Found myself describing blockchains to a layperson as “Coin Operated Networks,” before I realized the acronym. 🤦🏽♂️
— Naval (@naval) March 28, 2018
I’ll start by saying that I clearly don’t know much about cryptocurrency.
I’ll also add that it would be incredibly beneficial to have a global currency that works securely without the need for intermediaries and their resulting transaction fees.
However, I find bitcoin a bit concerning, and here are my thoughts and questions around cryptocurrency in general and Bitcoin in particular. If believers would indulge me for a few moments and be kind to share their views.
When fully mined, there will be 21 million bitcoin in all. As of today (6 Feb, 2021), about 88.6% of them have been issued, leaving about 2.37 million to be mined (at the rate of about 900 per day).
Q1. How can bitcoin strive to be a truly universal solution with that limited a number?
It is my understanding that in most countries, the most commonly circulated currency denominations are in numbers that are few, if not several times the population of the country. For instance, US population in 2018 was 327 million. They had the following number of bills (by denomination) in circulation in 2018:
$1 – 11.7 billion
$2 – 1.2 billion
$5 – 2.8 billion
$10 – 1.9 billion
$20 – 8.9 billion
$50 – 1.7 billion
$100 – 11.5 billion
You’d notice the number of bills of each denomination in circulation was a few times the total number of people in the US (between ~4x and ~36x).
Compare that with the 21 million bitcoin (when fully mined). It is far from enough.
Now let’s take it a step deeper.
One Satoshi (named after the presumed person or persons who developed bitcoin) is the smallest unit value or denomination of a Bitcoin (BTC). One BTC = 100,000,000 Satoshis (100 million Sats).
If Satoshis are traded, my earlier concern of there not being enough bitcoin to go around is more than addressed, as there would be some 276000x Satoshi’s per person (based on 2019 world population of 7.67 billion. That’s a great number to have in circulation. But trading tiny fractions of bitcoin seems a bit inconvenient from a average person’s daily transactions perspective. So while it might seem more like buying a fraction of a mutual fund, buying something with bitcoin might be inconvenient for us common folk. Perhaps a bit easier with Satoshis.
Now this might have been fair if the world was uniformly introduced to Satoshi’s, and they were pegged at one global currency (say USD). However, till now, BTCs have been traded by a tiny segment of the entire population, which gives them a ridiculously huge early-adopter advantage, and would seem unfair for the rest of the world to simply adopt right now.
Which means there could be a huge likelihood that BTCs remain something highly limited and exclusive. And with the demand and spikes in price, it seems more like a rare collectors items. Or a club membership that sells for huge fees, and the waitlist could be several years long.
The intent behind bitcoin appears noble, and I was all for it even when I first read about it years ago. The world could have benefited hugely, perhaps if the accessibility was more inclusive from the early days, rather than after it has become a highly inflated one with low trading volumes.
While I wait for your thoughts, here’s some light humour by Naval Ravikant.