1/ What is the bitcoin bet, what are you betting on exactly?
2/ First, we have to go into the history of money, governments, and central banks.
3/ The history of money is using something that people can agree as store of value and medium of exchange. Throughout history, this has varied from clam shells to cigarettes to gold to modern day fiat, which is not backed by anything.
4/ Sapiens would lead you to believe that it's just based on belief, but there are commonalities of what money needed to be. The item needs to be durable and breakable into individual pieces and also, not so valuable that you have to use it for everyday use like steel.
5/ This lead to gold and silver, which is durable, breakable to pieces, and only semi useful for utilitarian purposes like steel. The reason why people liked gold was also for a slightly different reason: kings and queens can't arbitrarily devalue and "re-mint' it.
6/ The French kings of would have a certain amount of money in their coffers (for example 1B dollars) and when depleted, they would re-issue the money and make the existing money worthless. Imagine if your money in your wallet went to 20 to 30% of its value every 5 years.
7/ This increased trust in gold and silver because you can take the coin and even if your king re-issues your coin at 20% you can go to the gold jewelry and sell it to them for 100% of the gold's value.
8/ The problem with this is obvious, money is a "good" for society for the people as well as the upper class. A small number of people shouldn't be able to arbitrarily devalue's society's purchasing power simply because of arbitrary wars or poor spending.
9/ As a result, more and more people created the central bank, which manages the monetary system on behalf of everyone and not just for the ruling elite. This is why the Fed is a separate political institution. In theory, this should work, but human incentives get in the way.
10/ The central bank has two targets unemployment and inflation and using money supply as way to hit these targets. As you enter into a deflationary environment (read: stock market or real estate asset crash), then the Fed lowers interest rates.
11/ The Fed increases money supply (read: prints money) and floods the system with liquidity. This is to prop up the economy and allow banks to be solvent. All good things right? Kind of.
12/ The Fed floods liquidity to the banks, who now cannot hit their internal 6 to 7% targets for returns and they start flooding the market with liquidity. So central banks -> banks (JP Morgan) -> Consumers and Businesses.
13/ As this liquidity floods the market, bankers need to push more and more product. In 2008, this manifested in the subprime packaging, and many said the banks were at fault, but the reality is the liquidity causes a bubble to happen every 15 years bc of this system.
14/ Interest rates lowers -> massive money supply lent to banks -> banks lend to everyone -> assets rise -> central banks declare winning -> people/firms overleverage to get return -> central banks raise interest rates -> crash -> political bailout -> no one goes to jail
15/ This is what's known as a wet process, which I describe here: the fundamental issue is that it's dependent on people, tribes, and a process that's inherently political.
16/ How do you get away from a "wet" process governance structure that's not designed for the patricians, but for the plebs, normal people. The only way is to use computers and a process that can't be hacked. Then comes bitcoin.
17/ Bitcoin is not based on faith, but based on math and computation. So you don't have to rely on the belief of other people. This is why people talk about decentralization all the time. It's like the concepts of the French and American revolution.
18/ A monetary system for the common good, and not just for the patricians but for the plebians, the everyman. No implicit or explicit corruption. Just dry law.
19/ So why is the conversation about tulips vs bitcoin so silly? It's like comparing the American Revolution to a flower. Governance for the people and allowing people to have an independent cloud based monetary system is crucial, and that's why bitcoiners are religious.
20/ Yes. Religion and math and computation meet. Due to the Lindy effect and the Minority Rule. This will spread just like how Christianity spread. A dominant vocal and indomitable group will eventually spread this everywhere.
21/ Everyone takes the principles of the Republic and Capitalism for granted these days. Checks and Balances. Separation of Power. These were experiments.
22/ America was considered an experiment. Just Lincoln said "A new nation, conceived in liberty, and dedicated to the proposition that all men are created equal ... testing whether that nation, or any nation so conceived, and so dedicated, can long endure." This is the test now.
23/ Bitcoin was an ideology and now a grand experiment. Will bitcoin survive, yes or no. Probably but no one knows, but the bet is this governance and decentralization.
24/ In conclusion, the bet on Bitcoin is whether the first cloud currency issued by the people for the people can long endure. It is a grand experiment and will be helluva ride.
