Thread by @ByteSizeCapital

If the cryptocurrency experiment succeeds, $BTC may be the only viable long-term Store of Value.

To understand our perspective, let’s unpack the motivations behind civilisation’s most important financial technology: money.

At any moment in time, we can make an infinite number of decisions.

Our time is limited, so we need a socially accepted system to value and allocate resources.

What are the ideal characteristics of such a system?

1) Stable policy -> Rules can’t change
2) Manipulation resistant -> Rules can’t be cheated.

This system is money.

Imagine a universal spreadsheet, maintained by a benevolent deity who tracked everyone’s "number". The deity would change your number as you interacted economically (i.e. produced or consumed) in line with a set of divine, unalterable rules.

This is the ultimate form of money.

Of course, there is no magical spreadsheet, and there is no almighty economic deity. Instead, civilization has enacted this system through commodities: seashells, glass beads & silver (to name a few).

Our best approximation to date is gold.

Why?

1) Stability -> The total supply of gold is relatively constant, inflating by a few % per year at most. Producers can’t easily ramp up supply to meet demand
2) Manipulation resistant -> We cannot "create" gold out of thin air. Prospecting & mining is a risky venture.

In a sense, gold is "nature's spreadsheet", governed by physical scarcity and limited by global deposits.

Gold is valuable BECAUSE it is one of the best forms of money, not because of "intrinsic" value attributed to its utility. Other commodities like copper or iron, despite their high utility, are poor systems of money.

Of course, gold has its drawbacks:

1) Costly & dangerous to transport
2) Difficult to store securely
3) Not practical as a medium of exchange
4) Susceptible to dilution and counterfeiting.

How did we get around gold's drawbacks? Paper receipts offered by central banks, convertible to gold on demand.

This was gold's "layer 2 scaling" solution, enabling its use as day to day cash.

And now we come to $BTC.

What is Bitcoin?

Bitcoin is THE universal spreadsheet governed by an almighty deity, changing everyone's "number" according to a set of unalterable rules.

Except, these rules are not divine, and the deity is not a single leader, organisation, foundation or group.

The deity is a distributed network of miners and $BTC's rules are hard-baked into software.

$BTC is not only an approximation of money, but the ideal form of money.

Why?

1) Fixed monetary policy -> Supply is capped at 21m & the network is resistant to base protocol changes. We can produce more gold, albeit inflexibly, but never more Bitcoin. In fact, as demand increases, so does mining difficulty, making it perpetually harder to create $BTC.

2) Manipulation resistant -> It's economically unfeasible to double spend. As the demand for $BTC grows, the network's security tightens: more hash-power mines fewer remaining coins.

Bitcoin is valuable because it cannot be changed. If you change any element of the base layer - something as simple as block size - you have invalidated the most valuable aspect of $BTC: protocol immutability.

This is why we believe all $BTC hard forks are destined to fall short of Bitcoin's throne as the SoV King.

Why?

Because a hard fork invalidates the network's core value proposition: a GUARANTEE of lifelong, consistent monetary policy.

Bitcoin is not just digital gold, it is the most ingenious system of money to date.

Even if $BTC's transaction limit never changes, Bitcoin will likely:

1) Outshine gold as a superior money & SoV
2) Scale through a 2nd layer, @lightning, like gold through convertible receipts.

We believe there is a strong place for incentivised networks governed by native tokens (e.g. $DFN, @Algorand). We aren't Maximalists. However, we believe $BTC will likely remain the bedrock of the entire cryptocurrency market.

And, perhaps, the world's next Store of Value.