted so much value from a relatively small number of early adopters, it’s hard to imagine that values go anywhere but up in the long term.
Besides, buying Ethereum (or Litecoin, Doge, etc.) means that you think those tokens are undervalued. What exactly is so valuable about an unregistered security with a long history of centralized control over monetary policy and censorship, a centrally-managed Bitcoin clone that the founder himself dumped on the market when the token price peaked, or a token that proudly touts its un-capped supply as a feature, not a bug? “Airtokens” like Ethereum, Litecoin, Doge, and so on might be useful insofar as unscrupulous whales and insiders can use them to run pump-and-dump schemes that bleed money from poor saps who don’t know any better. That is hardly a reason to buy them, and certainly not a reason to believe they will hold or increase in value over the long term. Beneath the shiny buzzwords that surround any airtoken, technical and fiscal due diligence invariably show that they cannot solve the problems they claim to, are unregistered securities being marketed and traded illegally, or cannot hold a candle to Bitcoin.
With very few exceptions, no token apart from Bitcoin has been a significant innovation on existing technology, and the Bitcoin protocol was specifically designed to be “winner-take-all” by virtue of its Proof-of-Work consensus mechanism. Not only that, but the Bitcoin protocol can be—and has been—incrementally improved by adopting the few innovations that do come out, without changing the fundamentals or causing any incompatibilities between older and newer versions.
“My cousin lost $10,000 on an exchange!” or “My friend had a bitcoin and got hacked!”
It is true that as a new technology for storing value, safe ways of purchasing, using, and owning bitcoin are not yet common knowledge. We generally know how to work with things like dollars (don’t keep large stacks of $100 bills laying around on the coffee table), and we have safeguards in place (credit card chargebacks, fraud reporting hotlines, etc). Buying, using, and owning bitcoin safely requires education, but it’s not hard and just about anyone can do it.
First of all, start small. Get $20 or $100 worth of bitcoin, and get some real hands-on experience before you go big. Once you do decide to invest, you’ll need to understand not only which on-ramps are available in your jurisdiction, but also what terms and conditions you must agree to. Here are some questions you should ask:
If you transfer money in, where will it be kept? Is it FDIC insured?
When you buy bitcoin, where will that be kept? Is it in an earmarked, segregated account, or a common pool?
Will your money or tokens be used as collateral to secure loans or otherwise rehypothecated, or will they sit in a separate account and remain untouched? Will you be able to see the address?
Can you take physical possession by withdrawing the bitcoin to your own address? If so, what are the limits or restrictions on making withdrawals?
What are the reporting requirements in your jurisdiction regarding purchase and sale of bitcoin? What are the tax implications?
If you don’t know the answers to those questions, or you aren’t confident in them, then you probably aren’t ready to buy bitcoin in any large quantity just yet.
You’ll also need to understand how your bitcoin are protected. Usually you will use a mnemonic seed (a 12 or 24 word passphrase), and you’ll need to know how to generate, keep, and use it safely. Anyone who sees or sneaks a photo of your seed phrase will be able to take ownership of your bitcoin, so it should not be written somewhere obvious like Google Drive or on a sticky note at your desk. If you have a lot of bitcoin, you probably don’t want to type your seed into an internet-connected device, period. Hardware signing devices are a small investment. Combined with a paper backup in a safe or safe deposit box, they provide perfectly adequate security for most users. If you left your car keys in the ignition with the windows down and the doors unlocked, you wouldn’t be surprised if someone hopped in and drove it away. The only difference is that when it comes to bitcoin, there’s no one you can call to help get your coins back. (On second thought, that might not be so different for a car, depending on where you live.)
So yes, you’ll need to do a little bit of homework, but it’s time well spent in order to secure your portion of the 21,000,000 bitcoin pie.
“Nobody will wait an hour or pay huge transaction fees to buy a cup of coffee. Bitcoin is too slow, and fees are too expensive!”
The first statement is probably true, but the second is unequivocally false. There is a very common misunderstanding that writing transactions to the global bitcoin ledger is the only way to make secure payments with bitcoin. The ledger supports up to about 300,000 or so transactions per day—clearly not enough to be a global payment system! What many people do not understand is that the time delay and fees are a necessary security feature of the Bitcoin protocol, but that this part of the protocol is only required for final settlement, not for every payment.
Do you go to the bank before every purchase, withdraw money, make the purchase, get the change, and then go back to the bank to deposit the change? Of course not. You take out enough cash to last a few days or a week, and only go to the ATM when you need to. Credit card purchases are bundled into 1-month intervals, and you receive a bill per month, not per purchase. Salary payments are given every two weeks, not after every hour worked. Whether giving or receiving money, things generally work the same way: payments are quick, but settlement is delayed. A bundle of payments is then settled all at once when you finally do the accounting (and pay the accountant). Even with cash, a merchant still needs to bring the money to the bank later before he can consider it settled. Bitcoin can handle multiple payments bundled into a single settlement in the same way, thanks to the Lightning payment network.
Lightning provides a way to withdraw chunks of bitcoin for easy, quick, cheap payments while keeping all of the accounting guarantees provided by the protocol. If Bitcoin is the bank, then Lightning is the cash or card that we use in the normal course of the day. Once in a while we'll go to the bank to make a deposit, withdraw some money from an ATM, or pay a bill. When we need to do that, we use the Bitcoin ledger, and yes, we'll have to wait an hour and pay an accounting fee for the “bank” to update our records.
The Lightning payment network is already used to carry around 5,000 bitcoin, or $85 million in value. While it works fine today, Lightning is newer than the base Bitcoin protocol and is not yet as simple as it eventually will be for the end user. In the future, users probably won't have to think too much about whether they want to use the Bitcoin settlement layer or the Lightning payment layer. Wallet software will provide seamless integration between the two, so that normal payments happen cheaply and instantly, with settlement back to the Bitcoin ledger when required.
Plenty of other cryptocurrencies claim to solve this so-called “scalability problem”, without a second-layer protocol like the Lightning network. These claims prey on the technical ignorance of users, who imagine that smart mathematicians and developers could solve such problems with the right formulas and code. The reality is that the base protocol or consensus layer—the record of final settlement—cannot be used for a global payment network directly. There are simply too many payments being made every second around the world for each one to be transmitted, validated, and recorded by other users. Removing strict limits on the speed and fees at the base layer necessarily reduces security and introduces all kinds of exploitable vulnerabilities. The only way to accomplish a global payment network is to separate payments from settlement, so that a large number of small payments can be bundled into each final settlement record. This is true regardless of which boy genius crypto project founder claims otherwise.
Obviously, there is an enormous volume of information in the Bitcoin space, and even more if we consider the crypto space beyond that. We are in a war for attention. It’s hard to get someone’s attention for even 30 seconds these days, let alone the 3 hours it might take to explain Bitcoin properly. Again and again, I’ve seen newcomers get stuck on these same mental blocks. It took me nearly 10 years since I first heard about Bitcoin (in 2009) to fully understand the solution, and I’m a software engineer, so I don’t blame them. We live in a world awash with fiat misinformation. Grokking Bitcoin really is something like breaking out of the Matrix.
So this is my call to action, or rather, my question to readers, and to myself: what are you doing to help us win the race to 10,000,000 bitcoiners in the US? Obviously, a great number of people are already doing everything they can, but there are many more of us sitting on the sidelines, idle. Like me, many of us are not whales with lots of extra time and money. In the past few years, I’ve sprinkled and watered plenty of Bitcoin seeds, but to my knowledge only half a dozen of them have taken root so far. That’s good, I suppose, but I feel like it’s not enough. If Klippsten’s estimates are correct and we have 50,000 bitcoiners today, even if we could double the number every year it would take 8 years to hit the 10,000,000 mark. Is that realistic, and is it fast enough? What will the US government do to bitcoiners by 2030, if there aren’t enough of us? Can we do it faster? Maybe “number go up” is the only way, although that comes with its own set of risks and tradeoffs. Or maybe it’s a question of tech, and channel factories will bring Bitcoin to the masses.
Like I said at the outset, I don’t have all the answers. I want to use this space to explore these questions, and to explore how Bitcoin, Lightning and other Bitcoin-based technologies can help more people see why Bitcoin makes sense for them, not as an investment to make more dollars, but as a safe store of value for decades and generations to come.
Any feedback or critique of my “responses to a Bitcoin-skeptic” above would be much appreciated, so that I and other readers can learn how to improve our answers. Or, if you have seen mental blocks and questions that you frequently run into, drop a comment and I can think about how I would respond to it for a future article.
Thank you for your time and attention.
Protip: if if you always write a full 8 decimal places in BTC-denominated values, conversion to satoshis is as easy as dropping the decimal point.