November 20, 2023
Greetings from the puzzled,
Wherein, we will uncover the mysterious world of Bitcoin, not only so that you can better understand the investment potential, but more importantly so you feel confident discussing the subject at Thanksgiving dinner with your know-it-all Uncle Norm.
For many people, the concept of Bitcoin is arcane and confusing. With my help, I hope to unravel some of that uncertainty and perhaps add some of my own.
Bitcoin, often referred to as BTX or XBT, is a cryptocurrency. Cryptocurrency is a scary word, (Aaah!) mostly because it includes ‘crypt’, but also because recently investors in cryptocurrency (Aaah!) lost a great deal of ‘money’ they kept with a company called FTX. FTX, run by a man who is mainly known as SBF, did not play by the BTX rules and ‘lost’ $8 billion dollars ($8 BN) (if you believe in that currency).
There are literally tens of thousands of brands of cryptocurrency, all of which are represented by a few letters to make it easier to confuse them. A quick search showed the name ‘Aaah!’ is still available.
So, our first lesson in the world of digital currency is to stay away from abbreviations.
To truly understand crypto, we have to go back to its origins, so that you can appreciate why it has any value. There is a lot of complicated math, computer code, algorithms, exotic-sounding words and probably magic, so rather than spend too much time here, let’s just say it has value because everyone agrees it does.
One of my favorite things to talk about is blockchain. Not because I understand what it is, but because I never get to combine those two words as one and it feels good in my mouth. Say it out loud: blockchain. If you did, (I can’t actually hear you) you will now start getting advertisements on your phone for Bitcoin.
Blockchain describes the complex, unfettered, global computer network that connects everyone in the universe who buys or sells cryptocurrencies, or whoever did, and keeps a permanent anonymous record of it. If this sounds ominous, it helps to know that blockchains were invented originally by Ian Fleming for the 2009 James Bond thriller “Bloctopussy”.
The people who facilitate all this connection are known as ‘miners’, (no one under 18 can be a miner). Miners use enormous computing power to keep track of all this activity, and the energy used to just keep track of all this abbreviation exchange is estimated at 150 terawatt hours (TWh) of electricity per year. To put that in perspective, that is more watts than Argentina uses in a year, a country of 45 million people, none of whom own an air fryer.
This is relevant because 150 TWh is 150 trillion watt hours, or to put it another way, 3.6 million joules, so 540,000,000,000,000 megajoules. Or for simplicity 540,000,000,000,000,000 kilojoules. (Astute readers will note that Megajoule was the evil nemesis in the James Bond epic “License to Kilowatt”)
In Michigan it costs eighteen cents for one kilowatt hour. (kWh) I’m sure you just did the math, (I stopped reading a little while ago) and so anyone can see that the real economic opportunity here is not cryptocurrency, but Electrocurrency® a term I just invented. (and copyrighted) The real money, and by that I mean virtual or imaginary, is in electricity. And tin foil.
That screeching noise you hear is me veering back from the precipice of inconsequence, and back to the original topic. Just give me a minute to scroll up to the top for reference. Ah yes, Uncle Norm.
In a statistic I just made up for this paragraph, it is estimated that by 2030 40% of all households will have some investment in cryptocurrency that is not regulated, insured, not accepted as currency in ordinary transactions, has mythological value, and whose universal golden rule is: Never invest more than you can afford to lose.
The good news is that it’s secure. Unless you lose your private encryption key and then you lose everything. As of today, it is estimated that 20-30% of cryptocurrencies are in lost accounts because someone can’t find their private key. Oops, wish I hadn’t written it on that old envelope. For those of us still using dirty old dollars, that’s $540 billion up in smoke.
Cryptocurrency is basically a religion. Not your religion, some other religion that you are skeptical of. It has elements of philosophy, faith, mystery, fear, belief in something you cannot see or understand, and greed. Sounds like the makings of a great weekend retreat. Or a James Bond movie.
So there you have it, everything you need to understand about Bitcoin, packaged into a neat blockchain that you can talk about at the dinner table on Thursday until everyone leaves the room and you can finally enjoy the green bean casserole on your own. Which is what any of us really wants. I mean money (or cryptocurrency) (Aaah!) can’t buy you happiness, but mmm, those crunchy onions on the top of those beans?
Hope this finds you grateful you bought IBM in 1980,
David
Copyright © 2023 David Smith
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