By Nathan Fisher – MS Cybersecurity, MBA
CISSP, PMP, MCSE, MCSA, MCTS-SCCM, Sec+, Network+, Server+, A+, MCP
Bitcoin is not money. There, I said it. Now go get rich.
The good news, is you’re still probably going to be stupid rich and if you follow my advice below, you will have a much better chance of marketing your speculation appropriately and get those investors you want.
I have been “against” bitcoin on twitter and in public, but I’ve wrestled with what the hell it actually is. I’ve done 4 writings recently on gold being the center of the financial solar system and documenting what I call “financial energy”.
I believe that gold and silver are sound money. And bitcoin people came to bitcoin because they feel it is sound money. Therefore, bitcoin and gold people have been going at each other’s throats.
Bitcoin people: “gold is dead. Bitcoin is the new way. Adapt and have fun being poor with your pet rock”.
Gold people: “gold has been money for 5,000 years. Your bitcoin is backed with nothing. It has no inherent value”.
Here is the main problem with the argument above. Financial energy.
You see, you are trying to compare apples to oranges. Bitcoin is not money. I’m sorry, but it’s not. Does it store financial energy? Yes. Can it be a medium of exchange? Yes. At the end of the day, however, you cannot hold it in your hands or spend it at the gas pump. You also cannot spend gold at the gas pump before converting to fiat dollars. In some sort of mad max world, I see bitcoin having virtually no utility. But please, hear me out because bitcoin could go to several million, and I’ll explain why.
The problem with bitcoin is that it has “coin” in it, and has been marketed as a “currency”. The problem is, it’s not a terribly good currency and is slow. With Moore’s law issues with processing power potentially going to cause an issue with further block chain speed down the road, this could cause more problems.
My writing over the last week, however, spoke of three asset classes I’m focused on.
- Real estate
When I started to try and classify everything that has a “store of value”, I ran into lots of math problems and chart problems when trying to put bitcoin in the money area. I think I know why.
Bitcoin is not money. It is real estate.
What is bitcoin? It’s an address on a technology called a block chain. You bought an address. A location. You bought a sexy beach front location.
Imagine this – the year is 1971 and there’s really cheap beach front property for sale. You have the ability to buy 10 acres for really cheap. You buy at $500 per acre, for an investment of $5000. Over the years, many people liked this beach front property and made you offers. Lots of people see the possible potential in this land. They know a major highway is about to get linked to it. In this community, there is a finite number of acres. No one really knows in 1971 what this property may be in 50 years, but they want to speculate on it.
At times, local government people said there would be problems with any development, and the values plunged. But more people felt like if you just wait until those people are out of office, it will be worth a ton, so they buy back in cheap. This cycle repeats a few times.
The year in 2021, and this beachfront property is now worth $100,000 per acre. It went up a lot in dollar value, and you still own those 10 acres.
The ultimately problem with land speculation is this:
- What if the big prize never comes? The beachfront property owners were waiting for infrastructure to be built. Restaurants, entertainment, hospitals, schools. It never came. Beautiful land, but I can’t do anything with it.
- A nicer beachfront property comes along close by, and at a fraction of the cost
- Everyone who ever wanted beachfront property has bought it, and there are no more buyers. The next buyer will have to be paying less for it as over supply at a price will then drop price.
See, the ultimate problem I’ve seen with bitcoin is the marketing, which has pit it AGAINST gold. This is not a fair fight for bitcoin. Bitcoin is the sexy beachfront property that has a lot of value in speculation and possible development of that asset.
I am putting together my final dissertation (jn a sense) of gold and financial energy – and with this, I am also classifying certain items into categories. If you go into this realizing you are buying sexy beach front property with the risks I discussed, you could hold this for years and make 10x of what you have now. OR, it could lose owners due to a copy like Doge, which I think does the exact same thing, it’s just another beach front location. Eventually, potentially with enough copies, you may over-supply beach front property.
So those owning bitcoin, I would encourage you to see my work with financial energy and gold – and how gold has been sound money for 5,000 years. I believe the problem overall in this argument is trying to determine if owning cattle or stock in IBM is better. They are different asset classes. They both a store financial energy for different purposes.
Therefore, I think the bitcoin and gold people should have a mutually agreed upon stand down over the next 6 months. Stop the fighting on which is better, and realize they are different vehicles to store financial energy.
If bitcoin people can welcome this new identity and market it as such, you may actually get gold people to speculate there. If bitcoin people realized they have 10 acres of this beach front property at stupid profits on a highly risky speculation, they may take a small portion of their profits off of the table and invest in gold. These are completely different in risk and characteristics of ownership, and it’s time we start looking at it like that.
Money needs some form of utility or backing of gold
All of the cryptocurrencies run in to the same issue – utility. Some I see are like tokens you’d buy at a batting cage or arcade. You put your fiat notes into a machine, then out come these tokens which you can spend on all of the games. The problem is, if there are less and less games you can get access to, the value of your token decreases. If there’s more and more games, the more people come and buy tokens for access to these games. But why can’t I just put quarters into the game? The quarter is a depreciating asset – but you may always need 1 token to run the game. Meaning, today, you may buy 4 tokens for a dollar, but maybe 10 years from now, you buy 2 tokens for a dollar. The games still run on 1 token – which is a constant. This is a problem with the crashing dollar – that all of these services are promised in fiat currency that becomes less valuable every day – but your token somehow doesn’t? You have to realize that it will suffer the same decay as the USD.
Throughout history – gold and silver have been those constants that you are seeking in that crypto. I say this a lot – in 1964, you could buy a gallon of gas with 2 silver dimes. Today, you cash in those two silver dimes and you can buy a gallon of gas. 50 years from now, you can take two silver dimes and buy a gallon of gas. silver was that token. So was gold. The constant in value. The ISSUE is when those tokens that provide utility are not backed by anything but a promise to deliver a service at a later time and are not exchangeable for the REAL value. Meaning, you put in a dollar today and buy 4 tokens. You hold on to those tokens 10 years from now and you get twice the value out of it. Or, 5 years from now, I realize I don’t want to play those games anymore, I want my financial energy back. Do I get $1 back?
Now, assume you buy a Kinesis silver token KAG with your dollar. This is a digital crypto backed by silver. The game you want to play will cost 1 KAG today, next year, 10 years from now, or 100 years from now. You get the financial energy constant of “sound money” in silver, but the instant portability and security of crypto currency. And – this is money because it is backed by metals. If you decide 31 years from now you do not want to play the game, you get 1 KAG back. The ultimate problem with most crypto currencies is that they are not the sexy beach front REAL ESTATE that bitcoin is, and they have no backing like money that Kinesis has. This is how 9200 tokens lose the VHS/betamax wars.
This is a continuation of the “financial energy” and “gold at the center of the financial solar system” series that I will be putting together into one major document as a form of dissertation to tie everything together. Each of these pieces are blow outs of individual concepts I will touch on in the summary piece, and point them to these individual parts to expound.
P.S. Forgive the alphabet soup at the top after my name – I want to start translating stuff for people across a lot of languages and I wanted to demonstrate above I do have the ability to at least coherently discuss these topics. Someone on the boards recently said, “oh you’re THAT guy – the renaissance man!”. So I plan on elaborating a lot more on my background to be a form of rosetta stone to link a lot of disciplines together. As my background as a “renaissance man”, I feel there’s a lot of narrow focused smart people out there who don’t know much about other things – and these people need people like me to bridge gaps of disciplines.