Bitcoin’s true value is digital, it is a level of digital reality, and it is more valuable than what we might conventionally call its “current price.” Bitcoin is built like TCP/IP, the two protocols that underpin the operation of the internet. Without protocols, there would be no digital revolution and our entire lives would be drastically different. Bitcoin’s value lies more in the protocol than in the asset itself.
Fundamentals are more important than price
Over the long term, fundamentals are the real guide to the valuation of any asset. The fundamentals are based on the short-term options of the holders (Bitcoin Standard). Even though this mantra is the key feature for the Bitcoin community, foolish behavior involving long holding times is still recorded. Especially, near the end of bull markets.
This is the classic behavior called TradFi: A human emotion that we will almost never be able to remove as long as price is part of the equation. “Money” or rather currency makes us all act paranoid! A basic description of the Internet is as follows:
At the core of Bitcoin, you’ll find many of these same features with nodes networked together to support Bitcoin portfolio addresses making transactions that are “compiled” and processed by miners who act similar to ISPs (traditional Internet Service Providers).
The latter confirms and bundles transactions so that transfers are made throughout the Bitcoin network. This technology is taking us from an Industrial Society to a Digital one and this transformation is as drastic or as our last step from an Agrarian to an Industrial Society (18th – 20th century).
The future winners will be just as richly rewarded and the losers will find themselves just as disempowered as they were during the last major transfer of wealth within human societies. What is certain is that we will all be operating in a “new world” with a different set of standards.
Connectivity is the beginning of everything
The power of a digital world is that everything will be connected. In a networked world, the value of the network is much more powerful than the sparsely connected processing points of the elements. What is different about the 21st century is that we have “brought mathematics back into focus”, after Descartes’ revolution in the 17th century.
Power Law statistics (exponential growth) and Metcalfe’s Law are the drivers of the new data driven era. We’ve followed this story before: the evolution and adoption of the traditional Internet (TCP/IP). We have seen what happens when information, business and communication become accessible to almost everyone, everywhere. The merging of space and time in a historically unprecedented way.
The new money
Now, with the advent of Bitcoin, we will see it happen with money. Essentially, we will transfer money through an API system*. In the new world, banks, digital portfolios, hubs, people, businesses, media, etc. they will have an address that can post data or receive money. Creates an optional feature.
Something real about the world. We’ve never had it before with this level of capability, but we’ve seen the consequences of digitization in almost every industry. This wave will be much bigger and much more drastic. Especially when you consider the potential of artificial intelligence, but that’s outside the scope of this discussion. Local area networks (digital) are now a dominant part of our lives.
Some kind of local area network touches almost everything we do. Because our networks are still pretty limited, it’s great when we have access, but not so great when we can’t connect. If we don’t have FTP, cloud, or some sort of remote server access, we may be left out.
What is an API?
At the heart of a money transfer API system is a three-letter acronym — API, or Application Programming Interface. So what is this API and why is it so useful for money transfers? An API is basically an intermediary between two computers or computer systems. It is a secure gateway through which computers or systems can communicate with each other according to a tightly controlled set of rules.
What is happened to the banks?
This is very similar to the current state of our banks when we read between the lines. To a large extent, bankers, especially central bankers, have fended off digital transformation with regulation, red tape and purposely bogus interests for many fairly obvious reasons.
Bitcoin and other cryptocurrencies bridge the gap not only for connectionless and decentralized money, but also pave the way for new digital infrastructure that is more connected, more integrated and more available than the existing TCP/IP installation. Of course, some are more secure (Bitcoin) than others (Crypto). But together they will bring a new wave of innovation that paves the way for the next Google, Amazon, Netflix, etc.
The Bitcoin protocol works in the same way as TCP, but with security and encryption at its core. Return ownership to the user and not the platform.
Data ownership
More direct, peer-to-peer, communication occurs without the need for an intermediary who has historically removed data for their own personal gain or imposed some form of censorship whenever the platform saw fit to do so. This is essentially what is different with the Bitcoin Protocol sitting on top of TCP/IP. the traditional internet protocol.
To make things simple on the Internet, we don’t need to remember IP addresses, servers, etc. We just need to type the name (google.com, espn.com, enterwebsitename.com) and the information appears. Bitcoin is currently (and rapidly changing) in the state where we enter the IP addresses and need to know the details of the servers, etc.
Soon, the next wave will bring a number of apps (released) that will have better UI/UX, so many of them will be hidden. You’re starting to see similar domain names and pay-per-user email-type features, just like we’re comfortable with on the traditional Internet.
That’s when Bitcoin goes mainstream. When long complex addresses are removed, as if you don’t need to use IP addresses on the Internet.
The role of hackers
How they voted and intellectually constructed what “standards” were needed to operate an operational information system accessible to the entire world. These were some of the most intelligent “hackers” who created a system that fueled the next great wave of human evolution – the digital revolution.
15 years ago, Satoshi did the same. Whoever he, she, they or whatever global group it was that created the Bitcoin Protocol seems to have recognized the value of building a global system in the same way. It appears that Satoshi copied this template while also figuring out how to incorporate cryptography. More importantly, Satoshi solved the problem of “double spending” (the ability to duplicate digital value).
For the first time, digital money could not be copied. Allowing money and data to live on the same “chain”.
The new digital monetary system
As we enter a new era, we have created a core level of digital money that can harness new energy sources, better integrate and power trade, and continue a story of technological innovation around the world. Not just in central parts of the planet – a form of technological democratization the planet has never seen today.
Like TCP/IP, Bitcoin looks to its secondary protocol (layer 2) to be the lightweight option that is faster, less cumbersome and cheaper. UDP, resembles the Lightning protocol for Bitcoin, or possibly Fediment or any other L2 that eventually becomes the layer that:
“That means it’s faster, every packet sent is lighter because it doesn’t contain all the information required in TCP and has a lighter process. The downside is that UDP is not as reliable as TCP. In the traditional monetary system, money works much the same.
- In the US, we have gold as the base value and bonds and dollars as the light faster L2 (medium of monetary exchange).
- In China, they have Yuan as base and Renminbi as L2.
While Bitcoin is a new innovative protocol, it is just a new hypothesis to better connect our global systems, people and money. It is also a case where, “nothing new under the sun” applies.
As innovation happens, time, names, technology and money change, but human emotions do not. The path will be the same, but we will feel different based on our behaviors and habits that feel threatened.
